Project Report

On

STUDY OF EXPORT FINANCE

Submitted for the partial fulfillment of the Award

Of

Master of Business Administration

DEGREE
(Session 2009-2011)

SUBMITTED BY
Roll No.0903270023

MANSI MITTAL

UNDER THE GUIDANCE OF

Internal Guide: Ms.Sonam Gulati Department of Management ABES ENGINEERING COLLEGE, GHAZIABAD

AFFILIATED TO

GAUTAM BUDDH TECHNICAL UNIVERSITY, LUCKNOW

PROJECT REPORT ON EXPORT FINANCE OF GOOD LUCK GROUP

CANDIDATE DECLARATION CERTIFICATE

I hereby declare that the work which is being presented in this report entitled EXPORT FINANCE is an authentic record of my own work carried out under the supervision of Ms. Sonam Gulati.

The matter embodied in this report has not been submitted by me for the award of any other degree.

Dated: Name of Student: MANSI MITTAL Department: MBA This is to certify that the above statements made by the candidate are correct to the best of my knowledge.

(Head of Department) Date:

(Name of Supervisor) Designation: Department: Date:

ACKNOWLEDGEMENT

I would like to express my deep and sincere gratitude to GOOD LUCK STEEL TUBES PVT. LTD. for provided me with the opportunity to do my project on an interesting area. The project was a great source of learning and a good experience as it made me aware of the professional culture and conduct that exists in an organization. Though at the onset of ambitious project one always encounters certain difficulties in the beginning, however, overcoming these difficulties of the project as well as making it a success, greatly depends on the encouragement, inspiration, and help given by Mr. D.P Yadav. For completion of this project various people have put lots of efforts. I will also like to thank other management trainees of my group for their cooperative attitude and queries which made me understand the different topics of IB quickly. And finally I would like to thank god & my parents who inspired a lot for the completion of the project.

DATE PLACE

(Signature of Student)

TABLE OF CONTENTS

Page No.

Chapter 1- INTRODUCTION
Introduction to Project.. Need of the Study Scope of Study. Objective of Study.. 1-5 6 7 8

Chapter 2- RESEARCH METHODOLOLY

Research Methodology Limitations of Study 9 10

Chapter 3- DESCRIPTIVE STUDY

Export Finance. Documentation.. Methods of Payment. Finance from Banks. Limit Approval. Pre-Shipment Finance.. Post-Shipment Finance Risk in Export.. EXIM Policy.. FEMA Act. FEDAI Guidelines. Export Promotion Benefits.. 11-13 14-31 32-44 45-48 49-50 51-57 58-66 67-80 81-84 85 86-90 91-97

Chapter 4- ANALYSIS AND INTERPRETATION

Data Analysis and Interpretation SWOT Analysis. 98-102 103-104

Chapter 5- CONCLUSION
Conclusion and Suggestion.. 105-107

Chapter 6- BIBLIOGRAPHY
Bibliography. Glossary 108-109 110-111

CHAPTER-1 INTRODUCTION

COMPANY PROFILE GOODLUCK GROUP:

Goodluck Group, an ISO 9001 company is one of Indias leading and fastest growing business groups with over 1000 employees and having multi location plants and units, with experience of more than two decades in the Manufacturing of Pipes and Sheets. Goodluck has diversified business interests in the national and international market.

MISSION:
To excel in quality international business.

VISION:
To be recognized internationally as best procurement partner.

CORE VALUES:
Customer Loyalty Customer Satisfaction Commitment to quality Continuous Communication

GOOD LUCK STEEL TUBES LTD.Good Luck Steel Tubes Ltd. is an ISO 9001:2000 company and government of India recognized category export House. Good Luck incepted in the year 1987 and since become one of the leading quality Manufacture of both Galvanized/Black Steel pipes as per various National/International Specifications with a capability to manufacture Tailor made Pipes/Structures/Poles/Towers etc. Besides Good luck is also manufacturing Hollow Sections, Poles, Towers (Transmission/ Telecommunication), CR coils and GP/GC Sheets with a Production capacity of 1,50,000 Tonnes Per annum. Good Luck has the latest technology plant and Machinery and Testing Equipments coupled with vigilant Quality Assurance Department, which ensures better quality Products. Their Products are also regularly inspected by various Third Party inspection Agencies both from National and International Sectors via SGS, Bureau VERITAS, Lloyds, QSS, Crown, TUV etc. Good Luck with optimized Production and perfect Management ensures good quality Products, which ultimately Guarantees the Buyers Satisfaction. Today, Good Luck enjoys strong satisfied Customers base both within India and in highly sensitive Markets like Belgium, Germany, Greece, France, Netherlands, Sweden, UK, Dubai, Iraq, Kuwait, South Africa, Australia, New Zealand, and U.S.A etc. APPLICATIONS1. Water Pipe lines: Water Mains Plumbing Sewage Systems Industrial Water Lines Plant Piping Domestic Water Supply 2. Agriculture and Irrigation: Deep tube-wells and casing pipes

3. Gas Pipes Lines: Pipe Lines for natural gas, LPG and other non-toxic gases. 4. Oil Pipes lines: Oil refinery piping Crude oil piping Cross country pipe line. 5. Construction industry: Scaffolding Structural purposes. 6. Chemicals Industries: Conveying of chemicals 7. Fire fighting System Air-Conditioning (HVAC) Power Projects: Ash handling system LP piping 8. Automobile Industry: Air and Water flow system 9. Other Purposes: Supply of exhaust piping Steel tubes for idlers and troughed belt conveyers Cold Storage Sugar Industry LPG cylinder supporting rings. It is at Good Luck where Customers satisfaction is paramount. It is having 2 divisions: 1. GOOD LUCK ENGINEERING CO. A unit of Good Luck Steel Tubes ltd. is an ISO 9001:2000 company and Government of India recognized Three Star Export House. The Forging Division of Good luck Steel is exclusively engaged in manufacturing of Steel Flanges, rings, shafts and hollow forging matching international standards and specifications. As for the Flanges, they manufacture a variety of blind, slipon, weld neck and butt welded flanges conforming to BS/ASTM/DIN/JIS standards. Their production facilities are presently manufacturing flanges in various chemical composition of Carbon Steel, alloy steel, stainless steel and exotic materials like duplex etc. Their manufacturing facilities are equipped with 3 forging hammers with capacities varying in the range of 10 tons each. Their in-house machining facilities are capable of maintaining high precision requirements. Accordingly, their product range includes flanges in the size range of 20mm to 1200mm in diameter. Their Products have application in Oil Sugar, Chemical, Fertilizer, paper and Food industries as well As in steel plants, rolling mills, hydraulic machinery, railways, power plants, etc. Good luck Engineering Co. has comprehensive mechanical testing facilities that include impact testing, tensile testing and non- destructive testing. The organization uses the most advanced equipment such as Ultrasonic testing and highly sensitive mobile spectrometer, specialized dye penetrate and magnetic particle technique. APPLICATIONS1. Oil Industry 2. Fertilizer Industry 3. Chemical Industry 4. Sugar Industry 5. Paper Industry 6. Hydraulic Machinery 7. Railways 8. Steel Plants

9. Rolling Mill 10. Gear Box Manufacturer 11. Power Plant and Turbine 12. Crane Manufacturer

2. GOOD LUCK INDUSTRIESA unit of GOOD LUCK STEEL TUBES LTD. is also an ISO 9001:2000 company and government of India Recognized Three Star Export House which make ERW/ CEW PRECISION TUBES. MAJOR APPLICATION: 1. Cycle industry- Cycle frames, Forks, hub tubes 2. Chains- Automotive, industrial and Cycle chains 3. Automotive Industry: Two/ Three Wheelers, Cars, LCVs and HCVs Classic Tube Bus Body Building Main Beam Tube Automobile Axle Tube Shock Absorbers Propeller Shafts Steering Columns Tie Rods and Drags Links Exhaust Tubes, Aluminized Tubes Front Fork Tubes for Two Wheelers Hydraulic Line Tubing 4. Boilers and Heat Exchangers: 5. Oil Industry: 6. 7. 8. 9. 10. 11. Chemical Industry Sugar Industry Paper Industry Process industry Line pipes to API specifications

Furniture Industry Construction Industry Machinery Manufacture Air Pollution Control Equipment Railway Coaches Electrical Industry: Transformers Fan Down Rods Conduits

BUSINESS DIVISION Pipe Division

With combined capacity of more than 1, 00,000 MT, Pipe Division manufactures all kind of ERW Black Steel Pipes for various purposes.

Steel Pipes manufactured as per ASTM specification. Capability exists for galvanizing pipes up to 24 feet in length and 12 inches in diameter.

Manufactures galvanized hollow sections. Leading manufacturers of manipulated tubes.

Cold Rolled and Galvanized Sheets-Coils Division

This unit is engaged in manufacturing standard range of Galvanized Plain & Corrugated Sheets/ Coils for wide range of applications. Cold Rolled Sheets/Coils produced by GLST are widely used in various applications.

International Division
International Division is engaged in export of wide range of engineering products, construction hardware, plants & machinery. They are manufacturing and exporting Mild Steel Black ERW square tubes, Rectangular Tubes and Round Hollow Section and Cold rolled Steel sections as per customer requirements with anti rust oil coating from inside and outside of the tubes to ensure safe delivery to end products.

INTRODUCTION

The Project deals in the field of INTERNATIONAL TRADE AND FINANCE, and is more concerned with the mitigation of financial as well as operational risks involved in the trade between the two parties (i.e. buyer and seller) who are located in two distinctly located countries. Apart from this the project also tries to explain the trade practices, exchange regulations, legal systems, documentation and financing that are involved in the international trade which differ from each other, because of their different locations and regulations according to their country.

NEED OF THE STUDY

Since last two decades, Indian products are well accepted in International Market and India has build up a base platform in European, USA and Latin American market. India International growth is increasing drastically. Now it is become necessary to review and study the important factors to maintain and sustain the growth.

SCOPE OF STUDY

International trade is having wide area of study which can be cover as marketing, financing, logistics and statutory compliances. However in general below are major focus areas where study is mandate to operate and control International business:

1. Development of Infrastructure to fast movement of Cargo. 2. To provide cheaper and easy financing to exporters. 3. Government Policy and Procedure should be liberal. 4. Support to exporter to meet their commitment with foreign buyer.

OBJECTIVE OF STUDY

My project intents to provide a clear view of how the parties involved in International Trade enter into an export contract, what all risks are involved in this contract and also the major principles applicable to export finance. It also gives detail information about all the documents required for financing to meet export requirement.

The report also gives a detailed explanation to all the referred key points:

What is the role of banks in international trade? How does an Export and Import Finance work to mitigate the risk of banks? What all uniform principles are followed while entering into export contracts? What are the various types of Credit letters issued by banks under International Trade? How the banks control the Operational Risk on special credits? What all documents are required for Export?

CHAPTER-2 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY Research Design

A Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. The appropriate research design formulated is detailed below. Exploratory research: this kind of research has the primary objective of development of insights into the problem. It studies the main area where the problem lies and also tries to evaluate some appropriate courses of action. The research methodology for the present study has been adopted to reflect these realties and help reach the logical conclusion in an objective and scientific manner. The present study contemplated an exploratory research by adopting Interaction with Representatives of Area concerned and study of Books i.e EXIM Policy, UCP 600, Incoterms, FEMA master circulars etc.

Sample size: 5
1.

Nature of Data
Primary Data: Primary data was collected using interaction. Secondary data: Secondary data that is already available and published. It could be internal and external source of data. o Internal source: which originates from the specific field or area where research is carried out e.g. publish brochures, official reports etc. o External source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet. As far as internet is concerned the articles have been taken from Eresearch papers, journals, E-books, and e-paper.

LIMITATIONS OF STUDY

The following are the few limitations found during the course of guidance:

1. Limited Access: While conducting onsite training certain limitations are important Virtue of data
privacy and confidentiality of the customer information. 2. Market Specific: As the study is conducted with the people executing the job, at Times the limitation of Market Specific Practices is encountered.

3. Limitation of historical data: As trade existed since 17th century, the agreements, laws and
Policies governing international trade practices also kept on changing with the demand of time, Relevant historical data is not available.

4 .Confidential Information: Foreign trading includes many confidential data and information that
Cannot be made available to every person involved, therefore as a trainee it is difficult to get access to all the internal information related to trade of the bank like banks credit limits and pricing.

