Export Management

Classification of Exports
Merchandise Exports

Service Exports

Project Exports

Deemed Export
Features of Exports

Business of managing variety

Multi-disciplinary functional area

Non routine activities

Uncertainty of environment
Establish organization
 1.
◦ Already exist or Not, select firm name- Get
approval of name from the regional licensing
authority
◦ Develop International division with infrastructure
◦ Firm may be proprietor, partnership or joint venture
◦ Requirements- Current Account, PAN, Registration
with sales Tax, Central Excise & Concerned EPC, No
name in caution list
2. Get the IEC/RCMC (Registration-cum- Membership Certificate)

a. Fill the application form & get the permission from DGFT
(for IEC)
b. Fill the application form & get the permission from EPC
(RCMC)
c. For service exporters (except soft wares) get the
permission from FIEO (Federation of Indian Exporters
Organization )
d. License will be given as merchant or manufacturer
exporter
e. In case an exporter desires to get registration as a
manufacturer exporter, he shall furnish evidence to that
effect.
De-Registration
• The registering authority may de-register an RCMC
holder for a specified period for violation of the
conditions of registration. Before such de-
registration, the RCMC holder shall be given a show
cause notice by the registering authority, and an
adequate and reasonable opportunity to make a
representation against the proposed de-registration.
Upon de –registration, the concerned export
promotion council shall intimate the same to all the
licensing authorities.
Appeal Against De-Registration

 A person aggrieved by a decision of the

registering authority in respect of any matter
connected with the issue of RCMC may prefer
an appeal to the Director General of Foreign
Trade or an officer designated in this behalf,
within 60 days. The DGFT may direct any
registering authority to register or de-
register an exporter
Benefits & Cost

◦ Benefits –EPC & Commodity board provides

consultancy service for export & manufacturing as
well, Market information, Organize export
promotion tours, Assists exporters in participating
in international fairs held in India or abroad, liaise
with Govt. of India,
◦ Cost- EPC & CB has its own Schedule of annual
membership fee. Generally, the fee is based upon
export turnover of the applicant. The fee rising in
value as the export turnover becomes larger.
Functions of Export Firm

 Export Marketing
 Merchandising
 Procurement/ Production
 Logistic
 Quality Control
 Finance & Accounts
 Export order Administration
 R & D
EPC

 The Export Promotion Councils are

organisations registered under the Indian
Companies Act or the Societies Registration
Act, as the case may be. They are supported
by financial assistance from the Government
of India.
Role
 To project India's image abroad as a reliable
supplier of high quality goods and services.
 EPCs encourage and monitor the observance of
international standards and specifications by
exporters.
 EPCs keep abreast of the trends and
opportunities in international markets for goods
and services
 Assists their members in taking advantage of
such opportunities in order to expand and
diversify exports.
Functions
 To provide commercially useful information and assistance to
their members in developing and increasing their exports
 To offer professional advice to their members in areas such as
technology up gradation, quality and design improvement,
standards and specifications, product development and
innovation etc.
 To organise visits of delegations of its members abroad to
explore overseas market opportunities.
 To organise participation in trade fairs, exhibitions and buyer-
seller meets in India and abroad.
 To promote interaction between the exporting community and
the Government both at the Central and State levels
 To build a statistical base and provide data on the exports and
imports of the country, exports and imports of their members, as
well as other relevant international trade data.
Directory of EPCs

◦ Agricultural and Processed Food Products Export Development Authority (APED

A)

◦ Apparel Export Promotion Council

◦ Chemicals Pharmaceuticals & Cosmetics Export Promotion Council, (CHEMEXCI
L)

◦ Carpet Export Promotion Council

◦ Cashew Export Promotion Council of India
◦ Chemical & Allied Products Export Promotion Council
◦ Cotton Textile Export Promotion Council
◦ Coffee Board
◦ Coir Board
◦ Electronic & Computer Software Export Promotion Council
◦ Engineering Export Promotion Council
◦ Federation of Indian Export Organisations (FIEO)
◦ Gems & Jewellery Export Promotion Council
◦ Export Promotion Council for Handicrafts
◦ Handloom Export Promotion Council
◦ Handicrafts & Handloom Export Corporation
◦ Office of the Development Commissioner for Handlooms
◦ Development Commissioner for Iron Steel
◦ Indian Silk Export Promotion Council
◦ Indian Trade Promotion Organisation
◦ Council for Leather Export
◦ Marine Products Exports Development Authority (MPEDA)
◦ National Agricultural Cooperative Federation of India Ltd. (NAFED)
◦ Overseas Construction Council of India
◦ Power loom Development and Export Promotion Council
◦ Plastic & Linoleum Export Promotion Council
◦ Rubber Board
◦ Sports Goods Export Promotion Council
◦ Spices Board
◦ Central Silk Board
◦ Synthetic & Rayon Textiles Export Promotion Cou
ncil

◦ Tea Board
◦ Tobacco Board
◦ Wool & Woollens Export Promotion Council
ITPO

 India Trade Promotion Organization (ITPO) is

the agency of the Government of India for
promoting the country's external trade. ITPO,
during its existence of nearly three decades,
in the form of Trade Fair Authority of India
and Trade Development Authority, has played
a proactive role in trade, investment and
technology transfer processes.
Role & Functions
 organizing of fairs and exhibitions in India
and abroad,
 Buyer-Seller Meets,
 Promotion Programmes,
 Product Promotion Programmes,
 Promotion through Overseas Department

Stores,
 Market Surveys and Information

Dissemination
Infrastructure Support in India
 The experience of operating berths through
PPPs(Public private projects) at some of the
major ports in India has been quite successful.
It has, therefore, been decided to expand the
programme and allocate new berths to be
constructed through PPPs
 The Government has also decided to empower
and enable the 12 major ports to attain world-
class standards. To this end, each port is
preparing a perspective plan for 20 years and
an action plan for seven years.
 A high level committee has finalised the plan for
improving rail-road connectivity of major ports.
The plan is to be implemented within a period of
three years.
 The National Maritime Development Programme
is expected to bring a total investment of over
Rs.50,000 crore in the port infrastructure.
 Minor ports are already being developed by
domestic and international private investors:
Pipavav Port by Maersk and Mundra Port by
Adani Group
 Pipava Port 152 nautical miles from Mumbai
Mundra Port & SEZ
 Purview of
Export-Import
 FLOW CHART – I
Knowledge of Knowledge of Knowledge of Product
Market Product Incentives Costing

Proforma Sample if Confirmation Payment

Invoice necessary of Export terms
Contract

Scrutiny of Amendments if Preparation of Benefits &

L/C Necessary Physical Execution
Exports

Continued….
FLOW CHART – I (continue from the previous slide)

Pre Post
Shipment Shipment

Confirmation from Buyer of

Receipt of Goods

Payment Realisation of Statutory

Realisation Benefits Records
EIC
 The Export Inspection Council (EIC) was set
up by the Government of India under Section
3 of the Export (Quality Control and
Inspection) Act, 1963, in order to ensure
sound development of export trade of India
through Quality Control and Inspection.
EIC is empowered under the Act to:

 Notify commodities which will be subject to

quality control and/ or inspection prior to
export,
 Establish standards of quality for such

notified commodities
 Specify the type of quality control and / or

inspection to be applied to such

commodities.
 Besides its advisory role, the Export
Inspection Council, also exercises technical
and administrative control over the five
Export Inspection Agencies (EIAs),
 Chennai,
 Delhi,
 Kochi,
 Kolkata and
 Mumbai
Working Area
 Certification of quality of export commodities
through installation of quality assurance
systems
 Certification of quality of food items for

export through installation of Food safety

Management System in the food processing
units. 
 Issue of Certificates of origin to exporters

under various preferential tariff schemes for

export products.
What is ECGC?
 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.
 It is managed by a Board of Directors comprising
representatives of the Government, Reserve Bank
of India, banking, insurance and exporting
community.
 ECGC is the fifth largest credit insurer of the
world in terms of coverage of national exports.
 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 equity or loan
How does ECGC help 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
ECGC- Standard Policy
 Also Known as SCR (Shipment Comprehensive
Risk)
 Turnover should be more than 50 lacs.
 Only for the 180 days.

Small Exporter Scheme – Less than 50 lacs

 Issued for the 12 months

SSP-ST (Specific Shipment Policy –Short term)

 Duration 12 months

BW-ST (Buyer wise police – ST)

 Export Turnover Policy
 Has to pay the premium at least 10 lac/yr

Buyer Exposure Policies- All buyers or specific

buyers
Overseas Investment Guarantee- No claim for
joint venture
Construction Works Policy
Risks in EX-IM
Commercial Risk
 Lack of knowledge about foreign markets
 Inadaptability of the product
 Longer transit time
 Preference changes
 Competition
Political Risk
 Changes in political power
 Civil wars, rebellion
 Wars between countries
 Capture of cargo during war
Cargo Risk
 Storms
 Fire
 Ship hijackers
Credit Risk
 Selling on the credit
 Exporter must have sufficient fund to offer

the credit to the importer

 Exporter should be prepared to take credit

risk
 ECGC
Foreign Exchange Risk
 Invoicing in the Indian Rupees
 L/C
 Forward Contract
Clearance of Import Cargo
 Overseas suppliers invoice, duly signed
 Packing list
 B/L
 Custom house Agent’s declaration
 Import License, If necessary
 Copy of L/C
 Insurance Policy
 Test report, industrial license, exemption

order, COO- if required

Procedure
 Submission of B/E to custom house
 B/E sent to the appraisal section
 On the basis of the examination report, the

apprising officer assesses the B/E.

 B/E is then sent to the assistant

commissioner
 Now actual duty is computed taking

consideration of exchange rates

 CHA/ Importer pays the duty at the
nominated bank
 Appeal can be raise within specified time limit
 After payment, documents are handed over to

the shed appraiser, who after examination

will release the cargo.
Clearance of Export Cargo
 Documents handling to the custom house
 The assessing officer will check the value of

the export including DEPB, EXIM policy etc

 Shipping bill is passed by export department,

the cargo is presented to the shed appraiser

for physical examination.
 Shed appraiser gives a “Let Export” order
 Now, Exporter or Importer can load the goods

on the vessel
Export Incentives Schemes
 Duty Authorization Scheme
◦ Advance Authorization Scheme
◦ Duty free import authorization scheme
 Duty remission scheme
◦ Duty drawback scheme
 Section 75, Custom Act, - Goods to be exported
 Duty drawback scheme = custom duty + excise duty
◦ Duty drawback on Re-export
◦ DEPB
 Export Promotion Capital Goods
Procedure to claim
 Directorate of drawback,
 If rates are fixed- All Industry Rate (AIR)
 If rates are not fixed – show the details –

brand rates.
 It is counted on the % of FOB Value
Fake Pulsar from China
 IMPORT,EXPORT,
DOCUMENTATION &
FOREIGN TRADE POLICY

By
Dr. Vikas Dahiya
Agenda
 Documentation: Overview – Commercial and
Regulatory documents
 Understanding - Invoice, Packing List, Inspection

Certificate, Certificate of Origin, Shipping Bill,

ARE-1, Mate Receipt, GR/SDF, Bill of exchange,
Bank Realisation Certificate, Bill of Lading and
Airway Bill, Bill of Entry etc.
 Incoterms
 Terms of payment
 Letter of credits - Concept, Types of L/C, Parties

to L/C, L/C mechanism.

