Export Import Procedures &

Documents

Suvarna Sable
 Evaluation
Two class test
Presentation
Assignment
BOOKS: Kale and Ahmed Vipuls BMS series
 Trade

TRADE

ENTREPORT
EXPORT IMPORT (re-export)

Sale of goods by one country purchase of goods by one country purchase of goods by one country &
to another country from another country selling to another country
Export:
"Export" means to send or take controlled tangible items, software or information out of the
country in any manner - shipping, mailed, hand-delivered, shipped by air, shipped by boat,
uploaded to an internet site, or downloaded from an internet site, fax or can be shared
during a telephone conversation.
The seller = "exporter" based in the country of export
The buyer = "importer overseas based
when you trade something out of the country

Import:
To have a product shipped into a country or region.
opposite of export.

you are faced with barriers

- differing languages, politics, laws, governments and
cultures.
Modes of import export
East India Company
HISTORY
From around 1600AD the
British East India Company
(EIC) started trading with
India in goods such as
spices, silk and tea.
By 1700 the EIC had set-up
three trading posts, in
Bombay, Madras and
Calcutta
Till now purpose was Trade
Robert Clive Conquers
India In 1751
The British Raj, 1858-1947
 TODAY
India-born Sanjiv Mehta
Bought East India Company - 2005
relaunched East India Company - 2010
 Need of Export-Import
No country in world is self sufficient in all respects.
It has to import some goods/services from abroad.
Due to geographical factors, inadequate resources & technological
development, huge population, economic backwardness.
Various organization working towards it.
Export- Gems & jewellary , cotton, carpet(excl. silk) handmade ,
rice , cashew, tea , tobacco , dairy products , sugar etc
Import-petroleum, crude & products , gold , organic chemicals ,
coal, coke, fertilizers manufactured , cement etc
 Export marketing

Marketing of domestic goods and services beyond national borders.

Management of various activities and operations since the receipt of an

export order till its execution and receipt of payment for the goods
exported.
 Need for Export marketing:
AT NATIONAL LEVEL:

1. Earning foreign Exchange:

- enables country to earn foreign exchange.(Next Slide)
- Helps to strengthen national Economy
- helps to import needed goods & services in return.

2. Solving balance of payment problem:

- deficit balance of trade &payment can be removed through large scale
exports.

3. Promoting economic development:

-Optimum utilization of resources may not be possible within domestic
market.
- Business grows rapidly if it has access to international markets.
4. Raising Production and employment:
- Facilitates large scale production of goods & services.
- Additional demand in overseas market generates new employment
opportunities.
5.Participation in global co-operation:
- Cordial relationship develop among nations.
- helps countries to bring world peace & economic development at global level.
AT BUSINESS/ENTERPRISE LEVEL
1. Higher profits:
-Exporter offer quality product they can charge higher prices , thus higher
profits.
Ex: TOYOTA, MERCEDEZ etc.
2.Goodwill & reputation:
- Due to their business contacts
- Participation in international trade fairs and exhibitions. Ex: BKC
3. Improvement in organizational efficiency:
- Exporters have to adopt advanced production & Mktg techniques for
survival in global competition.
Ex: Tata Group-exports nano In EU markets.
4. Spreading of marketing risks:
- Risk spread in two parts.
-if one area suffers losses in export market then stable profit is there in
domestic market.
- Ex: TCS
 Export marketing Organizations
Specialized organizations concerned with export trade
Look after export of Indian goods & services.
Explore foreign markets
Make arrangements to send goods to foreign buyers as per the orders
received/collected.
TYPES

1. Manufacturer Exporters
2. Merchant Exporters
3. Star Trading Houses of five categories
4. Canalising Agencies
5. State Export Corporations
6. Export Consortia
7. Government(public sector) Trading/Marketing Corporations.
 Manufacturer Exporters
Used by superior quality products manufacturer called :Export quality products
Undertaken by large & established organization as financial support is needed.
Export along with production & mktg activities.
Undertake exports directly along with manufacturing and marketing within the
country.
Not dependent on intermediaries for exporting their products
With increase in export business companies -
- Export manager is appointed exclusively for export operations.
- Create separate export division to look into export marketing.
- Ex :Tata Exports separate organizational structure looks after exports of Tata
Group.
- Establish subsidiary companies for export marketing.
- Ex: HMT(International) Ltd. Export marktg subsidiary company of HMT Ltd.
assigned the task of exploring ,developing & expanding export markets for the
products of HMT.
 Merchant Exporters

Person or organization whose business is to buy goods made in

his home country, ship them abroad to another country & sell
them there.
Specialized & concentrates in Exporting Indian goods only.
They purchase goods from domestic manufacturer & then export
Operate on commission basis.
Export wide variety of goods-manufacturing
items,friuts,vegetables flowers etc.
Ex: Ezzy Exports-leading merchant exporter of Machineries,
Agro based,Garments,household.
 Manufacturer-Exporter
Meaning: basically manufacturer but
also exports his products
Profit: Earns from products
manufactured by him only.
Capital Requirement: Requires huge
capital as-production & mktg are
also performed by him
Ex: Tata Group, Kirloskar group
Merchant -Exporter
Meaning: middleman in export mktg
& looks after exporting goods.
Commission: earns from products
manufactured by domestic
manufacturer.
Requires little capital as not
concerned with manufacturing only
exporting of goods.
EX: Ezzy Exports
 Government(public sector) Trading/Marketing Corporations

Set up by Government of India

Handle export import transactions.
Function by maintaining Branches/Offices abroad
Operate as per guidelines issued by Govt.of India.
EX:
1.The State Trading Corporation of India(STC)- Petroleum
Products, Cement, Rice, Wheat Flour and Liquefied Petroleum
Gas (LPG)
2. The minerals & Metals Trading Corporation(MMTC).
3. Government corporations:-
- Jute corporation of India,
- Cotton corporation of India
 Star Export Houses(SEHs)

Category/status Performance Value (In Crores)

over a period of 3 years

One star Export House 15

Two star Export House 100

Three star Export House 500

Four star Export House 1500

Five star Export House 5000

 Export of goods of small scale sector
Help SMEs to introduces product oversees
market
Assistance in quality improvement as they are
aware of foreign markets
Supply of imported inputs to clients
Undertake marketing risks on behalf of small
scale producers.
Export Import
documentation
 Goods are imported in India or exported from India
through sea, air or land. Goods can come through
post parcel or as baggage with passengers.
Export-import requires special document
depending upon the type of product and
destination to be exported-imported.
Called as shipping documents.
 Aligned Documentation Systems(ADS)
In India since 1991 new standardized documents are introduced by Govt.
under A(united) DS based on UN Layout key.
Exporters use such standard form while preparing various export documents.
Objectives:
- Provide benefit to every party associated with international trade.
- Facilitate easy entry of data and enables quick reading.
- Simplification in export import procedures.
- Simplifies trade documentation on a global level thereby helping all parties
involved in the trade.
 Classification of Documents

Documents

Commercial Regulatory
Documents Documents
 Commercial documents
Help in Import-Export
Out of 16 commercial documents,14 documents have been standardized
(Excel sheet)
Objectives:
1.To facilitate transfer of title of goods & property from the exporter to
importer.
2. To ensure safe transfer of goods from the country of the exporter to country
of the importer.
3. To help the exporters to realize payments without problem and delay.
Documents Include:
1. Certificate of origin
2. Bill of Lading
3. Certification of inspection,etc.
 Regulatory Documents
Prescribed by various government departments and bodies covering foreign
exchange regulations, export inspection, custom formalities etc.
Out of regulatory documents 4 have been standardized.
Documents Include:
1. Form GR(Goods Receipt)
2. Shipping Bill, etc.
 Export Documents
1.Invoice-
- Commercial Invoice
- Consular Invoice
2.Certificate of origin
3.Shipping Bill
4.Mate Receipt Transport documents
5.Bill of Lading
6.GR form
7.Marine insurance Policies
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 Invoice
An invoice or bill is a commercial document
issued by a seller to the buyer.
Indicates the products, quantities, and
agreed prices for products or services the seller
has provided the buyer.
An invoice indicates the buyer must pay the
seller, according to the payment terms.
Sample
 Commercial Invoice
Statement of account sent by the seller to the buyer
Prepared by on sellers letter- head(next slide).
Exporters bill for the goods shipped.
Objective:
Inform buyer about the conditions of sale and final amount payable
Features:
Detail information of export trade transactions.
No standard form of document so exporter is free to design his own format.
Importance/Uses:
Exporter:
-for collection of payment from the importer.
-To settle dispute about payment
-Useful for accounting purpose
Importer:
-Payment of customs duty
-Indicates Exact amount payable to the exporter
-Useful for accounting purpose.
 Consular Invoice
Certificate issued by Trade Consulate of the importers country stating that
goods of particular value are being imported from particular country by
particular importer.
Features:
- Submitted by exporter(3 copies)
- Gets it certified by the consulate of the importing country stationed in the
exporting company.
- A small fee is charged by consulate office for this facility.
- 1 copy- Consulate office
1 copy- Customs
1 copy- Exporter
Importance/Uses:
Exporter
-Facilitates easy clearance of goods from the customs
-Signed by consulate of the importing country, it is assured to exporter that
goods will enter into buyers country without any difficulty.
Importer:
Gets quick delivery of goods & that too with out opening containers for
verification purpose.
Loss of time and repacking of goods is avoided.
Importer is assured that banned goods are not sent.
 Mates Receipt
Evidence that goods are loaded in the vessel.
Acknowledgement of the goods received on board of the ship.
Contents:
Name of the ship and shipping company
Date of shipment
Description of packages (Quality,quantity,etc)
Number of packages and marks on them
Condition of cargo when it was received on board.
Port of loading and delivery
Freight(goods) paid or payable
Signature of issuing authority.
 Mates
Receipt

Clean Qualified
Receipt Receipt

Without Defect With Defect

 Clean Receipt:

- Goods have been properly packed

- There is no defect of any kind in the packing.

Qualified Receipt:

- Packing is defective
- Shipping company will not be responsible for damage of any
kind.
Exporter should get a clean receipt to avoid any complications.
 Bill of Lading (B/L) (Xerox)

B/L is a document of title to the goods.

Issued by shipping company & serves as a receipt from the shipping
company which undertakes to deliver the goods at agreed destination on
payment of freight.

Functions of B/L :

1. Receipt for goods: serves as receipt by shipping company stating that the
goods have been received for transportation.
2. Proof of contract of carriage: Exporters are required to book shipping
space much in advance. B/L serves as a proof of the terms & conditions
under which goods are carried by shipping company.
3. Document of title to goods: The possession of B/L gives right to the goods
covered by it.
 Contents:
1. Name & address of the shipper/consignee
2. Name of the shipping company
3. Name of the ship, voyage number and date of
loading goods on the ship
4. Quantity.quality,marks and description of goods
5. Number of originals issued
6. Port of shipment & destination & date of
loading.
7. Number of packages
8. Signature of issuing authority
 Types of B/L
Bill of Lading

Clean B/L

Claused B/L

Freight paid B/L

Freight collect
B/L

Direct B/L

Through B/L
 Clean B/L
A bill of lading issued by a carrier declaring
that the goods have been received in an
appropriate condition, without the presence
of defects.
The product carrier will issue a clean bill after
thoroughly inspecting the packages for any
damage, missing quantities or deviations in
quality.
 Claused B/L
A bill of lading that shows a shortfall or
damage in the delivered goods.

