Documents Used in Foreign Trade

Bill of Exchange
BOE is a direction from the exporter (drawer) to the importer (drawee) to pay the value of the goods through whom he sends the documents. A bill of exchange is a negotiable instrument and is governed by the Negotiable Instruments Act in India. As per NIA Bill of Exchange is an instrument in writing containing unconditional order, signed by the maker directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of instrument.

Bill of Exchange
The bill under a letter of credit may be drawn on the issuing bank or another drawee bank but not on importer. If the L/C calls for a bill on the applicant such bills will be considered as additional documents as per Article 9(a) iv and (b) iv) of UCPDC 600.

Types of Bills of Exchange

Sight & Usance Bills A bill of exchange is a sight bill or demand bill if the drawee is to make payment immediately on presentation of the bill to him. A bill is usance bill if the drawee is to make the payment after a specified period( say 30 days, 60 days or 90 days) This may also be drawn after so many days from Bill of Lading or Airway Bill

Types of Bills of Exchange

D/A & D/P Bills A usance bill may be on D/A or D/P terms. If it is on D/A (documents against acceptance), the collecting bank is to deliver to the drawee on the acceptance of the bill by him. The payment will be made by the drawee on the due date. If it is a D/P (documents against payment) the documents will be delivered to the drawee only on payment.

Types of Bills of Exchange

Inland and Foreign Bills According to Negotiable Instruments Act , a bill which is drawn in India and made payable in India or drawn upon any person resident in India is an inland bill. Thus an Inland bill has to fulfill both the conditions (a) Drawn in India and (b) Payable in India or drawn on a person resident in India (even though payable abroad). Any bill any bill which does not fulfill either of the conditions is a foreign bill.

Types of Bills of Exchange

Thus a bill drawn in India payable at a place outside India by a person resident outside India and a bill drawn at a place outside India but payable in India are Foreign Bills. Foreign bills are normally drawn in sets. Section 132 of Negotiable Instruments Act provides : Bills of Exchange may be drawn in parts , each part being numbered and containing provision that it shall continue payable only so long as the remain unpaid.

Noting and Protest

When a bill is dishonored steps should be taken to get it noted and protested. Noting and protesting by the Notary public serves as an authentic proof of the fact of dishonor of the bill. Noting should be done within a reasonable time of dishonor. For noting the dishonored bill is again presented formally by the notary himself or by a registered letter. When acceptance or payment is refused he makes a note on the instrument . The note contains the particulars of the fact of dishonor or if the instrument has not been expressly dishonored the reason why the holder treats it as dishonored and the notarys charges.

Noting and Protest

Protest is a step ahead of noting. It contains in the form of a legal document the facts of dishonor and all other related facts. Under Negotiable Instruments Act a bill is required to be protested within a specified time or before some further proceeding is taken . It is sufficient that the bill has been noted for protest before the expiration of the specified time .

Stamp Duty
A bill of exchange issued in India will bear stamp duty according to the rates prescribed in the Indian Stamp Act. Sight bills and usance bills upto 90 days are exempt from stamp duty. Usance bills for periods beyond 90 days are to be stamped at the rate of Rs.1.25per Rs.1000/per quarter. When a usance foreign bill is received in India appropriate stamp duty has to be affixed as per the Indian stamp Act irrespective of the duty paid abroad.

Marine Insurance Policy

Parties The proposer under the policy may be shipper or the Importer. The proposer may approach the Insurance company directly or through an agent because they know well the intricacies of marine Insurance business business. The insurers in marine insurance are generally called underwriters. The person who is to receive payment in case of loss or damage is the assured.

Marine Insurance Policy

Insurable Interest A person is having an insurable interest if he is interested in the safe arrival of cargo. The shipper/exporter has the insurable interest since he is the owner of the goods. The buyer acquires an insurable interest at a later date i.e. when the goods are boarded on the ship. Thus either seller or buyer may effect the insurance. If the contract is on CIF (Cost Insurance & Freight) basis seller has to arrange for insurance and if the contract is on C Fr (Cost & Freight) basis the buyer has to arrange the insurance.

