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PGDIEM- SEM I

Exim Policy &


Export Procedure & Documentation
(102)
(I)
Preliminaries For Exports
Registration IEC,
RCMC, EPC, C.Excise
Registration of Exporters/Importers

• All intending importers/ exporters are required to register themselves


with the following authorities before commencing business;
– DGFT( regional authority) for obtaining Importer-Exporter Code
Number (IEC Number)
– Concerned Export Promotion Councils / Federation of Indian
Export Organization) for obtaining Registration- cum Membership
Certificates (RCMC)
– Registration with Value added Tax Authorities
– Registration with Central Excise Authorities
Registration of Exporters /Importers

• Importer Exporter Code Number (IEC)


– No person is allowed to export or import goods
without obtaining an Importer-Exporter Code
Number, from the regional authority, unless
specifically exempted, under any other provision of
FTP.
– Exporter of goods to Nepal or Myanmar through
Indo-Myanmar border areas, are exempted,
provided that the CIF value per consignment, is
below Rs. 25,000.00.
Registration of Exporters /Importers
(cont)
• Application For Grant Of IEC Number
– An application for grant of IEC number shall be made by the
Registered Office/ H.O., of the applicant, to the Regional
Authority, (DGFT-Regional Office), under whose jurisdiction,
the Registered Office in case of the company, or H.O. in case
of others, falls in the Ayyat-Niryat Form, and shall be
accompanied by:
• DD or Bank Receipt for Rs. 1000.00
• ST registration certificate or passport copy (for an
individual), or copy of the legal authority letter when the
application is signed by an authorized signatory.
• Certificate from banker of the firm as required
• A copy of PAN card duly attested, copies of passport size
photographs etc
Registration of Exporters Contd..1

• The regional Office concerned, will grant an IEC number


to the applicant, in the prescribed format. A copy of such
certificate, shall also be endorsed to the banker.
• An IEC number allotted, shall be valid, for all its
branches/ divisions / units/ factories, as indicated on the
IEC number.
• To facilitate collection of license / other documents,
identity cards are issued by Regional Authority, to the
authorized representative of the applicant.
Registration With EPCs
• Registration with Export promotion Councils/ Commodity
Boards/ Authorities
– To enable exporters avail of benefits/ concessions given under
the FTP, they are required to register with concerned EPC/
C.B /or authority and obtain an registration –cum-
membership certificate (RCMC)
– The Exporter is required to apply in the prescribed format to
EPC relating to their main line of business
– Status Holder can also obtain RCMC from FIEO.
– Application for obtaining RCMC, to be made in prescribed
manner & accompanied by IEC code number. If application is
granted, EPC or FIEO will grant status of the exporter as
merchant exporter or manufacturer exporter
Registration With VAT Authorities
• Registration with Value added Tax Authorities (VAT)
– Goods which are to be shipped out of the country
for exports are eligible for are eligible for
exemption from both VAT & CST.
– For this , the exporters are required to register
themselves, with the VAT authorities of the state, in
which they are located.
– The registration has to be done in the manner
prescribed by the state VAT authorities.
Registration With Central Excise & PAN
• Registration with Central Excise Authorities
– Goods meant for export are exempt from CED.
– For this the manufacturer has two options :
• either they can deposit CED at the time of clearance from
factory
• or take refund or avail procedure for export of goods
without payment at the time of clearance.
• Obtaining PAN
– Exporters & importers who obtain the IEC number
are also required to obtain PAN. An application in
form number 49A has to be submitted
Other Registrations
• Any exporter who wants to export his goods needs to
obtain PAN based Business Identification Number
(BIN) from DGFT prior to filing of Shipping Bill for
clearance of export goods.
• The exporter must also register themselves to the
authorized foreign exchange dealer code & open a
current account in the designated bank for credit of
any drawback incentive.
• All exporters intending to export under export
promotion schemes need to get their licenses, DEEC
Books etc.
(II)
Categories Of Exports
Physical Direct & Indirect
Deemed Exports
Merchant & Manufacturer Exports
Categories of Exporters
• Exporter
– Means a person, who exports or intends to export and holds an
importer-exporter code number, unless otherwise specifically
exempted
• Manufacturer Exporter
– Manufacturer exporter means a person, who exports goods
manufactured by him, or intends to export such goods
• Merchant Exporter
– Merchant exporter means a person, engaged in trading activity
and exporting or intending to export goods.
– A status holder means an exporter recognized as Export House,
Trading House, PTH etc by DGTD/ Development Commissioner.
Categories of Exporters (Cont)

• Supporting Manufacturer , means any persons who


manufactures any product or part/ accessories/ components
of that product. Name of supporting manufacturer as well as
exporter must be endorsed on export documents.

• Third Party exports means exports made by an exporter or


manufacturer on behalf of another exporter(s). In such
cases, export documents such as shipping bills shall include
name of both manufacturer exporter/manufacturer & third
party exporters. BRCs, GR declaration, export order &
invoice should be in the name of third oarty exporter.
Categories of Exporters (Cont)
• Service Exporter means a person providing:
– Supply of service from India to any other country
– Supply of service to a service consumer of any other
country in India
– Supply of service from India through commercial or
physical presence in the territory of another country.
– Supply of service in India relating to exports paid in FFE
• Services normally means services recognized by GATT /
WTO’S Agreement & includes 161 tradable services covered
under GATS & where payment for services is received under
FFE.
Deemed Exports
• Deemed Exports refers to those transactions in
which goods supplied do not leave the country &
payment for such supplies is received either in
Indian Rupees or in FFE.
• Following categories of supplies by main/sub
contractors shall be regarded as “deemed exports”
under FTP, provided goods are manufactured in
India:
– Supply of goods under advance authorization/
DFIA
– Supply of goods to EOUs/ STPs/ EHTPs or BTPs
Deemed Exports (cont)
– Supply of capital goods to holders of authorization
under EPCG scheme.
– Supply of goods to projects funded by multilateral or
bilateral agencies or funds as notified by DEA.
– Supply of capital goods to fertilizer plants.
– Supply of goods to power projects & refineries.
– Supply to projects funded by UN agencies & nuclear
power plants etc.
Benefits For Deemed Exports

• Deemed exports, shall be eligible for any/ all of


the following benefits, in respect of manufacture &
supply of goods, qualifying as deemed exports
– Advance authorization/ DFIA
– Deemed export drawback.
– Exemption from terminal export duty where
supplies are made against ICB. In other cases
refund of terminal excise duty will be given.
Benefits For Deemed Exports (cont)
– In respect of supplies made against the Supplier
Authorization / DFIA in terms of paragraph 8.2(a)
of FTP, supplier shall be entitled to Advance
Authorization / DFIA, for intermediate supplies.
– If supplies are made against Advance Release
Order (ARO) or Back to Back Letter of Credit
issued against Advance Authorization / DFIA, in
terms of paragraphs 4.1.11 and 4.1.12 of FTP,
suppliers shall be entitled to benefits listed in
paragraphs 8.3(b) and (c) of FTP, wherever is
applicable.
Export & Trading Houses
• Export & Trading Houses: Merchant as well as Manufacturer
Exporters, Service Providers, EOUs & units located in SEZs ,
AEZs, Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) & Bio-Technology Parks
(BTPs) shall be eligible for status.
• Status is calculated on total FOB export performance during
current plus previous three years (taken together) upon
exceeding limit given below:
– EXPORT HOUSE (EH): Rs. 20 Crores
– STAR EXPORT HOUSE (SEH): Rs. 100 Crores
– TRADING HOUSE (TH): Rs. 500 Crores
– STAR TRADING HOUSE (STH): Rs. 2500 Crores
– PREMIUR TRADING HOUSE (PTH): Rs. 10,000 Crores.
Export & Trading Houses Contd.
• Status holder will be eligible for a number of facilities including :
– Authorization & customs clearance for both imports &
exports, on self-declaration basis.
– Fixation of input-output norms on priority within 60 days
– Exemption from compulsory negotiation of documents through
banks
– 100% retention of foreign exchange on EEFC account
– Enhancement of normal repatriation period from 180 days to
360 days.
– Exemption of providing Bank guarantee in schemes under
FTP.
– SEH & above to be permitted to establish export warehouses
as per DoR guidelines
– Conferring ACP status within 30 days of application.
(III)
Shipping Documents &
Terms Used In Shipping
III(a)
Shipping Documents
Documents For Declaration Of Goods
Under Foreign Exchange Rules
• Section 7 of FEMA 1999, lays down the statutory control
concerning exports.
• Under FEMA regulations ( number 3), every exporter of goods
or software in physical form or through any other form, either
directly or indirectly, to anyplace outside India ( other than
Nepal & Bhutan) shall furnish to the specified authority a
declaration in prescribed form & supported by such evidence as
may be specified.
• Certain goods & services like trade samples, personal effects,
personal gifts, goods being sent for testing, defective goods
being sent outside for repair etc are exempted from the above.
Documents For Declaration Of Goods
Under Foreign Exchange Rules
• The appropriate declaration forms are :
– GR Forms : To be completed in duplicate for all exports
(other than by post) including export of software in physical
form.
– SDF Form : In duplicate and appended to the shipping Bill
for exports declared to customs offices notified by Central
Government which have introduced EDI system for
processing Shipping Bill.
– PP Form : for exports by post
– SOFTEX : To be completed in triplicate for export of
software otherwise than in physical form ie. Magnetic
tapes, disks & paper media.
GR Form
• GR Form is an exchange control document required by RBI. The
exporter through the GR Form has to assure to the RBI that the export
proceeds will be realized within 180 days.
• It is submitted in duplicate, to the customs, at the port of shipment
along with the Shipping Bill & the customs certify the value declared
by the exporter & also record the assessable value.
• Customs returns one copy to exporter & retains the original for
transmission to RBI
• The exporter is required to negotiate the shipping documents, through
his bankers (authorized dealers), along with the GR Form, within 21
days of the shipment.
• The authorized dealer reports to the RBI after negotiation of
documents & has to retain the documents till the full exports proceeds
have been realized, & thereafter send the documents to RBI.
Electronic Data Interchange (EDI)
• Electronic data Interchange can be used to electronically transmit
documents such as purchase orders, invoices, shipping bills, receiving
advices and other standard business correspondence.
• Coping with the increasing imports/exports the Excise & Customs has
computerized the manual process of assessment of Bills of entry,
clearing of shipping bills for export & all documents relating to
imports & exports are being processed on-line
• At present all types of bills of entry for import of goods under export
related schemes, e.g., 100% EOUs, EPCG scheme, EPZ, STP, EHTP,
DEPB, DEEC, & imports for research purposes are being processed
on EDI system.
• A new centralized electronic data system will be in place at major
ports, airports by the end of the year (2008), for speedy and hassle-
free clearance of exports and imports as well as to reduce delays in
settling duty drawback claims.
SDF Forms
• On account of introduction of EDI system at certain customs
offices, where shipping bills are processed electronically, the
existing declaration in Form GR, is replaced by declaration in
Form SDF ( statutory declaration form) .
• SDF form is to be submitted in duplicate, annexed to the relative
shipping bill to the concerned commissioner of customs.
• After verifying & authenticating the declaration, the commissioner
hands over to the exporter, exchange control copy of the shipping
bill & the SDF form annexed thereto.
• This must be submitted to the authorized dealer, within 21 days
from the date of export, along with other shipping documents for
negotiation.
• The manner of disposal of the shipping bill & the SDF form
annexed thereto is the same as that of the GR form.
SOFTEX Forms
• The exporter should submit declaration in Form SOFTEX in
triplicate in respect of export of computer software & audio/
video/ television software to the concerned designated official of
GOI at STPI/ EPZ/FTZ/SEZ for valuation/ certification not later
than 30 days from the date of invoice.
• The designated official may also certify the SOFTEX forms of
EOUs which are registered with them.
• In respect of long duration contracts, where the exporter bills the
client periodically, the exporter can submit a combined SOFTEX
form of all invoices including advance remittance.
• Disposal of SOFTEX forms is done as per prescribed procedure in
Export Of Goods & Services Regulations, 2000. Duplicate copy of
SOFTEX along with a copy of the invoice may be retained by
authorized dealers.
Documents For Transportation Of goods

