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2005-2006 INDEX TOPICS
EXIM PROC & DOC
SR NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
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Important terminologies Introduction to exports Terms of payments INCOTERMS Export Credit Guarantee co operation of India ltd (ECGC) Export finance Different Export Houses Export Procedure Export documents Imports documents Imports procedure Export financing institutions Exim bank of India Export Incentives and Assistance Export Promotion Organization State trading corporation
IMPORTANT TERMINOLOGIES AUTHORISED DEALER: Reserve Bank of India gives license (could be nationalized, private etc) against their own application to operate foreign exchange transaction (currency and document). These banks can be nationalized or non-nationalized. VESSEL: Ship 1
S.Y.BMS – SEM – IV – A.Y. 2005-2006
EXIM PROC & DOC
ENTRY INWARD ORDER: When a foreign country vessel enters Indian national boundary, the Indian custom officer goes there physically and checks with details it has and enters the entry inward order register. BALANCE OF TRADE: Balance of trade is the difference between balance of export and import for a year. When the value of exports is greater than the value of imports, there is a favorable trade and is said to be positive trade. BALANCE OF PAYMENTS: The net difference between the inflow and outflow of foreign exchange transaction. Apart from balance of trade there are other ways by which foreign exchange is earned and spent by a country. ⇒ Providing shipping services ⇒ Commission earned or paid in international market ⇒ International tourism ⇒ Nationals settled abroad remitting money to the country ⇒ Loans taken by private organizations/government from abroad The current picture of a country’s exports and imports gets reflected through BOT and not BOP. LIBOR (LONDON INTER BANK OFFERED RATE): Berth INTRODUCTION TO EXPORT
Exports are vital to any economy, be it developed or developing. No country can isolate itself from exports in some form or other. Export performance is one of the main economic parameter of a nation. However, exports all over the world face tough challenges than before and Indian exporters are no exception. There is rapid expansion in the international market activities since the end of 2nd world war. The world export trade is increasing by leaps and bound. Due to exports countries have come closer for economic, cultural and social co-operation. International Marketing offers benefits to all participating countries. In order to maintain a healthy balance of trade and foreign exchange reserve it is necessary to have a sustained and high rate of growth of exports. Export can be defined as “sale of goods and services from one country.” According to B.S. Rathor, “Export Marketing includes the management of marketing activities for products which cross the national boundaries of a country.”
S.Y.BMS – SEM – IV – A.Y. 2005-2006
EXIM PROC & DOC
Export marketing involves the design of the products and services acceptable to the overseas customers and the conduct of those activities, which facilitate the transfer of ownership of goods and services from the seller of one country to the buyer of another country. Reasons to Exports (Why to Export?) / NEED & IMPORTANCE OF EXPORT MARKETING. The need and importance of export marketing can be explained from the viewpoint of a country and that of a business organization: A. 1. From the Viewpoint of a Nation: FOREIGN EXCHANGE: Export helps country to earn valuable foreign exchange, which is mainly required to pay for import of capital goods, raw materials, spares and components. Balance of Payments: A country’s external economic strength depends upon its balance of payment position. Since export brings in foreign exchange, it helps a country to solve and improve its Balance of Payments position. Employment opportunities: Export trade calls for more production, which ultimately opens door for more employment opportunities, not only in the export sector but also in allied sectors like banking, insurance etc. Financing of Development plans: Export earning can be a source of financing development plans through the import of capital goods and technology. The foreign exchange earned thru exports can be utilized for planned economic development of a country. Optimum utilization of Resources: There can be optimum use of resources. The excess production can be directed to other countries, there by enabling the exporting country to earn favorable foreign exchange. Research & Development: Goods to be exported to other countries may not be sold in the same form as it is available in the local markets. Products have to be redesigned according the requirement of the importing country. This leads to constant R & D, which ultimately leads to improve technology and production system. The fruits of R & D would benefit the customers not only in the overseas market but also in the domestic markets. Spread Effect: Because of export industry, other sectors also expand such as banking, transport, insurance etc. and at the same 3
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time a number of ancillary industries come into existence to support the export sector. 8. High Standard of Living: Export trade calls for more production, which in turn increases employment opportunities. More employment means more purchasing power as a result of which people enjoy new and better quality goods, which in turn improves standard of living of the people. From the viewpoint of a business organization:
1. Reputation: An organization, which undertakes exports can exports, can bring fame to its company not only in export market but also in domestic market. These companies enjoy worldwide reputation. TERMS OF PAYMENT An export contract payment terms are determined on the basis of the specific circumstances of the exporters and importers. It is not possible to make any generalization about the payment methods in any export transactions. The method of payment in respect of export finance depends upon the agreement between the exporter and importer. The method of payment of exporter also depends upon the conditions laid down by RBI. In India, export proceeds of consumer goods must be realized within a period of 180 days from the date of exports. However, in case of export of capital goods sold on deferred credit terms, the exporter can realize payment later than 180 days. There are commercial factors that affect the payment terms or methods of payments. 1. Nature of Products: The terms of credit depends upon the nature of goods. For e.g. perishable goods would not justify a longer credit term. In case of capital goods, the exporter may allow “Deferred Payment Terms” 2. Creditworthiness of the buyer: The method of payment may also depend on creditworthiness of the buyer. If the importer enjoys a sound creditworthiness, then the exporter may accept the method of “Documents against Acceptance.” 3. Economic situation in the importer’s country: If the economic conditions are poor in the importer’s country, then the exporter may not prefer to offer longer period terms. 4. Size of order: The exporter also has to consider the size of the order. If the order is substantial, then the exporter may receive the money in installment, and as such longer period can be given. The exporter may agree to “Documents against acceptance” method.
Y. Srilanka (India & Nepal diff) US $ 20 FREELY CONVERTIBLE CURRENCIES Following are the recognized methods of effecting payments under International Trade: A) Advance Payment: When the buyer’s credit is doubtful or the political or economical environment in the buyer’s country is unstable. then he may provide longer credit terms. If advance remittance is more than USD 1.Y. This method does not involve any risk of bad debts. Only banks having international repute can give such guarantee. seller (exporter) may demand advance payment.00. but demands payment in any free convertible currency. The goods are specifically designed for the customer. Competitor’s Credit terms: The exporter also have to find out the credit terms offered by the competitors. 5 . TYPE COUNTRIES CURRENCY ASIAN CLEARING UNIONS NON .ACUs (ACUs) Bangladesh. which will be to his advantage. the exporter may also follow the same. If they allow a longer period of credit.000 than a bank guarantee from exporter’s bank to importer (on behalf of exporter) must be given by exporter to importer. In case of capital goods he must receive within 3 years from date of remittance. Iran. Financial Position of the exporter: If the exporter’s financial condition is sound. then the exporter may offer a longer term of credit to the importer. The advance remittance must not be more than USD 1. But as per recent decision if the seller is in any other country (in case of ACU). If the exporter has good relations. The terms of payment relates to country of shipment and not country of payment. 7. iv. and There is heavy demand for the goods in buyer’s market Importer must receive the goods within 3 months from the date of remittance. the importer should make payment as per the demand of exporter. 2005-2006 EXIM PROC & DOC 5. iii. v.BMS – SEM – IV – A. However. if the exporter is in Japan and goods are shipped from Bangladesh (ACU) then the payment is made only in USD.g. Relations: The exporter may consider trading relations with the importer. E. ALL OTHER COUNTRIES Pakistan. this is the most unpopular method as a foreign buyer would not be willing to pay in advance of shipment unless: i. ii. Myanmar.00.000. 6.S.
e. In India. The realization of export proceeds here is 15 months. The documents are released against acceptance of the Time draft i.BMS – SEM – IV – A. the exporter agrees to present the documents to his bank along with the “Bills of exchange. When the buyer accepts the bills of exchange. Documents are directly sent to buyer with consignment. The risk involved is that the importer may refuse to accept the documents and to pay against them. The exporter ships the goods in the name of importer but documents concerned are handed over to the buyer thru the bank only on receipt of payment of bills of exchange. generally confined to between inter-related company and the exporter and overseas buyers have long and favorable dealings together. Payment is made only when the goods are ultimately sold by the overseas consignee to other parties. the documents and the bills to the goods are handed over to the buyer. oils and jute manufacturers. The system works favorably when there are no exchange restrictions and stable economic and political conditions prevails in the importing country. the risk involved is much 6 . say 30 days. on due date of payment. In this method. All the goods can be sold under this method. The advantage to the exporter under this system is that the documents remain in the hands of the bank and the exporter does not lose possession or the ownership of goods till the payment is made.Y. without actually giving up the title.Y. the exporter ships the goods with no financial documents to his advantage except commercial invoice. In case of D/A as compared to D/P bills. as exporter carries no documentary evidences of transaction with him. credit is allowed for a certain period. In India.” The method has two parts. the bank presents the bills to the buyer who makes the payment. Open account method is. documents against payment and document against acceptance. The reasons for non-acceptance may be political or commercial ones. Document against payment is also known as cash against documents. prior approval from RBI’s exchange control department is required to be taken for adopting this method of payment. This method indicates that the payment is made against sight draft.S. 2005-2006 EXIM PROC & DOC B) Open Account: Under this method. Sales on open account are settled thru agreed period between buyer and seller. C) PAYMENT AGAINST SHIPMENT ON CONSIGNMENT: The exporter supplies the goods to the overseas consignee or agent. D Documentary Bills: This is the most common method of payment in international trade. Considerable risk is involved in the open account method. commodities exported so far in this scheme have been tobacco. therefore. This method is very risky as the consignee may return the goods back if remained unsold and even the consignee may not clear off dues in time. 90 days etc. Under Document against Acceptance.
3. Advising Bank: Which advices LC. which may or may not be in his custody on the maturity date of the bill. Applicant / Buyer – on whose behalf LC is opened Beneficiary / Seller – in whose favor the LC is opened.Y. Importer also gets the advantage of his banker’s assistance in closely scrutinizing the documents and only after receiving the relevant documentary evidence from the exporter by the banker nominated in the credit the nominated banker releases payment. the exporter will have to start civil proceedings to receive his payment. It provides financial security to the Exporter. 2. Many a times the advising bank and confirming bank are one and the same. But once a Letter of Credit is established by the buyer’s bank on behalf of the buyer in favor of the seller and the seller submits the set of required documents to the opening bank or to the nominated bank. 2005-2006 EXIM PROC & DOC greater. Opening Bank / Issuing Bank: Importer’s bank. Confirming Bank: The bank in beneficiary’s country. which guarantees the credit on the request of the issuing bank.Y. 5.S. Parties to a Letter of Credit: 1.BMS – SEM – IV – A. which issues LC. if all alternatives fails. The exporter may not know the credit worthiness of the importer and the prevailing Regulations in the country of the importer. It is issuing bank’s branch or correspondent bank in exporter’s country to which the LC is sent for onward transmission to the beneficiary. L/C DIAGRAM ON THIS PAGE (COPY WITH STUDENTS) L/C transaction 7 . seller submits the set of required documents to the opening bank or to the nominated bank. the seller is assured of payment. The risk involved can be insured with ECGC. as the importer has already taken possession of goods. E. Letter of Credit (L/C): “An undertaking by importer’s bank stating that payment will be made to the exporter if the required documents are presented to the bank within the validating of the L/C” L/C is one of the most convenient methods of settling payments in International Trade. 4. If the importer fails to pay on due date.
An undertaking by importers bank stating that payment will be made to the exporter if the required documents are presented to the bank. 2005-2006 EXIM PROC & DOC Reimbursing bank EXPORTER (London) 3 Stan. By default all L/Cs are nontransferable. (4) An L/C can be transferred only once.Y.BMS – SEM – IV – A. Negotiating bank V/S Confirming Bank Negotiating Bank’s presence comes only in case of unconfirmed L/C. else confirming bank pays money.Chart LONDON UNION BANK (Californi a) 2 Issuing bank IMPORTER (MUMBAI) 1 ICICI Bank (Mumbai) • • ICICI buys funds ($) from market and funds Union Bank with $ which makes payment to standard chartered London.Y. 8 .S. (3) Exporter’s bank is known as Negotiating (confirming) bank.