Marine Insurance Policy

Utmost Good Faith A contract of insurance is a contract of unberrimae fidei i.e. one of utmost good faith. If either party to contract has concealed any material fact the contract can be avoided by the other party

Marine Insurance Policy

Indemnity The contract of Marine insurance is a contract of indemnity. The assured under the policy is not allowed to make a profit out of a claim under the insurance. But the marine insurance does not represent a pure indemnity . At the time the policy is taken the value of cargo is agreed between the parties. In the valuation for the insurance in addition to the cost the transportation cost and a certain percentage of profit is added and insurance is affected for 110% of CIF value.

Marine Insurance Policy

Assignment A marine policy can be transferred by assignment unless it contains terms expressly prohibiting assignment . The assignment can be made either before or after a loss.

Marine Insurance Policy

Contents of policy The marine Insurance Act provides that a contract of marine insurance shall not be admitted in evidence unless it is embodied in a marine policy in accordance with the Act. Marine policy may be issued in the form given in the schedule to the Act which follows the standard format of the Lloyds of London.

Marine Insurance Policy

The policy must specify the following :(a) The name of the assured or of the person who affects the insurance on his behalf. (b) The subject matter insured and risk insured against (c) The voyage or period of of time or both as the case may be covered by the insurance.

Marine Insurance Policy

(d) The sum or sums insured; and (e) The name or names of the insurers. The marine policy may be signed by or on behalf of two or more insurers. Voyage and time policies A voyage policy covers the goods from the commencement and till the completion of a particular voyage. A time policy is covers the risk for a specified period mentioned in the policy. A contract for both voyage and time may be included in the same policy. A time policy can be issued for a maximum period of 12 months.

Marine Insurance Policy

Valued and unvalued policies A policy may be either valued or unvalued, In a valued policy the value of goods insured is agreed between assured and the insurer. An unvalued policy is a policy which does not specify the value of the goods but subject to the limit of the sum insured leaves the insurable value to be subsequently ascertained.

Marine Insurance Policy

Specific & Open polices A policy issued against specific shipment of goods is called specific policy . This has to be on a stamped document. The policy has to be issued in the standard format. Exporters having continuous shipment may opt for an open policy. Under this arrangement a policy covering the expected shipments for a period of say 12 months is taken. As and when the shipment is made they are declared to the insurer and covered under the open policy. For the purpose separate certificates are issued.

Marine Losses
The basic risks covered by any marine insurance policy are (i) Perils of sea which include damage to the vessel or cargo by forces of waves, storms, stranding of the vessel, sinking of the vessel, and collision with other vessel (ii) Fire which includes damage directly due to fire or efforts to extinguish the fire. (iii) Jettison which means voluntary throwing overboard of some cargo to save the ship and the rest of the cargo.

Marine Losses
(iv) barratry which means loss due to fraudulent or wrongful actsof the captain of the vessel or its crew. Types of Losses the loss of goods insured may be a total loss or partial loss. Total loss A total loss may be either an actual total loss or a constructive total loss. When the goods insured are destroyed or so damaged as to cease to be a thing of the kind insured there is an actual loss. The loss is a constructive total loss appearing to be unavoidable or because it could not be preserved from actual total loss without an expenditure which would would exceed their value when the expenditure had been incurred.

Marine Losses
Partial Loss is defined as a loss other than total loss. Partial loss may include particular average loss or general average loss. General average loss cargo jettisoned in an effort to refloat the vessel. Goods damaged by water used to extinguish a fire provided the goods themselves have not been on fire

Marine Losses
Expenses of entering and leaving a port of refuge Expenses of discharging, storing, reloading, of the cargo if that is necessary for safety. Particular average Loss A particular average loss is a partial loss of the goods insured caused by a peril insured against.

