INTRODUCTION OF HINDALCO INDUSTRIES LTD
ADITYA BIRLA GROUP A US$ 29 billion corporation, the Aditya Birla Group is in the League of Fortune 500. It is anchored by an extraordinary force of 130,000 employees, belonging to 30 different nationalities. In the year 2009, the Group was ranked among the top six great places for leaders in the Asia Pacific region, in a study conducted by Hewitt Associates, RBL Group and Fortune magazine. In India, the Group has been adjudged the best employer in India and among the top 20 in Asia by the Hewitt-Economic Times and Wall Street Journal Study 2007. Over 60 per cent of the Group's revenues flow from its overseas operations. The Group operates in 25 countries - India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia and Korea. Globally the Aditya Birla Group is: :: A metals powerhouse, among the world's most cost-efficient aluminium and copper producers. Hindalco-Novelis is the largest aluminium rolling company. It is one of the three biggest producers of primary aluminium in Asia, with the largest single location copper smelter :: No.1 in viscose staple fibre :: The fourth-largest producer of insulators :: The fourth-largest producer of carbon black :: The tenth-largest cement producer globally, and the largest in India 3
In India: :: Largest premium branded apparel company :: The second-largest producer of viscose filament yarn :: The second-largest in the chlor-alkali sector :: Among the top five cellular operators :: Among top 10 Indian BPO companies by revenue size :: Among the top five asset management and private sector life insurance companies :: Among the top three supermarket chains in the retail business Working in 3,700 villages
ADITYA BIRLA GROUP
key products and Locations Capacities Country brands Hindalco Industries Ltd. Alumina Chemicals Renukoot (Uttar 1,160,000 tpa India Pradesh), Muri (Jharkhand), Belgaum (Karnataka) Primary Aluminium Renukoot, Hirakud 489,000 tpa (Orissa), *Taloja Extrusions Renukoot, Alupuram 27,700 tpa Rolled products Belur(West Bengal), 200,000 tpa Taloja(Maharashtra), Renukoot, Mauda(Maharashtra) Wire rods Renukoot, 64,400 tpa Alupuram(Kerala) Aluminium foil Silvassa (Dadra & 11,000 tpa Nagar Haveli), Kalwa(Maharashtra) Aluminium Wheels Silvassa (Dadra & 300,000 pcs Nagar Haveli) *For Taloja recycling plant Indal (subsidiary of Hindalco) Foil Rolling Kollur (Andhra 4,000 tpa Pradesh)
key products and Locations Capacities brands Birla Copper (Hindalco Industries Ltd.) copper cathodes Dahej (Gujarat) 500,000 tpa continuous cast 97,200 tpa 5
copper rods Sulphuric acid 1,670,000 tpa phosphoric acid 180,000 tpa gold (Birla Gold) 15 mt silver (Birla Silver) 150 mt DAP and complexes 400,000 tpa (Birla Balwan) Hindalco Industries Ltd. (Aditya Birla Minerals Resources Pty. Ltd.) copper cathodes Nifty mines 25,000 tpa Australia copper in Mt. Gordon mines 40,000 tpa Australia concentrate Power Mt. Gordon mines 28mw Australia
Key products and brands Capacities Grasim Industries Ltd. white cement Birla White 475,000 tpa grey cement UltraTech 13.12 mtpa Cement (formerly Birla Plus), Birla Super UltraTech Cement Ltd. ordinary Portland 17 mtpa cement, Portland blast furnace slag cement, Portland pozzolana cement and grey Portland cement
key products and brands Capacities Aditya Birla Nuvo Ltd (Hi-Tech Carbon) carbon black Birla Carbon 230,000 mtpa 6
Thai Carbon Black Co. Ltd. carbon black Birla Carbon 220,000 mtpa Alexandria Carbon Co. S.A.E carbon black Birla Carbon 285,000 mtpa Liaoning Birla Carbon Co. Ltd. carbon black Birla Carbon 55,000 mtpa
Thailand Egypt China
key products and brands Capacities Pulp Grasim Industries Ltd. rayon grade pulp 70,000 tpa AV Cell Inc. softwood / hardwood pulp 122,500 tpa AV Nackawic Inc. dissolving pulp 189,000 tpa Fibre Grasim Industries Ltd. viscose staple Birla Viscose 270,100 tpa fibre (VSF) Thai Rayon Public Company Ltd. VSF Birla Viscose 110,000 tpa PT Indo Bharat Rayon VSF Birla Viscose 155,000 tpa Thai Acrylic Fibre acrylic fibre Texlan 100,000 tpa Alexandria Fiber Company, S.A.E acrylic fibre 18,000 tpa Yarn Aditya Birla Nuvo Ltd. viscose filament Ray One 16,400 tpa yarn Aditya Birla Nuvo Ltd. (Jaya Shree Textiles) flax yarns 15,340 spindles worsted yarns 25,548 spindles PT Indo Liberty Textiles 7
India Canada Canada
Thailand Indonesia Thailand Egypt
rayon yarn, 45,120 ring Indonesia polyester, blended spindles yarn PT Elegant Textile Industry rayon, polyester, 168,088 spindles Indonesia rayon-polyester blended spun yarn PT Sunrise Bumi Textiles viscose rayon, polyester viscose, 89,376 spindles Indonesia spun polyester, polyester combed cotton, anti pill yarn, sewing thread, high twist yarn, reverse twist yarn, flame retardant yarn, rayon cotton blended yarn, micro denier polyester rayon yarn, rayon silk yarn, slub yarn, lycra core spun yarn Indo Phil Acrylic Manufacturing Corporation high bulk acrylic dyed yarn, non- 3,700 mtpa Philippines bulk acrylic dyed yarn Indo Phil Textiles Mills Inc poly viscose blended yarn, poly 13,500 mtpa cotton blended yarn, polyester yarn Indo Phil Cotton Mills Inc cotton yarn 10,000 mtpa Indo Thai Synthetics Co. Ltd. synthetic yarns 98,568 spindles Fabrics Grasim Industries Ltd. fabric - polyester, viscose, silk 146 looms and wool blends Uncrushables, Ice Touch, Purista, 18 million metres and CleanFab Aditya Birla Nuvo Ltd. Pure Linen and Linen Club Linen Blends Flame Retardent Pyroguard Fabrics Branded apparel 8 Philippines
Aditya Birla Nuvo Ltd. (Madura Garments) Ready-to-Wear Louis Philippe, Garments Allen Solly Van Heusen, Peter England
Key Products and Brands Capacities Indo Gulf Fertilisers Ltd. Urea Birla Shaktiman 864,600 mt Birla Copper (Hindalco Industries Ltd.) DAP/NPK Birla Balwan 400,000 tpa complexes
Country India India
Key Products and Brands Capacities Grasim Industries Ltd. Caustic Soda 258,000 tpa Aditya Birla Nuvo Ltd. Caustic Soda 82,125 tpa Liquid Chlorine 50,340 tpa Hydrochloric Acid 5,475 tpa Tanfac Industries Ltd. Aluminium Fluoride 17,000 tpa Hydrofluoric Acid 17,000 tpa Bihar Caustic and Chemicals Ltd. Caustic Soda Lye 92,750 mt Liquid Chlorine 65,785 mt Hydrochloric Acid 29,040 mt Sodium Hypochlorite 1,800 mt Compressed Hydrogen 17,42,400 nm3 Aluminium chloride 12000 tpa Captive Power Plant 30 mw 9
Country India India
Aditya Birla Chemicals (Thailand) Ltd. Sodium Triployphosphates, Polyphos® Tetrasodium Pyrophosphate, Epotec Sodium Hexametaphosphate, Birlasulf-SS, Sodium Acid Pyrophosphate, Birlasulf-SM, Monosodium Phosphate, Birlasol 35 Disodium Phosphate, Trisodium Phosphate, Speciality Phosphates Epoxy Resins (bis-a and bis-f), Diluents, Curing Agents and Allied Products Sodium Sulphite, Metabisulphite, Sodium Bisulphite Epichlorohydrin Caustic Soda Chlorine Sodium
Thai Peroxide Co. Ltd. Hydrogen Peroxide, Peracetic Encare, 15,000 Acid, Calcium Peroxide Ecare, Aqua- mtpa x, Birlox 5, Birlox 12, Ocare PT. Indo Raya Kimia Carbon Disulfide 50,000 tpa
Key Products and Brands Capacities Essel Mining & Industries Ltd Iron and Manganese Ore 15 million tons 10
Key Products and Brands Pan Century Surfactants Inc. Fatty Acids Fatty Alcohol Glycerin
Capacities 55000 mtpa 30000 mtpa 6500 mtpa
Key Products and Brands Aditya Birla Insulators Insulators
Capacities 38,800 tpa
Key Products and Brands Capacities Country PSI Data Systems Ltd. (subsidiary of Aditya Birla Nuvo Ltd.) IT solutions (banking, finance India and insurance)
Key Products and Brands Capacities Aditya Birla Minacs Worldwide Limited Birla Nuvo Ltd.) BPO / ITES 9,089 seats
Country (subsidiary of Aditya India
Key Products and Brands Capacities Birla Global Finance Company Ltd. Financial Services Birla Sun Life Insurance Company Ltd. Insurance Solutions Birla Sun Life Asset Management Company Ltd. 11
Country India India
Mutual Funds Birla Sun Life Distribution Company Ltd. Investment Planning Services Birla Insurance Advisory Services Ltd. Non-Life Insurance Advisory Services
India India India
Key Products and Brands Idea Cellular Cellular Services Idea
21 million India subscriber base
Hindalco ranks as one of the largest Aluminium producer in India and contributes about 35% of the total Aluminium production of the country. The company’s fully integrated Aluminium operations consist of the mining of Bauxite, conversion of Bauxite into Alumina, production of primary aluminium from Alumina by electrolysis and production of properzi redraw rods, rolled products and extrusions. Capacities Power Alumina Aluminium Rolled products Extrusions Wire rods Foils Co-generation Present 575 4,50,000 80,000 15,000 50,000 5,000 37 2,42,000 MW MT p.a. MT p.a. MT p.a. MT p.a. MT p.a. MT p.a. MW
HINDALCO’S STRATEGY EFFICIENCY FOCUS: To be one of the lowest cost producers
EFFECTIVENESS FOCUS: To continue to remain the market
GROWTH FOCUS: To purchase value adding growth opportunities
Aditya Birla Group traces its origin back to the tiny village of Pilani in the Rajasthan desert, where, late Shri Seth Shiv Narayan Birla started cotton-trading operations in 1857. Then one visionary – the late Shri G.D Birla set up India’s first integrated aluminium manufacturing unit at Renukoot, in 1962, backed by captive power plant at Renusagar in 1967. It further evolved under the dynamic leadership of the late Shri Aditya Vikram Birla – a prominent figure in the Indian industry, under whose stewardship Hindalco attained its leadership position in aluminium. Today our Group chairman, Dr. Kumar Manglam Birla has put together the building blocks to make Indian business a global force.
HINDALCO-An Overview Group Today
The Aditya Birla Group is India’s first truly multinational corporation (MNC), whose over 60% of revenues flow from its operations across the world.
Over 75 units in India and overseas as well (in Thailand, Indonesia, international Malaysia, trading Philippines, operations Egypt spanning and Canada) and several countries
including Singapore, Dubai, Russia, Vietnam, Myanmar and China make it India’s first truly multinational conglomerate. Hindalco Industries Limited, the metals flagship company of the Aditya Birla Group, is an industry leader in Aluminium and copper. A metals powerhouse with a consolidated turnover in excess of US$ 14 billion, Hindalco is the world's largest Aluminium rolling company and one of the biggest producers of primary Aluminium in Asia. Its Copper smelter is the world’s largest custom smelter at a single location.
Established in 1958, Hindalco commissioned its Aluminium facility at Renukoot in Eastern U.P. in 1962. Later acquisitions and mergers, with Indal, Birla Copper and the Nifty and Mt. Gordon copper mines in Australia, strengthened the company's position in value-added Alumina, Aluminium and copper products, with vertical integration through access to captive copper concentration. In 2007, the acquisition of Novelis Inc. a world leader in Aluminium rolling and can recycling marked a significant milestone in the history of the Aluminium industry in India. With Novelis under its fold Hindalco ranks among the global top five Aluminium majors, as an integrated producer with low-cost alumina and Aluminium facilities combined with high-end rolling capabilities and a global footprint in 12 countries outside India. Its combined turnover of US$ 14 billion, places it in the Fortune 500 league.
Hindalco in India enjoys a leadership position in Aluminium and Copper. The Company's Aluminium units across the country encompass the entire gamut of operations from bauxite mining, alumina refining, aluminium smelting to downstream rolling, extrusions, foils and alloy wheels, along with captive power plants and coal mines. The Birla Copper unit produces copper cathodes, continuous cast copper rods along with other by-products, including gold, silver and DAP fertilizers.
All of Hindalco's units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001 certified. The Renukoot and Taloja units have gone a step further with an Integrated Management System (IMS), combining ISO 9001, ISO 14001 and OHSAS 18001 into one Business Excellence Model. The company has been accorded the Star Trading House status in India. Its aluminium metal is accepted for delivery under the High Grade Aluminium Contract on the LME (London Metal Exchange), while its copper quality standards are also internationally recognized and registered on the LME with Grade “A” accreditation.
ALUMINIUM:Hindalco’s major products include Standard and Speciality Grade Aluminas & Hydrates, Aluminium Ingots, Billets, Wire Rods, Flat Rolled Products, Extrusions, Foil and Alloy Wheels. The integrated facility at Renukoot, (Uttar Pradesh) houses an Alumina Refinery and an Aluminium Smelter along with facilities for production of semifabricated products, namely, Redraw Rods, Flat Rolled Products and Extrusions. The plant is backed by a co-generation plant and a 742mw captive power plant at Renusagar to ensure continuous and consistent supply of power for smelter and other operations. The aluminium alloy wheels plant is located at Silvassa (Dadra and Nagar Haveli). Hindalco was among the first few alloy wheels companies to have obtained the ISO/TS 16949 certification to meet the stringent standard of the automobile industry. A strong presence across the value chain and synergies in operations has given Hindalco a major share of the domestic value-added products market. In India, the company enjoys a leadership position in Speciality Aluminas and Hydrates as well as in Primary Aluminium and downstream semi-fabricated products. As a step towards expanding the market for value-added products and services, Hindalco has launched several brands in recent years. These include the Aura Aluminium Alloy Wheels for cars, Everlast Roofing Sheets and Freshwrap and Freshpack household foil for packaging. Hindalco's Aluminium Galleries in Mumbai and Gurgaon showcase the versatility of aluminium through a wide range of applications. 17
Apart from being a major player in the domestic market, Hindalco's products are well accepted in international markets. Exports account for more than 20 per cent of total sales of aluminium products.
Hindalco is a leading domestic player segments — aluminium and copper.