9 .S. • Issuing bank has to make the payment to confirming bank in $. • Exporter procures and forwards the documents as per L/C terms to the CONFIRMING BANK (here. (Importer’s bank) (8) In case of revolving L/C it is not subject to exhaustion.Y. Every month when L/C is reinstated reinstatement charges are charged for every transaction. This bank will make payment to STANCHART LONDON.Y. • Confirming bank scrutinizes the documents as per stated in L/C • If documents are in order. • ICICI presents documents to importer who will again scrutinize documents and make payment to ICICI. Procedure involved in the Letter of Credit 1. Only with regular customers having regulated supply this L/C is opened. which is known as back-to-back L/C (7) Nominated bank is nominated by issuing bank. in this example. 2. Such L/C is useful when two parties have frequent dealings between them for a fixed amount. This bank should have NOSTRO account (Foreign currency account) • Here. LC is the most secured form of payment in foreign trade. Standard Chartered bank). ICICI may have a NOSTRO account with Union Bank of California in NY.BMS – SEM – IV – A. but reverse is possible. (Around 1000-2000 Rs. (6) In case of Back-to-Back LC the beneficiary becomes applicant. shipment is made. Exporter’s Request: The exporter requests the importer to issue LC in his favor. ICICI buys dollars from market and funds union bank with $. so to avoid that risk another L/C is available which is known as back-to-back L/C. confirming bank makes payment to the exporter. It is renewed automatically for the same amount and the same period once it is utilized. 2005-2006 EXIM PROC & DOC (5) In case of transferable L/C. Importer’s request to his bank: The importer requests his bank to open an LC. Union bank is known as REIMBURSING bank. He may either pay the amount of credit in advance or may request the bank to open a credit in his current account with the bank. • Confirming bank forwards documents to the ISSUING BANK (here. The second L/C is opened on the basis of original (parent) L/C. the importer cant find the share of distribution to all parties who have got their shares thru exporter. ICICI BANK). which also scrutinizes the documents.) LETTER OF CREDIT FLOWS AS FOLLOW • After L/C is established.
not very popular. provided the documents submitted comply with the terms of the letter of credit. 7. Because this places the exporter at risk. if so required by the beneficiary. The issuing bank may also request the advising bank to add its confirmation to the LC. then makes the payment to the exporter. 2005-2006 EXIM PROC & DOC 3.” Still this type of L/C is of limited utility and. Scrutiny of document: the negotiating bank then scrutinizes the documents and if they are in order. Issue of LC: The issuing bank issues the LC and forwards it to its correspondent bank with a request to inform the beneficiary that the LC has been opened.BMS – SEM – IV – A. TYPES OF LETTER OF CREDIT Revocable A revocable letter of credit allows for amendments. He should see to it that the LC is confirmed. 6. Documents to importer: The issuing bank in turn presents the documents to the importer and debits his account for the corresponding amount. Shipment of goods: Then the exporter supplies the goods and presents the full set of documents along with the draft to the negotiating bank. Receipt of LC: The Exporter takes in his possession the LC. 8. Confirmed & Unconfirmed L/C:A confirmed letter of credit is when a second guarantee is added to the document by another bank.Y. confirmed and back-to-back. This type of letter of credit is commonly used and preferred by the exporter or beneficiary because payment is always assured. Irrevocable an irrevocable letter of credit requires the consent of the issuing bank. hence. 5. 4. modification or cancellation to the original terms can be made. modifications and cancellation of the terms outlined in the letter of credit at any time to an importer without the consent of the exporter or beneficiary. Irrevocable letters of credit can be both confirmed and unconfirmed. The advising 10 . In order to safeguard the interest of the exporter in a revocable L/C. the beneficiary and applicant before any amendment. Realization of Payment: The issuing bank will reimburse the amount (which is to be paid to the exporter) to the negotiating bank.Y. Other forms of irrevocable letters of credit are unconfirmed. a clause is included that “any drawings negotiated against the L/C prior to notification or revocation or amendment will be honored on presentation.S. revocable letters of credit are not generally accepted.
” Back-to-Back Letters of Credit Back-to-back letters of credit is a domestic letter of credit. However.” The best form of L/C is therefore – “IRREVOCABLE. The issuing bank can transfer a credit only if it is expressly designated as transferable. Revolving L/C: When LC is issued for fixed amount and for a fixed period. The validity of 11 .Y. It is an ancillary credit created by a bank based on a confirmed export LC received by the direct exporters. CONFIRMED AND SANS RECOURSE.Y.BMS – SEM – IV – A. It may also be noted that if any bank confirms an L/C without an authorization from the issuing bank. With Recourse & Sans (without) Recourse: In a “With Recourse” L/C. the bank can have recourse to the exporter for payment of not only the bill amount but also expenses. 2005-2006 EXIM PROC & DOC bank. the branch or the correspondent through which the issuing bank routes the letter of credit. If no confirmation is added it is unconfirmed. provided that the stipulated documents are presented and that the terms and conditions of the credit are compiled with. the exporter is bound to refund the money back to the bank which has negotiated his bills in the event of refusal by the importer to honor the bill” where the importer fails to pay after the specified period or unduly delays his payments. it is called a fixed LC. which can be transferred by the beneficiary named therein in favor of another party. Transferable LC: A transferable LC is one. it will continue to be unconfirmed. in a “without recourse L/C” the liability of the exporter ends after the bill is negotiated. The direct exporters keep the original LC (received from issuing bank) with the negotiating or some other bank in India. adds its undertaking and commitment to pay to the letter of credit.S. This confirmation means that the Exporter / seller / beneficiary may also look to the credit worthiness of the confirming bank for payment assurance. Non-Transferable LC: The beneficiary cannot transfer the LC to a third party. If an intermediary bank adds its confirmation. as a security and obtains another LC in favor of domestic supplier. Under this credit the beneficiary has the right to draw the bills upto the specified amount within the specified period. Confirmation constitutes a definite undertaking of such bank (confirming bank). Usually all letters of credit are non transferable unless it is expressly stated that LC can be transferred. in addition to that of the issuing bank. it binds itself to negotiate documents under the particular credit confirmed. Through this route the domestic supplier gains direct access to a pre-shipment loan based on the receipt of domestic or back-to-back LC.
uniform rules for the interpretation of international trade terms were published in 1936. Thus. the amount of credit is automatically renewed after the bills are negotiated.Y. Under revolving type. ADVANTAGES OF L/C TO AN IMPORTER (BUYER) Reduce your commercial risk by ensuring that your supplier will not be paid until evidence has been provided that the goods have been dispatched. Import L/Cs will also help you: • Conserve your company's cash flow by eliminating the need to make advance payments or deposits Demonstrate your creditworthiness to your supplier Support your supplier's access to bank credit (in many countries. L/Cs are pledged by exporters as security against working capital loans) • • ADVANTAGES OF AN L/C TO AN EXPORTER (SELLER) • • Assure that you get paid (if the buyer doesn't pay. which is granted by commercial banks. L/C enables an exporter to avail pre-shipment finance.BMS – SEM – IV – A. the credit is renewed automatically for the same initial amount. L/C ultimately reduces the bad-debt of an exporter. a revolving credit is used to provide transactions are more or less regular and continuous atlest over a certain period of time.Y. Since then. Once the exporter fulfills all the conditions of L/C and presents as per the terms and conditions of L/C. but when the fixed amount is withdrawn. Red Clause LC: The red clause LC is the usual irrevocable LC. the bank that issued the L/C is obligated to pay) No blocking of fund. The strength of L/C helps exporter to avail preshipment finance. A revolving credit is a credit. It is called a red-clause LC because it is generally printed in red ink. which is available for a fixed amount only for fixed period. INCOTERMS • The first INCOTERMS . by the International Chamber of Commerce (ICC) used in buying and selling on a worldwide scale. the exporter is entitled to receive the amount of exports. 12 . Thus. 2005-2006 EXIM PROC & DOC the LC gets over as soon as the bills upto the specified amount have been paid within the specified time. which further authorizes the negotiating bank to make advances to the beneficiary for the purpose of processing the export goods.S. the red LC enables the exporter to obtain Packing Credit Facility for the purpose of processing the goods.
WHY SHOULD IMPORTERS INCOTERMS IN DETAIL? AND EXPORTERS UNDERSTAND THE Many international traders. Incoterms 2000 describe the responsibilities of seller and buyer in international trade. one of the more common uncertainties arising in international Sales is. The full and authoritative definition of each trade term is published in Incoterms 2000. local transport charges and dock dues are covered in the price quoted. 1967. 1990 and Incoterms 2000.Y.BMS – SEM – IV – A.Y. As a result. Each term means a different division of costs. the Exporter quotes a price which includes all the expenses incurred until the goods are actually delivered on board the ship at the port of shipment. For e. This means packing charges. who is responsible for loading (or unloading) the goods? An understanding of INCOTERMS will generally allow the matter to be solved. "INCO TERMS 2000" The important INCOTERMS ARE AS FOLLOWS: FOB (Free On Board): Under FOB contract. customs clearance and insurance. 3. unfortunately. and responsibilities between the seller and the buyer. The risk of loss if the transportation cannot take place. they are unprepared for certain common contingencies with respect to transfer of risk. Even expected profit is included in the FOB price. This set of rules defines the precise obligations of buyer and seller to reduce the possibility of misunderstanding between the exporter and importer. have only a general idea of the differences between such INCOTERMS such as EXW. risks. Incoterms 2000 aim is to set out the rights and obligations of the seller and the buyer when it comes to transporting the goods. In other words.S. loading / unloading. 2. The risk of loss or damage to goods in transit. and CIF etc. INCOTERMS 2000 (stands for International Commercial Terms) to provide a set of rules to interpret the most commonly used trade terms in international trade.g. The purpose of these terms is to clarify who is responsible (seller or buyer) for: 1. 2005-2006 EXIM PROC & DOC ICC has amended and modernized these rules in 1953. The cost of transporting the goods from one point to the other. It constitutes the following: 13 . 1980. FOB.
the expenses upto the board of the ship. The other arrangements like cartage. He should inform the seller the name of the ship by which the goods are to be sent and also the expected date of delivery. measure. because the shipping company is deemed to be the agent of buyer. Wharfage and porterage.Cost and Freight (CFR): C & F / CFR means COST AND FREIGHT.O. weight or quantity if any. iv. He has to obtain bill of lading from the shipping company and forward it to buyer to enable him to take delivery of goods.S. The quotation covers total cost of goods. ii. He has to load the goods on board the ship named by the buyer. Cost of checking operations like checking of quality. He must inform the buyer certain details like the name of the ship and the possible date of delivery. Inland Transportation charges. B. packing charges. Insurance arrangements are also to be made by the importer. Under FOB quotation the seller has no right of lien (possession of property) on goods and that of stoppage in transit.Y. C & F Price = F. Buyer’s obligations under FOB quotation: i. Export duty. 2005-2006 EXIM PROC & DOC Ex-Factory price. C & F. Buyer’s Obligation under C & F Quotation: 14 .Y. PRICE + FREIGHT Seller’s Obligations under C & F Quotation: In addition to the obligation mentioned under FOB quotation. He has to bear the risk when goods are loaded on the ship. iii. Customs dues. FOB Price = Cost Of Goods + Expenses Upto Board the Ship Seller’s obligations under FOB quotation: i. carriage.BMS – SEM – IV – A. the seller must pay freight charges to the shipping company that undertakes to carry the goods from the port of shipment to the port of destination. loading charges and the payment of freight upto the port of destination. He should make the payment to the exporter as per the terms of contract.B. Thus FOB price is calculated by adding the cost of goods. if any. packing. iii. unloading charges and expenses of carrying the goods from the port of delivery to importer’s warehouse are to be made by the importer. ii. He has to inform the buyer without delay that the goods have been delivered on board the vessel.
CIF-COST. it functions under the administrative control of the Ministry of Commerce. iii. What does ECGC do? a) Provides a range of credit risk insurance covers to exporters against loss in export of goods and services b) Offers guarantees to banks and financial institutions to enable exporters obtain better facilities from them c) Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan.Y. 1000 crores.800 crores. Government of India.BMS – SEM – IV – A. banking. INSURANCE AND FREIGHT: It includes FOB price plus freight plus marine insurance upto the port of destination. import duties etc. iv.500 crores and authorized capital Rs. He has to bear the loss or damage to the goods. This term is exactly the same as CFR except that the seller must in addition procure and pay for insurance for the buyer. insurance and exporting community. He has to pay clearing charges. The present paid-up capital of the company is Rs. The importer prefers it to FOB because there are fewer responsibilities for him as the exporter takes all risk for fluctuations in rates of freight and insurance unless otherwise specified in the contract. from the time and place at which the seller’s obligations are over.S. He has to make payment as per the commercial invoice. CIF = FOB + FREIGHT (C & F) + MARINE INSURANCE EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD (ECGC) Export Credit Guarantee Corporation of India Limited. Being essentially an export promotion organization. C. EXIM PROC & DOC He has to arrange and pay for insurance. The paid-up capital is expected to be enhanced to Rs. Reserve Bank of India.Y. if any. How does ECGC help exporters? ECGC provides • • Offers insurance protection to exporters against payment risks Provides guidance in export-related activities 15 . It is managed by a Board of Directors comprising representatives of the Government. was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. 2005-2006 i. ii. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports.
BMS – SEM – IV – A. and to enable them to expand their overseas business without fear of loss. commonly known as the Standard Policy.50 lac. A coup or an insurrection may also bring about the same result. Export credit insurance is designed to protect exporters from the consequences of the payment risks.e. from the date of shipment. This policy covers both • • Commercial and Political risks. In addition. SCR – STANDARD POLICY What is a SCR or Standard Policy? Shipments (Comprehensive Risks i. (The appropriate policy for exporters with an anticipated turnover of Rs. is the one ideally suited to cover risks in respect of goods exported on short-term credit. that is how known as COMPREHENSIVE RISK policy) Policy. credit not exceeding 180 days. both political and commercial. the exporters have to face commercial risks of insolvency or protracted default of buyers.Y. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. 16 .S. coverage of commercial as well as political risk.Y. i. It is issued to the exporters whose anticipated EXPORT TURNOVER for the next 12 months is more than Rs. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. 2005-2006 • • • • EXIM PROC & DOC Makes available information on different countries with its own credit ratings Makes it easy to obtain export finance from banks/financial institutions Assists exporters in recovering bad debts Information on credit-worthiness of overseas buyers Need for export credit insurance Payments for exports are open to risks even at the best of times. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. The covers issued by ECGC can be divided broadly into following groups: 1.50 lacs or less is the Small Exporter's Policy. described separately).e. An outbreak of war or civil war may block or delay payment for goods exported.
