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EXPORT PROCEDURE AND DOCUMENTATION

PROJECT REPORT ON

EXPORT PROCEDURE & DOCUMENTATION

PREPARED BY

MAYURI T. WAYAL

UNDER THE GUIDANCE OF

Prof. ALTAF

SUBMITTED TO UNIVERSITY OF MUMBAI IN

PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF

BACHELOR OF MANAGEMENT STUDIES

ACADEMIC YEAR

2006 - 2007

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DECLARATION

I Miss. DIVYA THINGALAYA OF VIVEK COLLEGE OF COMMERCE OF

T.Y.B.M.S. (SEMESTER VI) HEREBY DECLARE THAT I HAVE COMPLETED

THIS PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE

ACADEMIC YEAR2006 2007. THE INFORMATION SUBMITTED IS TRUE AND

ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATE:

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PLACE: (SIGNATURE OF THE STUDENT)

CERTIFICATE

I Prof. MONA HERBY CERTIFY THAT Miss. DIVYA THINGALAYA OF VIVEK

COLLEGE OF COMMERCE OF T.Y.B.M.S. (SEMESTER VI) HAS COMPLETED

THE PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE

ACADEMIC YEAR 2006 2007. THE INFORMATION SUBMITTED IS TRUE,

ORIGINAL AND AUTHENTIC TO THE BEST OF MY KNOWLEDGE.

SIGNATURE OF PRINCIPLE SIGNATURE OF PROJECT

GUIDE

(Prof. SUNIL .B. MANTRI) (Prof. MONA)

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ACKNOWLEDGEMENT

IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE

ABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE AND

DOCUMENTATION.

THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE

OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE

WITH THE CO-OPERATION OF THE PROJECT GUIDE. I WISH TO RECORD A

DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE, PROF.

MONA FOR HER ENCOURAGEMENT TO COURSE OF MY WORK. IT IS DUE

TO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE THAT

ULTIMATELY MADE IT SUCCESS.

I ALSO TAKE THIS OPPORTUNITY TO EXPRESS MY DEEP REGARDS

AND GRATITUDE TO THE PRINCIPLE SUNIL MANTRI AND WOULD LIKE TO

THANK THE HEAD OF B.M.S. DEPARTMENT PROF. MONA WHO GAVE US

GUIDANCE TO TAKE UP AND PURSUE THE PROJECT

I CANNOT JUST CONDONE THE VALUABLE OPPORTUNITY GIVE TO

ME BY THE UNIVERSITY OF MUMBAI FOR COMPILING AND SUBMITTING

THE PROJECT, WHICH I FEEL IS AN OPPORTUNITY TO EXPRESS MY VIEWS

ABOUT EXPORT PROCEDURE AND DOCUMENTATION.

I ACKNOWLEDGE MY INDEBTNESS TO VARIOUS AUTHORS FOR

MAKING USE OF VALUABLE INFORMATION LIBERALLY.

IT IS MY PROUD PRIVILEGE TO EXPRESS MY DEEP SENSE OF

APPRECIATION AND GRATITUDE TO MY PARENTS AND FRIENDS FOR

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THEIR SUPPORT AND CO-OPERATION IN THE COURSE OF THE PROJECT

EITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIR

VALUABLE CONTRIBUTION.

INDEX

SERIAL

NUMBER

CONTENT PAGE

NUMBE

R

1 INTRODUCTION 6

2 HOW TO SET UP AN EXPORT ORGANISATION 8

3 HOW ONE BEGINS TO DO EXPORT 14

4 EXPORT SALES & CONTRACT TERMS &

CONGITIONS

17

5 TERMS OF SHIPMENT INCOTERMS. 20

6 PROCESSING AN EXPORT ORDER 27

7 FINANCIAL RISK INVOLVED IN FOREIGN

TRADE

28

8 EXPORT DOCUMENTS 29

9 OCTROI 53

10 QUALITY CONTROL & PRE-SHIPMENT

INSPECTION

57

11 SHIPPING ANG CUSTOMS FORMALITIES 60

12 SALES TAXES EXEMPTION PROCEDURE 66

13 METHODS OF RECEIVING PAYMENTS

AGAINST EXPORTS

68

14 THE LETTER OF CREDIT 71

15 PREPARATION AND SUBMISSION OF

DOCUMENTS FOR BANK NEGOTIATIONOR

PURCHASE

88

16 SHIPMENT THROUGH COURIERS 91

17 CUSTOM PROCEDURE FOR EXPORT UNDER

EDI SYSTEM

92

18 THE ECGC COVER. 112

INTRODUCTION

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India has a mission to capture 2% of the global share of trade by 20010, up

from the present level of less than 1%. Export is one of the lucrative business activities in

India. The government also provides various promotional schemes to the exporters for

earning valuable foreign exchange for the country and for meeting their requirements for

importing modern technology and essential inputs. Besides, the income from export

business is also exempted to the specified extent under the Income Tax Act, 1961,

Refund of Central Excise and Custom Duty on export is also made under the Duty

Drawback Scheme of the Government. There is no Sales Tax on products meant for

exports.

Exports can be of goods which can be moved physically from one country

to another or can be of service rendered. Detailed list of services are given in the ForeignTrade Policy covering more than 160 items e.g. Insurance, Hospital, Postal and

Telecommunication etc.

TWO CLASSES OF EXPORTS:

Physical Exports: If the goods physically go out of the country or services

are rendered outside the country then it is called as physical export. Deemed Exports:

Where the goods do not go out of the country physically they can be termed as deemedexports. This will be subject to certain conditions as prescribed by the DGFT. Under

Deemed Exports, the goods may be supplied to the manufacturer exporter who ultimately

export a finished product of which this supply forms a part and ultimately go out of the

country. E.g. Supply of fabrics to the garment exporter who exports the garments made

out of the said fabric.

The government may announce from time to time the types of supplies

that may be considered as deemed export. The Foreign Trade Policy gives the list of

supplies considered under the Deemed Export Category. The policies and procedures are

different for Physical Exports and Deemed Exports as also the benefits available. In a

nutshell, Deemed Exports do not enjoy all the benefits that are available under Physical

Export. The Foreign Trade defines exports as taking out of India any goods by land, sea,

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air. Although the act does not term them as Physical Exports, we have to put phrase to

distinguish it from Deemed Exports which is sales in India but considered as exports

for limited purpose.

TYPES OF EXPORTERS:

Exporters can be basically classified into two groups

Manufacturer Exporter: As the exporter has the facility to manufacturer the

product he intends to export and hence he exports the products manufactured by

him.

Merchant Exporter: An exporter who does not have the facility to manufacture

an item. But, he procures the same from other manufacturers or from the market

and exports the same.

An exporter can be both a manufacturer exporter as well as a merchant

exporter, he can export product manufactured by him or he can export items bought from

the market.

Once it is decided to export, it is mandatory on your part to follow certain

procedures, rules and regulations as prescribed by various regulatory authorities such as

DGFT, RBI, and Customs. These procedures, rules and regulations are laid down in the

Exim Policy 2004-09, Exchange Control Manual, Customs Act etc. Accordingly Export

documents are required to be prepared keeping in view of the requirement of the foreign

buyers and our regulatory authorities.

HOW TO SET UP AN EXPORT ORGANISATION

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The proper selection of organization depends upon

Ability to raise finance.