CHAPTER-3 DESCRIPTIVE STUDY

EXPORT FINANCE - INTRODUCTION

Credit and finance is the life and blood of any business whether domestic or international. It is more important in the case of export transactions due to the prevalence of novel non-price competitive techniques encountered by exporters in various nations to enlarge their share of world markets. The selling techniques are no longer confined to mere quality; price or delivery schedules of the products but are extended to payment terms offered by exporters. Liberal payment terms usually score over the competitors not only of capital equipment but also of consumer goods. The payment terms however depend upon the availability of finance to exporters in relation to its quantum, cost and the period at pre-shipment and post-shipment stage. Production and manufacturing for substantial supplies for exports take time, in case finance is not available to exporter for production. They will not be in a position to book large export order if they dont have sufficient financial funds. Even merchandise exporters require finance for obtaining products from their suppliers. This project is an attempt to throw light on the various sources of export finance available to exporters, the schemes implemented by ECGC and EXIM for export promotion and the recent developments in the form of tie-EXIM tie-ups, credit policy announced by RBI in Oct 2001 and TRIMS.

CONCEPT OF EXPORT FINANCE:

The exporter may require short term, medium term or long term finance depending upon the types of goods to be exported and the terms of statement offered to overseas buyer. The short-term finance is required to meet working capital needs. The working capital is used to meet regular and recurring needs of a business firm. The regular and recurring needs of a business firm refer to purchase of raw material, payment of wages and salaries, expenses like payment of rent, advertising etc. The exporter may also require term finance. The term finance or term loans, which is required for medium and long term financial needs such as purchase of fixed assets and long term working capital. Export finance is short-term working capital finance allowed to an exporter. Finance and credit are available not only to help export production but also to sell to overseas customers on credit.

OBIECTIVES OF EXPORT FINANCE:

To cover commercial & Non-commercial or political risks attendant on granting credit to a foreign buyer.

To cover natural risks like an earthquake, floods etc. An exporter may avail financial assistance from any bank, which considers the ensuing factors: a) Availability of the funds at the required time to the exporter. b) Affordability of the cost of funds.

Export Financing- Sources

1. Commercial banks which are members of the Foreign Exchange Dealers Association provide
finance at a concessional rate of Interest and are refinanced by the Reserve Bank/Export Import Bank of India. In case they do not wish to avail refinance, they are entitled for an interest rate subsidy.

2. Export Import Bank of India, in certain cases, participates with commercial bank in
extending medium term loans to exporters.

Other Related Institutions:

3. Reserve Bank of India, being the central bank of country lays down the policy frame work and
provides guidelines. The RBI functions as refinancing institution for short and medium term loans respectively, provided by Commercial Banks.

4. Export Credit & Guarantee Corporation (ECGC) also plays an important role through various
policies and guarantees providing cover for commercial and political risks involved in export trade.

DOCUMENTATION Introduction
International market involves various types of trade documents that need to be produced while making transactions. Each trade document is differ from other and present the various aspects of the trade like description, quality, number, transportation medium, indemnity, inspection and so on. So, it becomes important for the importers and exporters to make sure that their documents support the guidelines as per international trade transactions. A small mistake could prove costly for any of the parties. For example, a trade document about the bill of lading is a proof that goods have been shipped on board, while Inspection Certificate certifies that the goods have been inspected and meet quality standards. So, depending on these necessary documents, a seller can assure a buyer that he has fulfilled his responsibility whilst the buyer is assured of his request being carried out by the seller.

The benefits of documentation

Documentation is a key means of conveying information from one person or company to another, and also serves as permanent proof of tasks and actions undertaken throughout the export process. Documentation is not only required for your own business purposes and that of your business partner, but also to satisfy the customs authorities in both countries and to facilitate the transportation of and payment for goods sold. One value of documentation is that copies can be made and shared with the parties involved in the export process (although you should always ensure that you make identical copies from an agreed-upon master - it is no use making changes without the other party's agreement and then presenting these as the "latest" copies). If the documentation is complete, accurate, agreed upon by the parties involved and signed by each of these of these parties (or their representatives), the document will represent a legally binding document.

Functions of export documentation

Export documentation may serve any or all of the following functions:

An attestation of facts, such as a certificate of origin Evidence of the terms and conditions of a contract if carriage, such as in the case of an airway bill Evidence of ownership or title to goods, such as in the case of a bill of lading A promissory note; that is, a promise to pay

A demand for payment, as with a bill of exchange A declaration of liability, such as with a customs bill of entry A receipt for goods received.

Before submitting the documents to the bank, the exporter should follow certain safeguards that are: Documents should be submitted in requisite number. Documents should be issued by person required to issue. Documents should be dated wherever required. Documents should be manually signed wherever stipulated. Documents should be consistent with each other. Documents should be presented at the place stipulated. Documents should be presented within the expiry date of the LC.

The following is a list of documents often used in international trade:

Air Waybill

Bill of Lading Certificate of Origin Combined Transport Document Draft (or Bill of Exchange) Insurance Policy (or Certificate) Packing List/Specification Inspection Certificate

Air Waybills
Air Waybills make sure that goods have been received for shipment by air. A typical air waybill sample consists of three originals and nine copies. The first original is for the carrier and is signed by an export agent; the second original, the consignee's copy, is signed by an export agent; the third original is signed by the carrier and is handed to the export agent as a receipt for the goods.

Air Waybills serves as: Proof of receipt of the goods for shipment. An invoice for the freight. A certificate of insurance. A guide to airline staff for the handling, dispatch and delivery of the consignment.

The principal requirement for an air waybill is:

The proper shipper and consignee must be mention. The airport of departure and destination must be mention. The goods description must be consistent with that shown on other documents. Any weight, measure or shipping marks must agree with those shown on other documents. It must be signed and dated by the actual carrier or by the named agent of a named carrier. It must mention whether freight has been paid or will be paid at the destination point.

Types of air waybills

There are two types of air waybills used for the international transportation of air cargo:

The "airline air waybill", with preprinted issuing carrier identification, The "neutral air waybill" without preprinted identification of the issuing carrier in any form and used by other bodies than air carriers (such as freight forwarder).

Bill of Lading (B/L)

Bill of Lading is a document given by the shipping agency for the goods shipped for transportation form one destination to another and is signed by the representatives of the carrying vessel. Bill of landing is issued in the set of two, three or more. The number in the set will be indicated on each bill of lading and all must be accounted for. This is done due to the safety reasons which ensure that the document never comes into the hands of an unauthorized person. Only one original is sufficient to take possession of goods at port of discharge so, a bank which finances a trade transaction will need to control the complete set. The bill of lading must be signed by the shipping company or its agent, and must show how many signed originals were issued.

It will indicate whether cost of freight/ carriage has been paid or not:

"Freight Prepaid: Paid by shipper "Freight collect: To be paid by the buyer at the port of discharge

the bill of lading also forms the contract of carriage.

To be acceptable to the buyer, the B/L should:

Carry an "On Board" notation to showing the actual date of shipment, (Sometimes however, the "on board" wording is in small print at the bottom of the B/L, in which cases there is no need for a dated "on board" notation to be shown separately with date and signature.)

Be "clean" having no notation by the shipping company to the effect that goods/ packaging are damaged.

The main parties involve in a bill of lading are:

Shipper
o

The person who send the goods.

Consignee
o

The person who take delivery of the goods.

Notify Party

The person, usually the importer, to whom the shipping company or its agent gives notice of arrival of the goods.

Carrier
o

The person or company who has concluded a contract with the shipper for conveyance of goods

The bill of lading must meet all the requirements of the credit as well as complying with UCP 500. These are as follows:

The correct shipper, consignee and notifying party must be shown. The carrying vessel and ports of the loading and discharge must be stated. The place of receipt and place of delivery must be stated, if different from port of loading or port of discharge.

The goods description must be consistent with that shown on other documents. Any weight or measures must agree with those shown on other documents. Shipping marks and numbers and /or container number must agree with those shown on other documents.

It must state whether freight has been paid or is payable at destination. It must be dated on or before the latest date for shipment specified in the credit. It must state the actual name of the carrier or be signed as agent for a named carrier.

FORMAT OF B/L:

Shipper GOOD LUCK STEEL TUBES LTD,INDIA A/C KDI EXPORT, IMMEUBLE DE BUREAUX LES 3 FONTAINES CASE POSTALE NO 1034,95003 CERGY - PONTOISE CEDEX, FRANCE Consignee: TO ORDER

Draft Bill of Lading

Notify Party: AUS TRAL IMPORT 7 RUE MONTAIGNE 97430 LE TAMPON ILE DE LA REUNION Vessel and Voyage No:

Place of Receipt: ICD DADRI

Place of Delivery: REUNION, REUNION IS LAND

Port of Loading: MUMBAI /INDIA Marks & Numbers SHIPPING MARKS: NEUTRAL LABELS + DIMENSIONS + EXP KDI EXPORT DEST: AUSTRAL IMPORT LE TAMPON VIA POINTE DES GALETS ILE DE LA REUNION 1 GREEN + 1 WHITE PAINT STRIPE CONTAINER NOS. PCIU - 8230988 SEAL NOS. NAME & ADDRESS OF SHIPPING AGENT AT PORT OF DISCHARGE

Port of Discharge REUNION, REUNION IS LAND Gross Weight 1104 PCS (34 BUNDLES) 344 PCS ( 21 BUNDLES) HOT DIPPED GALVANISD STEEL TUBES S235 JRH ACC TO EN 10219 INLENGTH OF 6.00 MTRS +- 50 MM. NOT ANY OIL NOR GREASE NOR VARNISH ON TUBES. 760 PCS ( 13 BUNDLES) WELDED HOT DIPPED GALVANISED STEEL TUBES, ISO II LIGHT SERIES WITH BOTH ENDS SCREWED ONE SOCKETED OTHER PROTECTED BY P.V.C. CAP IN LENGTH OF 6.00 MTRS +- 50 MM. NOT ANY OILNOR GREASE NOR VARNISH ON TUBES. AS PER PROFORMA INVOICE NO GLS T/2010-2011/098 DATED 15.06.2010. ALL OTHER DETAILS ARE AS PER COMMERCIAL INVOICE NO. GLST/2010-2011/184 DATED 29.06.2010. S.B. No. IEC NO. : 0593020707 RBI NO. : DG-003131 FREIGHT PREPAID 25.545 MT. NT.WT. 25.515 MT. Measure mnt 1 X 40

CLEAN ON BOARD

Total No.of Containers Movement: Freight: /Packages: FCL/FCL PRE-PAID 1 Number of Remarks: Originals 3/3 + 3 N/N COPY PLEASE FAX DUMMY B/L COPY BEFORE ISSUE ORIGINAL B/L NOTE : Plse Fax The Du mmy B/L First .

Certificate of Origin
The Certificate of Origin is required by the custom authority of the importing country for the purpose of imposing import duty. It is usually issued by the Chamber of Commerce and contains information like seal of the chamber, details of the good to be transported and so on.

The certificate must provide that the information required by the credit and be consistent with all other document, it would normally include:

The name of the company and address as exporter. The name of the importer. Package numbers, shipping marks and description of goods to agree with that on other documents. Any weight or measurements must agree with those shown on other documents. It should be signed and stamped by the Chamber of Commerce.

FORMAT OF CERTIFICATE OF ORIGIN:

GOOD LUCK STEEL TUBES LTD. "GOOD LUCK HOUSE" AMBEDKAR ROAD GHAZIABAD -201 001 (U.P.) INDIA

M/S XYZ EXPORT PVT. LTD. ENGLAND

FROM WORKS AT SIKANDRABAD TO ICD TKD NEW DELHI TO ICD TKD NEW DELHI TO MUMBAI BY TRAIN THEN MUMBAI TO PORT OF FREETOWN BY SEA

1684 PCS ( 27 BUNDLES ) WELDED HOT DIPEED GALVANISED STEEL PIPES WITH BOTH END THREADED, ONE END SOCKETED AND OTHER END PROTECTED WITH PLASTIC P.V.C. CAP IN LENGTH OF 5.80 MTRS +- 50 MM.