Risks Covered
Risks can be covered by incorporating standard cargo clauses as they have been evolved by the Institute of London. The principal cargo clauses are Clause c, Clause b, Clause A. Affording greater protection in the same order. Risks not covered Loss, damage or expenses attributable to willful misconduct of the insured Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear of the goods insured Loss, damage or expense caused by delay and inherent vice or nature of the subject matter

Marine Losses
Insufficiency or unsuitability of packaging Deliberate damage to or deliberate destruction of goods Loss, damage or expense arising from insolvency or financial default of the owners, managers, charterers or operators of the vessel Loss, damage or expense arising from the use of atomic weapons or nuclear fission and/or other like reaction or radioactive force

Institute cargo clauses

Clause C- Covers loss or damage to goods by Fire or explosion Standing, grounding, sinking or capsizing of the vessel Overturning or derailment of land conveyance Collision or contact of vessel craft or conveyance with any external object other than water Discharge of cargo at a port of distress General average sacrifice and Jettison

Institute cargo clauses

Clause B In addition to risk covered by clause c the following risks are also covered Loss or damage to the goods attributable to earthquake, volcanic eruption or lightning Washing overboard Loss or damage caused by entry of sea or lake water into vessel craft hold, conveyance container lift van or place of storage Total loss of any package lost overboard or dropped while loading or unloading from vessel or craft.

Institute cargo clauses

Clause B by paying additional premium following risks can also be got covered Theft, pilferage & non delivery Fresh or rain and or river water damage Hook, oil, mud, acid, and damage by other cargo Heating and sweating Breakage, denting, chipping, scratching and blending Bursting and tearing

Institute cargo clauses

Clause A the policy with cargo Clause (A) offers the widest cover. It covers risk against all risks except war and strike, riot and civil commotion. War and SRC cover The exporter can obtain war, strike, riot and civil commotion cover along with any of the three types of policies by payment of an additional premium.

Institute cargo clauses

Warehouse to warehouse Clause The goods are insured from the time they leave the warehouse of the exporter and remains in force till the goods reach the destination and are stored in a warehouse. This is valid for a period of 60 days after reaching the destination port.

War and SRCC cover

The exporter can obtain war,strike,civil commotion cover alongwith any of the three types of policies by payment of an additional premium. Warehouse to warehouse clause marine policies usually provide for a warehouse to warehouse clause which states that the goods are insured from the time they leave the warehouse of the exporter & remains in force till the goods reach the destination.

CLAIM - PROCEDURE
In the event of loss or damage to the goods arising a claim under the policy the assured should do the following Give a notice of loss to the insurance company immediately Take all steps to minimize the loss, preserve all rights against third parties Arrange survey by ship surveyors if the packages show any outward sign of damage or loss. Arrange for insurance survey by the insurance co. in other cases

CLAIM - PROCEDURE

(i) (ii) (iii) (iv) (v) (vi)

Prefer claims with shipping companies and other parties where required The following documents should be submitted to the insurance company while lodging a claim
Original insurance policy Original Invoice and Packing List Copy of Bill of Lading Survey report/short/non delivery/landed but missing certificate Copies of correspondence exchanged with carriers and Claim bill

INVOICES

(i) (ii) (iii) (iv) (v) (vi) (vii)

Commercial Invoice A commercial invoice is a statement containing full details of the goods shipped containing

Names and addresses of the seller and buyer Details of goods shipped quantity, quality, description Packing details and packing marks Price and amount payable by the buyer Terms of trade FOB, CFr, or CIF Details of freight charges, insurance premia and other charges Reference to the sale contract in fulfillment of which the shipment is made (viii) Name of the vessel (ix) Import Licence no. if applicable an invoice is not a document of title of goods but is only a description of goods verifying that the goods shipped and price charged are as per the contract.

INVOICES
Consular invoice is a special type of invoice in a prescribed form describing the details of the goods shipped and sworn as being correct in all respects by the exporter. Consul of the importing country then certifies the invoice . This may also contain a declaration about the place of origin of the goods. Any false information in the invoice attracts heavy penalty

INVOICES
Legalised/visaed Invoice the purpose of such an invoice is similar to that of consular invoice. The only difference is that instead of a prescribed format the ordinary commercial invoice is presented to the embassy or consular for certification.