BMS – SEM – IV – A. Exchange rate fluctuation. Insolvency or default of any agent of the exporter or of the collecting bank.S. New import restrictions or cancellation of a valid import licence in the buyer's country. Political risks • • • • • Imposition of restriction by the Government of the buyer's country or any Government action. the following risks: a. normally four months from the due date. War. subject to certain conditions b. Failure or negligence on the part of the exporter to fulfil the terms of the export contract. Commercial risks • • • Insolvency of the buyer Failure of the buyer to make the payment due within a specified period.Y. Buyer's failure to obtain necessary import or exchange authorization from authorities in his country. Loss or damage to goods. What are the risks not covered under the standard policy? The policy does not cover losses due to the following risks: • • • • • • • Commercial disputes including quality disputes raised by the buyer. Any other cause of loss occurring outside India not normally insured by general insurers. and beyond the control of both the exporter and the buyer. Which all shipments made by the exporter are required to be covered under the Standard Policy? The Standard Policy is meant to cover all the shipments made by an exporter. revolution or civil disturbances in the buyer's country. ECGC covers. unless the exporter obtains a decree from a competent court of law in the buyer's country in his favour. civil war. from the date of shipment. which can be covered by general insurers. Causes inherent in the nature of the goods. 2005-2006 EXIM PROC & DOC What are the risks covered under the Standard Policy? Under the Standard Policy. Buyer's failure to accept the goods. which may block or delay the transfer of payment made by the buyer.Y. on credit terms during the period of 24 months after the issue of 17 . Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which can not be recovered from the buyer.
restrictions on import of the items into the buyer's country. 2005-2006 EXIM PROC & DOC the policy.Y. an exporter is required to offer for the cover of the Policy each and every shipment that may be made by him in the next 24 months on DP. Can pre-shipment risks be covered under the Standard Policy? (Policy covered from DATE OF CONTRACT) The Standard Policy provides cover only for the post-shipment risks.S. consumer goods or consumer durables. i. However. What is the percentage of cover provided by ECGC? ECGC normally pays 90% of the loss. civil war. which are supported by irrevocable Letters of Credit. Where. In other words.e. since he faces no risk in respect of such transactions. all the shipments made by him in the 18 . which is manufactured to the non-standard specifications of a buyer. losses which may be sustained by an exporter due to impossibility of exporting goods already manufactured or purchased for reasons like ban on export of the item. etc. ECGC reserves the right to offer a lower percentage of cover in certain cases. however. As a result. Are there any shipments excluded from the purview of the Standard Policy? An exporter may exclude shipments made against advance payment or those. war. What is the time limit for declaration of shipments? On or before the 15th of every month the policyholder is required to declare to ECGC in a prescribed form. the export involves an item.BMS – SEM – IV – A. Normally such a risk is very low in respect of raw materials. which can easily be sold to alternate buyers. shipments by air can be covered by the Standard Policy if the exporter holds a valid credit limit under DA and pays premium at the rates applicable for the relevant credit period under DA. are not covered under the policy. cover can be provided for the pre-shipment risks as well as the post-shipment risks under the Contract Policy.. Preshipment losses. which carry the confirmation of banks in India. The remaining 10% has to be borne by the exporter himself. DA or Open Delivery terms to all buyers other than his own associates. as the case may be. whether it arises due to commercial risks or political risks. Is there any difficulty in covering air shipments under the Standard Policy? When shipments are made by air. the buyers are often able to obtain delivery of the goods from the airlines before making payment of the bills or accepting them for payment.Y. primary products.
S.BMS – SEM – IV – A. restricts or controls the transfer of payment from the customer’s country to India: or (b)The occurrence of war between the customers’ country and India: or 19 . which. involving (I) Development of software off-shore (i. a NIL declaration should be sent. What are the salient features of Software Projects Policy? Considering that software projects have special characteristics. What are the risks covered under the Software Projects Policy? The risks covered under the Policy would be similar to the risks covered under standard policies in character but the wordings are slightly amended to be in line with the special features of the software exports. in circumstances outside the control of the Exporter and/or of the buyer prevents.Y.Y.e. The loss coverage will be restricted to 80%. a separate policy pertaining to software projects has been designed by ECGC. or (ii) Development of software on-site of the client and supply and implementation. 2005-2006 EXIM PROC & DOC preceding calendar month. 2. If no shipment is made in a month. at the exporters location in India) to be delivered and implemented in the buyer’s (client) location. or (iii) Both off-shore and on-site development. The risks covered would be as under: Commercial risks: (a) Default – the failure of the customer to pay to the exporter within four months after the due date of payment the contract price of services rendered to and accepted by the customer: or (b) Insolvency of the customer: or (c) Wrongful repudiation (denial) of the contract by the customer after the exporter has incurred expenses for commencement of services. either on one time/turnkey basis or progressive/milestone basis. SOFTWARE PROJECTS POLICY What are the software services exports that will be eligible for cover under the Software Project Policy? The following software services will be eligible for cover under the Software Projects Policy: Software project services. decree or regulation having the force of law. Political risks: (a) The operation of a law or of an order.
as its name indicates. What are the different types of Services Policy and what protection do they offer? 1. revolution. In order to give a measure of protection to such exporters of services. 3. decree or regulation having the force of law. rebellion.Y. 2005-2006 EXIM PROC & DOC (c) The occurrence of war. Such policies are issued to cover all services contracts that may be concluded by the exporter over a period of 24 months ahead. ECGC has introduced the Services Policy. 20 . Specific Services Contract (Comprehensive Risks) Policy. of any law or of an order. or (d)The imposition in India or in the customer’s country after the date of contract. which are large in value and extend over a relatively long period. SERVICES POLICY o What is the purpose of Services Policy? Where Indian companies conclude contracts with foreign principals for providing them with technical or professional services. It is issued to provide cover for contracts. Whole-turnover Services (Political Risks) Policy Specific Services Policy. or (e) Any of the following causes of loss not being within the control of the exporter and/ or the customer. which arises from an event occurring outside India. Specific Services Contract (Political Risks) Policy. is issued to cover a single specified contract.S. Whole-turnover Services (Comprehensive Risks) Policy. payments due under the contracts are open to risks similar to those under supply contracts. insurrection or other disturbances in the customer’s country. 2. 3.BMS – SEM – IV – A. prevents performance of the contract. and 4. hostilities. which in circumstances outside the control of the Exporter and/ or the customer.Y. Refusal of visa for employees of exporter who are required to be in the place of the project to enable the exporter to execute contractual obligations for reasons not attributable to the exporter or customer. Whole-turnover services policies are appropriate for exporters who provide services to a set of principals on a repetitive basis and where the period of each contract is relatively short. civil war.
Specific Shipment (Comprehensive Risks) Policy. SPECIFIC POLICIES FOR SUPPLY CONTRACTS Why are specific policies needed for supply contracts? The Standard Policy is a whole turnover policy designed to provide a continuing insurance for the regular flow of an exporter's shipments for which credit period does not exceed 180 days. It is. the appropriate policy for an exporter to take if the payments are open to both commercial and political risks.g. therefore. What are the risks covered by Construction Works Policy? 1. 3. What are the different forms of specific policy for supply contracts and what risks do they cover? The different policies are: 1.S. Specific Shipments (Comprehensive Risks) Policy provides cover against all the risks covered under the Standard Policy for shipments to be made under the contract in question. and 4. insured by ECGC on a case-to-case basis under specific policies. Premium rates for Contract Policies will be higher than that for Shipment Policies. 2. the loss in respect of unshipped goods will also be covered under Contract Policies. Contracts for export of capital goods or turnkey projects or construction works or rendering services abroad are not of a repetitive nature and they involve medium/long-term credits. Such transactions are. Specific Contract (Comprehensive Risks) Policy.Y. Specific Contract Policy (which also can be for comprehensive or political risks) differs from Shipments Policy in that the former provides the exporter not only with the post-shipment cover like the latter but also with some preshipment cover from the date of contract. In case shipments could not be made due to any of the risks covered or due to restriction on export of the goods from India.Y. where the payments are guaranteed by a bank or by the Government of the overseas country. 21 . Specific Shipments (Political Risks) Policy. e. Construction Work Policy EXIM PROC & DOC What is the purpose of a Construction Works Policy? Construction Works Policy is designed to provide cover to an Indian contractor who executes a civil construction job abroad. therefore. Where the Commercial risks are absent.BMS – SEM – IV – A. Specific Contract (Political Risks) Policy. 2005-2006 4. The Construction Works Policy of ECGC is designed to protect the Contractor from 85% of the losses that may be sustained by him. 5. the exporter may opt for the Specific Shipments (Political Risks) Policy for which the premium rate will be lower than that for the Comprehensive Risks Policy.
2005-2006 6. the payment is made in US $ only generally. Continued from Page No. (1) …. but The recent decision permits to any exporter who is in any other country (in case of ACUs). the extent of cover is 90% for both commercial and political risks). the importer should make the payment as per the demand of the exporter. as against 24 months in the case of Standard Policy. the importer should make the payment as per the demand of the exporter.50 lac. ii) Declaration of shipments: Shipments need to be declared quarterly (instead of monthly as in the case of Standard Policy). iv) Waiting period for claims: The normal waiting period of 4 months under the Standard Policy has been halved in the case of claims arising under the Small Exporter’s policy. iii) Percentage of cover: For shipments covered under the Small Exporter's Policy ECGC will pay claims to the extent of 95% where the loss is due to commercial risks and 100% if the loss is caused by any of the political risks (Under the Standard Policy. SMALL EXPORTER'S POLICY EXIM PROC & DOC The Small Exporter's Policy is basically the Standard Policy.CONFIRMED LC) Negotiating bank V/S Confirming Bank 22 . incorporating certain improvements in terms of cover. It is issued to exporters whose anticipated export turnover for the period of one year does not exceed Rs.BMS – SEM – IV – A. in order to encourage small exporters to obtain and operate the policy. The recent decision permits to any exporter who is in any other country (in case of ACUs).Y. The payment terms relates to country of shipment and NOT country of payment. The same has been explained with the help of following example: If the seller is in Japan and goods are shipped from Bangladesh. and if he demands payment in any free convertible currency. (2) … Continued from page number 10 (To be included either BEFORE or AFTER CONFIRMED V/S NON .S. 4 after the ACU table. but demands payment in any free convertible currency. In what respects is the Small Exporter's Policy different from the Standard Policy? i) Period of Policy: Small Exporter's Policy is issued for a period of 12 months.Y.
Project Exports: 2. Interest rates should be cheaper. else confirming bank pays money. By default all L/Cs are nontransferable.c. It is renewed automatically for the same amount and the same period once it is utilized. Every month when L/C is reinstated reinstatement charges are charged for every transaction. (6) In case of Back-to-Back LC the beneficiary becomes applicant. 2. (Around 1000-2000 Rs. (5) In case of transferable L/C.BMS – SEM – IV – A.b.Y. so to avoid that risk another L/C is available which is known as back-to-back L/C. Exports of capital goods on deferred payment (beyond 6 months) 2.Y. Cash exports: payment here is received within 6 months from the date of shipment. Different types of Exports (From the viewpoint of Banker) 1. civil construction abroad. (4) An L/C can be transferred only once. Service exports / consultancy services abroad. (Importer’s bank) (8) In case of revolving L/C it is not subject to exhaustion. 2. The second L/C is opened on the basis of original (parent) L/C.d. Turnkey projects. 2005-2006 EXIM PROC & DOC Negotiating Bank’s presence comes only in case of unconfirmed L/C. which is known as back-to-back L/C (7) Nominated bank is nominated by issuing bank. Such L/C is useful when two parties have frequent dealings between them for a fixed amount.) EXPORT FINANCE RBI assures: Timely finance assistance. but reverse is possible. 2.S. (3) Exporter’s bank is known as Negotiating (confirming) bank. Only with regular customers having regulated supply this L/C is opened.a. 23 . the importer cant find the share of distribution to all parties who have got their shares thru exporter.