"P"

19.115 MT. NT.WT. 19.085 MT.

GLST/ 20102011/ 12 05.02. 2010

AS PER PROFORMA INVOICE NUMBER GLST/20092010/12RR DATED 05.02.2010 ALL OTHER DETAILS ARE AS PER COMMERCIAL INVOICE NO. GLST/2010-2011/65 DATED 01.01.2010 WE HEREBY CERTIFY THAT THE GOODS ARE OF INDIAN ORIGIN

LIBERIA NEW DELHI 12.04.2010

APPLICATION FOR CERTIFICATE OF ORIGIN

Exporter

GOOD LUCK STEEL TUBES LTD. "GOOD LUCK HOUSE" AMBEDKAR ROAD GHAZIABAD -201 001 (U.P.) INDIA

Ref. No. GLST/2010-2010/12 DATED 05.02.2010

Dated 12.04.2010

To, The Secretary

DELHI CHAMBER OF COMMERCE

Consignee

M/S XYZ EXPORT PVT. LTD ENGLAND

49, RANI JHANSI ROAD, NEW DELHI 110055 PHONE : 3616421 , 3515828

Dear Sir, This is to request the favour of your issuing us Certificate of Origin (in.. .....5 COPIES..) in respect of the consignment particulars of which are given herwith Yours Sincerely Pre-Carriage by Vessel/Flight No. Port of Discharge Place of Receipt by pre-carrier

ICD, TKD, NEW DELHI

Port of Loading

Encl.

Signature of Exporter

1. COMMERCIAL INVOICE IN 5 COPIES

MUMBAI/ INDIA
Final Destination

FREETOWN
Marks & Nos./ Container No.

FREETOWN
No. & Kinds of Pkgs. Description of goods Quantity Remarks

1684 PCS ( 27 BUNDLES ) WELDED HOT DIPEED GALVANISED STEEL PIPES WITH BOTH END THREADED, ONE END SOCKETED AND OTHER END PROTECTED WITH PLASTIC P.V.C. CAP IN LENGTH OF 5.80 MTRS +- 50 MM.

1620 PCS

AS PER PROFORMA 05.02.2010

INVOICE

NUMBER

GLST/2009-2010/12RR

DATED

ALL OTHER DETAILS ARE AS PER COMMERCIAL INVOICE NO. INVOICE NO. GLST/2010-2011/65 DATED 01.01.2010 WE HEREBY CERTIFY THAT GOODS ARE OF INDIAN ORIGIN IE CODE NO. 0593020707

Declaration by Exporter

Signature & Date

Combined Transport Document

Combined Transport Document is also known as Multimodal Transport Document, and is used when goods are transported using more than one mode of transportation. In the case of multimodal transport document, the contract of carriage is meant for a combined transport from the place of shipping to the place of delivery. It also evidence receipt of goods but it does not evidence on board shipment, if it complies with ICC 500, Arts 26(a). The liability of the combined transport operator starts from the place of shipment and ends at the place of delivery. This documents need to be signed with appropriate number of originals in the full set and proper evidence which indicates that transport charges have been paid or will be paid at destination port. Multimodal transport document would normally show:

That the consignee and notify parties are as the credit. The place goods are received, or taken in charges, and place of final destination. Whether freight is prepaid or to be collected. The date of dispatch or taking in charge, and the "On Board" notation, if any must be dated and signed. Total number of originals. Signature of the carrier, multimodal transport operator or their agents.

Commercial Invoice
Commercial Invoice document is provided by the seller to the buyer. Also known as export invoice or import invoice, commercial invoice is finally used by the custom authorities of the importer's country to evaluate the good for the purpose of taxation. The invoice must:

Be issued by the beneficiary named in the credit (the seller).

Be address to the applicant of the credit (the buyer). Be signed by the beneficiary (if required). Include the description of the goods exactly as detailed in the credit. Be issued in the stated number of originals (which must be marked "Original) and copies. Include the price and unit prices if appropriate. State the price amount payable which must not exceed that stated in the credit Include the shipping terms.

FORMAT OF COMMERCIAL INVOICE:

COMMERCIAL INVOICE
Exporter
Invoice No. & Date Exporter's ref.

GOOD LUCK STEEL TUBES LIMITED GOOD LUCK HOUSE AMBEDKAR ROAD GHAZIABAD - 201 001 (UP) INDIA
Consigne e

GLST/2010-2011/12 DATED 05.02.2010

Buyer's Order No. & Date

Other Reference(s)

P.I. NO. GLST/2009-2010/65 DATED 01.01.2010

Buyer (If other than consignee)

TO ORDER

M/S XYZ EXPORT PVT. LTD SIERRA LEONE

Country of Origin of goods

Country of Final Destination

INDIA
PreCarriage by Vessel/Flig ht No. Port of Discharge Place of Receipt by pre-carrier

SIERRA LEONE

ICD DADRI
Port of Loading

TERMS OF DELIVERY : CFR FREETOWN TERMS OF PAYMENT : FAX COPY OF DOCUMENTS

MUMBAI/INDIA
Final Destination

FREETOWN FREETOWN Marks & No. & Kinds of Pkgs. Nos./ Containe r No.
10 PALLETS (6620 SHEETS )

Description of goods

Quantity

Rate

Amount

COLD ROLLED GALVANISED NON ALLOY STEEL SHEETS (CORRUGATED) SIZE PALLETS NOS TOTAL NO OF SHEETS QUANTITY IN MTS. UNIT PRICE US $ PER MT. AMOUNT IN USD

0.30 MM X 762 MM X 2.44 MTRS 665 MM AFETR CORRUGATED

10

6620

26.885

126.00

3387.51

FREIGHT IN USD 1200/FCL TOTAL

Amount Chargeable (In words)

10

6620

26.885 TOTAL USD 3387.51

TOTAL CFR FREETOWN US DOLLARS THREE THOUSAND THREE HUNDRED EIGHTY SEVEN AND CENTS FIFTY ONE ONLY.

EXPORT UNDER DEPB SCHEME IN TERMS OF PARA 2.4 IMPORT-EXPORT POLICY 2004-2005, EXPORT UNDER

PASS BOOK SCHEME (POST EXPORT BASIS)

ITEM NET WT. (MT) C & F VALUE
FOB VALUE

SL. ON OF

DEPB RATE

IN USD IN USD
COLD ROLLED GALVANISED NON ALLOY STEEL SHEETS (CORRUGATED) TOTAL Declaratio n:
We declare that this Invoice shows that actual price of the goods described and that all particulars are true and correct.

DEPB RATE 329 5%

26.885 26.885

3387.51
3387.51

2187.51 2187.51

Signature & Date

Bill of exchange
A Bill of Exchange is a special type of written document under which an exporter ask importer a certain amount of money in future and the importer also agrees to pay the exporter that amount of money on or before the future date. This document has special importance in wholesale trade where large amount of money involved.

Following persons are involved in a bill of exchange: Drawer: The person who writes or prepares the bill. Drawee: The person who pays the bill. Payee: The person to whom the payment is to be made. Holder of the Bill: The person who is in possession of the bill.

On the basis of the due date there are two types of bill of exchange:

Bill of exchange after Date: In this case the due date is counted from the date of drawing and is also called bill after date.

Bill of exchange after Sight: In this case the due date is counted from the date of acceptance of the bill and is also called bill of exchange after sight.

FORMAT:

Bill of Exchange

02.07.2010
For EURO 13687.00 Drawn under IRREVOCABLE DOCUMENTARY CREDIT NUMBER R658769-H3 DATED 01100114 of XYZ BANK GERMANY At SIGHT Pay to this FIRST exchange (SECOND of the same tenor & date being unpaid) to the order of ING VYSYA BANK LTD., 30-

31, NAVYUG MARKET, GHAZIABAD 201001 (U.P.), INDIA the sum of EURO
THIRTEEN THOUSAND SIX HUNDRED EIGHTY SEVEN ONLY for the value received and charge the same to the account of our Invoice No. GLST/2010-2011/34 DATED 02.04.2010 Bill of Lading No.IR64378 DATED 25.05.2010

XYZ BANK

Insurance Certificate
Also known as Insurance Policy, it certifies that goods transported have been insured under an open policy and is not actionable with little details about the risk covered. It is necessary that the date on which the insurance becomes effective is same or earlier than the date of issuance of the transport documents.

Also, if submitted under a LC, the insured amount must be in the same currency as the credit and usually for the bill amount plus 10 per cent. The requirements for completion of an insurance policy are as follow:

The name of the party in the favor which the documents have been issued. The name of the vessel or flight details. The place from where insurance is to commerce typically the sellers warehouse or the port of loading and the place where insurance cases usually the buyer's warehouse or the port of destination.

Insurance value that specified in the credit. Marks and numbers to agree with those on other documents. The description of the goods, which must be consistent with that in the credit and on the invoice. The name and address of the claims settling agent together with the place where claims are payable. Countersigned where necessary.

Date of issue to be no later than the date of transport documents unless cover is shown to be effective prior to that date.

FORMAT OF INSURANCE CERTIFICATE:

9.6.2010 The Branch Manager ABC Insurance Co. Ltd. New Delhi Ref. : Dear Sir, Please cover our shipment as per detail herebelow under the above policy and issue the Insurance Certificate at the earliest : 1 2 3 4 5 6 INVOICE NO. GLST/2010-2011/138 DATED 11.06.2010 2011/045 DATED 05.04.2010 10,789.00 11,867.90 (Invoice Value + 10%) Rs. 557198 1800 PCS ( 20 BUNDLES) WELDED HOT DIPPED GALVANISED STEEL PIPE, BOTH ENDS PLAIN IN FIXED LENGTH OF 6 MTRS ( TOL: +/-50 MM), ACCORDING TO EN 10255 DELIVERY TERM: CFR CY/ CY ROTTERDAM, INCOTERMS 2000 FCL-FCL, INVOICING ON THEORETICAL WEIGHT. TOLERANCE: ON QUANTITY AND VALUE ON FROM FACTORY SIKANDRABAD (INDIA) TO ROTTERDAM (SELLER WAREHOUSE TO BUYER WAREHOUSE) EXPORT WORTHY PACKING IN 1 X 40' CONTAINER KIND ATTN. MR. G.P YADAV : MR. R.K. NAGPAL Open Marine Overseas Policy No. 573800/21/2010/11/011

INVOICE VALUE USD INSURED VALUE USD

PREMIUM QUANTITY COMMODITY

Rs.

8 9 10

L/C NO,. VOYAGE PACKING

We request you please provide us insurance certificate at the earliest. Thanking you. Yours faithfully, for GOOD LUCK STEEL TUBES LTD. DIRECTOR

Packing List
Also known as packing specification, it contains details about the packing materials used in the shipping of goods. It also includes details like measurement and weight of goods. The packing List must:

Have a description of the goods ("A") consistent with the other documents. Have details of shipping marks ("B") and numbers consistent with other documents

The purpose of the packing list

The packing list should be attached to the outside of a package in a waterproof envelope or plastic sheath marked "Packing list enclosed". The list is used by the shipper or forwarding agent to determine (1) the total shipment weight and volume and (2) whether the correct cargo is being shipped. In addition, customs officials (both local and foreign) may use the list to check the cargo. Packing lists come in fairly standard forms and can be obtained from your freight forwarder.

FORMAT:

PACKING LIST
Exporter
Invoice No. & Date

GOOD LUCK STEEL TUBES LIMITED GOOD LUCK HOUSE AMBEDKAR ROAD GHAZIABAD - 201 001 (UP) INDIA
Consignee

GLST/2010-2011/12 DATED 05.02.2010

Buyer's Order No. & Date Other Reference(s)

P.I. NO. GLST/2009-2010/65 DATED 01.01.2010

Buyer (If other than consignee)

TO ORDER

M/S XYZ EXPORT PVT. LTD. SIERRA LEONE

Country of Origin of goods Country of Final Destination

INDIA
Pre-Carriage by Vessel/Flight No. Port of Discharge Place of Receipt by pre-carrier

SIERRA LEONE

ICD DADRI
Port of Loading

TERMS OF DELIVERY : CFR FREETOWN TERMS OF PAYMENT : FAX COPY OF DOCUMENTS

MUMBAI/INDIA
Final Destination

FREETOWN FREETOWN Marks & No. & Kinds of Pkgs. Nos./ goods Container No.
10 PALLETS (6620 SHEETS )

Description of

Quantit y

Rem arks

COLD ROLLED GALVANISED NON ALLOY STEEL SHEETS (CORRUGATED) SIZE PALLETS NOS PCS PER PALLET
(NET WT) IN MT (GROSS WT) IN MT

0.30 MM X 762 MM X 2.44 MTRS 665 MM AFETR CORRUGATED

1 2 3 4 5 6 7 8 9 10

660 660 660 660 660 660 660 660 680 660

2.730 2.740 2.675 2.670 2.650 2.680 2.675 2.715 2.720 2.630

2.745 2.755 2.690 2.685 2.665 2.695 2.690 2.730 2.735 2.645

NET WEIGHT : GROSS WEIGHT:

26.885 27.035

MT MT

26.885 TOTAL 6620 10 27.035 EXPORT UNDER DEPB SCHEME IN TERMS OF PARA 2.4 IMPORT-EXPORT POLICY 2004-2005, EXPORT UNDER PASS BOOK SCHEME (POST EXPORT BASIS) ITEM NET WT. C&F FOB SL. ON DEPB (MT) VALUE VALUE OF RATE IN USD IN USD COLD ROLLED GALVANISED NON ALLOY STEEL SHEETS (CORRUGATED) TOTAL DEPB RATE

26.885

3387.51

2187.51

329

5%

26.885

3387.51

2187.51
Signature & Date

Inspection Certificate
Certificate of Inspection is a document prepared on the request of seller when he wants the consignment to be checked by a third party at the port of shipment before the goods are sealed for final transportation. In this process seller submit a valid Inspection Certificate along with the other trade documents like invoice, packing list, shipping bill, bill of lading etc to the bank for negotiation. On demand, inspection can be done by various world renowned inspection agencies on nominal charges.