The aluminium division's product range includes alumina chemicals, primary aluminium ingots, billets, wire rods, rolled products, extrusions, foils and alloy wheels. The company has a significant market share in all the segments in which it operates. It enjoys a domestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products, 20 per cent in extrusions, 44 per cent in foils and 31 per cent in wheels. As a step towards expanding the market for value-added products and services, Hindalco has launched several brands in recent years, which include Aura for alloy wheels, Freshwrap for kitchen foil and Everlast for roofing sheets. Our exclusive showroom, The Aluminium Gallery, seeks to promote Hindalco products to its customers. It is a platform for the company to showcase quality products to a quality audience in an appropriate ambience. The exhibits include products like windows, doors, furniture, ladder, roofing sheets and ceiling and cladding panels. Hindalco's products are well received not only in the domestic market, but also in the international market. The company's metal is accepted for delivery under the high grade aluminium contract on the London Metal Exchange (LME). The company exports about 17 percent of its total sales volume of aluminium. The company's alumina chemical business is a leader in manufacturing and marketing of speciality alumina and alumina hydrate products in the country. It has a major market share in the country. These speciality products find wide usage in diversified industries including water treatment chemicals, refractories, ceramics, cryolite, glass, fillers and plastics, conveyor belts and cables, among others. The company also exports these alumina chemicals to over 30 countries covering North America, Western Europe and the Asian region.
Birla Copper, Hindalco's copper division at Dahej in Gujarat, enjoys a leadership position in India, having built over 40 per cent of the domestic market share within three years of its commissioning. It has also made successful forays into the export markets of the Middle East, Southeast Asia, China, Korea and Taiwan. The copper plant produces world-class copper cathodes, continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic fertilizers and phospho-gypsum are also produced at this plant.
SOME RECENT MILESTONES
:: In May 2007, Novelis became a Hindalco subsidiary with the completion of the acquisition process. The transaction makes Hindalco the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia, as well as being India's leading copper producer. :: In May 2006, the company signed a MoU with the Government of Madhya Pradesh for setting up a Greenfield aluminium smelter and a captive power plant. The company also entered into a joint venture with Essar Power (M.P.) Ltd. to develop and operate coal mines at Mahan, Madhya Pradesh. The joint venture will supply coal to the proposed aluminium smelter and power complex in Madhya Pradesh :: In May 2006, the company's copper mining subsidiary Aditya Birla Minerals Limited (formerly Birla Mineral Resources Pty Ltd.) came out with an equity offering and subsequent listing on the Australian Stock Exchange (ASX) :: In March 2006, the company acquired an aluminium rolling mill and wire rods facility, from Asset Reconstruction Company (India) Limited (ARCIL), belonging to Pennar Aluminium Company Limited :: In January 2006, the company concluded 4:1 rights issue of its shares on partly paid basis. It was the largest ever rights issue in the history of corporate India and first one to issue partly paid instruments :: In September 2005, the company split its shares in ratio of 10:1 in order to enhance liquidity and to encourage participation from retail investors :: In April 2005, the company signed an MOUs to establish a world 19
class integrated aluminium project in the state of Orissa :: In April 2005, the company entered into MoUs with the Orissa and Jharkhand governments for setting up a Greenfield alumina facility and aluminium facility respectively, in the states
“To strengthen our position as a premium aluminium company sustaining domestic leadership and global competitiveness through Innovation Quality and Value added growth”
“To pursue the creation of value for our customers, shareholders, employees and society at large”
We, at Hindalco, shall aim to achieve and sustain excellence in all our activity. We are committed to total customer satisfaction by providing products and services, which meet or exceed the customer, expectations. Modernization of the manufacturing facilities stress on
technological innovation and training of employee at all level shall be a continuous process of Hindalco. A motivated workforce with a sense of pride in the organization shall us towards total quality.
HINDALCO VALUES:INTEGRETY: Honesty in every action. COMMITMENT: promised. PASSION: Missionary zeal arising and out of an emotional across engagement with work. SEAMLESSNESS: Thinking working together functional silos, hierarchy levels, business and geographies. urgency. Doing whatever it takes to deliver, as
SPEED: Responding to stockholders with a sense of
EFFICIENCY FOCUS: To be one of the lowest cost producers globally. EFFECTIVENESS FOCUS: To continue to remain the market leader domestically. GROWTH opportunities. FOCUS: To pursue value adding growth
Annual results in brief
Mar ' 10 Sales 19,536.28 Operating profit 2,949.92 Interest 278.00 Gross profit 2,931.77 EPS (Rs) 10.01 Mar ' 09 18,219.65 3,035.87 336.93 3,335.59 12.23 Mar ' 08 19,201.00 3,401.10 280.60 3,613.40 18.92 Mar ' 07 18,313.00 4,015.00 242.40 4,142.70 24.59 Mar ' 06 11,396.50 2,605.10 225.20 2,623.80 16.79
Annual results in details
Mar ' 10 Other income 259.85 Stock adjustment -755.25 Raw material 13,225.68 Power and fuel 1,938.00 Employee expenses 877.75 Research and development expenses Expenses capitalized Other expenses 1,300.18 Provisions made Depreciation 667.21 Taxation 462.10 Net profit / loss 1,915.63 Extra ordinary item Prior year 113.17 adjustments Equity capital 191.37 Equity dividend rate Agg.of non-prom. 11345.22 shares (Lacs) Agg.of non promotoHolding 59.29 (%) OPM (%) 15.10 GPM (%) 14.81 NPM (%) 9.68 Mar ' 09 636.65 520.71 10,426.28 2,231.56 667.55 1,337.68 645.27 610.88 2,079.44 150.83 170.05 9137.78 53.74 16.66 17.69 11.03 Mar ' 08 492.90 -132.70 12,047.40 1,910.80 621.20 1,353.20 587.80 705.40 2,320.20 540.70 122.60 8415.23 68.58 17.71 18.35 11.78 Mar ' 07 370.10 -442.50 11,078.30 1,848.60 519.60 1,294.00 638.10 940.30 2,564.30 104.30 8455.84 72.94 21.92 22.17 13.73 Mar ' 06 243.90 -1,033.80 6,603.40 462.70 2,759.10 521.10 450.20 1,655.50 3.00 98.60 8478.18 73.78 22.86 22.54 14.22
HINDALCO PRODUCT RANGE
1. 2. 3.
Primary Aluminium Ingots
Wire rods sheet
Blister pack 13.
FLAT ROLLED PRODUCTS (FRPs)
Hindalco is the world's largest Aluminium rolling company with the acquisition of Novelis, the global leader in value-added highend aluminium flat rolled products and aluminium can recycling. The combined volume of sales of flat rolled products in the world market is about 3 million tonnes and the market share is more than 20 per cent. Hindalco is now world No.1 in Hindalco is the largest manufacturer of the aluminium flat entire range of flat rolled products in India. It rolled products enjoys nearly 60 per cent of market share and its rolled products are widely used in various segments such as packaging, transportation, building and construction, electrical, defence and general engineering applications. The company's commitment to quality and service along with its extensive infrastructure has made Hindalco a prime source for bestselling brands. Continuous improvements in manufacturing, processes, practices and systems ensure that customers' needs and expectations are fully met. Efficiency and product quality are ensured by using state-of-the-art equipment and a strong research and development set-up, supported by dedicated and motivated employees and the Oracle ERP system. Wagstaff Air Slip™ slab casting technology is used to ensure consistent quality and surface finish of stock feed which in turn ensures quality finished products. The company's capacity in flat rolled products at present is 2,00,000 tonnes per annum and new plans are being implemented to increase the manufacturing capacity.
Of the total production of Hindalco's flat rolled products, around 40 per cent is exported and customers in more than 50 countries are using the products. Everlast, a Hindalco brand for aluminium roofing sheets, offers ideal and economical solutions for all roofing and cladding needs. Colourcoated and tiled roofing profiles are also offered by Hindalco. 25
Basically, there are three kinds of Flat Rolled Products (FRPs) which is being exported by Hindalco i.e, 1. Cold rolled Coils 2. Cold rolled Sheets 3. Circle
Hindalco's cold rolled coils are precision-finished to match international standards. They have good shape, high tolerance, versatility and blemish-free surfaces. They are used in commercial and general engineering applications such as bus bodies, cladding and fan blades. The company meets the demands of its ever-growing clientele with continuous upgrades and process improvement.
Hindalco's cold rolled sheets are precisionfinished to match international standards for tight thickness, tolerance, flatness and dimensional accuracy. Sound metallurgical properties for further fabrication, anodizing characteristics and a blemish-free surface make it useful in both commercial and general engineering applications. Hindalco offers circles, also known as flat circular sheets, in a variety of diameters and thickness to meet specific needs. Extensively used in the manufacture of pressure cookers, non-stick cookware, coated cookware, cans, etc they have earned the trust of many leading brands. Continuous upgrades and improvement of processes enable the company to keep pace with the demands of its ever-growing clientele. 26
ROLLED PRODUCT APPLICATIONS
Al-clad sheets / coils :: Automobile radiators, inter-coolers, air conditioners
Building sheets :: Cladding for roofs and walls :: Industrial buildings, warehouses, aircraft hangers :: Indoor and outdoor stadiums :: Insulation and protection of fuel storage tanks and industrial boilers :: Wall panels for high-rise buildings :: Residential roofing :: Roof-on-roof roofing :: Exhibition pavilions :: Poultry farms Cablewrap stock :: Telecom cables
Circles :: Pressure cookers, non-stick cookware and hard anodised cookware :: Milk cans :: Medical cylinders
Closure stock :: Pilfer-proof caps :: Vial seals :: Cream containers and caps
Cold rolled coils :: Bus cabins and bodies :: Insulation :: Cladding in buildings, aluminium composite panels, false ceilings and panelling (plain or colour-coated coils) :: Electrical busbar ducting, flexibles, transformer strips, etc Cold rolled sheets :: Defence :: Industrial engineering :: Transport — road, rail, air, marine :: Building and construction :: Fan blades :: Electrical engineering Finstock :: Air conditioners :: Car radiators :: Automobile heat exchangers
Flooring sheets / tread plates :: Flooring for buses, trucks and rail coaches :: Floors for loading bays, kick plates, stair treads and catwalks Foil stock :: Pharma / confectioneries / cigarette foils :: Foils :: Tetrapacks
Lampcap stock :: GLS lamps and tube lights
Litho stock :: Offset printing plates
Pattern sheets :: Decorative applications like interior panelling for trucks, cabins, etc
Printed Circuit Boards (PCB) entry sheets :: Electronic circuit boards
Plates :: Electrical busbars and ducting :: Tanks :: Ships, boats (corrosion-resistant and weldable plates) :: Defence and industrial uses (strong alloy plates) :: Aircrafts Spiral Finstock :: Industrial heat exchangers
Hindalco's foil business and packaging division delivers versatile solutions to meet the multipronged needs of customers round-the-clock. Hindalco's packaging solutions and impressive range of end products are well-accepted all over the world, thus ensuring sustainable growth in today's intensely competitive and cost-sensitive market. Applications Pharmaceuticals 25/30/40-micron thick, soft foil either laminated to low density polyethylene or coated with heat seal laquer (HSL) for sealing as per customer need. 20/25/30-micron thick, hard foil coated with heat seal laquer of varied grammages. Compatible with PVC.
45-micron foil, laminated on one side to 25 micron OPA and 60 micron PVC film on the other side to meet the fast emerging Alu alu packaging needs. Hindalco offers a maximum depth of 9mm. 7/9/12-micron thick, soft foil laminated with paper, films like polyester (PET), biaxially oriented polypropylene (BOPP), polyethylene (poly) and their combinations. Chiefly used for pouches and sachets. Offered in both surface and reverse printing.
Rolled to very fine tolerances for more closures per tonne of stock. Closure caps have high formability, strength, low earing and printable surfaces. Widely used for pilfer-proof bottle caps and vial seals. Offered in both coated and bare form. Dairy 9-micron thick, soft foil laminated to grease-proof paper, used for butter chiplets.
30/38/40-micron thick, soft foil coated with heat seal laquers (HSL), compatible with PS and PP containers. Used for cheese spreads, yoghurts and mineral water. 7/9-micron thick, soft foil laminated to polyester and poly with reverse printing on polyester.
House foil and semi rigid containers
Household foil is available in a range from 10 micron upwards. Widths can vary as per market requirements. Semi rigid containers are available in a range of sizes and shapes.
Processed food and beverages 9/12-micron thick, soft foil with printing on one side and heat seal laquer (HSL) coating or polythene lamination on the other. Also offered as a laminate of 9-micron foil with paper and wax. 9-micron thick, soft foil with printing on foil surface, laminated to paper and further coated with wax. Also 7-micron foil printing on foil surface, laminated to paper and further coated with wax. Polyster, foil and polythene laminates for packing coffee.
7-micron foil with printing on foil surface and poly laminated to paper.
Cigarette foil for inner packing of cigarettes is offered in 7micron thick soft foil laminated to paper. Foil can be silver or gold lacquered in matte of bright finish as per customer requirements. Personal products Flexible laminated tubes that utilise 12/20-micron thick soft aluminium foil laminate. Extensively used in toothpastes, cosmetics, ointments, cream and foodstuffs. 7/9-micron thick, soft foil laminated to board with adhesive or polythene as per customer demand.
9-micron thick, soft foil or BOPP and heat seal laquer (HSL) coated or co-polymer laminated as per customer demand.
Surgicals The laminates have two components, top — paper, 40 micron foil, co-polymer structure and bottom — coated, 50 micron foil, co-polymer structure Heating ventilation and air conditioning (HVAC)
80-160-micron thick foil, soft or partially annealed temper, offered bare as well as with hydropholic and hydrophobic coatings in blue or gold colour. The coated foil enhances the life of the air conditioner and improves cooling. 80-160-micron thick foil, soft or in partially annealed temper, offered bare as well as with hydropholic and hydrophobic coatings in blue or gold colour. The coated foil enhances the life of the radiator and improves cooling.
WHAT IS EXPORT
1. Export is an any goods or commodity, transported from one country to another in trade. Export is an important part of international trade. 2. The process of carrying or sending goods to another country. 3. Export means an actual shipment, transfer of items out of a country, a transfer of goods shipped or transfer to another country. 4. Shipment of goods to a foreign country.
WHAT IS EXPORT MANAGEMENT
Export management is the application of managerial process to the functional area of exports. It is a form of management which is required to bring about coordination and integration of all those involved in an export business.
MAIN OBJECTIVES OF EXPORT MANAGEMENT
1. To secure export orders. 2. To ensure timely shipment of goods as per prescribed norms of quality and other specifications including terms and conditions agreed to between the exporter and the importer.
CLASSIFICATION OF EXPORTS
1) 2) 3) 4) Merchandise exports Services exports Project exports Deemed exports
Merchandise exports: - It refers to the export of physical goods,
for example; readymade garments, engineering goods, furniture etc. 36
Services exports: - It refers to the export of goods that do not
exist in physical form that is, professional, technical or general services. Examples include export of computer software, engineering etc.
Project exports: - It refers establishment of a project by a
business firm in another country. The term’ project’ has been defined as “non-routine, non-repetitive normally with discrete time, financial and technical performance goals.
Deemed exports: - It refers to those “transaction in which the
goods supplied do not leave the country and the payment for such goods are made in India, by the recipient of the goods”.
WHY A COUNTRY SHOULD EXPORT
There are many reasons for a country to export, some of these are: It provides valuable foreign exchange to country. It is one of the measures of country’s economic growth. To control over balance of payments. For employment generation. For poverty alleviation. It provides shield against demand fluctuations in domestic market. For import of capital goods at 0% duty. Prepares ourselves for duty free regime. For capacity utilization. To get the working capital loan at low rate of interest. In line with company’s & country’s image.