Agenda
 Export Procedures
 Import Procedure
 Export Promotion Schemes under Foreign

Trade Policy
 Overview of
Documentation
Significance of Documentation
 Documents are important for the following reasons:

(a) as an evidence of shipment and title of goods;

(b) for obtaining payment;
(c) to provide a specific and complete description of the
goods;
(d) for assessment of correct Duty for clearance purpose;
(e) for obtaining Export Licences;
(f) for obtaining export finance;
(g) for completing Pre-shipment Inspection;
(h) for claiming export benefits like Duty Drawback, etc.
Commercial / Regulatory Documents
 Commercial set of documents are mainly
used for Commerce. In other words these are
documents normally exchanged between
buyer and seller.

 Regulatory documents are required in dealing

with various regulatory authorities such as
customs, RBI, Excise, Licencing authorities
Inspection and other Export Promotion bodies
for availing incentives etc.
Commercial / Regulatory Documents
 Documents are categorized into two categories, namely Commercial Documents and Regulatory Documents.

Commercial Regulatory
Commercial Invoice Shipping Bill
Inspection Certificate ARE1 from (Excise)
Insurance Certificate RBI Declaration Forms (GR/PP)
Bill of Lading / AWB Application for remittance of
currency
Certificate of Origin Various Licences
Bill of Exchange Bill of Entry
Shipment Advice
Packing List
Commercial / Regulatory Documents
Commercial Documents

Principal Auxiliary
 Referring to the Commercial set of
documents,
1. Commercial it may please
Invoice be observed
1. Proforma Invoice that
these set ofCertificate
2. Inspection documents2. are prepared
Intimation from
for Inspection
other set ofCertificate
3. Insurance documents3.(some offor
Declaration these only).
Insurance
These are known
4. Certificate of Originas auxiliary documents.
4. Application for Certificate of
Origin
 These documents
5. Bill of Lading may 5.not
Matebe required by the
Receipt
foreign buyer,
6. Shipment Advicebut these are must
6. Shipping orderfor
preparation of main export documents,
known as Principle Commercial
7. Packing List
Documents.
7. Shipping Instructions
8. Bill of Exchange 8. Letter to Bank for negotiation
of documents
Pre-shipment Documents
 Documents at pre-shipment stage are those documents,
which are required to be made, till the consignment is
presented to the customs department for clearance.

 The following documents can, therefore, be treated as

pre-shipment documents:-
◦ Proforma Invoice
◦ Confirmed order or contract
◦ Letter of Credit
◦ Pre-shipment Inspection Certificate
◦ Packing list
◦ Shipping Bill
◦ Export Declaration Forms (GR/SDF)
◦ ARE
Post-shipment Documents
 Documents at Post-shipment stage are naturally
those which are prepared after the shipment.

 These documents include the following:-

◦ Mate Receipt
◦ Bill of Lading
◦ Airway Bill
◦ Roadway/Railway Bill
◦ Post Parcel/ Courier Receipt
◦ Invoices
◦ Certificate of Origin
◦ Insurance Certificate or Policy
◦ Bill of Exchange
Documents for availing various Export
Benefits
 Documents are also divided, depending upon,
whether the benefit has to be claimed prior to
exports or after the exports.

 For claiming benefits one has to make

different applications with various
government authorities.

Contd….
Documents for availing various Export
Benefits
 At the pre-shipment stage the following
documents are note-worthy.
◦ Application for pre-shipment finance from the
bank.
◦ Application of Advance Authorization or Duty Free
Import Authorisation with DGFT.
◦ Application for execution of Bond with Central
Excise authorities.
◦ Application for obtaining CT-1 in case of a
Merchant Exporter
Documents for availing various Export
Benefits
 At the post shipment stage, the following
documents are note-worthy.
◦ Application of Duty Entitlement Pass Book.
◦ Application for Focus Market or Focus Product
Scheme.
Import Documentation
Important Documents–Imports
 Invoice
 Packing list
 Bill of Lading or Delivery Order/Airway Bill
 GATT declaration form duly filled in
 Importers/CHA’s declaration
 Licence/Authorisations in original wherever necessary
 Letter of Credit/Bank Draft/wherever necessary
 Insurance document
 Import license
 Industrial License, if required
 Test report in case of chemicals
 Catalogue, Technical write up, Literature in case of
machineries, spares or chemicals as may be applicable
 Certificate of Origin
 No Commission declaration
Understanding Documents
Understanding Documents
 All documents whether it is for export or import transaction
generally contain following information
◦ Name and address of the exporter and importer
◦ Document No. and date.
◦ Order No. and date
◦ Port of discharge
◦ Port of destination
◦ Country of origin
◦ Description of Goods
◦ Marks and nos., model nos. [if any]
◦ Weight
◦ HS Code No.
◦ Value
◦ Currency
◦ Terms of payment
◦ Terms of shipment etc.
Understanding Documents
 However, depending upon the nature of the
document, specific information is to be
mentioned.

 For e.g. apart from the above details, Shipping

Bill will include what export benefit is being
claimed against that particular shipment, etc.
Similarly, Packing List will give information about
how goods are packed.

 Let us now study each document in depth.

Invoice
 It is itemized statement prepared and issued by a seller
at the time of dispatching the goods to the buyer.

 It helps the Customs Authorities to:

◦ ensure that goods shipped are permitted by the export policy.
◦ compute the customs duty, if any, payable on the export or the
import.
◦ check the quantity of goods. They generally open a few packages
at random and check the veracity of details in the invoice.
◦ check if there is any over-invoicing or under-invoicing (that may
be resorted to by the importer to reduce the import duty
payable).
Invoice
 Invoices are often called bills.

 Various types of invoices used in

International Trade are
 Proforma Invoice
 Commercial Invoice
 Leagalized Invoice
 Customs Invoice
Packing List
 It is a consolidated statement in a prescribed format detailing
how goods are packed, marked and numbered including weight
and dimensions of each package. 

 It is useful for customs at the time of examination and

warehouse keeper of buyer to maintain inventory record and to
effect delivery.

 It have many details common from invoice but it does not

indicate unit rate value of goods.

 The exporter or his/her agent, the customs broker or the freight

forwarder, reserves the shipping space based on the gross
weight or the measurement shown in the packing list.
Packing List
 Customs uses it as a check-list to verify:
◦ the outgoing cargo (in exporting) and
◦ the incoming cargo (in importing).

 Basic functions of Packing List are:

◦ To confirm the contents of a shipment as it left the
exporter’s premises.
◦ To indicate weights, measures and the piece count (i.e. the
number of cartons or cases) in that shipment.

 It is prepared in 7-10 copies or as per the

requirement.
Inspection Certificate
 “Certificate of Inspection” is issued by the Inspection Agency
concerned certifying that the consignment has been
inspected before shipment as per the requirements of the
Exports (Quality Control and Inspection) Act, 1963.

 It satisfies the conditions relating to quality control and

inspection as applicable to it and is certified export worthy.

 This certificate bears cross references of invoice or contract

number.
Inspection Certificate
 Inspection can be done by
◦ Inspection Agency appointed by the Government of
India, i.e. Export Inspection Agency, Textile
Committee, Central Silk Board etc.
◦ Inspection Agency may also be nominated by
importing countries’ Government
◦ Sometimes buyer himself appoints an independent
private inspector to inspect the goods.
 If an inspection is a part of transaction, then exporter is
required to arrange for necessary inspection.
 It can be a certificate of quality, weight, analysis, or the like.
Certificate of Origin [COO]
 It is a certificate indicating the fact that the goods which have
been exported have originated or manufactured in a
particular country. So it is a sort of declaration testifying the
origin of export.

 It is normally required by an importer to clear goods from the

customs.

 For political and social reasons, it is insisted by Customs

Authority of importing country before goods are allowed to
enter in the country.

 It helps the importer to take an advantage in duty concession,

if any. For e.g. goods imported under FTA.
Certificate of Origin [COO]
 On the basis of COO, Customs can ensure that certain
prohibited goods of particular countries are not
imported.

 It also ensures that goods have not been reshipped by a

seller who has brought them into his own country from
some other place of origin.

 It is sent to the importer by the exporter.

 It is issued or signed by an independent official

organization, such as a Chamber of Commerce, on
prescribed form.
Shipping bill
 Shipping Bill is an important document required to seek
permission of customs to export goods by Sea/Air. It is
prepared by the exporter and submitted to the Customs.

 The exporter of any goods has to file a “SHIPPING BILL” as an

entry for the purpose of export by air or sea and a “BILL OF
EXPORT” in respect of export by land.

 Cargo will be allowed to be carted to Dock/Port sheds only after

stamping and passing of the shipping bill by customs
authorities.

 The exporter has to sign a declaration in the Shipping Bill

regarding the truth of its contents.
Shipping bill
 Shipping Bill normally contains:
 the name and address of the importer/consignee and
exporter,
 invoice number and date,
 name of vessel carrying the goods,
 name of master or agents,
 port at which goods are to be discharged,
 country of final destination,
 description of goods, quantity details of each case,
 value of the goods as defined in the Sea Customs Act,
 number of packages with total weight,
Shipping bill
 Types of Shipping Bills:
◦ FREE SHIPPING BILL: Used for export of goods which neither attract any
Export duty nor entitled to any Duty Drawback

◦ DUTIABLE SHIPPING BILL: Used when export goods are subject to

Export Duty Duty is charged either on quantity basis (Fixed amount
per kg. or per Metric tonne) or on certain percentage of assessable
value.

◦ DRAWBACK SHIPPING BILL: Used when Duty Drawback is to be claimed.

◦ SHIPPING BILL FOR SHIPMENT EX-BOND: Used when the goods are to
be exported which have been imported earlier and kept in bond prior
to re-export.
Shipping bill
 Types of Shipping Bills:
◦ DEPB SHIPPING BILL: When DEPB benefit is to be
claimed.