Capacity to bear the risk.

Desire to exercise control over the business.

Nature of regulatory framework applicable to anyone

If the size of the business is small, it would be advantageous to form a sole

proprietary business organization. It can be set up easily without much expenses and legal

formalities. It is subjected to only few governmental regulations. However, the biggest

disadvantage of sole proprietorship business is limited ability to raise funds which

restricts the growth. Besides the owner has unlimited personal liabilities. In order toavoid this disadvantage, it is advisable to form a partnership firm.

The partnership firm can also be set up with ease and economy. Business

can take benefit of the varied experiences and expertise of the partners. The liability of

the partners though joint and several, is practically distributed amongst the various

partners, despite the fact that the personal liability of the partner is unlimited. The major

disadvantage of partnership firm of business organization is that conflict amongst the

partners is a potential threat to the business. It will not be out of place to mention here

that partnership firms are governed by the Indian Partnership Act, 1932 and, therefore

they should be formed within the parameters laid down by the Act. Company is another

form of business organization, which has the advantage of distinct legal identity and

limited liability to the share holders.

It can be a private limited company or a public limited company. A private

limited can be formed by just two persons subscribing to its share capital. However, the

number of its shareholders cannot exceed 50, public cannot be invited to subscribe to its

capital and the members right to transfer their share is restricted. On the other hand, a

pubic limited company has a minimum of seven members. There is no limit on the

maximum number of its members. It can invite the public to subscribe to its capital and

permit the transfer of share. A public limited company offers enormous potential for

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growth because of access to substantial funds. The liquidity of investment is high because

of easiness of transfer of shares. However its formation can be recommended only when

the size of the business is large. For small business, a sole proprietary concern or a

partnership firm will be the most suitable form of business organization. In case it is

decided to incorporate a private limited company, the same is to be registered with the

Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

Merchant Exporter i.e. buying the goods from the market or from the

manufacturer and then selling it to foreign buyers.

Manufacturer Exporter i.e. manufacturing the goods yourself for export.

Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the

seller and charging the Commission.

Buying Agent i.e. acting on behalf of the buyer and charging Commission.

Service provider i.e. providing service from India to another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming

the business is an essential task for every exporter. The name and style should be soft,

attractive, short and meaningful. Open a current account in the name of the organisation

in whose name you intend to export. It is advisable to open the account with a bankwhich is authorised to deal in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

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marketing manager for generating sales

Commercial manager for looking activities of the execution of the orders.

staff personnel for carrying out the day-to-day activities namely

o

Preparation of pre - shipment documents.o Co-ordinating with clearing agents on the progress of the shipment to be

made.

o Co-ordinating with the ware house\C. excise department regarding

packing and clearance of the goods for export.

o Preparation of post shipment documents foe banks.

o Follow-up with the bank on dispatch of documents, receipt of payment,

availment of bank loans etc.

To look into the requirement of licenses, claiming of export benefits fiiling of

documents with the Government Authorities in Discharge of Export Obligations,

if any, filing of returns to the various Government Agencies which are mandatory,

prepare and keep an information bank of various transaction of the company, their

domestic as well as international competitors.

An office boy for doing leg work.

A clearing and forwarding agent to handle the documents and the goods in the

customs premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under

each category may increase. For example if a company is transacting substantial volume

of business in more than one product. Then it is necessary to have marketing manager for

each product so that the person can concentrate on a particular trade to enhance the

business.

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REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING

IMPORTER EXPORTER CODE (IEC) NUMBER.

The Customs Authorities will now allow the exporter to export or import goods into or

from India unless he holds a valid IEC number. Before applying for IEC number it is

necessary to open a bank account in the name of the company with any commercial bank

authorized to deal in foreign exchange. The duly signed application form should be

supported by the following documents.

Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. 1000/-

Certificate from the banker of the applicant firm as per Annexure 1 to the form

given.

One copy of PAN number issued by Income Tax Authorities duty attested by the

applicant.

One copy of Passport Size photographs of the applicant duly attested by the

banker to the applicant.

Declaration by the applicant that the proprietor/partners/directors as the case may

be of the applicant company, are not associated as proprietor/partners/directors in

any other firm, which has been caution, listed by the RBI. Where the applicant

declares that they are associated as proprietor/partners/directors in any other firm,

which has been caution, listed by the RBI, they will be allotted IEC No. but with

an additional condition that they can export only with RBIs prior approval and

they should approach RBI for the purpose.

Each importer/exporter shall be required to file importer/exporter profile once

with the licensing authority shall enter the information furnished in Appendix 2 in

their database so as to dispense with changes in the information given in

Appendix-2, importer/exporter shall intimate the same to the licensing authority.

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IEC EXEMPT CATEGORIES.

The following importer exporter is exempted from the requirement of IEC code number.

Ministries \ Department of Central or State Government.

Person importing or exporting goods for their personal use not connected with

trade or manufacture or agriculture.

Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF

value of single consignment does exceed Indian Rs. 25000\-.

APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed

above to Regional Licensing Authority (Office of the Regional DGFT). The registered

office or the head office may apply for allotment of IEC No.

Whenever, there is a change in the name, address or constitution of the holder of IEC

No., such change should be intimated within 30 days to the concern authorities.

IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also

endorsed to the concerned banker.

VALIDITY:

The IEC No allotted to a firm/company will be valid for all its branches/divisions

units/factories as indicated in the IEC No. Import/Export of any commodity by that

firm/company. There being no date of expiry, the IEC once allotted is valid till it is

revoked. But, if no import or export is effected in the previous financial year, the same

will be made inoperative. However, this can be made operative by a formal request to theDGFT.

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IDENTITY CARD (For conducting transactions with the office of DGFT):

As it is not always possible for the top man or directors, promoters of the company to

visit DGFT frequently. There is a provision of issuance of identity cards to the

proprietors/partners/directors and their authorized representatives. An application of

Issuance of an identity card may be made in the form (Appendix-5) The document/

License/Certificate/Permissions may be delivered to the identity card holder and officials

of the Licensing Authority(DGFT)shall not be responsible for any loss etc. In case of loss

of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In

addition to obtaining the IEC No. the exporter is also required to obtain Business

Identification No(BIN). For this exporter is required to contact DGFT online on web site.

The licensing authority issues BIN in coordination with customs authorities. This BIN isrequired to be mentioned on the shipping bills at the time of customs clearance of the

export cargo.

RCMC (Registration-Cum-Membership Certificate) REGISTRATION WITH

EXPORT PROMOTION COUNCILS

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade

Policy, the exporter is required to register himself with an appropriate export promotionagency by obtaining registration-cum-membership certificate. (RCMC). If the export

product is that it is not covered by any EPC, RCMC in respect thereof may be issued by

FIEO. An application for registration should be accompanied by a self certified copy of

the Importer-Exporter Code number issued by the regional licensing authority concerned

and bank certificate in support of the applicants financial soundness. The RCMC shall be

valid for 5 years ending 31st March of the licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions

from both Sales Tax and Central Sales Tax. For this purpose, exporter should get himself

registered with the Sale Tax Authority of is state after following the procedures

prescribed under the Sales Tax Act applicable to his state.