INVOICES
Certified Invoice - A commercial invoice becomes a certified invoice when it contains certain certification by the exporter like

(i) (ii)

The origin of goods is of a particular country The goods are in conformity with certain specific contract (iii) Any other stipulation of the importer has been fulfilled

INVOICES
Proforma Invoice a proforma invoice does not evidence a sale & is required in the following cases

(i)

It may be the basis on which the contract of sale is concluded later (ii) When goods are sent on consignment basis a proforma invoice may be used since the goods are sent only to an agent of seller and serves as the guide to the price at which the agent should sell the goods (iii) It may be used to support a tender for sale contract

CERTIFICATES
Certificate of origin issued by the chamber of commerce Weight note certificate indicating the weight of individual items shipped issued by an independent agency giving satisfaction to the importer that goods of proper weight have been shipped Quality Inspection Certificate issued by the supplier or an independent agency confirming that the goods were examined and found to be as required under the contract. Others

TRANSPORT DOCUMENTS
Bill of lading is defined as a document which evidences a contract of carriage by sea and the taking over of loading of goods by the carrier by which the carrier undertakes to deliver the goods against surrender of the document. It renders the following three functions
It is an evidence of contract of carriage It is a receipt for the goods received by the carrier It is a document of title of goods

i) ii) iii)

Bill of lading under a letter of credit

Full set clean on board freight paid ocean bill of lading made to order and blank endorsed i) Full set BL is usually drawn in sets of more than two
negotiable copies goods deliverable against any one of the copies surrendered to the shipping company duly discharged. The no. of negotiable copies will be mentioned on the bill of lading which will also provide that one of the copies being accomplished , the others stand void

Bill of lading under a letter of credit

Clean & Claused bill of lading A clean transport document is one which bears no clause or notation which expressly declares a defective condition of the goods or package. Claused bill of lading also called dirty or foul BL contains an adverse remark about the goods or packing I.e. packages torn or drums leaking .

Bill of lading under a letter of credit

Port of Loading & Port of discharge the BL should indicate the same port of loading and port of discharge as stipulated in the letter of credit. On Board & Received for Shipment BL on board BL is one which states that goods to be carried have actually been loaded into the ship. Sometimes the goods may be delivered to the shipping company but they may not be put into the ship because of non availability of space or non arrival of the vessel . In such cases the shipping company will issue received for shipment BL whereby it acknowledges that the goods have been received by it for carriage and will be carried by the next available vessel.

Bill of lading under a letter of credit

Shipped on deck bill of lading goods carried on the deck of the ship are subject to the risk of damage and therefore if the BL mentions that the goods are carried on deck it is not accepted under a letter of credit unless the credit authorizes it.

Bill of lading under a letter of credit

Ocean Bill of Lading a bill of lading should cover transportation by an ocean going vessel as against smaller vessels used in inland transport may be made to ensure safe voyage. Straight or order bill of lading a bill of lading made in the name of a consignee is known as a straight bill of lading as against an order bill of lading which provides that the goods are deliverable to a named person or his order.

Bill of lading under a letter of credit

Stale bill of lading to avoid delay in presentation of documents for negotiation after effecting shipment the LC provides for a period from the date of the transport document within which they should be tendered for negotiation. A bill of Lading presented after the period allowed is considered a stale BL.

Bill of lading under a letter of credit

Short term BL- A BL indicating some or all of the conditions of carriage by reference to a source or document other than the BL is called a short term bill of lading Third party BL- A BL in which the consignor is a party other than the seller . Charter Party Bill of Lading A complete ship may be made available to a shipper for a particular voyage or for a particular period of time. The document containing for this contract is known as the charter party bill of lading. The shipper who has chartered the ship may agree to carry the goods of others & issue BL for this purpose.

Bill of lading under a letter of credit

Liner Bill of Lading A liner is a vessel operating on a fixed route between two ports or series of ports . A conference is the arrangement between liners operating on the same route to avoid unhealthy competition.