◦ DEEC SHIPPING BILL: This shipping bill is used for

export of goods under Advance Authorisation (Duty
exemption scheme).

◦ DEEC CUM DRAWBACK SHIPPING BILL: This shipping bill

is used for export of goods where both the schemes
Duty Exemption as well as Drawback are to be taken
into account.
Shipping bill
 Shipping bill is required to be submitted in quadruplicate. If
Drawback/DEPB claim is to be made, one additional copy
should be submitted.

 Copies of Shipping Bill are as under:

◦ Customs Copy: For record of Customs
◦ Exporter’s Copy: For record of Exporters/ Exporter may forward it
to shipping company.
◦ Export Promotion Copy: For office of DGFT. This copy is the most
important document for claiming duty Neutralisation/Exemption
benefits plus export incentives wherever applicable.
◦ Exchange Control Copy: For negotiating the export documents in
bank. It is Proof of export for exchange purposes.
◦ DEPB Copy: For use in the import cell of customs for registration of
licence.
ARE
 ARE stands for application for removal of excisable
goods for exports by Air/Sea/ Post/Land.

 Goods which are sold overseas are exempted from

payment of excise duty or entitled for Rebate of Excise
Duty, if excise paid goods are exported. Under both
these circumstances, the document to be used is ARE.

 When goods are removed without payment of duty for

the purpose of export, they will get covered under the
provisions of Rule 19 of the Central Excise Rules.
ARE

 ARE is prepared before clearance of goods from the

factory gate.
 ARE will specify whether goods are exported under

Rule 19 or under Rule 18.

 There are three types of ARE:

a) ARE 1: is used for physical export of goods.

b) ARE 2: is used when goods are removed for
manufacture and packing of the goods to be exported.
c) ARE 3: is used when goods are supplied as deemed
exports.
Mate Receipt
 Mate’s receipt is a receipt issued by the Master or Mate of the
vessel stating that certain goods have been received on board his
vessel.

 It is prima-facie evidence that the goods are loaded in the vessel.

 It contains:
the name of shipping line and vessel,
port of loading, port of discharge and place of delivery,
number and kind of packages, gross weight,
description of goods,
container status/seal number,
shipping bill number and date and
condition of cargo at the time of its receipt on board the vessel.

 It is serially numbered.
Mate Receipt
 Port authorities recover port dues from exporter on production of
this receipt.

 On payment of Dock dues, the exporter or his agent collects the

receipt from the Port-Trust authorities and hands over to shipping
company for preparing Bill of Lading.

 Bill of Lading is prepared on the basis of Mate’s Receipt.

 It is of a transferable nature.

 In case of ascertaining the exact date of shipment, the mate’s

receipt date is also very important.

 Normally, the date of Export is regarded as “the date of Mate

Receipt or the date of Bill of Lading, whichever is later”.
Export Declaration Forms (GR/SDF)

 As per the exchange regulations, exporters, wishing to ship

goods abroad, are required to submit Export Declaration
Forms to the Customs authorities (whenever the value of the
shipment exceeds US $ 25,000) before any export of goods
from India is made.
Export Declaration Forms (GR/SDF)

Relevant Declaration Forms, as prescribed by RBI under

Foreign Exchange Management (Export of Goods and
Services) Regulations, 2000.

GR : Used for exports to all countries made other than by

Form post including export of software in physical form i.e.
magnetic tapes/discs and paper media - When S/B is
filed manually. [prepared in duplicate]

SDF : Appended to the shipping bill, for exports declared to

Form Customs Offices notified by the Central Government
which have introduced Electronic Data Interchange (EDI)
system for processing shipping bills notified by the
Central Government. [prepared in duplicate]
Export Declaration Forms (GR/SDF)
 These forms normally contain:
◦ Name and address of exporter, IEC code number and description
of goods.
◦ Name and address of authorised dealer through whom the
proceeds of the exports have been, or will be, realised.
◦ Details of commission due to foreign agent or buyer should be
correctly declared. Otherwise, difficulties may arise at the time of
remittances of such commission/ payment. An exporter should
note this point very carefully.
◦ An exporter is required to give analysis of full export value, a
break-up of FOB value, freight, insurance, discount, commission,
etc.
Statutory Declaration Form [SDF]
 Procedure for Distribution / disposal of copies of
SDF

◦ The SDF form should be submitted in duplicate to the

Commissioner of Customs concerned.

◦ After verifying and authenticating the declaration in

form SDF, the Commissioner of Customs will hand over
to the exporter, one copy of the shipping bill marked
‘Exchange Control Copy’ in which form SDF has been
appended for being submitted to the bank within 21
days from the date of export.
Statutory Declaration Form [SDF]
◦ Banks should accept the Exchange Control (EC)
copy of the shipping bill and form SDF appended,
submitted by the exporter for collection of
shipping documents.

◦ The manner of disposal of EC copy of shipping

Bill (and form SDF appended) is the same as that
for GR forms.
Bill of Exchange
 Bill of Exchange [BE] is a document drawn and is an
order by the exporter to the buyer to pay the money
in specified exchange.

 It is also known as a draft.

 A bill of exchange is accompanied by commercial

documents which are presented by a bank and
released to the buyer either against payment (at
sight) or against a signature for payment on a
specified future date.

 It is an unconditional written order.

Bill of Exchange

 It is prepared either in an international

currency or Indian rupees depending on the
terms of the contract.

 Accordingly, the bill is known by the name of

currency in which it is drawn.
e.g. a bill drawn in US dollars is known as a
“Dollar Bill” and when drawn in Rupees, it is
termed as “Rupees Bill”.
Bill of Exchange
 The most common versions of a bill of exchange
are:

A) Sight Draft –
◦ When the drawer (exporter) expects the drawee
(importer) to make payment immediately upon the draft
being presented to him.

◦ Unless and until the Draft is received, the Negotiating/

Collecting Bank does not hand over the Shipping
documents and the buyer cannot take delivery of goods.
Bill of Exchange

B) Usance Draft –
◦ When draft is drawn for payment at a date later
than the date of presentation.
◦ It may be a fixed future (specific) date or
determinable date according to the period of
credit viz. 30 days, 60 days or 90 days etc.
◦ It is presented to the drawee (importer) who will
retire the documents by accepting the draft by
putting his signature and date.
Bill of Exchange
 When the payment is received in advance no
Bill of Exchange is required to be drawn.

 Parties to a bill of exchange

i. Drawer – who makes the order for making
payment.
ii. Drawee – whom the order to pay is made.
iii. Payee – whom the payment is to be made.
Bill of Exchange
 Features of a Bill of Exchange:
◦ A bill must be in writing, duly signed by its
drawer, accepted by its drawee and properly
stamped.
◦ It must contain an order to pay. Words like
‘please pay US $ 5,000 on demand and oblige’
are not used.
◦ The sum payable mentioned must be certain
◦ The parties to a bill must be certain.
Bank Realisation Certificate
 Once the export proceeds are realised, the exporter
has to prepare Bank Certificate of Export and
Realisation for the purpose of claiming export
benefits, incentives, etc.

 It is prepared as per Form No.1, given in Appendix

22A of Handbook of procedures 2004-09 (Vol. I).

 To prepare this certificate, the date of realisation is

most essential, as the exporters have to apply for the
export benefits, incentives, etc. within six months
following the month/quarter of the realization month.
Bank Realisation Certificate
 It is signed by the authorized signatory of the
firm/company with full name in block letters
with designation, full official and residential
addresses.

 Bankers attest this certificate as true and

correct after verifying the particulars,
including the date of mate receipt. This date
is the most important, as this is the actual
date of export.
Bank Realisation Certificate
 It is signed by an authorized signatory of the bank with
his name and designation.

 Bankers affix certificate number and date and also

mention the Authorized Foreign Exchange Dealer's
Code number allotted to Bank by Reserve bank of India.

 For this purpose, this certificate must be accompanied

with the following documents:-
◦ A copy of invoice,
◦ A copy of customs attested export promotion copy of the
shipping bill,
◦ A copy of Bill of Lading/ PP receipt/ Airway bill,
◦ A copy of the insurance certificate/Insurance policy/cover.
Bill of Lading (B/L)
 Bill of Lading is the transport document associated
with Sea freight.

 It is issued by the Shipping Company or its agent

or master of a ship acknowledging that specified
goods have been received on board as cargo for
conveyance to a named place for delivery to the
consignee who is usually identified.

 It is a document of title to the goods and, as such,

is freely transferable by endorsement and delivery.
Bill of Lading (B/L)
 Bill of Lading serves three purposes as:
◦ Receipt given by Shipping Company as goods described
on document has been received by it/carrier.
◦ Evidence of the contract of carriage by sea between the
shipping company and the shipper (exporter or importer).
◦ Document of title to the goods and can be used to obtain
payment or a written promise before the merchandise is
released to the importer.

 For the bill of lading to be negotiable it must be:

1. made out to the order to the shipper.
2. signed by the steamship company.
Bill of Lading (B/L)
 It is the only evidence to file a claim against the
shipping company in the event of non-delivery,
defective delivery or short-delivery of the cargo at the
destination.

 For preparation of B/L the exporter should submit the

complete set of B/L together with mate receipt to the
shipping company which will calculate the freight
amount on the basis of measurement or weight.

 On payment of freight, the shipping company returns

the B/L duly signed and supported by requisite adhesive
stamps.
Bill of Lading (B/L)
 Generally made out in the sets of two or three
originals duly signed by the master of the
ship or the agent of the steamship company.

 All the originals are equally valid for taking

the delivery of the goods. Once one original
is utilised the other originals become null and
void.
Bill of Lading (B/L)
 Bill of Lading contains the following information:
◦ Shipping company’s name and address.
◦ Consignee’s name and address.
◦ Notify party
◦ Name of the vessel,
◦ Port of loading/Shipment and port of discharge.
◦ Shipping marks and Numbers, Cubic measurements, weights
◦ Description of the goods
◦ Number of packages.
◦ Shipped on board with date-rubber stamp.
◦ Gross weight and net weight.
◦ Freight details
◦ Signature of the shipping company’s agent.
◦ Container number if any.
◦ Shipper’s name and address.
◦ B/L Number and Date
◦ Originals
◦ Terms (on reverse)
Bill of Lading (B/L)
 Bill of Lading can be further described as
under:-
◦ Shipped on Board :- When goods are actually
shipped on board.

◦ Received for shipment :- When goods have been

handed over to agent for shipment.