HOW A COUNTRY SHOULD EXPORT
1) Name of the company/type of the company. 2) A current account with a bank authorized to deal in foreign exchange. 3) An RBI code number granted by the Reserve Bank of India. 4) An IEC (Importer-Exporter code) number granted by the regional licensing authority. 5) A Registration cum Membership certificate (RCMC) of export promotion council. 37
WHAT ARE THE ADVANTAGES OF EXPORT
The income from export business is exempted to the specified extent under the Income Tax Act, 1961. Refund of central excise and custom duty on export is also made under the Duty Drawback Scheme of the Government. There is no sales tax on products meant for exports. Duty free import of raw materials is allowed under various schemes of Ministry of Commerce. Foreign exchange regulations have been substantially liberalized for exporters. Liberal release of foreign exchange is made available for travel abroad. Norms for establishing offices abroad by the exporters have been eased. Export credit is also available to the exporters at confessional rates of interest. Transport subsidy is given for export by air as well as rail. Import policy has also been liberalized substantially for export oriented importers.
PROCESS OF EXPORT MANAGEMENT
The process of export management is essentially the process of planning, scheduling and controlling the complex of non-routine activities that must be completed to secure the export orders and to ensure the timely shipment of goods. The managerial process involved in export management relates to the following three activities (Fig.1): 1. Planning 2. Scheduling, and 3. Controlling
Planning Schedulin g
Process of Export Management 38
1. Planning Planning refers to taking various decisions involved in export business. This relates to procurement of export orders and their timely and successful execution. Planning for export order would involve making concerted efforts supported by proper market entry strategies to get the export order. 2. Scheduling Scheduling refers to deciding the logistics for execution of export order. This is primarily concerned with implementation and monitoring of export order. This involves defining in detail the various jobs/activities, the nature of those jobs/activities (parallel or sequential), expected time frame for completion of those jobs/activities and fixing responsibility for completion. 3. Controlling It seeks to ensure whether the activities planned have been completed on time or not and whether the various schedules drawn up for execution of those orders have been followed or not. A system of reporting should be developed and implemented in every export organization to ensure proper control of various activities involved in execution of export orders.
The various activities/stages involved in planning and execution of an export order are performed in a sequential manner. Therefore, the activities/stages are viewed as different links in the chain of a cycle called export cycle. The export cycle is divided into three phases (Fig.2): a. Planning for exports b. Implementation and monitoring of an export order c. Post export follow up action.
Planning for Exports
Post-export follow-up action
Implementation & Monitoring of Export order
a. Planning for Exports Planning for exports involves the following activities namely, 1. Understanding the international trade environment 2. Setting up an export firm/organization structure 3. Identification of export opportunities 4. Procurement of export order, negotiation and confirmation. b. Implementation and Monitoring of Export Order This represents the second phase in the export cycle and involves the following activities: 1. Development of logistics for execution of export order 2. Export financing arranging pre-shipment finance 3. Labeling, packaging, packing and marking 4. Pre-shipment inspection 5. Pre-shipment documentation 6. Shipment of good-central excise and customs clearance and transportation c. Post Export Follow-up Action Once the shipment of goods has been sent, export manager should take the necessary follow-up action. This would involve the following steps: 1. Negotiation of documents with the bank to realize payment against the port shipment, 2. Arranging post shipment finance 3. Claiming incentives/facilities 4. Maintaining liaison with the importer 5. Settlement of disputes, if any.
DEVELOPING EXPORT MARKETING PLAN
An export marketing plan is step-by-step guide to strategy implementation. It addresses strategic issues and outlines the corresponding operational action to be taken. It specifies targets for each step. The plan should answer all questions on how the export firm’s strategy is to be implemented and direct the enterprise in attaining the strategic objective. A typical export marketing plan focuses on the following aspects: 40
1. 2. 3. 4. 5. 6. 7.
Marketing objectives Market segmentation and positioning, Market research, Characteristics of the product line, Export pricing, Distribution channels, and Promotional strategies.
SOME PRACTICAL SUGGESTIONS • The exporters should innovate new product designs, strategies and promotional policies to improve the level of exports. This helps them to make ‘value rich offers’ that are better than the best. The exporter should aim at a Market Niche rather than at the mass market. Exporters should know the key buyers in the target market. Exporters should choose their markets carefully. The choice of market can make the difference between success and failure in exporting. Exporters should clarify their motives for exporting and set their objectives at the outset. They should know why they want to export and set their goals. Exporters should consider export market development a longterm investment. Sustained efforts are essential in export marketing. Planning and strategy development are essential for success in the long run in export trade. The export firm should have the requisite technical expertise, in addition to careful planning and suitable products. No enterprise should seek entry an export market until it is ready. Any attempt at exporting without experience in domestic marketing is bound to fail. The responsibility for the export effort should be assigned to a key staff member, usually known as export manager.
• • • • • • • • •
TIPS FOR EXPORT MARKETING 1. Select the product and the target market on the basis of desk research even before considering to export. 2. Once a market has been decided upon, the entrepreneur should carry out in-depth study of the target market. 41
3. The aim of the first visit to foreign market should not be to do business or looking for orders. Rather, the visit should be used to improve the preparation for entering the market. 4. Evaluate all the information collected and then formulate a marketing strategy and develop a marketing plan. 5. Gaining foothold in foreign markets can only be effective on a long term basis. Thus, the entrepreneur should have the strong financial base. 6. The foreign buyers can’t afford to loose face and credibility by deterioration in quality or alternatives to price and/or late deliveries. It is important to understand the requirement of the foreign buyers before marketing commitments. 7. In exports, consumers are quality and price conscious in a market which enjoys large and varied supplies. Success or failure in business will depend upon understanding this sensitivity of the foreign buyer. The entrepreneur should adopt a consumer oriented approach to manufacturing and selling. 8. International markets are trend sensitive. Designs frequently change and products may not remain in demand. It is therefore, necessary to be aware of this trend and efforts should be made to keep up-to-date with the market trends. 9. Foreign markets, particularly in the developed countries, are often highly segmented into different age and income groups. The exporter should select the right market segment and accordingly position the product in the market.
EXW-EXPORT WORKS The seller’s obligation to the deliver the goods under this term is complete when he passes the goods at the disposal of the buyer at his own premises and other places named therein, i.e. works, factory, warehouse etc. not cleared for export and not loaded on any collecting vehicle. This term thus enjoys the minimum for the seller. The buyer has to bear all the cost and risks. This term should therefore not be used if buyer cannot carry out the export formality himself. FCA-FREE CARRIER Here the seller’s obligation to deliver the goods is complete when he delivers to the carrier nominated by the buyer at the named place cleared for export. If the chosen place is the exporter’s premises
then the seller is responsible for loading. If it occurs at any other place, the seller is not responsible for unloading.
FAS-FREE ALONGSIDE SHIP Under this term the seller delivers the goods by placing them alongside the vessel at the named port of shipment. The buyer bears all the cost and risk of loss of or damage to the goods from that moment. This term can be used only of sea or inland waterway transport.
FOB-FREE ON BOARD Under this term, the seller fulfills his obligation of delivery when goods pass the ship’s rail at the named port of shipment. Form that point onwards buyer bears all costs and risks. The seller clears the goods for export. If the intention is not to deliver the goods across the ship’s rail, FCA terms should be used.
CFR-COST AND FREIGHT In CFR also, obligation of delivery is fulfilled when the goods pass the ship’s rail at the port of shipment. The only addition is that the seller also pays the freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods and also additional costs occurring after the time of delivery are transferred from seller to the buyer. Under this term the seller clears the goods for export. This term can be used only for the sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the term should be used. CPT-CARRIAGE PAID TO It denotes that seller delivers to the carrier nominated by him. If subsequent carriers are used, the risks pass when the goods have been delivered to the first carrier. The must in addition pay the cost of carriage to bring the goods to the named destination. The buyer bears all the risks and any cost occurring after the goods have been so delivered. Here too, obtaining the export clearance is the responsibility of the seller. It can be used for any mode of transport including multi-modal transport. 43
CIF-COST, INSURANCE AND FREIGHT Here again the delivery point is the goods passing the ship’s rail in the port of shipment. The seller however paid the cost and freight necessary to the named port of destination and contracts for insurance and pays the insurance and pays the insurance premium and the risk of loss of or damage to the goods and additional costs occurring after the time of delivery at transferred from the seller to the buyer. The seller obtains the insurance only for the minimum cover. If the buyer whishes to have a greater cover, he would either need to agree with the seller expressly or to make his own extra insurance arrangements. Clearance of goods for export is the responsibility of the seller under this term as well. It can be used for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CIP terms should be used.
CIP-CARRIAGE AND INSURANCE PAID TO The term corresponds to CPT except that under CIP the seller also to procure insurance against risk of loss of or damage to the goods during the carriage. The seller therefore has to obtain the insurance and pay the insurance premium for a minimum cover. For any additional cover, the buyer needs to either have express arrangements with the seller or make his own arrangement. Here again if subsequent carriers are used, the risks passes when the goods have been delivered to the first carrier and clearance of goods for export is the responsibility of the seller. The term can be used for any mode of transport including multi-modal transport.
DES-DELIVERED EX SHIP This term applies that the seller delivers the goods by placing them at the disposal of the buyer on the board, the ship not cleared for import at the named port of destination. The seller bears all the cost and the risk involved in bringing the goods to the named port of destination before their discharge. If the parties intend the seller to bear the cost and risk of discharging goods then the DEQ term 44
should be used. This term can be used for sea or inland waterways or multimode transport on a vessel in the port of destination. DAF-DELIVERED AT FRONTIER Under this term the seller delivers the goods by placing them at disposal of the buyer on arriving means of transport not unloaded, cleared for export but not cleared for imports at the named point/place at the frontier but before the custom border at the adjoining country. Since the term frontier includes the frontiers of the country of export naming the point and the place in the term is of vital importance. For making the seller responsible for the unloading of the goods and to bear the risk and cost therefore explicit working to this effect need to be included in the contract. The term can be used for any mode of transport when goods are to be delivered at the land frontier. When the delivery is to take place in the port of destination on board, a vessel or on the quay, the DES or DEQ terms should be used.
DEQ-DELIVERED EXPORT QUAY The point of delivery at this term moves to the quay not cleared for export at the named port of destination. The seller bears the cost of discharging the goods in quay in addition to the cost of risk involved as per the term DES. The term DEQ has been modified in the incoterms 2000 and is a total reversal from the previous incoterms version. Under the modified DEQ term the buyer clears the goods for imports and pays all formalities, duties, taxes and other charges. If the buyer still wants the seller to undertake import clearance, it should be made clear by adding an explicit warning. This term can be used only when the goods are to be delivered by sea or inland waterways or multimode transport on discharging from a vessel onto the port of destination. DDP-DELIVERY DUTY PAID Under the term the seller delivers the goods to the buyer cleared for imports but not unloaded from any arriving means of transport at the named place of destination. Thus all cost and risk involved in bringing the goods there to including, wherever applicable, any duty for import in the country of destination. Thus the term represents minimum obligation to the buyer and maximum obligation to the 45
seller. It should, therefore not be used if the seller is unable to obtain the import clearance. It the parties wish the buyer to bear all risks and costs of import the DDU term should be used. DDU-DELIVERED DUTY UNPAID This term can be used irrespective of the mode of transport, but when the delivery is to take place in the port of destination on board, the vessel or on the quay, the DES or DEQ terms should be used. Under DDU, the seller delivers the goods to the buyer not cleared for import, not unloaded from any arriving means of transport at the named place of destination. The seller bears the cost and the risk involved in bringing goods there to other than, where applicable, any duty of import in the country of destination. The term duty includes the responsibility for and the risk in the carrying out the customs formalities, the payment of such formalities, custom duties, taxes and other charges. Such duty has to be borne by the buyer, so also any costs and risks caused by his failure to clear the goods for import in time. If the intention is to make the seller carry out customs formalities and bears the risks resulting there from as well as some of the costs payable upon import of goods. This should be made clear by adding explicit wording to this effect in the contract of sale. The responsibility, risks and costs for unloading or reloading of the buyer or the seller.
PROCESSING OF AN EXPORT ORDER
EXPORT ORDER: - Export order is a document communicating decision of the foreign buyer to purchase certain items from the exporter. It specifies the description of the items, their quantity and quality specifications, unit price, delivery terms, shipping marks, insurance required, requirement as regards labeling, packaging and packing, payment terms, pre-shipment inspection requirements, documents required and so on. The export order represents an ‘offer to sell’ made by the exporter and its ‘acceptance’ by the foreign buyer. EXPORT AGREEMENT:- Export agreement refers to the offer by the exporter and its acceptance by the buyer. It is defined as exchange of promises by the parties to the agreement i.e, every promise and every set of promise forming consideration for each other. In case of an export agreement, the promise of the exporter is to supply the goods as per the quality specifications and other terms and conditions negotiated with the buyer of the goods. The promise of the buyer is to make payment to the exporter when he / she supplies the goods as per the terms and conditions of the export order. The exporter conveys this promise when he / she sends the ‘offer to sell’ to the buyer. The buyer conveys his / her promise by conveying his / her acceptance to the offer and communicating it to the exporter. Thus, the exchange of offer by the exporter and its acceptance by the buyer represents conclusion of an agreement between the exporter and the buyer. This agreement is called the export agreement. EXPORT CONTRACT:- Export contract can be understood of the terms contract as defined under the contact law. Contract is defined as an agreement enforceable by law.
PROCESS OF SECURING EXPORT ORDER
The process of obtaining the export order follows the sequence of the steps given below: 1. The exporter locates a trade enquiry i.e, he / she comes across the details of a foreign buyer who is willing to import the items.The exporter may get these details through any of the following ways: a) Web sites of the import firms. b) Visit to the exporter’s web site by an interested foreign buyer. c) Participation in a trade fair / visit to a trade fair by the exporter. d) Business promotion visit to a foreign country. e) Contact with the overseas marketing agent. f) Contact with a buying agent in the exporter’s country. g) Exporter’s own retail outlet in the foreign country. h) Circulation of the trade enquiry by the trade promotion body in the exporter’s country. 2. On receipt of the trade enquiry, the exporter sends his / her company profile, product profile and the promotional literature of his / her product range to know the interest of the buyer. 3. The buyer may like to have the details of a certain product of his / her choice from the exporter. 4. The exporter sends the quotation in respect of the product of interest to the buyer. This quotation contains the basic details like its FOB price, mode of payment, photograph of item along with its specifications and the likely delivery time. 5. On receipt of this basic information, the foreign buyer puts forward his / her requirements as regards the design, size, finish or other specifications of the product. 6. The exporter sends the proforma invoice to the foreign buyer setting out in details the terms and conditions negotiated between the two parties. 7. The importer conveys his / her ‘acceptance’ of ‘offer to sell’ to the exporter on the proforma invoice originally sent by the exporter.
TERMS AND CONDITIONS OF AN EXPORT ORDER
The terms and conditions of an export order would vary from order to order depending on the nature of product, parties involved and so on. But the following are the standard clauses of an export order:
1. 2. 3. 4. 5.