PAYMENT METHODS IN EXPORT

There are 3 standard ways of payment methods in the export import trade international trade market:

1. Clean Payment 2. Collection of Bills 3. Letters of Credit L/C

1. Clean Payments
In clean payment method, all shipping documents, including title documents are handled directly between the trading partners. The role of banks is limited to clearing amounts as required. Clean payment method offers a relatively cheap and uncomplicated method of payment for both importers and exporters.

There are basically two types of clean payments:

A. Advance Payment
In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer.

B. Open Account
In open account method the importer is trusted to pay the exporter after receipt of goods.

The main drawback of open account method is that exporter assumes all the risks while the importer get the advantage over the delay use of company's cash resources and is also not responsible for the risk associated with goods.

2. Payment Collection of Bills in International Trade

The Payment Collection of Bills also called Uniform Rules for Collections is published by International Chamber of Commerce (ICC) under the document number 522 (URC522) and is followed by more than 90% of the world's banks.

In this method of payment in international trade the exporter entrusts the handling of commercial and often financial documents to banks and gives the banks necessary instructions concerning the release of these documents to the Importer. It is considered to be one of the cost effective methods of evidencing a transaction for buyers, where documents are manipulated via the banking system.

There are two methods of collections of bill:

A. Documents Against Payment D/P

In this case documents are released to the importer only when the payment has been done.

B. Documents Against Acceptance D/A

In this case documents are released to the importer only against acceptance of a draft.

3. Letter of Credit L/C

Brief History:

The term Letter of Credit was perhaps first of all used with Travelers Letter Of Credit issued by banks to facilitate their preferred (valued) clients with the means of obtaining cash from their correspondent / Agent banks situated abroad for use during their foreign travel and also for minimizing the need of carrying huge sums of money, in order to avoid the risk of loss or robbery. Such Travelers Letter of Credit addressed to correspondent or agent banks indicated that, in consideration of this facility of cash payment, the issuing bank would pay bills of exchange drawn by the correspondent / agent

bank along with their processing charges. Such Travelers Letter of credit also had a maximum amount and expiry date available under the credit and each agent was required to indicate details of amounts paid and the dates so that the next correspondent / agent can ascertain the balance available to be drawn.

The Documentary Credit Specialist here played a very important role, they were used to check the origin of Letter Of Credit as per the letter provided by issuing bank stating the basis, on which credit is to be provided along with the information saying, how to obtain reimbursement from the issuing bank. Such Documentary

Credit in its modern form appeared as a first vehicle for effecting payments under foreign trade transactions among banks in 1840s. It may well be, either as a result of their personal contacts or their business deals that in order to fulfill each other needs more movement of goods had been seen since that time between two countries, that has given a great push to international trade. The movement of such goods from one country to another is more complicated than buying them from local market and more often it requires documents for transportation of goods and making payments across borders. Therefore it can be concluded here that International Trade involves various complexities and problems, which may be arise because of following reasons: The parties to a sale contract are located in different countries and are governed by different legal systems. Currencies of the two countries are different. Trade and exchange regulations applicable to both the parties are different.

In such a situation, a seller who ships goods will be apprehensive whether he will receive payment from buyer. The buyer on the other hand will be concerned whether the seller will ship the goods ordered for and deliver them in time. Given these complexities and problems, a need for an ideal method of settling international trade payments was felt and so came the usage of Documentary Credits, commonly known as Letter of Credits [LC]. Even this arrangement, initially created discomfiture as parties involved in the transaction have been using different terminologies or we can say interpreting the arrangements in different ways. Subsequently, ICC came up with a set of guidelines in the name of Uniform Customs and Practice for Documentary Credits (UCPDC) to facilitate uniform interpretation of terminology used under documentary credit by all the concerned. The UCP first appeared in 1933 and since then is getting revised with the experiences gained from time to time. The latest Version that is in use till June 2007 came in 1993 under publication no 500 and now the upcoming UCP version is available under publication no 600, which will be applicable from 1st July 2007. The UCPDC has also attained universal acceptance and the local courts too are referring it for settling trade disputes.

UCP 600-

UCP stands for Uniform Custom and Practice for Documentary Credit.
UCP 600 is the latest revision of the Uniform Customs and Practice that govern the operation of letters of credit. UCP 600 comes into effect on 01 July 2007

The 39 articles of UCP 600 are a comprehensive and practical working aid to bankers, lawyers, importers, exporters, transport executives, educators everyone involved in letter of credit transactions worldwide.

Various types of L/Cs are:

Various types of LCs are in operation based upon the need, nature and function. Such LCs are categorized as under:

Based on Scope for cancellation:

Revocable Letter of credit: A revocable letter of credit is the one which can be revoked (either canceled
or amended) by the issuing bank without giving any prior notice to any of the parties involved. A

revocable letter of credit is disadvantageous from the exporters point of view. By opening a revocable LC, the issuing bank does not make a definite undertaking to make payment to the exporter. However, if

a nominated bank has made payment to the beneficiary, prior to receipt of the notice of cancellation or amendment, then the issuing bank will be responsible to reimburse the claim. If a LC is revocable it would be referenced on its face. Irrevocable Letter of Credit: Almost all the LCs opened in the course of international trade are irrevocable LCs. Cancellation or any amendment to such an LC cannot be made without the prior acceptance of all the parties concerned. An irrevocable LC is more desirable from the exporters point of view. Confirmed Letter of credit: Here, in addition to the issuing bank, another bank will add its confirmation to the LC. In other words, a confirmed LC will have the guarantee of not only the issuing bank but also of the confirming bank. It is important to mention here that only irrevocable letters of credit can be confirmed. The confirming bank will add its confirmation only if requested by the issuing bank. Confirming banks are usually located in the country of the beneficiary. Such LCs works for the

convenience of the beneficiary, as he will have to deal with a local bank rather than a bank situated in another country.

Based on Tenor:
Sight Credit: When the payment is made either on demand or presentation, such a credit is called as sight credit. Drawing of drafts is not compulsory under sight credit. Usance Credit: It is also referred as Term credit. This credit requires draft to be drawn on the drawee or specified bank indicating the tenor. Such drafts will be accepted by the drawee and paid for at the end of the usance period.

Based on mode of payment:

Payment Credit: Under this credit, payment will be made to the beneficiary on submission of the required documents provided they are in compliance with the LC terms and conditions. Also under payment credit, the issuing bank, nominates a bank in the exporters country (which is generally a
correspondent bank of issuing bank in that country) to effect payment on its behalf if the documents are in

conformity with the LC. Such correspondent bank later gets reimbursement from issuing bank. Deferred Payment Credit: This type of credit is a usance credit, where payment is made on the due dates specified in the credit. However, under this credit, the maturity date and how it is determined should be clearly indicated. In such credits the drawee bank itself may draw promissory notes and pass on to the beneficiary for claiming payments on the due dates. Acceptance Credit: This credit is also a usance credit, where it is mandatory for the beneficiary to draw a draft on the drawee or specified bank for a specified tenor. The drawee bank will accept such drafts and make payment on the respective due dates on presentation of relevant bill of exchange. Negotiation Credit: This credit may be a sight credit or a usance credit. Under a sight credit, payment is made immediately, while under a usance credit payment is made after a specific tenor. A negotiation credit mat be freely negotiable in which case the beneficiary may approach any bank for presentation of documents. This implies that when a credit is freely negotiable, any bank is a nominated bank.

On the other hand, when a credit is restricted for negotiation, the issuing bank authorizes certain specified bank as the nominated bank. In such a case, the beneficiary is required to present the stipulated documents only to such banks as they alone are authorized to negotiate the documents under LC.

Parties to Letters of Credit A. Applicant (Opener): Applicant which is also referred to as account party is normally a buyer or
customer of the goods, who has to make payment to beneficiary. LC is initiated and issued at his request and on the basis of his instructions.

B. Issuing Bank (Opening Bank): The issuing bank is the one which create a letter of credit and
takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker. The payment has to be made to the beneficiary within seven working days from the date of receipt of documents at their end, provided the documents are in accordance with the terms and conditions of the letter of credit. If the documents are discrepant one, the rejection thereof to be communicated within seven working days from the date of receipt of documents at their end.

C. Beneficiary: Beneficiary is normally stands for a seller of the goods, who has to receive
payment from the applicant. A credit is issued in his favor to enable him or his agent to obtain payment on surrender of stipulated document and comply with the term and conditions of the L/C If L/C is a transferable one and he transfers the credit to another party, then he is referred to as the first or original beneficiary.

C. Advising Bank: An Advising Bank provides advice to the beneficiary and takes the responsibility
for sending the documents to the issuing bank and is normally located in the country of the beneficiary.

D. Confirming Bank: Confirming bank adds its guarantee to the credit opened by another bank,
thereby undertaking the responsibility of payment/negotiation acceptance under the credit, in additional to that of the issuing bank. Confirming bank play an important role where the exporter is not satisfied with the undertaking of only the issuing bank.

E. Negotiating Bank: The Negotiating Bank is the bank who negotiates the documents submitted to
them by the beneficiary under the credit either advised through them or restricted to them for negotiation. On negotiation of the documents they will claim the reimbursement under the credit and makes the payment to the beneficiary provided the documents submitted are in accordance with the terms and conditions of the letters of credit.

F. Reimbursing Bank: Reimbursing Bank is the bank authorized to honor the reimbursement claim
in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank. It is normally the bank with which issuing bank has an account from which payment has to be made.

G. Second Beneficiary: Second Beneficiary is the person who represents the first or original
Beneficiary of credit in his absence. In this case, the credits belonging to the original beneficiary is transferable. The rights of the transferee are subject to terms of transfer.

Rights and Responsibilities of parties involved in LC

The rights and responsibilities of every party associated with an LC have been defined in the UCPDC 500. It is necessary for every party dealing with an LC, to keep himself informed about these responsibilities. All parties dealing with an LC are dealing only with documents and not with good/ services, or

performances to which the documents may relate.

Exporter / beneficiary of LC have a right to receive payment against submission of prescribed

documents under the LC. It is the exporters duty to ship the goods and submit the documents within the stipulated time for negotiation. Negotiating Bank: Once documents under the LC are submitted, the negotiating bank has to

ascertain that they appear on their face to be in accordance with the terms and conditions of credit and if found agreeable, should effect payment as per the LC terms and dispatch documents to the opening bank as instructed. Once the amount under the LC is paid to the beneficiary, the negotiating

bank is entitled to get reimbursement from the opening bank, provided that the documents are in conformity with the LC terms and conditions. Opening Bank: Once documents under the LC are received from the negotiating bank, it should

scrutinize them, within 7 days from the date of receipt. If it finds any discrepancy, it must convey the same to the negotiating bank through the fastest means available, advising that, it is holding documents in want of disposal instructions. Advising Bank: Once LC opening instructions are received from the opening bank, the advising

bank should, if it so desires to act as advising bank, verify the authenticity of the LC and advise the beneficiary about the LC and its terms. It is entitled to receive advising charges for having advised the LC from the LC opening bank. Confirming bank: If, at the request of the issuing bank, the advising bank chooses to add its

conformity to the LC, it is taking upon itself, the responsibility of paying the beneficiary against the presentation of stipulated documents. Upon payment, it is entitled to receive reimbursement from the issuing bank. It is also entitled to receive confirmation charges. Applicant to the LC: The importer is responsible for making payment under the LC, against

release of stipulated documents, to the opening bank.

How a Letter of Credit Operates?