EXPORT MANAGEMENT

Registration cum Membership

Membership of certain bodies helps the exporters in a number of ways. There are specified export promotion councils (including commodity boards and export development authorities) for various products/ product groups. Members of EPC receive different kinds of assistance and services in respect of their export business. Exporters must get themselves registered with certain export promotion and regulatory bodies as such exporters are advised to get themselves registered with certain export promotion and regulatory bodies.

Registration cum Membership

Registration with EPC/FIEO : For any benefit or concession under the EXIM policy an exporter is required to register himself with the appropriate authority and obtain a registration cum membership certificate (RCMC). An exporter may obtain RCMC from anyone EPC relating to his main line of business. If the export product is not covered by any EPC the RCMC may be issued by the regional licensing authority concerned. Registration with sales tax for getting exemption from the sales tax on the export goods, the exporters should be registered with with the sales tax authorities of the concerned state.

INQUIRY AND OFFER

Inquiry is a request from a perspective buyer
(Importer) to be informed of the terms and conditions of sale . It may contain full details of the goods required, their description, catalogue, grades, weights, sizes or other distinguishing features, time and method of delivery etc. If the inquiry is from a person new to the exporter it is usual to make some investigation into the financial position of the client, either by means of a bankers reference ( the name of banks to be provided by the buyer) or through inquiry agencies like D&B, Mira Inform etc.

INQUIRY AND OFFER

Establishing an effective dialogue with the overseas buyer is very essential to click a deal and due care should be taken. The correspondence should be clear, precise and sufficient. Exporter must provide all the details to the inquirer because neither the inquirer(importer) nor the exporter know anything about any body. If it is necessary to send the samples exporter must do it within the regulations prescribed by the government.

Inquiry and Offer

OFFER -Once the inquiry is received the
exporter is expected to make an offer to the foreign customer in the form of letter, quotation etc. The offer made by the exporter is usually in the form of a proforma invoice sent to the buyer including the details of the product, quantity, quality, value etc. This offer when accepted by the buyer becomes a confirmed order.

Confirmation of Order
Once the negotiations are completed and the terms and conditions are acceptable to the buyer and seller the proforma invoice in triplicate is forwarded to the buyer. The buyer signs two copies and returns back . The exporter also signs on one copy and sends back to the importer. The exporter may sometimes insist on a documentary letter of credit .

Confirmation of Order
The confirmation of order then forms a detailed contract containing all the terms and conditions agreed to both the parties.the contract must contain the following details Details of goods Quantity & quality Price and period of delivery Shipping and packing marks Licenses, insurance , documentary requirements etc.

Export licence
The export of some items are banned and of some items controlled by means of licences. Though most of the items are freely exportable/ importable but the exporter should ensure that the item sought to be exported is not one which falls in the banned list . If any item requires licence, it is necessary to obtain it before finalizing the contract.

Finance
If the exporter wants to avail the finance facility against export order he must made arrangements for the same . Production/procurement of Goods once the order is confirmed the exporter should take necessary steps to ensure for timely availability of the goods of the specifications required. Any resource or production constraints should be prioritized as per the requirements of the export department.

Financing Exports
There are two sources of export finance. *Pre shipment or Packing Credit Finance *Post Shipment Finance Pre shipment finance or Packing credit is a loan given to an exporter for financing the purchase, processing, manufacturing and packing of goods meant for exports.

Financing Exports
Eligibility pre shipment credit can be granted bona fide exporters generally on the strength of letter of credit established by banks of standing abroad in favour of exporters. If there is no letter of credit the credit can be granted on the basis of confirm order . The letter of credit/ firm order is kept with the bank

Financing Exports
Type of account normally packing credit is extended in the form of a separate account being maintained for each export order. The request from the party should be supported by lodgment of letter of credit or confirmed order . Packing credit can also be extended n the form of a running account i.e. a cash credit account subject to fulfillment of following conditions i) The exporter is able to justify the need of a running account ii) Exporter has a good track record iii) Letter of credit is submitted iv) A separate packing credit account is maintained

