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EXPORT MANAGEMENT, TY BBA(MARKETING), VNSGU, 2014

CHAPTER 1

EXPORT PROCEDURE
EXPORT PROCEDURE Export Procedure is divided into following four stages; Registration Stage Shipment Stage Pre-shipment Stage Post-shipment Stage STAGE 1: REGISTRATION STAGE The exporter is required to register his organisation with a num er of institutions and authorities! which directl" or indirectl" help him in conducting export trade# The registration stage includes; a. Registration of the Organisation The form of organisation selected " the exporter must e registered under the appropriate $ct of the countr"# %or example! in &ndia! $ 'oint stoc( compan" registers itself under the )ompanies $ct! *+,-#; $ partnership firm registers itself under the &ndian Partnership $ct! *+./#; $ local trader should get the necessar" permission from the local authorities# b. O ening !an" A##o$nt The exporter should open a current account in the name of the compan" with an" commercial an( which is authorised " the Reserve 0an( of &ndia 1R0&2 to deal in foreign exchange# Such an( also helps in providing finance to the exporter in the form of Pre-shipment finance and Post-shipment finance# #. Obtaining I% orter&E' orter Co(e N$%ber )*EC No.+ 0efore *#*#*++3! it was compulsor" for ever" exporter to o tain )45 num er from the R0&# Since then! &E) num er is issued " the 6irector 7eneral for %oreign Trade 167%T2# 4ow )45 num er is not required# The application form for o taining &E) num er should e accompanied " pa"ing fee of Rs# *888# (. Obtaining Per%anent A##o$nt N$%ber)PAN+ There are man" exemptions and deductions availa le for Export income under different sections of the &ncome Tax $ct# %or claiming such exemptions and deductions! the exporter should register his organisation with the &ncome Tax $uthorities and o tain the Permanent $ccount 4um er 1P$42# e. Obtaining Sa*es Ta' N$%ber Export goods are exempted from sales tax if the exporter or his firm is registered with the Sales Tax $uthorities# ! %or this purpose! the exporter is required to ma(e an application in the prescri ed form to the Sales Tax 9ffice 1ST92 in whose 'urisdiction his :exporters2 office is situated# f. Registration ,ith E' ort Pro%otion Co$n#i* )EPC+ &t is eneficial for ever" exporter to register itself with the appropriate Export Promotion )ouncil 1EP)2 and o tain the ;Registration-cum-<em ership )ertificate 1R)<)2# The enefits provided in the E5&< Polic" are extended onl" to the registered exporters having valid R)<)#

g. Registration ,ith ECGC


ZAKIR PATEL, ASST. PROF., NARAN LALA COLLEGE OF COMMERCE & MANAGEMENT, NAVSARI

EXPORT MANAGEMENT, TY BBA(MARKETING), VNSGU, 2014

The exporter should also register with the Export )redit and 7uarantee )orporation of &ndia 1E)7)2 in order to protect itself against political and commercial ris(s# &t also helps the exporters in o taining the financial assistance from commercial an(s and other financial institutions# h. Registration ,ith other A$thorities:& The exporter should also register with various other authorities! such as= %ederation of &ndian Export 9rganisation 1%&E92! &ndian Trade Promotion 9rganisation 1&TP92! )ham ers of )ommerce 1)o)2! Productivit" )ouncils! etc# STAGE -: PRE&SHIP.ENT STAGE Pre-shipment stage consists of the following steps= a. A roa#hing /oreign !$0ers: & &n order to o tain an export order! a new exporter can ma(e use of different mar(eting techniques! such as advertising in international media! sales promotion! pu lic relation! personal selling! pu licit" and participation in trade fairs and exhi itions# b. In1$ir0 an( Offer:& $n inquir" is a request from a prospective importer 1 u"er2 a out description of goods! their standard or grade! si>e! weight or quantit"! terms of pa"ments! etc# 9n getting an inquir"! the exporter must process it immediatel" " ma(ing an offer in the form of a ?Proforma invoice@# #. Confir%ation of Or(er:& 9nce the negotiations are completed and the terms and conditions are finalised! the exporter sends three copies of Proforma &nvoice to the importer for the confirmation of order# The importer signs these copies and sends ac( two copies to the exporter# 9ne cop" is (ept " the importer# This means that the order is confirmed# (. O ening 2etter of Cre(it:& The documentary credit or letter of credit is the most appropriate and secured method of pa"ment adopted in international usiness# 9n finali>ation of the export contract! the importer opens a letter of credit in favour of the exporter# e. Arrange%ent of Pre&shi %ent /inan#e:& 9n getting the letter of credit! the exporter o tains preshipment finance from his an( for the purpose of procuring raw materials and other components! processing and pac(ing of goods and transfer of goods to the Port of Shipment 1PoS2# f. Pro($#tion or Pro#$re%ent of Goo(s: & 9n o taining pre-shipment finance from the an(! the exporter either arranges for the production of the required goods or procures them from the domestic supplier as per the specifications of the importer# The exporter who manufactures goods for export is (nown as manufacturer-exporter and the exporter who u"s read"-made goods from the domestic supplier for export is (nown as merchant-exporter# g. Pa#"ing an( .ar"ing: & The export goods should e properl" pac(ed and mar(ed with necessar" details such as Port of Shipment 1PoS2 and Port of 6estination 1Po62! countr" of origin! gross and net weight! etc# &f required! assistance can e ta(en from the &ndian &nstitute of Pac(ing 1&&P2# h. Pre&shi %ent 3Ins e#tion4 & &f the export goods require compulsor" qualit" control and preshipment inspection! then the exporter should contact the Export &nspection $genc" 1E&$2 for o taining an inspection certificate# i. Centra* E'#ise C*earan#e: & The exporters are totall" exempted from the pa"ment of central excise dut"# Aowever! the exemption should e claimed in one of the following wa"s= ZAKIR PATEL, ASST. PROF., NARAN LALA COLLEGE OF COMMERCE & MANAGEMENT, NAVSARI