The following step by step procedure is required to execute a LC:

Buyer and seller enter in to a contract for goods and/or services. The seller wants a letter of credit to ensure payment for goods and/or services.

Buyer applies to his bank to open a LC in favor of seller. Buyers bank issues and forwards the LC to its Advising bank (Correspondent). This Advising bank is usually located in the sellers country.

Advising bank checks for the authenticity of LC and forward the original LC to the seller. Seller ships the goods and prepares the required documents. Seller presents the required documents to the Nominated or Confirming bank to be processed for payment.

Nominated or Confirming bank examines the documents for compliance with the terms and conditions stated in the LC.

Nominated or Confirming bank will forward the documents to the issuing bank

If the documents of credit are in compliance with terms and conditions, the Nominated or Confirming bank will claim the funds either by: o Debiting the account of Issuing Bank. o Claim funds from Issuing Bank. o Claim for Reimbursing Bank

Issuing bank will examine the documents for compliance and forward the same against payment.

Summary of procedure for LC operation

Source: CDCS Study book [By Institute of Financial Services]

FORMAT OF LETTER OF CREDIT:

FINANCE FROM BANKS AND FINANCIAL INSTITUTIONS

BANK GUARANTEE: Introduction

A bank guarantee is a written contract given by a bank on the behalf of a customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if it is not paid by the customer on whose behalf the guarantee has been issued. In return, a bank gets some commission for issuing the guarantee.

Any one can apply for a bank guarantee, if his or her company has obligations towards a third party for which funds need to be blocked in order to guarantee that his or her company fulfills its obligations (for example carrying out certain works, payment of a debt, etc.).

In case of any changes or cancellation during the transaction process, a bank guarantee remains valid until the customer dully releases the bank from its liability.

In the situations, where a customer fails to pay the money, the bank must pay the amount within three working days. This payment can also be refused by the bank, if the claim is found to be unlawful.

Benefits of Bank Guarantees:

For Government 1. Increases the rate of private financing for key sectors such as infrastructure. 2. Provides access to capital markets as well as commercial banks. 3. Reduces cost of private financing to affordable levels. 4. Facilitates privatizations and public private partnerships. 5. Reduces government risk exposure by passing commercial risk to the private sector.

For Private Sector 1. Reduces risk of private transactions in emerging countries. 2. Mitigates risks that the private sector does not control.

3. Opens new markets. 4. Improves project sustainability. Legal Requirements Bank guarantee is issued by the authorized dealers under their obligated authorities notified vide FEMA 8/ 2000 dated 3rd May 2000. Only in case of revocation of guarantee involving US $ 5000 or more need to be reported to Reserve Bank of India (RBI).

Types of Bank Guarantees:

1. Direct or Indirect Bank Guarantee: A bank guarantee can be either direct or indirect.

Direct Bank Guarantee It is issued by the applicant's bank (issuing bank) directly to the guarantee's
beneficiary without concerning a correspondent bank. This type of guarantee is less expensive and is also subject to the law of the country in which the guarantee is issued unless otherwise it is mentioned in the guarantee documents.

Indirect Bank Guarantee With an indirect guarantee, a second bank is involved, which is basically a
representative of the issuing bank in the country to which beneficiary belongs. This involvement of a second bank is done on the demand of the beneficiary. This type of bank guarantee is more time consuming and expensive too. 2. Confirmed Guarantee It is cross between direct and indirect types of bank guarantee. This type of bank guarantee is issued directly by a bank after which it is send to a foreign bank for confirmations. The foreign banks confirm the original documents and thereby assume the responsibility. 3. Tender Bond This is also called bid bonds and is normally issued in support of a tender in international trade. It provides the beneficiary with a financial remedy, if the applicant fails to fulfill any of the tender conditions.

4. Performance Bonds this is one of the most common types of bank guarantee which is used to secure the completion of the

contractual responsibilities of delivery of goods and act as security of penalty payment by the Supplier in case of non-delivery of goods.

5. Advance Payment Guarantees This mode of guarantee is used where the applicant calls for the provision of a sum of money at an early stage of the contract and can recover the amount paid in advance, or a part thereof, if the applicant fails to fulfill the agreement.

6. Payment Guarantees This type of bank guarantee is used to secure the responsibilities to pay goods and services. If the beneficiary has fulfilled his contractual obligations after delivering the goods or services but the debtor fails to make the payment, then after written declaration the beneficiary can easily obtain his money from the guaranteeing bank.

7. Loan Repayment Guarantees this type of guarantee is given by a bank to the creditor to pay the amount of loan body and interests in case of non fulfillment by the borrower.

8. B/L Letter of Indemnity this is also called a letter of indemnity and is a type of guarantee from the bank making sure that any kind of loss of goods will not be suffered by the carrier.

9. Rental Guarantee This type of bank guarantee is given under a rental contract. Rental guarantee is either limited to rental payments only or includes all payments due under the rental contract including cost of repair on termination of the rental contract.

10. Credit Card Guarantee

Credit card guarantee is issued by the credit card companies to its customer as a guarantee that the merchant will be paid on transactions regardless of whether the consumer pays their credit.

How to Apply for Bank Guarantee

Procedure for Bank Guarantees is very simple and is not governed by any particular legal regulations. However, to obtained the bank guarantee one need to have a current account in the bank. Guarantees can be issued by bank through its authorized dealers as per notifications mentioned in the FEMA 8/2000 date 3rd May 2000. Only in case of revocation of guarantee involving US $ 5000/ or more to be reported to Reserve Bank of India along with the details of the claim received.

Bank Guarantees vs. Letters of Credit

A bank guarantee is frequently confused with letter of credit (LC), which is similar in many ways but not the same thing. The basic difference between the two is that of the parties involved. In a bank guarantee, three parties are involved; the bank, the person to whom the guarantee is given and the person on whose behalf the bank is giving guarantee. In case of a letter of credit, there are normally four parties involved; issuing bank, advising bank, the applicant (importer) and the beneficiary (exporter).

Also, as a bank guarantee only becomes active when the customer fails to pay the necessary amount where as in case of letters of credit, the issuing bank does not wait for the buyer to default, and for the seller to invoke the undertaking

INCOTERMS:

Incoterms or international commercial terms are a series of international sales

terms, published by

International Chamber of Commerce (ICC) and widely used in international commercial transactions. They are used to divide transaction costs and responsibilities between buyer and seller and reflect state-of-the-art transportation practices. They closely correspond to the U.N. Convention on Contracts for the International Sale of Goods. The first version was introduced in 1936 and the present dates from 2000. Notes on Incoterms 1. Underlying ContractIncoterms were designed to be used within the context of a written contract for the sale of goods. Incoterms, therefore, refer to the contract of sale, rather than the contract of carriage of the goods. Buyers and sellers should specify that their contract be governed by Incoterms 2000. 2. EXW and FCAIf you buy Ex Works or Free Carrier you will need to arrange for the contract of carriage. Also, since the shipper will not receive a bill of lading, using a letter of credit requiring a bill of lading will not be possible. 3. EDI: Electronic Data InterchangeIt is increasingly common for sellers to prepare and transmit documents electronically. Incoterms provides for EDI so long as buyers and sellers agree on their use in the sales contract. 4. Insurable InterestNote that in many cases either the buyer or the seller is not obligated to provide insurance. In a number of cases neither party is obligated to provide insurance. However, both the seller and buyer should be aware that they may have insurable interest in the goods and prudence dictates purchase of insurance coverage. 5. Customs of the Port or TradeIncoterms are an attempt to standardize trade terms for all

nations and all trades. However, different ports and different trades have their own customs and practices. It is best if specific customs and practices are specified in the sales contract. 6. Precise Point of DeliveryIn some cases it may not be possible for the buyer to name the precise point of delivery at contract. However, if the buyer does not do so in a timely manner, it may give the seller the option to make delivery within a range of places that is within the terms of the contract. For example, the original terms of sale may state CFR Port of Rotterdam. The Port of Rotterdam is huge and the buyer may find that a particular point within the port is best and should so state in the sales contract and in the trade term. Also, since the buyer becomes liable for the goods once they arrive, he or she may be responsible for unloading, storage and other charges once the goods have been made available at the place named. 7. Export and Import Customs ClearanceIt is usually desirable that export customs formalities be handled by the seller and import customs formalities be handled by the buyer. However, some trade terms require that the buyer handle export formalities and others require that the seller handle import formalities. In each case the buyer and seller will have to assume risk from export and import restrictions and prohibitions. In some cases foreign exporters may not be able to obtain import licenses in the country of import. This should be researched before accepting final terms. 8. Added WordingIt is possible, and in many cases desirable, that the seller and buyer agree to additional wording to an Incoterm. For example, if the seller agrees to DDP terms, agreeing to pay for customs formalities and import duties, but not for VAT (Value Added Taxes) the term DDP VAT Unpaid may be used. 9. PackingIt is the responsibility of the seller to provide packaging unless the goods shipped are customarily shipped in bulk (usually commodities such as oil or grain). In most situations it is best if the buyer and seller agree in the sales contract on the type and extent of packing required. However, it may not be possible to know beforehand the type or duration of transport. As a result, it is the responsibility of the seller to provide for safe and appropriate packaging, but only to the extent that the buyer has made the circumstances of the transport known to the seller beforehand. If the seller is responsible for packing goods in an ocean or air freight container it is also his responsibility to pack the container properly to withstand shipment. 10. InspectionThese are several issues related to inspections: a) the seller is responsible for

costs of inspection to make certain the quantity and quality of the shipment is in conformity with the sales contract, b) pre-shipment inspections as required by the export authority are the responsibility of the party responsible for export formalities, c) import inspections as required by the import authority are the responsibility of the party responsible for import formalities, and d) third-party inspections for independent verification of quality and quantity (if required) are generally the responsibility of the buyer. The buyer may require such an inspection and inspection document as a condition of payment. 11. Passing of Risks and Coststhe general rule is that risks and costs pass from the seller to the buyer once the buyer has delivered the goods to the point and place named in the trade term.

TERMS EXPLANATION:

Group F Main carriage unpaid

FCA Free Carrier (named place) The seller hands over the goods, cleared for export, into the custody of the first carrier (named by the buyer) at the named place. This term is suitable for all modes of transport, including carriage by air, rail, road, and containerized / multi-modal transport. FAS free alongside Ship (named loading port) The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export; this changed in the 2000 version of the Incoterms. Suitable for maritime transport only. FOB Free on board (named loading port) The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. Maritime transport only. It also includes Air transport when the seller is not able to export the goods on the schedule time mentioned in the letter of credit. In this case the seller allows a deduction of sum equivalent to the carriage by ship from the air carriage.

Group C Main carriage paid

CFR or CNF Cost and Freight (named destination port) Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Maritime transport only.

CIF Cost, Insurance and Freight (named destination port) Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. Maritime transport only. CPT Carriage Paid To (named place of destination)

The general/containerized/multimodal equivalent of CFR. The seller pays for carriage to the named point of destination, but risk passes when the goods are handed over to the first carrier. CIP Carriage and Insurance Paid (To) (named place of destination) The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

Group D Arrival
DAF Delivered At Frontier (named place) This term can be used when the goods are transported by rail and road. The seller pays for transportation to the named place of delivery at the frontier. The buyer arranges for customs clearance and pays for transportation from the frontier to his factory. The passing of risk occurs at the frontier. DES Delivered Ex Ship (named port) Where goods are delivered ex ship, the passing of risk does not occur until the ship has arrived at the named port of destination and the goods made available for unloading to the buyer. The seller pays the same freight and insurance costs as he would under a CIF arrangement. Unlike CFR and CIF terms, the seller has agreed to bear not just cost, but also Risk and Title up to the arrival of the vessel at the named port. Costs for unloading the goods and any duties, taxes, etc are for the Buyer. A commonly used term in shipping bulk commodities, such as coal, grain, dry chemicals - - - and where the seller either owns or has chartered, their own vessel. DEQ Delivered Ex Quay (named port) This is similar to DES, but the passing of risk does not occur until the goods have been unloaded at the port of destination. DDU Delivered Duty Unpaid (named destination place) This term means that the seller delivers the goods to the buyer to the named place of destination in the contract of sale. The goods are not cleared for import or unloaded from any form of transport at the place of destination. The buyer is responsible for the costs and risks for the unloading, duty and any subsequent delivery beyond the place of destination. However, if the buyer wishes the seller to bear cost

and risks associated with the import clearance, duty, unloading and subsequent delivery beyond the place of destination, then this all needs to be explicitly agreed upon in the contract of sale. DDP Delivered Duty Paid (named destination place) This term means that the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty. Also used interchangeably with the term "Free Domicile". The most comprehensive term for the buyer. In most of the importing countries, taxes such as (but not limited to) VAT and excises should not be considered prepaid being handled as a "refundable" tax. Therefore VAT and excises usually are not representing a direct cost for the importer since they will be recovered against the sales on the local (domestic) market.