• The documents required for transportation of goods are:


– Airway Bill or Air consignment Note
– Bill Of Lading
– Mate Receipt
– Combined transport document : ICDs have been set up
at various centers within the country for convenience of
exporters.The movement of goods from ICDs to the
destination is covered by the Combined transport
document.
Airway Bill or Air Consignment Note
• The receipt issued by an airline company or its agent for
carriage of goods, is called airway bill (AWB) or air-
consignment note.
• It is not a document of title and it is not issued in a negotiable
form.
• The goods are delivered to the consignee mentioned in the AWB,
after identifying himself as the party named in the AWB as the
consignee / receiver, against payment of charges if any.
• It is therefore desirable to cosign the goods in the name of the
foreign corresponding bank, as it will enable us to retain the
control of the goods, till payment is made/ documents are
accepted for payment.
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.This receipt is a prima facie
evidence that goods are loaded in the vessel.

• Mate’s receipt is first handed over to the Port Trust


authorities & on receipt of port dues, the Port Trust
authorities, hand the mate’s receipt to the exporter
or his agent.
Mate’s Receipt (cont)
• The mate’s receipt has to be handed over shipping
company for obtaining the Bill of Lading.
• The mate’s receipt is a transferable document &
can be of two types
– Clean mate’s Receipt : This signifies that the goods have
been received well in order, properly packed & without
any defect or damages
– Qualified Mate’s receipt: This signifies goods have not
been packed properly or received damaged. In this case
the shipping company does not take any responsibility
for damage in transit.
Bill of Lading
• Bill of Lading (B/L) 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 & other
charges as mentioned have been duly paid. It is also a document of
title to the goods & as such is freely transferable by endorsement &
delivery.
• B/L serves three main purposes :
– As a document of title to the goods
– As a receipt from the shipping company
– As a contract for the transportation of the goods.
Types Of Bill of Lading
Clean B/L B/L acknowledging receipt of goods apparently in good order &
condition & without any qualification is a clean B/L. Such B/L
does not contain any negative remark about condition of goods.

Claused B/L B/L with a remark such as “goods insufficiently packed” is known
as claused B/L.

Transshipment or For multimode transportation, or when another shipping


through B/L company’s vessel is used, this B/L is issued.

Stale B/L A B/L held too long (normally more than 21 days)), before
negotiations, is termed stale B/L.

Freight paid B/L B/L issued when freight is paid at the time of shipment is a freight
paid B/L

Freight collect B/L B/L issued when freight is not paid at the time of shipment& is to
be collected from consignee is a freight collect B/L
Contents Of The Bill Of Lading

• Name & logo of the Shipping Line


• Name & address of the shipper
• Name & number of vessel
• Name of the port of lading, port of discharge & place of delivery
• Marks & container number, container seal number
• Packing & container description
• Total number of packages & containers
• Description of goods, gross weight, volume
• Amount of freight paid or payable
• Shipping Bill number & date
• Signature & initials of the Chief Officer
Documents For
Customs Clearance Of Goods
• The Shipping Bill is the main document required by customs
for clearance of goods for shipment.
• Where the goods are to be cleared by Land Customs, Bill Of
Export is prepared instead of the Shipping Bill.
• Bill Of Exports are also of four types
– White for export of duty free goods
– Green for export of goods under claim for duty drawback
– Yellow for export of dutiable goods
– Pink for export of duty free goods ex-bond.
Shipping Bill

• Shipping Bill is an important document required by


the customs authorities for allowing shipment.
• It is prepared by the exporter & it contains the name
of the vessel, name of port of discharge, country of
final destination, , exporter’s name & address,
details about packages, number & description of
goods, marks & numbers, quantity & details about
each case, FOB price, total number of packages
with the weight & value and the name & address of
the importer.
Shipping Bill (cont)

• The shipping Bills are of following types:


– Duty Free Shipping Bill : No duty or cess
applicable
– Dutiable Shipping Bill : Goods subject to
export duty / cess
– Drawback Shipping Bill :
– Shipping Bill for shipment Ex-bond.: For goods
imported for re-export.
Documents Required For Processing Of
Shipping Bill:

• The following documents are required for the processing of the Shipping
Bill:
– GR forms (in duplicate) for shipment to all the countries.
– 4 copies of the packing list mentioning the contents, quantity, gross
and net weight of each package.
– 4 copies of invoices which contains all relevant particulars like
number of packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct
& full description of goods etc.
– Contract, L/C, Purchase Order of the overseas buyer.
– AR4 (both original and duplicate) and invoice.
– Inspection/ Examination Certificate.
Other Documents

• Other documents as shown in the following


pages are also necessary and required to
carry out various formalities for shipment
& negotiation of documents and for meeting
the regulations in the importing country.
Aligned Documentation System

• Aligned Documentation System is based on the


UN layout key.
• Under this system, different forms used in the
international trade transactions are printed on
paper of the same size & in such a way that the
common items of information are given in the
same relative slots in the same piece of paper.
Aligned Documentation System (cont)
• Commercial Documents
– These are required for effecting physical transfer of goods &
their title from the exporter to the importer & the realization of
export proceeds. Out of the 16 commercial documents in the
export documentation, as many as 14, have been standardized
and aligned to one another. These are proforma invoice,
commercial invoice, packing list, shipping instructions,
intimation for inspection, certificate of inspection, insurance
declaration, certificate of insurance, mate’s receipt, B/L,
application & certificate of origin, shipment advice &
negotiation of documents.
– Shipping order & bill of exchange could not be brought under
this system.
Aligned Documentation System (Cont)
• Regulatory documents
– Regulatory pre-shipment export documents are
prescribed by different government department &
bodies in order to comply with various rules &
regulations under the relevant laws governing
export trade such as export inspection, etc.
– Out of the nine regulatory documents, four have
been standardized and aligned. These are Shipping
Bill, Exchange Control Declaration (GR Form),
port trust copy of the Shipping Bill for payment of
Port Charges.
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 & net weights
etc.
• The packing list also contains all basic information about
the export order like name & address of the buyer & the
exporter, purchase order number & date etc.
• The packing order is the basic document used in the
preparation of further documents like proforma invoice &
so on.
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 customer is in the form of
the Proforma Invoice.
• It is a quotation given as a reply to an enquiry.
• It normally forms the basis of all trade
transactions & enables importer to obtain import
license, if required.
Proforma Invoice (cont)
• Contents of Proforma Invoice are generally the
following:
– Name & addresses of exporter & importer
– Mode of transportation, port of discharge, final destination
– Buyer’s & seller's reference numbers / dates
– Description of the goods, mode of packing, total number of
packages, expected total weight etc.
– Origin of goods
– Price offer on FOB & CIF Basis
– Basic terms & conditions of sale.
Commercial Invoice
• Commercial invoice is the basic export document & contains all
information required for making other documents.
• It is prepared by the exporter after the execution of the export order
giving details about the goods shipped
• It should be addressed to the consignee as per the letter of credit.
• It is the basic evidence of the ‘contract of sale’ or purchase &
therefore must be prepared strictly in accordance to the terms 7
conditions mutually agreed between the buyer & seller.
• It should contain basic details as in the proforma invoice, the detailed
description of goods, as well as the final packing lists and the
markings on packages plus details of shipment of goods, name &
number of vessel/ voyage.
• This document is used for various export formalities, incentive claims,
negotiation of documents , accounting etc.
Certificate Of Origin
• The importers in several countries require a Certificate Of
Origin without which clearances 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.
• Certificates of origin are required when:
– Goods produced in a particular country are subject to preferential
tariff rates in the foreign market at the time of importation
– The goods produced in a particular country are banned for import
in the foreign market.
Types Of Certificate Of Origin 1
• (1) Certificate Of Origin for Availing Concessions under
GSP :
– Required by countries like France,Germany, Italy, Benelux
countries,UK, Australia, Japan, USA etc., which extend GSP
benefits & are issued by specialized agencies like:
• Export inspection agencies
• Joint DGFT, Commodity Boards & their regional offices
• Development Commissioner, Handicrafts
• Textile Committee for textiles
• Marine product export development authority for marine
products
• Development Commissioner for EPZs
Types Of Certificate Of Origin (cont)
• (2) Non-preferential Certificate Of Origin:
– These are normally required for clearance of goods by all
importers & are issued by the Chamber of Commerce of the
exporting countries or by Trade Association of the importing
country.
• (3) Certificate For availing concessions Under
Commonwealth Preferences:
– This is also known as “Combined Certificate Of origin &
value” & is required by two commonwealth countries,
Canada & New Zealand for concessions under
Commonwealth preferences.
– These have to be obtained from the High commission of the
country concerned.
Types Of Certificate Of Origin (cont)