24 Rs. 46/-) = Less 12% is the Insurance & Freight = loan amount obtained by the exporter initially. EOUS / Units operating under EPZs / SEZs Status holder exporters. 4. Maximum loan available against each order: US $ 1.is the . Pre-shipment finance is extended to an exporter for the purpose of procuring raw materials.b.S.000 US $ 75. warehousing of goods meant for exports. c.d. Export Finance is a short term.a. Software Exports: 4.000/Rs. 4. 29. customized projects: foreign company floating tenders and Indian software engg. 33. Manufacturer exporters Merchant exporters.00.75. On-site software development. An exporter may need financial assistance for execution of an export order from the date of receipt of an export order till the date of realization of the export proceeds at any stage.75. Develops projects (tailor made / customized projects) Different types of exporters (From the viewpoint of Banker) a. US $ 75. Conditions for availing packing credit loan 1. 4. packing. Financial assistance extended to the exporter from the date of receipt of export order till the date of shipment is known as pre-shipment credit. Interest for availing Pre-shipment finance is charged at PLR (Prime Landing Rate) in case of Indian Rupee currency loan. processing. b. Deemed Exports: A Supplier to advance license holder or SEZ or EOU are known as deemed exporters. 2005-2006 EXIM PROC & DOC 3.Y. offshore projects.Y.00. transporting. working capital finance allowed to an exporter.000 Say: the CIF Value of invoice is -------------- Maximum loan available -------------- (Banks generally does not give 100% loan) around 25% Margin is kept generally.000 * 46 (Rs. Branded software sales. Credit facility extended to an exporter from the date of shipment of goods till the realization of the export proceeds is known as post-shipment credit.c. d.BMS – SEM – IV – A.000/----------------------Rs. 4. It is also known as “Packing Credit” facility.000/. 4.
4.5% Types of Pre-shipment finance: i. Packing Credit Loan: The PCL is granted as loan in the form of pledge in cases where exporters are required to collect / obtain raw materials in odd or bunched lots or the raw material is seasonal in nature and the exports take place in due course in installment as the shipping schedules agreed upon by the overseas buyers.g.75% + 2% No Extension is granted E.Y.BMS – SEM – IV – A.5 % (Max) LIBOR + . bank should assess the procurement period and once the goods are acquired and are in the custody of the exporter client. Maximum Period: Till the date of shipment / date of submission of the documents OR upto a maximum period of 180 days from date of loan whichever is earlier. Interest rate slabs Description 1 – 180 Days 181 – 270 days Beyond 270 days Slab 1st Slab 2nd Slab Rupee Loan PCFC PLR – 2.P PLR – 0. iii. A manufacturer exporter dealing in any of notified 10 items or dealing with any of notified 43 countries.00. ii. However. he is eligible for packing credit at concessional rate of interest upto 365 days.5 % (Max) LIBOR + . Packing Credit Hypothecation: It is extended where raw materials. Extension of 90 days: (180 days + 90 Days = 270 Days): if the exporter can’t ship the goods then.5% & 181 days to 240 days – Interest rate = PLR – 0. 2005-2006 EXIM PROC & DOC Rs. 25 . convert the clean advance into PCL hypothecation. Beyond 270 days: Packing credit can continue but at no concessional rate of interest. Extended Packing Credit Loan (PCL): it is granted to the clients (exporters) for making advance payment to the suppliers for acquiring goods to be exported.000 is released afterwards when exporter has to take the responsibility to pay insurance and freight charges. Work-in Progress and finished goods meant for export are available as security. for a very short duration. if an exporter has availed loan for 240 days then for 1 – 180 days interest rate = PLR -2.S. 4.Y. 3.75 % B. 2. it is clean in nature and is usually extended to the parties who are rated as first class. The processing / manufacturing may be undertaken by the exporter himself or thru sub-contractors unit. further extension upto 90 days is given at concessional rate of interest. Thus.
BMS – SEM – IV – A. Secured shipping loan: Once the goods are ready for shipment and exporter/supplier has handed over the goods to the clearing and forwarding agent for dispatch the advances can be granted as secured shipping loan. iii. an undertaking to the effect that the same will be produced to the bank within a reasonable time for verification and endorsement. v. This undertaking is required where the exporter wants to avail him of packing credit advance against preliminary information of contract whereby at the later stage the contract or L/C. i. Nevertheless. Here bank ensures that the goods are handled by approved transport operators / C & F agents. Copies of RBI’s Exporter’s code number (CNX) Appropriate guarantee of the ECGC. Where the exporter asking for the PCL is a sub-supplier and wants to supply the goods to the Export / Trading / Super Star Trading House stating that they have not / will not avail themselves of packing credit facility against the same transaction for the same purpose till the original packing credit is liquidated. as the case may be. partnership deed in case of partnership firm or Memorandum of Association. 2005-2006 EXIM PROC & DOC iv.Y. rules regarding submission of stock statements and insurance would have to be complied with. In such cases. in original.Y.S. Letter of hypothecation. viii. vii. Where it is not available. Money advances are clean at their initial stage when goods are not yet acquired. Confirmed export order / contract or L/C etc. 26 . Once the goods are acquired and are in the custody of the exporter. PCL is generally granted on secured basis. ii. will be received by him. iv. Any other document required by the bank. Audited reports of past 3/5 years. An undertaking that the advances will be utilized for the specific purpose of procuring / manufacturing etc. banks usually convert the clean advance into hypothecation. DOCUMENTS REQUIRED: The following documents are to be submitted along with application form for packing credit. Articles of Association for public/private business. vi. of the goods meant for export only as stated in the relative confirmed export order or the L/C. clean packing advances may also be granted.
Some key features of post-shipment finance are as follows: • • • • • Finance is extended against evidence of shipping documents.BMS – SEM – IV – A. the banks require the exporter to execute a formal “loan agreement.Y.S.5% / LIBOR + 0. Concessive rate of interest is available for a maximum period of 180 days. Post shipment finance bridges the financial gap between the date of shipment and actual receipt of payment from overseas buyer thereof. starting from the date of submission of documents.5% / LIBOR +0. POST – SHIPMENT FINANCE Post-shipment finance is a loan or advance granted by a bank to an exporter of goods from India.” The format of this agreement differs from bank to bank.75 + 2 BP What is the quantum of this finance? Post shipment finance can be extended upto 100% of the invoice value of goods. 2005-2006 EXIM PROC & DOC Loan agreement: Before disbursement of loan. the documents are to be submitted within 21days from the date of shipment. Normally. Who is eligible for pre-shipment credit? An exporter who holds an export order or Letter of Credit (LC) in his own name to perform an export contract can avail of pre-shipment credit. RBI has enlisted 10 products and 43 countries to implement above case. What is the purpose of this finance? Pre-shipment finance can be availed of only for the specific purpose of procuring raw materials / purchasing / manufacturing / processing / transporting / warehousing / packing and shipping the goods meant for export. This facility is available to an exporter subsequent to the date of shipment of goods upto the date of realization of export proceeds. Finance provides working capital to the exporter from the date of shipment to the date of realization of export proceeds. 27 .Y. A manufacturer exporter dealing in any of the notified item is eligible for packing credit at concessional rate of interest upto 365 days.75 BP 91-180 days – IInd slab – PLR – 0. 0-90 days – Ist slab – PLR – 2. How much financing can an exporter get? The banking practice is that the exporter can obtain 90% of the FOB value of the order or 75% of the CIF value of the order.
c. Export Oriented Units (EOUs) and Units located in Special Economic Zones (SEZs). If documents are in order. DIFFERENT EXPORT HOUSES Merchant as well as Manufacturer Exporters. the bank negotiates the bill and advance is granted.BMS – SEM – IV – A. d. Export Bills negotiated (L/C Bills): An exporter can avail of postshipment credit by drawing bills or drafts under the L/C. Service Providers. which is payable within one year from date of shipment. Banks offer pre-shipment advances against claims for DBK. Banks offer pre-shipment as well as post shipment advances against claims for DBK. Export Bills discounted (D / A Bills). It also includes refund of central excise duties paid on indigenous materials. Advances against goods sent on consignment basis: Banks may grant post-shipment advances against goods sent on consignment basis. Agri Export Zone (AEZ’s). f. e.Y. The bank insists on production of the necessary documents as stated in the L/C. b. 2005-2006 EXIM PROC & DOC Post-shipment finance can be further classified as under: a. Software Technology Parks (STPs) and Bio Technology Parks (BTPs) shall be eligible for applying for status as Star Export Houses. Electronic Hardware Technology Parks (EHTPs).S.Y. Above two bills are Non – L/C Bills. 28 Performance (Rupees in Crores) 15 100 500 1500 5000 . components and packing material used in the export product. Advances against Retention Money: Banks advance against retention money. Advance against incentives / DBK: DBK means refund of custom duties paid on the import of raw materials. The applicant shall be categorized depending on his total FOB/FOR export performance during the current plus the previous three years: Category One Star Export House Two Star Export House Three Star Export House Four Star Export House Five Star Export House DEEMED EXPORTS "Deemed Exports" refers to those transactions in which the goods supplied do not leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. Export Bill Purchased (D / P Bills).
receipt of order. The entire export procedure stated above briefly is divided into four stages as given below: EXPORT PROCEDURE (c) (d) (f) (i) (j) 29 . by a notification. shipment of goods and to realize export proceeds including incentives. identification of overseas markets. permits the import of such goods at zero customs duty. and Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding.Y. Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the Department of Economic Affairs.S. CHPT . Ministry of Finance under International Competitive Bidding in accordance with the procedures of those agencies/ funds. export pricing quotation.EXPORT PROCEDURE Export procedure is the method or system or the manner in which various formalities are required to be completed in the case of export trade transaction. Its registration with concerned authorities. Supply of capital goods to holders of licenses under the Export Promotion Capital Goods (EPCG) scheme. Supply to projects funded by UN agencies. provided the goods are manufactured in India: (a) (b) Supply of goods against Advance License OR DFRC Scheme.Y.BMS – SEM – IV – A. Supply of goods to Export Oriented Units (EOUs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP). 2005-2006 EXIM PROC & DOC The following categories of supply of goods by the main/ sub-contractors shall be regarded as "Deemed Exports" under this Policy. Export marketing activity start right from organizing one self by way of establishing a firm. choosing a product to sell in international market. where the legal agreements provide for tender evaluation without including the customs duty. Supply of goods to any project or purpose in respect of which the Ministry of Finance.
Pre-Shipment Stage: This stage comprises of following sub-stages: i. etc.Y. the IEC once allotted is valid till it is revoked. The basic objective of EPC is to promote and develop the exports of the country. PRELIMINARY STAGE STAGE: – up of organization: The exporter should have an organization to I. B. The EPC keeps up to date details of the trends and opportunities in international markets for goods and services and assist their members in taking advice of opportunities in order to expand and diversify exports. Each council is responsible for the promotion of a particular group of products. Registration with various authorities: In case of proprietary firm or partnership firm – register with registrar of firms of the State territory wherein the same is located.Y. Obtaining Pre-shipment finance iv. RCMC number enables any exporter to avail benefits and concessions wherever applicable under EXIM policy. Other registrations such as registration to Sales Tax authorities.S. There being no date of expiry. iii. Set look after exports. Importers – Exporter’s Code (IEC) Number: Any firm exporting or importing goods from / into India will require importer’s exporter’s Code Number. They are non profit organizations registered under Indian Companies Act and supported by financial assistance from the government of India. Obtaining Registration cum Membership Certificate (RCMC) From EPC. ii. Confirmation of order ii. Exporters may set up a complete new organization or add an export section to an existing one. Approaching Foreign Buyers: The exporters then approaches foreign buyers with a quotation. The RCMC is available only after availing IEC number. Production and procurement of goods 30 .BMS – SEM – IV – A. Registration with Export Promotion Councils and other authorities helps in obtaining facilities provided by these organizations. projects and services.SHIPMENT STAGE – IV POST – SHIPMENT STAGE A. Obtaining letter of credit (If required) iii. This IEC number is to be filled in the Bill of Entry (in case of import or Shipping Bill (in case of export). 2005-2006 EXIM PROC & DOC STAGE – I PRELIMINARY STAGE STAGE – III SHIPMENT STAGE STAGE – II PRE .
Calcutta and Chennai and the EIA has a network of nearly 60 offices thru out India. For units in which Consignment wise inspection takes place or the units which are not approved under IPQC should apply in the prescribed form in duplicate submitting the original to EIA and duplicate to EIC (Export Inspection Councils) [The EIC has set up 5 EIAs they are at Mumbai. Trading Houses.Y. The necessary pre-shipment inspection certificate is issued by the concerned agency. manufacturing of sewing machines and electric fans as are exercising adequate in-process quality controls are allowed to export their products. the units. Star Trading Houses and Super Star Trading Houses recognized by the Central Govt.BMS – SEM – IV – A. The exporter should prepare a packing list. Exporters should therefore contact. this exemption is not applicable to the exports of fish and fishery products and engg. net and gross weight. The goods must be appropriately marked with country of origin. which are exercising adequate in-process quality control (IPQC) and approved as Export Worthy Units have to only submit their application known as “Intimation” for inspection in the prescribed form.S. transit coverage etc. 1. Units approved by the Export Inspection Agencies (EIA) under the in process quality control system have been authorized to issue statutory certificates by themselves instead of EIAs. are exempted from preview of compulsory pre-shipment inspection of all products for being exported by them. Delhi. Approved EOUs and EPZ units are exempt from the purview of compulsory pre-shipment inspection system. Commercial Invoice (5 Copies) Declaration Regarding importer’s technical specifications. Cochin.g. and necessary assistance can be obtained from IIP. How ever. concerned inspection agency to avoid delay or problem at the time of shipment. if required. Pre-Shipment Inspection: The methods and standards of pre-shipment inspection vary from product to product as laid down under different regulation and implemented by various organizations.Y. 31 . Procedure for Pre-shipment Inspection As stated above. Exemption: Export Houses. Goods. Goods marked with ISI/AGMARK are not required to be inspected by any agency. For e. of the expected date of shipment with following documents: Crossed cheque / demand draft etc containing necessary amount of inspection fee in favor of EIA. Packing and marking: The goods must be packed and marked Properly depending upon type of product. 2005-2006 EXIM PROC & DOC v. if any. port of destination and shipment and other details if any.] seven days in advance. vi.