RISK INVOLVED IN EXPORT

1. TRADE TRANSPORT RISK: Introduction

It is quite important to evaluate the transportation risk in international trade for better financial stability of export business. About 80% of the world major transportation of goods is carried out by sea, which also gives rise to a number of risk factors associated with transportation of goods. The major risk factors related to shipping are cargo, vessels, people and financing. So it becomes necessary for the government to address all of these risks with broad based security policy responses, since simply responding to threats in isolation to one another can be both ineffective and costly.

While handling transportation in international trade following precaution should be taken into consideration.

In case of transportation by ship, and the product should be appropriate for containerization. It is worth promoting standard order values equivalent to quantities loaded into standard size containers.

Work must be carried out in compliance with the international code concerning the transport of dangerous goods.

For better communication purpose people involve in the handling of goods should be equipped with phone, fax, email, internet and radio.

About the instructions given to the transport company on freight forwarder. Necessary information about the cargo insurance. Each time goods are handled; there risk of damage. Plan for this when packing for export, and deciding on choice of transport and route.

The expected sailing dates for marine transport should be built into the production programme, especially where payments is to be made by Letter of Credit when documents will needs to be presented within a specified time frame.

Choice of transport has Balance Sheet implications. The exporter is likely to received payments for goods supplied while they are in transit.

Driver accompanied road transport provides peace of minds, but the ability to fill the return load will affect pricing.

Transport Insurance
Export and import in international trade, requires transportation of goods over a long distance. No matter whichever transport has been used in international trade, necessary insurance is must for ever good. Cargo insurance also known as marine cargo insurance is a type of insurance against physical damage or loss of goods during transportation. Cargo insurance is effective in all the three cases whether the goods have been transported via sea, land or air. Insurance policy is not applicable if the goods have been found to be packaged or transported by any wrong means or methods. So, it is advisable to use a broker for placing cargo risks.

Scope of Coverage
The following can be covered for the risk of loss or damage:

Cargo import, export cross voyage dispatched by sea, river, road, rail post, personal courier, and including associated storage risks.

Good in transit (inland). Freight service liability. Associated stock.

However there is still a number of general exclusion such loss by delay, war risk, improper packaging and insolvency of carrier. Converse for some of these may be negotiated with the insurance company. The Institute War Clauses may also be added. Regular exporters may negotiate open cover. It is an umbrella marine insurance policy that is activated when eligible shipments are made. Individual insurance certificates are issued after the shipment is made. Some

letters of Credit will require an individual insurance policy to be issued for the shipment, while others accept an insurance certificate.

Specialist Covers
Whereas standard marine/transport cover is the answer for general cargo, some classes of business will have special requirements. General insurer may have developed specialty teams to cater for the needs of this business, and it is worth asking if this cover can be extended to export risks. Cover may be automatically available for the needs of the trade.

Example of this are:

Project Constructional works insurers can cover the movement of goods for the project. Fine art Precious stones Special Cover can be extended to cover sending of precious stones. Stock through put cover extended beyond the time goods are in transit until when they are used at the destination.

Seller's Buyer's Contingent Interest Insurance

An exporter selling on, for example FOB (INCOTERMS 2000) delivery terms would according to the contract and to INCOTERMS, have not responsibility for insurance once the goods have passed the ship's rail. However, for peace of mind, he may wish to purchase extra cover, which will cover him for loss or will make up cover where the other policy is too restrictive. This is known as Seller's Interest Insurance. Similarly, cover is available to importers/buyers. Seller's Interest and Buyer's Interest covers usually extended cover to apply if the title in the goods reverts to the insured party until the goods are recovered resold or returned.

Loss of Profits/ Consequential Loss Insurance

Importers buying goods for a particular event may be interested in consequential loss cover in case the goods are late (for a reason that id insured) and (expensive) replacements have to be found to replace them. In such cases, the insurer will pay a claim and receive May proceeds from the eventual sale of the delayed goods.

2.

CREDIT RISK:

Introduction
Contract risk and credit risk are the part of international trade finance and are quite different from each other. A contract risk is related to the Latin law of "Caveat Emptor", which means "Buyer Beware" and refers directly to the goods being purchase under contract, whether it's a car, house land or whatever. On the other hand a credit risk may be defined as the risk that a counter party to a transaction will fail to perform according to the terms and conditions of the contract, thus causing the holder of the claim to suffer a loss.Banks all over the world are very sensitive to credit risk in various financial sectors like loans, trade financing, foreign exchange, swaps, bonds, equities, and inter-bank transactions.

Credit Insurance
Credit Insurance is special type of loan which pays back a fraction or whole of the amount to the borrower in case of death, disability, or unemployment. It protects open account sales against nonpayment resulting from a customer's legal insolvency or default. It is usually required by manufacturers and wholesalers selling products on credit terms to domestic and/or foreign customers.

Benefits of Credit Insurance:

1. Expand sales to existing customers without increased risk. 2 Offer more competitive credit terms to new customers in new markets. 3. Help protect against potential restatement of earnings. 4. Optimize bank financing by insuring trade receivables. 5. Supplement credit risk management.

Payment Risk
This type of risk arises when a customer charges in an organization or if he does not pay for operational reasons. Payment risk can only be recovered by a well written contract. Recovery cannot be made for payment risk using credit insurance.

Bad Debt Protection

A bad debt can affect profitability. So, it is always good to keep options ready for bad debt like Confirmation of LC, debt purchase (factoring without recourse of forfeiting) or credit insurance.

Confirmation of LC
In an international trade, the confirmation of letter of credit is issued to an exporter or seller. This confirmation letter assures payment to an exporter or seller, even if the issuing bank defaults on its payment once the beneficiary meets his terms and conditions.

Factoring and Forfeiting

Where debt purchase is without recourse, the bank will already have advanced the funds in the debt purchase transaction. The bank takes the risk of nonpayment.

Credit Limit
Companies with credit insurance need to have proper credit limits according to the terms and conditions. This includes fulfilling the administrative requirement, including notification of overdoes and also terms set out in the credit limit decision.

Payment of the claim can only be done after a fix period, which is about 6 months for slow pay insurance. In case of economic and political events are six or more than six months, depending on the exporter market?

Credit insurance covers the risk of non-payment of trade debts. Each policy is different, some covering only insolvency risk on goods delivered, and others covering a wide range of risk such as:

Local sales, export sales, or both. Protracted default. Political risk, including contract frustration, war transfer. Pre-delivery risks. Cover for sales from stock. Non -honoring of letters of credits. Bond unfair calling risks.

Like all other insurance, credit insurance covers the risk of fortuitous loss. Key features of credit insurance are:

The company is expected to assess that its client exists and is credit worthy. This might be by using a credit limit service provided by the insurer. A Credit limit Will to pay attention to the company's credit management procedures, and require that agreed procedures manuals be followed at all times.

While the credit insurer underwrites the risk of non-payment and contract frustration the nature of the risk is affected by how it is managed. The credit insurer is likely to pay attention to the company's credit managements procedures, and require that agreed procedures manuals be followed at all times.

The credit insurer will expect the sales contract to be written effectively and invoices to be clear. The company will be required to report any overdue or other problems in a timely fashion. The credit insurer may have other exposure on the same buyers or in the same markets. A company will therefore benefit if other policyholder report that a particular potential customer is in financial difficulties.

In the event that the customer does not pay, or cannot pay, the policy reacts. There may be a waiting period to allow the company to start collection procedures, and to resolve nay quality disputes.

Many credit insurers contribute to legal costs, including where early action produces a full recovery and avoids a claim.

Benefits of Credit Cover

Protection for the debtor asset or the balance sheet. Possible access to information on credit rating of foreign buyer. Access to trade finance Protection of profit margin Advice on customers and levels of credit. Disciplined credit management. Assistance and /or advice when debts are overdue or there is a risk of loss. Provides confidence to suppliers, lenders and investors. Good corporate governance.

3.

COUNTRY POLITICAL RISK:

Introduction

Country risk includes a wide range of risks, associated with lending or depositing funds, or doing other financial transaction in a particular country. It includes economic risk, political risk, currency blockage, expropriation, and inadequate access to hard currencies. Country risk can adversely affect operating profits as well as the value of assets. With more investors investing internationally, both directly and indirectly, the political, and therefore economic, stability and viability of a country's economy need to be considered.

Measuring Country Risk

Given below are the lists of some agencies that provide services in evaluating the country risk.

Bank of America World Information Services Business Environment Risk Intelligence (BERI) S.A. Control Risks Information Services (CRIS) Economist Intelligence Unit (EIU) Euro money Institutional Investor Standard and Poor's Rating Group Political Risk Services: International Country Risk Guide (ICRG) Political Risk Services: CoplinO'Leary Rating System Moody's Investor Services

Political Risk The risk of loss due to political reasons arises in a particular country due to changes in the country's political structure or policies, such as tax laws, tariffs, expropriation of assets, or restriction in repatriation of profits. Political risk is distinct from other commercial risks, and tends to be difficult to evaluate. Some examples of political risks are:

Contract frustration by another country, government resulting in your inability to perform the contract, following which the buyer may not make payment and or / on demand bonds may be called.

Government buyers repudiating the contract this may be occur if there is a significant political or economic change within the customer's country.

License cancellation or non renewal or imposition of an embargo. Sanctions imposed against a particular country or company. Imposition of exchange controls causing payments to be blocked. General moratorium decreed by an overseas government preventing payment Shortage of foreign exchange/transfer delay. War involving either importing or exporting country. Forced abandonment Revoking of Import/ Exports license.

Insurance companies provide political risk covers. These may be purchased:

On their own, covering only political risk on the sale to a particular country. For a portfolio of political risks. For the political risks in relation to the sale to another company in your group (where there is a common shareholding and therefore insolvency cover is not available).

As part of a credit insurance policy.

Pre-Delivery Risks
A company can suffer financial loss, if export contract is cancelled due to commercial or political reasons, even before the goods and services are dispatched or delivered. In such a situation, the exposure to loss will depends on:

The nature of the contract. If the company can salvage any products and resell them quickly, with a small amount of re working Any stage payments If servicing staff have left the country. The extent of the commitments to suppliers. The horizon of pre delivery risk The customer and country risks

Pre Delivery Cover

Credit insurance can be extended to cover pre-delivery risk, in particular, the risk of customer insolvency predelivery or political frustration pre-delivery. Sometimes pre delivery cover can be extended included the

frustration of a contract caused by non-payment of a pre delivery milestone, and or non- payment of a termination account, and or bond call.

Pre-delivery risks are often complicated and the wording of the cover is worth careful examination. It is to be noted that in the event that it was clearly unwise to dispatch goods, credit risk (payment risk) cover would not automatically apply if the company nonetheless went ahead and dispatched head them.

Binding contracts cover and Non-Cancelable Limits

Binding contracts cover and non-cancelable limits are not included in pre-delivery cover. However, they provide a commitment from the credit insurer that the cover for dispatches / invoices will not be withdrawn without a prior notice. If the company's customer is overdue, or it is imprudent to dispatch, there is no credit insurance cover for dispatches subsequently made, even where the company holds binding contract cover or non-cancelable limits.

4. FOREIGN EXCHANGE RISK CURRENCY RISK- Currency risk is a form of risk that arises from the change in price of one currency
against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Transaction risk is the risk that exchange rates will change unfavorably over time. It can be hedged against using forward currency contracts;

Translation risk is an accounting risk, proportional to the amount of assets held in foreign currencies. Changes in the exchange rate over time will render a report inaccurate, and so assets are usually balanced by borrowings in that currency.

The exchange risk associated with a foreign denominated instrument is a key element in foreign investment. This risk flows from differential monetary policy and growth in real productivity, which results in differential inflation rates. For example if you are a U.S. investor and you have stocks in Canada, the return that you will realize is affected by both the change in the price of the stocks and the change of the Canadian dollar against the U.S. dollar. Suppose that you realized a return in the stocks of 15% but if the Canadian dollar depreciated 15% against the U.S. dollar, you would make a small loss.