◦ Through B/L:- When two or more carriers/ different

modes of transport form i.e. road, rail, air, and sea
employed to reach goods to their final destination.
Bill of Lading (B/L)
◦ Transhipment B/L:- When there is no direct
service between the two ports and shipowner is
prepared to tranship the goods at an intermediate
port.

◦ Stale B/L:- i.e. a late B/L that has been held too
long before it is passed on to a bank for
negotiation or to the consignee.

◦ Clean B/L:- Where the carrier has noted that the

goods have been received or loaded in ‘apparent
good condition’ (no apparent damage, loss, etc.).
Bill of Lading (B/L)
◦ Claused B/L:- Which contains additional
clauses/notations limiting the responsibility of the
shipping company which specify deficient
condition(s) of the goods and/or packaging.

◦ Combined Transport B/L:- When different modes

of transport are used; usually issued when goods
stuffed at shipper’s premises and delivered at
consignee’s premises.
Bill of Lading (B/L)

◦ Freight Paid B/L:- When freight is paid at the time

of shipment or in advance, the B/L is marked,
freight paid.

◦ Freight Collect B/L:- When the freight is not paid

and is to be collected from the consignee on the
arrival of the goods, the B/L is marked, freight
collect.
Airway Bill (AWB)
 Airway Bill is a transport document associated with Airfreight.

 It serves as a receipt for goods and an evidence of the contract

of carriage, but it is not a document of title to the goods.
Hence, the AWB is non-negotiable.

 It contains the following details:

◦ number of packages
◦ dimensions or volume
◦ gross weight

 The goods in the air consignment are consigned directly to the

consignee.
Airway Bill (AWB)
 On the reverse side of the airway bill are the airline’s terms and
conditions of carriage whereby an airline is obligated to transport a
consignment to its final destination once it has confirmed receipt of
the shipper’s consignment.

 Airway bill can be comprised in two parts:

◦ MAWB (Master Airway bill) – shipments sent on a direct
basis, not consolidated.

◦ HAWB (House Airway bill) – shipments sent on a

consolidation basis whereby grouping together various
clients consignments under one MAWB being issued by the
freight forwarder.
Bill of Entry
 The document on the strength of which clearance
of imported goods can be affected is known as Bill
Entry, the form of which has been standardized by
the Central Board of Excise and Customs.

 Every importer has to submit it under section 46 of

the Customs Act, 1962.

 Under EDI system, Bill of Entry is actually printed

on computer in triplicate only after ‘out of charge’
order is given. Duplicate copy is given to importer.
Bill of Entry
 Salient features of a Bill of Entry which is to be
presented for clearance of goods for home
consumption are mentioned below:
◦ Origin & Vessels Particulars
◦ Particulars of the Goods
◦ Value
◦ Duties Leviable
◦ Code
◦ Declaration of Importers/Clearing Agents

 Types of Bill of Entry – There are three types. Out of these, two
types are for clearance from customs while third is for clearance from
warehouse.
Bill of Entry
◦ BILL OF ENTRY FOR HOME CONSUMPTION - When the imported
goods are to be cleared on payment of full duty. Home consumption
means use within India.

◦ BILL OF ENTRY FOR WAREHOUSING - If the imported goods are not

required immediately, importer may like to store the goods in a
warehouse without payment of duty under a bond and then clear
from warehouse when required on payment of duty. This will enable
him to defer payment of customs duty till goods are actually
required by him.
It is also called ‘Into Bond Bill of Entry’ as bond is executed for
transfer of goods in warehouse without payment of duty.

◦ BILL OF ENTRY FOR EX-BOND CLEARANCE - It is used for clearance

from the warehouse on payment of duty.
 Bill of Entry
 Documents required by customs authorities are required to be
submitted to enable them to (a) check the goods (b) decide
value and classification of goods and (c) to ensure that the
import is legally permitted.

 Documents presented to customs along with the Bill of Entry

generally include:
 Invoice,
 Packing List,
 Bill of Lading or Delivery Order,
 Import Licence(s) / Customs Clearance Permit,
 Letter of Credit / Bank Draft wherever necessary
 Insurance Policy,
 Certificate of Origin etc.
 GATT declaration form duly filled in
 Importers / CHAs declaration duly signed
Tips for Proper Documentation
 Implications of all Regulatory documents must be studied
carefully. For example; declaration on ARE1 forms.

 Filing of Shipping Bill electronically requires correct entries

including HS code for the product. Many times, small
mistakes are extremely difficult to correct later on.

 Shipping bills must be filed according to the scheme the

exporter wants to avail . For example; DEPB
/DFIA/Drawback etc.

 Extra care should be taken when combination of schemes

is intended to be used. For example; DEEC – Drawback.

 Co-relation between customs, excise and DGFT is

extremely important. Many times documents do not match
with each other, which results in delay or denying of some
benefit under one or the other scheme.
Tips for Proper Documentation

 Each regulatory document is important from the point of

view of claiming various benefits associated with exports.
Each document therefore should be carefully looked into
as to correctness of the contents, description, quantity,
weight, currency, declaration etc.

 Maintenance of statutory records: Since most of the

schemes are in the nature of the exemption / remission of
the duty, documentary compliances are insisted upon by
all the government departments. For example; Appendix
23 – Consumption register.
Thought for the Day…

“Where ignorance is our master,

there is no possibility of real
peace”

Shri Dalai Lama

EOU
 The needs for higher level of technological
and industrial progress made the Government
devise a series of export promotional
schemes. EOU & SEZ Schemes are one among
them, which provides an internationally
competitive duty free environment coupled
with better infrastructural facilities for export
production.
 Country’s export performance is about 10%.
Eligibility
 An EOU can be set up by any entrepreneur for
manufacturing of goods. An EOU can be set
up for repair, reconditioning, re-making and
re-engineering also.
 Trading activity is not allowed in the EOU

Scheme.
 EOU unit is required to achieve only positive

Net Foreign Exchange (NFE) over a period of 5

years.
SALIENT FEATURES
No license required for import.

Exemption from Central Excise Duty in procurement of capital

goods, raw-materials, consumables spares etc. from the
domestic market.

Exemption from customs duty on import of capital goods,

raw materials, consumables spares etc.

Reimbursement of Central Sales Tax (CST) paid on domestic

purchases.

Supplies from EOUs treated as deemed exports.

100% Foreign Direct Investment permisisible.

SEZ
 India was one of the first in Asia to recognize
the effectiveness of the Export Processing
Zone (EPZ) model in promoting exports, with
Asia's first EPZ
 This policy intended to make SEZs an engine

for economic growth supported by quality

infrastructure complemented by an attractive
fiscal package, both at the Centre and the
State level, with the minimum possible
regulations. set up in Kandla in 1965.
The main objectives of the SEZ Act
are:
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and
foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities
Incentives and facilities offered to the
SEZs
 Duty free import/domestic procurement of goods for
development, operation and maintenance of SEZ units
 100% Income Tax exemption on export income for SEZ

units under Section 10AA of the Income Tax Act for first 5
years, 50% for next 5 years thereafter
 External commercial borrowing by SEZ units upto US $ 500

million in a year without any maturity restriction through

recognized banking channels.
 Exemption from Central Sales Tax.
 Exemption from Service Tax.
 Single window clearance for Central and State level

approvals.
Export-Import Bank of India
 Exim Bank

 SET UP BY AN ACT OF PARLIAMENT IN

SEPTEMBER, 1981

 WHOLLY OWNED BY GOVERNMENT OF INDIA

 COMMENCED OPERATIONS IN MARCH, 1982

 Objectives

Established “for providing financial assistance to

exporters and importers, and for functioning as the
principal financial institution for coordinating the
working of institutions engaged in financing export
and import of goods and services with a view to
promoting the country’s international trade…”

Source : Export-Import Bank of India Act, 1981

 Evolving Vision
Product Centric
Approach “To develop commercially viable
Export relationships with a target set of
Credits externally oriented companies by
1982-85 offering them a comprehensive range of
products and services, aimed at
enhancing their internationalisation
Export Capability efforts”
Creation
1986-94

Customer Centric Comprehensive Range of

Approach Products And Services
– All Stages of the Business Cycle –
Exim Bank TODAY

Leadership and Expertise in India’s Export Finance

We are at All Stages of the
Export Business

Export Pre-
Marketing shipment

Export Post-
Production shipment

Export
Product Investment
Development Abroad

Import Advisory
Finance Services
Network of 14 Offices in India & Overseas

Head Office
+
9 Domestic Offices
Delhi
Guwahati

Ahmedabad Kolkata

Mumbai
Hyderabad
Pune

Bangalore
Chennai
Role of Exim Bank
Principal financial institution in India for
coordinating working of institutions engaged in
financing exports and imports

 Range of Financing Programmes

 Export Credits
 Finance for Export Oriented Companies

 Export Services

 Support Programmes
 Export Credits
For Indian Companies
Pre-shipment credit
Foreign Currency Pre-
shipment Credit
Post-shipment Supplier’s
Credit
Finance for deemed exports
Financing Rupee
Expenditure for Project
Exports
Finance for Consultancy
and Technology Services
Guarantee Facilities
 Countries covered under LOCs
of Exim Bank
AFRICA ASIA EUROPE
BANGLADESH
ALGERIA INDONESIA
PTA BANK covering BULGARIA
GHANA IRAQ
BURUNDI MOROCCO
KENYA KOREA ROMANIA
COMOROS
MALAWI MALAYSIA
DJIBOUTI RUSSIA
MAURITIUS THAILAND VIETNAM
EGYPT
NAMIBIA IRAN POLAND
ERITREA
SEYCHELLES PHILIPPINES
ETHIOPIA KAZAKHSTAN
SOUTH AFRICA SRI LANKA
KENYA
SUDAN HUNGARY
MALAWI MYANMAR
TANZANIA CAMBODIA
MAURITIUS
TUNISIA
UGANDA RWANDA
ZAMBIA Central & South AMERICA
SOMALIA
ANGOLA SUDAN
DR. CONGO JAMAICA VENEZUELA
TANZANIA TIRINIDAD & BRAZIL
BOAD covering UGANDA TOBAGO COLOMBIA
BENIN ZAMBIA MEXICO
BURKINA FASO ZIMBABWE
EADB covering CAF covering BCIE covering
COTE D’IVOIRE BOLIVIA HONDURAS
NICARAGUA
MALI KENYA COLOMBIA GUATEMALA
NIGER EL SALVADOR
SENEGAL TANZANIA ECUADOR COSTA RICA
GUINEA BISSAU UGANDA PERU
TOGO VENEZUELA
Financing of Export-Oriented Companies

