exporting spices

8/12/2019 Exporting Spices

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PROJECT REPORT

ON

EXPORT OF SPICES

FOR

INTERNATIONAL MARKETING

BY

NAME ROLL NOSagar Ashamshetty 62

Devadas Boda 67

Rahul Dhas 69

Lilesh Gangurde 74

Rohit Padalkar 91

Sunil Yadav 120


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SPICES INDUSTRY

India produces 2.5 million tones to 3 million tones of spices annually. India produces spices of

different categories worth around US$ 3 billion. In terms of volume and value, India

accounted for 46 percent and 23 percent in value of global spice trade. (Source: Spices

Board India) India accounts for 25-30 per cent of worlds pepper production, 35 per cent of

ginger and about 90 per cent of turmeric production. Among the Indian Federal states, Kerala

tops in pepper (96 per cent), Cardamom (53 per cent), Ginger (25 per cent) production in the

country. Andhra Pradesh leads in Chilli and Turmeric production in the country with 49 per cent

and 57 per cent. In coriander, cumin and fenugreek production in the country, Rajasthan emerges

as the largest producer with63 per cent, 56 per cent and 87 per cent. (Source: All India Spice

Exporters Forum)The world spice trade is estimated at US$ 1.5-2 billion in terms of value and

500,000tonnes in terms of quantity

REASONS FOR EXPORTING SPICES

Out of the 109 spices listed by the ISO, India produces as many as 75 in its various agro climatic

regions. India accounts for about 45% (2, 50,000 tons-2002-03) of the global spice exports,

though exports constitute only some 8% of the estimated annual production of spices at 3.2

million tons (2002). Over all, spices are grown in some 2.9 million hectares in the country. Spice

production in India, as much of the agriculture in the country, is undertaken in millions of tiny

holdings and determine the livelihood of large number of the rural population. Spices exports

have registered substantial growth during the last one decade. It has increased from 203398 tons

valued MLN US $ 241million in 1995-96 to 350363tonnes valued MLN US $ 593 million in

2005-06, registering an annual average growth rate of 9.4% in value terms. During the year

2006-07, the spices export from India has registered an all time high both in terms of quantity

and value. In 2006-07 the export of spices from India has been 373,750 tons valued MLN US $

793 million registering an increase of 34% in value over 2005-06. India commands a formidableposition in the World Spice Trade with 47% share in Volume and 40% in Value.


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Exporting Spices

STEP 1: REGISTRATION PROCEDURE

1. Registration of the organization:

The form of organization selected by the exporter must. Be registered under the appropriate Act

of the country

A joint stock company under the Companies Act, 1956. A partnership firm under the Indian Partnership Act, 1932. A sale trader should seek permission from the local authorities, as required.

2. Opening-Bank Account:

The exporter should open a current account in the name of the firm or company with a

commercial bank which is authorized by the Reserve Bank of India (RBI) to deal in foreign

exchange. Such bank also serves as a source of pre-shipment and post-shipment finance for the

exporter.

3. Obtaining Importer-Exporter Code Number (IEC No.)

To start with any export, one has to obtain Import-Export Code Number issued the office of the

Director General of Foreign Trade. In all foreign trade as well as foreign exchange

documentation you have to mention IE code number. In case of export/import of Spices/Spice

products, Certificate of Registration as Exporter of Spices issued by the Board is also required in

addition to the IE Code number. Spices Board issues Certificate of Registration as Exporter of

Spices [CRES] under Section 11 of the Spices Board Act.

5. Obtaining Permanent Account Number- (PAN):

Export income is subject to a number of exemptions and deductions under different sections of

the Income Tax Act. For claiming such exemptions and deductions, the exporter should register

his organization with the Income Tax Authorities and obtain the Permanent Account Number

(PAN).


