Exports

I] What is Exports
It is a transaction between a buyer and seller of
two
different countries.
Each is required to fulfill / follow certain rules &
regulation of the said country.
The value of goods are paid in foreign currency.
II] Type of Exports
a) Direct Exports
This are exports which are directly exported to
a
foreign party.
The goods are exported either by Manufacturer
exporter / Merchant Exporter.

b) Deemed Exports
"Deemed Exports" refers to those transactions in which
the goods supplied do not leave the country.
The payment for such supplies is received either in
Indian rupees or in free foreign exchange.
(a) Supply of goods against Licence holders
(b) Supply of goods to Export Oriented Units
(c) Supply of goods to any project as per Ministry of
Finance notification.
(d) Supply of goods to the power projects and refineries.
(i) Supply to projects funded by UN agencies.
c) Project Exports
Construction of Bridges in some other country is a
Project Export.
Value of service is received in foreign Currency

d) Exports by EOU / ETZ

EOU Export Oriented Unit is a Unit which
exports its total goods manufactured.
This unit gives an undertaking to the
concerned
authorities that it will
manufacture goods of certain value for
export purpose only.
This units are allowed to import capital
goods without payment of any duty
(Customs / Excise).
They are also allowed to import raw material
without payment of any duty.
Supply of goods by companies / firms to this
units will be treated as deemed exports and
will
be eligible for benefits as
applicable.

III] Currency of Exports (International Trade)

1) Indian Rupees
2) US Dollars
3) British Pounds
4) EURO
5) Deutsche Mark
6) Dutch Guilder
7) Swiss Franc
8) Japanese Yen
9) Singapore Dollars
10) Italian Lira

IV] Mode of Payment

a) Letter of Credit
This is a bank instrument opened by the importer
(applicant) on the exporter (beneficiary), where the
importer agrees to make payment to exporter for
goods
supplied as per the instructions given on
the Letter of
Credit.
Letter of Credit is opened by the importers bank.
b) Documents against Payment
In transactions where the Payment Terms is
Documents
against Payment, the exporter will
ship the goods to
the importer and present the
original shipping
documents to his banker.
The exporters banker will forward this original
document to the importers banker.
But the importers banker will release this original
documents to the importer on payment for the goods

c) Documents against Acceptance.

In transactions where the Payment Terms is
Documents
against Acceptance, the exporter
will ship the goods to
the importer and present the original shipping
documents to his banker.
The exporters banker will forward this original
document to the importers banker and
The importers banker will release this original
documents to the importer on acceptance of Bill
of Exchange.
d) Advance Payment
The payment is made by the importer prior to
receipt of
goods by him.

V] Delivery / Contract Terms

a) CIF Cost, Insurance & Freight &
CIP Carriage & Insurance
b) CNF / CFR Cost & Freight
CPT - Carriage Paid to
c) FOB Free On Board.
VI] Government Policy / Schemes available to Exporters.
1) Packing Credit Facility
This is a type of loan financial assistance given to
exporter at a low interest rate, that is the rate charged
is less than interest rate charged to other industry.
The exporter applies of this financial assistance to his
bankers against exporter orders / his export invoices.

This assistance is given to the exporter to bridge the gap

of finance requirement between manufacturing process
till receipt of payment for the goods from the buyer.
The bank will claim the amount against receipt of export
proceeds realized against the export order / invoice.
2) Quota System
This is a procedure under which an exporter can export
goods to certain countries only on receipt of export
quota.
The quota system is applicable for garment industry.
The AEPC issues quota to the exporter based on the
export price given by him for a particular category of
garments which he wants to export.
The AEPC fixes a floor price for a particular category of
garments and if the export price is higher than the floor
price than the quota is granted to the exporter.

The exporter has to apply for the quota prior to

shipment of the consignment as the same is required
by customs.
3) Advance License
The advance license scheme is applicable for duty free
import of inputs used in the manufacture of the final
product.
Duty Free import of mandatory spares upto 10% of CIF
value of license required to be supplied with the final
product are also allowed.
The license is issued for inputs against the norms
applicable for the final product.
The license is also issued on the basis of ad-hoc
norms / self applicable for the final product.
The license is issued against a positive value addition.
The license holder can import material to the extent
of quantity of the same mentioned in the license, that
is it
is quantity restrictive.

Only those items can be imported which have nexus

with final product.
The license is issued for intermediate supplies.
The license is also issued for deemed export to main
contractor for import of inputs.
The license cannot be sold in open market.
The raw material imported against this license cannot
be sold in the open market.
The license is issued with actual user condition, that is
the raw materials imported against the license can be
utilized only for the manufacture of his own products.
The exporter can apply for the license of a product,
where norms have not been fixed.
4) Duty Free Entitlement Pass Book Scheme
The Duty Free Entitlement Pass Book scheme is to
neutralize the incidence of Customs duty on the import
content of the export product.