Some adverse remarks-goods not properly

packed, signs of damage.EX: Goods Damage

Typically, if the shipped products deviate from

the delivery specifications or expected quality,
the receiver may declare a claused bill of
lading.
 Freight paid B/L
- Freight is paid by exporter
Freight collect B/L
-Freight is not paid by the exporter
Direct B/L
-same ship carries goods from the port of shipment to the port destination
Through B/L
- Covers goods being trans-shipped on route
-at least two different modes of transport being used.
- B/L issued for containerized door-to-door shipments that have to use
different ships and/or different means oftransportation (aircraft, railcars,
ships, trucks, etc.) from origin to destination.
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40 Days

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 A A A

Container On Sea Unloading at Port Stacking at port Custom Clearance From Mumbai to
Aurangabad

Issue of Material Storing of Material Receipt of Material Container Docking Gate Entry at SAIPL

Physical Issue of
Material Assembly Progress
55
Importance / Benefits of B/L :
Exporter:
-Legal document-in case of dispute it can be presented in court of law.
-Contract of transportation
-Acknowledgement of the receipt of the goods on board the ship
-It enables the exporter to send a shipment advice to the buyer
-Helps exporter to file claim of compensation, if goods are damaged in transit.
Importer:
- Document of title.
- Semi-negotiable document-ownership can be transferred by endorsement
and delivery.
Shipping company:
- Enables shipping company to collect freight either from exporter or
importer.
- Protects the shipping company goods damaged before loading on the ship
is shown in B/L
Guaranteed receipt Form-Xerox

Exchange control document

Submitted to Reserve bank of India after clearance from the customs
Authorities.
Designed mainly to furnish guarantee to RBI to remit(send) the foreign
exchange earned from the export shipment within 180 days from the date
export.
Features:

-Declaration and assurance as regards foreign exchange receivable out of the

export transaction.
-As per the exchange control regulations, the exporter has to realize export
proceeds within a period of 6 months from the date of shipment from India.
- Unless form GR is presented with full particulars, the customs authorities will
not pass the shipping bill.
 Guaranteed receipt Form
Exporter -------- submit GR forms to custom for permission for shipment of
goods
custom authorities(duplicate)----Scrutinize form with reference to exchange regulation
original copy retained by customs

RBI ------- Original copy forwarded by Customs to RBI

Exporter ------- Duplicate copy handed over to exporter by customs authorities
Negotiating bank --- --- payment for export is to be realized. Duplicate copy of Form GR will
be retained by the bank till full export proceeds are realized.
RBI ------------- When payment is received the bank will send duplicate copy of form
GR to RBI
 Contents of GR
Name of Exporter
Name of negotiating bank
Currency in which payment will be received
Name of buyers country
Port of origin
Port of destination
Commission or discount payable on export
Quantity, Quality and value of exports.
 Import Documents
Transport Documents
Bill of Entry
Certificate of inspection
Certificate of Measurements
Freight Declaration
 Import Document
Bill of Entry:
-When goods enter the dock of the importing country.
Types:
-BoE-in case of goods for home consumption
-BoE for free goods,-imported without paying custom duty.
-BoE when goods are kept in bonded warehouse

Contents:
-Name and address of the importer, Exporter.
-Description of goods
-Value of goods
-Import License number of importer
-Name of the port/dock where goods are to be cleared
-Rate and amount of import duty payable.
 Certificate of Inspection
Issued by Inspection Authorities in the country of the exporter.
Document sent to importer by the exporter through his bank.
Certificate states that
- goods have been inspected under the recognized quality control standards
- Satisfies the specifications provided under quality control and inspection.
This one Certificate of inspection by China National Center for Quality Supervision and Test of
Woodworking Machinery.
provided to a premise that successfully met the conditions for safe food handling on the date of its last
inspection.
 Certificate of Measurement
Two ways freight(goods) can be charged:
-Basis of weight
-Measurement
When freight is charged on the basis of weight, the weight declared by the
exporter is accepted.
The exporter can obtain certificate of measurement either from the Indian
Chamber of Commerce or any other approved organization.
Submit it to shipping company for calculation of applicable freight.
Certificate contains details like name of the vessel, port of destination,
description of goods,length,breadth,quantity,depth etc of packages.
International Organization
International Organization
for Standardization
for Standardization

www.iso.org
www.iso.org
 ISO has developed over 18 000 International Standards on a variety of
subjects and some 1100 new ISO standards are published every year.
ISO (International Organization for Standardization) is the world's largest
developer and publisher of International Standards.
ISO is a network of the national standards institutes of 163 countries, one
member per country
Indian Representative- Bureau of Indian Standards(BIS)
"International Organization for Standardization" would have different
acronyms in different languages ("IOS" in English, "OIN" in French for
Organization internationale de normalization), its founders decided to give
it also a short, all-purpose name.
 Why standards matter
When products, systems, machinery and devices work well and safely, it is
often because they meet standards. Ex: AGMARK,ISO,NAAC etc.
Standards ensure desirable characteristics of products and services such as
quality, environmental friendliness, safety, reliability, efficiency and
interchangeability - and at an economical cost.
when standards are absent, we soon notice. We soon care when
products turn out to be of poor quality, do not fit, are incompatible
with equipment that we already have, are unreliable or dangerous.
Ex:Garments
 ISO does not certify
ISO does not carry out ISO 9001 or ISO 14001
certification.
ISO does not issue certificates.
ISO does not accredit, approve or control the certification
bodies.
ISO develops standards and guides to encourage good
practice in accreditation and certification.
It means that an independent, external body has audited an
organization's management system and verified that it
conforms to the requirements specified in the standard (ISO
9001 or ISO 14001).
 ISO 9000 family- Quality Management
Standard
ISO 14000 family- Environment Management
standard
 The ISO 9000 family
ISO 9001 -standard that gives the
requirements for a quality management
system.
ISO 9001:2008 - latest, improved version.
It is the only standard in the ISO 9000 family
that can be used for certification.
There are 17 other standards in the family
that can help an organization on specific
aspects such as performance improvement,
auditing, trainingetc
 Objectives of ISO 9000
To facilitate international trade of goods and services
To achieve competitiveness by obtaining required quality in cost effective
way.
To help industries improve their quality standards.
To promote total quality Control Systems
 ISO-9000
Series of 5 international standards on
Quality Management
Standards
ISO 9001 Design,Development,Production,Installation and servicing
ISO 9002 Development,Production,Installation
ISO 9003 Final Inspection and Testing of Laboratories, Warehouse etc

Guidelines

ISO 9000

ISO 9004
VIDEO-1
 Advantages of ISO 9000
Widespread Adoption: helps to win over markets purely based on quality goods and
services.
Valuable to Indian Exporters:
- European Union insists on ISO 9000 registration .
- Since ISO 9000 is internationally recognized quality standard ,Indian firms gets entry
into EU countries to promote trade.
Reliability and durability:
Organization successfully manufacture goods as per established specifications.
Performance of the product is highly reliable
Chances of product failure is low.
Business Links established:
- Indian exporters prefers to buy raw materials and Components from those firms that
they have ISO registration
Consistency in quality:
-ISO 9000 ensures consistency in quality of goods and services.
- Facilitates early detection of mistakes and timely corrective action.
Manpower development:
- ISO 9000 encourages management to provide training to all employees
- Improves Ability, Skills and commitment of employees towards organization.
 Procedure for ISO 9000 Registration
Preliminary Submission of Audit of quality Selection of
investigations Application manual Registrar

Issue of Assessment by Pre-assessment Negotiate terms

Certificate Audit Team by Auditing body with registrar
Preliminary investigations
Export firm desiring to get ISO 9000 certification should conduct self evaluation
determine quality control infrastructure.
Work is assigned to team of specialists working with firm.
Submission of application
- Name, location & structure of the company
- Location of plant
-Size of the business
- range of products
- type of manufacturing process
-name of products, etc
Audit of Quality manual (PDF File)
-Existing quality manual is audited
- compares with 20 elements of ISO 9000 standard
- Report is prepared on findings
- if deficiencies occurs corrected
-manual is resubmitted for approval by auditing body
 Selection of Registrar:
-Registrar is an independent body with knowledge ,skills and experience to evaluate
companys quality system.
-Consideration in selection of registrar:
-Cost of registrars service
-Reputation of the registrar
- Time required to start and complete registration
-Location of registrar
- familiarity of the registrar with company needs
-auditing by registrar or by the sub-contractors, etc.
Negotiate terms with registrar
- Before signing the contract, company should establish scope of services and costs
involved.
-time needed to conduct audits
-secrecy of confidential information
-details of contract
-cost and fee structure,etc
 Pre-assessment by Auditing body:
Auditors may look for 3 things:
-sufficient documents as per standards
-implementation of documented procedure
-whether implementation is effective.
Assessment by Audit Team:
- An audit team from BIS will visit the firm to assess firms compliance to the
procedures
a) Opening meeting:
-presided by the leader of audit team
-Meeting is attended by CEO,HOD and Management Representative.
-Leader will explain scope and area of Audit
b) Conducting assessment:
-Each auditor should be accompanied by the guide who is familiar with the
activities of the departments
-The auditors will record the observations which must be signed by the guide
indicating acceptance
 C) closing meeting and presenting report:
i. All members should be present when the audit team present their
finding to the firm
ii. On daily basis, audit team will present to the firm non-conformities
observed for necessary corrective measures.
iii.corrective measures are carried out within fixed period of time.
Issue of certificate:
-Auditors should ensure whether the company has compiled with the ISO
9000 standard.
-Auditors if satisfied will submit favorable report to the registration board.
- If registration board approves the registration, the registrar issues a
certificate which enables the company to use ISO 9000 mark.
 Suspension/Cancellation of Registration

A registrar can suspend or cancel the registration because of:

a) Non payment of fees
b) Non communication of changes in the quality system to the registrar
c) Fraud, negligence or improper uses of symbols
d) Non-implementation of corrective actions.
 VIDEO-2
Environmental Management Systems
(BIS 14000)

Established in 1967
AIM:
-Provide all industries with a structure for an environmental management system to obtain
environmental objectives of the firm.
Consist of 20 standards-environmental labeling and evaluating life cycle of
the products.
 The ISO 14000 family
ISO 14001 is the standard that gives the requirements for an
environmental management system.
ISO 14001:2004 is the latest, improved version.
It is the only standard in the ISO 14000 family that can be
used for certification.
The ISO 14000 family includes about 25 other standards that
can help an organization specific aspects such as auditing,
environmental labelling, life cycle analysis
 Environmental Management System (EMS):
The part of the overall management system that
includes organizational structure, planning
activities, responsibilities, practices, procedures,
processes and resources for developing,
implementing, achieving, reviewing and
maintaining the environmental policy
 5 principles
Formulate an environmental policy and commit itself to environmental
management system.
To prepare and keep ready a plan to achieve its environmental goal.
To develop the capabilities, and support mechanism to achieve its
environmental policy and objectives.
To evaluate a companys environmental performance.
To review environmental management system in order to improve overall
environmental performance
91 11/23/99 Version No. 2
 4 .2

E n v ir o n -
m e n ta l
4 .6 P o li c y

M anage- 4 .3
m ent
R e v ie w
P la n n in g
E n v ir o n m e n ta l
S y s te m

C h e c k in g
& C o r r e c tiv e
A c t io n Im p le -
m e n ta tio n
4 .5 & O p e r a tio n

4 .4
92 11/23/99 Version No. 2
 14000 certification
Two Areas
-Organizational Evaluation
-Product Evaluation
a) Organizational Evaluation:
1. EMS standard:
-Company follows a system to meet environmental goals through a formal
environmental policy.
-Employees are communicated about environmental specifications
-Necessary documents are prepared and workers are given relevant training.
2. Environmental Auditing Standards:
-Prescribes the qualification of auditor
-procedure of audit
- observing all the principals of auditing
3. Environmental Performance Evaluation Standards:
-Company needs to evaluate its EMS to ensure system is in place.
-Evaluation can be in areas such as- reduced consumption of water and energy,
decline in air emission, cutting down generation of hazardous waste etc.
- After evaluation if results are positive it indicates environmental responsibilities
are well performed.
 Product Evaluation:
1. Environmental Labelling Standards:
-Standard is directed towards preventing exaggerated & false advertising
-A company using environmental product advertising or making claims for
eco-friendly products must do so under BIS-14000.(next slide)
2. Life cycle Assessment:
-Company need to prepare report - impact of product on environment from
design to disposal stage.
- Company will be able to get less hazardous materials or reengineering process
to reduce consumption of energy and water
3. Environmental Aspects in product standards:
- Analyst must know and check composition of product-harmful ingredient is
present in product.
 Marine Insurance
Types of Marine Insurance policies:
- Voyage policy
-Time policy
-Mixed policy
-Valued policy
-Valued policy
-unvalued policy
-Floating Policy
-Blanket Policy
-Specific Cover policy
-Open cover policy
-Fleet Insurance policy
-Port Policy
-Composite Policy
-Currency Policy
-Block Policy
 1.Voyage(journey/trip) Policy
One specific Voyage(trip)
The cargo is insured for one trip only
Compensation is also paid for one trip if goods are damaged in that voyage.
Policy expires after completion of the journey of goods to the destination.
Time required for voyage is not considered.
 2.Time Policy

Gives Protection/insurance for particular period of time

Goods are insured for certain period of time e.g.-one year
Compensation is paid only when the loss is in that particular specified period.
 3. Mixed Policy
Voyage + Time = Mixed Policy
Ex: Ship may be insured for voyage between Mumbai and London for
period of 6 months.
4.Valued Policy
The amount of insurance is fixed at the time of issuing the policy.
Compensation of that amount is paid if the loss occurs.
Simplicity in the payment of compensation as the value of the
subject matter of insurance is agreed between underwriter and
insurer at time of taking insurance policy .
5.Unvalued Policy(open policy):
The amount and value for insurance is ascertained if and when the
loss actually occurs.
The loss is assessed afterwards and the compensation is paid
accordingly.
value of the subject matter of insurance is not specified at the time
of taking insurance policy.
 6.Blanket Policy

This policy is taken for certain amount .