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HOW ONE BEGINS TO DO EXPORT

Before entering into the venture of exports, one must look for the product to be exported

and the market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures

as is or with possible modification as may be required by the market. However, in case of

a merchant exporter or a trader, one has to identity the product to export. If the exporter is

already in the trade in the domestic market and is familiar with the product it would be an

advantage to export the said product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the

prospective market. For finding out the market for the selected product, the following

methods will help.

Get statistical information as to imports of the product by various countries

and their growth prospects in the respective countries

Approach the chamber of commerce for their guidance to find out the market.

Approach the Export Promotion Council dealing in the product of selection to

get more information.

The Preliminary

Once you are ready with the product you wish to export and have found the market for

the same, you are ready to proceed further. Following sequences can be followed:

Any one, who wishes to export, must first of all get an Importer Exporter

Code Number (IE Code).This can be obtained by making a formal

application to the office of the Regional Directorate General of Foreign

Trade (DGFT).

Get yourself registered with the related Export Promotion Council and

become a member. Also arrange to obtain Registration-Cum-Membership

Certificate (RCMC) from the council. This has twin objectives:

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o Under the Foreign Trade Policy, it is mandatory that an exporter gets him

registered with the Export Promotion Council to avail of various export

facilities.

o Being a member, you will have access to all the information relating to the

product that could be made available by the council

o Many foreign buyers send their enquiries for the imports to the Export

Promotion Council. Hence you will have few customers interested in your

product.

If you are a manufacturer, find out the provisions under the EXIM Policy of

getting the raw materials duty free.

Get familiar with the excise formalities as goods meant for export can be cleared

without payment of C. Excise duty on the finished product subject to compliance

of certain formalities.

Understand the local government regulations in relations to the export of the

product.

Get information of the governments regulations of the importing country as to

restrictions on the quantity, product specification, packing regulations, customs

regulations, requirement of specific documents/information etc.

Availability of Vessels/Airlines, the transport charges, frequency of operation

etc.,

To look for a Custom House Agent (CHA) (also know as freight forwarders or

clearing agents) for handling the documents/cargo in the customs.

If the product is covered under any quota regulation, find out the agency/council

who are handling the quota distribution for the product and the availability of

quota for exports.

FINDING A CUSTOMS

Once you have selected the market, the next step is to find a prospective customer.

This you can get

From the directory of importers of the country

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By writing to the Embassy of India in that country for assistance

By writing to the chamber of commerce of that country

By means of participation in a Fair/Exhibition abroad either directly or through

the Export Promotion Council

By participating in international fair if organized locally

Through the personal contacts in that country. By these processes one can only

have the list of customers. One has to dialogue or correspond with these

customers by sending samples, getting feedback from the customers etc. to

ultimately select the customer with whom to deal with. It is necessary to know the

financial standing of the company which can be obtained through the bank

channel or through the office of ECGC.

NEGOTIATING CONTRACT.

Once the prospective customer is found, the business deal has to be concluded. The

following aspects may be considered before entering into a final contract with the

buyer.

Credit Worthiness of the Customer.

Availability of the Steamer/Airlines and the frequency

The freight charges

The full product specification

The quantity, Price

Terms of Payment

Type of packing and markings on the packages

Mode of shipment & Shipment schedule

Tolerance of quantity to be shipped

Documentation requirement for the customer

Documentation requirement of the government of importing country

Compliance of the local governmental rules and regulations

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Before entering into contract one should take note of the above factors. While these are

indicative, the requirements will vary from country to country, product to product and

buyer to buyer.

EXPORT SALES & CONTRACT TERMS & CONDITIONS

Very often exporters do not enter into any formal contract and finalize the trade deal

through the exchange of letters, cable, telex etc. It is, however, expedient that the parties(exporters & importers) incorporate all important terms & conditions of their trade deal in

a separate document or contract that will avoid disputes arising out of uncertainty or

ambiguity. Export contract may be sent in duplicate along with the Proforma Invoice to

the overseas buyer.

NATURE OF INTERNATIONAL TRADE COUNTRACTS.

There are certain, peculiar characteristics of international trade contract which are notpresent in those for sales of goods in the domestic market

Whereas the parties to a domestic trace contract normally needs only agree on the

elements which are necessary for their particular trade transactions like price, description,

quality and quantity of goods, delivery terms etc the situation will be quite different when

the buyer and the seller to sale/purchase contract belong to different countries. The

parties to all international trade contracts provide all their relative rights and obligations

in several ways

For example, they may agree to adopt either the Law of the country of the buyer or that

of the seller. The traders are normally reluctant to leave the determination of the rights

and obligations by implications under the legal system of eithers country. They prefer to

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make explicit provisions regarding the rights and obligations by including a set of

detailed and precise terms and conditions in their contract.

EXPORT OF SAMPLES\GIFTS.

Exports of bonafide trade and technical samples of freely exportable items shall be

allowed without any limit. Goods including edible items of value not exceeding Rs.

100000/- in a licensing year, may be exported as a gift. However items mentioned as

restricted for exports in ITC(HS) shall not be exported as a gift without a

licence/certificate/permission, except in the case of edible items.

STANDARD CONTRACT FOMS:

Notwithstanding the efforts made by various national/international organizations like the

United Nations Commission on the International Trade Law, there is still no perfection or

a device which would give the parties an accurate and complete idea of each others

understanding of various trade terms, the commercial practices and the rights and the

obligations vis--vis each other so that the misunderstandings are practically eliminated.

Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on Standard

Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts. It was

revised and reprinted in 1969 and 1977. It can be referred to by exporter for various

clause to be incorporated in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT

In order to avoid disputes, it is necessary to enter into an export contract with the

overseas buyer. For this purpose, export contract should be carefully drafted

incorporating comprehensive but in precise terms, all relevant and important conditions

of the trade deal.

There should not be any ambiguity regarding the exact specifications of goods and terms

of sale including export price, mode of payment, storage and distribution methods, type

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of packaging, port of shipment, delivery schedule etc. The different aspects of an export

contract are enumerated as under:

Product, Standards and Specifications

Quantity

Inspection

Total Value of Contract

Terms of Delivery

Taxes, Duties and Charges

Period of Delivery/Shipment

Packing, Labeling and Marking

Terms of Payment-- Amount/Mode & Currency Discounts and Commissions

Licenses and Permits

Insurance

Documentary Requirements

Guarantee

Force Majeure of Excuse for Non-performance of contract

Remedies

Arbitration clause

It will not be out of place to mention here the importance of arbitration clause in an

export contract Court proceedings do not offer a satisfactory method for settlement of

commercial disputes, as they involve inevitable delays, costs and technicalities. On the

other hand, arbitration provides an economic, expeditious and informal remedy for

settlement of commercial disputes. Arbitration proceedings are conducted in privacy and

the awards are kept confidential. The Arbitrator is usually an expert in the subject matter

of the dispute. The dates for arbitration meetings are fixed with the convenience of all

concerned. Thus, arbitration is the most suitable way for settlements of commercial

disputes and it may invariably be used by businessmen in their commercial dealings.

ARBITRATION:

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Arbitration clause recommended by the Indian Council of Arbitration:All disputes

or differences whatsoever arising between the parties out of / relating to the meaning,

construction and operation or effect of this contract or the breach thereof shall be settled

by arbitration in accordance with the rules of Arbitration of the Indian Council of

Arbitration and the award made in pursuance thereof shall be binding on the parties (or

any other arbitration clause that may be agreed upon between the parties).