Financing Exports
Period of loan and interest the period of loan depends upon the time required for procuring, manufacturing or processing and shipping cycle of the goods to be exported. However the maximum period allowed is 180 days however can be extended upto 360 days under special cases with the permission of RBI. The banks are free to decide their rates within the band specified by RBI from time to time. Presently the rate of interest chargeable is 2.5% below PLR upto 180 days and PLR plus .5% beyond that

Financing Exports
If the packing credit is adjusted from export proceeds within 360 days the normal rate of interest is charged till due date and penal interest is charged after that. IF PCL is not adjusted within 360 days Normal rate of interest applicable to domestic loans plus penalty is to be charged.

Financing Exports
Quantum of advances normally the advance as pre shipment finance should not exceed the FOB value or the domestic cost of production whichever is lesser. Margin may also be stipulated depending upon the partys worth and the commodity to be exported. If the LC value is on CIF/ CFr basis the value should be reduced to FOB value and eligible finance should be calculated on that date.

Financing Exports
Sources of repayment the packing credit should be repaid out of the proceeds of foreign bills of exchange drawn under the export contract. It may also be repaid out of export incentives like duty drawback or advance payment received against exports.

Financing Exports
Substitution of contracts In case the exporter is unable to export against the original contract due to reasons beyond his control, the packing credit may be adjusted. The packing credit may be adjusted by purchasing/discounting export bills relating to another contract wthin a reasonable time.

Financing Exports
In respect of exporters with good track records the banks may Permit liquidation of packing credit by exporting some other commodity where it becomes necessary and unavoidable. Mark off the existing packing credit with export proceeds of documents against which no packing credit has been drawn by the exporter.

Financing Exports
Packing credit is to be adjusted out of the proceeds of export bills tendered by the borrower on shipment of goods. Therefore the packing credit limit should be considered along with limit of purchase/discount of foreign bills. The normal credit appraisal norms used by the bank are applied to sanction the limits to the exporter.

Financing Exports
Appraisal -The banker decides on the basis of the borrowers character, capital, capacity etc. besides the experience he has in the field of exports. The bank should take necessary precautions i.e. a) The applicant has IEC code no or not b)The exporters name is not in the caution list of RBI c) The goods to be exported are not banned for exports d) The L/C or confirmed order provides all essential details e) There is sufficient time allowed in L/C / order to enable the exporter to manufacture the goods and export them f) The country to which the exports are o be made is not under political or economic stress g) If the L/C is restricted to some other bank undertaking from the exporter that the documents will be routed through the bank making advance

Financing Exports
Special cases packing credit can also be granted to manufacturer supplier who do not have L/C or confirmed orders but are routing their exports through State Trading Corporation/MMTC or other export houses subject to adopting the following procedure . The export house should issue a letter setting out the details of the export order and the portion thereof to be executed by the manufacturer supplier and also certifying that the export house has not obtained and will not ask for PCL in respect of such portion of the order to be executed by the manufacturer The manufacturer should give an undertaking that the advance payment if any received from the export house against the export order will be credited to packing credit account. The export house should open an Inland Letter of Credit in favour of the supplier giving relevant particulars of the export letter of credit/confirmed order and the outstanding in the PC account should be adjusted by negotiation of bills under such an inland letter of credit.

Financing Exports
Sub suppliers packing credit can also be granted to sub suppliers of raw materials, components of exported goods on the basis of the Inland letter of credit opened in favour of the supplier by the exporter concerned .This scheme is applicable only in case of manufacturer supplier. Deemed exports packing credit can be extended to the parties against orders for supplies to projects financed by ADB,IBRD etc. which is recognized as deemed exports

Financing Exports
Pre Shipment Credit in foreign currency under PCFC exporters are allowed to avail preshipment credit in a convertible currency at interest rates not exceeding .75% over six months LIBOR plus withholding tax. The credit will be self liquidating in nature and will be adjusted by discounting of the relative export bill designated in foreign currency. PCFC is advantageous as compared to the brupee packing credit due to low interest and avoidance of conversion cost.