When a firm conducts transactions in different currencies, it exposes itself to risk. The risk arises because currencies may move in relation to each other. If a firm is buying and selling in different currencies, then revenue and costs can move upwards or downwards as exchange rates between currencies change. If a firm has borrowed funds in a different currency, the repayments on the debt could change or, if the firm has invested overseas, the returns on investment may alter with exchange rate movements this is usually known as foreign currency exposure.

Currency risk exists regardless of whether you are investing domestically or abroad. If you invest in your home country, and your home currency devalues, you have lost money. Any and all stock market investments are subject to currency risk, regardless of the nationality of the investor or the investment, and whether they are the same or different. The only way to avoid currency risk is to invest in commodities, which hold value independent of any monetary system.

A Foreign exchange hedge (FOREX hedge) is a method used by companies to eliminate or hedge foreign exchange risk resulting from transactions in foreign currencies. This is done using either the cash flow or the fair value method. The accounting rules for this are addressed by both the International Financial Reporting Standards (IFRS) and by the US Generally Accepted Accounting Principles (US GAAP).

Foreign Exchange Risk

The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced. For example, if an investor residing in the United States purchases a bond denominated in Japanese yen, deterioration in the rate at which the yen exchanges for dollars will reduce the investor's rate of return, since he or she must eventually exchange the yen for dollars. It is also called exchange rate risk. When companies conduct business across borders, they must deal in foreign currencies . Companies must exchange foreign currencies for home currencies when dealing with receivables, and vice versa for payables. This is done at the current exchange rate between the two countries. Foreign exchange risk is the risk that the exchange rate will change unfavorably before the currency is exchanged.

EXPORT IMPORT (EXIM) POLICY FOR EXPORT BUSINESS AND INCENTIVES: Introduction
Export Import Policy or better known as Exim Policy is a set of guidelines and instructions related to the import and export of goods. The Government of India notifies the Exim Policy for a period of five years (1997 2002) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current policy covers the period 2002 2007. The Export Import Policy is updated every year on the 31st of March and the modifications, improvements and new schemes became effective from 1st April of every year. All types of changes or modifications related to the Exim Policy is normally announced by the Union Minister of Commerce and Industry who coordinates with the Ministry of Finance, the Directorate General of Foreign Trade and its network of regional offices.

Highlight of Exim Policy 2002 - 07

1. Service Exports
Duty free import facility for service sector having a minimum foreign exchange earning of Rs. 10 lakhs. The duty free entitlement shall be 10% of the average foreign exchange earned in the preceding three licensing years. However, for hotels the same shall be 5 % of the average foreign exchange earned in the preceding three licensing years. Imports of agriculture and dairy products shall not be allowed for imports against the entitlement. The entitlement and the goods imported against such entitlement shall be non transferable.

2. Status Holders
1. Duty free import entitlement for status holder having incremental growth of more than 25% in FOB value of exports (in free foreign exchange). This facility shall however be available to status holder having a minimum export turnover of Rs. 25 crore (in free foreign exchange). 2. Annual Advance License facility for status holder to be introduced to enable them to plan for their imports of raw material and component on an annual basis and take advantage of bulk purchase. 3. Status holder in STPI shall be permitted free movement of professional equipments like laptop/computer.

3. Removal of Quantitative Restrictions

1. Import of 69 items covering animals products, vegetables and spice antibiotics and films removed from restricted list 2. Export of 5 items namely paddy except basmati, cotton linters, rare, earth, silk, cocoons, family planning device except condoms, removed from restricted list.

4. Special Economic Zones Scheme

1. Sales from Domestic Tariff Area (DTA) to SEZ to be treated as export. This would now entitle domestic suppliers to Duty Drawback / DEPB benefits, CST exemption and Service Tax exemption. 2. Agriculture/Horticulture processing SEZ units will now be allowed to provide inputs and equipments to contract farmers in DTA to promote production of goods as per the requirement of importing countries. 3. Foreign bound passengers will now be allowed to take goods from SEZs to promote trade, tourism and exports. 4. Domestic sales by SEZ units will now be exempt from SAD. 5. Restriction of one year period for remittance of export proceeds removed for SEZ units. 6. Netting of export permitted for SEZ units provided it is between same exporter and importer over a period of 12 months. 7. SEZ units permitted to take job work abroad and exports goods from there only. 8. SEZ units can capitalize import payables. 9. Wastage for sub contracting/exchange by gem and jewellery units in transactions between SEZ and DTA will now be allowed.

10. Export/Import of all products through post parcel /courier by SEZ units will now be allowed. 11. The value of capital goods imported by SEZ units will now be amortized uniformly over 10 years. 12. SEZ units will now be allowed to sell all products including gems and jewellery through exhibition and duty free shops or shops set up abroad. 13. Goods required for operation and maintenance of SEZ units will now be allowed duty free.

5. EOU Scheme
Provision b,c,i,j,k and l of SEZ (Special Economic Zone) scheme , as mentioned above, apply to Export Oriented Units (EOUs) also. Besides these, the other important provisions are:

1. EOUs are now required to be only net positive foreign exchange earner and there will now be no export performance requirement. 2. Period of Utilization raw materials prescribed for EOUs increased from 1 year to 3 years.

6. EPCG Scheme
1. The Export Promotion Capital Goods (EPCG) Scheme shall allow import of capital goods for preproduction and post production facilities also. 2. The Export Obligation under the scheme shall be linked to the duty saved and shall b 8 times the duty saved. 3. To facilities up gradation of existing plant and machinery, import of spares shall be allowed under the scheme. 4. To promote higher value addition in export, the existing condition of imposing an additional Export Obligation of 50% for products in the higher product chain to be done away with. 5. Greater flexibility for fulfillment of export obligation under the scheme by allowing export of any other product manufactured by the exporter. This shall take care of the dynamics of international market. 6. Capital goods up to 10 years old shall also be allowed under the Scheme. 7. To facilitate diversification in to the software sector, existing manufacturer exporters will be allowed of fulfill export obligation arising out of import of capital goods under the scheme for setting up of software units through export of manufactured goods of the same company.

8. Royalty payments received from abroad and testing charges received in free foreign exchange to be counted for discharge of export obligation under EPCG Scheme.

7. DEPB Scheme
1. Facility for pro visional Duty Entitlement Pass Book (DEPB) rates introduced to encourage diversification and promote export of new products. 2. DEPB rates rationalize in line with general reduction in Customs duty.

8. DFRC Scheme
1. Duty Free Replenishment Certificate (DFRC) scheme extended to deemed export to provide a boost to domestic manufacturer. 2. Value addition under DFRC scheme reduced from 33% to 25%.

9. Miscellaneous
1. Actual user condition for import of second hand capital goods up to 10 years old dispensed with. 2. Reduction in penal interest rate from 24% to 15% for all old cases of default under Exim policy 3. Restriction on export of warranty spares removed. 4. IEC holder to furnish online return of importers/exporters made on yearly basis. 5. Export of free of cost goods for export promotion @ 2% of average annual exports in preceding three years subject to ceiling of Rs. 5 lakhs permitted.

FOREIGN EXCHANGE MANAGEMENT ACT (FEMA): Introduction

Foreign Exchange Management Act or in short (FEMA) is an act that provides guidelines for the free flow of foreign exchange in India. It has brought a new management regime of foreign exchange consistent with the emerging frame work of the World Trade Organization (WTO). Foreign Exchange Management Act was earlier known as FERA (Foreign Exchange Regulation Act), which has been found to be unsuccessful with the pro liberalization policies of the Government of India. FEMA is applicable in all over India and even branches, offices and agencies located outside India, if it belongs to a person who is a resident of India.

Some Highlights of FEMA

It prohibits foreign exchange dealing undertaken other than an authorized person;

It also makes it clear that if any person residing in India, received any Forex payment (without there being a corresponding inward remittance from abroad) the concerned person shall be deemed to have received they payment from a non authorized person.

There are 7 types of current account transactions, which are totally prohibited, and therefore no transaction can be undertaken relating to them. These include transaction relating to lotteries, football pools, banned magazines and a few others.

FEMA and the related rules give full freedom to Resident of India (ROI) to hold or own or transfer any foreign security or immovable property situated outside India.

Similar freedom is also given to a resident who inherits such security or immovable property from an ROI.

An ROI is permitted to hold shares, securities and properties acquired by him while he was a Resident or inherited such properties from a Resident.

The exchange drawn can also be used for purpose other than for which it is drawn provided drawl of exchange is otherwise permitted for such purpose.

Certain prescribed limits have been substantially enhanced. For instance, residence now going abroad for business purpose or for participating in conferences seminars will not need the RBI's permission to avail foreign exchange up to US$. 25,000 per trip irrespective of the period of stay, basic travel quota have been increased from the existing US$ 3,000 to US$ 5,000 per calendar year.

INDIA NEW FOREIGN TRADE POLICY 2009-2014 FOREWORD:

Foreign Trade Policy 2009 - 2014 Foreword

The UPA Government has assumed office at a challenging time when the entire world is facing an unprecedented economic slow-down. The year 2009 is witnessing one of the most severe global recessions in the post-war period. Countries across the world have been affected in varying degrees and all major economic indicators of industrial production, trade, capital flows, unemployment, per capita investment and consumption have taken a hit. The WTO estimates project a grim forecast that global trade is likely to decline by 9% in volume terms and the IMF estimates project a decline of over 11%. The recessionary trend has huge social

implications. The World Bank estimate suggests that 53 million more people would fall into the poverty net this year and over a billion people would go chronically hungry.

Though India has not been affected to the same extent as other economies of the world, yet our exports have suffered a decline in the last 10 months due to a contraction in demand in the traditional markets of our exports. The protectionist measures being adopted by some of these countries have aggravated the problem. After four clear quarters of recession there is some sign of a turnaround and the emergence of green shoots, though I would be hesitant to hazard a guess on the nature and extent of this recovery and the time the major economies will take to return to their pre-recession growth levels.

EXPORT PROMOTION BENEFITS:

Government provides various incentives to exporters for promoting exports internationally. The incentives used by exporters for import purpose and sometimes company sell the export incentives in market. The incentives are discussed below: 1. Duty Exemption Schemes a. Advance / Advance intermediate Authorization; b. DEPB Scheme; 2. Duty Free Import Authorization; 3. Export Promotion of Capital Goods (EPCG Scheme); 4. Deemed Exports;

5. Star Export House; 6. Focus Market Scheme; 7. Focus Product Scheme; 8. Vishesh Krishi Gram Upaj Yojana (VKGUY); 9. Service Exports

1. DUTY EXEMPTION SCHEMES

Duty Exemption Schemes enable duty free import of inputs required for export production. A Duty Remission Scheme enables post export replenishment / remission of duty on inputs used in the export product. Goods exported under Advance Authorization / DFRC / DEPB may be re-imported in the same or substantially the same form subject to such conditions as may be specified by the Department of Revenue from time to time. a. Advance / Advance Intermediate Authorization

An Advance Authorization / Advance Intermediate Authorization is issued to allow duty free import of inputs, which are physically incorporated in the export product. In addition, fuel, oil, energy, catalysts etc. which are consumed in the course of their use to obtain the export product, may also be allowed under the scheme.

Advance Authorization can be issued for:Physical Exports; Intermediate Supplies; Deemed Exports;

o o o

B. DEPB
The objective of Duty Entitlement Pass Book (DEPB) is to neutralize the incidence of Customs duty on the import content of the export product. The neutralization shall be provided by way of grant

of duty credit against the export product. Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. DEPB Scheme has been extended till May, 2009. Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to 30.04.2006. This scheme is being replaced by the Duty Free Import Authorization (DFIA) w.e.f. 01.05.2006.

2. Duty Free Import Authorization (DFIA)

This scheme will come into force from 1st May, 2006. A Duty Free Import Authorization is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage), and fuel, energy, catalyst etc. which are consumed or utilized in the course of their use to obtain the export product. The Authorization shall be issued on the basis of inputs and export items given under Standard Input and Output Norms (SION). The import entitlement shall be limited to the quantity mentioned in SION. Such Authorization can be issued either to a manufacturer exporter or merchant exporter tied to supporting manufacturer(s). A minimum 20% value addition shall be required for issuance of such Authorization.Once export obligation has been fulfilled, request for transferability of the Authorization or the inputs imported against it may be made before the Regional Authority. Once, transferability is endorsed, the Authorization holder will be at liberty to transfer the duty free inputs, other than fuel and any other item (s) notified by DGFT for this purpose.