Term Loans

Project Equipment Working Overseas Other

Finance Finance Capital Investment Finance Programmes

Short Term Loans to Indian Export

EOU Projects companies for Equity Marketing
< 1 year
Investment in their Finance
Software Training Term Loans ventures overseas
Institutes for 1-2 years Export Product
Loans to Indian Development
Long Term
Minor Ports upto 5 years companies for their
overseas ventures Finance for
R&D
Technology Parks
Direct Equity stake
Value Based Services

ADVISORY
SERVICES
- Multilateral Agencies-
Funded Projects Overseas
- Exim Bank as Consultant

KNOWLEDGE BUILDING
- Eximius Centre for Learning
- Research Studies

INFORMATION
Markets, Products, Countries

SUPPLEMENTS FINANCING PROGRAMMES

Services
through

Bank’s Network

 Head Office
 Overseas Offices - 5
 Domestic Offices - 9
 Institutional Linkages
 Export Credit Agencies
 Trade & Investment Promotion Agencies Abroad
 Trade & Industry Associations in India
 Multilateral Agencies

 Supported by Indian Missions Abroad

 Exim Bank : Partner in Globalisation
Technology  Final Products
Capital (Foreign EX
Investment) PO  Capital Goods
RT
Raw Materials  Capital
Capital Goods (Overseas
Ventures)
I
M
P
O
R  Product
T Development
 Production
O N
I TI
 Marketing
D D
VALUE A  Pre shipment
 Post shipment
THANK
THANK YOU
YOU
www.eximbankindia.com
Export Finance
 RBI promotes the exports by providing the
financial assistant to the exporters.
 Other commercial bank also provide the loan

to the exporters at a concessional interest

rates.
 RBI & EXIM bank provides the refinancing
facility to the commercial bank the loan
extended by them to the exporters.
 Before lending, bank has to ensure the
followings
◦ Current assets
◦ Current liabilities
◦ Performance
◦ Intention
Maximum Permissible Bank Finance
 Normally, Bank asked the exporter to
contribute 25% of the amount (MARGIN
MONEY)

 How to calculate margin money and MPBF?

 Method – I
◦ Under this method, the amount of margin money is
computed on the basis of a specified % of the
working capital gap.
 Method-II
◦ Under this method, the amount of margin money is
computed on the basis of a specified % of the total
current assets.
 Company XYZ
◦ Current assets- Rs. 1500000
◦ Current Liabilities – Rs. 300000
◦ Receivables export – 500000
Calculate the MPBF and Margin money according to
the both methods
Method-I
◦ Current assets - Rs. 1500000
◦ Current Liabilities – Rs. 300000
◦ Working capital Gap – 1200000
◦ Margin 25% - 300000
◦ MPBF - 900000
Method-II
◦ Current assets - Rs. 1500000
◦ Current Liabilities – Rs. 300000
◦ Working capital Gap – 1200000
◦ Margin 25% - 375000
◦ MPBF - 825000
Classification of Finance
 Pre-shipment Finance

 Post-shipment Finance
Pre-Shipment Finance
 Packing Credits
◦ Packing credits includes the purchase of raw
materials, supplies required for the processing or
manufacturing, purchase of packing materials etc.
◦ Packing credits is granted on the basis of a
confirmed export order or L/C opened by importer
in favour of exporter from India.
Eligibility
 Company having export order or L/C
 Company (supporting) which does not have

export order or L/C in his name and

exporting through merchant exporter or
export houses, subject to norms laid down by
the RBI in this regards.
Criteria
 Confirmed order
 L/C
 Bank may exempt the L/C or order copy if

exporter can produce the exchange of the

message and may follow order, L/C
subsequently.
Purpose
 For raw materials
 Supplies required
 Processing of goods
 Purchase of goods for export
 Packing
 Transportation
 Warehousing
Security
 It is unsecured, when the exporter procures
raw material.
 When he gets a title of the goods, it

converted into a secured advance when

bank charges on the goods by way of
hypothecation or Pledge.
Quantum of Finance
 There is no fixed formula for financing
 RBI guidelines should be follow.
 RBI says no export order should suffer due to

lack of finance.
 Bank do ask for the exporters to contribute a

part of the fund from their own sources i.e

margin money.
 Generally consider FOB value.
Form of Finance
 Fund Based
◦ To purchase the raw material, processing,
warehousing, manufacturing etc.

 Non Fund based

◦ To open letter of credit for export & import as well
◦ Issue of various types of guarantees
Period
 Total 270 days max
◦ Initially 180 day
◦ 90 days may be extended

Interest rate according to the benchmark prime

lending rate (BPLR)
- actual cost of funds to the bank
- Operating expenses
- minimum margin to cover regularity requirement
of capital charge & profit margin
Documentation Formalities
 Export Credit Agreement
 Hypothecation/Pledge Agreement
 Corporate/Individual guarantee from

company/partner/director etc.
 Insurance policy to cover the stock etc.
 Necessary Undertaking
 Other formalities as specified by bank in the

sanction letter
Category Average FOB FOB value Average NFE NFE earned
value during during the earnings during the
the preceding made during preceding
preceding licensing the licensing
three year, in preceding year, in
licensing Rupees three Rupees
years, in licensing
Rupees years , in
Rupees

(1) (2) (3) (4) (5)

EXPORT 15 crores 22 crores 12 crores 18 crores

HOUSE

TRADING 75 crores 112 crores 62 crores 90 crores

HOUSE

STAR 375 crores 560 crores 312 crores 450 crores

Export Management
Classification of Exports
Merchandise Exports

Service Exports

Project Exports

Deemed Export
Features of Exports

Business of managing variety

Multi-disciplinary functional area

Non routine activities

Uncertainty of environment
Establish organization
 1.
◦ Already exist or Not, select firm name- Get
approval of name from the regional licensing
authority
◦ Develop International division with infrastructure
◦ Firm may be proprietor, partnership or joint venture
◦ Requirements- Current Account, PAN, Registration
with sales Tax, Central Excise & Concerned EPC, No
name in caution list
2. Get the IEC/RCMC (Registration-cum- Membership Certificate)

a. Fill the application form & get the permission from DGFT
(for IEC)
b. Fill the application form & get the permission from EPC
(RCMC)
c. For service exporters (except soft wares) get the
permission from FIEO (Federation of Indian Exporters
Organization )
d. License will be given as merchant or manufacturer
exporter
e. In case an exporter desires to get registration as a
manufacturer exporter, he shall furnish evidence to that
effect.
De-Registration
• The registering authority may de-register an RCMC
holder for a specified period for violation of the
conditions of registration. Before such de-
registration, the RCMC holder shall be given a show
cause notice by the registering authority, and an
adequate and reasonable opportunity to make a
representation against the proposed de-registration.
Upon de –registration, the concerned export
promotion council shall intimate the same to all the
licensing authorities.
Appeal Against De-Registration

 A person aggrieved by a decision of the

registering authority in respect of any matter
connected with the issue of RCMC may prefer
an appeal to the Director General of Foreign
Trade or an officer designated in this behalf,
within 60 days. The DGFT may direct any
registering authority to register or de-
register an exporter
Benefits & Cost

◦ Benefits –EPC & Commodity board provides

consultancy service for export & manufacturing as
well, Market information, Organize export
promotion tours, Assists exporters in participating
in international fairs held in India or abroad, liaise
with Govt. of India,
◦ Cost- EPC & CB has its own Schedule of annual
membership fee. Generally, the fee is based upon
export turnover of the applicant. The fee rising in
value as the export turnover becomes larger.
Functions of Export Firm

 Export Marketing
 Merchandising
 Procurement/ Production
 Logistic
 Quality Control
 Finance & Accounts
 Export order Administration
 R & D
EPC

 The Export Promotion Councils are

organisations registered under the Indian
Companies Act or the Societies Registration
Act, as the case may be. They are supported
by financial assistance from the Government
of India.
Role
 To project India's image abroad as a reliable
supplier of high quality goods and services.
 EPCs encourage and monitor the observance of
international standards and specifications by
exporters.
 EPCs keep abreast of the trends and
opportunities in international markets for goods
and services
 Assists their members in taking advantage of
such opportunities in order to expand and
diversify exports.
Functions
 To provide commercially useful information and assistance to
their members in developing and increasing their exports
 To offer professional advice to their members in areas such as
technology up gradation, quality and design improvement,
standards and specifications, product development and
innovation etc.
 To organise visits of delegations of its members abroad to
explore overseas market opportunities.
 To organise participation in trade fairs, exhibitions and buyer-
seller meets in India and abroad.
 To promote interaction between the exporting community and
the Government both at the Central and State levels
 To build a statistical base and provide data on the exports and
imports of the country, exports and imports of their members, as
well as other relevant international trade data.
Directory of EPCs

◦ Agricultural and Processed Food Products Export Development Authority (APED

A)

◦ Apparel Export Promotion Council

◦ Chemicals Pharmaceuticals & Cosmetics Export Promotion Council, (CHEMEXCI
L)

◦ Carpet Export Promotion Council

◦ Cashew Export Promotion Council of India
◦ Chemical & Allied Products Export Promotion Council
◦ Cotton Textile Export Promotion Council
◦ Coffee Board
◦ Coir Board
◦ Electronic & Computer Software Export Promotion Council
◦ Engineering Export Promotion Council
◦ Federation of Indian Export Organisations (FIEO)
◦ Gems & Jewellery Export Promotion Council
◦ Export Promotion Council for Handicrafts
◦ Handloom Export Promotion Council
◦ Handicrafts & Handloom Export Corporation
◦ Office of the Development Commissioner for Handlooms
◦ Development Commissioner for Iron Steel
◦ Indian Silk Export Promotion Council
◦ Indian Trade Promotion Organisation
◦ Council for Leather Export
◦ Marine Products Exports Development Authority (MPEDA)
◦ National Agricultural Cooperative Federation of India Ltd. (NAFED)
◦ Overseas Construction Council of India
◦ Power loom Development and Export Promotion Council
◦ Plastic & Linoleum Export Promotion Council
◦ Rubber Board
◦ Sports Goods Export Promotion Council
◦ Spices Board
◦ Central Silk Board
◦ Synthetic & Rayon Textiles Export Promotion Cou
ncil