Full premium amount is paid right in the beginning.
Adjustments are made as and when need arises.
 Steps in Export Procedure
Export
Procedure

Registration Pre-shipment
Post-shipment
Stage Stage Shipment Stage
Stage
 Registration Stage
Registration with Reserve Bank Of India
No longer required. Prior to 1.1.1997
it was compulsory for every exporter to obtain an exporters' code number from the
Reserve Bank of India before engaging in export.
Registration with Regional Licensing:
Obtaining IEC(Import Export ) Code Number
The Customs Authorities will not allow you to import or export goods into or from
India unless you hold a valid IEC number.
Ex: 0100000088 Ford Foundation
Register With Export Promotion Council
- In order to enable you to obtain benefits/concession under the export-import
policy, you are required to register yourself with an appropriate export
promotion agency by obtaining registration-cum- membership certificate.
 Pre-shipment Stage
1.Receipt of confirmed Order:

Buyer Sends order to exporter

Exporter accepts order and send confirmation (Indent) to Buyer

Confirmation-Goods will be send as per the order

2. Obtaining a confirmed Letter of Credit:

-The exporter sends formal request to the importer to open LOC in exporters favour.
3.Obtaining Export License, if necessary:

- Export license is a government document that authorizes the export of

specific goods in specific quantities to a particular destination.
-EX: nuclear materials, controlled substances(medicines) and precursor
chemicals
- only in case of few controlled items.
4. Obtaining Pre shipment Finance:
-As soon as exporter receives a confirmed order and LOC , he should approach
bank for pre shipment finance to meet his working capital requirements
- man , machine, material, Environment, maintenance etc.

5.Production/Procurement of Goods
- Once securing the preshipment advance from the bank, the exporter has to
arrange for production/procurement of goods for shipment
- Merchant Exporter- procure and export
-manufacturer Exporter Manufacture and export

6. Packing
- Packing-proper protection of goods
-Packing material depends on
Mode of transport
distance covered Perishable and Non perishable items
type of handling of goods-Manual or Automated
7.Preshipment inspections
-Pre-shipment inspections (PSI) are required when mandated by the
government of the importing country.
-Export cargo is subject to quality control and pre shipment inspection export
should get inspection certificate.
-5 inspection agency established by government :
Mumbai, Kolkata, cochin, Chennai and Delhi
Methods/Types of pre-shipment Inspection/systems of Quality Control:
1. Self Certification Scheme:
-Reputed Units having proper reputation and adequate testing facility for
product quality, design, development are eligible to get self certification
scheme.
-Unit has to apply to the Director, Export Inspection Council of India, New
Delhi and pay fees.
2. In-process Quality Control:
products such as chemicals and Engineering goods is done at various
stages of manufacturing-raw material and component control, process
control, product control and packing control etc..
3. Consignment Wise Inspection:
- Each individual consignment is inspected by the Export Inspection Agency before
export and inspection certificate is issued.

4. Fumigation of consignment:
-compulsory fumigation is done for crushed bones, hooves and horns etc
-These commodities are exposed to infection
-ensure commodities reach destination free from infection.
8. Central Excise Clearance
-Excise duty is a tax levied on the event of manufacture but is collected when the
goods are removed from the factory.
-Excise Duty: Tax on a good produced for sale, or sold, within the country

clearance is obtained in two ways:

1.Export Under Bond:
-Exporter need not pay any amount of duty
- export goods under a bond supported by a bank guarantee-sum equivalent to excise duty
-Running bond account-the bond is arranged for a suitably large amount with the
approval of Excise Authorities so that several consignment may be exported under same
bond without frequent renewals.
2. Export under Rebate(Refund):
- The manufacturer /exporter initially pays the duty and then claims the refund after
shipment of the goods.
9. ECGC Cover:
- The exporter must take appropriate policy to protect himself from credit
risk.

10. Marine Insurance Policy:

- To protect cargo from risk of marine causalities exporter must obtain
marine insurance policy.
 C& F Agents
Clearing and forwarding Agents
Making shipment through the customs is an elaborate and difficult job.
C& F Agent is familiar with shipment formalities and is knowledgeable about
customs procedure.
Works on commission basis
Procedure for appointing C & F Agent:
1.Reference of Agent:
-Advisable that an exporter should appoint C&F Agent through some business
recommendation.
-C&F Agent must have branches in the port cities like Mumbai, Kolkata, Chennai
and Cochin.
2. Collection of Information:
- references from Export Council.
-Information about-services provided by this agent, their experience and
reputation in business
3. Discussion with the Agent:
- discussion with agent with regards to the services that he could provide and fees
payable for service.
 Selection and Appointment of Agent:
-when the exporter is satisfied with the discussion with C& F agent,
Appoint
Sign the Agreement
(so as to protect the interest of both the parties- to avoid disputes )
-preferably the Exporter should prepare the shipping documents himself and entrust C& F
agent to get the documents processed.
 Follow Up
-Exporter must remain in touch with C&F agent
-Ensure that shipping of goods takes place as per plan
 Shipment Stage

Shipping and customs Formalities:

Goods can be shipped by

 As most of the export orders are of large volume, shipment by sea is the
most preferred mode of transport.
Exporter should prepare proper documents and handover it to the C& F
Agent in time to avoid any delivery schedule.
The shipment stage consists of:
Reservation of space in ship

Arrangement of Internal
Transport

Preparation & Processing of

shipping documents
 Reservation of space in the ship:
-Exporter has to contact the shipping company in advance for booking the
required space in the vessel for shipment of his consignment

-He has to provide necessary information as regards-

-Date
- Net weight of each package
-Particulars of the Importers and exporter himself
- Arrival & departure date of vessel etc.
-When shipping company excepts the Exporters request the agent or
company issues Shipping Order
 Arrangement of internal Transport from Factory/Warehouse to
the port of Shipment:
-The exporter has to make necessary arrangements for the transporting the
goods by road/rail from his own place to the port of shipment

-If railway wagon are to be booked , the shipping order and fees should be
placed with railways Authorities.
- After loading the goods into the wagon , the railway office issues Railway
Receipt.
 Preparation and processing of shipping documents:
-When goods reach the port of shipment, the exporter hands over the
complete set of documents to the forwarding agent which are submitted
to the Custom House.
-Shipping Bill(5 copies)
-Commercial Invoice(duplicate )
-Letter of Credit
-Certificate of Origin
-Guarantee Receipt Form(original & Duplicate)
-ARE-1
-Packing List
-Excise Invoice
- Valuation Certificate
-Certificate of Inspection(original)
-Marine Insurance Policy
-Rail Freight Concession Form
-Weightment certificate
 Customs Clearance
Excise Duty: Tax on a good produced for sale, or sold, within the country
Customs: Taxes on import
 Carting Order

Storing the goods

in the shed

Examination of
Goods

Let Ship Order

Loading of Goods

Payment of Port
Dues

Obtaining B/L
Carting Order:
The C& F agent obtains Carting order from the Port trust Authorities to cart or carry
the goods inside the Dock.
The customs appraiser issues carting order after verifying the endorsement on the
duplicate copy of the shipping bill.
Storing the Goods in the Shed:
After obtaining the carting order, the cargo can be moved into appropriate
shed inside the dock.
Examination of Goods:
The C&F Agent now approaches the customs Examiner who may physically inspect the
goods
The customs Examiner, if satisfied, issues Let Export Order
It is clearance from the customs that goods are permitted to export.
Let ship Order:
The Duplicate copy of shipping Bill which is endorsed by the customs
Examiner is handed over to the Customs Preventive officer who endorses it
with Let ship Order
It is permission for actual loading of cargo into the ship.
It is issued by preventive officer of the customs.
Loading of Goods:
The goods are then loaded on board the ship for which Mates receipt is issued by the
Mate of the ship.
Payment of port Dues:
The C& F Agent pays port dues and collects Mates Receipt from the
superintendent of port Trust.
Obtaining B/L:
The C&F Agent approaches the shipping company ,surrenders Mates
Receipt and obtains B/L
Customs EDI System
 Electronic data interchange (EDI) is the structured transmission of data
between organizations by electronic means.

It is used to transfer electronic documents or business data from one

computer system to another computer system, i.e. from one trading partner
to another trading partner without human intervention.
 With effect from 15th sept 2004, Govt.of India has introduced computerized
processing of shipping bills under Indian Customs EDI system.
With the introduction of EDI system India now has the advantage of using
paperless trade.
Now, documents can be exchanged electronically with the customs and
other government departments.
With this computerized documents processing, the exporters and importers
are the main beneficiaries
About 20 Ports in India have adopted computerized processing of shipping
bills.
 Objectives of customs EDI system
To expedite customs clearance
To simplify customs laws, regulation and procedures.
To cut down interaction of trade with government agencies.
To promptly make available correct information on import/Export statistics
To maintain uniformity in assessment and valuation.
To provide information on revenue collection.
To attend the needs of the trade.
To monitor incomplete work lying with customs
To present complete information on goods imported, ex-bond clearance of
warehoused goods and control on customs activities.
 Obtaining common Business Identification Number(BIN)
- Under computerized customs clearance exporter has to obtain PAN based BIN
from Directorate General of Foreign Trade.
- Pan is 10 digit alphanumeric code
- Alphanumeric-identify importers/exporters
Electronic filing of shipping bill
-Fill shipping Bill consist of:
- Import Export code number
-Bank account number to receive amount
-License number
Exporter has to submit relevant documents
Computerized shipping Bill is generated from computer
Loading of goods and issue of Mate Receipt
Receive B/L
 Advantages of Customs EDI system
Ease of Operation:
- The exporters & Importers can know status of various documents in different
departments of customs online.
-makes business operations simple and accurate
Less running around:
- When exporters were doing manual clearance with customs they need to approach
customs for each & every work that involved running around various departments.
- Now, exporters can send these documents online and meet customs officials only at
the time of physical examination of goods.
Economical:
-saving of time and cost at every stage
-total transparency is maintained with improved communication leading to fairness and
certainty of shipment.
Improved service:
Less dependency on Agents
Provides security at all levels of system
 Prompt Service:
-As delays in customs is either removed or minimized carriers of goods benefit
from quick service, lower cost and full use of available equipments
Benefits Officials:
- The customs officials are also benefitted because they can access documents on
their screens an din order.
-work is done with ease, simplicity and convenience
Post Shipment Stage
Negotiation of Documents and Realization of Export Proceeds
Submission of Documents by the agent to the Exporter:
- The C&F agent submits the necessary documents to the exporter to enable him
to present the same to his bank for the purpose of negotiation.
Shipment Advice to Importer:
-After the shipment of goods, the exporter has to send suitable intimation to the
importer for his information.
- date of shipment,
- name of the vessel
-date on which the goods will reach this destination should be informed to
importer.
Presentation of Documents to the bank for Negotiations:
-complete set of document is submitted by the exporter to his bank for purpose of
negotiating the same and obtaining export proceeds in time.
-Bank then sends the same documents to the importer.
-Documents to be submitted to bank includes:
-Bill of Exchange - Marine Insurance Policy
-Commercial invoice - Certificate of Origin
-B/L - Inspection certificate
 Dispatch of Documents:
-After verifying the documents the bank will dispatch the shipping documents
as specified in L/C to importer
Realization of Export Proceeds:
- The importer receives the documentary bill of exchange sent by the
exporters bank.
-in case of usance bill, payment is made on maturity of the bill.
- if the exporter bill are not covered by LOC the bank gives loan against bills
till the payment for export is received by the exporter.
-The negotiating bank has to take follow up action to remind the importers
bank to clear the payment at earliest.
-when payment is received by the negotiating bank, post shipment procedure
is completed.
Import Procedures
 Before taking any decision of importing it is necessary to decide under what
category of importers a businessman should like to act.
You may be proprietor /partner of a firm , director of private or public limited
company
You may desire to import a particular commodity either for self use or to sell
in the domestic market or to used in the product that you are manufacturing.
Under Export Import policy, importers are classified under following categories:
Importer:
A person/firm who imports or intends to import and hold an importer Exporter
code number.
Actual User:
Importer who may be either Industrial or Non industrial
a) Actual User(Industrial):
-person who utilizes the imported goods for manufacturing in his own
industrial unit or manufacturing for his own use in another unit.
b) Actual user (Non Industrial):
-Person who utilizes the imported goods for his own use in:
 i) any commercial establishment carrying on any business, trade or
profession Ex: Importing of Watches, Mobiles etc
Ii)Any laboratory, scientific or R& D institution, university or other
educational institution or hospitals
Iii) Any service Industry
 Hospitals constantly seeking new equipment
in Myanmar
Every single day hospitals use mountains of single-use items such as rubber
gloves, bandages, swabs and gowns. And then there is the food, washing powder,
disinfectant and cleaning products that are consumed on a daily basis.
Other items can be reused many times like bed sheets, pillow cases, scalpels and
surgical instruments.
Most of the expensive equipment electronic equipment used in Myanmars
hospitals must be imported because they cannot be made locally.
For sophisticated products like CT scanners and MRI machines, many hospitals
rely on brands like Siemens.
 Pre Import Procedure