• (4) Certificate For Availing Concessions Under Other


System Of Preferences
– Certificates of Origin are also required for tariff
concessions under the Global system Of Trade
Preferences (GSTP), Bangkok agreement (BA),
SAPTA,
– Export Inspection Councils have the authority to
print blank Certificates of Origin & these are
issued by EPCs, DCs of EPZs, EIC, FIEO etc.
Consular Invoice
• Consular Invoice is a document required mainly by the African &
certain other countries like Kenya, Uganda, Tanzania, Mauritius,
Australia, New Zealand Nigeria, Ghana etc.
• The exporter is required to submit 3 copies of the Commercial invoice
& related documents for certification to the respective Embassy &
one copy is returned to him after certification.
• Balance copies are sent by the Embassy to the customs department of
the importing country for verification upon arrival of goods &
calculation of the import duty payable.
• The consular certified copy is negotiated by the exporter along with
other documents.
Customs Invoice
• Countries like USA, Canada etc need customs invoice
• It is generally made out on a special form presented by the
customs authorities of the importing country & helps for
allowing entry of goods in the importing country at
preferential tariff rates.
• The invoice forms are generally available at the consular
office of the importing country and are required to be
signed and witnessed after duly filling the same.
Bill Of Exchange / Draft
• A Bill Of Exchange also known as Draft contains an order from the
creditor to the debtor to pay a specified amount to a person
mentioned therein.
• The maker of the Bill is known as “Drawer” & the person who is
directed to pay is called the “Drawee”
• The person who is entitled to receive the amount is called “Payee”
• A Bill Of Exchange is of two types: (i) Sight draft (immediate
payment) & (ii) Usance Draft ( Credit – Usance 30 days or usance
60 days)
• Unless & until the draft is retired, the negotiating collecting bank
does not hand over the shipping documents & the buyer can not
take delivery of goods.
Legalization & Attestation Of Documents
• Documents issued in one country ('Source Country') which need to be
used in another country ('Destination Country') must be
'authenticated' or 'legalized' before they can be recognized as valid in
the foreign country. This is a process in which various seals are
placed on the document.
• The number and type of authentication certificates depends on the
nature of the document and whether or not the foreign country is a
party to the multilateral treaty on "legalization" of documents.
• "Embassy (Consular) Legalization" of official documents is a
procedure of confirmation of the validity of originals of official
documents or certification of authenticity of signatures of the officials,
authorized signatures on documents, and also the validity of prints of
stamps, seals by which the document is fastened.
III(b)
Terms Used In Shipping
(INCO Terms)
INCO Terms
• Incoterms are internationally accepted commercial
terms, developed in 1936 by the International Chamber
of Commerce (ICC), in Paris.
• Incoterms 2000 define the respective roles of the buyer
and seller, in the agreement of transportation and
other responsibilities and clarifies, when the ownership
of the merchandise takes place.
• Incoterms are used in union with a sales agreement or
other methods of sales transactions and define the
responsibilities and obligations of both, the exporter
and importer, in Foreign Trade Transactions.
INCO Terms
– Incoterms 2000, is mainly concerned with the
loading, transport, insurance and delivery
transactions.
– Its main function is the distribution of goods and
regulation of transport charges.
– Another significant role played by Incoterms is to
identify and define the place of transfer and the
transport risks involved.
– Incoterms make international trade easier and
help traders in different countries to understand
one another & are most widely used international
contracts
INCO Terms- Objectives
• Incoterms safeguard the following issues in the
Foreign Trade contract or International Trade
Contract:
– To determine the critical point of the transfer of the
risks of the seller to the buyer, in the process of
forwarding of the goods (risks of loss, deterioration,
robbery of the goods).
– To enable the person who supports these risks to
make arrangements in term of insurance & other
arrangements.
– To specify who is going to subscribe the contract of
carriage; seller (exporter) or the buyer (importer).
INCO Terms- Objectives
• To distribute between the seller and the buyer, the logistic and
administrative expenses, at the various stages of the process
• It is important to define, who is responsible for packaging,
marking, operations of handling, loading and unloading,
inspection of the goods.
• Need To confirm and fix respective obligations, for the
achievement of the formalities of exportation and importation,
the payment of the rights and taxes of importation, as well as
the sending of the documents.
• There are 13 Incoterms, globally adopted by the International
Chamber of Commerce.
INCO Terms- Groups
• Incoterms 1990 / 2000 - which defines all trade terms are divided
into four basic groups.
• Group E comprise of Departure term. Where the seller makes the
goods available to the buyer at the seller's own premises,
(EXW) - Ex Works
• Group F: Comprise of Shipment terms - Main carriage unpaid.
Where the seller is called on to deliver the goods to a carrier
named by the buyer, (FCA, FAS and FOB). These are shipment
contracts with the shipment point named, and carriage unpaid by
the seller.
– FCA - Free Carrier
– FAS - Free Alongside Ship
– FOB - Free On Board
INCO Terms- Groups
• Group C: Comprise of Shipment terms - Main carriage
paid. Where the seller has to contract for carriage, but
without assuming the risk of loss of or damage to the
goods or additional costs due to events occurring after
shipment and dispatch, (CFR, CIF, CPT and CIP).
• These are shipment contracts, with the destination point
named, and carriage paid by the seller.
• There are two critical division points, one for costs, the
other for risk.
• Costs being assumed by the seller until the destination
point; risk being transferred to the buyer at the point of
shipment.
INCO Terms- Groups

• In CIF & CIP terms, the seller arranges the


contract of carriage and payment of freight.
– CFR - Cost and Freight
– CIF - Cost, Insurance and Freight
– CPT - Carriage Paid To
– CIP - Carriage and Insurance Paid To
INCO Terms- Groups

• Group D: Comprise Of Arrival Terms. Where the seller


has to bear all costs and risk needed to bring the goods
to the country of destination, (DAF, DES, DEQ, DDU
and DDP). These are arrival contracts.
– DAF - Delivered At Frontier
– DES - Delivered Ex Ship
– DEQ - Delivered Ex Quay
– DDU - Delivered Duty Unpaid
– DDP - Delivered Duty Paid
Ex-Works Contract (EXW)
• Title and risk pass to buyer, (including liability for
payment for all transportation and insurance costs)
from the seller's door.
• Used for any mode of transportation.

• Seller : In EXW shipment terms the Seller (Exporter)


provides the goods for collection by the Buyer
(Importer) on the seller’s or exporter's premise.
• Responsibility for the seller is to put the goods, in a
good package which is adaptable and disposable by
the transport.
Ex-Works Contract (EXW)
• Buyer : The buyer or Importer, arranges
insurance for damage in transit goods & have to
bear all costs and risks involved in shipment
transactions.

• (However, if the parties wish the seller to be


responsible for the loading of the goods on
departure and to bear the risks and all the costs of
such loading, this should be made clear by adding
explicit wording to this effect in the contract of
sale.
FCA -Free Carrier (…. Named place)
• "Free Carrier" means that the seller fulfils his obligation to
deliver when he has handed over the goods, cleared for export,
into the charge of the carrier named by the buyer at the named
place or point.
• If no precise point is indicated by the buyer, the seller may
choose within the place or range stipulated where the carrier
shall take the goods into his charge.
• When, according to commercial practice, the seller's assistance
is required in making the contract with the carrier (such as in
rail or air transport), the seller may act at the buyer's risk and
expense.
• This term may be used for, any mode of transport, including
multimodal transport.
FCA -Free Carrier (…. Named place)
• "Carrier" means any person who, in a contract of carriage,
undertakes to perform or to procure the performance of carriage by
rail, road, sea, air, inland waterway or by a combination of such
modes.
• If the buyer instructs the seller to deliver the cargo to a person, e.g.
a freight forwarder who is not a "carrier", the seller is deemed to
have fulfilled his obligation to deliver the goods when they are in
the custody of that person.
• "Transport terminal", means a railway terminal, a freight station, a
container terminal or yard, a multi-purpose cargo terminal or any
similar receiving point.
• "Container" includes any equipment used to unitize cargo, e.g. all
types of containers and/or flats, trailers etc and applies to all modes
of transport.
FAS - ( Free Alongside Ship) Contract
• FAS- Free Alongside ship: Title and risk pass to buyer, including
payment of all transportation and insurance cost, once delivered
alongside ship by the seller.
• Used for sea or inland waterway transportation. The export clearance
obligation rests with the seller.
• In FAS price includes all costs incurred in delivering the goods
alongside the vessel, at the port or nominated place of the buyer, but
seller does not pay charges for loading on board of vessel, as well as
ocean freight charges and marine insurance.
• Seller: The responsibility of the seller are fulfilled, when goods are
placed cleared along the ship.
• Buyer: Buyer or Importer bears all expenses and risks of loss or
damage of transit goods, delivered along the ship.
Free On Board (FOB) Contract

• FOB is one of the most frequently used price


quotation, in the international market.
• Under this quotation, the exporter undertakes to pay
all expenditure till the loading of goods, on board
the ship, including documentation charges.
• All expenditure thereafter, such as ocean freight,
marine insurance, unloading charges etc are borne
by the importer.
Free On Board (FOB) Contract (cont)
• The sellers obligations are :
– To provide goods & the commercial invoice , or its equivalent
electronic message, in conformity with the contract of sale.
– To obtain any export license or other official authorization,
and carry out all customs formalities, necessary for
exportation of goods.
– To deliver the goods on board of vessel, at the port of
shipment, on the date, or within the period, stipulated.
– To give the buyer sufficient notice, that, the goods have been
delivered on board the vessel
– To pay the costs of checking quality, measuring, weighing,
counting , packing and marking of the goods.
Free On Board (FOB) Contract ( Cont)
• The buyer’s obligations in a FOB contract are:
– To pay the price as provided, in the contract of sale
– To obtain import license or other official authorization &
carry out all customs formalities, for the importation of
goods
– To take delivery of goods, when the goods have been
delivered, in accordance with the terms of the contract.
– To reserve the necessary shipping space and give due notice
of the same, to the exporter ; &
– To bear all costs and risks of the goods, from the time, when
they shall have effectively passed the ship’s rail,
Cost & Freight (CFR) Contract
• In this term the exporter bears the cost of carriage or transport to
the selected destination port, & the risk transferable, to the
buyers at the port of shipment.

Seller: chooses the carrier, concludes and bears the expenses by


paying freight to the agreed port of destination, unloading not
included. The loading of the duty-paid goods on the ship falls on
him as well as the formalities of forwarding. On the other hand,
the transfer of risks is the same one as in FOB.

Buyer: The buyers supports all the risk of transport. When the
goods are delivered aboard by ship at the unloading port, buyer
receives it from the carrier and takes delivery of the goods from
nominated destination port.
CIF Contract
• Cost, insurance & freight means, that, the seller has
the same obligations as under the FOB contract, but
with the addition, that, he has to organize the marine
freight & procure marine insurance, against the
buyer’s risk of loss or damage, to the goods during
carriage.