Product and its description Product specifications as regards its quality Price : FOB / CFR / CIF etc., per INCOTERMS 2000 Quantity Payment Terms: D/A. D/P, Letter of Credit, Advance Payment etc. 6. Delivery Schedule: Time period; partial / complete dispatch 7. Mode Shipment: Air / Sea / Road / Post 8. Type of shipment : Direct / Transshipment 9. Inspection Labeling, Packaging, Packing and Marketing requirements 10. Insurance : By exporter / importer 11. Documents required 12. Escalation clause : Sharing of increase in cost 13. Force Majeure Clause : Clause providing for excuse of non-performance due to acts of goods 14. Arbitration Clause: Clause for settlement of dispute 15. Fines / Penalties 16. Applicability of Law
Enquiry Quotation Order confirmation Letter of Credit Production planning Production of material Dispatch Preparation of Pre-shipment documents Arrival at port Shipment Preparation of Post-shipment documents Document negotiation with bank Payment realization
SWOT ANALYSIS OF HINDALCO
STRENGTH • A global leader in value-added high-end aluminium flat rolled products and aluminium can recycling. • • • • It is the largest manufacturer of the entire range of flat rolled products in India & enjoys nearly 60 per cent of market share. The company exports about 17 per cent of its total sales volume of aluminium. The company has been accorded the Five Star Trading House status in India. The company's metal is accepted for delivery under the high grade aluminium contract on the London Metal Exchange (LME).
Since I had done my project in Renukoot plant then the only weakness which I found here in Renukoot plant is that Marketing process is very difficult from here due to its remote location and it is also very far from ports.
OPPORTUITIES • Takeover of Indal is taking Hindalco to the production to meet the Importer’s requirements in time and it also giving the opportunities to department to secure as much export order capacity of production. •
way of without export due to
increased any delay marketing increased
Acquisition of Novelis giving the opportunities to the Hindalco to expand more its global market, since, Novelis has the unrivaled capability to provide its customers with a regional supply of technologically sophisticated rolled aluminium products throughout Asia, Europe, North America and South America.
THREATS Due to high International Inflation rate, price of the Aluminium is increasing in the International Metal Market. As a result, the Aluminium, which was said as the product of poor peoples, now it has been gone far from the hands of a middle class people. Now, it becomes a product of high class society. So, poor and middle class peoples are searching and getting the alternatives of the Aluminium metal i.e. Iron and Steel which is low in cost as comparison to Aluminium now-a-days.
The objective of study is to find answer of the some questions, which are important to clearly understand the importance, procedure and role of export documentation for Aluminium & Aluminium
products in smooth Export working. The main objectives of doing this project are as follows:• • To study the Export Documentation Process. To understand the global Aluminium industry trends in the major demand and supply center of the world. • • • • To understand the global marketing of Hindalco products. To understand the Export Market Plan. To study the Export Process from Order Booking to Shipment. To understand the overall process involved in the Export
Management System of the Hindalco Industries Ltd. • To understand the overall process used by the Hindalco to establish the Export Documentation Process. • To understand the benefits and incentives given by the
government to the exporter for boosting up the Indian Export.
PROCEDURE FOR EXPORT
There are various steps involved for the proper procedure of export of a product. These are as follows: • RECEIPT OF AN ENQUIRY. • • • • • • • • • • • • • • • CHECK ON RESTRICTIONS ON FOREIGN EXCHANGE AND IMPORT IN THE IMPORTER’S COUNTRY. SCRUITINISE THE ORDER. ACKNOWLEDGEMENT OF THE ORDER. ARRANGING FOR GOODS. EXPORT LICENSE. CENTRAL EXCISE CLEARANCE. APPLY TO EXPORT INSPECTION COUNCIL OF INSPECTION. APPLY FOR MARINE INSURANCE POLICY, IF IT IS A C.I.F. QUOTATION. ISSUE INSTRUCTIONS AND TO THE CLEARING ROLE AND FOR FORWARDING AGENT. CLEARING FORWARDING AGENTS SHIPPING AND CUSTOMS AT PORT. DOCUMENTS RETURNED BY THE FORWARDING AGENTS. SHIPPING ADVICE TO IMPORTER. PRESENTATION OF DOCUMENTS BY THE BANK. CENTRAL EXCISE REBATE. DUTY ENTITLEMENT PASSBOOK SCHEME
STEP 1: RECEIPT OF AN ENQUIRY It is not possible to attend personally to all of these enquiries, as it would not be economical to do so. The best way to do this is to ask the enquirers themselves to supply information about their business. If the enquirer is well established, he will be glad to give the information asked for, but if he refuses to do so than it is fair evidence that his intensions are not good. The exporter after having satisfied himself that the enquirer abroad is a fit person and is capable of meeting his obligations should give him the details of his business. STEP 2: CHECK ON RESTRICTIONS ON FOREIGN EXCHANGE AND IMPORT IN THE IMPORTER’S COUNTRY. When the order is received its first decision is based upon the approval of credit. For example: War or any other disturbances in the buyer’s country could lead to the restriction of transaction. Therefore if the exporter is dealing with a well experienced importer the latter will furnish full information with reference to foreign exchange restrictions and import Licenses while placing the initial order. STEP 3: SCRUITINISE THE ORDER The exporter should carefully scrutinize and check the contents of an export before its confirmation. If should be broadly in accordance with the ‘elements of contract’ which might have been conveyed to the overseas buyer, received along with the duplicate copy duly signed of export contract. The export should be scrutinized on the following aspects: • • Terms of payment Documents 57
Delivery schedule STEP 4: ACKNOWLEDGEMENT OF ORDER In this step the order is to be acknowledged. The order must be acknowledged before the exporter states that whether he would be able to fill it or not. The acknowledgement should contain the essential concerning the shipment which the exporter should know. STEP 5: ARRANGING THE GOODS As soon as the export order has been confirmed or finalized, preparations are made for the production or procurement of goods to be exported. STEP 6: EXPORT LICENSE If the item being exported requires an export License, the exporter from the Licensing authority, i.e., chief Controller of imports and Exports should procure the same. STEP 7: CENTRAL EXCISE CLEARANCE The excisable goods can be exported outside India either under claim for rebate of excise duty or under bond. STEP 8: APPLY INSPECTION TO EXPORT INSPECTION COUNCIL FOR features
Exporter should apply to EIC for pre-shipment inspection. Under the EIC an inspector will carry out the quality control and inspection for exportable products. After carrying out inspection the consignment is found to confirm to the prescribed specification.
STEP 9: FOR MARINE INSURANCE POLICY, IF IT IS A C.I.F. QUOTATION STEP 8: APPLY As soon as the goods are ready for export, the exporter has to apply to insurance company for an insurance cover/policy as the case may be. The policy would be for C.I.F. value plus 10% to cover expenses. STEP 10: ISSUE INSTRUCTIONS FORWARDING AGENT TO THE CLEARING AND
A detailed note is prepared for the clearing and forwarding agent, giving instructions regarding the shipment of the consignment. STEP 11: CLEARING AND FORWARDING AGENT’S ROLE FOR SHIPPING AND CUSTOMS AT THE PORT The clearing and forwarding agent then prepares the shipping bill and presents them along with the above documents to the export department of the customs house. STEP 12: AGENT DOCUMENTS RETURNED BY THE FORWARDING
The master document is returned by the clearing and forwarding agent to the exporter along with: • • • • Shipping bill Original L/C AR-4/AR-4A form in duplicate Full set of clean-on-board of lading together with required number of non-negotiable copies.
STEP 13: SHIPMENT ADVICE TO IMPORTER An intimation is sent to the imports, indicating the date of dispatch of goods and the name of ship by which they have been sent.
STEP 14: PRESENTATION OF DOCUMENTS BY THE EXPORTER OF THE BANK The following documents are presented by the exporter for negotiation/collection. • • • • • • • • Master Document GR-1 form Full set of clean-on-board bill of lading Original L/C Bank certificate in prescribed form Marine Insurance Policy Export Contract/Order Bill of Exchange
STEP 15: PROCESSING OF DOCUMENTS BY THE BANK Bank examines the documents with reference to the terms and conditions of the original order and also of the letter of credit. The exporter’s bank screens the above documents and sends a set of the following documents to the importer’s bank: • • • • Master Document Marine Insurance Policy Negotiable Bill of Lading Bill of Exchange
STEP 16: CENTRAL EXCISE REBATE A claim is filled by the exporter with the concerned maritime collector of Central excise for rebate on central excise duty. STEP 17: DUTY ENTITLEMENT PASSBOOK SCHEME The exporter should file an application to the Licensing authority for an advance License/special License in accordance with export/import policy of the country at point of time.
FLOW OF LOGISTICS PROCESS
Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involve the integration of information, transportation, inventory, warehousing, material-handling, and packaging.
Logistics management Logistics management is that part of the supply chain which plans, implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers' requirements. A professional working in the field of logistics management is called a logistician.
Logistics Management Software Software is used for logistics automation which helps the supply chain industry in automating the work flow as well as management of the system. There are very few generalized software available in the new market in the said topology. This is because there is no rule to generalize the system as well as work flow even though the practice is more or less the same. Most of the commercial companies do use one or the other custom solution. But there are various software that are being used within the departments of logistics. Few department in Logistics are namely, Conventional Department, Container department, Warehouse, Marine Engineering, Heavy haulage, Etc. In Hindalco, all the departments are interconnected with computer network system and the software on which these department works is on the Oracle 11i platform. This software is connected with Internet and the working in any department in any region of Hindalco will make effect in all over India.
Logistics as a business concept evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials and shipping out products in an increasingly globalized supply chain, calling for experts in the field who are called Supply Chain Logisticians. This can be defined as having the right item in the right quantity at the right time at the right place for the right price and is the science of process and incorporates all industry sectors. The goal of logistics work is to manage the fruition of project life cycles, supply chains and resultant efficiencies. In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions so that there is a coordination of resources in an organization. There are two fundamentally different forms of logistics. One optimizes a steady flow of material through a network of transport links and storage nodes. The other coordinates a sequence of resources to carry out some project.
The term is used for industry. The purpose of machine and workstation right quantity and quality describing logistic processes within an production logistics is to ensure that each is being fed with the right product in the at the right point in time.
The issue is not the transportation itself, but to streamline and control the flow through the value adding processes and eliminates non-value adding ones. Production logistics can be applied in existing as well as new plants. Manufacturing in an existing plant is a constantly changing process. Machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency.
A Brief Description of the Flow of Logistics
Export Office Export Control Head
Finished Goods Warehouse
Packaging Flow of Logistics in Brief First of all Customer or Importer place their order to the company. This is done in the following two ways: 1. Through Export Office 2. Directly to Planning Office
1. Through Export Office For placing their order, Customer or Importer contacts to their respective Export Office. There must be one Export Control Head who can deal with that order. Export Control Head sends the information about the order to the Planning department. Planning dept. can make a plan to execute that order and sends the information about the amount of production to the Production Plant. After production, the product is being sent for packaging. There packaging should be done according to the demand of the customer. When the product is being packed, it is being sent to the Finished Goods Warehouse for storage. When the finished product reaches to the warehouse, it can be informed to the Export Control Head that the product is ready for the delivery to the customer. From warehouse the product reaches to the Export office and from there it reaches to the respective Importer’s destination.
2. Directly to Planning Office The second option for the customer to place their order is that they can place their order directly to the planning office of the company. Rest all the process after planning till warehousing is same as through Export office process. In this process the product is being delivered to the importer from the Finished Goods Warehouse directly. Following process: diagram shows the subdivision Logistics of export logistics
Storage of Finished Goods
Stuffing of Finished Goods By Roadways
FLOW OF EXPORT LOGISTICS PROCESS IMPLEMENTED BY HINDALCO
Confirmation of the Export Order Container Indenting Process
Arrange empty Containers at ICD, Kanpur/Kolkata port based on Export Order Indent Container in advance based on Production Schedule. Inform Finished Goods Warehouse for segregating of material as per container load. Inform Finished Goods Warehouse with details of the Order. Pre-shipment Export Documentation & stuffing of materials in containers. Excise Clearance (Filling ARE-1 form & Excise Invoice, Verification of exporting consignment by Excise Clearance Authority). Arrival of consignment at Dry Port. Custom Clearance. Shipment. Post-shipment Documentation. Document Negotiation Payment Realization
Step 1: First of all, order is being confirmed. Step 2: Container Indenting Process • • Order for the container is given to according to the Production schedule. the Shipping Line
Container comes via ICD, Kanpur in case of Mumbai Shipment and directly via roadways or railways in case of Kolkata Shipment. A particular number is being allotted in the ICD or Kolkata port before sending it to the factory. Information is being sent to the warehouse about availability of containers for the stuffing of containers. the
Step 3: According to the information, materials is being segregated as per container load in the Warehouse. Step 4: Stuffing of material in the containers is being done as well as Pre-shipment documents is being made in this step. Step 5: After the stuffing of material, Excise Clearance office is being informed to do the Excise clearance process. In this stage ARE-1 form and Excise Invoice is being filled by the exporter. Step 6: After the completion of Excise clearance process, stuffed containers is being sent to the respective port according to their destination. Step 7: After the arrival of export consignment at the port, Custom Clearance process is being done by the Custom clearing authority. Step 8: Shipment is being done after the Custom process is cleared. Step 9: Post-Shipment documents is being made by the exporter after the shipment of the consignments. Step 10: When the post-shipment documents are made, documents are being sent to the bank for the negotiation. these
Step 11. After negotiation, the documents are cleared for making payments which exporter receives. This stage is called Payment Realization stage.
SHIPPING THE PRODUCT
When shipping a product overseas, the exporter must be aware of packing, labeling, documentation, and insurance requirements. It is important that exporters ensure that the merchandise is: • Packed correctly so that it arrives in good condition; • Labeled correctly to ensure that the goods are handled properly and arrive on time at the right place; • Documented correctly to meet U.S. and foreign government requirements, as well as proper collection standards; and • Insured against damage, loss, pilferage and delay. . Following are the ways by which Sheets, Coils and Circles are packed by Hindalco:
COILS The coils are packed in eye-to-sky or eyeto-wall position, wrapped in HDPE and hardboard, strapped with hoop iron and placed on wooden pallets. Moisture protection is provided by silica gel packets.
SHEETS Cold rolled sheets are wrapped in HDPE and placed on wooden pallets which have runners along and across the length of the sheet. An angle board is attached to the edges for edge protection, plyboard is placed on the top and bottom of the stack and the package is strapped with hoop iron straps. Silica gel packets are used for moisture protection.
Documentation Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires as forwarders are specialists in this process. The following documents are commonly used in exporting; but which of them are necessary in a particular transaction depends on the requirements of the U.S. government and the government of the importing country.