Select right product

Select right supplier
Find out creditworthiness of the supplier
To seek services of suppliers agents
To approve sample
 Select right product
1.Select the right product:
-Even though import into India are liberalized since 1991 but
the importer cannot import every item.
-He must consult negative List of Import decide accordingly-
There are certain items that are prohibited and cannot be
imported.
-Items included under restricted list can be imported against
licensing.
-Hence importer has to select such a project that is permitted
under the law.
 Bache-de-mer of sizes below 3 inches
Cattle
Camel
Chemical fertilizers, all types, including super-phosphate Micronutrient
fertilizers and mixtures thereof containing NPK, excluding those specified
Dress materials/readymade garments fabrics/textile items with imprints of
excerpts or verses of the Holy Quran Deoiled groundnut cakes containing
more than 1% oil (and groundnut expeller cakes) Fresh and frozen silver
pomfrets of weight less than 300 gms. Fur of domestic animals, excluding
lamb fur skin Fodder, including wheat and rice straw Hides and skins,
namely :-
 Vintage motor cars, parts and components
thereof manufactured prior to 1-1-1950
Vintage motor cycles, parts and components thereof manufactured
prior to 1-1-1940
 2. Select the right supplier:
-Indian importers can order their supply from any
country of the world with which India maintains cordial
political relations.
-In order to select dependable and reliable suppliers,
importers can obtain information from various
government Embassies and press advertising
-international trade fairs and exhibitions is another good
source to select a supplier
Crude and Oil suppliers
 Find out creditworthiness of the supplier
Importers must doubly check the business standing and
creditworthiness of the suppliers.
Bank reference is a dependable source to ascertain creditworthiness
of the suppliers.
It is safe to place orders through indent houses who are in the
business of import trade and are in the know status of suppliers.
 To seek services of suppliers agents

Some multinationals and large suppliers have

appointed their agents in India.
It is desirable to deal with these agents who are easily
accessible
In case of any misunderstanding or disputes these
agents can screen the complaint and work out
mutually agreeable solution.
Two major areas of dispute are: Quality of products
and payment
 To Approve Sample
Major area of dispute: Quality of goods
Dispute about quality of the goods will have to
settled between the buyer and the seller.
Hence, it is advisable to call for sample and
approve the sample.
This will make way for hassle free imports
Importers must carefully go through the terms
and conditions of the business to know the
extent of liability(responsibility) if problems take
place.
 Steps in Import Trade Procedure
Procurement of License:
-under the imports and Exports control Act,1947 no goods can be imported into
India without a valid import license.
-the importer can import goods either under a general license or a specific or
individual license
-General License Importer can import goods from any country of the
world
-Individual License-an importer can import goods from specific countries
only.
-Every License shall be valid for the period specified in the license
 Documents to submitted by the importer while
applying for import License:
- Income Tax certificate
- Import License fee receipt
- A certificate from CA
After going through these documents, the licensing
Authority will issue import license.
Import License bears Registration number.
Preliminary Negotiations:
-Having procured import License, the importer must enter into preliminary
discussion with overseas suppliers as regards terms and conditions of business
such as price, credit period, payment terms, delivery schedule etc.
Procurement of Quota:
-A certificate indicating the import quota is issued to an established importer.
-it is called Quota certificate
-This certificate enables the importer to import goods up to the value mentioned in
the said certificate.
Obtaining foreign Exchange:
-The importer is required to forward his application through his bank to the
Exchange control Department of RBI
-The exchange control Department scrutinizes the application of the importer
- If found to be in order sanctions necessary foreign Exchange for a particular
transaction.
 Placing Indent:
-Form of order sent abroad for goods to be imported.
-The importer can place his indent directly or through the middleman called
Indent House.
Dispatch of L/C:
-A foreign seller would like to be sure about the creditworthiness of the importer
.
-importers bank issues a L/C in favor of the foreign dealer.
Appointment of C& F Agent:
-To clear goods from customs C&F agent should be appointed.
- The C&F agent will prepare a Bill of Entry giving details of goods to be
cleared from the customs.
Receipt of shipment advice:
-Shipment advice is sent by the exporter to importer
-shipment advice contains the date on which the goods are loaded on the ship
and the approximate date of arrival of cargo.
-importer receives copy of commercial invoice, packing list and B/L
 Receipt of Documents:
- The exporter draws a bill of exchange on the importer for the full invoice value
of goods
-Bill of exchange includes certain documents like commercial invoice,
certificate of origin, B/L, weight / measurement certificate etc
Obtaining delivery order:
-If any freight is to paid the clearing agent makes the payment to the shipping
company and obtains delivery order.
Clearing of goods:
-The C&F agent has to clear port dues and obtain a certificate to this effect
- The agent then pays the customs duty and clears the goods.
Payment of C&F agent:
-For the services rendered by the C&F agent the importer has to pay
commission to him.
-C&F agent must provide goods services in order to be in goods books of the
importers for future contracts.
 Making the Payment:
-The importer has to make the payment for the goods as per the agreement .

Follow-Up:
-Having collected the goods from the customs the importer will examine
the shipment
-if any discrepancy or damage to the goods is noticed the importer must
intimate to the exporter.
-Even if in any case discrepancy is not there the importer must intimate to
the exporter.
Legal Dimensions of Import
Procedures
 Mexicans arrested after 64kg cocaine importation thwarted

The criminals attempted to make the shipment appear Lawful by

establishing a front company and concealing the cocaine inside cement
cylinders, flower pots and statues, each weighing 210 kilograms.
A joint international law enforcement investigation led to the arrest in
Melbourne of three Mexican citizens attempting to import 64 kilograms of
cocaine into Australia.
The international law enforcement investigation ultimately resulted in the
disruption of a transnational drug trafficking syndicate and prevented an
estimated 16 million worth of cocaine from being distributed on Australia's
streets
 To Sign import contract:
-Import trade is known to face many unexpected and unanticipated problems
-Hence, it is in the mutual interest of both importer and supplier to prepare a
contract and signed by both the parties
-The contract will outline what each party is allowed /not allowed to do.
-Liability (Responsibility) of each party will be known
-Terms and condition of the business should be specific and to the point
-Contract must clarify about
-quality and quantity of goods,
- price, payment terms,
- packaging, delivery schedule,
-ports of departure and destination
-Insurance
-Import License etc.
 To finalize pricing within INCO Terms:

-Inco terms 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
-Number of trade terms used in International trade to indicate the sale price and
corresponding rights and obligations of the seller and buyer
-Main objective of Inco term is to give common interpretation for the different
trade terms used in international trade.
-These terms are defined by International Chamber of Commerce, Paris
-These are accepted by governments, legal authorities and practitioners
worldwide for the interpretation of most commonly used terms in international
trade.
-They are used to divide transaction costs and responsibilities between buyer
and seller
-With these terms the importer and supplier come to know the exact expenses to
be borne by each of them.
 To finalize payment terms:
Importers have choice payment terms which are:
-Letter of credit or advance payment
-The creditworthiness of the importer is an important factor that supplier
takes into account before agreeing on the terms of payment.
-Safety of payment is never compromised by any supplier
To collect IE number:
- Importers and exporters in India have to obtain Importer-Exporter Code
(IEC) number from DGFT without which they cannot import or export.
- To collect IEC number Number , importer has to submit documents like:
photographs, PAN card, DD for fees, any other documents
To obtain import License:
-importer desires to import items included under restricted list, he has to
apply to the regional licensing , authority for the issue of import license
To get foreign exchange sanctioned:
-payment for imports are made in foreign exchange which is sanctioned by
the RBI
 To undertake financial planning:

-importers must undertake financial planning that adequate funds are

maintained to get the consignment release on arrival.
-when importers goods remain uncleared importers have to pay huge
demurrages (goods lay in warehouse beyond limited time)which is financial
loss to them
To obtain L/C from the bank:
- Some suppliers insist that payment has to be done through L/C only
-Under this circumstances importers have to negotiate much in advance with
the bank to open relevant L/C in favour of the supplier
-L/C gives security of payment to the supplier who comes under the
obligation(duty) to execute the shipment as per terms of the business.
Customs Formality for Imports
 Submission of Import General Manifest:
-Under section 30 of the customs Act,1962 the person carrying imported goods
has to submit within 24hours to the proper Authority of the customs a
document called Import General Manifest at the port of destination.
-It is list of items that the carrier is carrying for unloading at the port of
destination
-On receipt of this document, customs transfers imported cargo to the bonded
warehouse maintained at the port
Preparation of Bill of Entry:
-When goods are imported, importer has to pay necessary import duty.
-For this, the information about the goods imported are given to the customs
authorities in a prescribed form called Bill of Entry
-Bill of entry can be filed 30 days in advance to facilitate processing of this
documents.
-This documents states that the goods of the stated value and description in the
specified quantity is going to enter into India
-Following types of Bill of entry
 1.Bill of Entry for Home Consumption:
-This form is white in color.
-goods are meant for home consumption against payment of duty
2.Bill of Entry for Bonded Goods:
- form is yellow in color
- this form is used when no duty is paid on imported goods which are
transferred to bonded warehouse.
3. Bill of Entry for Ex-Bond Clearance:
- When the importer desires to clear imported goods either in full or in part
after paying applicable import duty meant for home consumption this form
is used
-Goods are hereafter transferred to bonded warehouse.
 Contents of Bill of Entry:
a) Name and address of the importer and exporter
b) Description, classification and value of goods
c) Import License number of the importer
d) Rate and amount of import duty payable
e) Name of the port/dock where goods are to be cleared
f) Currency, weight, freight and insurance
g) Details of exporter
h) Declaration about the correctness of information
 Services of customs House Agent:
-Customs clearance of imported goods is a complicated process.
-It is advisable that importer utilizes the services of accredited clearing agent who
becomes responsible to prepare and submit Bill of Entry in time
Noting of Bill of Entry:
Bill of Entry complete in all respect and duly signed by the importer and his CHA is
submitted to the import Noting Department for noting .
Bill of Entry presented for Appraisal(assessment):
-Bill of Entry presented to Appraising counters with the following documents:
Commercial invoice