Y. if called for. b. if necessary. The above application is submitted to the Superintendent of Central Excise.e. Issue of Certificate: If the consignment is found in order. Appeal against rejection: If the consignment is not approved for export. can file an appeal within 10 days of the receipt of the rejection note. The 5th copy is retained by Excise Authority. a. (BLUE). Vii. their decision is final and binding on both the parties i. the duplicate copy is for the overseas buyers and the triplicate for the exporter. EIA and the exporter.S. the concerned EIA will issue a Rejection note. goods are removed from warehouse and loaded on the vehicle.Y. The panel will review inspection report. Filling up ARE-1 forms: The exporter has to fill up ARE-1 form for removal of excisable goods in five copies: Original Copy – White Duplicate Copy – Buff Triplicate Copy – Pink 4th Copy Green th 5 Copy Blue 6th Copy Yellow (Exporter’s office record copy) The five copies of ARE-1 form is prepared in 5 colors for easy verification and processing. 2005-2006 EXIM PROC & DOC 2. (GREEN) The 3rd copy is sent to Maritime Collector of Central Excise at the port of shipment. Central Excise Clearance: Procedure as follows: 3. On receipt of such appeal. On the receipt of the application. certificate of inspection is issued in triplicate. The exporter hands the original and duplicate copy to customs. Processing of Forms: All 5 copies of ARE-1 Forms are presented to the inspector. 32 . an inspector is appointed under whose supervision. The original and duplicate copies are handed back to exporter. A sixth copy is prepared for exporter’s reference. here the exporter. the EIA will convene a meeting of the panel. With this the Consignment is ready to leave the factory Premises. The Custom Preventive Officer sends the original to the Maritime Collector. 4th copy is sent by Excise Authority to Chief Account Officer of Central Excise. and examine the consignment concerned.BMS – SEM – IV – A. While the original (White) copy is to be submitted to the customs. The exporter if not satisfied with the decision of the inspection agency. The duplicate is handed back to exporter or his agent.
Y.Y. the container can be cleared at the Port Gate upon submission of the Carting Order and the Shipping Bill along with the endorsed Commercial Invoice. then issues “LET EXPORT ORDER” On the basis of LET EXPORT ORDER. Packing List. ) Now. Marine Insurance Policy and other documents if required specifically. bill of exchange. 2005-2006 SHIPMENT STAGE: • • EXIM PROC & DOC • • • • The Commercial Invoice. Importer’s bank intimates the importer about the receipt of the documents.EXPORT DOCUMENTS 33 . which enables to load the container on the ship (vessel). DESPATCH OF DOCUMENTS BY C&F AGENT TO EXPORTER: Commercial Invoice (attested) Shipping Bill (Export Promotion Copy) Original L/C or Contract order B/L GR form (duplicate copy – duly attested) Form AR-4 (duplicate copy) Railway freight rebate form (attested by custom) ii. Mate Receipt is issued by the Mate of the Ship to the exporter confirming the date of sailing which is exchanged with the Bill of Lading issued by the Shipping Company. The goods are examined by the Custom Officer. The customs grants permission by endorsing the documents and caters with a Shipping Bill and Carting Order (The exporter’s agent has to obtain permission to bring the goods inside the docks and store them in proper sheds. Certificate of Origin. Realization of exports incentives by Exporter’s bank: (Hand Written) v. Once the container is loaded on the vessel and vessel sails. Copy of B/L. the Custom Preventive Officer issues LET SHIP ORDER. General documents here processed are Commercial Invoice. Follow-up of exports sales: CHPT .S. It is issued by the Superintendent of Port Trust.BMS – SEM – IV – A. iii. Custom Invoice (If required). iv. Presentation of Documents to Bank: exporter submits all required documents to the bank for further processing and these documents are processed by exporter’s bank to the bank of importer. Shipment Advice to Importer: at this stage exporter intimates importer about the expected date of shipping. Packing List and ARE-1 are submitted to the customs. who. Packing List and ARE-1. LAST STAGE: POST-SHIPMENT i.
the person to whom payment is made. PROFORMA INVOICE 34 . 3rd copy stays with exporter) In short.S. a bill of exchange is: a. 3. of Copies: 3 Original (1st and 2nd copy goes to bank. It is a promise of payment. d. (Exporter/Supplier) Prepared By: Exporter Signed By: Exporter No. 3 parties are involved in this transaction. Means for extending credit (Under D/A Method of payment). i. Bill of Exchange: The bill of exchange is an order in writing. 5. the person who draws the bill. The drawer. 1.e. a. Transportation of the goods. (Exporter) The drawee.Y. e. Commercial Documents: The documents which are needed by the exporter and the importer for their normal commercial transactions are termed as commercial documents. Means for demanding payment. It is a receipt for payment. Means for collecting payment arising out of a transaction. requesting the drawee to pay a specified sum of money at a specified date. Depending upon the usage. i.Y. a.e. c. 2. 2. the person on whom the bill is drawn. Financial Documents: Documents which perform the function of obtaining finance collection of payment etc. b. Custom clearance of the goods. Inspection of goods To submit the documents to the importer. 2005-2006 EXIM PROC & DOC Export documents have to be prepared for various purposes viz. Declaration of exports as per exchange control regulations of the country. (Importer) The payee i. documents have been classified as under o o o o o Financial Documents Commercial Documents Transport Documents Risk Covering Documents Official / Regulatory Documents 1. 4.BMS – SEM – IV – A.e.
IMPORTANCE OF COMMERCIAL INVOICE TO IMPORTER: It helps him to pay Custom Duty. but it can be designed as per requirements. A Commercial Invoice is an evidence to verify the value and nature of goods & in certain circumstances. A Proforma Invoice is a reply to an enquiry made by an importer. of copies: Exporter Inspector of Central Excise Minimum 4 Copies. A PACKING LIST is A document showing the nature and number of goods. COMMERCIAL INVOICE A basic export document. It gives clear idea to the importer in respect of terms and conditions of sale and the price of goods. which contains all information. b. it is an evidence of contract between 2 parties. etc. of copies: Exporter Front side signed by the exporter 3 Copies. This certificate is desired by importer for assuring himself for the right type of goods. Export Inspection Council (EIC) was set up by the Government of India in order to ensure sound development of export trade of India through Quality Control and Inspection and for matters connected thereof. put in each packet / container etc. Prepared By: Signed By: No. It is exporter’s bill for goods. It helps to know the exact amount payable to exporter. It shows item-by-item the contents of the containers.BMS – SEM – IV – A. In India. required for the preparation of all other documents. Packing list: It is a list showing details of goods contained in each carton / shipment. It is also required by customs to randomly check the goods. 35 . Prepared By: Signed By: No. d. when he is importing different sizes of goods (assorted items) so that he may identify the nature of goods in each package. 2005-2006 EXIM PROC & DOC A Proforma Invoice is a quotation given to an importer by an exporter. It helps importer to obtain preferential tariff rates.Y. c. Thus packing list facilitates easy identification of goods in each package / container by importer or Customs etc. IT HELPS THE IMPORTER TO OBTAIN AN L/C.S. There is no standard form for such invoice. Needed by an importer. Inspection Certificate: This certificate certifies having inspected the goods prior to shipment.Y.
36 . Hence the bank becomes possessory custodian of cargo against the security of which bank releases money to the exporter. 2) Clean BL On a BL. Types of BL 1) Stamped and Unstamped BL In case of stamped BL. Functions of BL: (i) It is negotiable document through bank: when the exporter submits all the documents and original BL to the bank duly endorsed in favor of bank. Unstamped BL is only a copy of original BL. ii) It is document of title: when the holder of BL endorses BL to another party. 3. A stamp of clause BL is put on the BL. such BL is known as clean BL. In case of LC transaction always a clean BL is preferred. It is a proof that the goods have been loaded on the ship.g. Prepared By: Shipping Company. Bill of Lading (B/L): On loading the cargo on board the exporter get mate’s receipt (MR). It contains that information of the exporter & the importer & gives the details of the vessel the goods have sailed on. a court fee of stamp is affixed of certain value. This explains how BL is negotiable through bank.BMS – SEM – IV – A. E. when no remarks are present of cargo not being in good order or condition. 3) Claused BL Adverse remarks appear on BL stating the problem in the cargo. 2 cases broken. Signed By: Shipping Company No.Y. It is also required by the importer to clear the goods at the port of destination. This fetches revenue to the government. All original BLs must be stamped. which is temporary receipt for the cargo loaded. Letter of credit also mentions that exporter has to submit BL and other documents before bank releases money to exporter. hence the endorsee has the title to claim the goods. Mate’s receipt is to be exchanged for BL soon.S. Transport Documents: a. 2005-2006 EXIM PROC & DOC EIC plays an important role in raising quality standards of export commodities and also in creating goodwill for Indian goods abroad. the properties and rights thereon are transferred to endorsee. the property and rights thereon are transferred to endorsee. BL is issued by the shipping company of the exporter.Y. of Copies: 3 Original Negotiable Copies & 5 Non Negotiable Copies.
When it is not a title to goods naturally it is not a negotiable document. Risk Covering Documents: 37 . The first Original (Green) is retained by the airline for accounting purpose. 6) Freight Paid B/L: if exports are effected on CIF basis i.Y. It is consigned to one party only who can take delivery of goods after proper identification.S. Unlike a B/L. They provide legal framework to the shipper. AWB is not a document of title to goods because it is merely an acknowledgement of goods. irrevocable and without recourse letter of credit. it becomes stale BL. c. Sea way bill is generally preferred by MNCs for shipping cargo to their branches abroad where payment through bank is not involved. AIRWAY BILL: Airway bill is an acknowledgement issued by an Airline Company or their authorized agents stating that they have received the goods detailed therein for dispatch by Air to the named consignee at the address stated therein. only front side of BL is issued mentioning it is subject to all terms and condition of regular BL. On front side all particulars are present which are essential for transaction and on back side all clauses and conventions are printed in small letters. a freight paid B/L is issued 7) Freight Collect B/L: if goods are exported on FOB basis. at the request of Shipper Sea way bill is issued instead of bill of lading. Sometimes it may be stated in L/C that short BL will not be accepted in which case exporter will insist on regular BL which will be issued.Y.e. b. The Airway bill is prepared in 3 Originals. 2005-2006 EXIM PROC & DOC 4) Stale BL An exporter has to submit original BL to the bank along with other documents within 21 days from the date of shipment. 8) Straight B/L: Straight B/L is made out usually when payment for goods is made through confirmed. Multimodel Transport Document: Multimodel B/L 4.BMS – SEM – IV – A. Freight Collect B/L is given. If after 21 days the exporter submits the BL. In short BL. SEA WAY BILL In the recent times. 5) Short BL In a normal BL there are two sides. The second (Pink) copy accompanies the consignment to final destination (Exporter’s copy) and Original (Blue) 3rd copy is given to the importer for his reference purpose. It is not negotiable to bank as it is not endorsable. freight is paid by exporter.
h.Y. 2.Y. Selecting the Insurance Company: a no of cos.F What risks are covered? a. Theft. Marine Insurance Policy: A marine insurance policy is a contract that covers perils on high sea. then GR Form is to be filled by the exporter. e. Derailment of land transport. craft etc. Rail/road transport. Fire or explosion b. SDF Form: If exports takes place in PHYSICAL FORM thru a fully computerized port then SDF form is filled. Registered post. b. f. 1963. It covers: a. Following is the procedure: 1.I. This form (In duplicate) is to be used when exports are made to all countries otherwise than by post. Original copy is sent to the RBI by customs and second copy is handed over to exporter. pilferage and non-delivery. lake or river water into the vessel. Proposal Form: fill up 3. Discharge of cargo at a port of distress. d. a. Verification of the same: 4.BMS – SEM – IV – A. Sinking or grounding of vessels. After realization of remittance. Insurance policy is issued after payment: 5. Any other reason acceptable to the insurance company. j. Transportation by Sea. G. Payment of premium: 5.S.1. 2005-2006 EXIM PROC & DOC a. d. Goods quoted under C. Loss/damage to goods caused by entry of sea. Jettison (discard/throw away). 38 . c. Exporter is bound to insure with GIC or its 4 subsidiaries. c. i. operating the marine insurance business.R Form: If the export takes place in PHYSICAL FORM thru a Noncomputerized port. g. The exporter hands over 2nd copy to his bank. Prior permission is required from RBI if the exporter intends to insure with insurance companies in foreign country. Air and land. MARINE INSURANCE POLICY PROCEDURE Marine Insurance is governed by Marine Insurance Act. Regulatory documents: a. Inland water voyages. Total loss of any package lost overboard or dropped whilst loading on to or unloading from the vessel or craft. bank sends 2nd copy of GR to the RBI for verification purpose. Collision (accident) of the vessel.