◦ Tea Board
◦ Tobacco Board
◦ Wool & Woollens Export Promotion Council
ITPO

 India Trade Promotion Organization (ITPO) is

the agency of the Government of India for
promoting the country's external trade. ITPO,
during its existence of nearly three decades,
in the form of Trade Fair Authority of India
and Trade Development Authority, has played
a proactive role in trade, investment and
technology transfer processes.
Role & Functions
 organizing of fairs and exhibitions in India
and abroad,
 Buyer-Seller Meets,
 Promotion Programmes,
 Product Promotion Programmes,
 Promotion through Overseas Department

Stores,
 Market Surveys and Information

Dissemination
Infrastructure Support in India
 The experience of operating berths through
PPPs(Public private projects) at some of the
major ports in India has been quite successful.
It has, therefore, been decided to expand the
programme and allocate new berths to be
constructed through PPPs
 The Government has also decided to empower
and enable the 12 major ports to attain world-
class standards. To this end, each port is
preparing a perspective plan for 20 years and
an action plan for seven years.
 A high level committee has finalised the plan for
improving rail-road connectivity of major ports.
The plan is to be implemented within a period of
three years.
 The National Maritime Development Programme
is expected to bring a total investment of over
Rs.50,000 crore in the port infrastructure.
 Minor ports are already being developed by
domestic and international private investors:
Pipavav Port by Maersk and Mundra Port by
Adani Group
 Pipava Port 152 nautical miles from Mumbai
Mundra Port & SEZ
 Purview of
Export-Import
 FLOW CHART – I
Knowledge of Knowledge of Knowledge of Product
Market Product Incentives Costing

Proforma Sample if Confirmation Payment

Invoice necessary of Export terms
Contract

Scrutiny of Amendments if Preparation of Benefits &

L/C Necessary Physical Execution
Exports

Continued….
FLOW CHART – I (continue from the previous slide)

Pre Post
Shipment Shipment

Confirmation from Buyer of

Receipt of Goods

Payment Realisation of Statutory

Realisation Benefits Records
EIC
 The Export Inspection Council (EIC) was set
up by the Government of India under Section
3 of the Export (Quality Control and
Inspection) Act, 1963, in order to ensure
sound development of export trade of India
through Quality Control and Inspection.
EIC is empowered under the Act to:

 Notify commodities which will be subject to

quality control and/ or inspection prior to
export,
 Establish standards of quality for such

notified commodities
 Specify the type of quality control and / or

inspection to be applied to such

commodities.
 Besides its advisory role, the Export
Inspection Council, also exercises technical
and administrative control over the five
Export Inspection Agencies (EIAs),
 Chennai,
 Delhi,
 Kochi,
 Kolkata and
 Mumbai
Working Area
 Certification of quality of export commodities
through installation of quality assurance
systems
 Certification of quality of food items for

export through installation of Food safety

Management System in the food processing
units. 
 Issue of Certificates of origin to exporters

under various preferential tariff schemes for

export products.
What is ECGC?
 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.
 It is managed by a Board of Directors comprising
representatives of the Government, Reserve Bank
of India, banking, insurance and exporting
community.
 ECGC is the fifth largest credit insurer of the
world in terms of coverage of national exports.
 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 equity or loan
How does ECGC help 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
ECGC- Standard Policy
 Also Known as SCR (Shipment Comprehensive
Risk)
 Turnover should be more than 50 lacs.
 Only for the 180 days.

Small Exporter Scheme – Less than 50 lacs

 Issued for the 12 months

SSP-ST (Specific Shipment Policy –Short term)

 Duration 12 months

BW-ST (Buyer wise police – ST)

 Export Turnover Policy
 Has to pay the premium at least 10 lac/yr

Buyer Exposure Policies- All buyers or specific

buyers
Overseas Investment Guarantee- No claim for
joint venture
Construction Works Policy
Export/Import Contracts
 Generating Trade Enquiry
 Web sites to identify export/import firms
 Participation in trade fairs
 Business promotion visits
 Contact with marketing agents/brokers in

India and abroad

 Trade enquiries through ITPO, EPCs,

Commodity Boards, Chambers of Commerce

 The Sequence
Trade Enquiry

Dispatch of company profile, product range and

other details

Indicative quotation and samples, photo on

demand

Buyer credibility check & situation analysis

Proforma invoice on receipt of firm enquiry / interest

Before Finalizing the Contract
Assess:
 Credit Worthiness of the Customer
 Availability of the Steamer/Airlines and its
frequency to the place of projected
destination
 Documentation requirement for the customer
and government of the importing country

While these are indicative, the requirements

will vary from country to country, product to
product and buyer to buyer.
 The Export Order

 The export order can be procured based on

written communication, verbal discussions &
negotiations when offer/bid acceptance is
finalized between exporter and importer
 In many cases the exporter sends the
proforma invoice to buyer giving terms &
conditions of proposed export sale
contd.
 The Export Order contd

 After negotiations, buyer may accept the

offer. The buyer confirms the acceptance of
offer mentioned in the proforma invoice by
signing the proforma invoice as token of
acceptance of the sellers’ offer
 A contract is then drawn giving details of the

terms agreed
 Export Contract
 Is a sale and purchase agreement between
the exporter and the importer
 In most cases the terms are standardized and
contain specified heads in which the
conditions are detailed
 The ambiguity is avoided and all parties have
uniform understanding of all terms &
conditions
 It is essential to scrutinize the terms carefully
and in detail to avoid any problems later
 General Standard Conditions
 When the export contract is made quickly and
informally, some of the conditions are either
assumed or clarified later
 This situation may lead to dispute or
misunderstanding. This can be avoided by using
the General Standard Conditions
 These are standardized contract terms that
permit the parties to refer to a pre established
set of rules that can be incorporated into their
contract
 Once such General Standard Conditions have
been adopted, they are legally binding whether or
not both parties are aware of and understand
every provision
Written vs. Construed Contract
 All large export/import orders are
usually written and signed between
the buyer & the seller to avoid
ambiguity
 There are sometimes situations when
the agreement takes place in piece
meal by e-mail, fax, etc but it is not
developed into an agreement putting
all terms & conditions in a single
document contd.
 Contd…
◦ In such a case, the exporter/importer can
establish existence of a contract by
stitching together various pieces of
documents
◦ The Indian Evidence Act recognizes
commercial & regulatory documents,
provided exporter can prove through
various communications he has
exchanged with the importer
◦ Such unwritten contract is referred to as
‘construed contract’
 Broad Terms & Conditions in an
Export Contract

 Packing,
The namemarking & labeling
& address of buyer & seller

 Payment terms
Description of the product/s
 Shipment

 Quality & specifications
Insurance

 Quantity
Inspection
 Documentation
Price per unit with Specified incoterm & total
 Jurisdiction
value
contd.
 Contd….
 Some other issues, terms & conditions may be
included in the international sales contract,
like:
◦ Requirement of import/export license in cases of
restricted items
◦ Any amendments and supplements should become an
integral part of the contract from the date these have
been finalized
◦ The export order should fully comply with RBI norms
related to permitted currencies and methods of
payment
 The Conflict of Laws
 In export transactions two nations are involved.
Important to define which country’s law will apply
 Usually buyer/seller should agree on this at the
time of finalization of the contract
 A set of rules are developed by each country’s
law. The courts consider this while deciding the
issue. This commonly known as ‘conflict of laws’
situation
 Conflicts can be taken care of in advance by
incorporating some specific provisions with
respect to jurisdiction & applicability of law in the
sales contract
 Frustration of Contracts/Force Majeure

 Situations can develop beyond the

control of buyer or seller & insurer
 Examples are Acts of God, such as
floods, tsunami, fire at factory, etc.
 Such a situation is called
‘Frustration of contracts’ or ‘Force
Majeure’ contd.
 Frustration of Contracts/Force
Majeure contd.
 Incorporation of this clause in the contract
allows the party concerned to terminate the
contract or take other remedial measures
provided for in the contract, without any
penalty
 Notice for invoking the Force Majeure clause

has to be given by the affected party as per

prescribed terms agreed between
buyer/seller
Methods of Dispute Settlement
 Many causes of dispute
◦ Most common clause relates to quality
◦ Other causes could be late shipment, failure to
ship, Refusal to ship because of change in
market conditions, Government regulations
restricting exports after the finalization of
contract, etc.
 Two well recognized methods to settle
disputes
◦ Litigation
◦ Arbitration
 Arbitration
 Arbitration is particularly popular as a means
of dispute resolution in the commercial sphere.
 It is generally speedier, less formal and a
greater degree of privacy and confidentiality
can be observed and enjoyed by the parties.
 Unlike litigation in open court, arbitrators are,
as a rule, forbidden to disclose any information
whatsoever about arbitral proceedings and/or
results to a third party. contd
 The Arbitration Clause

 An arbitral award is a determination on the

merits by an arbitration tribunal in an
arbitration, and is analogous to a judgment in
a court of law.
 Need to be a very non contravorsial and
acceptable by all parties
 The international arbitration can take place in
the exporter or importer’s country or at any
third neutral country Contd.
 The Arbitration Clause contd.

 Parties should stipulate in the arbitration clause

itself the law governing the contract, the number
of arbitrators and the place and language of the
arbitration.
 For example, The ICC recommends that all parties
wishing to make reference to ICC arbitration in
their contracts use the following standard clause
"All disputes arising out of or in connection with
the present contract shall be finally settled under
the Rules of Arbitration of the International
Chamber of Commerce by one or more arbitrators
appointed in accordance with the said Rules."
Enforcement of Arbitral Award
 The Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, also
known as the New York Convention, was
adopted by a United Nations diplomatic
conference on 10 June 1958 and entered into
force on 7 June 1959.
 The Convention requires courts of contracting
states to give effect to private agreements to
arbitrate and to recognize and enforce
arbitration awards made in other contracting
states. contd.
Enforcement of Arbitral Award
contd.

 Though other international conventions apply

to the cross-border enforcement of
arbitration awards, the New York Convention
is by far the most important.
 As of October 1, 2009, there are 144

signatories which have adopted the New York

Convention
IMF
IMF
 The IMF works to foster global growth and
economic stability. It provides policy advice and
financing to members in economic difficulties and
also works with developing nations to help them
achieve macroeconomic stability and reduce
poverty.
 The IMF promotes international monetary
cooperation and exchange rate stability, facilitates
the balanced growth of international trade, and
provides resources to help members in balance of
payments difficulties or to assist with poverty
reduction.
 It also lends to countries in difficulty, and
provides technical assistance and training to
help countries improve economic
management. This work is backed by IMF
research and statistics.
The IMF provides technical assistance
and training mainly in four areas:
 Monetary and financial policies (monetary policy
instruments, banking system supervision and
restructuring, foreign management and operations,
clearing settlement systems for payments, and
structural development of central banks)
 Fiscal policy and management (tax and customs
policies and administration, budget formulation,
expenditure management, design of social safety
nets, and management of domestic and foreign debt)
 Compilation, management and improvement of
statistical data
 Economic and financial legislation.
Lending
 In the event that member countries
experience difficulties financing their balance
of payments, the IMF is also a fund that can
be tapped to facilitate recovery. A policy
program supported by financing is designed
by the national authorities in close
cooperation with the IMF.
 The IMF also provides low-income countries
with loans at a concessional interest rate
through the Poverty Reduction and Growth
Facility (PRGF)
Surveillance
 The IMF promotes economic stability and global
growth by encouraging countries to adopt
sound economic and financial policies. To do
this, it regularly monitors global, regional, and
national economic developments. It also seeks
to assess the impact of the policies of
individual countries on other economies.
 This process of monitoring and discussing
countries’ economic and financial policies is
known as bilateral surveillance.
Research and data
 All above three can be achieved through
research & data.