EXPORT MANAGEMENT, TY BBA(MARKETING), VNSGU, 2014

Export under Re ate# Export under ond# 5. Obtaining Ins$ran#e Co6er: & The exporter must ta(e appropriate policies in order to insure ris(s= E)7) polic" in order to cover credit ris(s! <arine polic" for covering ris( of goods in transit# ". A oint%ent of C7/ Agent: & Since exporting is a complex and time- consuming process! the exporter should appoint a )learing and %orwarding 1)B%2 agent for the smooth clearance of goods from the customs and preparation and su mission of various export documents# STAGE 8: SHIP.ENT STAGE Export! cargo can e exported to the importer " sea! air or land route# Aowever! shipment " sea is the most popular method as it is comparativel" cheaper# 0esides! the ships capacit" is greater than other modes of transportation# Transportation " air is utilised for export of expensive items li(e diamond! gold! etc# The shipment stage includes the following steps; a. Reser6ation of Shi ing S a#e:& 9nce the export contract is finalised! the exporter reserves the required space in the vessel for shipment# 9n accepting the exporters request! the shipping compan" issues a Shipping 9rder# The original cop" of the shipping order is given to the exporter and the duplicate cop" to the commanding officer of the ship# The commanding officer gets the information regarding the goods that shall e received on oard# b. Arrange%ent of Interna* Trans ortation $ to the Port of Shi %ent:& The exporter ma(es necessar" arrangements for transportation of goods to the port " road or railwa"s# 9n loading goods into the railwa" wagon! the railwa" authorities issue a ;Railwa" Receipt! which ma" e either ;freight paid or ;freight to pa"# &t serves as a title to the goods# The exporter endorses the railwa" receipt in favour of his agent to ena le him to ta(e deliver" of the goods at the port of shipment# #. Pre aration an( Pro#essing of Shi ing Do#$%ents :& $s the goods reaches the port of shipment! the exporter should issue detailed instructions to the )B% agent for the shipment of cargo along with a complete set of the documents listed elow= Cetter of )redit along with the export contract or export order# )ommercial &nvoice 1/ copies2 Pac(ing Cist or Pac(ing 4ote# )ertificate of 9rigin# 7R %orm 1original and duplicate2 $RE-& %orm# )ertificate of &nspection! where necessar" 1original cop"2 <arine &nsurance Polic"# (. C$sto%s C*earan#e: & The cargo must e cleared from the )ustoms efore it is loaded on the ship# %or this! the a ove mentioned documents! along with five copies of shipping ill! are to e su mitted to the )ustoms $ppraiser at the )ustoms Aouse# The )ustoms $ppraiser ensures that all the formalities relating to exchange control! qualit" control! pre-shipment inspection and licensing have een fulfilled " the exporter# $fter verification! all documents! except the original 7R! original cop" of Shipping 0ill and one cop" of )ommercial &nvoice! are returned to the )B% agent# e. Obtaining 3Carting Or(er4 fro% the Port Tr$st A$thorities: & The )B% agent! then! approaches the Superintendent of the concerned Port Trust for o taining the ;)arting 9rder for moving the cargo inside the doc(# $fter o taining the )arting 9rder! the cargo is ph"sicall" moved into the port area and stored in the appropriate shed#