The trader has to bring back the consignment.Y. GR WAIVER: The exporter need not declare under following circumstances: • Sending Trade Samples. d. charity. required by foreign governments. declaring that goods in a particular international shipment are of a certain origin.g.S. 2005-2006 • EXIM PROC & DOC This form denotes that exporter undertakes to bring back full export proceeds within the prescribed time limit. A Certificate of Origin is a signed statement as to the country of origin of the exported products for a particular shipment. Prepared & Signed by: No. P.000/. CERTIFICATE OF ORIGIN A Certificate of Origin is a document.Y. c.BMS – SEM – IV – A. The chamber must have access to the commercial invoice in order to verify that the exporter claims the goods originated in a particular country than his country. certifying that the nature of goods is hazardous and yet sea / air worthy. Customs offices will use this document to determine whether or not a preferential duty rate applies on the products being imported and whether a shipment may be legally imported during a specific quota period. In India. b. MATE RECEIPT Mate Receipt is issued by the assistant to the captain of the ship. Prepared & Signed By: Captain of the Ship No. certificate of origin is issued by the Chambers of Commerce and Export Promotion Councils. upto US$ 5. e. • Consignment moved out for trade fair. SOFTEX FORM: This form is to be used when computer software is being exported in NON-PHYSICAL FORM. The certificate of origin must be signed by the exporter and be certified by a local chamber of commerce. The country of origin is NOT the country from where the product is shipped. of copies: 1 copy HAZARDOUS CERTIFICATE: A declaration. It also indemnifies the carrier from any losses or damage caused due to the hazardous nature of the cargo. A limit is allowed.P Form: This form (in duplicate) is to be used when exports are made to any country by parcel post. some countries require that a separate certificate be completed.as donation. Even though the commercial invoice usually includes a statement of origin. The Mate Receipt being Prima Facie document is the proof that goods are loaded in the vessel. It is issued after the goods are shipped. of Copies: Exporter 1 copy 39 .
S. by paying the stipulated amount of duty. details of goods being importer (in brief). Ex-Bond BoE: (Green Color) For releasing the above goods from warehouse. BoE for Home Consumption: (White Color) This BoE is filed when goods imported are to be consumed within India. Number of Copies: Under EDI system: 3 copies are required Under Manual system: 5 Copies are required Distribution of Copies EDI 40 MANUAL .Y. he pays the duty and releases the goods. importer’s name and address. In case of Import of goods. 3. The purpose of BoE is to access the value of cargo and assess the duty value. Bill of Entry: A Bill of Entry (BoE) talks everything about a consignment to be imported.Bond BoE: (Yellow) When the imported goods are not required immediately.BMS – SEM – IV – A. Pkg List. 2. This BoE can be filed only if an importer has filed the above (yellow color) BoE.Y. Documents required under BoE: Commercial Invoice (attested by custom) B/L or AWB L/C (if required) Insurance Policy. the importer has to file this BoE. Types of BoE: 1. the importer may like to store the goods in a warehouse without paying the duty under a bond and clear the consignment when required. 2005-2006 IMPORT DOCUMENT EXIM PROC & DOC BILL OF ENTRY This document is to be used in case of import of goods. This challan is known as Bill of Entry. Warehousing / Into . COO. The bill contains the information regarding the name of the seaport. duties are paid on the basis of furnishing a challan form.
Trade Enquiries: After getting the IEC number. the next procedure is to generate the enquires related to the products in which the importer is interested to deal. Communication and Negotiation The next stage is to have the communication and negotiation before placing the final order. 3. Arranging for the payment.BMS – SEM – IV – A. The proposed exporter is required to send some samples of his products so that the importer can test the product in his market and find out whether the product will do well in his market. For this trade journals and various other sources are available.Y. 6. It serves as a license for carrying out import export trade. Even the after sales services to be received can be negotiated in this stage. In this stage the importer obtains an IEC i.Y.S. Also negotiation takes place for deciding the final price for the consignment. 2005-2006 1st Copy 2nd Copy 3rd Copy 4th Copy 5th Copy Customs RBI Importer Bank for the payment purpose ------- EXIM PROC & DOC Customs RBI Customs RBI Importer Bank for payment purpose Port Authorities The Original (or original and duplicate both) is forwarded by Customs to RBI Import Procedure The various steps that are involved in import procedure are as follows 1. 41 . Importer Exporter Code Number. 2. Without the IEC number no person can carry out any import export transaction. Obtaining of IEC: This is the very first requirement of an import transaction. the importer may be interested in testing the product in his market. Placing of the order After both the parties are satisfied with the product quality and terms and conditions the actual order is placed. Sampling\ Here. 4. or any form of modification is required before the final order is to be placed. 5.e. the negotiation takes place as to who will take the responsibilities for getting the product marine insured and book the ship for exporting the product. Here.
Payment to the clearing agent. which are directly or indirectly concerned with export financing: COMMERCIAL BANKS (SHORT TERM LOAN) EXIM BANK (MEDIUM & LONG TERM LOAN) SIDBI (LONG TERM LOANS TO EXPORTERS) RBI EXPORT CREDIT GUARANTEE CORPORATION (ECGC) ROLE OF COMMERCIAL BANKS IN EXPORT FINANCE IT PROVIDES MAJOR PART OF FINANCE TO EXPORTERS ALSO PROVIDES OTHER FACILITIES AND SERVICES TO EXPORTERS. the importer present to the shipping authorities to release the consignment and get the possession of the goods. Preparation of bill of entry and payment of custom duty if required. 7.S.Y. 42 . 2005-2006 EXIM PROC & DOC Once the actual order is placed the importer now has to arrange for the necessary finance to pay the exporter. 8. 12. EXPORT FINANCING INSTITUTIONS In India. Following are the institutions. Applying to the bank for release of documents and fulfilling the requirements for release of documents. There are few options that the importer has which are D/A. Releasing the consignment from custom authorities and making an arrangement for shifting the consignment to the importer’s warehouse. export finance is undertaken by COMMERCIAL BANKS as well as by FINANCIAL INSTITUTIONS. After receiving the documents from the bank. Presenting the documents at the port of arrival.BMS – SEM – IV – A. 9. 10. D/P or Letter of Credit method.Y. 11. Payment for delay (if required).
Y.Y.F u n d B t a n Ac e s s i s t a n c e At Pre-Shipment Stage At Post-Shipment Stage Bank Guarantee Advisory & other services 43 . 2005-2006 EXIM PROC & DOC A C F A s o s i s m B t a m n c e o f f e r e d e r c i a l B a n k a u s n d s i s aN s o e n d .BMS – SEM – IV – A.S.
EXIM PROC & DOC At Pre-Shipment Stage: Short-term basis Finance – duration 180 days. Advance against bills under collection iv. It issues bank certificates in respect of export sales value. which are useful for claiming incentives. Other services: Collects export proceeds from the importer and credit the same to exporter’s account. Prior Permission from RBI is not required except in case of exports of capital goods under differed payments. It is available in following forms: I Cash Packing Credit Loan Ii Advance against Hypothecation/Pledge Iii Other forms. Helps exporter to collect useful information on the creditworthiness of buyers thru their foreign agents. Bank issues GUARANTEE FOR PAYMENT OF RETENTION MONEY by overseas party who would release the retention money to Indian party only after receiving guarantee from bank. Other forms. NON-FUND ASSISTANCE: (i) Bank Guarantees: Commercial Banks are authorized by RBI to issue guarantees and furnish bid bonds in favor of overseas buyers. ii. It provides information on the exchange rates of various countries. GUARANTEE FOR FOREIGN CURRENCY LOANS sanctioned by financial institution abroad to Indian exporters who raise funds to finance their projects abroad. consultancy and technical services contracts and turnkey projects. Bank issues draft in case of payment of freight charges and other charges. The bank sends duplicate copy of GR form to the RBI after realization of export proceeds. (Details covered in earlier topic) At Post Shipment Stage: Duration – 90 days It is available in following forms: I Negotiation of Bills drawn under LC. construction contracts. . iii. Purchase/Discount of Bills. EXIM BANK OF INDIA 44 b. Following are the guarantees: PERFORMANCE GUARANTEE: Incase of exports of capital goods and turnkey and construction projects.
Functions of EXIM Bank: A S S IS T A N C B Y E X IM F U N D B A S E D N E B O O F F E R A N K N . 45 . II. In d ia n C o m B a n k s FUND BASED ASSISTANCE: A. EXIM is the principal financial institution in the country for coordinating working of institutions engaged in financing exports and imports. Export-Import Bank of India was set up for the purpose of financing. EXIM also provides finance to 100% EOUs and units set up in FTZ (Free Trade Zones).F U N D E D B A S E D A s s is t a n c e t o : F in a n c ia l G u a r a n t e e s In d ia n E x p o r t e r s & B o n d s O v e r s e a s B u y e r s & A g e n c ie s & m e r c ia l A d v is o r y O t h e r S e r v ic e s . To promote foreign trade of India. To deal with all matters that may be considered to be incidental to the attainment of above objectives.EXIM PROC & DOC EXIM BANK was set up by an Act of Parliament in September 1981 and it started its operations in March 1982. Direct financial assistance to exporters on deferred payment terms. The main objectives of EXIM Bank are: To provide financial assistance (medium term and long term) to exporters and importers. To function as the principal financial institution for coordinating the working of institutions engaged in providing export finance. PURPOSES: The EXIM bank was established for the purpose of financing medium and long-term loans to the exporters thereby promoting foreign trade of India. facilitating and promoting foreign trade in India. Assistance to Indian Exporters: I.
This facility enables importers in those countries to import from India on deferred credit terms as per the terms and conditions already negotiated between EXIM Bank and the overseas agency. Pre-shipment finance to eligible exporters for procuring raw materials and other inputs required to produce machinery and equipment to be exported. which in turn. V. extend finance to importers of their country to buy Indian capital goods. How it works The buyer arranges to obtain allocation of funds under the credit line from the borrower. IV. B. (EXIM GOVT. without recourse to them. industrial manufactures and related services from India on deferred payment terms. The exporter then enters into contract with the buyer. ABROAD BUYER OF THAT COUNTRY) LINES OF CREDIT EXIM Bank extends lines of credit to overseas governments/agencies nominated by them or financial institutions overseas to enable buyers in those countries to import capital/engineering goods. The Indian exporters can obtain payment of eligible value from EXIM Bank against negotiation of shipping documents. 46 . It offers “Overseas Buyer’s Credit” facility to foreign importers for import of Indian capital goods and related services with repayment spread over a period of years. Features The lines of credit are denominated in convertible foreign currencies or Indian Rupees and extended to sovereign governments/agencies nominated by them or financial institutions. (EXIM FOREIGN IMPORTER) II It offers long term credit under “Lines of Credit” to finance government and financial institute abroad. Such governments/agencies/institutions are the borrowers and EXIM Bank the lender. Financing export and import of machinery and equipment on lease basis. VII. Assistance to Overseas parties: i. VI. Financing Indian joint ventures in foreign countries. Provide Export Development Fund (EDF) to finance techno economic survey / research or any other study for the development of Indian Exports.EXIM PROC & DOC III. The contracts would need to conform to the basic terms and conditions of the respective credit lines. for the eligible items covered under the line of credit. Finance to Indian exporters to undertake various export marketing activities in India and foreign thru Export Marketing Fund.
establishes an irrevocable Letter Of Credit (L/C). inspection certificate and a certificate that documents negotiated are as per terms of L/C and after having satisfied itself. The Bank forwards negotiated documents to the buyer. EXIM Bank reimburses the eligible value of shipment in equivalent rupees to the negotiating bank for payment to the exporter. that all formalities have been complied with in conformity with the terms of the Credit Agreement. covering the full eligible value of the contract including. The letter of credit is advised through a bank in India designated by EXIM Bank. The Buyer. and other conditions subject to which approval is granted. last date for disbursement. • • • • • • • The buyer arranges to comply with procedural formalities as applicable in his country and then submits the contract to the borrower for approval.EXIM PROC & DOC All contracts should provide for pre-shipment inspection by the buyer or agent nominated by buyer. An L/C is to be opened. eligible contract value. with copy to exporter. indicating approval number. EXIM Bank debits the borrower's account and arranges to collect interest and principal receivable on due dates as per the terms of the line of credit agreement between EXIM Bank and the borrower. On receipt of set of shipment documents along with the relative invoices. freight and/or insurance as laid down in the contract. Exporter ships the goods covered under the contract and presents documents for negotiation to the designated bank. on advice from the borrower. The borrower in turn forwards copies of the contract to EXIM Bank for approval. EXIM Bank advises approval of the contract to the borrower. 47 .
a. 48 . (EXIM COMMERCIAL BANKS EXPORTER) II Export Bills rediscounting facility to commercial banks in India so that it helps commercial banks to fund post-shipment credit extended to Indian exporters. in executing contracts abroad and sources of overseas finances. Refinance facilities to commercial banks so that they can offer credit to Indian exporters who extend term credit to importers. Assistance to Indian Commercial Banks: I. (I) (II) NON-FUND BASED ASSISTANCE: Guarantee and Bonds: SIMILAR TO BANK GUARANTEES OF COMM-BANK.EXIM PROC & DOC • III It also provides re-lending facility to overseas banks to make available term finance to their clients for import of Indian goods. B. Advisory and other services: Advises Indian companies. (EXIM OVERSEAS BANKS IMPORTER OF THAT COUNTRY) C.