 To strengthen the international financial

system and improve its ability to prevent and
resolve crises.
WTO
 The World Trade Organization (WTO) is the
only global international organization dealing
with the rules of trade between nations. At its
heart are the WTO agreements, negotiated
and signed by the bulk of the world’s trading
nations and ratified in their parliaments. The
goal is to help producers of goods and
services, exporters, and importers conduct
their business.
Trade negotiations
 The WTO agreements cover goods, services and

intellectual property. They spell out the principles

of liberalization, and the permitted exceptions.
They include individual countries’ commitments
to lower customs tariffs and other trade barriers,
and to open and keep open services markets.
They set procedures for settling disputes. These
agreements are not static; they are renegotiated
from time to time and new agreements can be
added to the package
Implementation and monitoring
 WTO agreements require governments to

make their trade policies transparent by

notifying the WTO about laws in force and
measures adopted. Various WTO councils and
committees seek to ensure that these
requirements are being followed and that
WTO agreements are being properly
implemented.
Dispute settlement
 The WTO’s procedure for resolving trade

quarrels under the Dispute Settlement

Understanding is vital for enforcing the rules
and therefore for ensuring that trade flows
smoothly. Countries bring disputes to the
WTO if they think their rights under the
agreements are being infringed.
Building trade capacity
 WTO agreements contain special provision for

developing countries, including longer time

periods to implement agreements and
commitments, measures to increase their
trading opportunities, and support to help
them build their trade capacity, to handle
disputes and to implement technical
standards.
 Ministerial Conferences
 The topmost decision-making body of the

WTO is the Ministerial Conference, which

usually meets every two years. It brings
together all members of the WTO, all of which
are countries or customs unions. The
Ministerial Conference can take decisions on
all matters under any of the multilateral trade
agreements.
 The WTO General Council
 The General Council is the WTO’s highest-level
decision-making body in Geneva, meeting
regularly to carry out the functions of the WTO.
It has representatives (usually ambassadors or
equivalent) from all member governments and
has the authority to act on behalf of the
ministerial conference which only meets about
every two years. The current chairman is H.E.
Mr. Yonov Frederick AGAH (Nigeria).
 GATT WTO
It is a set of rules & multilateral It is a permanent institution
agreement
It was applied on the provisional Its activities are full & permanent
basis
Rules are applicable in Goods & services
merchandise goods
Dispute settlement system was not Fast & Automatic
so faster & automatic
INCOTERMS
INCOTERMS
 INTRODUCTION

In their sales contract buyer and seller agree on

the conditions of sale : payment on the one
hand and delivery on the other. These terms
determine at what precise location the
ownership of the goods is transferred from
seller to buyer and when/how payment will be
done. In international trade a universal set of
rules on delivery has been developed over the
years. It is called INCOTEMRS.
INCOTERMS
 The Incoterms divide costs and risks
The Incoterms of trade have been designed to
clarify obligations of both parties, the buyer
and the seller. Principally, these are:

The seller must: The buyer must:

Provide the goods Pay the price as agreed
according to the contract upon

Contd….
INCOTERMS
In order to finalise the transaction, both parties will
have to perform certain tasks, like:

Arrange for licences, Arrange for licences,

Authorisation and formalities Authorisation and formalities
Arrange for shipment Arrange for shipment
Arrange for delivery Accept delivery
Bear the risks for his activities Bear the risks involved in his
contractual activities.

Source: Guide to Incoterms, ICC Paris

 INCOTERMS
 EXW = EX WORKS
Cost of Goods plus cost of Export packing and marking
In this term the seller delivers the goods by keeping it ready in
deliverable state at the seller's place or another named place. This
named place can be factory/godown or manufacturing unit. In
this term seller does not clear the goods for exports nor goods
are loaded on vehicle.

 FCA = FREE CARRIER

Cost of Goods plus cost of Getting goods to railway station or
truck for transportation to port
This term refers to seller's responsibility to deliver the goods,
cleared for export, to the carrier appointed by the buyer at the
named place. In this term the place of delivery is very important.
If the delivery is at sellers place's then he is responsible for
loading. If the delivery occurred at any other place, the seller is
not responsible for unloading. This term can be used for all
modes of transport as well as multimodal.
INCOTERMS
 FAS = FREE ALONGSIDE
 Cost of Goods plus cost of Transport to
port and getting goods alongside ship
In this term when the goods are placed
alongside the vessel at the named port of
shipment it will be considered that the seller
has completed the delivery. The buyer has to
bear all risks of loss or damage to the goods
and all costs from this point of time. However
the seller must clear the goods for the
purpose of export. This term can be used only
for inland waterway transport or shipment by
sea. It is not used when it is air shipment.
INCOTERMS
 FOB = FREE ON BOARD
Cost of Goods plus cost of Getting goods on
board and preparing shipping documents
This is the most popular term and is widely in
use. FOB means that the seller delivers when
the goods pass the ship's rail at the named
port of shipment. Under this term the buyer
has to bear all costs and risk of loss of
damage to the goods from that point. This
term requires the seller to clear the goods for
exports. This term is used only for sea or
inland waterway transport. It is not suitable
for shipment by air.
INCOTERMS
 CFR = COST AND FREIGHT
Cost of Goods plus cost of Freight cost (port
to port)
Earlier this term was popularly known as C&F
or CNF. CFR means the seller must pay the
cost and the freight necessary for the goods
to reach at the named destination. The seller
is required to clear the goods for exports.
This term can be used only for sea and inland
waterway transport.
 INCOTERMS
 CIF = COST INSURANCE AND FREIGHT
Cost of Goods plus cost of Marine Insurance
“Cost, Insurance and Freight” means that the seller, delivers when the
goods pass the ship’s rail in the port of shipment. The CIF price
refers that it covers the cost of the goods, freight necessary to bring
the goods to the named port of destination and also marine
insurance. Compared to the previous term, CFR the seller contracts
for the insurance and pay the insurance premium. It will be essential
for the buyer to know that under the CIF term the seller is required to
obtain the insurance only on minimum cover. If the buyer wishes to
have more protection then he should make his own insurance
arrangement extra or should specify to the seller at the time of
contract.
In this term the seller must clear the goods for exports and the buyer
must arrange necessary clearance for import. This term can be used
only for sea and inland water transport.
 INCOTERMS
 CPT = CARRIAGE PAID TO
“Carriage Paid To” means the seller delivers the goods to the
carrier nominated by him but the seller must in addition pay the
cost of carriage necessary to bring the goods to the named
destination. This refers to the fact that all the risks and any other
cost occurring after the goods have been delivered will be on
buyer’s account. This term is used for all modes of transport
including multimodal transport.

 CIP = CARRIAGE AND INSURANCE PAID TO

“Carriage and Insurance Paid To” means that the seller delivers the
goods to the carrier nominated by him, but the seller must in
addition pay the cost of carriage necessary to bring the goods to
the named destination. This means that the buyer bears all risks
and any additional costs occurring after the goods have been so
delivered. However, in CIP the seller also has to procure insurance
against the buyer's risk of loss of or damage to the goods during
the carriage.
 INCOTERMS
 DAF = DELIVERD AT FRONTIER
This term is used when goods are to be delivered at land frontier,
irrespective of the mode of transport. "Delivered At Frontier"
means the seller delivers when the goods are placed at the
disposal of the buyer on the arriving means of transport not
unloaded, cleared for exports but not cleared for import at the
named point and place at the frontier, but before the customs
border of the adjoining country.

 DES = DELIVERD EX SHIP

Cost of Goods plus cost of Putting goods at disposal of customer
on board vessel at port of destination
under this mode, the exporter makes the goods available to the
importer on the ship at the named port of destination at this cost.
 INCOTERMS
 DEQ = DELIVERED EX QUAY
Cost of Goods plus cost of Unloading charges at port of
destination
The DEQ term requires the buyer to clear the goods for import
and to pay for all formalities, duties, taxes and other charges
upon import & to make the goods available to the importer into
Quay (after crossing the custom boarder)
 INCOTERMS
 DDU = DELIVERED DUTY UNPAID
“Delivered Duty Unpaid” means that the seller delivers the goods
to the buyer, not cleared for import, and not unloaded from any
arriving means of transport at the named place of destination.
Such duty has to be borne by the buyer as well as any costs and
risks caused by his failure to clear the goods for import in time.
INCOTERMS
 DDP = DELIVERED DUTY PAID
Cost of Goods plus cost of Payment of duties
and transport to customer
“Delivered Duty Paid" means that the seller
delivers the goods to the buyer, cleared for
import, and not unloaded from any arriving
means of transport at the named place of
destination. The seller has to bear all the costs
and risks involved in bringing the goods
thereto including, where applicable, any duty
for import in the country of destination.
INCOTERMS
 Incoterms – an example
A customer in Hanover, Germany, asks for a quotation for
3000 pairs of shoes, to be delivered DDP at his warehouse.
You have decided on a unit selling price of $2, giving a total
nominal price of $ 6000 for the goods when sold domestically.
For export you will have to calculate with an additional set of
costs which are involved in making them physically available to
your customer.

What are the additional costs of getting the goods from your
factory in (e.g.) Agra, India, to the customer? How (*) is your
quotation affected by the terms of delivery?

(*) In this calculation example, all costs are hypothetical.