The neutralization is provided by grant of Duty

Credit
against Export Product.
The exporter can apply for Duty Free Entitlement
Pass
Book Certificate only for those material
where the
Standard Input Output norms are
fixed.
The license is issued on the basis of Duty Free
Entitlement Pass Book rate fixed by the government
from time to time on a product.
The exporter may apply for credit, as a specified
percentage of FOB value of exports made in freely
convertible currency.
The license can be used towards payment of
Customs duty against imports
The license can be sold in open market.
The raw material imported against this license can
be sold in the open market.
The Duty Free Entitlement Pass Book Certificate is
valid
for 24 months (that is for import of raw
material),
there is no further revalidation.

5) Duty Free Replenishment Certificate

The exporter can apply for Duty Free
Replenishment Certificate only for those material
where the
Standard Input Output norms are
fixed.
The license can be used towards import of raw
material without payment of duty.
This inputs shall be subject to payment of
additional
customs duty.
The Duty Free Replenishment Certificate shall be
issued
on minimum value addition of 25%.
The license can be sold in open market.
The raw material imported against this license
can be
sold in the open market.

6) Drawback Scheme
Under Duty Drawback Scheme relief of Customs and
Central Excise Duties suffered on the inputs used in
the manufacture of export product is allowed to
Exporters.
The drawback amount is paid to exporters by
depositing
it into their nominated bank account .
Under Duty Drawback Scheme, an exporter can opt
for either
All Industry Rate or brand rate of
Duty
Drawback
Scheme.
All Industry Rate of Duty Drawback for a large number
of export products are notified every year.
The All Industry Rates are generally fixed as a
percentage of FOB price of export product.

In respect of export products where All Industry Rate

is considered by the exporter to be insufficient to
fully
neutralize incidence of duties on the inputs
utilized in
the production/manufacture of the
export product, the
exporters opt for Brand Rate
Duty Drawback Scheme.
Under this Scheme, the exporters are compensated by
paying the amount of Customs & Central Excise Duty
incidence which is actually incurred on the inputs
used
in the manufacture of export products
The exporter has to produce documents/proof about
the actual quantity of inputs utilized in the
manufacture of export product along with evidence of
payment of duties
thereon.
The exporter has to make an application to the Directorate
of Drawback within 60 days from the date of export of
goods

7)

Export Promotion Capital Goods Scheme

The scheme allows import of capital goods used for

manufacturing export products.
This scheme is availed on payment of 5% customs
duty
subject to export obligation equivalent to 8
times of duty saved on capital goods imported.
Capital goods are allowed at 0% duty for exports of
agricultural products and their value added variants.
In respect of EPCG Licenses with duty saved of Rs.100
Crore or more, the EO shall be fulfilled in 12 years.
The scheme covers manufacturer exporters with or
without supporting manufacturer.
Import of capital goods shall be subject to Actual User
Condition.

8) Customs Clearance Permit

The Customs Clearance Permit is granted for
import
as gifts of items appearing as restricted for
imports.
The CCP is not required if the recipient of gift is a
charitable, religious or an educational institution
registered under a law and the gift sought to be
imported has been exempted from payment of
customs duty.
9) Exemption on payment of Central Sales Tax
The exporter is exempted from payment of Sales Tax
on exports.
In case of Merchant exporter the required form has to
be submitted to the manufacturer for supply of goods.

10) Rebate on Central Excise Duty

The exporter is exempted from payment of excise duty
for goods exported.
But the exporter has to execute a Bond and debit the
excise duty amount to the Bond.
The excise duty amount is re-credited to the bond on
submission of export documents to excise department.
The exporter has to pay penalty along with interest to
excise department in case of failure to submit the
documents within stipulated period.
The exporter can also pay the excise duty in cash and
claim rebate of excise by submission of export
documents.
In case of failure of submitting export documents the
exporter will lose the excise duty paid.

11) ECGC Scheme

This is an insurance on the export proceeds, that
is ECGC corporation backs up the exporter for nonrealization of payment.
There is a premium to paid by the exporter for
this
assurance.
The premium differs as per the country of the
buyer and
mode of payment.

12)

EEFC account

This is an account maintained with the

exporters
banker.
Foreign currency deducted from export proceeds
realized is maintained in this account.
The exporter is allowed to make payment from
this
account for any services / imports in
foreign currency.
The exporter is allowed to debit this account for
payment of commission / import of raw material,
etc.

Exports

Enquiry
Verbal Confirmation
Pro-forma /
Sales Contract
Work Order/
Factory Order

Production
Of Goods
Intimation
To Export
Of Stocks

P
A
Y
M
E
N
T
/
L.
C.