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Enquiries for product should, specify the following details or provide the following data

Quantity required Delivery schedule Is the price required on FOB or C& F or CIF basis Mode of Dispatch - Sea, air or Sea/air Mode of Packing

3. Confirmation of Order: -

Once the negotiations are completed and the terms and conditions are finalized, the exporter

sends three copies of Performa Invoice to the importer for the confirmation of order. The

importer signs these copies and sends back two copies to the exporter.

4. Opening Letter of Credit

The documentary credit or letter of credit is the most appropriate and secured method of payment

adopted to settle international transactions. On finalization of the export. Contract, the importer

opens a letter of credit in favor of the exporter, if agreed upon in the contract.

The following are the step in the process of opening a letter of credit:

Exporters Request: The exporterrequests the importer to issue LC in his favor. LC is the mostsecured form of payment in foreign trade.

Importers Request to his Bank: The importer requests his bank to open a L/C. He May eitherpay the amount of credit in his current account with the bank.

Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank with alsorequest to inform the beneficiary that the L/C has been opened. The issuing bank may also

request the advising bank to add its confirmation to the L/C, if so required by the beneficiary.

Receipt of LC: the exporter takes in his possession the L/C. He should see it that the L/C isconfirmed.

Shipment of Goods: Then exporter supplies the goods and presents the full set of documentsalong with the draft to the negotiating bank.


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Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if they are inorder makes the payment to the exporter.

Negotiation: The exporters bank negotiates the document against the letter of credit andforwards the export documents to the L/C opening bank or as per their instructions.

Realization of payment: The issuing bank will reimburse the amount (which is paid to theexporter) to the negotiating bank.

Document to Importer: the issuing in turn presents the documents to the importer and debits hisaccount for the corresponding amount.

5. Arrangement of Pre-shipment Finance

On securing the letter of credit, the exporter procures a pre-shipment finance from his bank for

procuring raw materials and other components, processing and packing of goods and transfer of

goods to the port of shipment.

Pre Shipment Finance is issued by a financial institution when the seller wants the payment of

the goods before shipment. The main objectives behind preshipment finance or pre export

finance are to enable exporter to:

Procure raw materials. Carry out manufacturing process. Provide a secure warehouse for goods and raw materials. Process and pack the goods. Ship the goods to the buyers. Meet other financial cost of the business.

Types of Pre Shipment Finance

Packing Credit Advance against Cheques/Draft etc. representing Advance Payments.

Preshipment finance is extended in the following forms:

Packing Credit in Indian Rupee


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In this case some of the responsibilities of meeting the export requirements have been out

sourced to them by the main exporter. In other cases where the export order is divided between

two more than two exporters, pre shipment credit can be shared between them

Quantum of Finance

The Quantum of Finance is granted to an exporter against the LC or an expected order. The only

guideline principle is the concept of Need Based Finance. Banks determine the percentage of

margin, depending on factors such as:

The nature of Order. The nature of the commodity. The capability of exporter to bring in the requisite contribution.

6. Production or Procurement of Goods

On securing the pre-shipment finance from the bank, the exporter either arranges for the

production of the required goods. Or procures them from the domestic market as per the

specifications of the importer.

7. Packing and Marking:

The goods should be properly packed and marked with necessary details such as

por t of sh ipmen t and des tinat ion, coun try of or ig in , gross and net weigh t, et c. If

required, assistance can be taken from the Indian Institute of Packing (IIP).

8. Pre-shipment Inspection

If the goods to be exported are subject to compulsory quality control and pre-shipment

inspection then the exporter should contact the Export Inspection Agency (EIA). For obtaining

an inspection certificate.


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9. Central Excise Clearance

The Exporter are totally exempted from the payment of central excise duty,

however. The exemption should be claimed in one of the following ways:

a. Export under Rebateb. Export under Bond

10. Obtaining Insurance Cover

The exporter must take appropriate policies in order to insure risks: ECGE policy in

order to cover credit risks, Marine policy, if the price quotation agreed upon is CIF.

11. Appointment of C&F Agent

Since exporting is a complex and time- consuming process, the exporter should appoint a

Clearing and Forwarding (C&F) agent for the smooth clearance of goods from the

customs and p repar ation and submission of various export documents.