Post Shipment Finance

Any loan or advance granted or credit provided by an institution to an exporter in India after shipment of the goods to the date of realization of export proceeds .

Financing Exports
i) ii) iii) iv) Post Shipment Finance Purchasing export bills Discounting export bills Negotiate bills under L/C Advance against export bills sent on collection basis v) Advance against bills sent on consignment basis

Financing of Exports
Eligibility Post shipment credit is granted to
the actual exporter or to an exporter in whose name the export documents are transferred. All finance extended to exporter is called suppliers credit. In case of export of capital goods and project exports finance is extended in the name of overseas buyer (importer of the goods/services) but the disbursal of money is made directly to Indian exporter. Such finance is referred to as Buyers Credit

Financing of Exports
Basis of post shipment Finance Post
Shipment finance is always extended against evidence of shipment of export of goods.

Purpose of Finance Post shipment

finance is basically export sales finance, is meant for financing export sales receivables after the date of shipment of goods to the date of realization of export proceeds.

Financing of Exports
Form of finance post shipment finance is normally
secured . Since the finance is extended against the evidence of export shipments and banks obtain documents of title to goods, the finance is normally self liquidating . Quantum of finance post shipment finance can be extended upto 100% of invoice value. Period of finance post shipment finance is a working capital finance depending upon payment terms between the exporter and the overseas buyer. In case of cash exports the maximum period allowed for realization is 6 months with concessional interest upto 90 days.

Financing of Exports
Rates of Interest The rate of interest
applicable are announced by RBI periodically on slab basis ,

Exchange Control regulations relating to Exports

Exchange control lays down the regulations, methods and procedures for realization of proceeds of exports

Declaration of Exports in prescribed forms every exporter who exports goods by whatever mode must in the prescribed form declare to the customs authority full export value of the goods and affirm that the full value has been or will be received within the prescribed period in the prescribed manner. At present there are four types of export declaration forms in use .

Export declaration forms

GR form to be used when exports are made
to any country otherwise than by post. PP Form to be used when exports are made to any country by post parcels other than on value Payable or Cash on delivery basis. VP/COD Form- To be used when exports are made to any country by post parcel under arrangements to realize proceeds through postal channels on value payable or Cash on delivery basis.

Export declaration forms

SOFTEX Form To be used in case of exports of

computer software in non physical form. Check list for scrutiny of forms when duplicate copy of GR/PP are received from the exporter alongwith relative bills and export documents, authorized dealers should verify 1. Original sale contract or inn absence of sale contract any of the following Order of overseas buyer with exporters confirmation Proforma invoice countersigned by overseas buyer Indent/order from overseas buyer or his agent. 2.Essential particulars like description, quantity, value of goods country of destination etc. declared in GR/PP form

Export declaration forms

No. of the GR form matched with the bill of lading and duly verified by the customs authorities. Terms of shipment i.e. FOB, CIF, C & F etc.

Trade Discounts all trade discounts offered on exports must be declared on relative GR form by the exporter. Such discounts mentioned in GR form are acceptable to the ADs as the same has been accepted by customs.

Pre Shipment Vs Post Shipment

Pre shipment Finance extended before shipment of goods Finance extended to exporters or supporting manufacturers Finance extended to only Indian Clients Short term Finance Working capital finance but pre-sales or inventory Finance extended against evidence of existing or anticipated export order or L/C. Post shipment Finance extended after shipment of goods Finance extended to the exporters only Finance extended to either clients of overseas clients Short term Finance Working capital finance but sales finance (against receivables) Finance extended against evidence of shipping documents.

Pre Shipment Vs Post Shipment

Pre shipment
Finance extended for the purpose of procurement, processing, manufacturing, packing, warehousing, transporting and shipping the export goods. Form of finance is either fund based or non-fund based Finance is available at concessional rates for a period of maximum 270 days.

Post shipment
Credit extended to finance export receivables after date of shipment to date of realization of export proceeds. Form of finance is mostly fund based finance Concessional rate is available according to the period of credit