TERMS OF SHIPMENTS INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set of

definition of international trade terms, such as FOB, CFR & CIF, developed by the

International Chamber of Commerce(ICC) in Paris, France. It defines the trade contractresponsibilities and liabilities between buyer and seller. It is invaluable and a cost-saving

tool. The exporter and the importer need not undergo a lengthy negotiation about the

conditions of each transaction. Once they have agreed on a commercial terms like FOB,

they can sell and buy at FOB without discussing who will be responsible for the freight,

cargo insurance and other costs and risks.

The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised

periodically to keep with changes in the international trade needs. The complete

definition of each term is available from the current publication --- INCOTERMS 2000.

Under INCOTERMS 2000, the international commercial terms are grouped into E, F, C

and D, designated by the first letter of the term, relating to the final letter of the term. E.g.

EXWexworks comes under grouped E.

The purpose of Incoterms is to provide a set of international rules for the interpretation of

the most commonly used trade terms in foreign trade. Thus, the uncertainties of different

interpretations of such terms in different countries can be avoided or at least reduced to a

considerable degree. The scope of Incoterms is limited to matters relating to the rights

and obligations of the parties to the contract of sale with respect to the delivery of goods.

Incoterms deal with the number of identified obligations imposed on the parties and the

distribution of risk between the parties.

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In international trade, it would be best for exporters to refrain, wherever possible, from

dealing in trade terms that would hold the seller responsible for the import customs

clearance and/or payment of import customs duties and taxes and/or other costs and risks

at the buyers end, for example the trade terms DEO (Delivery Ex Quay) and DDP

(Delivered Duty Paid)

Quite often, the charges and expenses at the buyers end may cost more to the seller than

anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the

importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which would

hold the buyer responsible for the export customs clearance, payment of export customs

charges and taxes, and other costs and risks at the sellers end

MORE CLARIFICATION ON INCOTERMS

EXW {+the named place}

Ex Works: Ex means from. Works means factory, mill or warehouse, which are the

sellers premises. EXW applies to goods available only at the sellers premises. Buyer is

responsible for loading the goods on truck or container at the sellers premises and for the

subsequent costs and risks. In practice, it is not uncommon that the seller loads sthe

goods on truck or container at the sellers pre4mises without charging loading fee. N the

quotation, indicate the named place (sellers premises) after the acronym EXW for

example EXW Kobe and EXW San Antonio.

The term EXW is commonly used between the manufacturer (seller) and export-

trader(buyer), and the export-trader resells on other trade terms to the foreign buyers.

Some manufacturers may use the term Ex Factory, which means the same as Ex Works.

FCA {+the named point of departure}

Free Carrier: The delivery of goods on truck, rail car or container at the specified

point(depot) of departure, which is usually the sellers premises, or a named railroad

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station or a named cargo terminal or into the custody of the carrier, at sellers expense.

The point(depot) at origin may or may not be a customs clearance centre. Buyer is

responsible for the main carriage/freight, cargo insurance and other costs and risks.

In the air shipment, technically speaking, goods placed in the custody of an air carrier are

considered as delivery on board the plane. In practice, many importers and exporters still

use the term FOB in the air shipment. The term FCA is also used in the RO/RO (roll

on/roll off) services

In the export quotation, indicate the point of departure (loading) after the acronym FCA,

for example FCA Hong Kong and FCA Seattle. Some manufacturers may use the former

terms FOT (Free on Trucks) and FOR (Free on Rail) in selling to export-traders.

FAS {+the named port of origin}

Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on the

dock or lighter, within reach of its loading equipment so that they can be loaded aboard

the ship, at sellers expense. Buyer is responsible for the loading fee, main

carriage/freight, cargo insurance, and other costs and risks In the export quotation,

indicate the port of origin(loading)after the acronym FAS, for example FAS New York

and FAS Bremen. The FAS term is popular in the break-bulk shipments and with the

importing countries using their own vessels.

FOB {+the named port of origin)

Free on Board: The delivery of goods on the board the vessel at the named port of origin

(Loading) at sellers expense. Buyer is responsible for the main carriage/freight, cargo

insurance and other costs and risks. In the export quotation, indicate the port of origin

(loading) after the acronym FOB, for example FOB Vancouver and FOB Shanghai.

Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only.

However, in practice, many importers and exporters still use the term FOB in the air

freight. In North America, the term FOB has other applications. Many buyers and sellers

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in Canada and the USA dealing on the open account and consignment basis are

accustomed to using the shipping terms FOB Origin and FOB destination.

FOB Origin means the buyer is responsible for the freight and other costs and risks. FOB

Destination means the seller is responsible for the freight and other costs and risks until

the goods are delivered to the buyers premises which may include the import custom

clearance and payment of import customs duties and taxes at the buyers country,

depending on the agreement between the buyer and seller. In international trade, avoid

using the shipping terms FOB Origin and FOB Destination, which are not part of the

INCOTERMS (International Commercial Terms).

CFR {+the named port of destination}

Cost and Freight: The delivery of goods to the named port of destination (discharge) at

the sellers expenses. Buyer is responsible for the cargo insurance and other costs and

risks. The term CFR was formerly written as C&F. Many importers and exporters

worldwide still use the term C&F.

In the export quotation, indicate the port of destination (discharge) after the acronym

CFR, for example CFR Karachi and CFR Alexandria. Under the rules of the

INCOTERMS 1990, the term Cost and Freight is used for ocean freight only. However,

in practice, the term Cost and Freight (C&F) is still commonly used in the air freight.

CIF {+named port of destination}

Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named

port of destination (discharge) at the sellers expense. Buyer is responsible for the import

customs clearance and other costs and risks.

In the export quotation, indicate the port of destination (discharge) after the acronym CIF,

for example CIF Pusan and CIF Singapore. Under the rules of the INCOTERMS 1990,

the term CIFI is used for ocean freight only. However, in practice, many importers and

exporters still use the term CIF in the air freight.

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CPT {+the named place of destination}

Carriage Paid To: The delivery of goods to the named port of destination (discharge) at

the sellers expenses. Buyer assumes the cargo insurance, import custom clearance,

payment of custom duties and taxes, and other costs and risks. In the export quotation,

indicate the port of destination (discharge) after the acronym CPT, for example CPT Los

Angeles and CPT Osaka.

CIP {+ the named place of destination)

Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to the

named place of destination (discharge) at sellers expense. Buyer assumes the importer

customs clearance, payment of customs duties and texes, and other costs and risks.

In the export quotation, indicate the place of destination (discharge) after the acronym

CIP, for example CIP Paris and CIP Athens.

DAF {+ the names point at frontier}

Delivered At Frontier: The delivery of goods to the specified point at the frontier at

sellers expense. Buyer is responsible for the import custom clearance, payment of custom

duties and taxes, and other costs and risks.

In the export quotation, indicate the point at frontier (discharge) after the acronym DAF,

for example DAF Buffalo and DAF Welland.

DES {+named port of destination}

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Delivered Ex Ship: The delivery of goods on board the vessel at the named port of

destination (discharge) at sellers expense. Buyer assumes the unloading free, import

customs clearance, payment of customs duties and taxes, cargo insurance, and other costs

and risks.