Preparation of
Pre-shipment
Documents
Dispatch Docs.
To Factory & Book
Space with Liner

Dispatch of
Container
to Factory
Preparation
Of Excise
Documents
Goods
Dispatch from
Factory

Goods Arrival
At Port & Customs
Clearance

Receipt of B/L,
S/B, ARE (Trip),
etc
Preparation of
Post Shipment
Documents
Submission
Of Documents
To Bank
Realization
Of Payment

Receipt of
Bank Realization
Certificate
Application for
Benefits i.e.
License / Cert.

Export Flow
Pre-shipment
Invoice

Commercial
Invoice

Pre-shipment
Packing List

Commercial
Packing List

PGI
Sales Order

Delivery

Bank Realization
Certificate

Bill of
Exchange

Invoice

Work Order
Certificate of
Origin

Purchase
Requisition

GSP

Insurance
Certificate

Certificate

GR at Port

Excise Invoice

Stock Transfer
Order

Plant
Delivery

Excise
Invoice

ARE 1

Export Benefit Component

SAP does not provide any functionality to track export benefits
in the Indian Context
This gap is addressed by the Export Benefit Component (CVSEBC)
For example in DEPB tracking, the EBC allows the selection of
invoices to be included in DEPB application and prints out the
required application to be sent to DGFT. Similarly EBC keeps
track of the applications forwarded to customs for verification
Apart from DEPB, other schemes such as Advance License are
also covered

Application
To DGFT
Advance License
Application

Receipt of
License /
T.Rcpt.No.

Registering
License with
Customs

Monitoring of
License

Audit of
License

Import of
Raw Material

Sep 2003
Sep 2003
1234567
1234567
8 9 ..
8 9 ..

Invoice

+
Invoice

Apply
for
DEPB

Receipt
Of License

DEPB
Application

+
Imports Or
Sale Of
License

Sep 2003
Sep 2003

Invoice

+
Invoice

Apply
for
DFRC

1234567
1234567
8 9 ..
8 9 ..

Receipt
Of License

DEPB
Application

+
Imports Or
Sale Of
License

Export Documentation Component

Even though SAP does provide the basic export
transaction, a number of documents in various formats
are required to be submitted to various heads at
varied points of time for statutory or commercial
reasons.
The major requirement from an export package is

Flexibility in outputs and at the same time

Minimal re-entry of data.

Flexibility
- Documents may have to be created
as per LC terms which may differ from LC to LC or
customer to customer
Minimal Reentry - While the formats of the documents
may differ, most of the date they contain is similar
At the same time the transactions must be properly
recorded for production, dispatch (excise) and in
accounts
Export Documentation Component (CVS-EDC) ensures
just that without compromising on SAP Standard flow

Export Documentation Component

The following documents are possible through the CVS-EDC

Work Order

Commercial Invoice

Pre-shipment Invoice

Commercial Packing List

Pre-shipment Packing List

Insurance Certificate

Excise Invoice

Bank Realization Certificate

ARE1

Bill of Exchange

Certificate of Origin

Form C for excise refund

GSP Certificate

Proof of Export

A NUMBER OF OTHER DOCUMENTS SPECIFIC TO A CLIENT CAN ALSO BE CREATED

SUCH AS WEIGHT CERTIFICATE, VARIOUS TYPES OF DECLARATIONS

Features of Add-On components For Export Documentation

PRE-SHIPMENT DOCUMENTS

POST-SHIPMENT DOCUMENTS

1. Order copy

1. Post-shipment Invoice

2. Order confirmation

2. Packing list for L/C / Wt. Note

3. Pre-shipment Invoice

3. Bill of exchange

4. Examination Report (Back

Side)

4. Insurance certificate

5. DEPB,DBK,DEEC declaration

5. Certificate of Origin/Indian merchant

6. SDF Form

6. GSP

7. Covering Letter -( CHA

instructions)

7. Bank realization certificate

8. ARE1

8. Bank covering letter

9. Excise Gate pass

9. Fax confirmation of non-negotiable docs.

10. Intimation to Insurance

Company / Inspection
Agency / Consulate.

10. Bombay merchant chamber certificate

11. Indo-Sri Lanka Free Trade Agreement
(ISFTA)
12. SAARC preferential trading agreement
(SAPTA)
13. Merchant Export Packing list
14. Merchant Export Direct/Indirect
Separate report

EXPORT INCENTIVES SCHEMES

M.I.S REPORTS

1. DEPB application

1. Export Register -Sale reports

2. DEEC application - All types

2. DEPB Status report

3. DFRC application

3. DEEC Status report

4. DBK- Brand Rate application

4. DBK Status report

5. Rebate Claim applicationForm C

5. Commission Status report

6.Commission payment form

CDX

6. BRC Status report

7. 80 HHC form for Merchant

export

7. Bank Register
8. Master report

9. Poof of Export Status, ARE1 tracking

STATUTORY
REPORTS/DOCUMENTS

10. Post Export docs received from CHA Status

11. Merchant export BRC & POE tracking

1. Proof of Export application

2. Basic chemical report
Monthly