Air freight shipments are handled by air waybills, which can never be made in negotiable form. A bill of lading is a contract between the owner of the goods and the carrier (as with domestic shipments). For vessels, there are two types: a straight bill of lading which is nonnegotiable and a negotiable or shipper's order bill of lading. The latter can be bought, sold, or traded while the goods are in transit. The customer usually needs an original as proof of ownership to take possession of the goods. A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by governments to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, and number of copies, language to be used, and other characteristics. A consular invoice is countries. It describes information such as the shipment. Certified by country stationed here, officials to verify the shipment. a document that is required in some the shipment of goods and shows consignor, consignee, and value of the the consular official of the foreign it is used by the country's customs value, quantity, and nature of the
A certificate of origin is a document that is required in certain nations. It is a signed statement as to the origin of the export item. Certificate of origin are usually signed through a semiofficial organization, such as a local chamber of commerce. A certificate may still be required even if the commercial invoice contains the information. A NAFTA certificate of origin is required for products traded among the NAFTA countries (Canada, the United States, and Mexico). Inspection certification is required by some purchasers and countries in order to attest to the specifications of the goods shipped. This is usually performed by a third party and often obtained from independent testing organizations. A dock receipt and a warehouse receipt are used to transfer accountability when the export item is moved by the domestic carrier to the port of embarkation and left with the ship line for export. 68
A destination control statement appears on the commercial invoice, and ocean or air waybill of lading to notify the carrier and all foreign parties that the item can be exported only to certain destinations. A Shipper's Export Declaration (SED) is used to control exports and act as a source document for official U.S. export statistics. SEDs must be prepared for shipments through the U.S. Postal Service when the shipment is valued over $500. SEDs are required for shipments not using the U.S. Postal Service when the value of the commodities, classified under any single Schedule B number, is over $2,500. SEDs must be prepared, regardless of value, for all shipments requiring an export license or destined for countries restricted by the Export Administration Regulations. SEDs are prepared by the exporter or the exporter's agent and delivered to the exporting carrier (for example, the post office, airline, or vessel line). The exporting carrier will present the required number of copies to the U.S. Customs Service at the port of export. Often, the SED is prepared as a by-product of another document, the Shipper's Letter of Instructions, as shown in. An export license is a government document that authorizes the export of specific goods in specific quantities to a particular destination. This document may be required for most or all exports to some countries or for other countries only under special circumstances. An export packing list considerably more detailed and informative than a standard domestic packing list. It itemizes the material in each individual package and indicates the type of package, such as a box, crate, drum, or carton. It also shows the individual net, legal, tare, and gross weights and measurements for each package (in both U.S. and metric systems). Package markings should be shown along with the shipper's and buyer's references. The list is used by the shipper or forwarding agent to determine the total shipment weight and volume and whether the correct cargo is being shipped. In addition, U.S. and foreign customs officials may use the list to check the cargo. An insurance certificate is used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit.
Documentation plays a very crucial role in the execution of an export contract. In fact, the process of documentation begins when the order is placed by the foreign buyer with the exporter. The formalities as regards various documents relate to pre- shipment inspection, origin of the goods, central excise, exchange control and customs clearance is known as pre- shipment export documentation. The documentation in relation to negotiation of documents for realization of export proceeds is referred to as post- shipment export documentation.
Need for Export Documentation An exporter is required to deal with various documents both at the pre- shipment and post- shipment stages for export transaction. These documents are important because of:1. As an evidence of shipment and title of goods. 2. For obtaining payment. The shipment is represented by the set of documents once have been cleared by the customs for their transportation to the importer. These documents are of vital interests to both the importer and exporter. The importer needs them to claim peaceful and legal possession and delivery of the goods in his country; the exporter needs to hand them over to him to claim payment for the shipment. Accuracy and completeness are of paramount importance in documents covering export shipments. Minor discrepancies in the documents, which look harmless sometimes, assume menacing form either in the data themselves. If any alteration or addition has been made by an authority issuing the documents, the exporter should ensure that the same has been endorsed by it properly under the signature of the person issuing the documents only. The main purpose of the documents accompanying a shipment is to provide a specific and complete description of the goods so that they can be assessed correctly for duty purpose and meet the import licensing requirements or import quota restrictions imposed on the goods for clearance purpose. If there are any discrepancies in the documents the required documents are not produced, the shipment 70
may not be allowed for import or may even be confiscated by the customs of the importing country.
SET OF DOCUMENTS REQUIRED FOR EXPORTS
The following documents are generally required for export of products: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Invoice-in 4 copies plus 10 copies for certification. Packing List in4 copies. Mill’s Certificate in 3 copies. Insurance Certificate in duplicate. Certificate of Origin in 3 copies. Bill of Exchange-in duplicate. B/L-full set plus 2 non-negotiable copies. Material Safety Data Sheets/Analysis Report in 3 copies. SDF Form & Custom certified Invoice both in original. Above mentioned L/C in original.
THE MAJOR DOCUMENTS
Export documentation plays a vital role in international marketing as it facilitates the smooth flow of physical goods and payments thereof across national frontiers. Export documentation is however complex as the number concerned authorities to whom the relevant documents are to be submitted. On the basis of the function to be performed export documents can be classified under four categories:
Trade documents/Commercial documents: The commercial documents are those by which customs of trade are required for effecting physical transfer of goods and their title from the exporter to the importer. On an average there are 16 commercial documents. The following 16 commercial documents are involved in the pre-shipment stage: Pro-forma invoice Commercial invoice Packing list Shipping instruction Intimation inspection Certificate of inspection Insurance declaration Certificate of insurance Shipping order Mate’s receipt Bill of lading Application for certificate of origin Certificate of origin Bill of exchange Shipping Advice Letter to the bank for collection
Our of 16 documents 14 have been standardized and aligned to one another. Two documents namely Shipping order and Bill of exchange could not be standardized.
Regulatory documents: These are the documents which are required for complying with the rules and regulations governing export trade transactions such as foreign exchange regulations, customs formalities, export inspection etc. The regulatory documents associated with the preshipment stage of an export transaction are as follows: Gate Pass-1/gate Pass-2 AR-4 form Shipping bill/bill of export Export application/dock Challan/Port trust shipping bill Receipt for payment of port charges Vehicle chit Exchange Control declaration (GR/PP) Forms Freight Payment Certificate Insurance premium payment certificate
Out of the above 9 regulatory documents, 4 have been standardized.
Export assistance documents These are the documents which are required for claiming assistance under the various export assistance measures or may be in operation from time to time. Presently these refer to import replenishment licenses, cash compensatory support scheme drawback of central excise & custom duties & packing credit facilities.
Foreign documentation These are the documents which are required by the importer in order to satisfy the requirements of his governments. These include: Certificate of origin 73
Consular invoice Quality control certificate etc. Export documents can be classified into two categories depending upon the specific requirements: • • Regulatory Operational
NEED FOR EXPORT DOCUMENTS
Export documents have to be prepared for various purposes: o Declaration of exports as per exchange control regulation of the country. o Transport of the goods. o Customs clearance of the goods o Other purposes.
SIGNIFICANCE OF SOME EXPORT DOCUMENTS
Some of the principal documents are discussed as follows: Letter of Credit Export Invoice Packing List Certificate of Origin Bill of Lading Shipping Order/Mate’s Receipt Shipping Bill Marine Insurance Policy
LETTER OF CREDIT
Letter of credit is an undertaking by the importer’s bank that if the exporter exports the goods and produces documents as stipulated in the letter, the bank would make payment to the exporter. “Letter of credit” is the most important single document in international trade. It forms the basis of very large volume of world trade. Letter of credit provides great security to the exporter. “It is an arrangement by means of which (issuing bank) acting at the request of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predetermined amount by a given date according agreed stipulation and against presentation of stipulated documents.” SALIENT FEATURES It is an undertaking by the bank. It is an undertaking to make payment. It is an undertaking to make on behalf of the person. It is an undertaking given to the third party. It is an undertaking given to the third person. (A person other than the one on whose behalf it is given) It is a conditional undertaking, payment being subjected to compliance with some conditions. PARTIES TO A LETER OF CREDIT A documentary credit has got four parties, namely: ♦ ♦ ♦ ♦ APPLICANT (opener) ISSUING BANK BENIFICIARY ADVISING BANK
MECHANISM OF L/C ♦ Is to make payment to the order of a third party (the beneficiary), or is to accept and pay bills of exchange drawn by the beneficiary; or ♦ Authorizes another bank to effect such payment or to accept and pay such bill of exchange; or ♦ Authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions of the credit are complied with.
TYPES OF A LETTER OF CREDIT • Revocable Letter of credit: It is a credit which can be revoked. A revocable L/C is the one which can be cancelled or amended by the issuing bank at any time without prior notice to the beneficiary. A revocable credit indicate the nature by a specific clause addressed to the advising bank. Irrevocable letter of credit: It is a firm undertaking on the part of issuing bank and cannot be cancelled or amended without the consent of the parties to L/C, particularly the beneficiary. An irrevocable credit constitutes a definite undertaking of the issuing bank to accept or pay bills drawn on another bank or make payment. Payment credit: It is a credit which will be paid at sight basis against presentation of requisite documents to the designated paying bank. In a payment credit, beneficiary may or may not be called upon to draw a draft. Deferred payment credit: It is a usance credit where payment will be made by designated bank, on respective due dates. Acceptance credit: It is similarly to deferred payment credit except for the fact that in this credit drawing of a usance draft is a must. Under this credit, drafts must. Under this credit, drafts must be drawn on the specified bank. With recourse without recourse credit Revolving letter of credit Confirmed letter of credit Transferable credit Revolving credit Transit credit Bank to back credit 76
• • • • • • •
• • •
The sight credit Usance credit The deferred payment credit.
It is one of the most important documents issued by the seller in the standardized format. The invoice is usually made out of the full realizable amount of the Trader term. The invoice should be strictly as per the contract of sale and must be signed by the seller or the person on his behalf.
CONSULAR INVOICE A consular invoice is required to be prepared in a prescribed format and it should be signed/certified by the council of the importing country located in the country of export. The main purpose of consular invoice is to enable the importer’s country to collect accurate and authenticated information about the value, volume, quality, source etc. of the import for assessing Import duties and for other statistical purposes. It helps the importer to get cleared the goods through the customs without any undue delay. This document is required mainly by the Latin American countries like Kenya, Tanzania, Nigeria, Mauritius, New Zealand etc.
PACKING LIST Packing list may be shown on invoice or separately and should contain item by item, the contents of cases or containers or of a shipment with its weight and description set forth in such a manner as to permit checks of the contents by the customs on arrival at the port of destination. The packing list is a relatively simpler document and the whole of the information can be reproduced from the master by masking information not desired on the packing list. Special information, if any can be given in the blank space in the lower third position of the document. It is a list showing the details of goods contained in each 77
Parcel shipment. document from.
Packing list has to be prepared in the Aligned
BILL OF LADING A Bill of lading is a document issued by the sipping company or its agent, acknowledging the receipt of goods for carriage which are deliverable to the consignee or his assignee in the same condition as they were received. A bill of lading serves the following purposes:
It is a receipt of goods received by the shipment company. A Contract with the carrier: it contains the terms of contract between the shipper and the shipping company, between stated points at a specific charge. Evidence of title: It is a certificate of ownership or title to the goods. Contents of Bill of lading The usual form of a bill of lading includes the following information: • • • • • • • • • • Name of the shipping company. Name of the shipper. Name and address of the importer. Name and address of the party to be notified on the arrival of shipment. Name of the carrying vessel. Name of the ports of loading and discharge. Whether freight is payable or whether freight has been paid. Number of originals in the set of bill of lading documents. Marks and number identifying goods. Brief description of the goods (including weights and dimensions). 78
• • • •
Number of packages. Signature of ship’s master or his agent. Date on which goods were received for shipment. Signature of the exporter (or his agent) and his designation applicable.
IMPORTANCE OF BILL OF LADING o It is a contract between the shipper and the shipping company for the carriage of goods to the port of destination. o It is an acknowledgement indicating that the goods mentioned in the document have been received on the board for the purpose of shipment. o It issue for claiming incentives offered by the government to exporters.
MARINE INSURANCE POLICY The safe conduct of the goods from the time it leaves the exporter’s godowns and till it reaches the warehouse of the importer is what all the parties in the transaction pray for. It depends upon the safety of the goods during the voyage and safety of the vessel that carries the goods. Marine insurance Policy offers the desired cover against the loss or damage of the goods during the transit. It allows a free flow of international trade. In India Marine insurance is governed by the marine Insurance act’ 1963. Section 3 of the act defines a contract of marine insurance as “as agreement in which the insurer undertakes to indemnify the assured in the manner and to the extent thereby agreed”.
NATURE OF MARINE CARGO INSURANCE o Parties o Insurable interest o Utmost good faith o Indemnity o Assignment CERTIFICATE OF ORIGIN
This certificate certifies the place of origin of the merchandise’ Besides the federation of Indian Chamber of Commerce and Industry, EPC’s and various other trade associations have been authorized government of India to issue certificate of origin. These certificates are important in case of shipments to countries which have preferential rates of tariff for Indian goods. Certificates of origin are issued by Chamber of commerce on their own printed forms differing in sizes and layout. The standard documents in respect of certificate of origin are included in the series of aligned documents. A Certificate of origin declares the place of actual manufacture or growth of the goods. A country may place restrictions on imports from certain countries.
SHIPPING ORDER/MATE’S RECEIPT When a cargo is loaded on the ship the commanding officer of the ship will issue a receipt called the mate’s receipt for the goods. The mate receipt is first handed over the port trust authorities so that all the port dues are paid by the exporter to the port trust. The bill of lading is prepared by the shipping agent only after the male receipt has been obtained. The aligned shipping order and the mate’s receipt have been prepared after examining the forms of the two documents issued by the different shipping companies. The information required in these documents can be reproduced with great ease from the master. The issuance of these documents in the standard from will also facilitate the processing of documents at various stages.
SHIPPING BILL Shipping bill is required by the customs. It is only after the shipping bill is stamped by the customs that cargo is allowed to be carted to the docks. The aligned shipping bill has been prepared after taking into consideration the requirement of custom’s public notice no. 39 which suggests a uniform shipping bill for different categories of exports. Basically shipping bill are of four types: Export duty/cess Free of duty/cess Entitlement to duty drawback 80
Re-export of imported goods. The format presented for shipping bill is as under : o o o o White shipping bill. Green shipping bill. Yellow shipping bill. Pink shipping bill. BILL OF EXCHANGE A bill of exchange is an instruction by the exporter (drawer) to the (importer) or the importer’s bank to make payment of the amount mentioned in it. A bill of exchange is a negotiable instrument and is governed by the Negotiable Instruments Act in India and by similar enactments in other countries. The Negotiable Instruments Act defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by the maker directing a certain person to pay a certain sum of money only to or order of a certain person or to the bearer of instrument. A bill of exchange is also called as draft contains an order from the credit to the debtor to pay a specified amount to a person mentioned therein. There are three parties to B/E. The Drawer (exporter) : The person who executes the B/E. The Drawee (importer) : The person on whom the B/E is drawn and who is required to meet the terms of the document. The Payee (the exporter’s bank): The party to receive the payment. TYPES OF BILL OF EXCHANGE o o o Sight and usance bills. D/A and D/P bills. Inland and foreign bill.
The RBI to ensure that the foreign exchange receipts in respect of exports are repatriated to India has prescribed this form. This has to be prepared in duplicate. The original copy has to be submitted to the customs authorities at the port of shipment. This is sent to the RBI directly by the customs authorities. The duplicate copy is submitted to the negotiating bank along with the other documents after shipment of goods. The negotiating bank sends the duplicate copy to the RBI.