In the export quotation, indicate the Port of destination (discharge) after the acronym

DES, for example DES Helsinki and DES Stockholm.

DEQ {+ the named port of destination

Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination at

buyers expense. Seller is responsible for the importer customs clearance, payment of

customs duties and taxes, at the buyers end. Buyer assumes the cargo insurance and other

costs and risks. In the export quotation, indicate the Port of destination (discharge) after

the acronym DEQ, for example DEQ Libreville and DEQ Maputo.

DDU {+ the named point of destination}

Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point

at destination, which is often the project site or buyers premises at sellers expense. Buyer

assumes the import customs clearance, payment of customs duties and taxes. The seller

may opt not to insure the goods at his/her own risks.

In the export quotation, indicate the point of destination (discharge) after the acronym

DDU for example DDU La Paz and DDU Ndjamena.

DDP {+ the named point of destination)

Delivered Duty Paid: The seller is responsible for most of the expenses which includethe cargo insurance, import custom clearance, and payment of custom duties, and taxes at

the buyers end, and the delivery of goods to the final point of destination, which is often

the project site or buyers premise. The seller may opt not to insure the goods at his/her

own risk. In the export quotation, indicate the point of destination (discharge) after the

acronym DDP, for example DDP Bujumbura and DDP Mbabane.

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E-term,F-term, C-term &D-term: Incoterms 2000, like its immediate

predecessor, groups the term in four categories denoted by the first letter in the three-

letter abbreviation.

Under the E-TERM (EXW), the seller only makes the goods available to the

buyer at the sellers own premises. It is the only one of that category.

Under the F-TERM (FCA, FAS, &FOB), the seller is called upon to deliver

the goods to a carrier appointed by the buyer.

Under the C-TERM (CFR, CIF, CPT, & CIP), the seller has to contract for

carriage, but without assuming the risk of loss or damage to the goods or

additional cost due to events occurring after shipment or discharge.

Under the D-TERM (DAF, DEQ, DES, DDU & DDP), the seller has to bear

all costs and risks needed to bring the goods to the place of destination.

All terms list the sellers and buyers obligations. The respective obligations of both

parties have been grouped under up to 10 headings where each heading on the sellers

side mirrors the equivalent position of the buyer. Examples are Delivery, Transfer of

risks, and Division of costs. This layout helps the user to compare the parties respective

obligations under each Incoterms.

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PROCESSING AN EXPORT ORDER

You should not be happy merely on receiving an export order. You should first

acknowledge the export order, and then proceed to examine carefully in respect of

Items

Specification

Pre-shipment inspection

Payment conditions

Special packaging Labeling and marketing requirements

Shipment and delivery date

Marine insurance

Documentation requirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer,

otherwise clarification should be sought from the buyer before confirming the order.

After confirmation of the export order immediate steps should be taken for

procurement/manufacture of the export goods. In the meanwhile, you should proceed to

enter into a formal export contract with the overseas buyer.

Before accepting any order necessary homework should have been done as to availability

of the production capacity, raw material e.t.c. It would be in the interest of the exporter to

look into entering into forward contract to safeguard against exchange rate fluctuations.

Ensure that the mode of payment is also agreed upon. In case of shipment against letter ofcredit, the buyer should be advised to open the credit well in advance before effecting the

shipment.

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FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

As an exporter while selling goods abroad, you encounter various types of risks. The

major risks which you have to undergo are as follows:

Credit Risk

Currency Risk

Carriage Risk

Country Risk

You can protect yourself against the above risks by initiating appropriate steps.

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a

letter of credit in your favour. Alternatively one can avail of the facility offered by

various credit risk agencies. A specific insurance cover can also be obtained from ECGC

(Exports Credit & Guarantee Corporation) to cover your country risk besides covering

credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can

request your banker to book a forward contract.

Carriage Risk:

The carriage risk can be covered by taking an appropriate general insurance policy.

Country Risk:

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ECGC provides cover to protect the exporter from country risks. A detailed procedure

how an exporter can get himself protected against the above risks are given in separate

chapters later.

EXPORT DOCUMENTS

Any export shipment involved various documents required by various authorities such as

customs, excise, RBI, Inspection and according depending upon the requirements, there

are categorized into 2 categories, namely commercial documents and regulatory

documents.

A. Commercial Documents. : - Commercial documents are required for effecting

physical transfer of goods and their title from the exporter to the importer and the

realisation of export sale proceeds. Out of the 16 commercial documents in the

export documentation framework as many as 14 have been standardised and

aligned to one another. These are proforma invoice, commercial invoice, packing

list, shipping instructions, intimation for inspection, certificate, of inspection of

quality control, insurance declaration, certificate' of insurance, mate's receipt, bill

of lading or combined transport document, application for certificate origin,

certificate of origin, shipment advice and letter to the bank for collection or

negotiation of documents. However, shipping order and bill of exchange could

not be brought within the fold of the Aligned Documentation System,

1. Commercial Invoice: Commercial invoice is an important and basic export

document. It is also known as a 'Document of Contents' as it contains all the

information required for the preparation of other documents. It is actually a seller's

bill of merchandise. It is prepared by the exporter after the execution of exportorder giving details about the goods shipped. It is essential that the invoice is

prepared in the name of the buyer or the consignee mentioned in the letter of credit.

It is a prima facie evidence of the contract of sale or purchase and therefore, must

be prepared strictly in accordance with the contract of sale.

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Contents of Commercial Invoice

Name and address of the exporter.

Name and address of the consignee.

Name and the number of Vessel or Flight.

Name of the port of loading.

Name of the port of discharge and final destination.

Invoice number and date.

Exporter's reference number.

Buyer's reference number and date.

Name of the country of origin of goods.

Name of the country of final destination.

Terms of delivery and payment.

Marks and container number.

Number and packing description.

Description of goods giving details of quantity, rate and total amount in terms of

internationally accepted price quotation.

Signature of the exporter with date.

Significance of Commercial Invoice

It is the basic document useful in preparation of various other shipping

documents.

It is used in various export formalities such as quality and pre-Shipment

inspection excise and customs procedures etc.

It is also useful in negotiation of documents for collection and claim of incentives. It is useful for accounting purposes to both exporters as well as importers.

2 Inspection Certificate: The certificate is issued by the inspection authority such as

the export inspection agency. This certificate states that the goods have been

inspected before shipment, and that they confirm to accepted quality standards.

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3 Marine insurance policy: Goods in transit are subject to risk of loss of goods

arising due to fire on ship, perils of sea, theft etc. marine insurance protects losses

incidental to voyages and in land transportation. Marine insurance policy is one of

the most important document used as collateral security because it protects the

interest of all those who have insurable interest at the time of loss. The exporter is

bound to insure the goods in case of CIF quotation, but he can also insure the goods

in case of FOB contract, at the request of the importer, but the premium payment

will be made by the exporter. There are different types of policies such as

SPECIFIC POLICY: This policy is taken to cover different risks for a

single shipment. For a regular exporter, this policy is not advisable as he

will have to take a separate policy every time a shipment is made, so this

policy is taken when exports are in frequent.

Floating Policy: This is taken to cover all shipments for some months.

There is no time limit, but there is a limit on the value of goods and once

this value is crossed by several shipments, then it has to be renewed.

Open Policy: This policy remains in force until cancelled by either party

i.e. insurance company or the exporter.