LoC
B/L
Import License
Packing List
Insurance Policy
Importer Exporter code Number
Weight specifications
Custom declaration
 Payment of Duty:
-Importer proceeds to pay import duty with assessed Bill of Entry.
-Original copy of Bill of Entry is removed by the customs and remaining
documents are returned to the importer
Physical Examination of Goods:
-Loaded with these documents the importer approaches the Dock Appraiser for
physical examination of goods.
-After the physical examination of goods is over the dock Appraiser issues Out of
charge order(second check procedure)
Issue of Release order:
In case any dues like demurrage remains unpaid, importer has to clear the payment
When no dues remain outstanding the port manager issues release order against
which he is allowed to take the goods out of customs area
Penal Action:
Importer must take all the precautions not to give wrong/misleading information.
If customs establish that certain tangible facts were hidden or wrong/misleading
information was provided it is authorized to either confiscate(take away) the goods
or charge fine.
Warehousing of Imported Goods
 Warehousing means storage of goods in systematic easy wway to maintain
the quality of goods.
Specifically constructed building for the storage of goods in a safe and
secured manner.
An importer may not always clear the imported goods for home
consumption
He may release the goods in installments or may postpone the decision to
collect the consignment
Under this condition he may avail the facility of bonded warehouse.
Bonded warehouse are constructed and maintained by the Dock and
customs Authorities.
They work under the government license
Sometimes importer may not like to take immediate delivery of goods or he
may not be in position to pay the full duty on the goods.
Under this condition he may avail the facility of bonded warehouse for
temporary period of time
The goods will be released from the bond only when the customs
authorities give necessary permission
 Importers have to file set of yellow colored bill of entry
Payment of duty is postponed
After the assessment of goods for the levy of the import duty is completed
the scrutinizing appraiser debits import license
Warehousing bill of entry passes through normal checking by the Assistant
collector of customs.
In order to get goods cleared from the warehouse the importer is required to
submit Ex-bond bill of entry
This document is printed in green paper and submitted- Import Bond
Department
Retirement of Import Documents
 Intimation from supplier:
-When are goods are dispatched by the supplier, he will send shipment advice to
the importer informing him about the shipment of goods.
-Some of the details will be : name of the vessel, date of sailing, port of
destination, quality and quantity of goods, Invoice number, description of goods,
B/L etc
Retirement of import documents:
Overseas supplier makes shipment of goods and makes ready documents as
required under LoC and hands them over to his bank with a request to negotiate
for payment.
The supplier hands over the following documents:
a) Bill of Exchange
b) Commercial Invoice with packing list, if needed
c) B/L
d) Certificate of Origin
e) Inspection Certificate
f) Marine insurance Policy
g) Any other document
 The importer is required to submit the following documents to the bank in
order to retire the documents
A) Remittance in foreign exchange executed under form A1
B) Exchange control copy of import license , if required
Preparation of Bill of Exchange:
When bank has received the full set of documents, it prepares bill of exchange as per the instructions
from the supplier. Bill of Exchange can be of two types
a) Sight Draft: The importer will be given document only against payment
b) Usance Draft: The importer gets the documents against acceptance or credit. He will
make the payment at the expiry of the credit period
Scrutiny of Documents:
The importers bank will carefully examine the documents forwarded by the suppliers bank.
importer's bank will check if all the documents are in order and there is no discrepancy.
Services of C&F agent:
As mentioned earlier, import procedure is a complex process. As a practice, the services of
C&F Agent is utilized to ensure smooth completion of import procedure.
-C&F Agents are well acquainted with documentation and customs procedure.
-They will ensure importer does not face hardship in getting goods imported in India.
 Export Marketing Organizations
1. Manufacturer Exporters
2. Merchant Exporters
3. Star Trading Houses of five categories
4. Canalizing Agencies
5. State Export Corporations
6. Export Consortia
7. Government(public sector) Trading/Marketing
Corporations
 Registration of Export Firms
Any individual or partnership firm or private firm limited company or
public limited company that desires to enter into export trade must follow
guidelines provided by the foreign Trade (Development and Regulation)
Act, 1992.
Act requires a person or organisation to register itself with the DGFT.
Registration of export business is compulsory with various authorities
because it will deal in foreign exchange and will also be eligible to enjoy
the benefits and incentives provided by the government.
 Registration formalities of Export
Trade
Any individual. partnership firm/ private Ltd./Public Ltd. Company desires to do
export trade must follow guidelines provided by Foreign Trade Act,1992.
Registration of export business is compulsory with various authorities
Registration will deal in foreign exchange and will also be eligible to enjoy the
benefit and incentives provided by the government.
Registration with Various Authorities:
1.Decide the Nature of Business:
- Decide Nature of Business
-Sole Proprietary Business
- Partnership
- Joint stock Company

This will help him to decide seed capital requirements and amount of bank
finance needed.
Look for suitable office space, print goods letter Heads and Business cards.
 Sole proprietary Business
A sole proprietorship, also known as a sole trader
A business by a single individual which is not formally organized and for which the individual
and the business are indistinguishable in law.
Sole proprietorship is a business structure for individuals who work for themselves
Freelance writers, copy editors, photographers and craftspeople
A sole proprietorship is a type of business in which one person legally makes up the whole
company.
Partnership
 Steve Jobs+ Steve Wozniak+ Mike Markkula
 Joint Stock company
A joint-stock company (JSC) is a type of corporation or partnership
involving two or more individuals that own shares of stock in the company.
A joint stock company can come into existence only when it has been
registered after completion of all required by the Indian Companies Act,
1956.
Joint Stock company
 Hero Honda is a joint venture between the Hero Group of India and Honda
of Japan
Hero is the brand name used by the Munjal brothers Hero Cycles Ltd
A joint venture between the Hero Group and Honda Motor Company was
established in 1984 as the Hero Honda Motors Limited
Munjal family and Honda group both own 26% stake in the Company
Hero Group of India would buy out the 26% stake of the Honda in JV Hero
Honda
Since last 25 years the Hero Group relied on their Japanese partner Honda
for R & D for new bike models.
Under the joint venture Hero Group could not sell into international
markets and the termination would mean that Hero Group can exploit
global opportunities now.
 Look for suitable office space, print goods letter
Heads and Business cards.
 Selection of Name of the Firm:
-A exporter is free to select the Name of his firm
- The name of business should suggest that the firm is engaged in
export/import business e.g. international, global or overseas are common
words with the name of the exporting firm.
 Approval of Firms Name:
-Regional Licensing Authority of DGFT approves name of Export firms
Opening of Bank Account:
An exporter has to select a bank which undertakes to fill all banking
formalities connected with negotiation of documents and realization of
proceeds.
The bank must be authorized to deal in foreign exchange.
Registration with Excise Authorities
-Excise Duty: Tax on a good produced for sale, or sold, within the country
- Customs: Taxes on import

Registration with Export Promotion Council(EPC)

Every Exporter is required to register his firm with the concerned council
meant for his commodity.
Ex: An exporter of textiles must register with the Textiles Export Promotion
Council.
The concerned EPC issues the following 3 forms:
- Application for Registration
-Application for Membership
-Application for Registration-cum-Membership certificate (RCMC)
 Fully filled forms along with the Registration fees and necessary
documents such as bank certificate shows applicants financial soundness
should be submitted to EPC.
The council verifies form, documents ,fees and issues Registration-cum-
Membership certificate to the Exporter
Obtaining GIR/PAN no.
Income from export is exempted from income Tax, for which the exporter
is required to register his firm with Income Tax Authorities.
Exporter must have General Index Registration(GIR) number
GIR-temporary number allotted by the income Tax authorities to a new
entrant in field of export trade
 Registration for code Number from DGFT:
Import Export Code Number
Granted by Director General of Foreign Trade
Export Licensing
 Export Licensing:
-Export of goods restricted under Indian Trade Council
-Export Import items will be allowed to trade only in accordance with the
license/certificate/permission or a public notice issued by the concerned licensing
authority.
-The main Licensing authority is Director General of Foreign Trade, Delhi
-Most of the goods are freely exportable and they do not require license unless they
fall in the negative list of export Import.
Negative List consist of following three categories:
1. Prohibited Items:
-Items included under this list can neither be exported nor imported and include
exotic birds, wild life, wood and wool products in the form of timber ,pulp and
charcoal.
2. Restricted Items:
-Items included under this list can be exported or imported only through licenses
and include chemicals,fertilizers,cattles, etc
3. Canalized Items:
-Items included under list can be exported or imported through the canalysed
agencies like
STC(state trading corporation of India)
MMTC (Minerals and Metals Trading Corporation of India )
 Selection of Export Product
Appropriate selection of the product and its adjustment as per the expectations of
foreign buyers are necessary for large scale exporting.
The product line to be introduced in the foreign market should be clearly
decided.
Product Includes- Product+packaging , branding, Labeling, warranties and after
sale service offered.
Product offered to foreign customers should be unique in terms of quality,
merits, color , brand , package, label and warranties.
Exporter should select the product on various considerations such as market
demand, nature of customers for the product, degree of competition,
import/export restrictions, future export potential, government incentives,
domestic production capacity and servicing facilities required by actual users
 Offering the same product in foreign market
as is marketed in the domestic marketing
Ex: Eureka forbes
 Offering the same product but after modifying
the contents as well as packaging
Ex: Mcdonald
 Offering completely new product as per the
needs and requirements of customers in
specific foreign market
 Guidelines can be suggested while selecting product for
exporting/export business

The selected product should have regular and continuous demand in the target
export market selected
It should be possible to manufacture/procure the selected product at lower cost
so that it can be offered to foreign buyers at competitive and attractive price
Ex: China
The selected product should be available in sufficient quantity so that supply
will be maintained regularly. So the exporter needs to have adequate production
capacity for meeting large scale exports.
Government regulations should be given due consideration while selecting the
product for export.
The product selected for exporting should adjustable as per market requirement
through quick modification.
The product selected should have regular demand so that continuous and steady
market will be available
 Methods of Exporting
Exporting firm has to decide the method of
entry in the proposed market.
There are several market entry alternatives
available to enter in target market.
Direct Exporting
Indirect Exporting
 Direct Exporting
Exporting the products by the manufacturer himself i.e. without using the
services of middleman like merchant exporters, export houses etc.
A manufacturer exporter can undertake direct exporting of his products in the
target market through his export department/division.
Ex: Kirloskers
Exporter of various engineering products
 S.L. Kirloskar's manufactures products with
minimum imported contents and selling them
through a well trained and equipped sales and
service network.
 Sales Representatives
A sales representative is often called a manufacturer's representative or a sales
agent.
The term "sales representative" is preferred because the term "agent" has legal
connotations in some countries.
A sales representative:
Uses the company's product literature and samples to present the product to
potential buyers.
Works on a commission basis; essentially acting as a broker.
Assumes no risk or responsibility for servicing the product after the sale.
A contract with a sales representative should state:
The period of the agreement.
The territory where the sales representative may operate.
Whether a sales representative may operate on an exclusive or a nonexclusive
basis.
That sales representative may sell complementary products that do not conflict.
The method compensation.
Reasons for terminating the agreement.
Limits on the legal authority of the sales representative to obligate the firm.
 Distributors
A foreign distributor is a merchant who purchases goods at a substantial
discount and resells it for a profit.
Foreign distributors generally provides support and service for the
product.
Distributors usually carry an inventory of products and a sufficient
supply of spare parts.
Distributors maintain adequate facilities and personnel for normal
servicing operations.
Distributors may resell the product to local dealers and retailers.
Ex: NOKIA
 Foreign Retailer
A company may sell directly to a foreign retailer.
These transactions often involve consumer products.
Effective in countries that have large retail chains.
EX: RELIANCE FRESH
Sales to foreign retailers can be achieved through:
Traveling sales representatives contact foreign retailers.
Direct mailing of catalogs, brochures, or other literature.
Which has the advantages of:
Eliminating commissions
Reducing travel expenses
Reaching a broader audience
But should be supported with other marketing activities.
 Selling Via The World Wide Web

Selling internationally via the World Wide Web offers many advantages.
You sell seven days a week, 24 hours a day.
Time difference is no longer a problem.
No travel costs.
Selling internationally via the World Wide Web requires added
considerations.
Web site should be in the language of the customer.
International shipping costs and delivery times need to be clearly
stated.
 End User