COMMON DEFECTS IN DOCUMENTATION
The bank making payment on behalf of its foreign correspondent must verify that all documents & drafts conform precisely to the terms & conditions of the L/C. to avoid payment delays, the beneficiary should prepare & examine all documents carefully before presenting them to the paying bank. Paying banks find that the following discrepancies between the documents & the letter of credit occur most frequently: 1. 2. 3. 4. 5. 6. 7. 8. 9. Drafts are presented after L/C has expired or after time for shipment has expired. Invoice value or draft exceeds amount available under L/C. Charges included in the invoice are not authorized in the L/C. Amount of insurance coverage is inadequate or coverage does not include risks required by the L/C. Insurance document is not endorsed and/or countersigned. Date of insurance policy or certificate is later than the date on bill of lading. Bills of lading are not “clean” that is, they bear notations that qualify good order & condition of merchandise of its packing. Bills of lading are not marked “On Board” when so required by L/C. “On Board” endorsement or charges on bills of lading are not signed by carrier or its agent or initialed by party who signed bills of lading. “On Board” endorsement is not dated. Bills of lading are not endorsed.
Bills of lading are made out “to order” (Shipper’s order, Blank endorsed) where L/C stipulates “Straight” (direct to consignee bills of lading or vice versa. Bills of lading do not indicate, “Freight prepaid” as stipulated in the L/C. B/L are not marked “Freight prepaid” when freight charges are included in invoice. Descriptions, marks & nos. of merchandise are not same on all documents presented or are not as required by L/C. Not all documents required by L/C are presented. Invoice states “used”. “second hand” or “rebuilt” merchandise when L/C does not authorize such condition. Invoice does not specify shipment terms (C & F, CIF, FOB, etc) as stated in L/C. Invoice is not signed as L/C requires.
13. 14. 15. 16. 17. 18. 19.
SHIPMENT OF EXPORT GOODS
The exporter should arrange for shipment of the goods as soon as they have been cleared by the inspection agency from the point of view of their quality and the distribution logistics has been worked out. The process of shipment of goods would involve essentially their clearance by the Central Excise and the Customs Authorities. The exporter should first plan for the Central Excise Clearance and then take the help of a custom house agent to obtain the Customs Clearance of the shipment. CENTRAL EXCISE CLEARANCE PROCEDURES All excisable goods can be removed from the factory only after their clearance by the Central Excise Authorities. The Central Excise Clearance of goods is governed by Central Excise Act,1944 and Central Excise(No.2) Rules, 2001. The procedure for clearance of excisable goods for exports can be classified into the following two categories:1. Procedure for excise clearance in the case of exempted units. 2. Procedure for excise clearance in the case of units other than exempted units. 83
EXCISE CLEARANCE PROCEDURE The exempted units shall prepare an invoice for the goods reference of the exemption letter issued by the Central Authority in terms of Notification No. 36 / 2001 / Central (NT). This invoice would serve as a proof of Central Clearance of the goods. giving Excise Excise Excise
EXPORT UNDER BOND / LETTER OF UNDERTAKING: RULE 19 In this case the exporter is allowed clearance of goods for export without payment of the excise duty subject to the execution of bond with security or surety for a sum equivalent to the duty chargeable on the goods to be exported. This procedure is called Export under Bond as provided under Rule 19 of the Central Excise Rules. Manufacturer – Exporter can submit Letter of Undertaking instead of bond. CENTRAL EXCISE CLEARANCE EXAMINATION OF GOODS WITH OR WITHOUT
The exporter has an option to seek excise clearance of export cargo without examination or after examination by the Central Excise Officer. In case the clearance is done after examination of the goods then the Central Excise Officer draws three samples of the goods. After clearance of the goods, the export boxes are duly sealed by the Central Excise Officer who would then hand over two samples of the goods duly sealed to the exporter for the purpose of handling over one sample to the customs and the other to be retained by him for record. The facility of excise clearance with or without examination is available under both the option i.e, export under claim of Rebate of Duty and export under Bond / Letter of Undertaking. The Excise Clearance after examination is also known as export under Central Excise Seal.
The basic form used for the purpose of seeking Central Excise Clearance is called ARE.1 (Application for removal of excisable 84
goods for export) – whether by air / sea / post / land. This form is required to be filled by the exporter in all cases that is :Export clearance of his own without examination by the Central Excise officer whether under claim for rebate or under bond / Letter of Undertaking. Export clearance under Central Excise Seal under claim for rebate or under bond / Letter of Undertaking.
ARE.1 FORM:The different copies of ARE.1 are indicated as below :1. Original 2. Duplicate 3. Triplicate 4. Quadruplicate 5. Quintuplicate CLEARANCE UNDER EXAMINATION CLAIM OF REBATE WITHOUT
The copies of ARE.1 would be disposed as under :a. O r i g i n a l a n d d u p l i c a t e : T o t h e e x p o r t e r p r e s e n t i n g t h e m t o the Customs Officer at the point of export along with export shipment.
b. T r i p l i c a t e : - T h e t r i p l i c a t e c o p y o f t h e A R E . 1 F o r m i s s e n t t o
rebate sanctioning authority that is Maritime Collector of Central Excise or the Assistant Collector of Central Excise declared by the exporter on the ARE.1. This copy on the request of the exporter may be saled and handed over to the exporter / his authorized agent for presenting to the rebate sanctioning authority.
c. Q u a d r u p l i c a t e : - I t i s a n o f f i c e c o p y t o b e r e t a i n e d b y t h e
Central Excise Officer. 85
CLEARANCE UNDER CLAIM CENTRAL EXCISE SEAL
The copies of ARE.1 would be disposed as under :a. O r i g i n a l / D u p l i c a t e : - T o t h e e x p o r t e r f o r p r e s e n t i n g t o t h e Customs Officer at the point of export along with the export shipment. b. T r i p l i c a t e : To the rebate sanctioning authority i.e. Maritime Collector of Central Excise or the jurisdictional Assistant Collector of Central Excise, as declared by the exporter on the ARE.1. The Central Officer may handover this copy under a sealed cover on exporter’s request. c. Q u a d r u p l i c a t e : - T o b e r e t a i n e d f o r r e c o r d s . PROCESSING OF ARE.1 BY THE CUSTOMS OFFICER The original and duplicate copies of the ARE.1 are presented by the exporter / his authorized agent to the Customs Officer at the point of export along with the goods, Shipping Bill / Bill of Export, and samples sealed by the Central Excise Officer. The export shipment is checked by the Customs Officer to see whether the seals are intact and the marks and number tally, and if found in order, he may allow exports after ensuring that the No. of the ARE.1 has been indicated in the Shipping Bill or the Bill of Export, as the case may be . After the goods have been shipped, the proper officer of Customs makes necessary endorsements in the Original, and Duplicate copies of the ARE.1 at appropriate place, and puts his stamp with his name and designation below his signature. The copies of ARE.1 are disposed of by him in the following manner :a. O r i g i n a l : - T o b e h a n d e d o v e r t o t h e E x p o r t e r , O r i g i n a l s h a l l be used for filing rebate claim.
b. D u p l i c a t e : - T o b e s e n t t o R e b a t e S a n c t i o n i n g A u t h o r i t y declared on ARE.1. This copy on a request of exporter may be sealed and handed over to the exporter / his authorized agent for presenting to the rebate sanctioning authority.
Where the export is from any port, airport or post office falling within the jurisdiction of Maritime Collector of Central Excise, option is available to file claim of rebate before such Maritime Collector Of Central Excise. For this purpose, exporters are required to clearly indicate their option ARE.1 along ith complete postal address of the authority from whom the rebate shall be claimed. Following documents should be filed for claiming rebate :I. II. III. IV. V. VI. Application in the prescribed form Original copy of ARE.1 Duplicate copy of ARE.1 in sealed cover received from Customs Officer (optional) Duly attested copy of the Bill of Lading Duly attested copy of Shipping Bill (Export Promotion Copy) Disclaimer Certificate ( in case where claimant is other than the exporter)
On receipt of the documents for claim of Rebate of Duty, the Maritime Collector of Central Excise or the Assistant Collector of Central Excise, the authority with whom the claim for rebate has been filed, shall verify and compare the original copy of ARE.1 with the duplicate copy of ARE.1 received from the Customs Officer and with the triplicate copy of ARE.1, received from Superintendent, Central Excise Range and after satisfying himself that the claim is in order, will sanction the rebate either in whole or in part.
EXCISE BOND / LETTER OF UNDERTAKING
The central excise clearance of the export shipment without payment of Central Excise Duty is allowed if the exporter submits 87
bond as provided under Rule 19 of the Central Excise Rules as amended from time to time. The bond is to be submitted in the form B.1 – General Bond (Surety / Security) as prescribed in Annexure 1 to Notification No. 42 / 2001 / Central Excise / (N.T.). The amount of bond is equal to the duty chargeable on then goods to be exported. Bond can be executed with surety or without surety / security. Exporters of the following categories are allowed to execute the bond with surety and do not have to furnish any bank guarantee or cash security.
1. One to Five Star Export House 2. Registered exporters ( Registered with relevant Export Promotion Council) 3. Manufacturers registered with the Central Excise department.
CLEARANCE OF GOODS UNDER EXCISE BOND WITHOUT EXAMINATION
The copies of ARE.1 would be disposed as under :I. II. Original & Duplicate :- To be given to the exporter. Triplicate :- To the authority before whom the bond is executed and who will accept the proof of export i.e. Maritime Collector of central Excise or the Assistant Collector of Central Excise Declared by the exporter on the ARE.1. This copy on the request of exporter may be sealed and handed over to the exporter / his authorized agent for presenting to the authority. Quadruplicate :- Office copy to be retained by the Central Excise Officer.
CLEARANCE OF GOODS UNDER EXCISE BOND WITH EXCISE SEAL
The Central Excise Officer shall dispose of the copies of ARE.1 as under :88
Original & Duplicate :- To be handed over to the exporter Triplicate :- To the authority before whom the bond is executed and who will accept the proof of export i.e. Maritime Collector of central Excise or the Assistant Collector of Central Excise Declared by the exporter on the ARE.1. This copy on the request of exporter may be sealed in a tamper proof cover and handed over to the exporter / his authorized agent for presenting to the authority. Quadruplicate :- Office copy to be retained by the Central Excise Officer.
CUSTOMS CLEARANCE OF EXPORT SHIPMENT
Every exporter is required to seek customs clearance of the export goods before sending them to the importer. The exporter can send the shipment through any one of the following modes of transportation of the goods:1. Shipment by air 2. Shipment by sea 3. Shipment by post 4. Shipment by road The procedure for customs clearance is essentially the same whether the shipment is sent by air or sea or post or land route.
The exporter / CHA is required to submit various documents to the Customs authorities to seek clearance of the shipment and obtain LET EXPORT order. The documents required depend upon the mode of shipment.
DOCUMENTS IN THE CASE OF SHIPMENT BY AIR / SEA
The following documents are required for customs clearance of the shipment of goods by Air / Sea. 1. Shipping Bill in quadruplicate or Annexure A ( in the case of computerized processing of export documents) 2. Commercial Invoice 3. Exchange Control Declaration Form GR or SDF as applicable (original and duplicate) 4. Copy of Letter of Credit / Copy of Export Order / Export contract duly attested by bank 5. Packing List 6. Certificate of Origin or GSP Certificate of Origin 7. Shipper’s Declaration form for export of goods under Claim of duty draw back or Advance License Without certificate from Export Inspection Agency 8. ARE.1 duly approved by the Central Excise Officer or Invoice showing clearance of excisable goods. DOCUMENTATION IN CASE OF SHIPMENT BY POST In case of shipment by post, the exporter is required to submit the following documents :1. Customs Declaration Form instead of shipping Bill 2. Exchange Control Declaration Form (PP Form) 3. Form D in case the shipment is for export of goods under claim for Duty Drawback 4. ARE.1 or the Invoice showing clearance of excisable goods 5. Commercial Invoice 6. Packing List 7. Certificate of Origin / GSP Certificate of Origin 8. Copy of export order / Letter of credit 9. Insurance policy or the certificate of Insurance 10. Export License, if required 11. Pre- shipment inspection certificate 90
Any other document that may be required by the Customs / Post office
DOCUMENTATION IN CASE OF SHIPMENT BY LAND The following documents are required to be presented to the Land Customs Station wing of the Customs Department having jurisdiction over the place through which the consignment moves into the foreign country :-
1. Bill of Export 2. Exchange Control Declaration Form ( GR / SDF) 3. Drawback Bill 4. Commercial Invoice 5. Packing List 6. Certificate of Origin / GSP Certificate of Origin 7. Copy of the export order / Letter of credit 8. Pre- shipment Inspection Certificate 9. ARE.1 or Invoice showing clearance of excisable goods 10. Export license if any 11. Any other document that may be required by the customs
APPOINTMENT OF CLEARING AND AGENT / CUSTOM HOUSE AGENT
The exporter should first of all appoint a Clearing and Forwarding Agent / Custom House Agent ( CHA) to handle the procedure involved in the customs clearance of the export shipment. He is expected to take the following steps for this purpose:1. Booking of shipping space with the conference liner or booking the shipment with the airline. The liner issues shipping order and the airlines issues the carting order when the shipment is booked for transportation. 91
2. Provide assistance for hiring of the container if the shipment is proposed to be sent through container.
REGISTRATION OF IMPORTER – EXPORTER CODE NUMBER, RBI CODE NUMBER The CHA should apply to the customs authorities on behalf of the exporter for registration of the details as regards Importer-Exporter Code Number, RBI Ten digit code number, Authorized Dealer Code Number of the bank through which the exporter would negotiate the shipping documents for negotiation / collection, and Current Account with the designated bank for the purpose of crediting the amount of duty drawback to the exporter in respect of export shipment. CUSTOMS CLEARANCE PROCEDURE The process of customs clearance of the export shipments involves the following four phases irrespective of the mode of shipment :1. 2. 3. 4. Checking of the shipping documents Physical examination of export cargo Loading of the goods Post loading certification
MARINE INSURANCE POLICY
Marine insurance is governed by the Marine Insurance Act, 1963, the Insurance Act, 1938 and the Insurance Rules, 1939.According to the Marine Insurance Act, marine insurance is an insurance cover for marine cargo, air cargo and post parcels The purpose of cargo insurance is to protect goods against physical or damage during transit. Marine Insurance contract is an agreement where by the insurance company (insurer) undertakes to indemnify the owner (insured) of a ship or cargo against risks which are incidental to marine adventure. (Section 3 of the Marine Insurance Act,1963).
NEED FOR MARINE INSURANCE The exporter may suffer loss if the cargo is damaged due to an accident or any other circumstances during transportation of goods from the port of loading to the port of discharge. The exporter can protect himself against this kind of loss by taking insurance cover against such risks arising due to physical damage to the goods. This kind of insurance is known as marine insurance. The need for this insurance has arisen due to both the legal and commercial reasons. RISKS COVERAGE UNDER MARINE INSURANCE The shipper / exporter can cover his goods against the following risks depending upon the need and terms of Letter of Credit / Export Order. The risks coverage is done in terms of various institute cargo clause to define the perils / risks covered by the policy. 1. INSTITUTE CARGO CLAUSE A 2. INSTITUTE CARGO CLAUSE B 3. INSTITUTE CARGO CLAUSE C 4. WAR AND STRIKES, RIOTS AND CIVIL COMMOTION (SRCC) CLAUSE
INSTITUTE CARGO CLAUSE C
This cover is granted by attaching Cargo Clause ( C ) to the policy of insurance. The policy covers loss or damage to the caused by a) b) c) d) Fire or explosion Stranding, grounding, sinking or capsizing of the vessel Overturning or derailment of land conveyance Collision or contract of vessel, craft or convenience with any external object other than water. e) Discharge of cargo at a port of distress f) General average sacrifice 93
g) Jettison The cover extends over the entire period goods leave the warehouse at the place of and continues during such transit including on delivery of the goods warehouse at the policy or on expiry of 60 days after the from the vessel at the final port. of transit from the time commencement of transit deviation and terminates destination named in the completion of discharge
The policy will not cover the following risks: a) Loss, damage or expense caused by delay and inherent vice or nature of the subject matter b) Loss, damage or expense attributable to willful misconduct of the insured. c) Ordinary leakage, ordinarily loss in weight or volume, or ordinary wear and tear of the subject ,matter insured. d) Insufficiency or unsuitability of packing. e) Deliberate damage to or deliberage destruction of the gods. f) Loss, damage or expense arising from insolvency or financial default of the owners or operators of the vessel. g) Loss, damage or expense arising from the use of atomic weapons or nuclear fission and other like reaction or radioactive force.