DFIA

Advance Authorization Scheme

Transferability Value Addition Basis of Application

Conditional Minimum 20% Only SION Based

Actual User Clause Positive Value Addition SION or Self Declared Basis

3. EPCG SCHEME
The EPCG scheme allows import of capital goods for pre production, production and post production at 3% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported to be fulfilled over a period of 8 years reckoned from the date of issuance of the authorization.

The capital goods shall include spares (including refurbished/ reconditioned spares), tools, jigs, fixtures, dies and moulds. EPCG Authorization may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the authorization holder. An EPCG authorization can also be issued for import of capital goods for supply to projects notified by the Central Board of Excise and Customs under wherein the basic customs duty on imports is 10% with a CVD of 14%. Payment of Duty under EPCG Scheme, through debit of DEPB or other duty credit scraps would be allowed w.e.f. 01.01.2009

4. DEEMED EXPORTS
Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange Deemed exports shall be eligible for any / all of the following benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the terms and conditions as given in Handbook (Vol. I) viz.:-i. ii. Benefit of duty free imports of inputs; Refund of Terminal Excise Duty;

Supply of goods will be eligible for refund of Terminal Excise Duty provided the recipient of the goods does not avail CENVAT credit / rebate on such goods. Similarly, supplies will be eligible for deemed export drawback on the Central Excise paid on inputs /components, provided CENVAT credit facility/rebate has not

been availed by the applicant. Such supplies will however be eligible for deemed export drawback on the customs duty paid on the inputs /components.

5. STATUS HOLDERS
Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs), Agri Export Zone (AEZs), Electronic Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio Technology Parks (BTPs) shall be eligible for status.

Applicant shall be categorized depending on his total FOB (FOR - for deemed exports) export performance during current plus previous three years (taken together) upon exceeding limit below. For Export House (EH) Status, export performance is necessary in at least two out of four years (i.e., current plus previous three years).

Category Performance

(Rupees in Crores)

Export House (EH) Star Export House (SEH) Trading House (TH) Star Trading House (STH) Premier Trading House (PTH)

20 100 500 2500 10000

A Status Holder shall be eligible for the following facilities:

Authorizations and Customs clearances for both imports and exports on self-declaration basis; Fixation of Input-Output norms on priority within 60 days; Exemption from compulsory negotiation of documents through banks. Remittance / Receipts, however, would be received through banking channels;

100% retention of foreign exchange in EEFC account; Enhancement in normal repatriation period from 180 days to 360 days; Exemption from furnishing of Bank Guarantee in Schemes under FTP; SEH and above shall be permitted to establish Export Warehouses as per DOR guidelines.

6. Focus Market Scheme

The objective of the Focus Market Scheme is to offset the high freight cost and other disabilities to select international markets with a view to enhance our export competitiveness to these countries. Exports of all products to the notified countries shall be entitled for duty credit scrip equivalent to 2.5% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable.

Under the Scheme, export to all countries as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined.The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS). Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

7. Focus Product Scheme

The objective of the Focus Product Scheme is to incentivize export of such products which have high employment intensity in rural and semi urban areas so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products. Exports of notified products to all countries shall be entitled for duty credit scrip equivalent to 1.25% of the FOB value of exports for each licensing year commencing from 1st April, 2006. The scrip and the items imported against it would be freely transferable. Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined. The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS). Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

8. Vishesh Krishi Gram and Upaj Yojana (VKGUY)

The objective of the Vishesh Krishi Gram Upaj Yojana (VKGUY) is to promote exports of: a) Agricultural produce and their Value added products; b) Minor Forest Produce and their value added variants;

c) Gram Udyog Products; d) Forest Based Products Duty scrip benefits are granted with aim to compensate high transport costs. Exporters of notified products shall be entitled for duty credit scrip equivalent to 5.00% of the FOB value of exports. The scrip and the items imported against it would be freely transferable. All Status Holders shall be incentivized with duty credit script equal to 10% of FOB value of agricultural exports which can be used for duty free import / procurement of capital goods related to infrastructure meant for agro-processing to promote agricultural exports. Under the Scheme, export of such products as specified in the Handbook of Procedures (Vol. I) shall qualify for export benefits with certain exceptions as outlined. The Duty Credit may be used for import of inputs or goods including capital goods, provided the same is freely importable under ITC (HS). Exporters shall have the option to apply for benefit either under the Focus Market Scheme or under the Focus Product Scheme or under Vishesh Krishi and Gram Udyog Yojana in respect of the same exported product/s.

9. SERVICES EXPORTS
With the new Foreign Trade Policy, the Government of India has aimed to accelerate the growth in export of services so as to create a powerful and unique Served from India brand. In light of the above, all Service providers who have a total foreign exchange earning or earning in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI, of at least Rs.10 lakhs in the preceding or current financial year shall be eligible to qualify for duty credit scrip.

They shall be entitled to duty credit equivalent to 10% of the foreign exchange earned by them in the preceding financial year. Duty credit entitlement may be used for import of any capital goods including spares, office equipment and professional equipment, office furniture and consumables, provided it is part of their main line of business.

10. 100% EOU, SEZ, etc.

Units undertaking to export their entire production of goods and services (except permissible sales in the DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park (BTP) scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering and rendering of services. Trading units, however, are not covered under these schemes. Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. SEZ units may be set up for manufacture of goods and rendering of services. Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported. The Income Tax exemption previously available to 100% EOUs u/s 10B of the IT Act, till 31.03.2009 has been extended for one more year.

CHAPTER-4 DATA ANALYSIS AND INTERPRETATION

COMPARISION BETWEEN EXPORT AND INDIGENOUS SALES:

 Year 2005 2006 2007 2008 2009

Export Sales 148.61 124.1 130.26 129.63 197.94

Indigenous Sales 78.11 132.67 184.73 201.94 283.92

INTERPRETATION:
The above figure shows the Export sales as well as the domestic sales of Good Luck Group.

In 2005, the Export sales were 148.61 crore compare to domestic sales which was 78.11 crore only.

But in 2006, the export sales had gone down by 19% and domestic sales have risen by 69%.

Again in 2007, the export sales had risen by 5% and domestic sales have also risen by 40%.

In 2008, the export sales had gone down due to Recession.

In 2009, company had shown the tremendous growth. Its export raise to 197.94 crore and in 2009 the company got Best Export House.

TERMS OF PAYMENT

70% 60% 50% 40% 30% 20% 10% 0% %US E CNF CIF F OB

INTERPRETATION

Company uses 3 Incoterms i.e CNF, CIF and FOB.

CFR or CNF Cost and Freight (named destination port) Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods have crossed the ship's rail. Company uses 70% CNF

CIF Cost, Insurance and Freight (named destination port) Exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer maritime transport only. Company uses 20% CIF

FOB Free on board (named loading port) The seller must load the goods on board the ship nominated by the buyer, cost and risk being divided at ship's rail. The seller must clear the goods for export. It also includes Air transport when the seller is not

able to export the goods on the schedule time mentioned in the letter of credit. In this case the seller allows a deduction of sum equivalent to the carriage by ship from the air carriage. Company uses 10% FOB.

SWOT ANALYSIS :

STRENGHTS: A firms Strengths are its resources and capabilities that can be used as a basis for developing a Competitive Advantage. The Strengths of are: Strong Brand Names. Patents. Good customer satisfaction. Favorable access to distribution networks. Technological Skills.

WEAKNESS: The absence of certain strengths may be viewed as a weakness. The weaknesses are: Sub- Scale (Low capacity but high demand). High Cost Structure. Lack of access to the best natural resources.

OPPURTUNITIES: The External environmental analysis may reveal certain new opportunities for Profit and Growth. Some opportunities are: Liberalization of geographic market. Scope of increase in Production Capacity to meet customer needs. Removal of international trade barriers. Need to modify government policies.

THREATS: Changes in the external environmental also may affect the companys international business. The major threats to the firm which can affects are: Emergence of substitute products. New Regulations Increased Trade barriers. Tax Amendments.

CHAPTER-5 CONCLUSION AND SUGGESTIONS

CONCLUSION AND SUGGESTIONS:

Learnings/Suggestions through this project:

Export Finance is a very important branch to study & understand the overall gamut of the international finance market. All Documents needed in export should be made in triplicate. One copy is given to Finance Department, another copy is given in Bank and third copy is used/ retained by export department. Company first approve its limits from banks i.e. Pre-shipment Finance so that they have money to manufacture the goods and after the manufacturing of Goods and arrange shipment. Thereafter company take Post-shipment finance from banks to maintain their working capital liquidity. There should be transfer of risk from supplier to buyer so there are many terms specified in Incoterms 2000 which I have explained above. There are risks involved in trade. Company mainly faces problem in foreign Exchange Risk because dollar value or Euro value changes on daily basis based on international transactions. So it is not easy to fix prices. Companies first does market analysis and then fix the rate. Availability of favorable Export finance schemes directly impacts the local trade, encourages exporters, enlarges markets abroad, improves quality of domestic goods and overall helps the nation boost its exchange earnings. The Government of any nation plays a very vital role in boosting export turnover. RBI is issuing credit policy on every six months reviewing the need of Market. Indian Government is also changing rules depending upon the needs of the exporters, global trade environment etc. ECGC and EXIM Bank take a lot of efforts for Export promotion. The strategies of these 2 agencies in India should be flexible & their finance schemes should be constantly synchronized with the changing scene of world trade. This alone can help Indian exporters to stand competition in world markets effectively and more gain-fully. A very essential question needs to be answered by the International Trade gurus with reference to Relevance of EXIM Policy in the current scenario. Exim policies had emerged when the state decided to limit imports and encourage exports in order to maintain currency reserves. However, such ideas backfired: consumers were hurt and producers turned lazy.

SUGGESTIONS:
Company is required to strengthen their delivery schedule and production commitment to meet customer requirement in time, it will help in growing the export sales in future. Also it is become necessary due to increase in Competition in international Trade.

CHAPTER-6 BIBLIOGRAPHY AND GLOSSARY

BIBLIOGRAPHY:

a. BOOKS-

1. 2.

Khurana P.K, Export Management, Galgotia Publishing Co., New Delhi: 2003. Dunn Angus and Knight Martin, Export Finance, Euro money Publications, California: 1982.

b.

WEBSITES-

1.

www.dgft.gov.in- Exim policy http://dgftcom.nic.in.exim/2000-Exim Policy

2.

www.rbi.org.in- Fema act http://www.rbi.org.in/scripts/BS_EntireSearch.aspx?searchString=Fema act

3.

www.iccwbo.org- Incoterms and UCP http://www.iccwbo.org/incoterms/ucp

GLOSSARY

Acceptance - A time draft (bill of exchange) which a drawee has signed and has written the word "accepted"
and the date payable on the face of the draft.

Beneficiary - A party in whose favor a letter of credit is issued. Bill of Lading - A document issued by a carrier or a carriers agent evidencing receipt of goods by a carrier
and an obligation to move the goods between specified points for a specified charge..

Clean Bill of Lading - A bill of lading that bears no clause or notation which expressly declares a defective
condition or shortage of goods.

Consignee - A person or firm to whom goods are sold or shipped. Consignor - A person or firm from whom goods have been accepted by a carrier for shipment. Customs Invoice - A document that contains a declaration by the seller, shipper, or agent of either as to value
of goods covered.

Date Draft - A draft that matures at a given number of days after its date regardless of its time of acceptance. Documents Against Acceptance - Instructions given by an exporter to a bank that the documents attached
to a draft for collection are to be given to a drawee only against acceptance of the draft.

Documents Against Payment - Documents surrendered to a drawee only after payment. Drawee - Payer of a draft. Drawer - Receiver of payment of a draft.

Endorsement - A signature on a negotiable document made primarily for the purpose of transferring the
rights to another party.

Expiration Date - Latest date on which documents required under a letter of credit may be presented to a
negotiating bank.

Guarantee - A promise made by a bank on behalf of the banks customer that payment will be made to a third
party if the banks customer fails to make good on obligations. A guarantee is similar to a standby letter of credit, but differs in legal form. Banks in some countries are prohibited from accepting standby letters of credit; therefore, guarantees must be used.

Sight Draft - A draft payable upon presentation. Straight Bill of Lading - A bill of lading in which goods are consigned directly to a consignee. Delivery can
be made only to that consignee.

Tender - Offer of goods for transportation or to place cars or containers for loading or unloading. Tenor - Term specified for payment of a draft. Time Draft - A draft payable at a certain fixed time after presentation or acceptance. This may be a given
number of days after sight (acceptance) or a given number of days after the date of the draft.

Transshipment - A term used when a shipment is routed through an intermediate port to reach final
destination.