The exporters need various concessions and rebates to make the price competitive. c. 49 . and therefore. so in order to induce them the GOI provides a number of incentives. and such encouragement is provided through export incentives and facilities. (d) Fulfill the requirement of finance. b. Financial and advisory services to Indian construction projects abroad. In order to facilitate marketing of goods. so to correct it. • Growth and diversification of export trade. (i) A lot of encouragement is needed for small-scale entrepreneur exporters. Indian exporters can survive provided they can produce good quality goods at reasonable cost. (b) Indian exporters have considerably less expertise in marketing of products.EXIM PROC & DOC Advises Indian exporters on global exchange control practices. • Increased earnings of foreign exchange. to face competition. a country can enhance its name and goodwill in the international market. In the domestic market practically everything is highly taxed. etc. The advantages of export promotion measures can be summarized. GOI has also introduced such measures. • Production of quality goods. (e) Exporters need training for the development of their skills in export fields. The main reasons for such export promotion measures are as follows: (a) The exporters from India face Price and quality disadvantage due to high cost of production and the type of technology used to produce export goods. (f) A number of countries have launched attractive export promotion schemes to their exporters. (g) India is facing balance of payment crisis. Such as EPCs. (c) Manufacturers are reluctant to export due to the presence of lucrative domestic market. Advises small-scale manufacturers on export markets and product areas. (h)Through export promotion. GOI assists the exporters thru number of export orgn. • Improvement in balance of payment. EXPORT INCENTIVES AND ASSISTANCE NEED FOR EXPORT PROMO MEASURES Export assistance and incentives is a financial help given by the government to Indian exporters to improve their ability to compete in foreign markets. • Reduction in trade deficit. export promotion measures have been undertaken. It is provided thru IIFT and the institutions alike. since many of them are new in the export field.
export promotion seminars. 50 . international departmental stores. sales promotion campaigns. registration charges for pharmaceuticals and testing charges for engineering products etc. Marketing Development Assistance: The Marketing Development Assistance (MDA) Scheme is intended to provide financial assistance for a range of export promotion activities implemented by export promotion councils. publicity campaigns.servicing. assistance for participation in Trade Fairs abroad and travel grant is available to such exporters if they travel to countries in one of the four Focus Areas. Expansion of infrastructure within the country. CIS Region. The financial assistance is available for Export Promotion Councils. Australia and New Zealand. participation in international trade fairs. such as. Facilitates debt . These include market studies. As per the revised MDA guidelines with effect from 1st April. 2. Various Export Promotion Assistance & Incentives 1. ASEAN countries. Africa. brand promotion. These include participation in Trade Fairs and Buyer Seller meets abroad or in India. It results in socioeconomic development of the country. industry and trade associations on a regular basis every year.. Agencies of State Governments . Indian Commercial Missions abroad and other eligible entities as may be notified from time to time. A whole range of activities can be funded under the MAI scheme.2004 assistance under MDA is available for exporters with annual export turnover upto Rs 5 crores. etc Further. Latin America. setting up of showroom/ warehouse. Enhances name and goodwill in the international market. Provision of employment opportunities.EXIM PROC & DOC • • • • • • Further utilization of available resources. Industry and Trade associations . Market Access Initiative (MAI) The Market Access Initiative (MAI) scheme is intended to provide financial assistance for medium term export promotion efforts with a sharp focus on a country and product. Each of these export promotion activities can receive financial assistance from the Government ranging from 25% to 100% of the total cost depending upon the activity and the implementing agency.
when he shows the proof of exports to the relevant Municipal Authorities. (ii) Materials used in the manufacture of raw materials and components used in the manufacture of finished products. the rates of duty drawback in respect of schedule of items. of India announces every year on 31st May. However. He can claim the refund of the duty. It also includes refund of central excise duties paid on indigenous materials. in other areas financial assistance without travel grant is available. components and packing material used in the export product. then the exporter can apply for its upward revision in the prescribed form. These rates are made effective for one year from 1st of June. 4. how ever under following dealings. Brand Rate: In case duty drawback rate is not announced for a product. OCTROI REFUND: When the exporter brings manufactured goods inside the municipal limits of the city. SALES TAX EXEMPTION State Government has exempted exportable goods from payment of sales tax. Special Brand Rate: When the rate of duty drawback is less than 80% of the duties paid. 51 . All such rates are called All Industry Rates i. Duty Drawback (DBK): 5. its manufacturer / exporter can submit an application in the prescribed for determination of specific rate of duty drawback for that particular product.EXIM PROC & DOC For participation in trade fairs. The modified rate of DBK is known Special Brand Rate. drawback entitlement goes upto 100%. etc. he is required to pay octroi duty to the Municipal Corporation. exemption is not granted unless the exporter or his firm is registered with sales tax authorities.e. Maximum entitlement of duty paid is 98%. Drawback is available on the following items: (i) Raw materials and components used in the process of manufacture. Supply of fuel to a foreign going Indian /foreign vessel. The govt. Such a rate is known as Brand Rate. Financial assistance would be provided to deserving exporters on the recommendation of Export Promotion Councils for meeting the cost of legal expenses relating to trade related matters. DBK means refund of custom duties paid on the import of raw materials. rates of drawback announced for a class of goods. 3. Supply of ship stores (spares and components) to Indian navy ships.
packaging requirement. (iv) Goods are produced using imported materials or excisable materials in respect of which duties have not been paid. participation in international trade fairs and exhibitions. in order to assist the export trade of India. (e) Other required documents. and units located in FTZs/ EPZS. (iv) Material used for packing the finished export products.EXIM PROC & DOC Irrecoverable wastages. What Documents Required: (a) Non-negotiable copy of Bill of Lading. At present. (ii) Selling goods at less than cost price. except tea chest used as packing materials for export of blended tea. (c) A copy of commercial invoice. documentation. if required. market intelligence and benefits of marketing research to exporters. advertising of Indian goods abroad and procedure in export trade transaction. which arises in the process of manufacturing. (b)A copy of duty drawback. EXPORT PROMOTION ORGANIZATIONS The Govt. Some of these institutions also provide educational / training facilities. inform them about governmental policies and incentives offered. (vi) Amount of drawback is less than 2% of net FOB Value of exports. (v) Finished products. Procedure to Claim DBK Whom to Apply: The application needs to be made to the nearest Customs House. Export Promotion Councils: The basic objective of EPC is to promote and develop exports of country. 50/-. (d)A copy of special brand rate letter. DBK is not admissible if the (i) Amount of drawback entitlement is less than Rs. (v) Products manufactured by 100% E0Us. started a number of Institutes in 1951. These institutes do not participate directly in India’s export trade. of India. Following are important Export Promotion Organizations: 1. Some of them are as follows: Apparel Export Promotion Council 52 (iii) . there are around 20 EPCs functioning in country. (iii) Goods have been taken into use after manufacture. Their contribution in export promotion is indirect in character. but they provide number of assistance to the exporters in terms of finding out suitable markets in foreign. (vii) Export to countries like Nepal & Bhutan where consideration is in Indian currency.
The members have to pay an annual subscription fee for the services rendered to them by the council. publicity and assistance to manufacturers and exporters The functions of CB are same as EPCs.EXIM PROC & DOC Basic Chemicals Pharmaceuticals & Cosmetic Export Promotion Council Chemicals & Allied Products Export Promotion Council Cotton Textiles Export Promotion Council Council for Leather Exports Engineering Export Promotion Council Gem & Jewellery Export Promotion Council Indian Silk Export Promotion Council Plastics & Linoleum Export Promotion Council Synthetic & Rayon Textiles Export Promotion Council Wool & Woolen Export Promotion Council The EPCs are non-profit organizations registered under the Indian companies Act or the societies act. It organizes participation in trade fairs. exhibitions and buyer-seller meets in India and abroad. Few commodity boards are as follows: 53 . coming under the purview of the council are entitled to become members of the council. These boards are supplementary to EPCs and function on the same lines. standards and specifications. COMMODITY BOARDS (CBs): Commodity Boards have been established by GOI for primary commodities having high export potential. All members are given registration-cummembership certificate from the respective EPC.. Commodity Boards promote India’s specific traditional commodities including tea. 2. It provides purely advisory assistance to the members. rubber. and handloom items. both at central and state level. It organizes visits of delegations of its members abroad to explore overseas market opportunities. market research. coffee. product development and innovations. Functions: It provides commercially useful information and assistance to their members in developing and increasing their exports. as the case may be and supported by financial assistance from GOI. RCMC enables any exporter to avail benefits and concessions wherever applicable under EXIM policy. quality and design improvement. The board takes interest in introduction of new methods of cultivation of commodities. It promotes interaction between the exporting community and govt. It builds a statistical base and provide data on the It issues Certificate of Origin The assistance provided by EPC is not at all financial. All exporters of products. It offers professional advice to their members in areas such as technology upgradation.
generating. IIP over the years has built up a very strong and capable expertise in various fields of packaging Sciences and Technologies. Functions: 1. IIP provides service facilities for domestic / export package certification to comply with National and International codes and regulations IIP also conducts SHELF LIFE EVALUATION i. Thus.e. research and training organization specialized in international marketing. The Institute has its head office and principal laboratories at Mumbai and regional testing and development laboratories at Calcutta. IIFT is an academic institute which studies various aspects of foreign trade including research and market surveys. assessment of package for shelf life under Varying climatic condition In different packaging media.EXIM PROC & DOC Rubber board. Coffee Board. Following products are covered Food Pharmaceuticals Chemicals Others IIP also conducts specific research and development programme for package development for keeping food fresh. Indian Institute of Packaging (IIP): The Indian Institute of Packaging was incorporated as a society under the Societies Registration Act 1860. INDIAN INSTITUTE OF FOREIGN TRADE: The Indian Institute of Foreign Trade (IIFT) was set up in 1963 by the Government of India as an autonomous organization to help professionalize the country's foreign trade management and increase exports by developing human resources. analyzing and disseminating data. Central Silk Board 3. Spices Board. Training of export management personnel in modern technique of international trade: 54 . New Delhi and Chennai. Tea Board. on 14th May 1966. IIFT is essentially an academic. and with the excellent infrastructural facilities available is geared to cater to the various needs of the package manufacturing and package user industries both with regard to the domestic distribution and export market requirements. and conducting research. 4.
international marketing. 5. and It specifies the type of quality control and / or inspection to be applied to such commodities. EXPORT INSPECTION COUNCIL (EIC): The Export Inspection Council (EIC) was set up by the Government of India under Section 3 of the Export (Quality Control and Inspection) Act. export procedure. IIFT also conducts training programmes for various officers in export units. IIFT also organizes commodity survey. Providing information arising out of its activities relating to research and market studies IIFT provides information gathered in its monthly and quarterly bulletins.EXIM PROC & DOC IIFT provides training to various exporters In different and important areas of export management such as EXIM policy. At present EIC conducts pre-shipment inspection for nearly 1100 items such as chemicals. Its training courses are conduced at different centres. one each at Chennai. Kochi. product development and publicity abroad. Delhi. IIFT also invites and sends trade delegations abroad to have communications between Indian exporters and foreign buyers. Kolkata and Mumbai established by the Ministry of Commerce. EIC notifies commodities which will be subject to quality control and/ or inspection prior to export. Consultancy services: IIFT gives advice to Indian exporters in different aspects of foreign trade such as export pricing. Seminars and workshops are organized for providing consultancy services to exporters. 4. export promotion. It establishes standards of quality for such notified commodities. Export Inspection Council. IIFT IS NOW INTERNATIONALLY RECOGNIZED AS AN EXCELLENT RESEARCH ORGANIZATION ON FOREIGN TRADE. export promotion. also exercises technical and administrative control over the five Export Inspection Agencies. This publication work provides information and guidance to exporters as well as export promotion organizations and commodity boards. (EIAs). 5. 55 . 1963 in order to ensure sound development of export trade of India through Quality Control and Inspection and for matters connected thereof. export procedure. 2. market survey and area survey within the country and abroad. footwear. etc. export finance. Conducting Research Process in foreign trade: The IIFT conducts academic and research activities on various problems relating to export marketing to enable govt to frame export policies and taking decisions. jute. food. coir and so on. 3.