• The seller contracts the insurance and pays the


premium and also pays the ocean freight.
CIF Contract(cont)
• The seller has the following additional obligations as
compared to FOB Contract :
– To arrange for the carriage of the goods to the named port of
destination by the usual route in a sea-going vessel & to pay its
costs & freights.
– To obtain cargo insurance as agreed in the contract & to provide
the buyer with the insurance policy or other evidence of insurance
cover.
• The above obligations are excluded from the buyer’s
obligations. Buyer still has the obligations, as indicated in
the “ buyers’ obligations, in FOB contracts.
CPT- Carriage Paid To….
• "Carriage paid to... " means that the seller pays the freight for the
carriage of the goods to the named destination. The risk of loss of or
damage to the goods, as well as any additional costs, due to events
occurring after the time the goods have been delivered to the carrier, is
transferred from the seller to the buyer, when the goods have been
delivered into the custody of the carrier.
• "Carrier" means any person who, in a contract of carriage, undertakes to
perform or to procure the performance of' carriage, by rail, road, sea,
air, inland waterway or by a combination of such modes.
• If subsequent carriers are used for the carriage to the agreed destination,
the risk passes when the goods have been delivered to the first carrier.
• The CPT term requires the seller to clear the goods for export.
DAF- Delivered At Frontier(Named Place)

• "Delivered at Frontier" means that the seller fulfils his


obligation to deliver when the goods have been made available,
cleared for export, at the named point and place at the frontier,
but before the customs border of the adjoining country.
• The term "frontier" may be used for any frontier including that of
the country of export. Therefore, it is of vital importance that the
frontier in question be defined precisely by always naming the
point and place in the term.
• The term is primarily intended to be used when goods are to be
carried by rail or road, but it may be used for any mode of
transport.
DES - DELIVERED EX SHIP
(... named port of destination)
• “Ex Ship" means that the seller fulfils his obligation to
deliver, when the goods have been made available to the
buyer on board the ship, uncleared for import at the
named port of destination.

• The seller has to bear all the costs and risks involved in
bringing the goods to the named port of destination. This
term can only be used for sea or inland waterway
transport.
DEQ -"Delivered Ex Quay (duty paid)"
• "Delivered Ex Quay (duty paid)" means that the seller fulfils his
obligation to deliver when he has made the goods available to the
buyer on the quay (wharf) at the named port of destination. The
seller has to bear all risks and costs including duties, taxes and
other charges of delivering the goods thereto.
• This term should not be used if the seller is unable directly or
indirectly to obtain the import license.
• Buyer has to clear the goods for importation and pay the duty.
• If the parties wish to exclude from the seller's obligations some of
the costs payable upon importation of the goods (such as value
added tax (VAT)), this should be made clear by adding words to
this effect: "Delivered ex quay, VAT unpaid (... named port of
destination)",.
• This term can only be used for sea or inland waterway transport.
DDU- "Delivered duty unpaid"
• Delivered duty unpaid" means that the seller fulfils his
obligation to deliver when the goods have been made
available at the named place in the country of
importation.
• The seller has to bear the costs and risks involved in
bringing the goods thereto (excluding duties, taxes and
other official charges payable upon importation) as
well as the costs and risks of carrying out customs
formalities.
• The buyer has to pay any additional costs and to bear
any risks caused by his failure to clear the goods for
import in time.
DDU- "Delivered duty unpaid“(cont)
• If the parties wish the seller to carry out customs
formalities and bear the costs and risks resulting there
from, this has to be made clear by adding words to this
effect.
• If the parties wish to include in the seller's obligations
some of the costs payable upon importation of the
goods (such as value added tax (VAT)), this should be
made clear by adding words to this effect: Delivered
duty unpaid, VAT paid, (... named place of destination),
• This term may be used irrespective of the mode of
transport.
DDP- Delivered Duty Paid
• "Delivered duty paid" means that the seller fulfils his obligation to
deliver when the goods have been made available at the named place
in the country of importation.
• The seller has to bear the risks and costs, including duties, taxes and
other charges of delivering the goods thereto, cleared for importation
whilst the DDU should be used.
• If the parties wish to exclude from the seller's obligations some of the
costs payable upon importation of the goods (such as value added tax
(VAT)), this should be made clear by adding words to this effect:
"Delivered duty paid, VAT unpaid (...named place of destination)".
• This term may be used irrespective of the mode of transport.
(IV)
Export Procedures
IV(a)
Excise Clearance For Exports
Excise Clearance Benefit/ Rebate

• Excise Duty
– Excise duty is a tax imposed by the Central government
on goods manufactured in India.
– It is collected at source I.e. before removal of goods
from the factory premises
– Exporters are totally exempted from payment of CED
– However, necessary clearances must be obtained by the
exporter in one of the following ways
Excise Clearance Benefit/ Rebate (cont)

• (i) Export Under Rebate


– Under this system, an exporter is required to pay
CED initially & then claim it from central excise
department after shipment of goods.
• (ii) Export under Bond
– Under this system, an exporter is required to execute
a bond, in favor of excise authorities, for a sum
equivalent to the amount of excise chargeable on
such goods. Such bond should be supported by an
appropriate bank guarantee.
Excise Clearance Under Rule 18 & Rule 19
of Central Excise Rules

• Export Procedures for Excise - There are basically


two procedures for dispatching the goods out of
India.
– (a) (Rule 18 of Central Excise Rules).
• In the first procedure, duties are paid and subsequently
rebate (refund) is claimed after exportation of such
goods. Alternatively, rebate is granted of duty paid on
inputs used in the exported final product.
• Rebate claim had to be made to A.C. of Central excise
along with original of ARE-1 & other prescribed
documents.
Excise Clearance Under Rule 18 & Rule 19
of Central Excise Rules (cont)
– (b) (Rule 19 of Central Excise Rules).
• The other procedure is to export goods under bond
without payment of excise duty.
• On actual exportation of goods and on presentation
of necessary proofs regarding exports, the bond is
released. Regular Exporters can have a running
bond for this purpose.
• A merchant exporter has to furnish bond in form B-1
& certificate in CT-1.
Conditions For Central Excise
Clearance
• As a part of further simplifications and
rationalization of excise rules announced by the
Finance Minister a new set of Central Excise
Rules, 2001, has come into effect from 1st March
2002.
• The procedure for export of excisable goods
(except to Nepal & Bhutan) is subject to certain
conditions & limitations.
Conditions & Limitations
( Under payment of CED)
• The excisable goods can be exported directly from a factory
or a warehouse after the payment of excise duty
• The excisable goods must be exported within 6 months from
the date within which they were cleared for export from the
factory of manufacture or his warehouse.
• The market price of the excisable goods at the time of
exportation is not less than the amount of rebate duty
claimed.
• The amount of rebate of duty admissible is not less than Rs.
500.00
Conditions & Limitations
( Without payment of CED)

• The exporter is required to submit a General Bond


( Surety or security) to the Assistant Commissioner of
Central Excise or the Maritime Commissioner for a sum
equivalent to the duty chargeable on the goods.

• The excisable goods must be exported within 6 months


from the the date on which they were cleared for exports
from the factory of manufacturer or his warehouse.
Procedure For Central Excise Clearance
• The following is the procedure for obtaining central excise clearance:
– (i) Application to the Assistant Collector/ commissioner of Central
Excise (ACCE)
• The exporter is required to make an application to the
Superintendent or the Inspector of Central Excise, having
jurisdiction over the factory of production or warehouse of the
exporter, by filling up 4 copies of ARE-I form, in five copies
with distinctive colors.
– (ii) Information to the Range Superintendent
• The ACCE informs the range superintendent, in whose area the
exporter’s factory or warehouse is located. On receiving
instructions from the ACCE, the range superintendent, deputes
an inspector for clearance of goods for exports.
Procedure For Central Excise Clearance
(Cont)

• (iii) Sealing of goods :


– The inspector of Central Excise verifies the
goods mentioned in the application and the
particulars of the duty paid or payable.
– If satisfied, he seals each package or the
container in the manner as may be specified by
the Commissioner of Central excise and
endorses each copy of the application.
(iv)Processing of ARE-I Forms

ARE-I(Original) The Superintendent or Inspector returns the original


ARE-II(Duplicate) & the duplicate to the exporter
ARE-I (Triplicate) The triplicate copy of ARE-I is sent to the Maritime
Commissioner at the port of shipment or to the Excise
Rebate Audit section in case the rebate is to be
claimed by EDI (Electronic Data Interchange) system
of customs.
ARE-I This copy of ARE-I is retained by the Superintendent
(Quadruplicate) or Inspector of Central Excise.

ARE-I This copy is returned to the exporter for claiming any


(Quintuplicate) other incentive.
Procedure For Central Excise Clearance
(Cont)
• (v) Examination of the goods at the place of exports

– At the port of shipment, the exporter presents goods


together with original, duplicate & quintuplicate copies of
the ARE-I to the Commissioner of Customs.
– The Commissioner of Customs examines the consignments
and if satisfied, certifies the goods for exports, by an
endorsement on all the copies of ARE-I.
– The original & quintuplicate copies are returned to the
exporter and the duplicate copy is sent to the Maritime
Commissioner.
Procedure For Central Excise Clearance
(Cont)
• (vi) Submission of the claim: For claiming rebate, the exporter is
required to submit the following documents along with the prescribed
application in form “C”(in triplicate) to Assistant Commissioner of central
excise / maritime collector
– Original copy of ARE-I duly endorsed by customs officer
– Duplicate copy of ARE-I received from customs officer in a sealed cover.
– Duly attested copy of shipping bill
– Duly attested copy of Bill of Lading or airway bill
– Duplicate copy of Central Excise invoice under which CED was paid
Procedure For Central Excise Clearance
(Cont)
• (vii) Verification of the application
– Assistant or Deputy Commissioner of Central Excise compares the
details listed in the different copies of ARE-I & if he is satisfied that
the exports are not under claims for duty drawback, he sanctions the
rebate.
• (viii) Refund of duty
– If any refundable amount is not paid to the applicant within 3
months from the date of filing the claim, interest at the rate of 20%
is paid for the period between the expiry of 3 moths & the date of
refund.
• (ix) Cancellation of documents
– If the excisable goods are not exported, the Assistant Commissioner
of Central Excise cancels the export documents on request of the
exporter.
IV(b)
Shipment Of Goods
(Sea Shipment)
Shipping & Customs Formalities