INSTITUTE CARGO CLAUSE (B)
This cover is granted by attaching Institute Cargo Clause (B) to the policy of insurance. In addition to the risks covered under Institute Cargo Clause the following risks are covered:(C),
a) Loss of or damage to the goods attributable to earthquake, volcanic eruption or lighting. b) Washing overboard. c) Loss of or damage to the goods caused by entry of sea, lake or river water into vessel, craft, hold, conveyance, container lift van or place of storage. 94
d) Total loss of any package lost overboard or dropped whilst loading onto, or unloading from, vessel or craft. EXTRANEOUS PERILS As the goods in transit are subject to a large number of non maritime extraneous perils, it is possible to extend the policy issued on Institute Cargo Clause (B) to cover and or all the following:a) b) c) d) e) f) g) Theft, pilferage and non – delivery Fresh and / or rain and / or river water damage Hook, oil, mud, acid and damage by other cargo Heating and sweating Brakeage, denting, chipping, scratching and blending Leakage Bursting and tearing
INSTITUTE CARGO CLAUSE (A)
This cover is granted by attaching Institute Cargo Clause (A) to the policy of insurance. This policy covers all risks of loss of or damage to the goods insured and is the widest cover. This policy will not cover the risks excluded under items (1) above i.e. Institute Cargo Clause (C).
WAR AND SRCC COVER The exporter can obtain war, riots, strikes and civil commotion cover along with all the three types of policies by payment of an additional payment. The above cover is granted by attaching Institute War Clause (Cargo) and Institute Strike Clause (Cargo) to the policy of insurance.
PROCESS INVOLVED IN GETTING EXPORT INCENTIVES
Export Incentives The Government of India has framed several schemes to promote exports and to obtain foreign exchange. These schemes grants incentive and other benefits. The few important export incentives, from the point of view of indirect taxes are briefed below: 95
Free Trade Zones (FTZ) Several FTZs have been established at various places in India like Kandla, Noida, Cochin, etc. No excise duties are payable on goods manufactured in these zones provided they are made for export purpose. Goods being brought in these zones from different parts of the country are brought without the payment of any excise duty. Moreover, no customs duties are payable on imported raw material and components used in the manufacture of such goods being exported. If entire production is not sold outside the country, the unit has the provision of selling 25% of their production in India. On such sale, the excise duty is payable at 50% of basic plus additional customs or normal excise duty payable if the goods were produced elsewhere in India, whichever is higher. Electronic Hardware Technology Park / Software Technology Parks This scheme is just like FTZ scheme, but it is restricted to units in the electronics and computer hardware and software sector. Advance License / Duty Exemption Entitlement Scheme (DEEC) In this scheme advance License, either quantity based (Qbal) or value based (Vabal), is given to an exporter against which the raw materials and other components may be imported without payment of customs duty provided the manufactured goods are exported. These Licenses are transferable in the open market at a price.
Export Promotion Capital Goods Scheme (EPCG)
According to this scheme, a domestic manufacturer can import machinery and plant without paying customs duty or settling at a concessional rate of customs duty. But his undertakings should be as mentioned below: Customs Duty Rate 10% Export Obligation 4 times exports (on FOB basis) of CIF value of machinery. Time 5 years
Nil in case CIF value is Rs200mn or more.
6 times exports (on FOB basis) of CIF value of machinery or 5 times exports on (NFE) basis of CIF value of machinery.
Nil in case CIF value is Rs50mn 6 times exports (on FOB 8 years or more for agriculture, basis) of CIF value of aquaculture, animal husbandry, machinery or 5 times floriculture, horticulture, exports on (NFE) basis of poultry and sericulture. CIF value of machinery. Undertaking of EPCG Note:• NFE stands for net foreign earnings. • CIF stands for cost plus insurance plus freight cost of the machinery. • FOB stands for Free on Board i.e. export value excluding cost of freight and insurance. Deemed Exports The Indian suppliers are respect of deemed exports:
• • • •
Refund of excise duty paid on final products Duty drawback Imports under DEEC scheme Special import licenses based on value of deemed exports
The following categories are treated as deemed exports for seller if the goods are manufactured in India:
Supply of goods against duty free Licenses under DEEC scheme Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software technology park or a unit in a hardware technology park Supply of goods to holders of License under the EPCG scheme Supply of goods to projects financed by multilateral or bilateral agencies or funds notified by the Finance Ministry under international competitive bidding or under limited tender systems in accordance with the procedures of those agencies or funds where legal agreements provide for tender evaluation without including customs duty Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under international competitive bidding 97
Supply of goods to any project or purpose in respect of which the Ministry of Finance permits by notification the import of goods at zero customs duty along with benefits of deemed exports to domestic supplies Supply of goods to power, oil and gas sectors in respect of which the Ministry of Finance permits by notification benefits of deemed exports to domestic supplies
Manufacture under Bond This scheme furnishes a bond with the manufacturer of adequate amount to undertake the export of his production. Against this the manufacturer is allowed to import goods without paying any customs duty, even if he obtain it from the domestic market without excise duty. The production is made under the supervision of customs or exciseauthority.
Duty Drawback It means the rebate of duty chargeable on imported material or excisable material used in the manufacturing of goods in and is exported. The exporter may claim drawback or refund of excise and customs duties being paid by his suppliers. The final exporter can claim the drawback on material used for the manufacture of export products. In case of re-import of goods the drawback can be claimed. The following are Drawbacks:
Customs paid on imported inputs plus excise duty paid on indigenous imports. Duty paid on packing material.
Drawback is not allowed on inputs obtained without payment of customs or excise duty. In part payment of customs and excise duty, rebate or refund can be claimed only on the paid part. In case of re-export of goods, it should be done within 2 years from the date of payment of duty when they were imported. 98% of the duty is allowable as drawback, only after inspection. If the goods imported are used before its re-export, the drawback will be allowed as at reduced per cent.
Shipping Bill for Export of Goods under claim for DEPB Scheme is made after shipment. BRC is prepared for claiming the export incentives. A bunch of 20-25 Shipping Bills and their respective BRCs has been made for one application. Various data regarding export made are feeded in the Excel system for the purpose of online feeding on the DGFT Site. Necessary application fee in the form of EFT is made through system. The application is digitally signed and submitted to Jt. DGFT, Varanasi through the Internet Site. 99
Hard copy of Application form alongwith E.P. copy of Shipping Bills & original BRCs has been sent to Jt. DGFT, Varanasi for issuing DEPB License. After receipt of DEPB License, this License alongwith respective DEPB copy of shipping bills & duplicate copy of BRCs & a statement showing comprehensive details of claims has been sent to respective customs house through the clearing agents for verification. Step 1 – First of all, Shipping Bill has been made for claiming the Export Incentives. It is made as SHIPPING BILL FOR EXPORT OF GOODS UNDER CLAIM FOR DUTY ENTITLEMENT PASS BOOK (DEPB) SCHEME. Under this the main things which have been covered are:-1. 2. 3. 4. 5. 6. Invoice No. & Date Custom House agent’s Description Nature of Contract Exchange Rate Currency of Invoice Statistical Code & Description of Goods & Exim Scheme code where applicable. 7. Analysis of Export Value 8. Amount 9. DEPB Rate 10. Rate List Sr. No. 11. Product Group 12. DEPB No. 13. LET Export date Passed for Shipment There are two copies of this document. 1st one is export promotion copy & the 2nd one is DEPB copy. These document having the stamp of Custom & Excise and the signature & seal of Custom Inspector. Step 2 – When Shipping Bill has been prepared, after that Bank Realization Certificate (BRC) has been made for negotiation process in claiming the Export Incentives. This document has two parts; the 1st part contains 17 columns named Invoice no. & date, Shipping Bill 100
no. & date, Description of goods, Bill of Ladings’ no. & date, Destination, Bill amount, Freight amount, Insurance amount Commission Paid, FOB value, Date of realization of export proceeds and No., date & category of applicable License which has been filled by the exporter. Under these columns Place, Date, Seal & Signature of the exporter have been mentioned. The 2nd part of this document contains Bank’s Certificate which has to be filled by the Banker with their authorization seal & signature. When the exporter gets this BRC, it means that exporter had got the exported amount in his bank account. Step 3 – After getting the BRC from the bank, one application have been prepared for a bunch of 20-25 Shipping bills and their respective BRCs. This application is in favor of the Jt. Director General of Foreign Trade (DGFT). Description of application for issue of DEPB License, description of EFT towards the application fee, description of Export Promotion Copy of Shipping Bills & the description of self-addressed envelop with a relevant amount of stamp fixed on it have been mentioned in this application. Step 4 – On the DGFT site, there is an application software for filling the data regarding export made. For this purpose various data regarding export made are feeded in the Excel system. Step 5 – After filling the necessary information regarding export made in the DGFT site, relevant application fee in the EFT form is made through system. Step 6 – After that application is digitally signed & submitted to DGFT through the Internet. Step 7 – A hard copy of application form has been made and alongwith Export Promotion Copy of Shipping Bills & original BRCs, it has been sent to Jt. DGFT, Varanasi for issuing DEPB License. Step 8 – After getting the DEPB License from DGFT, this License alongwith respective DEPB copy of shipping bills & original BRCs & a statement showing comprehensive details of claims, it has been sent to respective customs house through the clearing agents for verification. The DEPB License from DGFT which an exporter receives after the verification of application regarding export made under DEPB scheme contains the following:
1. 2. 3. 4. 5.
Authorization Forwarding Letter DEPB License Details of the exported items Application Submission Details DEPB E-Commerce Version, under this ♦ IEC Details ♦ Application Firm Details ♦ Nature of Concern ♦ Type of Exporter ♦ Industrial Registration Details ♦ Service Tax Registration Details ♦ RCMC Registration Details ♦ Status House Details ♦ Excise Details ♦ VAT Details ♦ Past Turnover (Rs. Lakhs) ♦ Name & Address of the exporter ♦ Payment Details ♦ FOB value of Exports ♦ DEPB Claimed ♦ DEPB Applied for ♦ DEPB Entitlement for 100% ♦ DEPB Entitlement after cut ♦ Shipping Bills Details ♦ Declaration/Undertaking ♦ Signature & Description of the applicant ♦ Sign of DGFT is being covered.
These are meant to take away certain taxes which are present in the cost, the removal of which is necessary as they are meant only for goods manufactured for sale within the country and, more than that, to make the Export product competitive vis-à-vis the products of other countries. One is the concessional rate at which the commercial banks provide pre-shipment and post-shipment finance. The rate is currently 9.5 per cent per annum. Interest is an important element and any concession in this will make the product competitive.
Removal of Central Excise Duty Central Excise Duty is levied on sold here in this country. They So, they have to be eliminated. product will be comparable with countries. all goods manufactured in India and have no relevance to export goods. Then only the price of the export the prices of the products of other
There are two methods here : 1. 2. Exporter removes the goods with the duty paid and claims rebate later. Exporter removes the goods under involving any payment of excise duty). bond (without
Export under Rebate of Duty Payment In this case, the goods are exported and later the excise duty paid is allowed as a rebate. Important conditions for claiming the rebate are: a. Goods are exported not more than 2 years after removal from the producing factory or within such shorter period as may be specified. For claiming the rebate of duty, the application should be made within 6 months, if the export is by sea or air (6 months from the date of loading or the ship leaving India). If exports are by land, application should be made within 6 months from the date on which goods cross the frontier.
Sealing the goods and examination of dispatch - Rebate scheme When the Exporter desires to seal the goods at the place of dispatch, he should approach the Superintendent of Central Excise of the Range and provide details in quadruplicate in form ARE 1. The Superintendent will conduct the examination of the goods removed to the port. Customs examination at the port is dispensed with on production of a copy of ARE 1 form with the Excise Superintendent's attestation and when customs authorities are satisfied that the goods produced at the port are the same as mentioned in ARE 1 form and the seals are intact and the goods are exportable as per the laws of the country. 103
Presentation of Claim for Rebate
To get the rebate of excise duty paid, the Exporter should lodge the original of ARE 1 form with the Excise Superintendent's attention to the Deputy Commissioner or Assistant Commissioner of the Range having jurisdiction over the Exporter's factory. This is examined with the triplicate copy received from the Central Excise Superintendent and the copy received from the Maritime Superintendent (verification for the export of goods) and, if satisfied that the claim is or order, he sanctions the rebate either whole or in part. Procedure or Removal of Goods without Payment of Duty Clearance Under Bond
(for all countries except Nepal and Bhutan). The procedure is governed by Rule 19 of the Central Excise Rules 2001. The details are found in Notification No.42/2001 - CE (NT) dated 26th June 2001. The conditions are: a. The Exporter should furnish a General Bond to the Assistant Commissioner of Central Excise or to the Maritime Commissioner. The Bond should be for a sum equivalent to the excise duty payable. The goods should be exported within six months from the date on which they were cleared from the Exporter's factory. Exporter should obtain a certificate Assistant Commissioner concerned. in form CT1 from the
b. c. d. e.
The Exporter should ensure that there is enough balance in the bond. Exporter should furnish a letter of undertaking in the specified form.
The goods will then be sealed on production of ARE 1 Form. The consignment is then sent to the Port where the Customs authorities verify with the help of the copies of ARE 1 forms, that the seals are 104
intact and permit the shipment if the goods are exportable as per the laws of the country. There is no question of claim for rebate, as no excise duty has been paid and, instead, a Bond has been provided. The Bond is generally supported by a Bank guarantee.