INCOTERMS
 Incoterms – an example

If you Your price should Additional Your total price

quote: include: costs: is:
EXW Ex-works Agra 300 6300
Export packing, marking
crates with shipping
marks
FCA Free on Carrier at Agra 100 6400
station. Carriage and
insurance for delivery
to railway station by
road transport including
insurance
INCOTERMS
 Incoterms – an example

FAS Free alongside ship at 310 6710

JNPT port. Rail
transport to port
(including insurance)
and getting goods on
the quay alongside
ship.
FOB Free on board JNPT 100 6810
Port. Dock dues,
loading goods on board
ship. Preparing
shipping documents
INCOTERMS
 Incoterms – an example

CFR Cost and Freight. 875 7685

Sea Freight to
Hamburg (nearest
port to Hanover)
CIF Cost, insurance, 100 7785
freight. Sea freight +
marine insurance
(port to port)
DES Delivered ex ship at 90 7875
Hamburg.
Landing charges at
Hamburg port.
 INCOTERMS
 Incoterms – an example

DDP Delivery duty Paid at 1200 9075

customer’s warehouse
in Hanover. Import
duties for 3000 pairs
of shoes
Transport by rail 150 9225
Hamburg to Hanover

The buyer actually 1350 9225

pays **

(**) = ‘availability price’.

 Incoterms
Group E EXW Ex Works

Departure


Group F FCA Free Carrier

Main carriage unpaid FAS Free alongside ship
FOB Free on board
Group C CFR Cost and Freight
Main carriage paid CIF Cost, Insurance, Freight
CPT Carriage Paid to
CIP Carriage and Insurance Paid to
Group D DAF Delivered at Frontier
Arrival DES Delivered Ex Ship
DEQ Delivered Ex Quay
DDU Delivered Duty Unpaid
DDP indicate
(Note, that when the Incoterms Delivered DutyorPaid
a certain Point “…..,” the point of
destination or origin must be mentioned)
 Methods of Payments
Payment can be made by means of any of the
following
1. Advance payment
2. Open Account
3. Documentary collection
4. Letter of Credit
 Advanced Payment
◦ Under this method, the exporter receives payment
from the importer in advance through demand draft
or cheque
◦ Huge payment require involvement of bank
◦ Exporter may ask for advance payment only when
he is in strong position of trading.
 Open Account
◦ Open account is an arrangement between the
exporter & importer whereby the goods are
manufactured & delivered even before the payment
is required
◦ No legal commitments
◦ Required high trust
Documentary Collection
 The exporter- present document to his bank
along with bill of exchange
 The collection bank- the bank which forward

the documents for collection or obtaining the

acceptance of the draft from the importer as
per the instruction of the exporter
 The remitting bank- the bank which present

the documents to the importer for collection

of payment as per the instruction of the
collection bank
 The importer- the party to whom documents
are handed over against
payment/acceptance.

Types
 Documents against payments (D/P)
 Document against acceptance (D/A)
D/P
 Under this method, the shipping documents
concerning the shipment of goods are given
to the importer against payment for the
goods
D/A
In this case, the remitting bank hands over the
shipping documents to the importer only
upon acceptance of the accompanying draft.
The acceptance implies that he agrees to pay
the amount of the draft.
Collection of the payment under D/P
1 2 3
Exporter Exporter's
(forward Bank (forward Importers
Importer
documents documents Bank
to) to)
7 6 4,5
3. Inform
4 Makes Payments
5. Handover of documents
6. Send remittance
7. Credit the account of
Acceptance of the draft under D/A
1 2 3
Exporter Exporter's
(forward Bank (forward Importers
Importer
documents documents Bank
to) to)
7 6 4,5
3. Informs
4. Acceptance of draft
5. Handover of documents
6. Send acceptance to
7. Send acceptance to
Collection of the payment under D/A
1 2 3
Exporter
Exporter's
(forward Importers
Bank (forward Importer
documents
acceptance to) Bank
to)
6 5 4
3. Ask for payment
4 Makes Payments
5. Sent remittance to
6. Credit the account of
Risk Under D/P
 Importer not receiving the goods
 It makes liquidity problems

The possible options before him are as follows

1. Re-negotiate with the importer & offer him a
discount
2. Bring goods back to home country
3. Look for alternate importer
4. Abandon the goods
Risk in D/A
 Importer may not pay on due date
 Importer becomes bank corrupt
 Importer may refuse to make payment

Options available
1. Rating of the importer
2. consign the goods to importers bank rather
than importer
3. Obtain credit risk policy
Quality Control & Pre Shipment
Inspection
 Quality Control – it is a set of attributes or
specifications including packaging.
 It is the manufacturer who first decide the

quality of product before launching in the

market.
 Finally quality may vary according to buyers

demand.
 Quality may be high, low or medium

according to the quality of the specification

Need for pre shipment inspection
 Exporters face the competition from inside &
outside players
 Quality also affect the image of the exporter

& country as well.

 Thus, Indian govt. introduced the Export

(Quality Control & Inspection) Act, 1963.

Types of pre shipment inspection
 Voluntary Inspection
◦ By exporter himself
 Primary responsibility of exporter
 Inspection of finished product
 Inspection under process of manufacturing
 Inspection after packaging
◦ By buyer’s representative
 Inspection before dispatch
 Shipment only after getting the satisfaction certificate
 Buyer can not raised question after satisfaction certificate
◦ By buying agent in the exporter’s country
 Inspection by agent & satisfaction certificate for raw material,
process, product, packaging
◦ By inspection agencies in the private sector
 By private agency like SGS India Ltd.
 Compulsory Inspection
◦ The central Govt. is empowered to
 Notify the commodities which shall be subject to
quality control or inspection or both
 Specify the type of quality control or inspection
 Prohibit the export without inspection certificate

EIC is the body

5 Agencies works under EIC
EIA- Compulsory Product Coverage
 Engineering
 Chemical
 Food & Agriculture products
 Jute products
 Coir products
 Footwear & footwear components
 Cashew
 Fish & fish products
 Miscellaneous products
System of Inspection
 Consignment Wise Inspection
 On request pre shipment

 In process Quality control (IPQC)

 Self Certification System

◦ Required proven record of quality maintenance
Exemption
 Star Export House
 100% EOU
 Units in SEZ
 Product bearing ISI or AGMARK for Export
 Item notify under Export Act, 1963
Export Finance
 The commercial banks are required to
observe the following
◦ Finance are to be disposed off expeditiously
◦ Adequate finance
◦ Credit Appraisal
◦ Close eyes on the end use of the funds
◦ Additional funds for extra export order
◦ Finance as per MPBF
Maximum Permissible Bank Finance

 Method I – Under this method, the amount of

margin money is computed on the basis of a
specified % of the working capital gap.

 Method II - Under this method, the amount of

margin money is computed on the basis of a
specified % of the total current assets.
 Method I Method II
Current Assets 100000 100000
Current Liabilities 10000 10000
Working Capital gap 90000 90000
Margin 25% 22500 25000
MPBF 67500 65000
Classification of Finance
 Pre Shipment finance
◦ To provide finance for working capital
◦ To enable the exporters to purchase raw material,
supplies, manufacture or ship the goods.
Classifications
◦ Packing Credit
◦ Advance against incentives receivables from
Govt. covered by ECGC
◦ Advance against cheques/drafts received as
advance payment
Packing credit
 Packaging credit granted by a bank to enable
an exporter to pack the goods meant for
export.
 It includes purchase raw material, supplies

etc.
 It is granted on the basis of confirmed export

order received or letter of credit opened.

Criteria
 Export order should contains
◦ Name of overseas buyer
◦ Particular of goods
◦ Quantity & Unit prices or values of order
◦ Date of shipment
◦ Term of sale & payment
Form of Finance
 Fund Based
◦ To purchase the raw material, processing,
warehousing, manufacturing etc.

 Non Fund based

◦ To open letter of credit for export & import as well
◦ Issue of various types of guarantees
Security
 Packaging credit hypothecation

 Packaging credit pledge loan

 No fixed formula for determining the
quantum of finance, it depends upon the
specific order.
 RBI guidelines – that no export order should

suffer because of wants of funds.

 Bank do ask for the exporters to contribute a

part of the fund from their own sources i.e

margin money.
Period
 Total 270 days max
◦ Initially 180 day
◦ 90 days may be extended

Interest rate according to the benchmark prime

lending rate (BPLR)
- actual cost of funds to the bank
- Operating expenses
- minimum margin to cover regularity requirement
of capital charge & profit margin
Documentation Formalities
 Export Credit Agreement
 Hypothecation/Pledge Agreement
 Corporate/Individual guarantee from

company/partner/director etc.
 Insurance policy to cover the stock etc.
 Necessary Undertaking
 Other formalities as specified by bank in the

sanction letter
Risks in EX-IM
Commercial Risk
 Lack of knowledge about foreign markets
 Inadaptability of the product
 Longer transit time
 Preference changes
 Competition
Political Risk
 Changes in political power
 Civil wars, rebellion
 Wars between countries
 Capture of cargo during war
Cargo Risk
 Storms
 Fire
 Ship hijackers
Credit Risk
 Selling on the credit
 Exporter must have sufficient fund to offer

the credit to the importer

 Exporter should be prepared to take credit

risk
 ECGC
Foreign Exchange Risk
 Invoicing in the Indian Rupees
 L/C
 Forward Contract
Clearance of Import Cargo
 Overseas suppliers invoice, duly signed
 Packing list
 B/L
 Custom house Agent’s declaration
 Import License, If necessary
 Copy of L/C
 Insurance Policy
 Test report, industrial license, exemption

order, COO- if required

Procedure
 Submission of B/E to custom house
 B/E sent to the appraisal section
 On the basis of the examination report, the

apprising officer assesses the B/E.

 B/E is then sent to the assistant

commissioner
 Now actual duty is computed taking

consideration of exchange rates

 CHA/ Importer pays the duty at the
nominated bank
 Appeal can be raise within specified time limit
 After payment, documents are handed over to

the shed appraiser, who after examination

will release the cargo.
Clearance of Export Cargo
 Documents handling to the custom house
 The assessing officer will check the value of

the export including DEPB, EXIM policy etc

 Shipping bill is passed by export department,

the cargo is presented to the shed appraiser

for physical examination.
 Shed appraiser gives a “Let Export” order
 Now, Exporter or Importer can load the goods

on the vessel
Export Incentives Schemes
 Duty Authorization Scheme
◦ Advance Authorization Scheme
◦ Duty free import authorization scheme
 Duty remission scheme
◦ Duty drawback scheme
 Section 75, Custom Act, - Goods to be exported
 Duty drawback scheme = custom duty + excise duty
◦ Duty drawback on Re-export
◦ DEPB
 Export Promotion Capital Goods
Procedure to claim
 Directorate of drawback,
 If rates are fixed- All Industry Rate (AIR)
 If rates are not fixed – show the details –

brand rates.
 It is counted on the % of FOB Value