• According to Section 40 of Customs Act, the person in charge of


conveyance vessel, vehicle, aircraft etc., can not permit loading of
export cargo, at the customs station, until & unless a formal approval
to the export given by the authorized customs officer is presented.
• Before granting permission, the customs officer ensures that the
goods being exported are in accordance with different regulations,
particularly in terms of the following:
– Goods must be as declared by the exporter
– The duty or cess leviable thereon has been properly declared &
paid.
– Provision of Export Control order, Export (Quality Control &
Inspection Act) & FEMA are complied with.
Procedure For Shipping &
Customs Clearance
• (a) Preparation & Submission of Export Documentation:
For clearance of cargo from customs, the exporter or his agent is
required to submit the following documents along with 5 copies of
Shipping Bill to the customs appraiser at the Customs House.
– Letter of Credit along with Export Contract or Export Order
– Commercial Invoice (2 copies)
– Packing List or Packing Note
– Certificate of Origin
– GR Form ( original & duplicate)
– ARE-I Form
– Original copy of Certificate Of Inspection, wherever necessary.
– Marine Insurance Policy.
Procedure For Shipping & Customs
Clearance ( cont 1)
• (b) Verification Of Documents
– The Customs appraiser verifies the details listed in each document
& ensures that all formalities relating to exchange control etc.,
have been properly complied with by the exporter. If satisfied, he
issues a Shipping Bill Number.
• (c) Valuation Of Goods
– The customs appraiser assesses the Shipping Bill and values the
goods.The value as determined by the customs officer, holds good
in future transactions, especially for the claim of incentives. All
documents are then returned to the exporter, except the following:
• Original copy of GR, to be forwarded to the RBI
• Original Copy of Shipping Bill
• One copy of Commercial Invoice.
Procedure For Shipping & Customs
Clearance ( cont 2)
– The validity of the assessed Shipping Bill, is for one
month only. If the exporter fails to deliver the goods in
that period, he will have to undergo the above procedure
again.
• (d) Obtaining Carting Order
– The C&F Agent, then, approaches the Superintendent of
the concerned Port Trust, for obtaining the “Carting
Order” for moving the cargo inside the docks. After
obtaining the carting order, the cargo is physically
moved into the port area & stored in the appropriate
shed.
Procedure For Shipping & Customs
Clearance ( cont 3)
• (e) Customs Examination & Issue of “Let Export Order”:
– The customs examiner at the port of shipment physically examines
the goods and seals the package in his presence. The same can be
arranged for at the factory or the warehouse by making an
application to the Assistant Collector of customs. The customs
examiner, if satisfied, issues a formal permission for loading of the
cargo on the ship in the form of a “ let export order”. The above
procedure is now processed through EDI system.
• (f) Obtaining “Let ship Order” from customs preventive officer:
– “Let export order” must be supplemented by a “Let Ship Order”
issued by the Customs Preventive Officer. The C&F agent submits
the duplicate copy of the Shipping Bill, duly endorsed by the
customs examiner, to the preventive officer, who endorses it with
the “Let Ship Order”
Procedure For Shipping & Customs
Clearance ( cont 4)

• (g) Obtaining Mate’s receipt & the Bill of Lading:


– The goods are then loaded on board of ship for which the
Mate or the captain of the ship, issues Mate’s Receipt to
the Port Superintendent. The Port Superintendent on
receipt of the port’s dues, hands over the mate’s receipt to
the C&F agent who surrenders the Mate’s receipt to the
shipping company for obtaining the Bill of Lading.
– The shipping company issues two or three negotiable and
two or three copies of non-negotiable copies of the B/L.
Exports By Air
• The exporter must have an IEC (Import Export Code)
number issued by DGFT (Director General of Foreign
Trade).
• He has to file a Shipping Bill which has to be assessed by
Customs and the goods are also subject to examination by
Customs before LEO (Let Export Order) is given.
• This document can be filed with Customs up to 15 days
before the goods are actually exported.
• Like in case of imports, in exports too, the document for
assessment and examination by Customs Shipping Bill, is
processed through the EDI.
Exports By Air (cont)
• To encourage exports, the Government has introduced
various export promotion schemes i.e. Drawback,
DEEC, DFRC, DEPB, EPCG etc. and the exporter has
a choice to avail any of them.
• However, certain schemes cast an export obligation on
the exporter for which he is required to execute Bond
and Bank Guarantee for certain period.
• Exports are also governed by the Customs Act, 1962,
the EXIM Policy and are subject to prohibitions and
restrictions imposed under various other Acts i.e.
CITES, NDPS Act, Arms Act, Antiques Act, Drugs &
Cosmetics Act, etc. .
Procedure For Air- Cargo as given by AAI
Shipment Procedure for Export General Cargo
• 1.Registration, Processing of shipping bill by customs.
• 2.Obtain carting order and AWB from the carrier or
through EDI
• 3.Present papers (shipping bill / AWB / Carting order) to
AAI counter and obtain terminal charges receipt.
• 4.Pay AAI Charges.
• 5.Enter Export Cargo along with relevant documents
• 6.Present TSP receipts to AAI staff at designated TO gate
and off-load cargo. Obtain AAI endorsement on TSP
receipt.
Procedure For Air- Cargo as given by AAI
• 7.Get the packages (as per the customs endorsement) examined by
customs and complete the formalities
• 8.Let Export Order / Customs Orders
• 9.Present TSP receipt along with let Export Order to AAI staff at
bonded area gate along with cargo for binning & for location slip
for airlines handled by AAI.
• 10.Hand over documents to airlines
• 11.Unitization - Airline submits Customs approved checklist for
unitization or bulk loading to AAI
• 12.Release of Export Cargo for the flight against request from
airlines duly approved by customs.
Basically the steps in clearance of air-cargo are the same as in sea-
cargo. However, suitable modifications as required are done.
IV(c)
Marine Insurance For Export Cargo
Introduction
• Marine Insurance covers the loss or damage of ships, cargo,
terminals, and any transport or property by which cargo is
transferred, acquired, or held between the points of origin and
final destination.
• Cargo insurance is a sub-branch of marine insurance, though
Marine also includes Onshore and Offshore exposed property
(container terminals, ports, oil platforms, pipelines); Hull;
Marine Casualty; and Marine Liability.
• In the 19th. century, Lloyd's and the Institute of London
Underwriters (a grouping of London company insurers)
developed between them standardized clauses for the use of
marine insurance, and these have been maintained since. These
are known as the Institute Clauses because the Institute covered
the cost of their publication.
Marine Cargo Insurance
• Transport Insurance
• Export and import in international trade, requires transportation
of goods over a long distance.
• No matter whichever transport has been used in international
trade, necessary insurance is must for every single good.
• Cargo insurance also known as marine cargo insurance is a type
of insurance against physical damage or loss of goods during
transportation.
• Cargo insurance is effective in all the three cases whether the
goods have been transported via sea, land or air.
• Insurance policy is not applicable if the goods have been found to
be packaged or transported by any wrong means or methods. So,
it is advisable to use a broker for placing cargo risks.
Insurance- Scope Of Coverage

• The following can be covered for the risk of loss or damage:


• Cargo import/ export cross voyage dispatched by sea, river, road,
rail post, personal courier, and including associated storage risks.
• Good in transit (inland).
• Freight service liability.
• Associated stock.
• However there are still a number of general exclusions such as loss
by delay, war risk, improper packaging and insolvency of carrier.
Covers for some of these may be negotiated.
• Regular exporters may negotiate open cover. It is an umbrella
marine insurance policy that is activated when eligible shipments
are made. Individual insurance certificates are issued after shipment
Insurance- Specialized Covers
• Whereas standard marine/transport cover is the answer for general
cargo, some classes of business will have special requirements.
• General insurer may have developed specialty teams to cater for the
needs of these business, and it is worth asking if this cover can be
extended to export risks.
• Cover may be automatically available for the needs of the trade.
• Examples of this are:
– Project Constructional works: cover the movement of goods for
the project.
– Fine art
– Precious stones : Special Cover for of precious stones.
– Stock through put cover: extended beyond the time goods are in
transit until when they are used at the destination.
Insurance- Specialized Covers
• Seller's Buyer's Contingent Interest Insurance
– An exporter selling on, for example FOB
(INCOTERMS 2000) delivery terms would according
to the contract and to INCOTERMS, have no
responsibility for insurance, once the goods have
passed the ship's rail.
– However, for peace of mind, he may wish to purchase
extra cover, which will cover him for loss or will make
up cover where the other policy is too restrictive .
This is known as Seller's Interest Insurance.
– Similarly, cover is available to importers/buyers.
Insurance- Specialized Covers (cont)

• Loss of Profits/ Consequential Loss Insurance


– Importers buying goods for a particular event
may be interested in consequential loss cover in
case the goods are received late and expensive
replacements have to be found to replace them.
– n such cases, the insurer will pay a claim and
receive proceeds from the eventual sale of the
delayed goods.
Insuring Goods
Against Marine Risks
• A marine insurance policy has to be obtained to cover
various risks while goods are in transit.

• Marine insurance policy must normally be taken from an


Indian insurance company & should be for CIF value
plus 10% for incidentals.