A company may sell directly to a foreign end

user.
Selling overseas may incur some added costs.
Unless other arrangements are made, the seller is
responsible for:
Shipping
Payment collection
Product support and service
EX: DELL
 Dell Focuses on Selling Products Direct to
consumers
Direct selling, from manufacturer to consumer,
was a key component of its strategy.
 With direct exporting the exporter handles every aspect of the
exporting process.
- Market research
-Foreign distribution
-Collections
 Advantages /Merits of Direct Exporting
High profit Margin:
-High
-as sale price can be kept at a reasonable level because deductions due to
commissions etc are absent.
Intensive use of selected market:
-Intensive use of selected foreign markets is possible as exports are made
directly.
-this gives larger sales and popularity in the market.Ex: DELL
Benefit of government Incentives:
-secure full and direct benefits of various export incentives and concessions
offered by the government.
Absence of dependence on middleman:
-The exporting firm is not at mercy of the middleman for exporting
purpose.
-it can export regularly through the marketing network.
 Optimum use of production capacity:
-A manufacturer selling in domestic as well as overseas markets can utilize
his production capacity fully as wide market area is available.
-Excess production can be exported through special measures
-Thus full use of production capacity is possible.
Spreading of marketing risks:
-A manufacturer exporter may supply his products in many overseas
markets.
-This is in marketing area, the risk in marketing is divided in the wider
area.
-As a result, actual marketing risk is minimized-distribution of risk is in all
markets
EX: NANO
 ASIA, AFRICA,
LATIN AMERICA, EUROPE
 Meeting export Obligation:
-A manufacturer importing raw materials/machinery on a large scale has to
accept certain export obligation(duty) as per government rules.
-A manufacturer exporter can fulfill such obligation through direct exporting
Market goodwill:
-Due to direct contact with the consumers, the firm can establish close
relationship with the consumers and create goodwill/reputation in the market.
Effective Control:
-The exporter can exercise effective control over export operations including
the selling price, after sale service and credit policy-no intermediater
Reliable market information:
-The manufacturer exporter gets first hand and reliable information of the
requirements and expectations of buyers and adjust his product and sales
promotion strategy accordingly.
 Summary
Direct methods of exporting give your firm:
More control over the export process
Potentially higher profits
A closer relationship to the overseas market
 Limitations/ Demerits of Direct Marketing
Huge Investments:
-The exporter needs more capital investment, suitable organization structure ,
more marketing efforts and effective supervision and control as the entire
responsibility of marketing is shared by the exporter himself.
Unsuitable to small firms:
-A small manufacturer with limited exporting capacity may not use such direct
exporting as it is not profitable
-Moreover, it is not possible for small firms to export directly due to financial
difficulties.
Heavy Business Risk:
-The risk involved in direct exporting is more as the entire risk is undertaken
by the exporter himself.
-Indirect exporting reduces the risks in export marketing
High Overhead:
-A manufacturer exporter has to bear the production overheads as well as
marketing overheads as he is engaged in production as well as marketing
Indirect Exporting
 Exporting through an Export Management Company (EMC)
- A foreign or domestic company that acts as a sales agent for domestic
exporters in international markets.
Exporting through an Export Trading Company (ETC)
- A company that supervises the exportation process for clients.
- They operate like an export division for a company that does not
have an export division.
Franchising Licensing
Contract manufacturing
 Alternative to direct exporting which may not be possible in the case of all
exporters
Exporting firm will prefer to export to the target market through marketing
middleman such as merchant exporter, export houses, trading houses or
through cooperative / government agencies.
All procedural aspects are handled by the export houses on behalf of the
exporting firm
Famous or popular with new generation of exporters.
Small manufacturing companies deals garments, handicrafts, textiles etc
Prefer such indirect exporting due to limited financial condition, managerial
problems
Manufacturers time and energy is saved as he is free from procedural
aspects of exports, as he concentrates on manufacturing only.
 Advantages
Less/Limited Investments:
Indirect exporting facilities exporting with less capital investment as
marketing process comes to an end when goods are supplied to middleman
within home country only
Relief from actual exporting:
-Indirect exporting gives relief to the manufacturing firm from the
botheration about actual export marketing.
-the firm concentrates on manufacturing only.
Benefit of services of middleman:
-the middleman take keen interest in marketing and also in sales promotion
-this gives benefit to the middleman as well as manufacturing firm
Limited Business Risks:
-shared partly by both middleman and manufacturer
-The expenditure on marketing is less as-no need to set up any branch in
foreign location
 Specialization:
-A manufacturer specializes on production activities due to indirect
exporting.
- he concentrates his attention on production activities only
Less overheads:
-share overheads relating to production activities only
-not concerned with marketing
-less burden of overheads
Suitable to small firms:
-Small firms prefer indirect exporting due to their financial and other
difficulties.
-It serves as an easy and economical method of exporting
 Limitations/Disadvantages of Indirect Exporting
Non availability of Middleman:
-Merchant exporters or other middleman may not be easily available for exporting
to all foreign markets.
-Manufacturer is at the mercy of middleman for exporting his product.
Sales target may not be achieved:
-In indirect exporting, the expected sales results may not be available as the agents
appointed may not take adequate interest in exporting.
-this may bring down the profit of the exporting firm.
Dependence on middleman :
-In indirect exporting .the export operations will be looked after by the middleman
-The export organisation will not have any say once the product goes in the
hands of the middleman.
-the manufacturer will not have direct control on pricing, packaging and so on
No benefits of export incentives:
-The exporting firm may not get the benefits of various incentives and the
facilities provided since he is not involved directly in the promotion of exports.
 Non Availability of reliable market information:
-In indirect exporting, information relating to export market will be
available from the intermediaries.
-such information may not be reliable and complete as it is second hand
information.
-this may effect his product planning and development
 Direct Exporting
Meaning: Exporting firm exports goods
through its agents ,opening
branches/sales offices in the
target market
Export prices: A manufacturer gets higher
price for his export item as no price for his export product as
commission is paid to
intermediaries
Risk Involved Risk involved in marketing is
more as manufacturing and
marketing risk are shared by
exporting firm
Market Information A manufacturer exporter gets
first hand information for his
business
Control on Market The exporting firm exercises
complete control on export
pricing, packaging and so on
Indirect Exporting
Exports its products through
merchant exporter, export
houses or through
cooperative or government
agencies
A manufacturer gets lower
intermediaries is involved
The risk involved is limited as
marketing risk are shared by
the marketing middleman
Manufacturer gets
information from
intermediaries- inadequate,
unreliable and supplied late
Limited control on export
pricing, packaging etc,
As marketing is given to the
marketing middleman
 Direct Exporting Indirect Exporting

Investment required Huge investments Less/Limited Investment-

manufacturing+ exporting as only manufacturing
activity is involved
Benefit of incentives Claim various incentives May not be able to claim
from government incentives from
government
Suitability Used by large exporting New and small exporters
firms prefer indirect exporting as
it suits them
 Other Means of Entry in export
Business
Licensing
Joint Venture
Wholly Owned Foreign Subsidiary
Licensing
 Licensing can be used as a method for initial Entry in the foreign market.
Manufacturer (Licensor) enters into an agreement with the firm in the
importing country(Licensee)
It gives him the right to use the manufacturing process, a patent design or
trademark or any item of value for a consideration.
It may be certain fee, royalty or other payment by Licensee to the licensor.
Manufacturer with developed technology will enter in foreign market
through licensing agreements.
The producers in foreign markets get the right to use the reputed firms
license in exchange for royalty
This gives opportunity to the manufacturer to enter in foreign market.
Licensing is a quick method for entry in the overseas market.
 The licensor gets entry into the foreign market without any expenses
The licensee gains production expertise or a known brand name for use.
Franchising is the most popular form of Licensing
Export companies from developed countries make such licensing
arrangement for entry in foreign markets and earn good profit through fees
and royalty
 Advantages of Licensing Method
It is a simple method for entry in foreign markets
The licensor gets guaranteed income in the form of fees
World wide recognition as the owner of popular brand
The licensee gets profit through marketing the product which is already
popular in the market.
He also gets the benefits of production expertise.
Cheaper alternative to direct and indirect exporting
Trade restriction have no effect on licensing as products are manufactured
and sold in the target market itself.
Disadvantages of Licensing Method
The licensor may suffer loss on long term basis:
-Licensee may not renew the license after its expiry
-he may even start his own manufacturing activity and become a
competitor of the licensor himself
The royalties/fees paid by the licensee may be very less because of the
restriction placed by the host country on such payment
Licensing as a technique for entry in foreign market is available only to
reputed firms possessing something unique as regards technology, brand
name, etc
Licensor has limited control on the licensee as regards production and
marketing
 Joint Venture
One more option available for entry in foreign markets through
manufacturing/marketing activities or both.
JV involves financial partnership between a foreign company and a local
company.
Partnership of two or more companies
Easy for foreign company to enter in the new market.
The foreign company brings finance and technical know how
Domestic company provides marketing facilities.
 JV takes place when
The domestic investor buys a interest in a manufacturing unit situated in a
foreign country
A Domestic investor and an investor of a foreign country jointly start a new
venture in that foreign country.
JV enables the local firm to get technology ,machinery ,know how,
consultancy services etc from the foreign partner.
JV gives easy entry to Indian companies in foreign countries/markets for
export of goods, machinery, technology and consultant services
 At present Liberal facilities are provided for JV abroad.
Indian JV abroad are located in the neighboring countries of south and East
Asia followed by UK, USA,West Asia and Africa.Tatas
Indian companies take keen interest in starting JV abroad.
Considered and approved by RBI
Indian companies provide machinery, technology and skilled manpower to
complete the project and handover the same to concerned foreign partner
for operation. Software companies. Infosys,Wipro,TCS
 Wholly Owned Foreign Subsidiary
A firm interested in exporting may establish a subsidiary manufacturing
unit in a foreign country. EX: FORD,HYUNDAI
The exporting firm will be the exclusive owner and controller of the
subsidiary
Result of direct investment in the foreign company
The subsidiary will manufacture and market the products in the foreign
country but the benefits will be available to the home investors.
Sometimes, the branches/subsidiaries may purchase raw material from the
foreign market and send them to the manufacturer who will manufacture
the products and send back to branches for distribution to consumers.
Branches are ultimately controlled by head office.
 Subsidiaries could be Greenfield investments
or acquisitions
Advantages:
No risk of losing technical competence to a
competitor
Tight control of operations.
Realize learning curve and location economies.
Disadvantage:
Bear full cost and risk
 Pricing Quotations
Price means expression of value or utility of a commodity in terms of money
Technique of determing such acceptable price at which the seller is willing to
sell and the buyer is willing to buy the product
Price fixed should be most reasonable.
Some people consider price as value for money while others associate it with
quality.
An exporter must make all such perceptions into consideration while
deciding the price.