Open Cover Policy: This policy is generally issued for 12 months period,

for all shipments to one or more destinations. The open cover may specifythe maximum value of consignment that may be sent per ship and if the

value exceeded, the insurance company must be informed by the exporter.

Insurance Premium: Differs upon product to product and a number of

such other factors, such as, distance of voyage, type and condition of

packing, etc. Premium for air consignments are lowered as compared to

consignments by sea.

4. Consular Invoice: Consular invoice is a document required mainly by the

Latin American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand,

Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This

invoice is the most important document, which needs to be submitted for

certification to the Embassy of the importing country concerned. The main purpose

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of the consular invoice is to enable the authorities of the importing country to

collect accurate information about the volume, value, quality, grade, source, etc., of

the goods imported for the purpose of assessing import duties and also for statistical

purposes. In order to obtain consular invoice, the exporter is required to submit

three copies of invoice to the Consulate of the importing country concerned. The

Consulate of the importing country certifies them in return for fees. One copy of the

invoice is given to the exporter while the other two are dispatched to the customs

office of the importer's country for the calculation of the import duty. The exporter

negotiates a copy of the consular invoice to the importer along with other shipping

documents.

Significance of Consular Invoice for the Exporter

It facilitates quick clearance of goods from the customs in exporter's as well

as importer's country.

Certification' of goods by the Consulate of the importing country indicarer

that the importer has fulfilled all procedural and licensing formalities for

import of goods.

It also assures the exporter of the payment from the importing country.

Significance of Consular Invoice for the Importer

It facilitates quick clearance of goods from the customs at the port

destination and therefore, the importer gets quick delivery of goods.

The importer is assured that the goods imported are not banned for imported

in his country.

Significance of Consular Invoice for the Customs Office

It makes the task of the customs authorities easy.

It facilitates quick calculation of duties as the value of goods as determine

by the Consulate is considered for the purpose.

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5. Certificate of Origin: The importers in several countries require a certificate of

origin without which clearance to import is refused. The certificate of origin states

that the goods exported are originally manufactured in the country whose name is

mentioned in the certificate. Certificate of origin is required when:-

The goods produced in a particular country are subject to preferential tariff rates

in the foreign market at the time importation.

The goods produced in a particular country are banned for import in the foreign

market.

Types of the Certificate of Origin

(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is

required in general by all countries for clearance of goods by the importer, on which

no preferential tariff is given. It is issued by:

The authorised Chamber of Commerce of the exporting country.

Trade Association. Of the exporting country.

(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin

required for availing of concessions under Generalised System of Preferences

(GSP) extended by certain, countries such as France, Germany, Italy, BENELUX

countries, UK, Australia; Japan, USA, etc. This certificate can be obtained from

specialised agencies, namely;

Export Inspection Agencies.

Jt. Director General of Foreign Trade..

Commodity Boards and their regional offices.

Development Commissioner, Handicrafts.

Textile Committees for textile products.

Marine Products Export Development Authority for marine products.

Development Commissioners of EPZs

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(c) Certificate for availing Concessions under Commonwealth Preferences (CWP):

Certificate of origin for the purpose of Commonwealth Preference is also known as

'Combined Certificate of Origin and Value'. It is required by two member countries,

i.e. Canada and New Zealand of the Commonwealth. For concession under

Commonwealth preferences, the certificates or origin have to be submitted in

special forms obtainable, from the High Commission of the country concerned.

(d) Certificate for availing Concessions under other Systems of Preference:-

Certificate of origin is also required for tariff concessions. under the Global System

of Trade Preferences (GSTP), Bangkok Agreement(BA) and SAARC Preferential

Trading Arrangement (SAPTA) under which India grants and receives tariff

concessions On imports and exports. Export Inspection Council (EIC) is the soleauthority to print blank Certificates of Origin under BA, SAARC and SAPTA

which can be issued by such agencies as EPCs, DCs of EPZs, EIC, APEDA,

MPEDA, FIEO, etc...

Contents of Certificate of Origin

Name and logo of chamber of commerce.


Name and address of the consignee.

Name and the number of Vessel of Flight


Name of the port of discharge and place of delivery.


Packing and container description.

Total number of containers and packages.

Description of goods in terms of quantity.

Signature and initials of the concerned officer of the issuing authority.

Seal of the issuing authority.

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Significance of the Certificate of Origin

Certificate of origin is required for availing of concessions under Generalised

System of Preferences (GSP) as well as under Commonwealth Preferences

(CWP).

It is to be submitted to the customs for the assessment of duty clearance of goods

with concessional duty.

It is required when the goods produced in a particular country are banned for

import in the foreign market.

It helps the buyer in adhering to the import regulations of the country.

Sometimes, in order to ensures that goods bought from some other country have

not been reshipped by a seller, a certificate of origin IS required.

6. Bill of Lading: The bill of lading is a document issued by the shipping

company or its agent acknowledging the receipt of goods on board the vessel, and

undertaking to deliver the goods in the like order and condition as received, to the

consignee or his order, provided the freight and other charges as specified in the bill

have been duly paid. It is also a document of title to the goods and as such, is freely

transferable by endorsement and delivery.

Bill of Lading serves three main purposes:

As a document of title to the goods;

As a receipt from the shipping company; and

As a contract for the transportation of goods.

Types of Bill of Lading

Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods

apparently in good order and condition and without any qualification is termed as

a clean bill of lading.

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Claused Bill of Lading: - A bill of lading qualified with certain adversere marks

such as, "goods insufficiently packed in accordance with the Carriage of Goods

by Sea Act," is termed as a claused bill of lading.

Transhipment or Through Bill of Lading: - When the carrier uses other

transport facilities, such as rail, road, or another steamship company in addition to

his own, the carrier issues a through or transhipment bill of lading.

Stale Bill of Lading: - A bill of lading that has been held too long before it is

passed on to a bank for negotiation or to the consignee is called a stale bill of

lading.

Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in

advance, the bill of landing is marked, freight paid. Such bill of lading is known

as freight bill of lading.

Freight Collect Bill of lading :- When the freight is not paid and is to be

collected from the consignee on the arrival of the goods, the bill of lading is

marked, freight collect and is known as freight collect bill of lading

Contents of Bill of Lading

Name and logo of the shipping line.

Name and address of the shipper.

Name and the number of vessel.





Total number of containers and packages,


Container status and seal number.

Gross weight in kg. and volume in terms of cubic meters.

Amount of freight paid or payable.

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Shipping bill number and date.

Signature and initials of the Chief Officer. .

Significance of Bill of Lading for Exporters

It is a contract between the shipper and the shipping company for carriage of the

goods to the port of destination.

It is an acknowledgement indicating that the goods mentioned in the document

have been received on board for the Purpose of shipment.

A clean bill of lading certifies that the goods received on board the ship are in

order and good condition.

It is useful for claiming incentives offered by the government to exporters The exporter can claim damages from the shipping company if the goods are lost

or damaged after the issue of a clean bill of lading.

Significance of Bill of Lading for Importers

It acts as a document of title to goods, which is transferable endorsement and

delivery.

The exporter sends the bill of lading to the bank of the importer so as to enable

him to take the delivery of goods.