The Forwarding Agent completes the following formalities:-

He obtains the Customs' Permit from the Customs Department for exporting goods. The Forwarding Agent discloses the details of the goods such as their nature, size,

quantity, weight, etc. to the shipping company.

The Forwarding Agent prepares a Shipping Bill. The Forwarding Agent prepares two copies of the dock challans and pays the dock dues. The Captain of the ship gets the goods loaded on the ship on the basis of the Shipping

Order in the presence of customer officers.

When the goods are loaded on the ship, the Mate (Vice Captain or the Captain) issues areceipt, called Mate's or Captain's Receipt.

Size of the agent's company Date of foundation of the agent's company Company's ownership and control Company's capital, funds, available and liabilities


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Name, age and experience of the company's senior executives Number, age and experience of the company's salesman Other agencies that the company holds, including those of competing products and turn-

over of each

Length of company's association with other principal New agencies that the company obtained or lost during the past year Company's total annual sales and the trends in its sales in recent years Company's sales coverage, overall and by area Number of sales calls per month and per salesman by company staff

Any major obstacles expected in the company's sales growth Agent's capability to provide sales promotion and advertising services

STEP 3. SHIPMENT PROCEDURE

Export, cargo can be exported to the overseas buyer by sea, air or land. However, shipment by

sea is the most popular and generally resorted to, as it is comparatively cheaper. Besides, the

shipscapacity is far greater than other modes of transportation. Nevertheless, transportation by

air is utilized for export of expensive items like, diamonds, gold, etc. The shipment stage

includes the following steps

1. Reservation of Shipping Space: -

Once the export contract is finalized, the exporter reserves the required space in the vessel for

shipment. On accepting the exporters request, the shipping company issues a Shipping Order.

The original copy of the shipping order as given to the exporter and the duplicate instruction by

the shipping company to the commanding officer of the ship that the goods as per the detailsgiven should be received on board.

2. Arrangement of Internal Transportation up to the Port of Shipment :-

The exporter makes necessary arrangements for transportation of goods to the port either by road

or railways. On loading goods into the railway wagon, the railway authorities issue a Railway


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Receipt, which may be either freightpaidor freightto pay.It serves as a title to the goods.

The exporter doses the railway receipt in favour of his agent to enable him to take delivery of the

goods at the port of shipment.

3. Preparation and Processing of Shipping Documents:-

As the goods reach the port of shipment, the exporter should issue detailed instructions to the

C&F agent for the shipment of cargo along with a complete set of the documents listed below:

Letter of Credit along with the export contract or export order. Commercial Invoice (2 copies) Packing List or Packing Note. Certificate of Origin GR Form (original and duplicate) ARE-I Form. Certificate of Inspection where necessary (original copy) Marine Insurance Policy.

4. Customs Clearance: -

The cargo must be cleared from the Customs before it is loaded on the ship. For this, the above

mentioned documents, along with five copies of shipping bill, are to be submitted to the Customs

Appraiser at the Customs House. The Customs Appraiser ensures that all the formalities relating

to exchange control, quality control, pre-shipment inspection and licensing have been complied

with by the exporter. After verification, all documents, except the original GR, original copy of

Shipping Bill and one copy of Commercial Invoice, are returned to the C&F agent.

5. Obtaining CartingOrderfrom the Port Trust Authorities: -

The C&F agent then approaches the Superintendent of the concerned Port Trust for obtaining

the CartingOrderfor moving the cargo inside the dock. After obtaining the Carting Order, the

cargo is physically moved into the port area and stored in the appropriate shed.


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6. Customs Examination and Issue of LetExport Order:-

The Customs Examiner at the port of shipment physically examines the goods and seals the

packages in his presence. The same can be arranged for at the factory or warehouse of the

exporter by making an application to the Assistant Collector of Customs. The Customs

Examiner, if satisfied, issues a formal permission Ifor the loading of cargo on the ship in the

form of a LetExport Order.