Duty Drawback Duty drawback is the rebate of any duty relating to the inputs that go into export products. The export product may contain certain input items purchased by the Exporter which have suffered excise duty. Or he may have used certain products that have been imported and which have suffered import customs duty. The excise duty or the import duty thus suffered has to be eliminated as they have no relevance to exports and cannot be passed on to the overseas buyer. The elimination is done through the Duty Drawback Scheme. The Duty Drawback is an export incentive but it is not meant to be a source of income or profit for the Exporter. It is meant to remove the sting due to the presence of excise or import duty and make the price competitive vis-a-vis products from other countries. For claiming duty drawback, the Exporter should use the Shipping Bill for Drawback. A copy of the Shipping Bill is sent to the Customs Audit. This section verifies whether the goods have left the country, the rate applicable and the computation of the drawback amount. They may require clarifications from the Exporter. If they are satisfied about the bonafides, the Drawback amount is released. It is not sent directly to the Exporter but is transferred under Electronic Data Interchange (EDI) system to a bank account that the Exporter has been asked to open in a specified bank from which the Exporter can transfer to his own bank account. All Industry Drawback Rates On the basis of the inputs and the duties relevant to them found in export products, Government of India announce Drawback rates every year following changes in duty rates. The rate is expressed as a percentage of the FOB value of the product. 105
Special Brand Rate Where the All India Drawback rate has not been announced or where the Exporter fees that the rate is lower than what has been paid, he may apply for a special brand rate. When he desires to do this, he should keep samples of the exported product with the Customs and after export, make application to Ministry of Finance in a specified form for a special brand rate. The Ministry deputes a competent person to visit the Exporter's factory, study the composition of the product and in the sample with the Customs, work out the duty paid Deemed Exports Deemed Exports refer to the goods that do not leave the country but which trigger earning of foreign exchange. Various categories of goods are coming under Deemed Exports.
a. b. c. d. e. f. g.
Supplies of goods against an Advance License. Supply of goods to EOU's, EHTP's Supply of capital goods to a holder of EPCG License. Supply of goods to projects financed by multi-lateral or bilateral agencies. Supply of goods to any project for which the Ministry of Finance. Supply of marine freight containers to 100% EOU. Supplies to projects funded by UN funded agencies.
Benefits in Respect of Deemed Exports
Deemed Exports are eligible for any or all of the following benefits. a. Advance License for intermediate supply
b. Refund of excise duty c. Drawback to the extent permitted.
Export Houses, Trading Houses & Star Trading Houses Export houses/Trading Houses/Star Trading Houses have been accorded a special status in the EXIM policy. Certain additional benefits of import are extended to them with a view to develop merchandising & manufacturing companies’ activities towards larger exports. Such companies which are registered as Export houses/Trading Houses/Star Trading Houses are entitled to additional foreign exchange to import items not otherwise allowed to other categories of importers. The policy differs a little for each of these three categories of exporters and, as such, dealt with here. These are export organizations that have done and have the potential for making sizeable exports. In view of the big contribution they make for the export development of the country, they enjoy a certain status and some special privileges. According to the Exim Policy, merchant and manufacturer exporters, service providers, Export Oriented Units (EOUS), units located in Special Economic Zones (SEZs), Agri Export Zones (AEZs), Electronic Hardware Technology Parks (EHTP's), Software Technology Parks (STPs) and also Bio-technology Parks (BTPs) are eligible to apply for the status of a star Export House. Star Export Houses replace the various categories of export organizations like Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses. An existing status holder shall be automatically treated to be an equivalent Star Export House as per the following table. Erstwhile status under Exim Policy 2002 – 2007 Export House 107 Converted status as per the Foreign Trade Policy of 2004 2009 One Star Export House
Trading House Star Trading House Superstar Trading House Three Star Export House Four Star Trading House
Five Star Trading House Converted Status of Export houses as per FTP 2004-09 The Criterion for getting recognition as Star Export House will be the export performance (FOB value) during the current plus the three previous years as per details given below. Category One Star Export House Two Star Export House Three Star Export House Four Star Export House Performance in Rupees Crores 15 100 500 1500
Five Star Export House 5000 Criterion for Getting Recognition of Star Export House Certain organizations have the advantage of double weightage, that is, even if they do half the stipulated performance they will get the status. These organizations are: Manufacturer Exporters in SSI / Tiny Sector, Cottage sectors. Units registered with KVICs/KVIBs, Units located in North Eastern States, Sikkim and J&K, Units exporting handloom, handicrafts, hand knitted silk carpets, exporters exporting to Latin American Countries, Units having ISO 9000/14000 series, exports of services, and exports of agro products. A Star Export House is entitled to the following facilities: (a) (b) Licenses / CCPs on a self-declaration basis. Fixation of Input - Output Norms on priority basis within sixty days.
(c) Exemption from compulsory negotiation of documents through banks (but remittances should come through banking channel). (d) They can retain 100% of the remittances received in EEFC Account.
(e) Enhancement of repatriation period for export bills from 180 to 360 days. (f) Entitlement for consideration under the Target Plus Scheme.
FACILITIES PROVIDED ENGINEERING GOODS
Machinery and Equipment Facilities To facilitate and assist export production of engineering goods, facilities for procurement of machinery and equipment, dies, jigs, tools, etc. are given under various schemes. These schemes, inter alia, include their arrangement on hire-purchase through NSIC, special allotment of foreign exchange & arrangement of finance on concessional rate, lower import duty, etc. There are two schemes which allow import of Capita/Equipment at concessional import duty of 15% subject to specified conditions. The two schemes are: 1. EPCG scheme for all sectors other than Services Specified CG (Capital Goods) including spares upto 10% of the value of the CG may be imported at a concessional custom duty of 15% subject to an export obligation of four times the CIF value of imports to be fulfilled within a period of 5 years from the date of issue of the import License. Both new & secondhand CG may be imported under the scheme. The secondhand CG shall not be more than seven years old and shall have minimum residual life of five years. 2. EPCG Scheme for Service sector Capital equipment (including spares up to 10% of the CIF value of the capital equipment) may be imported under this scheme, whether in India or abroad, for rendering of services for which 109
the payment are received in freely convertible currency. There will be charged a concessional import duty of 15% only with export obligation of four times the CIF value of the imports, to be fulfilled within a period of five years from the date of issue of the import License.
Technical Development Fund Scheme With a view to assist upgradation and modernization of existing units, the TDF scheme has been instituted under which foreign exchange up to Rs. Five crores per unit per year is allotted for import of:a) b) c) d) e) small value balancing equipment technical know-how, foreign consultancy services, drawing & design, and any other inputs for improving export capability
The ceiling on import is relaxable upto 50% in respect of applicants exporting more than 10% of total turnover of the company or more than 25% of the production of the particular item for which the TDF approval is sought. The scheme covers all industries. Purpose The scheme aims at enabling the applicant to quickly improve, in an integrated manner, the following aspects of their operations:a) b) c) d) e) f) g) enhancement of export capability and quality improvement capacity utilization volume, productivity gains technology upgradation cost reduction product-mix rationalization/product diversification modernization & rationalization energy saving
There is no limit on capacity expansion arising out of implementing modernization proposals under the scheme. It also admits modernization proposals of those sick industrial units who had 110
reported to BIFR for resolution of their financial health by taking up forward/backward integration or other suitable measures. Simplification of Procedure To facilitate expeditious implementation of the approved projects, the scheme has introduced the following simplified procedure:a) foreign exchange allocation will be simultaneous with the approval of import and no further procedure of seeking foreign exchange loan will be necessary: b) all indigenous clearance will be given by the sponsoring authority and in appropriate cases indigenous clearance condition would be waived: c) decision on application will be given within 45 days. Import Licenses under this scheme are granted by the CCI&E. the application which are not approves under this scheme, will be automatically considered for disposal under the normal procedure. It is not necessary for the applicant to apply a fresh. Finance & Credit Facilities for financing purchase/import of machinery & equipment are available from different financial institutions, besides the TDF. Small Scale Units may also approach the National Small Industries Corporation (NSIC) for getting Capital goods on hire-purchase basis. Different State Industrial Development Corporations and State Financial Corporations are the other institutions which could be approached in this regard. IDBI’s TDF scheme The units holding import License under the TDF scheme, and which can satisfy the IDBI that the proposed import will be improve their productivity, export, etc. are eligible for assistance from the IDBI upto Rs. 35 million per unit per annum. In deserving cases, a part of the import duty and other incidentals may also be financed, subject to a ceiling of 25% of the c.i.f. value of the import License and within the overall limit of Rs. 35 million. A concessional rate of interest is charged. The World Bank shall reimburse 70% of the sanctioned amount under the scheme. Raw Material facilities
Raw materials both imported and indigenous are made available to units manufacturing goods for exports, whether exports are effected by such units themselves or through other exporters/Export Houses, etc. This facility is given for production of export products both and before effecting export i.e. in advance as well as after the shipment of goods. The policy of advance allocation of different types of raw materials like iron &steel, chemicals, plastic raw material: drugs, etc. Iron & Steel Specified items manufactured by mills participating the JPC (Joint Plant Committee) Scheme like pig iron, MS sheets/CR sheets, HR/CR coils, plates, rounds, etc. are made available on replenishment basis against their consumption in the goods exported outside the country. This scheme is, however, applicable to exports of fabricated engineering goods and not to straight exports of steel. The facility of priority allotment can be availed of through the EEPC (Engg. Export Promotion Council). Plastic Raw Material by IPCL Specified raw materials like low density polyethylene moulding powder are supplied by the Indian Petro-Chemicals Corporation Ltd. Baroda.
Hindalco’s Export (From Renukoot Plant )
YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 QTY. (MT) 20393 32828 36559 35477 39317
Hindalco’s Export in terms of Quantity (MT) 112
FINDINGS & RECOMMENDATIONS
FINDINGS • • Hindalco is the leading exporter of Aluminium Semi-Finished products in India. FIEO (Federation of Indian Export Organization) has awarded Hindalco as a Five Star Trading Houses on their export achievements. Hindalco is following all the norms as per Central Excise & Customs and other government rules & regulations in the export process. Hindalco is following positive and proactive approach towards export. Hindalco is exporting all over the world, from underdeveloped countries to advance countries.
Hindalco is a reputed Aluminium industry in the world and its products are well accepted in the market but as we know that there is always a scope of improvement. Following are the recommendations in all the three areas; Export Process, Export Documentations and Export Logistics: EXPORT PROCESS • Sometimes 3-4% execution of export order has been delayed due to rejection of partial quantity of the product due to quality problems and manufacturing defects. So, it is recommended that Hindalco should have to keep advance stock or backup products in their warehouse to overcome this problem and to execute the order on time. Some of the Caster product order is being delayed due to limited capacity of the Caster Plant. So, it is recommended that Hindalco should have to increase the capacity of their Caster Plant.
EXPORT DOCUMENTATION • Hindalco is using Oracle & IVL software system for making export documents. The working of this software is from Order management to Shipment. This process is time taking due to partly adoption of the software system. So, it is recommended that this software should have been start from Enquiry management to Shipment. It would ease in making documents in faster way manual interruption will be minimized.
EXPORT LOGISTICS PROCESS Hindalco is exporting from Kolkata and Mumbai port both. Sometimes delay in movement of export consignment occurs due to logistics problems. The problems and their recommendations are as follows: • Sometimes there is unavailability of containers for any particular destination occurs. This problem have been overcome by helding a meeting and making a successful negotiation process from the shipping line companies for the arrangement of empty containers.
Unavailability of tailors due to non-uniformity of production occurs. This problem should have been solved by the proper working collaboration of the Marketing & Production department. The company is working on this process and it is expected that this problem will be solved shortly.
Movement of export consignment of problems by the Naxaliets problem will be overcome by company have not any solution of
tailors disturbs due to creation in Jharkhand and Bihar. This the Indian Government only, this problem.
The above study makes it clear that Hindalco has a well-established export market for its products. The company is making a rapid progress, in the various spheres of its business activities. Besides, the company adopts a favorable attitude towards safety environment and quality considerations. The company has also been undertaking various community development programs, in the nearby-located areas. It has been learning-exercise to complete this project. Working on this project I found the practical knowledge about the industrial organization. It has been an enjoyable and fruitful experience tome. I certainly gained a lot of practical knowledge while on training. The study is intended to be concluded with the help of “strength, Weaknesses, threat”-analysis of Hindalco products, role of export documentation, which is the matter of prime importance in any export business & export procedures especially for Aluminium products, which will present a summarized view of all study.
BOOKS: • Khurana P. K., Export Management, Number of Pages referred from “10-21”,”133150” and “333-416”. • Ram Paras, Export A to Z Documentation & Procedure, Number of Pages referred from “12-18”, “121-167”and “342-402”.
MAGAZINES: • Impex Times • • • • • • FIEO News Aluminium International Today Aluminium Times Aluminium Now Incale 2 Incale 3
INTERNET: • http://www.algomtl.com • • • • • • • • • • • • http://www.go4worldbusiness.com http://www.unzco.com/basicguide http://dgftcom.nic.in http://www.fieo.org http://www.airportsindia.org.in http://www.indiandata.com/trade_policy/export_procedures http://www.wikipedia.com/logistics http://www.google.co.in/ http://www.hindalco.com/products/rolled_products http://www.hindalco.com http://www.novelis.com http://www.adityabirla.com
SPECIMEN OF INVOICE Exporter Invoice no. & date Exporter’s Ref
Buyer’s order no. & date Other references Consignee Buyer Country of origin of goods Country of Final destination
Terms of delivery and payment Pre-carriage by Place of Receipt by Precarrier Vessel/Flight No. Port of discharge Marks and no. of containers Port of lading Final destination No. and kind of Pkgs. Description of goods Quality Rate Amount
Signature & date
SPECIMEN OF PACKING LIST Exporter Invoice No. Date Buyer’s order no. & date Other reference(s) Consignee Buyer
Country of origin of goods
Country of Final destination
Pre-carriage by Vessel/Flight No. Port of discharge Marks & No.s/ containers no.
Place of Receipt by Pre-carrier Port of lading Place of delivery No. and kind of Pkgs. Description of goods Quality Remarks
Signature & date
SPECIMEN OF CERTIFICATE OF ORIGIN Exporter NAME OF THE Consignee CHAMBER OF COMMERCE
Pre-carriage by Vessel Port of discharge
Place of receipt of Pre-Carrier Port of loading Final destination No. and kind of Gross weight (kg) packages : Description of goods Measurement
Certification : It is hereby certified that this declaration was made before me and that to the best of my knowledge and believe the above mentioned goods are of Indian origin.
Declaration by Exporter : We hereby declared that the above mentioned goods were produced in the Indian Union and are shipped to Name of the authorized Signatory
Place & date of issue Signature Secretary
Place and date of issue
SPECIMEN OF BILL OF LANDING Shipper B/L NO.
NAME AND LOGO OF SHIPPING LINE
Local Vessel Ocean Vessel Port of Discharge
From Port of Lading Final Destination (if on carriage) Description of goods
Marks & Numbers No. & Kind of Packages; Gross weight(kg) Measurement
Freight details, charges, etc Shipped on board in apparent good order…………… Freight Payable at No. of Original B/L Applicable only when document used as through Bill of Lading Place & date of time Signature
SPECIMEN OF EXPORT QUOTATION WORKSHEET
SPECIMEN OF COMMERCIAL IMNVOICE 1. EXPORTER
CONSIGNEE, INTERMEDIATE CONSIGNEE
3. FORWARDING AGENT
4. COMMERCIAL INVOICE NO.
5. CUSTOMER PURCHASE ORDER NO.
6. B/L, AWB NO. a. COUNTRY OF ORIGIN b. DATE OF EXPORT c. TERMS OF PAYMENT d. EXPORT REFERENCES e. AIR/OCEAN PORT OF f. EMBARKATION g. EXPORTING h. CARRIER/ROUTE i. PACKAGES j. QUANTITY k.NET WEIGHT/GROSS WEIGHT l. DESCRIPTION OF MERCHANDISE UNIT
m. PRICE/TOTAL VALUE n. PACKAGE MARKS o. MISC. CHARGES
SAMPLE OF INSURANCE CERTIFICATE