The exporter can give an advance intimation to the foreign buyer about the

shipment of goods by sending him a non-negotiable copy of bill of lading

Significance of Bill of Lading for Shipping Company

It is useful to the shipping company for collection of transport charges from the

importer, if not collected from the exporter.

7. Airway Bill: An airway bill, also called an air consignment note, is a receipt

issued by an airline for the carriage of goods. As each shipping company has its own bill

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of lading, so each airline has its own airway bill.Airway Bill or Air Consignment Note is

not treated as a document of title and is not issued in negotiable form.

Contents of Airway Bill

Name of the airport of departure and destination.

The names and addresses of the consignor, consignee and the first carrier.






Amount of freight paid or payable.

Signature and initials of the issuing carrier or his agent.

Importance of Airway Bill: It is a contract between the airlines or his agent to

carry goods to the destination. It is the document of instructions for the airline

handling staff. It acts as a customs declaration form. Since, it contains details about

freight it also represents freight bill.

7. Shipment Advice to Importer:- After the shipment of goods, the exporter

intimates the importer about the shipment of goods giving him details about the date

of shipment, the name of the vessel, the destination, etc. He should also send one

copy of non-negotiable bill of lading to the importer.

8. Packing List: The exporter prepares the packing list to facilitate the buyer to check

the shipment. It contains the detailed description of the goods packed in each case,

their gross and net weight, etc. The difference between a packing note and apacking list is that the packing note contains the particulars of the contents of an

individual pack, while the packing list is a consolidated statement of the contents of

a number of cases or packs.

9. Bill of Exchange: The instrument is used in receiving payment from the importer.

The importer may prefer Bill of Exchange to LC as it does not involve blocking of

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funds. A bill of exchange is drawn by the exporter on the importer, to make

payment on demand at sight or after a certain period of time.

B/E is a means to collect payment.

B/E is a means to demand payment.

B/E is a means to extent the credit.

B/E is a means to promise the payment.

B/E is an official acknowledgement of receipt of payment.

Financial documents perform the function of obtaining the finance

collection of payment etc.

2 sets. Each one bearing the exclusion clause making the other part of the

draft invalid.

Sight B/E.

Usance B/E.

It is known as draft.

Immediate payment Sight draft.

There are two copies of draft. Each one bears reference to the other part

A&B. when any one of the draft is paid, the second draft becomes null and

void.

Parties to bill of exchange.

1. The drawer: The exporter / person who draws the bill.

2. The drawee: The importer / person on whom the bill is drawn for payment.

3. The payee: The person to whom payment is made, generally, the exporter /

supplier of the goods.

B Auxiliary Documents: These documents generally form the basic

documents based on which the commercial and or regulatory

documents are prepared. These documents also do not have any

fixed formats and the number of such documents will wary

according to individual requirements.

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1. Proforma Invoice: The starting point of the export contract is in the form of offer

made by the exporter to the foreign customer. The offer made by the exporter is in

the form of a proforma invoice. It is a quotation given as a reply to an inquiry. It

normally forms the basis of all trade transactions.

Contents of Proforma Invoice


Name and address of the importer.

Mode of transportation, such as Sea or Air or Multimodal transport.


Name of the port of discharge and final destination. Provisional invoice number and date.

Exporter's reference number.

Buyer's reference number and date.

Name of the country of origin of goods.

Name of the country of final destination.

Marks and container number. .

Number and packing description.

Description of goods giving details of quantity, rate and total amount in

terms of internationally accepted price quotation.

Signature of the exporter with date.

Importance of Proforma Invoice

It forms the basis of all trade transactions.

It may be useful for the importer in obtaining import licence or foreign

exchange.

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2. Intimation for Inspection: Whenever the consignment requires the pre-

shipment inspection, necessary application is to be made to the concerned

inspection agency for conducting the inspection and issue of certificate thereof.

3. Declaration of Insurance: Where the contract terms require that the insurance

to be covered by the exporter, the shipper has to give details of the shipment to

the insurance company for necessary insurance cover. The detailed declaration

will cover:

Name of the shipper \ exporter.

Name & address of buyer.

Details of goods such as packages, quantity, value in foreign

currency as well as in Indian Rs. Etc.

Name of the Vessel \ Aircraft.

Value for which insurance to be covered.

4. Application of the Certificate Origin: In case the exporter has to obtain

Certificate of Origin from the concerned authorities, an application has to be

made to the concerned authority with required documents. While the simple

invoice copy will do for getting C\O from the chamber of commerce, in respect of

obtained the same from the office of the Textile Committee or Export Promotion

Council, the documents requirement are different.

5. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of

the ship when the cargo is loaded on the ship. The mate's receipt is a prima facie

evidence that goods are loaded in the vessel. The mate's receipt is first handed

over to the Port Trust Authorities. After making payment of all port dues, the

exporter or his agent collects the mate's receipt from the Port Trust Authorities.

The mate's receipt is freely transferable. It must be handed over to the shipping

company in order to get the bill of lading. Bill of lading is prepared on the basis of

the mate's receipt.

Types of Mate's Receipts

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Clean Mate's Receipt: - The Commanding Officer of the ship

issues a clean mate's receipt, if he is satisfied that the goods are packed

properly and there is no defect in the packing of the cargo or package.

Qualified Mate's Receipt: - The Commanding Officer of the

ship issues qualified mate's receipt, when the goods are not packed properly

and the shipping company does not take any responsibility of damage. to the

goods during transit.

Contents of Mate's Receipt

Name and logo of the shipping line.

Name and address of the shipper.

Name and the number of vessel.








Gross weight in kg. and volume in terms of cubic meters.

Shipping bill number and date.

Signature and initials of the Chief Officer.

Significance of Mate's Receipt

It is an acknowledgement of goods received for export on board

the ship.

It is a transferable document. It must be handed over to the

shipping company in order to get the bill of lading.

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Bill of lading, which is the title of goods, is prepared on the basis

of the mate's receipt.

It enables the exporter to clear port trust dues to the Port Trust

Authorities.

Obtaining Mate's Receipt

The goods are then loaded on board the ship for which the Mate or the

Captain of the ship issues Mate's Receipt to the Port Superintendent.

6. Shipping order: it is issued by the Shipping/Conference Line intimating the

exporter about the reservation of space for shipment of cargo which the exporter

intends to ship. Details of the vessel, poet of the shipment, and the date on whichthe goods are to be shipped are mentioned. This order enables the exporter to

make necessary arrangements for customs clearance and loading of the goods.

7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent

to the CHA for customs clearance, necessary instructions are to be give with

relevance to

The export promotion scheme under which goods are to be

exported.

Name of the specific vessel on which the goods are to be

loaded.

If goods are to be FCL or LCL.

If freight amount are to be paid / collected.

If shipment are covered under A.R.E.-1 procedure.

Instructions for obtaining Bill of Lading etc.

8. Bank letter for negotiation of documents: at the post shipment stage, the exporter

has to submit the documents to a bank for negotiation or discounting or collection

for forwarding the same to the customer and also for realization of export

proceeds. The bank letter is the set of instruction for the bank as to how to handle

the documents by them and by the bank at the buyers country which may include

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Name and address of the buyer.

Details of various documents being sent and the number of the copies thereof.

Name and address of the buyers bank if available.

If the documents are sent L/C or on open terms. If the proceeds are to adjusted against any pre-shipment packing credit loan.

If the bill amount is to be adjusted against any forward exchange cover.