• Upon receipt of the cover, the insurer must study the


various clauses carefully.
Insuring Goods
Against Marine Risks (cont)
• Policies can broadly be divided into 3 groups
– Individual shipment policy
– Open policy – (automatic protection for all shipments. Each
shipment must be declared to the insuring company)
– Floating Policy ( describes insurance in general terms &
leaves other particular to be stated subsequently)
• Risks covered by marine insurance policies are represented by
special clauses like Institute Cargo clause (C), Institute Cargo
clause(B) , Institute Cargo clause(A) etc.
• These policies are freely assignable
IV(d)
Quality & Preshipment Inspection
Introduction
• For sometime now, a number of importers have used the services
of independent inspection companies, to certify the quality &
quantity of products , they want to import.
• These inspections, mostly conducted prior to shipment & in the
country of exports, assure the importer that the goods conform to
the technical specification & quality standards laid down in the
contract & that the quantities exported are accurate.
• Regulations in many countries, require that goods imported by
government departments to be inspected & certified for quality &
quantity by independent & competent inspection authorities.
• Over 30 developing countries in the world use the services of
preshipment inspection (PSI) agencies to control unfair or
improper practices.
Introduction
• The basic objectives of PSI are:
– To carry out physical inspection of the goods to ensure that
they conform to the terms of the contract
– To verify their prices &
– To ensure that they are classified by the exporter under the
correct tariff classification of the importing country.
• GATT Agreement recognizes PSI by several nations.
• The purpose is to safeguard national financial interests
(prevention of capital flight and commercial fraud as well as
customs duty evasion, for instance) and to compensate for
inadequacies in administrative infrastructures.
Export Inspection Council of India (EIC)
• The Export Inspection Council of India (EIC) was set up by the
Government of India under the Export (Quality Control &
Inspection) Act, 1963, as an apex body, to provide for sound
development of export trade, through quality control and pre-
shipment inspection.
• The Act empowers the Central Government, to notify
commodities and their minimum standards for exports and to set
up suitable machinery for inspection and quality control.
• The EIC is assisted in its functions by the Export Inspection
Agencies (EIAs) located at Chennai, Kochi, Kolkata, Delhi and
Mumbai, having a network of 38 sub-offices and laboratories, to
back up the pre-shipment inspection and certification activity
Export Inspection Council
• Majority of export commodities have been brought within the
purview of this Act and are subject to compulsory pre-shipment
inspection.
• All commodities will be covered by quality control and
compulsory pre-shipment inspection ultimately.
• The Export Inspection Council, established under the Act
administers quality control and pre-shipment inspection.
• The Council is responsible for establishing laboratories/ test
houses providing inspection facilities for the commodities notified
• Has established inspection agencies, under which quality
inspection officials operate
IV(e)
ECGC Services
ECGC
• Export contracts are open to risks which can generally be
categorized into two broad types:
• POLITICAL RISKS
– Can be caused by outbreak of war or civil war, in the
importer’s country or coup or an insurrection, which can
result in delay or non-receipt of payments. Same problems
may arise due to macro-economic or balance of payments
problems, in the importer’s country.
• COMMERCIAL RISKS
– These are insolvency or protracted default in payment by
the buyers.
ECGC
• The Government set up the Export Risks Insurance Corporation
(ERIC) in 1957 to provide export credit insurance support to
Indian exporters.
• This was transformed to Export Credit & Guarantee Corporation
Ltd. (ECGC) in 1964 & then to Export Credit Guarantee
Corporation of India Ltd. In 1983.
• ECGC is wholly owned by GOI & functions under the Ministry of
Commerce.
• ECGC is managed by a Board of Directors comprising
representatives of the Government, RBI, Banking , Insurance &
Exporting community.
• The goal of ECGC is to provide cost effective insurance and trade
related services to meet the needs & expectations of the exporting
community.
Need For Export Credit Insurance
• Payments for exports are open to risks even at the best of times.
• The risks have assumed large proportions today,due to the far-
reaching political and economic changes that are sweeping the
world.
• Outbreak of war or civil war or coup or an insurrection, may
block or delay payment for goods exported.
• Economic difficulties or balance of payment problems may lead
a country to impose restrictions on either import of certain
goods or on transfer of payments for goods imported.
• In addition, the exporters have to face commercial risks of
insolvency or protracted default of buyers.
• Export credit insurance is designed to protect exporters from the
consequences of the payment risks, both political and
commercial, to enable them to expand their overseas business
Services Provided By ECGC
To Exporters
• To provide political & commercial risk cover to the
exporters.

• To provide exporters information regarding credit


worthiness of overseas buyers (Dun & Bradstreet)

• Provide information on approximately 180 countries


with its own export ratings.

• To facilitate exporters in recovering bad debts.


Services Provided By ECGC
To Exporters (cont)
• Assists exporters in obtaining financial assistance from
commercial banks / financial institutions & provides guarantees
to bankers for:
– Packing Credit guarantee ( pre-shipment credit on the basis
of export order)
– Post shipment export credit guarantee
– Export performance guarantee ( Counter guarantee to
protect bankers against guarantees given by it on behalf of
exporters)
– Export Finance Overseas Credit guarantee ( to banks
financing overseas projects)
Types Of Policies Issued By ECGC
• Construction Works Policy
– It is a comprehensive policy covering credit risks faced by
Indian contractors executing civil contracts abroad. Nature of
these contracts differ from other normal supply contracts.
• Insurance for Buyer’s Credit & Lines Of Credit
– Buyer’s Credit is a credit extended by Banks in India to an
overseas buyer in order to enable him to pay for importing
machinery & equipment for a specific project from India
– A Line of Credit is a credit extended by a Bank in India to an
Overseas Bank, institution or Government, for the purpose of
facilitating import of goods from India to the overseas country.
– ECGC has evolved policies for banks which extend Buyer’s
Credit or Line Of Credit to overseas buyers.
Types Of Policies Issued By ECGC
Continued
• Shipment Policy
– Shipment ( comprehensive risks) Policy, commonly known as the
Standard Policy, is ideally suited to cover risks in respect of goods
exported against maximum 180 days terms & covering most risks
I.e political & commercial, from date of shipment.
– Issued to exporters whose export turnover is over Rs. 50 Lakhs
– Covers all shipments made by the exporter on credit terms
excepting shipments made to one’s own associates.
– Shipments on consignment basis ( where payments are made by the
agent on stock & sale of the goods ) are normally excluded.
– Air shipments are covered only when the exporter has been issued
a cover against “open delivery” & has paid appropriate
premiums.
ECGC’s Performance
(In Rs. Crores)

Item 2007-08 2006-07

Value Of risks covered 922,183 428,040

Premium Income 668 618

Claims Paid 420 372

Recoveries made 157 210


IV(f)
GSP Rules Of Origin
Generalised System Of Preferences
(GSP)
• GSP is a non contractual instrument by which
industrialized (developed) countries
unilaterally & on the basis of non- reciprocity
extend tariff concessions to developing countries.
• The following countries extend tariff preference
under their GSP schemes:
– USA, New Zealand, Belarus, European Union ,
Japan , Russia, Canada, Norway, Australia,
Switzerland, Bulgaria.
Generalised System Of Preferences
(GSP)( Cont)
• GSP schemes of these countries detail the sectors/
product & tariff lines under which these benefits are
available, besides the conditions & the procedures
governing these benefits.
• These schemes are renewed & modified from time to
time.
• Normally customs of GSP offering countries require
information in a prescribed form duly filled by
exporters of beneficiary countries & certified by
authorized agencies.
Global System Of Trade Preferences (GSTP)

• Under the agreement establishing global system Of


Trade Preferences (GSTP), tariff concessions are
exchanged among developing countries, who have
signed the Agreement.
• Presently there are 46 member countries of GSTP
and India has exchanged tariff with 12 countries on
a limited number of products.
• Export Inspection Council (EIC) is the sole agency
authorized to issue “certificate of origin” under
GSTP.
SAPTA
• The agreement establishing SAPTA (SAARC preferential
Trading Agreement) was signed by 7 SAARC members
namely India, Pakistan, Nepal, Bhutan, Bangladesh, Sri
Lanka, Maldives in 1993 & came into operation in 1995.

• Four rounds of trade negotiations have been completed


and more than 3000 tariff lines are under tariff
concessions among the SAARC countries.
(v)
Benefits Of Exports
(i) Excise Clearance Benefits/Rebate
Income Tax Benefit
Excise Clearance Benefit/ Rebate

• Excise Duty
– Excise duty is a tax imposed by the Central government on goods manufactured
in India.
– It is collected at source I.e. before removal of goods from the factory premises
– Exporters are totally exempted from payment of CED
– However, necessary clearances must be obtained by the exporter in one of the
following ways
• (i) Export Under Rebate
– Under this system, an exporter is required to pay CED initially & then claim it
from central excise department after shipment of goods.
• (ii) Export under Bond
– Under this system, an exporter is required to execute a bond, in favor of excise
authorities, for a sum equivalent to the amount of excise chargeable on such
goods. Such bond should be supported by an appropriate bank guarantee.
Excise Clearance Under Rule 18 & Rule 19
of Central Excise Rules
• Export Procedures for Excise - There are basically two procedures
for dispatching the goods out of India.
– (a) (Rule 18 of Central Excise Rules).
• In the first procedure, duties are paid and subsequently rebate (refund) is
claimed after exportation of such goods. Alternatively, rebate is granted of
duty paid on inputs used in the exported final product.
• Rebate claim had to be made to A.C. of Central excise along with original
of ARE-1 & other prescribed documents.
– (b) (Rule 19 of Central Excise Rules).
• The other procedure is to export goods under bond without payment of
excise duty.
• On actual exportation of goods and on presentation of necessary proofs
regarding exports, the bond is released. Regular Exporters can have a
running bond for this purpose.
• A merchant exporter has to furnish bond in form B-1 & certificate in CT-1.
Conditions For Central Excise Clearance

• As a part of further simplifications and


rationalization of excise rules announced by the
Finance Minister a new set of Central Excise
Rules, 2001, has come into effect from 1st March
2002.
• The procedure for export of excisable goods
(except to Nepal & Bhutan) is subject to certain
conditions & limitations.
Conditions & Limitations
( Under payment of CED)

• The excisable goods can be exported directly from a factory


or a warehouse after the payment of excise duty
• The excisable goods must be exported within 6 months from
the date within which they were cleared for export from the
factory of manufacture or his warehouse.
• The market price of the excisable goods at the time of
exportation is not less than the amount of rebate duty
claimed.
• The amount of rebate of duty admissible is not less than Rs.
500.00
Conditions & Limitations
( Without payment of CED)

• The exporter is required to submit a General Bond ( Surety


or security) to the Assistant Commissioner of Central Excise
or the Maritime Commissioner for a sum equivalent to the
duty chargeable on the goods.

• The excisable goods must be exported within 6 months from


the the date on which they were cleared for exports from the
factory of manufacturer or his warehouse.
Income Tax Benefits

1. Exemption from Income Tax: In order to


enable the exporters to plough back their
earnings and promote exports, the
Government has given IT exemption to
exporters under section 80HHC of the I.Tax
Act
2. Similarly long term tax holidays are allowed
to 100% EOUs in designated areas such as
EPZs, SEZs etc.
VI
Shipment & Transport
Sea, Air, Rail, Road, Pipeline
VII
Role Of Overseas Agents
& Remittance Of Commission
Overseas Agents
• Selling through overseas agents is a strategic entry option
open to exporters.
• Like all options, it has certain advantages & demerits.
• Overseas Agents
– Selling through an overseas agent is an effective strategy.
– The agents serve as a source of market intelligence.
– The agent is in a position to render his advice to exporter or new
methods and strategy for pushing up sales of your products. He also
provides you support in the matter of transportation, reservation of
accommodation, appointment with the government as and when
required by you.
Overseas Agents (cont)
– In some countries it is compulsory under their law to
sell through local agents only. It is, therefore,
essential that you should carefully select your
overseas agent.
– Some source of information on agents are:
• Government Departments Trade Associations
/Chambers of Commerce /Banks
• Independent Consultants/Export Promotion
Councils/Advertisement Abroad.
Appointing Overseas Agents
• Points to be considered before appointing Agents
– Size & age of the agent's company
– Company's ownership and control, capital &
financial details
– Name, age and experience of the company's senior
executives/ salesmen
– Other agencies that the company holds.
– Length of company's association with other principal
– New agencies that the company obtained or lost
during the past year
Appointing Overseas Agents (cont)
– Company's total annual sales and the trends in its sales in
recent years
– Company's sales coverage, overall and by area
– Any major obstacles expected in the company's sales
growth
– Agent's capability to provide sales promotion and
advertising services
– Agent's transport facilities and warehousing capacity
– Agent's rate of commission; payment terms required
– References on the agents from banks, trade associations
and major buyers
Demerits Of Appointing An Agent