ZAKIR PATEL, ASST. PROF., NARAN LALA COLLEGE OF COMMERCE & MANAGEMENT, NAVSARI

EXPORT MANAGEMENT, TY BBA(MARKETING), VNSGU, 2014

f. C$sto%s E'a%ination an( Iss$e of 32et E' ort Or(er4: & The )ustoms Examiner at the port of shipment ph"sicall" examines the goods and seals the pac(ages in his presence# The same can e arranged for at the factor" or warehouse of the exporter " ma(ing an application to the $ssistant )ollector of )ustoms# The )ustoms Examiner! if satisfied! issues a formal permission for the loading of cargo on the ship in the form of a ;Cet Export 9rder# g. Obtaining 32et Shi Or(er4 fro% the C$sto%s Pre6enti6e Offi#er: & Let Export Order must e supplemented " a Let Ship Order issued " the )ustoms Preventive 9fficer# The )B% agent su mits the duplicate cop" of Shipping 0ill! dul" endorsed " the )ustoms Examiner to the )ustoms Preventive 9fficer who endorses it with the ;Cet Ship 9rder# h. Obtaining .ate4s Re#ei t an( !i** of 2a(ing: & The goods are then loaded on the ship for which the <ate D )aptain of the ship issues <ates Receipt to the Port Superintendent The Port Superintendent! on receipt of port dues! hands over the <ates Receipt to the )B% $gent# The )B% $gent surrenders the <ates Receipt to the Shipping )ompan" for o taining the 0ill of Cading# The Shipping )ompan" issues two to three negotia le and two to three non-negotia le copies of 0ill of Cading# STAGE 9: POST&SHIP.ENT STAGE The post-shipment stage consists of the following steps= a. S$b%ission of Do#$%ents b0 the C7/ Agent to the E' orter: & 9n the completion of the shipping procedure! the )B% agent su mits the following documents to the exporter= $ cop" of invoice dul" attested " the )ustoms# 6raw ac( cop" of the shipping ill# Export promotion cop" of the shipping ill# $ full set of negotia le and non-negotia le copies of ill of lading# The original CD)! export order or contract# 6uplicate cop" of the $RE-& form# b. Shi %ent A(6i#e to I% orter: & $fter the shipment of goods! the exporter intimates the importer a out the shipment of goods giving him details a out the date of shipment! the name of the vessel! the destination etc# Ae should also send one cop" of non-negotia le ill of lading to the importer# #. Presentation of Do#$%ents to !an" for Negotiation: & Su mission of relevant documents to the an( and the process of getting the pa"ment from the an( is called ?4egotiation of the 6ocuments@ and the documents are called ;4egotia le Set of 6ocuments# The set normall" contains= 0ill of Exchange! Sight 6raft or Esance 6raft# %ull set of 0ill of Cading or $irwa" 0ill# 9riginal Cetter of )redit# )ustoms &nvoice# )ommercial &nvoice including one cop" dul" certified " the )ustoms# Pac(ing Cist# %oreign exchange declaration forms! 7RDS9%TE5DPP forms in duplicate# Exchange control cop" of the Shipping 0ill# (. Dis at#h of Do#$%ents: & The an( -negotiates these documents to the importers an( in the manner as specified in the CD)# 0efore negotiating documents! the exporters an( scrutinises them in order to ensure that all formalities have een complied with and all documents are in order# The an( then sends the 0an( )ertificate and attested copies of commercial invoice to the exporter# e. A##e tan#e of the !i** of E'#hange:& 0ill of Exchange accompanied " the a ove documents is (nown as the 6ocumentar" 0ill of Exchange# &t is of two t"pes=
ZAKIR PATEL, ASST. PROF., NARAN LALA COLLEGE OF COMMERCE & MANAGEMENT, NAVSARI

EXPORT MANAGEMENT, TY BBA(MARKETING), VNSGU, 2014

-6ocuments against Pa"ment 1Sight Drafts2= - &n case of Sight draft! the drawer instructs the an( to hand over the relevant documents to the importer onl" against pa"ment# -6ocuments against $cceptance 1Usance Draft2= - &n case of Esance draft! the drawer instructs the an( to hand over the relevant documents to the importer against his ;acceptance of the ill of exchange# f. 2etter of In(e%nit0:& The exporter can get immediate pa"ment from his an( on the su mission of documents " signing a letter of indemnit"# 0" signing the letter of indemnit" the exporter underta(es to indemnif" the an( in the event of non-receipt of pa"ment from the importer along with accrued interests# g. Rea*isation of E' ort Pro#ee(s:& 9n receiving the documentar" ill of exchange! the importer releases pa"ment in case of Sight draft or accepts the Usance draft underta(ing to pa" on maturit" of the ill of exchange# The exporters an( receives the pa"ment through importers an( and is credited to exporters account# h. Pro#essing of GR /or%: & 9n receiving the export proceeds! the exporters an( informs a out this to the R0& " recording the fact on the duplicate cop" of 7R# The R0& verifies the details in duplicate cop" of 7R with the original cop" of 7R received from the )ustoms# &f the details are found to e in order then the export transaction is completed# i. Rea*isation of E' ort In#enti6es: & &f the exporter is eligi le for export incentives! then he should su mit claim for it along with the an( certificate to the appropriate authorit"# -------------------------------------------------------------------------------------------------------------------------

ZAKIR PATEL, ASST. PROF., NARAN LALA COLLEGE OF COMMERCE & MANAGEMENT, NAVSARI