In case of credit bill who has to bear the interest, either exporter or if the same is to be

collected from the buyer.

Instructions in case non-acceptance/non-payment by the buyer.

C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by

the different government departments and bodies in order to comply with various

rules and regulations under the relevant laws governing export trade such as export

inspection, foreign exchange regulation, ex port trade control, customs, etc. Out of 9

regulatory documents four have been standardised and aligned. These are shipping

bill or bill of export, exchange control declaration (GR from), export application dock

challan or port trust copy of shipping bill and receipt for payment of port charges.

1. Shipping Bill: Shipping bill is the main customs document, required by the

customs authorities for granting permission for the shipment of goods. The

cargo is moved inside the dock area only after the shipping bill is duly

stamped, i.e. certified by the customs. Shipping bill is normally prepared in

five copies :-

Customs copy.

Drawback copy.

Export promotion copy.

Port trust copy.

Exporter's copy.

Types of Shipping Bill

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Based on the incentives offered by the government, customs authorities have introduced

three types of shipping bills:-

Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the

customs drawback against goods exported.

Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are

subject to export duty.

Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods

on which there is no export duty.

In order to facilitate easy recognition and quick processing, following colours have been

provided to different kinds of shipping bills :

Types of goods By Sea By Air

Drawback shipping bill Green Green

Dutiable shipping bill Yellow Pink

Duty-Free shipping bill White Pink

Contents of Shipping Bill


Name and address of the importer.

Name of the vessel, master or agents and flag.

Name of the port at which goods are to be discharged.

Country of final destination.

Details about packages, description of goods, marks and numbers, quantity and

details of each case.

FOB price and real value of goods as defined in the Sea Customs Act.

Whether Indian or foreign merchandise to be re-exported

Total number of packages with total weight and value.

Significance of Shipping Bill

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a) Shipping bill is the main customs document, required by the customs

authorities for granting permission for the shipment of goods.

b) The cargo is moved inside the dock area only after the shipping bill is duly

stamped, i.e. certified by the customs.

c) Duly endorsed shipping bill is also necessary for the collection of export

incentives offered by the government.

d) It is useful to the Customs Appraiser while determining the actual value of

goods exported.

2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central

Excise rules for export of goods. In case goods meant for export are cleared

directly from the premises of a manufacturer, the exporter can avail thefacility of exemption from payment of terminal excise duty. The goods may

be cleared for export either under claim for rebate of duty paid or under bond

without payment of duty. In both the events the goods are to be cleared under

form A.R.E-1 which will show the details of the goods being exported, the

relevant duty involved and if the duty is paid or goods being cleared under

bond, details of goods being sealed either by the exporter or Central Excise

officials etc.

3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange

control regulations all exporters must declare the details of shipment for

monitoring by the Reserve Bank of India. For this purpose, RBI has

prescribed different forms for different types of shipments like GRI, PP forms

etc. These declaration forms must be presented to the customs officials at the

time of passing of export documentation. Under the EDI processing of

shipping bill in the customs, these forms have been dispensed with and a new

form SDF has to be submitted to the customs in the place of above forms.

4. Export Application: this is the application to be made to the customs officials

before shipment of goods. The prescribed form of the application is the

Shipping Bill/Bill of Export. Different types are required for shipment like ex-

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bond, duty free goods, and dutiable goods and for export under different

export promotion schemes such as claims for duty drawback etc.

5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken

inside the port for loading, necessary permission has to be obtained for

moving the vehicle into the customs area. This permission is granted by the

Port Trust Authority. This document will contain the detail of the export

cargo, name and address of the shippers, lorry number, marks and number of

the packages, drivers licence details etc.

6. Bank Certificate of Realisation: this is the form prescribed under the Foreign

Trade Policy, wherein the negotiating bank declares the fob value of exports

and for the date of realisation of the export proceeds. This certificate is

required fore obtaining the benefit under various schemes and this value of

fob is reckoned as fob value of exports.

D. Other Document:

Black List Certificate: it certifies that the ship/aircraft carrying the

cargo has not touched the particular country on its journey or that the

goods are not from the particular country. This is required by certain

nations who have strained political and economical relations with theso called Black Listed Countries.

Language Certificate: Importers in the European Community require a

language certificate along with the GSP certificate in respect of

handloom cotton fabrics classifiable under NAMEX code 55.09.

Generally four copies of language certificate are prepared by the

concerned authority who issues GSP certificate. Three copies are

handed over to the exporter. A copy is sent along with the other

documents for realisation of export proceeds.

Freight Payment Certificate: in most of the cases, the B/L or AWB

will mention the transportation and other related charges. However if

the exporter does not want these details to be disclosed to the buyer, the

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shipping company may issue a separate certificate for payment of the

freight charges instead of declaring on the main transport documents.

This document showing the freight payment is called the freight

certificate.

Insurance Premium Certificate: this is the certificate issued by the

Insurance Company as acknowledgement of the amount of premium

paid for the insurance cover. This certificate is required by the bank for

arriving at the fob value of the goods to be declared in the bank

certificate of realisation.

Combined Certificate of Origin and Value: this certificate is required

by the Commonwealth Countries. This certificate is printed in a special

way by the Commonwealth Countries. This certificate should contain

special details as to the origin and value of goods, which are useful for

determining import duty. All other details are generally the same as

that of Commercial Invoice, such as name of the exporter and the

importer, quality and quantity of the goods etc.

Customs Invoice: this is required by the countries like Canada, USAfor imposing preferential tariff rates.

Legalized Invoice: this is required by the certain Latin American

Countries like Mexico. It is just like consular invoice, which requires

certification from Consulate or authorised mission, stationed in the

exporters country.

Special Provision under Uniform Customs and practice for Documentary Credit

UCP-500, for Commercial Invoice.

Article-37: Commercial Invoice

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o Must appear on their face to be issued by the beneficiary named

in the credit.

o Must be made out in the name of the applicant.

o Need not be signed

Banks may refuse Commercial Invoice issued for amounts in excess of

the amount permitted by the credit except otherwise stated.

The description of the goods in the commercial invoice must

correspond with the description of the credit. In all other documents the

goods may be described in the General in general terms not

inconsistent with description in the credit. In all documents goods maybe described in general terms not inconsistent with the Description of

the goods in the credit.

Pre-Shipment Documents:

Shipping bill.

Export order/Sales contract/Purchase order.

Letter of Credit

Commercial invoice.

Packing list.

Certificate of origin.

Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF.

Certificate of Inspection.

Various declarations required as per custom procedure.

Exchange Control Declaration Form: all exports to which the requirement of

declaration apply must be declared on appropriate forms as indicated below unless the

consignment is of samples and of No Commercial Value

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GR FORM: to be completed in duplicate for exports otherwise than by

post including export of software in physical form i.e. magnetic

tape/discs and paper media.

SDF FORM: to be completed in duplicate and appended to the

Shipping Bill for export declare to the customs offices notified by the

Central Government which have introduced EDI system for processing

Shipping Bill.

PP FORM: to be completed in duplicate for export by post.

SOFTX: to be completed in triplicate for export of software otherwise

than in the physical form i.e. magnetic tapes/discs and paper media.

These forms are available for sale in Reserve Bank of India

Export declaration forms have utmost importance and are binding on the exporters. It is,

therefore,