• There are certain disadvantages of appointing an


overseas sales agent, which are as follows;
– After sales service can be difficult when selling
through an intermediary
– There is some risk for the exporter to lose some
control over marketing & brand image.
(VIII)
Various Export Promotion
Schemes
Export Promotion schemes & Incentives
Duty Exemption Schemes- Advance license
Advance license (authorization) issued to allow duty free import of
inputs, which are physically incorporated in export product (making
normal allowance for wastage).
Advance license holders are exempted from payment of basic customs
duty, additional customs duty, anti dumping duty, education cess &
safeguard duty.
• Consumables such as fuel, oil, energy, catalysts, etc are also allowed
under this scheme.
– Available to a manufacturer exporter / merchant exporter
– Also available to manufacturer of intermediate products used by
the main exporter & for deemed exports.
Duty Exemption Schemes-
Advance Authorisation
• Advance license is issued subject to actual user condition &
necessitate exports with a positive value addition. Exports to SEZ
units are allowed.
• Input-output norms are the description of inputs that are required for
the production of particular products & are published in Handbook of
Procedures.
• Export obligations for manufacturers using the scheme is normally 18
months for the date of issue of license.
• This scheme is considered useful when a standard product is
manufactured in large quantities & standard raw materials are used
for production.
• Duty free import of mandatory spares up to 10% of CIF value of
license are also allowed.
• Presently a Quantity Based Advance Licensing Scheme (QABAL) is
allowed replacing the value based scheme in force earlier.
Export Promotion Schemes & Incentives
Duty Exemption & Remission Schemes
• Duty Exemption schemes enable duty free import of inputs required
for export production. These schemes are :
– Advance Authorization
– Duty Free Import Authorization (DFIA) : salient features of
Advance Licensing Scheme & DFRC have been clubbed to evolve
a new scheme named as DFIA.
• The new scheme offers the facility to import required inputs
before the exports & allows transferability of scrip once the
export obligation is fulfilled.
• This scheme allows duty free import of specified inputs for
export production as per standard Input- Output norms.
• DFIA is allowed under actual user condition till export
obligation is fulfilled
• Minimum of 20% of value addition is required for such
authorization.
Export Promotion Schemes & Incentives
Duty Exemption & Remission Schemes (cont)

• Duty Remission Schemes enables post export


replenishment/ remission of duty on inputs used in
export product. Duty remission scheme consists of
– Duty Entitlement Passbook Scheme (DEPB) &
– Duty Drawback scheme (DBK)
Export Promotion Schemes & Incentives
Duty Remission Schemes
• The main Duty Remission Schemes are Duty Entitlement
Passbook Scheme (DEPB) & Duty Drawback (DBK)
• Entitlement Passbook Scheme (DEPB)
– Under this scheme, grant of customs duty credit against the
exported product, is provided on the import content of the
product exported.
– The credit is granted on post- export basis, as a percentage
of FOB value.
– DEPB is a fully transferable instrument, which can be
availed of by the manufacturer as well as the merchant
exporter.
– Exports under the DEPB scheme are allowed only in respect
of items, for which standard input-output norms exist.
Duty Remission Schemes (cont)

– DEPB is valid for a period of 12 months from date of its


issuance.
– Credit rates of DEPB are generally better than Drawback
rates and this scheme is very widely used by the exporting
community.
• Duty Free replenishment certificates ( DFRC)
– DFRC is an alternative to the advance license scheme where
the benefits are provided on post export basis
– DFRC scheme has been withdrawn with effect from 1st May
2006
Duty Remission Schemes
Duty drawback Scheme (DBK)
• Duty drawback is defined as the rebate of duty chargeable on any
imported or excisable material used in the manufacture of goods
exported from India.
• This is a widely used incentive around the world and provides a level
playing field to the country’s exporters.
• This scheme is widely used exporters in India & has worked very
well.
• The rates are notified by Directorate of Drawback under the Ministry
of Finance, annually.
• Drawback rates are fixed for any class of products manufactured,
known as all industry rates, or for a product manufactured by a
particular manufacturer, known as brand rates.
Duty Remission Schemes
Duty drawback Scheme (DBK) (Cont)
• All industry rates are published every year & are normally valid for
one year. These are calculated
– On the basis of average consumption of inputs, duties & taxes
paid, quantity of wastage & export price of exported products.
– These are given either on quantity basis (per kg) or on ad valorem
basis (as % of FOB value) & are reviewed and revised
periodically.
• Brand rates/ Special Brand rates are calculated if all industry rates
are unavailable or industry rates provide inadequate compensation
– These are product and exporter specific & require proof of
payment of duties, materials used & irrevocable wastages incurred
and other data.
Export Promotion Schemes & Incentives
Export Promotion Capital Goods
(EPCG) Scheme
• EPCG scheme: introduced in 1990 to enable the import of
capital goods at concessional rate of duty (3% at present`)
subject to an appropriate export obligation accepted by the
exporter. The specified export obligation needed to be fulfilled
over a specified period in a prescribed manner.
• The aim of the scheme is to reduce the incidence of high capital
costs on export prices to make export competitive in
international markets.
• The import duty slab on capital goods was quite high when this
scheme was introduced. However, the import duties have been
reduced in the succeeding years
Export Promotion Schemes & Incentives
Export Promotion Capital Goods
(EPCG) Scheme (cont)
• The export obligation is required to be fulfilled by the
export of goods manufactured or produced by the use of
the capital goods imported under the scheme.
• Capital goods including spares, jigs, fixtures, dies &
moulds can also be imported.
• The export obligation of the user of this scheme is linked
to the amount of custom duty saved (presently 8 times)
• There are no restrictions on the quantum of domestic
sales in case of imports under EPCG.
Marketing Development Assistance
(MDA)
• Marketing Development Assistance (MDA)

– Under MDA, exporters with turnover upto Rs. 15.00 crores are
eligible for financial assistance for a range of export promotions
activities such as participation in Trade Fairs, buyer-seller meets
abroad or in India , export promotion seminars etc.

– Financial assistance with travel grants is available to exporters


traveling to Latin America, Africa, CIS region, ASEAN countries,
Australia & New Zealand. In other areas, financial assistance
without travel grants is available
Market Access Initiative (MAI)
• Market Access Initiative (MAI)
– This scheme is intended to provide financial assistance for
medium term export promotion efforts with a sharp focus on a
country & product. Export Promotion Councils (EPC) Industry
& Trade Associations, Agencies of State governments, Indian
Commercial Missions abroad are eligible for assistance under
this scheme.

– Range of activities can be funded by MAI scheme. These


include: market studies, setting up of showrooms/warehouses,
sales promotion & publicity campaigns, participation in
international trade fairs etc.

– Financial assistance ranging from 25% to 100% of total costs


can be received
Focus Market Schemes (FMS)
• Objective:
– Objective is to offset high freight costs & other externalities
to select international markets with a view to enhance our
export competitiveness in these countries.
• Entitlement
– Exporters of all products to notified countries shall be
entitled for duty credit scrip equivalent to 2.5% of FOB
value of exports for each licensing year commencing from
1st April, 2006
– Exports made by EOUs,/ EHTP/ BTP, who do not avail
direct tax benefits,/ exemptions shall be eligible, provided
the same benefits are not availed otherwise.
Focus Product Schemes (FPS)
• Objective:
– Objective is to incentivise exports of such products which have
high employment intensity in rural or semi-urban areas, so as
to offset infrastructure inefficiencies & other associated costs
involved in marketing of such products.
• Entitlements:
– Export of notified products to all countries (including SEZ
units) shall be entitled for duty credit scrips equivalent, to
1.25% of FOB value of exports for each licensing year
commencing from 1st April, 2006
– Exports made by EOUs,/ EHTP/ BTP, who do not avail direct
tax benefits,/ exemptions shall be eligible, provided the same
benefits are not availed otherwise.
Export & Trading Houses
• Export & Trading Houses: Merchant as well as Manufacturer
Exporters, Service Providers, EOUs & units located in SEZs ,
AEZs, Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) & Bio-Technology Parks
(BTPs) shall be eligible for status.
• Status is calculated on total FOB export performance during
current plus previous three years (taken together) upon
exceeding limit given below:
– EXPORT HOUSE (EH): Rs. 20 Crores
– STAR EXPORT HOUSE (SEH): Rs. 100 Crores
– TRADING HOUSE (TH): Rs. 500 Crores
– STAR TRADING HOUSE (STH): Rs. 2500 Crores
– PREMIUR TRDING HOUSE (PTH): Rs. 10,000 Crores.
Export & Trading Houses (Cont)
• Status holder will be eligible for a number of facilities including :
– Authorization & customs clearance for both imports & exports, on
self-declaration basis.
– Fixation of input-output norms on priority within 60 days
– Exemption from compulsory negotiation of documents through
banks
– 100% retention of foreign exchange on EEFC account
– Enhancement of normal repatriation period from 180 days to 360
days.
– Exemption of providing Bank guarantee in schemes under FTP.
Special focus Initiatives
Vishesh Krishi & Gram Udyog Yojana
(VKGUY)
– A new scheme called “Vishesh Krishi Upaj Yojana”( now
Vishesh Krishi & Gram Udyog Yojana -VKGUY) to boost
exports of fruits, vegetables, flowers, minor forest produce
and their value added products, has been initiated.
– Capital goods imported under Export Promotion Capital
Goods (EPCG) scheme shall be permitted to installed
anywhere in Agri-Export Zone (AEZ)
– Funds shall be earmarked under the Assistance to States for
Infrastructure Development of Exports (ASIDE) scheme for
development of AEZs
Special focus Initiatives
Vishesh Krishi & Gram Udyog Yojana
(VKGUY) (cont)
– Import of restricted items like panels shall be
allowed under various export promotion schemes.
– New towns of excellence with reduced threshold
limit of 250 crores shall be notified.
– Certain specific flowers, fruits and vegetables will
be entitled to a special duty credit scrip, in addition
to the normal benefit under VKGUY.
– Imports of inputs such as pesticides under Advance
License.
Special focus Initiatives
Handloom & Handicrafts Sector:
• Handloom & Handicrafts Sector:
– Specific funds would be earmarked for Market Access
Initiatives(MAI) Market Development Assistance (MDA)
scheme for promoting handloom exports.
– CVD is exempted on duty free imports of trimmings &
establishments for handlooms & handicrafts.
– Exemption of samples from countervailing duty (CVD)
– Authorizing Handicraft Export Promotion Council to
import trimmings embellishments and samples for small
manufactures
Special focus Initiatives
Handloom & Handicrafts Sector: (cont)
– Establishment of a new Handicraft Special Economic Zone.
– Duty free import entitlement of tools, machinery
&equipment, trimmings & embellishments shall be 5% of
FOB value of exports during the previous financial year.
This shall also extend to merchant exporter tied up to a
supporting manufacturer.
– Handicrafts EPC is authorized to import trimmings on behalf
of exporters.
– New towns of excellence with reduced threshold limit of 250
crores shall be notified.
Special focus Initiatives
Gems & Jewellery Sector
• Gems & Jewellery Sector
– Permission for duty free import of consumables for metals
other than gold & platinum up to 2% of FOB value of exports
– Duty free re-import entitlement for rejected jewellery allowed
upto 2% of FOB value of exports.
– Duty free import of commercial samples of jewellery allowed
upto Rs 3 Lakhs
– Permission to import gold of 18 carat and above under the
replenishment scheme
– Cutting & polishing of gems & jewellery to be treated as
manufacturing under the Income Tax for purposes of
exemption.
Special focus Initiatives
Leather & Footwear Sector
• Leather & Footwear Sector
– Increase in duty free entitlement of import trimmings &
embellishments & footwear components for leather industry
to 3% of FOB value of exports & duty free imports of
specified items for leather sector to 5% of FOB value of
exports.
– Imports of machinery for Effluent Treatment Plants
exempted from basic customs duty
– Re-exports of unsuitable material ( raw hides & skins & wet
blue) permitted.
– CVD is exempted on lining & interlining material & raw,
tanned & dressed fur skins.
Special focus Initiatives (Cont)
Special Focus initiatives have also been extended to
• Marine Sector
– Duty free entitlement of specified specialized inputs/ chemicals and
flavoring oils is allowed to the extent of FOB value of preceding
financial year’s export.
• Electronic & IT Hardware
– Exporters/ associations would be entitled to utilize MAI & MDA
schemes for promoting their exports
• Sports Goods & Toys
– This sector will be treated as a priority sector under MDA/MAI
schemes wherein specific sums would be earmarked for this sector.
– DGFT will issue Fast Track clearances to their applications.
Served from India Scheme (SFIS)
Service Exports