8. Obtaining MatesReceipt and Bill of Lading: -

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

Mates Receipt to the Port Superintendent The Port Superintendent, on receipt of port dues,

hands over the MatesReceipt to the C&F Agent. The C&F Agent surrenders the MatesReceipt

to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to

three negotiable and two to three non-negotiable copies of Bill of Lading.

STEP 4: REALIZING EXPORT INCENTIVES INCENTIVE

Is an expectation that encourages people to behave in a certain way. The Government of India

has framed several schemes to promote exports and to obtain foreign exchange. These schemes

grants incentive and other benefits.

The few important export incentives & exemptions are ----

Exemptions for Indian Exporters Registration with Excise Authorities---They getexemption,& they have two options either deposit excise duty at time of clearance from

factory & later claim return or open Bond Account with Maritime Collector of Central

Excise

Facilities to Indian Exporters

Marketing Development Assistance (MDA) Market Access Initiative (MAI) Free Trade Zones (FTZ) Export Financing Exim Bank Finance


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Advance License / Duty Exemption Entitlement Scheme (DEEC) & Duty Drawback Manufacture under Bond

5. POST SHIPMENT STAGE

The post-shipment stage consists of the following steps:

1. Submission of Documents by the C&F Agent to the Exporter: -

On the completion of the shipping procedure, the C&F agent submits the following

documents to the exporter

A copy of invoice duly attested by the Customs Drawback copy of the shipping bill. Export promotion copy of the shipping bill. A full set of negotiable and non-negotiable copies of bill of lading. The original L/C, export order or contract. Duplicate copy of the ARE-I form

2. 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.

3. Presentation of Documents to Bank for Negotiation:

Submission of relevant documents to the bank and the process of getting the

paymen t from the bank is ca ll ed Negotiation of the Documents and tile documents

are called Negotiable Set of Documents. The set normally contains:

Bill of Exchange Sight Draft or Usance Draft Full set of Bill of Lading or Airway Bill Original Letter of Credit Customs Invoice


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Commercial Invoice including one copy duly certified by the Customs Packing List Foreign exchange declaration forms, GR/SOFTEX/PP forms in duplicate Exchange control copy of the Shipping Bill Certificate of Origin, GSP or APR Certificate, etc Marine Insurance Policy, in duplicate

4. Dispatch of Documents: -

The bank -negotiates these documents to the importersbank in the manner as specified in the

L/C. Before negotiating documents, the exportersbank scrutinizes them in order to ensure that

all formalities have been complied with and all documents are in order. The bank then sends the

Bank Certificate and attested copies of commercial invoice to the exporter.

5. Acceptance of the bill of exchange:

Bill of Exchange accompanied by the above documents is known as the Documentary Bill of

Exchange. It is of two types:-

Documents against Payment (Sight Drafts)In case of sight draft, the drawer instructs the bank to hand over the

relevant documents to the importer only against payment.

Documents against Acceptance (Usance Draft):In case of usance draft, the drawer instructs the bank to hand over the

relevant documents to the importer against his acceptanceof the bill of exchange.-

Letter of Indemnity:The exporter can get immediate payment from his bank on the submission of

documents by signing a letter of indemnity. By signing the letter of indemnity the

exporter undertakes to indemnify the bank in the event of non-receipt of

pa yment from the im por te r along wi th accrued interests.

Realization of Export Proceeds :On receiving the documentary bill of exchange, the importer releases payment in

case of sight draft or accepts the usance draft undertaking to pa y on maturity of


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the bill of exchange. The exporters bank receives the payment through

importersbank and is credited to exportersaccount.

6. Processing of GR Form: -

On receiving the export proceeds, the exportersbank intimates the same to the RBI by recording

the fact on the duplicate copy of GR. The RBI verifies the details in duplicate copy of GR with,

the, original copy of GR received from the Customs. If the details are found to be in order then

the export transaction is treated to be completed.