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ASSIGNMENT SOLUTIONS GUIDE (2014-2015)

I.B.O-4
Export Import Procedures
and Documentation
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Auhtors for the help and Guidance
of the student to get an idea of how he/she can answer the Questions of the Assignments. We do not claim 100% Accuracy
of these sample Answers as these are based on the knowledge and cabability of Private Teacher/Tutor. Sample answers
may be seen as the Guide/Help Book for the reference to prepare the answers of the Question given in the assignment. As
these solutions and answers are prepared by the private teacher/tutor so the chances of error or mistake cannot be denied.
Any Omission or Error is highly regretted though every care has been taken while preparing these Sample Answers/
Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer & for up-to-date and exact
information, data and solution. Student should must read and refer the official study material provided by the university.
Q. 1. What is post-shipment finance? Explain its various methods and discuss the procedure of export under
deferred payments.
Ans. Post-Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment
that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the
goods to the realization date of the exporter proceeds. Exporters don't wait for the importer to deposit the funds.
Basic Features: The features of post shipment finance are:
Purpose of Finance: Post shipment finance is meant to finance export sales receivable after the date of shipment of
goods to the date of realization of exports proceeds. In cases of deemed exports, it is extended to finance receivable
against supplies made to designated agencies.
Basis of Finance: Post shipment finances is provided against evidence of shipment of goods or supplies made to the
importer or seller or any other designated agency.
Types of Finance: Post shipment finance can be secured or unsecured. Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. In that
case it involves advance against undrawn balance, and is usually unsecured in nature.
Further, the finance is mostly a funded advance. In few cases, such as financing of project exports, the issue of
guarantee (retention money guarantees) is involved and the financing is not funded in nature.
Quantum of Finance: As a quantum of finance, post shipment finance can be extended up to 100% of the invoice
value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance
for a price difference can also be extended and the price difference is covered by the government. This type of finance is
not extended in case of pre-shipment stage.
Banks can also finance undrawn balance. In such cases banks are free to stipulate margin requirements as per their
usual lending norm.
Period of Finance: Post shipment finance can be off short terms or long term, depending on the payment terms
offered by the exporter to the overseas importer. In case of cash exports, the maximum period allowed for realization of
exports proceeds is six months from the date of shipment. Concessive rate of interest is available for a highest period of
180 days, opening from the date of surrender of documents. Usually, the documents need to be submitted within 21days
from the date of shipment.
There are several basic methods of receiving payment for products sold abroad. As with domestic sales, a major
factor that determines the method of payment is the amount of trust in the buyer's ability and willingness to pay. For sales
within our country, if the buyer has good credit, sales are usually made on open account; if not, cash in advance is
required. For export sales, these same methods may be used; however, other methods are also often used in international
trade. Ranked in order from most secure for the exporter to least secure, the basic methods of payment are:

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cash in advance,
letter of credit,
documentary collection or draft,
open account, and
other payment mechanisms, such as consignment sales.
Q. 2. What is the need for documents in international business? Substantiate your answers with suitable
examples.
Ans. Documents required for an international sale can vary significantly from transaction to transaction, depending on
the destination and the product being shipped. At a minimum, there will be two documents: the invoice and the transport
document. The buyer will usually provide the seller with a list of documents needed to get the goods into his country as
expeditiously and inexpensively as possible. Some documentary requirements are not open to negotiation, as they are
needed by the importer to clear customs at the port of destination. Following documents are used in foreign trade.
Indent: It is an order place by importer of one country with exporter of another country. It contains detail of goods
like price, quality, packing, shipping and payment method.
Letter of Credit: It is a commitment on the part of buyer's bank to pay or accept drafts drawn upon it provided that
such drafts do not exceed specified amount.
Shipping Order: It is instruction given by shipping company to the captain of ship to accept goods of specified
quantity on the ship.
Dock Receipt: Dock authority will receive goods from exporter and issue a receipt to him.
Master Receipt: Captain of ship is called mate. Mate will issue a receipt after loading goods on ship. It contains
detail about goods such as quantity, number of packets, condition of goods etc.
Bill of lading: It is a receipt issued by shipping company. In this receipt, the shipping company acknowledges the
receipt of goods from exporters.
Commercial Invoice: It is a bill of goods supplied to importer. This is prepared according to terms and conditions
settled.
Bill of Entry: This is a form. This form is given by custom office to the importer. It contains particulars of import
such as name of country from which goods have imported and custom duty payable etc.
Q. 3. Distinguish between:
(a) Open Cover and Open Policy
Ans. An open cover is particularly useful for large export and import firms-making numerous regular shipments who
would otherwise find it very inconvenient to obtain insurance cover separately for each and every shipment. It is also
possible that through an oversight on the part of the insured a particular shipment may remain uncovered and should a
loss arises in respect of such shipment, it would fall on the insured themselves to be borne by them. In order to overcome
such a disadvantage, a permanent form of insurance protection by means of an open cover is taken by big firms having
regular shipments.
An open policy is a form of cargo insurance policy that is used to cover all types of shipments undertaken by the
insured party. Sometimes referred to as blanket coverage, the client is covered for any situation specified in the terms and
conditions of the insurance agreement, as long as those shipments have been properly declared to the company that
underwrites the policy. While somewhat expensive, the protection that is provided by an open policy can often necessary
when goods are shipped between countries, and in some cases is necessary to comply with regulations put in place by the
jurisdiction where the shipper does business.
(b) Consular Invoice and Customs Invoice
Ans. A consular invoice can be obtained through a consular representative of the country you're shipping to. The
consular invoice is required by some countries to facilitate customs and collection of taxes. A consular invoice also has a
copy of the commercial invoice in the language of the country, giving full details of the merchandise shipped.
After the pro-forma invoice is accepted, the exporter must prepare a commercial invoice. The commercial invoice is
required by both the exporter (to obtain the necessary export documents to enable the consignment to be exported, to
prove ownership and to enable payment) and importer (who requires the commercial invoice to facilitate the import of the
goods in question). In exporting, the commercial invoice is considered a very important document as it serves as the
starting document that underpins an export transaction.
The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the buyer (the importer)
describing the goods to be sold and the terms involved. The commercial invoice will normally be presented on the