 PRICE
Price refers to the amount of money that
consumers have to give up to acquire a good or
service.
Example:
If an MP3 player is priced at Rs 2000, it means I
must give up that amount of money to acquire
that product.
 COST
Cost refers to the amount paid to produce a good or service. The cost
represents the sum of the value of the inputs in production - land, labour,
capital and enterprise.
Manufacturing of Chocolate:
The raw materials === cocoa, sugar, milk, honey, hazelnuts, flavoring and
colour that are used to make the chocolate bar.
The capital === buildings and factories that make up the Cadbury's
business, the machinery, equipment used in the manufacturing, vehicles
and so on involved in the distribution of the finished product and the
offices and administration buildings that support the business.
Labour includes not only those who are involved directly in the making of
the bars but all the sales staff, administration staff, management,
marketing teams and so on that are employed by Cadbury.
The profit is the reward for enterprise. It is the amount left over when all
the costs have been paid.
These represent the costs of production.
 Objectives of pricing
To enables Indian exporters to offer competitive price to overseas buyers.
To earn a specific percentage of profit on the sales turnover.
To create sound image of Indian goods abroad.
To survive in the face of stiff competition in overseas markets.
To use export incentives in such a way that exporters can make attractive
offers to foreign buyers.
To enable exporters to survive economic recession.
Prices are charged to cover variable costs and some fixed costs to improve
chances of business survival.
To guide exporters to price the goods and services at a certain level not
only to defend but also to increase the market share.
To offer to foreign buyers attractive price discounts in order to increase
overall sales.
Factors Affecting Export Pricing
 Competition
The competition is severe due to differences in costs, levels of technology
and quality of products. Ex: Developed & Developing nations
Exporters from advanced countries are at an advantage due to available
credit facilities, use of advanced technology, better packaging, etc.
Less developed countries have to face keen competition with advanced
countries.
 Demand
The prices in every market are directly related to the demand for products.
The demand may be elastic or inelastic.
Pricing depends on the degree of elasticity of demand
highly elastic demand for a product tends to keep its price low, because a
slight change in the price may cause considerable change in demand for a
product. ex: Luxury products
Products having relatively inelastic demand can be quoted at comparatively
higher prices. Ex: Food items
 Availability of substitutes
Export prices are easily influenced if many substitutes are available in the
foreign market.
Consumers easily and quickly move to the substitutes when price is raised.
Thus, when substitutes are available, increase in prices may prove to be
fatal to the exporter.
Ex: Maruti Suzuki-core competency
 Incentives offered by the Government
Sometimes the government offers incentives and special concessions to
exporters for export promotion.
The objective of such incentives is to raise cost competitiveness of
domestic manufacturers and exporters.
As such, an exporter can charge lower price in the foreign market and can
confidently face the competition.
 Tax concessions and Exemptions
Export prices are also affected by the taxes and duties imposed by the
government of an importing country.
It has direct effect on export prices
Export prices rise as a result of such protective duties levied on imports.
On the other hand, lower prices can be charged if exemptions and
concessions are available to exports.
 Delivery Schedule:
-Delivery terms and schedules are also counted in price calculation.
-If prompt delivery is desired by the buyer, then the price charged would be
relatively higher.
Pricing objectives:
- Export pricing may have the objective to attain certain level of turnover or
profitability or capture a particular segment of the market or face market
competition.
-Accordingly the prices for exports are fixed.
-some exporters may have the objective of skimming or penetrating the
market.
Composition of consumers:
-Exporter has to consider composition of consumers based on income,
education, buying habits etc,
 Purchase considerations:
-Frequent buyers cannot be charged high.
-New customers can be charged high.
 Export Pricing/Quotation
Quotation:
- is an offer or proposal made by an exporter in reply to the enquiry from
an importer.
- The quotation should clearly state the price and other terms and
conditions.
-it may be in the form of Performa invoice that gives a clear idea to the
importer about the price to be paid by him in case the deal is struck.
 Types of Quotations

FOB Quotation(Free On Board)

C&F Quotation(Cost and Freight)

CIF Quotation (Cost, Insurance & Freight)

FOB Quotation(Free On Board)
 FOB Quotation, the seller quotes a price which includes all expenses
incurred till the goods are actually loaded on board.
Packing charges ,local transport charges and dock dues are covered In the
price quote.
Sellers Obligations:
- He has to load the goods on board the ship named by the buyer.
- He has to obtain B/L from the shipping company and forward it to the
buyer to enable him to take delivery of goods.
- He must inform the buyer certain details like the name of the ship and the
possible date of delivery
- He has to arrange for the necessary space in the vessel
- He must inform the buyer without delay that the goods have been delivered
on board the vessel or aircraft.
Buyers Obligation:
- He should inform the seller the name of the ship by which the goods are to
be send and also the expected date of delivery.
- He has to bear the risk when the goods are loaded on the ship
- He should make payment to the exporter as per the terms of contract
 C&F Quotation(Cost and Freight)
- price quoted=total cost of goods, packing, carriage, loading charges and the
payment of freight up to the port of destination.
- Other expenses include =cartage, unloading charges and expenses of carrying
the goods from the port of delivery to the warehouse are to be borne by the
importer
C&F Price = F.O.B Price + Freight

Seller Obligation:
- Seller must pay freight charges to the shipping company that undertakes to carry
the goods from the port of shipment to the port of destination.
Buyers Obligation:
- He has to arrange and pay for insurance
- He has to pay clearing charges, import duties etc.
- He has to make payment as per the commercial invoice
- He has to bear the loss or damage to the goods, if any, from the time and place at
which the sellers obligations are over.
 CIF Quotation (Cost, Insurance &
Freight)
CIF-cost, Insurance and Freight.
It includes FOB price + freight + marine insurance up to the port of
destination.
CIT=price of production and all other expenses till the goods reach the port of
destination in the buyers country.
CIF price = F.O.B Price + Freight+ Insurance
Sellers Obligation:
-pay for freight and insurance cover also.
Buyers Obligation:
-pay clearing charges,
- Make payment as per the commercial invoice
Letter of Credit (L/C)
(A promise to Pay)
 Credit- what comes
Debit-what goes
A letter from a bank guaranteeing that a buyer's payment to a seller will be
received on time and for the correct amount.
In the event that the buyer is unable to make payment on the purchase, the bank
will be required to cover the full or remaining amount of the purchase.
Letters of credit are often used in international transactions to ensure that payment
will be received.
It is basically a mechanism, which allows importers/buyers to offer secure terms of
payment to exporters/sellers in which a bank (or more than one bank) gets
involved.
 Exporters/ Sellers Importers/Buyers
Bank Bank

Exporter/Seller Importer/Buyer

Carrier
 Negotiating Bank Opening Bank

Exporters/ Sellers Importers/Buyers

Bank Bank

Beneficiary Applicant

Exporter/Seller Importer/Buyer

Carrier
 A Letter of Credit is an authorization issued by the opening bank to the
negotiation bank that if the exporter presents the relevant set of documents,
make the payment.

Negotiating Bank Opening Bank

Exporters/ Sellers Importers/Buyers

Bank Bank

Beneficiary Applicant

Exporter/Seller Importer/Buyer
Procedure/Operation of Letter of
Credit(L/C)
Exporter Mumbai Contract of Sale(1) Importer New York
(Beneficiary) (Applicant)

Forwards L/C Request to Open L/C

(4) (2)

SBI Mumbai Citibank

opens L/C and sends it to
New York
(3)
 Contract of Sale:
-The transaction in L/C originates when the exporter and the importer enter
into a contract of sale.
-The contract covers description, value and quality of goods, method of
payment, date of shipment etc.
Request from the importer:
The importer will request his bank to open a L/C in favour of the
exporter.
He can get his L/C opened either by depositing cash in advance or by
showing sufficient balance in his current account.
Issue of L/C:
-The issuing bank opens the L/C and forwards it either directly to the
negotiating bank or to the Advising Bank.
 Possession of L/C:
- In case the exporter wants confirmation of L/C, advising bank is authorized by
the issuing bank to add confirmation.
- Now a days exporters prefer confirmed L/C.
- Hereafter, the exporter can take possessions of L/C.
Submission of Documents:
-After shipment of goods through the customs, the exporter presents relevant set
of documents to the negotiating bank.
Scrutiny of documents:
-The negotiating bank will minutely scrutinize the documents to ensure that they
are as per the requirements of the importer.
-If documents are found to be in order, the negotiating bank will make the
payment to the exporter.
 SBI Mumbai presents documents & Exporter Mumbai
(Negotiating Bank) (Beneficiary)
obtain payment (8)

Reimbursement
of payment (7) ships goods to (5)

Citibank Importer
New York New York
(Issuing Bank) collects consignment & (Applicant)
instructs the bank (6)
 Realization of payment:
-The amount paid by the negotiating bank to the exporter is reimbursed by
the issuing bank.
Documents to importer:
-The documents sent by the negotiating bank to the issuing bank is now
handed over to the importer.
 Importance of Letter of credit

L/C is the safest method of receiving payment from abroad when the
exporter has irrevocable and sans recourse type of L/C.
It protects the exporter against failure of the importer to pay.
The bank which issues the credit ensures that the goods covered by the L/C
would be permitted to import under the exchange control regulations.
An exporter gets prompt payment from the bank if his documents are in
order. He need not wait for the payment to come from abroad.
An exporter is free from the problem of bad debt as the payment is
guaranteed by the opening bank.
The importer is certain to get the goods and documents because only then
his bank will clear payment.
 Types of Letter of credit

Revocable L/C:
- L/C can be revoked, modified or cancelled by the opening bank without
seeking prior permission of the exporter. It can be revoked
-Before procuring the goods
-After procuring the goods
-Before dispatching the goods
-After dispatching the goods
-When the goods are in the transit,
-When the goods have reached the destination.
-When L/C is revoked, notice must be given by the issuing bank to the
beneficiary so that he does not dispatch the goods.
-Risky as it can be cancelled any time.
-In case the negotiating bank has already made the payment and thereafter
receives the notice of modification or cancellation, such notice remains
inapplicable.
 Irrevocable L/C:
-This L/C is exactly the opposite of revocable L/C.
-Irrevocable L/C cannot be revoked, modified or cancelled by the importer
unless permission is obtained from the exporter.
-Safer type of L/C
-Firm commitment on the part of the opening bank, which once issued
cannot be withdrawn.
Confirmed L/C:
-A certain issuing bank may not be known in the country of the exporter.
Under the circumstances, the exporter may ask the issuing bank to get the
L/C confirmed by the local bank.
-The confirming bank agrees to honor all the documents presented by the
exporter provided it fits into the terms and conditions of L/C.
-Safest type of
Unconfirmed L/C:
- L/C to which confirmation is not added by the advising bank.
-Risk of Non payment is high.
Payment Terms
 In export trade, business dealings are carried on
between parties who may be separated by thousands
of miles.
There must exist clear understanding of how and
when the buyer will pay the exporter for the goods
ordered.
It is left to the exporter to indicate the way in which
he want the importer to pay him.
Either for prompt payment or he may allow credit.
Exporters have to realize payments as per the terms and conditions prescribed
by RBI

Under instructions from RBI, Indian exporters are advised to realize

payments within 180 days from the date of making exporters.
The exporters can realize payment later than six months, in case of deferred
payment terms.

Group Prescribed Methods

Member countries in the Asian Clearing Payment in Rupees from the account of a
Union bank situated in any country in this group
(Bangladesh, sri lanka, Pakistan, OR
Myanmar) Payment in any permitted currency
All other countries other than the above 5 Payment in permitted currency.(RBI has
countries recognized about 20 permitted currencies
 Methods of Payment for Exports
Advance Payment
Open Account
Payment against Shipment on consignment
Documentary Bills
 Advance Payment
Buyer needs to pay in advance
Safety of getting payment
Works when buyer is completely dominated by the exporter and the buyer is
interested in getting the goods.
Used under following conditions:
-When there is political stability in buyers country
-When the buyers country faces economic crises
-When the buyer has poor creditworthiness
-When the exporter is not prepared to bear credit risk
-When the goods are manufactured as per the specifications of foreign buyers
Not practical:
- may be non execution of the order after receiving the payment, and
-sometimes buyer may not accept the goods
 Open Account
When the goods are shipped on open account, the exporter forwards all the shipping
documents to the buyer and frees himself of the contract and payment.
There is no need to draw a bill of exchange
If buyer is not given credit facility , he must make payment immediately.
There is proper understanding between the exporter and the buyer on terms of credit
and the rate of interest in the outstanding amount.
Following circumstances are favorable for open account method:
-the exporter is confident that the buyer will honor his obligation
-there is a long and established relationship between the exporter and the buyer
-the exporter is absolutely sure about the sound financial position of the buyer.
-the exporter is financially sound to finance the operation.
-there should not be any exchange restriction in the importers country otherwise
payment will be hampered
-importers country should be financially sound and politically stable
Payment against shipment on Consignment
Consignment sale is possible only when the exporter maintains his own
establishment abroad or appoints an agent abroad to sell goods on his
behalf.
Exporter must obtain prior permission from RBI
Exporter must enter into legal contract with agent
The agent sells the goods as per the demand and sends the payment to the
exporter.
The export proceeds are received only when goods are sold.
The shipment on consignment basis should be made to trustworthy agent
only because:
-consignment exports is full of risks
-due date for the payment cannot be foreseen
-the exporter may face cash flow problem
-price to be realized depends on market conditions.
 Documentary Bills
When relevant documents of the title of the goods are also sent along with the
foreign bill of exchange it is called Documentary Bill.
Two types:
-Documents Against Payment(D/P)
-Documents Against Acceptance(D/A)
Documents Against payment(D/P)
-exporter sends the negotiable documents to buyer through bank
-payment is made against documents verification
-Risk-Buyer may refuse to accept the documents and to make payment
-to cover this risk-ECGC policy is advised.
This method is used under following conditions:
-the exporter instructs the bank to retain the documents until payment is made
-the importer can collect documents only when he makes payments
In case, the importer does not collect the documents by making payment, the
exporter has to dispose of the goods in the overseas market.
 Documents Against Acceptance(D/A)
-the importer cannot collect documents unless he gives in writing his
acceptance to make payment as per the terms of export contract
-the documents are released against acceptance of the Time Draft .i.e
credit is allowed for a certain period say for 60,90 or 180 days.
-the buyer gets possession of the documents only after accepting the bill.
D/A is used under following conditions:
i) The importer desires to use the goods before making payments
ii) The exporter has dispatched the goods before receiving the payment. He
cannot get the bills discounted.
iii) For the number of days of credit granted, the importer has to pay
interest to the principal sum.
Liberalization of Imports
INDIA TRADE BEFORE
LIBERLISATION
 1980s, suggests that the root cause of the crisis was the large and growing
fiscal imbalance.
Large fiscal deficits emerged as a result of mounting government
expenditures, particularly during the second half of the 80s.

