Export-Import

Summary
Chapter 1 – Foreign Trade
World Trade Organization (WTO) is the only international organization that deals with rules of
trade between countries. Established back in 1995 with GATT (General Agreement of Trade and
Tariffs), WTO aims to eliminate non-tariff barriers and reduce tariff rates.
12 Steps
1. Name
2. Registration
3. Bank Account
4. Permanent Account Number (PAN)
5. Sales Tax Office
6. IEC (Import Export Code)
7. Export Promotion Council
8. ECGC (Export Credit Guarantee Corporation)
9. Central Excise
10. Chambers of Commerce
11. BIN (Business Identification Number)
12. Export License
4 Steps
1. Promote the Business/Brand
2. Price List
3. Contract
4. Delivery
Chapter 2 – Export Import Documentation
Main Documents
1. Contract
2. Purchase Order
3. Commercial Invoice
4. Packing List
5. Bill of Lading / Airway Bill
List of Documents:
1. Pro Forma Invoice
2. Packing List
3. Commercial Invoice
4. Certificate of Origin
5. GSP COO (Generalized System of Preference)
6. Shipping Bill / Bill of Entry
7. ARE-I Form
8. Mate’s Receipt
9. Exchange Declaration Form (GR/SDF Form)
10. Distribution/Disposal of Copies of GR Form
11. Statutory Declaration Form
12. Post Parcel Form
13. SOFTEX Form
14. Bills of Exchange
15. Sight Draft
16. Usance Draft
17. Inspection Certificate
18. Bill of Lading
19. Airway Bill
20. Insurance Certificate
21. Consular Invoice
Chapter 3 – Methods of Instruments and Payments
Methods of Payment
1. Payment in Advance
2. Letter of Credit (LC) – (RRR I T)
- Revocable LC may be cancelled or amended at any time without prior
notice

- Irrevocable LC cannot be revoked or amended without consent of all

parties

- Red Clause LC that contains a clause providing for payment in advance

for purchasing materials/processing/packing the product

- Revolving LC that provides delivery of product in an interval

- Transferrable LC if the beneficiary is not the actual producer. In this case,

seller may request to the buyer to directly transfer to the actual supplier

3. Drafts (Bill of Exchange)

- Sight Bill
- Usance Bill
4. Open Account
Payment in Advance – Advantage for Exporter, Disadvantage for Importer
For Exporter, they will receive their payment before the product is being sent. This of course
troublesome for the Importers, as they have a risk that the product is not being sent or the
product does not meet the specifications.
Letter of Credit – Best for Exporter and Importer
In this type of payment, bank will act as an intermediary in exchange for a payment. Bank will
act on behalf of the Importer to pay to the Exporter, only if the Importer complete all the terms
and conditions of the LC. The bank will charge to the Importer as the buyer, but in other cases
when they’re not willing to pay for it, the Exporter has to absorb that cost.
Bills of Exchange
Instrument submitted by Exporter along with other documents to his/her bank. The exporter’s
bank will send this to the importer’s bank, the importer will make payment on or before the
due date.
Sight Bill – used when exporter wishes to get the payment before the importer collects the
goods from the port (Delivery Against Payment D/P).
Usance Bill – used when the exporter extends credit and the facility to use the goods to the
buyer. The draft states that payment is due by a specific time after buyer accepts the time draft
and receiver the goods.
Open Account – used by reputable importer that has a favorable payment record. Using the
open account, exporter simply ills the customer – expected to pay under the agreed terms. This
type of payment is used to save money from opening LC. But, the absence of documents makes
it difficult to pursue legal enforcement of claims.
Parties of LC (AIB ACR)
1. Applicant buyer / importer
2. Issuing Bank bank that issues the LC
3. Beneficiary seller / exporter
4. Advising Bank bank that advises LC to the beneficiary
5. Confirming Bank bank that gives guarantee to the LC opened by another
bank
6. Reimbursing Bank bank authorized to honor the reimbursement claim
Instruments of Payment
1. Credit Transfers
2. Direct Debits
3. Payment Cards
4. Cheque
Incoterms
1. EXW (Ex Works) export packing, crates with markings
2. FCA (Free Carrier) first carrier, any mode of transport air, rail, road
3. FAS (Free Alongside Ship) seller gets good alongside ship
4. FOB (Free on Board) dock dues, loading goods on board ship
5. CFR (Cost and Freight) sea freight to bring goods to destination port
6. CIF (Cost, Insurance, and Freight)marine insurance (port to port)
7. DEQ (Delivered Ex Quay) landing charges at port
8. DDP (Delivered Duty Paid) import duty
Questions
1. What is the best method of payment?
2. What is the best type of LC?
3. What is the participant of LC?
Chapter 4 – Export Import Strategies and Practices
Chapter 5 – Export Marketing
Chapter 7 – Business Risk
Risks
1. Commercial
2. Political
3. Law
4. Cargo
5. Credit
6. Foreign Exchange
Incoterms
EXW – Packing
FCA –
FAS –
FPN –
CFR –
CIF –
DEQ –
DDP –