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exporters letterhead and will be addressed to the importer. It should contain full details of the consignment, including
price and other related costs, in order to facilitate customs clearance. It must be signed and dated.
4. Discuss the formalities prescribed under Central Excise rules for:
(a) Claiming rebate of central excise under rule
Ans. Under Rule 12, rebate of Central Excise duty is admissible to the exporters of the goods in respect of:
duty paid on excisable goods; and
duty paid on material used in the manufacture of goods.
The exporter is required to furnish proof of export of goods on AR-4. The rebate of duty paid on the material used in
the manufacture of goods exported is not admissible if the export has availed drawback under the Customs and Central
Excise Duties (Drawback) Rules, 1995.
Where a refund of duty has been erroneously given, the refunded amount can be demanded by service of notice
within 6 months from the date of such refund order. In case the refund has been taken on account of any fraud/collusion
or any misstatement or suppression of fact or contravention of any Rule with an intent to evade duty, the notice can be
issued up to a period of 5 years instead of 6 months.
The authorities are obliged to sanction refund within 3 months from the date of receipt of all the requisite information
or documents, failing which interest is payable to the claimant at the rate of 15% per annum.
The 100% EOU scheme is, at present, governed by the provisions set forth under Chapter 9 of the Export and Import
(EXIM) Policy, 1997-2002. The scheme facilitates the approved units in export of their entire production, subject to
certain relaxation, indicating inter alia the conditions of approval of units, their operational framework, and the legal
obligations cast upon them.
(b) Export under central excise bond under rule
Ans. The conditions and procedure relating to export without payment of following type of duties are contained in
Notification Nos. 42/2001Central Excise (N.T.) to 45/2001-Central Excise (N.T.), all dated 26th June, 2001 issued
under rule 19 of the Central Excise Rules, 2002 (hereinafter referred to as the said Rules).
The duties of excise collected under the following enactments, namely:
The Central Excise Act, 1944 (1 of 1944);
The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
The Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
The National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001), as
amended by Section 169 of the Finance Act, 2003 (32 of 2003) which was amended by Section 3 of the Finance
Act, 2004 (13 of 2004);
Any special excise duty collected under a Finance Act.
The additional duties of excise as levied under section 157 of the Finance Act, 2003 (32 of 2003);
The Education Cess on excisable goods as levied and collected under Clause 91 read with Clause 93 of the
Finance(No. 2) Act, 2004. (23 of 2004)
Board vide Circular No. 807/4/2005-CX., dated 10th February, 2005 has clarified that Additional Duty of Excise or
Special Additional Duty of Excise leviable under different sections of Finance Acts are not required to be paid for the
goods exported under Bond.
There are two categories of export without payment of duty:
Export of finished goods without payment of duty under bond or undertaking.
Export of manufactured/processed goods after procuring raw material without payment of duty under bond.
Q. 5. Write notes on:
(a) Financing under foreign currency
Ans. A foreign currency loan is a bank loan, usually in the same currency as your export contract, which can provide
working capital to help you fulfil an export order before you receive payment. When you negotiate an export sale in a
foreign currency, you may choose to request a loan from your bank in the same currency to finance the export contract. As
your debt is in the same currency as the payment to be received, you are not exposed to movements in the rate of exchange
to Australian dollars between when you enter an export contract and receive payment. Depending where the goods or
services are produced, you might use the foreign currency loan funds to pay suppliers and wages in another country, or
convert the borrowed funds to Australian dollars at the market rate of exchange to cover your working capital costs in
Australia. When you receive the foreign currency payment from your buyer, you can use it to repay the loan. A foreign
currency loan is typically used to finance an individual export transaction. However, you might also use the loan when

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managing the ongoing finances of an overseas operation. The interest rate on your loan may be fixed or variable. If the
interest rate is fixed, your bank will charge a risk premium to cover its exposure to market rate movements.
(b) Financing under deferred payment arrangement
Ans. A deferred payment is an arrangement in which a debt does not have to be repaid until sometime in the future.
The debt might be created when a person takes out a loan, for example, or purchases a good or service. The use of
deferred payment plans is one of the more common sales and marketing tools used by companies. Essentially, the underlying concept is that customers can buy now and pay later. When a customer is unable to pay for the purchase right away
but has a reasonable expectation of being able to provide payment in full by a certain date in the future, a deferred
payment plan makes sense for both the consumer and the seller. Some companies offer these plans only to preferred
customers, but others offer them to everyone.
A common deferred payment plan is one in which the customer does not need to make any payments and is not
charged any interest for the first six months after the purchase. After six months, the customer could then pay the original
amount in full or begin making smaller payments.
For example, a customer might have a long-standing relationship with the seller and might have an excellent history
of making payments. New customers might have to pass credit checks and other evaluations to ensure that they can meet
all of the requirements of their payment arrangements. In both cases, it is not unusual for the deferred payment plan to not
include interest charges if the balance is paid according to the terms of the plan. If a buyer fails to make payments as
specified in the agreement, however, the seller might begin to apply interest charges to the outstanding balance.

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