These fiscal deficits led to high levels of borrowing by the

government from the Reserve Bank of India (RBI),IMF, World Bank.
Over the 1980s, government expenditure in India grew at a phenomenal rate,
faster than what government earns as a revenues.

The subsidies grew at a rate faster than government expenditures.

Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 to Rs. 107.2

billion in 1990-91.

Although, a large part of the problem concerning external imbalances in India

could be attributed to extraneous developments, such as two oil-shocks during
the last decade.
The Indian economy was indeed in deep trouble.
Lack of foreign reserves .
Gold reserve was empty.
Before 1991, India was a closed economy.
The government was close to default and its foreign exchange

reserves had reduced to the point that India could barely finance three weeks worth
of imports.
The Government of India headed by Chandra Shekhar decided to usher in several
reforms that are collectively termed as liberalization in the Indian media with
Man Mohan Singh whom he appointed as a special economical advisor.
License Raj was the regulations that were required to set up business in India
between 1947-1990.

where all aspects of the economy are controlled by the state and licenses were given
to a select few.

The License Raj is considered to have been dismantled in 1990.

Ended many public monopolies, allowing automatic approval of foreign direct

investment in many sectors

India still ranks in the bottom quartile of developing nations in terms of the ease of
doing business compared to China
Deputy Chairman of the Planning Commission
 Key players in the battle field of
economy reforms

Dr. Man Mohan Singh, a professional economist and an economic administrator,

was appointed Finance Minister.
ManMohan Singh is undoubtedly the architect of the most far reaching reforms in
India since independence in 1947.

Government economists such as Dr. Arvind Virmani took upon themselves the
task of clarifying the goals, objectives and methods of the reform package along
with:-
C. Rangarajan,
Montek Singh Ahluwalia,
Shankar Acharya and
Y. Venugopal Reddy.
Chairman of the Prime Minister's
Economic Advisory Council
Indian economist. He is currently Member Board
of Governors
Economist & Governor of the
Reserve Bank of India
The reforms brought changes in three broad areas, collectively known
as liberalization, privatization and globalization.
Liberalization did away with regulatory hurdles and minimized
licensing requirements.
Privatization reduced the role of the state and public sector in
business.
Globalization made it easier for the MNCs to operate in India.
This policy was later continued by Prime minister P. V. Narasimha
Rao,

and he was fully supported by his finance minister Manmohan Singh

and other officials such as C. Rangarajan, Montek Singh Ahluwalia,
Shankar Acharya and Y. Venugopal Reddy.
 INDIA TRADE
AFTER
LIBERLISATION
 Changing
Environment
After 1991

Opening up of the Indian Economy

Before 1991 closed economy and import of certain
goods was restricted.
After 1991 competition increased tremendously after
the liberalisation.
Competitors from all over the world enter the Indian
market
Competition from Low Wage Countries
Low range products are floating into the market
Low price, low quality
 GDP growth at constant prices

8.2 8

6.1

Average for
1993-2003 2003-04 10th Plan
Projection (2002-07
Indian Foreign Exchange Reserves: a steady rise after liberalization

Foreign exchange reserves (US$ billion)

118.

75.4
54.1

17.0
2.2

1990-91 1995-96 2001-02 002-03 2003-04

 Foreign Investmentsafter
Foreign Investments after liberalization
liberalization

Total Foreign Investment (US$ million)

15,872

8,152
6,789
5,138
5,385 5,639

103

1990-91 1994-95 1997-98 2000-01 2001-02 2002-03 2003-04

Import duty Reductions after liberalization

Reduction in Peak Customs Duties on Manufactured items

150

110

50

42
38.5 30
25
20

1991 Mar-92 Mar-95 Mar-97 Mar-00 Mar02 Mar-03 w.e.f March

2004
Vehicle Exports After Liberalization

Vehicle Exports

4 Wheelers (in Nos) 2 and 3 Wheelers (in Nos)

1992-93 1994-95 1996-97 998-99 2000-01

STEEL Industry after Liberalization
Production and Export of Finished Steel

Production (in million tonnes) Exports (in '000 tonnes)

36.19
33.67
29.7
23.82

14.33 17.82

1991-92 1994-95 998-99 2000-01 2002-03 2003-0

 IT & IT ENABLED SERVICES
OIL & GAS
POWER
PORTS & ROADS
AIRPORTS
 Categories of Imports
Importer means a person who imports or intends to import and holds an Importer-
Exporter Code Number.
Importers are classified into two categories viz.
i) Actual user(Industrial)
ii) Actual User (Non Industrial)

Actual user(Industrial):
- it refers to a person who uses the imported goods for manufacturing in his own
industrial unit or manufacturing for his own use in another unit including a jobbing
unit.
Actual User (Non-Industrial)
It refers to a person who uses the imported goods for his own use in:
a) Any commercial establishment carrying on any business, trade or profession, or
b) Any laboratory, scientific or R &D institution, university or any other educational
institution or hospital
c) Any service industry
 Non-Actual Users:
-it refers to such users who import but not meant for commercial use and
includes:
a) Personal imports
b) Imports of gifts
c) Importers for stock and sale
Negative List For Imports
 Free Importable Items:

-Free import of goods is not allowed for items included under the
prohibited list.
-Under Duty Exemption Scheme, certain items of import are allowed free
of duty meant for export production
-such item freely imported , they do not require import licenses
All second hand goods:
- can be imported only in accordance with provisions of FOREIGN Trade
Policy 2009-2014
-second hand personal computers/laptops, photocopier machines, AC,
diesel generating sets will only be allowed against a license.
-Import of re-manufactured goods will be allowed only against License.
-when import of second hand capital goods are made they must have a
minimum residual life of five years
 Prohibited List
Unprocessed Ivory
Animal rennet
Tallow fat
Wild animal including their parts and products
Unprocessed Ivory
 Animal Rennet
An enzyme which splits milk into curds
Although rennet can be made from vegetable or microbial sources, most
forms are derived from the stomach linings of animals.
often used in the production of cheese
 Tallow is a rendered form of beef or mutton
fat, processed from suet (raw beef or mutton
fat
 Restricted List
Cannot be imported freely
Can be imported with special permission / license from DGFT.
Importers need licenses to import restricted items and only by actual users
The grounds on which importers are restricted include health, security and
environmental protection or the goods are reserved for production by small
and tiny entrepreneurs.
Small and tiny sector in India adopt home based and village based
production requiring low skills but making available employment to large
number of people.
 Consumer Goods:
Industrial, agricultural, mineral or animal origin are included
which consist of:

i) Cameras
ii) Exports goods/ equipment
iii) Consumer telecommunication equipment
iv) Electronics goods
v) Watches, Watch cases and dials
vi) Gifts of consumer goods
vii) Concentrates of alcoholic beverages
viii) Wines
ix) Cloves, Woolen silk, man made and blended fabrics
B) Safety and Security Beverages:
i) fire arms
ii) ammunition
iii) explosives
iv) empty/ discharged cartridges of all bores/ sizes
Paper for security printing, currency paper, stamp paper and other special types
of paper
C) Electronic Item:
i)Audio magnetic tapes in all forms excluding 35mm and 16mm sprocketed
tapes
ii) Video magnetic tapes in hubs and reels, rolls, pancakes, jumbo rolls-in all
forms
iii) TV, picture tubes
iv) Printed circuit boards
v)PC
Consumer Goods:
Safety and security Items
Semi precious and precious stones
Animals & Reptiles
Miscellaneous items
Canalised List
Mineral oil
Niger seeds (Uchellu)
Maize unfit for human
consumption
EXPORT CREDIT GUARANTEE
CORPORATION OF INDIA LTD.
 Payments for exports are open to risks even at the best of
times.
The risks have assumed large proportions today due to the far-
reaching political and economic changes that are sweeping the
world.
An outbreak of war or civil war may block or delay payment
for goods exported.
Economic difficulties or balance of payment problems may
lead a country to impose restrictions on either import of certain
goods or on transfer of payments for goods imported.
 INTRODUCTION
Export Credit Guarantee Corporation of India
Limited, was established in the year 1957 by the
Government of India
To strengthen the export promotion drive by
covering the risk of exporting on credit.

ECGC is the fifth largest credit insurer of the

world.

The present paid up capital of ECGC is Rs. 800

crores
VISION

To excel in providing credit insurance and trade related services.

MISSION

To support the Indian Export Industry by providing cost-effective insurance

and trade-related services to meet the growing needs of the Indian export
market through the optimal utilization of available resources.
 What does ECGC do?

Provides a range of credit risk insurance covers to exporters against loss in

export of goods and services
Offers guarantees to banks and financial institutions to enable exporters to
obtain better facilities from them
Provides Overseas Investment Insurance to Indian companies investing in
joint ventures abroad in the form of loan
International experience to enhance Indian capabilities
Provides credit Insurance covers to banks against lending risks of exporters
An ISO organisation excelling in credit insurance services
 ECGCs role in helping exporters

Offers insurance protection to exporters against

payment risks
Provides guidance in export-related activities
Makes available information on different countries
with its own credit ratings
Makes it easy to obtain export finance from
banks/financial institutions
Assists exporters in recovering bad debts
Provides information on credit-worthiness of
overseas buyers
 Objectives of ECGC
ECGC is designed to protect exporters

It helps exporters to expand their overseas business.

It enables them to get timely & liberal bank finance.

It provides financial guarantees to banks.

It enables exporters & importers to take calculated risks.

 Risks covered by ECGC
COMMERCIAL RISKS:
Insolvency of the buyer.

Buyers failure to accept the goods when the

exporters is not at fault.

Buyers extended default to pay for the .goods

accepted by him
 POLITICAL RISKS:

Imposition of restriction by the Government of the buyer's country or any

Government action, which may block or delay the transfer of payment made
by the buyer.
War, civil war, revolution or civil disturbances in the buyer's country.
New import restrictions or cancellation of a valid import license in the
buyer's country.
Interruption or diversion of trip outside India resulting in payment of
additional freight or insurance charges which can not be recovered from the
buyer. Ex: diversion due to accidents, traffic, security reasons etc
Any other cause of loss occurring outside India not normally insured by
general insurers, and beyond the control of both the exporter and the buyer.
 Risks not covered by ECGC
General or Marine Insurance Risk.

Failure or negligence on the part of exporter.

Default or insolvency of Exporters agent.

Mistake committed by the exporter or his

agent.
 Products and services
Credit Insurance Policies
Risk covered for -short-term credit, i.e. credit not exceeding
180 days. This policy covers -commercial and political risks
from the date of shipment.
Guarantees to Banks-
- The Guarantees assure the banks that, in the event of an
exporter failing to discharge his liabilities to the bank, ECGC
would make good a major portion of the bank's loss.
Special Schemes
 Special Schemes Exchange Fluctuation Risk Cover

The Exchange Fluctuation Risk Cover is intended to provide a measure of

protection to exporters of capital goods, civil engineering contractors and
consultants
They often receive payments over a period of years for their exports,
construction works or services.
Where such payments are to be received in foreign currency, they are
open to exchange fluctuation risk as the forward exchange market does
not provide cover for such deferred payments.
Risk Cover -payments scheduled over a period of 12 months or more, upto
a maximum of 15 years.
The reference rate can be the rate prevailing on the date of biding.