• Served from India Scheme (SFIS)


– Objective is to accelerate growth in exports of
services so as to create a powerful & unique
“Served From India” brand, instantly recognized
and respected
– All service providers of services listed, who have a
total free foreign exchange earning of at least Rs.
10 Lakhs in preceding year will qualify for duty
credit scrip equivalent to 10% of free F.E. earned
Served from India Scheme (SFIS)
Service Exports (cont)
• Service Exports
– EPCs set up in order to map opportunities for key services in key
markets and develop strategic market access programmes,
including brand building in coordination with sectoral players &
nodal bodies of the service industry.
– Services include all 161 tradable services covered under General
Agreement on Trade in Services (GATS) where payment for such
services is received in free foreign exchange.
– Service exporters are required to register themselves with
respective EPC or FIEO.
(IX)
SEZ, EHTP,STP & EOUs
Export Processing Zones (EPZs)
• In order to encourage exports, GOI, has provided special incentives
for units set up primarily for manufacturing goods for export. Such
units can be set up in designated Export processing Zones (EPZs)
• These EPZs are designed to provide an internationally competitive
duty free environment at low cost for export production. Each of the
zones provide basic infrastructure facilities like developed land,
standard design factory buildings, roads, power, water supply,
drainage and customs clearance facilities.
• The first EPZ set up in India was in 1965 - the Kandla Free Trade
Zone. Subsequently, six more EPZs have been set up at : Santa Cruz
(Bombay) , Falta (WB) , Madras (Tamil Nadu), Noida (U.P), Cochin
(Kerala), and Visakhapatnam (AP).
• EPZs have now been merged into SEZs.
EOU Scheme
• The Export Oriented Unit (EOU) Scheme, which had been
introduced in the early 1980s remains in the forefront of
country’s export production schemes.
• The scheme has witnessed many changes over the last twenty-six
years in the context of ever changing economic realities.
• However, the basic premise remains the same. This premise is
that the exporters are treated as a special class and given the
required tariff, non-tariff and policy support to facilitate their
export efforts.
• Thus, today the EOU Scheme has emerged as a dynamic policy
initiative facilitating the exporting community in the task of
increased exports
EOU Scheme
• There is a separate Export Promotion Council for EOU & SEZ
units.
• 100% EOUs fall into 3 categories
– (a) EOUs established anywhere in India and exporting 100%
products except certain fixed percentage of sales in the
Domestic Tariff Area (DTA) as may be permissible under the
Policy.
– (b) Units in Free Trade Zones or Special Economic Zones
(SEZs) and exporting 100% of their products.
– (c) EOUs set up in Software Technology Parks (STPs) and
Electronic Hardware Technology Parks (EHTPs) of India,
Bio-technology Parks (BTP), for development of Software &
Electronic Hardware & Bio-technology respectively.
Export Oriented Units (EOU), Electronic Hardware Technology
Parks(EHTPs), Software Technology Parks(STPs)
Bio-technology Parks (BTPs)
• Eligibility : Units undertaking to export their entire production of
goods & services (except permissible sales in DTA), may be set up
under the above schemes. Trading units are not covered under these
schemes.
– These units may import and/or procure from DTA or bonded
warehouses in DTA/ international exhibitions held in India,
without payment of duty, all types of goods including capital
goods. Import of capital goods will be on self certification basis &
will be subject to actual user condition.

– They may procure from DTA, without payment of duty, certain


specified goods for creating a central facility.
Export Oriented Units (EOU), Electronic Hardware Technology
Parks(EHTPs), Software Technology Parks (STPs)
Bio-technology Parks (BTPs)

– These units ,other than service units, may export to Russian


Federation in Indian Rupees against repayment of State
Credit/ Escrow Rupee account , subject to RBI approval.
– These units, may also source capital goods from a domestic/
foreign leasing company without payment of customs/ excise
duties
– They will be entitled for reimbursement of CST on goods
manufactured in India & exemption from payment of CED on
goods procured from DTA.
– They will be exempted from Income Tax as per section 10A &
10B of I.T. Act
– They will be allowed to retain 100% of export earnings in
EEFC account.
Special Economic Zones
(SEZ)
• Special Economic zones (SEZ) is a specifically
designated duty free enclave which shall be deemed to
be a foreign territory for the purpose of trade
operations & duties & tariffs.
• The policy provides for setting up of SEZ in the
public, private & joint sectors or by state
governments.
• The Government has already converted a number of
Export Processing Zones (EPZ) to SEZ. Amongst them
is the Santa Cruz SEZ at Mumbai.
Special Economic Zones
(SEZ) (cont)
• SEZ Act 2005, was passed by the Parliament in May 2005 & came into
effect on 10th Feb 2006. The Act is supported by SEZ rules.
• As on 9th Jan, 2008, number of notified SEZs were 193. At the end of
December 2007, there were 211 SEZs with formal valid approvals.
• In 2006-07, total exports from all 18 SEZs (Government & private
together) were $ 7.68 B, indicating an increase of 48.8% over the exports
in 2005-06.
• By the end of November, 2007, total investments in all SEZs were Rs.
59,631 Crores and 276,307 persons were employed by all SEZs.
(Statistical Outline of India)
Special Economic Zones(SEZ) (Cont1)

• Some of the features of SEZ are:


– Export & Import : Goods & services going into
the SEZ area from DTA shall be treated as deemed
exports and the domestic suppliers are eligible for
deemed export benefits. Similarly, goods &
services coming from SEZ area into DTA shall be
treated as if the goods are being imported. The
entire production of SEZ must be exported & DTA
sales are permitted only after payment of full
applicable customs duties.
Special Economic Zones(SEZ) (Cont2)
– Activities permissible : SEZ units may be set up for manufacture, services,
production, processing, assembling, trading, repair, remaking,
reconditioning etc. Units for generation of power may also be permitted at
SEZs.
– Foreign direct Investments: (FDI) : FDI up to 100% is allowed through
automatic route for all manufacturing activities, except prohibited items.
– Promotional Package:
• Exemption from payment of CED on procurement of capital goods, raw
materials, consumable spares etc. from the domestic market.
Special Economic Zones(SEZ) (Cont2)

• Reimbursement of CST paid on domestic purchases.


• Income Tax exemptions as notified in Section 10A and Section
80-LA of the I.T. Act.
• Support services like banking, post offices, clearing agents etc.
are available within the zone.
• Exemption from payment of Service Tax.
• No license required for imports. Exemption from customs duty
on imports of capital goods, raw materials, consumables,
spares etc.
• SEZ units can retain 100% of their export proceeds in
Exchange Earner’s Foreign Currency (EEFC) account.
• Realization of export proceeds allowed up to 12 months from
the date of exports.
Highlights- EOUs Vs SEZs
Export Oriented Units Special Economic Zones
Establishme EOU can be set up at any place declared SEZ unit has to be located within
nt as warehousing station under Custom’s the specified zone developed
Act. There are over 300 such places in
India.

Import Can import capital goods, R.M. SAME AS EOUs


consumables, packing material,etc without
Procedure
payment of customs duty. Similarly, these
can be procured indigenously without
payment of CED Second hand capital
goods can also be imported.

Net Forex They have to achieve positive NFE.( Net SAME AS EOUs
Earnings foreign Exchange Earnings)

Minimum Min investment in plant & machinery & There is no such limit for SEZs.
Investment building is Rs.100L before stating prodn.
Highlights- EOUs Vs SEZs
Export Oriented Units Special Economic Zones

Procedure A bond in prescribed format has to A bond in prescribed format has


be executed ( B-17 in case of EOU) to be executed ( A form
prescribed under SEZ Rules
2003)

Green There is no physical supervision of SAME AS EOUs


channel customs/excise authorities over
production & clearances but proper
records to be maintained.

Customs Fast track clearance scheme for In case of SEZs , customs


Clearance clearance of imported consignments clearance for exports & imports
for EOUs is obtained within SEZ
Export Of Generally all final prodn to be SAME As EOUs
Final Prod. exported except rejects up to
prescribed limit.
Highlights- EOUs Vs SEZs

EOUs SEZs
CST CST paid on purchases is In case of SEZs, suppliers
refundable do not have to pay CST.

Supplies made Supplies made by Indian suppliers Supplies to SEZs are


by Indian are “deemed exports” & suppliers exports and all export
Suppliers are entitled to benefits of “deemed benefits are available.
exports”
Infrastructure General infrastructure available to SEZ infrastructure is
EOU units are not as good as those normally much better.
available to SEZs.