SPECIAL ECONOMIC ZONES (SEZ) Following products are dealt in SEZ Gems & Jewellery Electronic & Hardware Software Textile & Garments Engineering Goods Leather Products Chemicals and allied products Following are currently functioning SEZs in India: SEEPZ Special Economic Zone Kandla Special Economic Zone. Cochin Special Economic Zone. EIC plays an important role in raising quality standards of export commodities and also in creating goodwill for Indian goods abroad. (Software development and IT enabled services) A policy was introduced on 1.EXIM PROC & DOC Although. Kolkatta. QDC has started Regional QDCs at Mumbai. The units in the Zone have to be a net foreign exchange earner but they shall not be 56 . These centres arrange workshops and training programmes for personnel connected in industry with quality management. Madras Special Economic Zone Visakhapatnam Special Economic Zone Falta Special Economic Zone Noida Export Processing Zone Surat Special Economic Zone Manikanchan. Units may be set up in SEZ for manufacture of goods and rendering of services. Another important contribution of EIC in increasing India’s exports is thru setting up Quality Development Centre (QDC) at Chennai.4.2000 for setting up of Special Economic Zones in the country with a view to provide an internationally competitive and hassle free environment for exports. IPQC is the responsibility of concerned manufacturer. Cochin and Delhi. All the import/export operations of the SEZ units will be on self-certification basis. the EIC ensures that adequate controls are exercised by periodic inspection and testing of export consignments at random. 6. Kolkata. Also. Salt Lake SEZ (for gems and Jewellery) Indore Special Economic Zone (Multi-product) Jaipur Special Economic Zone (Gems and Jewellery) Mahindra City-SEZ. Chennai (Tamil Nadu) Salt Lake Electronic City-SEZ.
partly processed goods. It was also envisaged that some of the existing Export Processing Zones would be converted into Special Economic Zones. (it is duty free) Any output to other country by SEZ is exports done under SEZ. duties and tariffs are concerned. Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. Any material supplied by DTA to construct / develop SEZ is considered as exports (although payment is received in Rupees) 57 . Sales in the Domestic Tariff Area by SEZ units shall be subject to payment of full Custom Duty and import policy in force. 3 new Special Economic Zones approved for establishment at Indore (Madhya Pradesh). the Government has converted Export Processing Zones located at Kandla and Surat (Gujarat). Falta (West Bengal). Cochin (Kerala). In addition. SEZ units may export goods and services including agroproducts. Further Offshore banking units may be set up in the SEZs. Manikanchan – Salt Lake (Kolkata) and Jaipur have just commended operations. SEZ can import / export anything except negative list. private. joint sector or by State Governments. operations. which is deemed to be foreign territory in geographic Indian area. Santa Cruz (Mumbai-Maharashtra). and waste scrap arising out of the production process. The units may also export by-products. Inputs coming to SEZ area from domestic (DTA – Domestic Tariff Area) is exports for DTA & goods coming from the SEZ TO DTA is considered as imports for DTA Any inputs to SEZ from outside India is NOT IMPORTS for SEZ. as far as trade.” Thus. Accordingly. without any permission. Visakhapatnam (Andhra Pradesh) and Noida (Uttar Pradesh) into a Special Economic Zones. Madras (Tamil Nadu).EXIM PROC & DOC subjected to any pre-determined value addition or minimum export performance requirements. rejects. The policy provides for setting up of SEZ's in the public. In addition. approval has been given for setting up of 42 Special Economic Zones in various parts of the country in the private/joint sectors or by the State Government. sub-assemblies and components except prohibited items of exports in ITC (HS). Definition: “A duty free enclave.
(See below for more details) 58 . SEZ units may be set up for manufacture of goods and rendering of services. Exemption from payment of Central Excise Duty on all goods eligible for procurement by the unit. on payment of applicable duty. Export Through Status Holder SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/STP unit. o Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance. and services in DTA in accordance with the import policy in force. on the supplier. DTA sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. o Supplies against special entitlement of duty free import of goods. with the annual permission of Customs authorities. Reimbursement of Duty paid on fuels or any other goods procured from DTA as per the rate of drawback notified by the Directorate General of Foreign Trade from the date of such notification.EXIM PROC & DOC DTA Sales and Supplies SEZ unit may sell goods. SEZ units shall be entitled for Exemption from Central Sales Tax. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. Sub. Entitlement for Supplies from the DTA DTA supplier shall be entitled for: Drawback /DEPB/DFRC/Advance Licence Discharge of Export performance. if any. including by-products. The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfillment of positive NFE: o Supplies to other EOU/SEZ/ EHTP/ STP/BTP units provided that such goods or services are permissible to be procured/rendered by these units.Contracting Rule SEZ unit may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/ EHTP/ STP. Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or returned to the unit.
NFEP (Net Foreign Exchange Export Performance): =A-B=>0 Where A = inflow of foreign exchange (FOB Exports. SEZ units other than gems and jewellery units may be allowed to undertake job-work for export. finished or semi-finished. Disposal of Rejects/Scrap/ Waste/ Remnants Rejects/scrap/waste/remnants arising out of production process or in connection therewith may be sold in the DTA on payment of applicable duty. No duty shall be payable in case scrap/waste/ remnants/ rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the SEZ with the permission of Custom authorities. and finished goods in stock. including studded jewellery. that may be imposed by the adjudicating authority under Foreign Trade (Development and Regulation) Act. OBLIGATION 1. For such exports. taken outside the zone for sub. on behalf of DTA exporter. platinum. provided the finished goods are exported directly from SEZ units. Such exit from the scheme shall be subject to payment of applicable Customs and Excise duties on the imported and indigenous capital goods. In case the unit has not achieved positive NFE. precious and semi precious stones. 59 . silver. Exit from SEZ Scheme SEZ unit may opt out of the scheme with the approval of the Development Commissioner. 1992. No cut and polished diamonds. Destruction as stated above shall not apply to gold. the exit shall be subject to penalty. precious and semi-precious stones shall be allowed to be taken outside the zone for sub-contracting. NET FOB EARNED) B = Outflow foreign exchange (CIF imports) PLUS Everything that goes out of country in US$ is considered as outflow – it also includes following: Dividend to equity partner Interest on external commercial borrowings Commission to agents 1/5th of capital goods value to be taken every year as depreciation.EXIM PROC & DOC Sub-contracting by SEZ gems and jewellery units through other SEZ units or EOUs or units in DTA shall be subject to following conditions Goods. diamond. the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. raw materials etc.contracting shall be brought back to the unit within 90 days.
SEZ can be established as govt / state govt and as a private venture. for DTA it is import. as there is no duty payable by exports. there are two parties involved: owner of SEZ and owner of a unit in SEZ. Additional benefit to SEZ: SEZ can donate imported or locally procured computer peripherals such as plotters. • Exemption from Central Excise duties and other levies on products manufactured within the Zone. Applications to SEZ SEZ unit shall be a positive Net Foreign exchange Earner. tooling and packaging materials. such as registered charitable hospital. when SEZ sells to DTA. He does not have to fulfill obligation. Net Foreign Exchange Earning (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given above. procured from Domestic Tariff Area. Sales Taxes and Property Tax. The income of owner is also given 10 yrs tax benefits. but if SEZ sells any goods in foreign country. • 60 . outflow. public libraries & public funded R & D establishment and such donation will get exemption in B part of NFEP (1/5th value). • Excise exemption on capital goods. A bank established in SEZ is given status of overseas branch. SEZ is provided I. raw materials. which is sold to DTA. But it won’t add to NFEP of SEZ. • Exemption from Customs duty on imported capital goods. There are no benefits given to SEZ in terms of duty refund etc. Entitlements of SEEPZ SEZ SEEPZ SEZ units are eligible for a tax holiday as per the provision of the Income-tax Act. components. scanners etc without payment of duty after using for 2 years to recognized non-commercial educational institute. DEPB etc. Venture. • Duty free import of capital goods and equipment from preferred sources. • Special dispensations and relaxations in local laws and levies including Octroi. Sale in such case accounts as part A of NFEP. In case of pvt. computers etc. SEZ has no limit in exhibiting samples in India / Outside for display / sale. printers. The DTA selling to SEZ will get all benefits of Advance License. SEZ can sell to DTA and vice versa.EXIM PROC & DOC Misc. raw materials. the sale is considered as exports. Tax holiday for ten years. For SEZ it is NOT an EXPORT. None of the Indian act except Indian labor law is applicable to SEZ. spares. consumables.
ELECTRONICS HARDWARE TECHNOLOGY PARKS (EHTPs). there is very wide choice of location. • The SEEPZ Service Centre within the Zone is the One-Stop Shop. Positive NFE = A – B > 0 (Rest of the details are same as EOU) Under the EOU scheme. conversion of EOU to DTA unit by exit (de-bonding) is comparatively very easy.EXIM PROC & DOC Capital Goods and all other inputs supplied to the Zone from the rest of the country are treated as Deemed Exports and are eligible for deemed export benefits such as Duty Drawbacks. raw materials. it has to be physically moved out of the zone after exit (debonding). required for export production or in connection therewith. packing materials. concentrate on their export activity and run their operations smoothly. if a unit is SEZ. Even the goods appearing in the restricted list of the EXIM Policy (1997-02) are 61 . spares and various other specified categories of equipments including material handling equipments. On the other hand. while EOU unit can be set up at any place declared as ‘warehousing station’ under Customs Act. EOU/EHTP/STP unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given below. 1764 units are in operation under the EOU scheme as on March 2004. Even within the factory of manufacturer. This enables easy availability of materials at International Prices. SOFTWARE TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY PARKS (BTPs) Between EOU and SEZ. . The supportive administrative system helps new firms to get down to production within the shortest possible time. the SEZ unit has to be located at the specified locations where such zones are developed. There are over 300 such places all over India. • Goods manufactured in SEEPZ SEZ are permitted to be sold on payment of applicable duties. Even use of common utilities is possible.If export orders dry up. Thus. • Units set up in SEEPZ SEZ will be charged rent for lease of industrial plots and standard design factory buildings as per the rate fixed from time to time. thus saving considerably in administrative costs.. • 7. components. • Foreign Equity upto 100% is permissible in the case of SEEPZ SEZ units. which caters to all the needs of the Zone units. a separate unit for EOU can be set up. the units are allowed to import or procure locally without payment of duty all types of goods including capital goods. consumables. Terminal Excise Duty and CST Reimbursement. EXPORT ORIENTED UNITS (EOUs).
are required to be utilized within a period of one year or within such period as may be extended by the Customs authorities. consumption and utilization of all imported/locally procured materials and exports made and submit them periodically to the Development Commissioner/ Customs. Gems and Jewellery units may sell upto 10% of FOB value of exports of the preceding year in DTA subject to fulfillment of positive NFE. Such sales shall not. agriculture and allied sector units are allowed to supply /transfer the capital goods and the inputs in the farms/fields with prior permission of Customs. Units. (iv) The importer is required to maintain a proper account of the import. Rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties. be subject to achievement of positive NFE. 1962. may sell goods/ services upto 50 % of FOB value of exports. Granite Quarrying units. The entire production of EOU/EHTP/STP units shall be exported subject to the following: 1. Scrap/ waste/ leftovers arising out of production process or in connection therewith may be sold in the DTA on payment of duties as applicable. (v) The importer is required to achieve minimum NFEP/export performance as per the provisions of EXIM Policy. the goods prohibited for import are not permitted. (iii) The goods. The unit is also required to execute a B-17 bond with surety/ security with jurisdictional Customs/ Central Excise officers and take out a licence under section 58 of the Customs Act. sale in the DTA in any mode. 5. shall be permissible up to 50% of foreign exchange earned. 6. General Conditions of Duty free Import: The facility of duty free import (extending exemption both from basic & countervailing duty) is subject to certain general conditions in accordance with the EXIM Policy and these are summed up as follows: (i) The goods are required to be imported into the EOU premises directly. 62 . However. However.EXIM PROC & DOC permitted to be imported. other than gems and Jewellery units. 3. For services. (ii) Prior to undertaking import / local procurement duty free. tea (except instant tea) and books 4. except capital goods and spares. sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE. including software units. subject to fulfillment of positive NFE on payment of applicable duties. 2. Such sales shall be counted against DTA sale entitlement. the unit is required to get their premises customs bonded. No DTA sale shall be permissible in respect of motor cars. however. However. including on-line data communication.
may on the basis of annual permission from the Customs authorities. Exempted from industrial licensing for manufacture of items reserved for SSI sector. Single window clearance 6. c. the goods by these DTAs can be imported from EOUs…duty free. 4. These units may also subcontract upto 50% of the overall production of the previous year in value terms for job work in DTA with the permission of the Customs Authorities. Communication facility 5. An EOU… can sell to another EOUs… SEZ. 2. d. precious and semiprecious stones shall be allowed to be taken out for sub-contracting. taken out for sub. 2. b. No cut and polished diamonds." All EOU/ EHTP/ STP are given following facilities: 1. Export proceeds will be realized within 12 Months. Supplies from the DTA to EOU/EHTP/STP units will be regarded as "deemed exports for DTA. Other entitlements of EOU/EHTP/STP/BTP units are as under: a. EPCG holder. An EOU… is exempted from payment of Income Tax as per the provisions of Section 10A and 10B of Income Tax Act. through job work by units in the DTA. floating global tender. Post/Parcel services 8. finished or semi finished. SUB CONTRACTING RULES FOR EOUS…. nominated projects by MOC/MOF of national importance. is considered as “A” part of NFEP 3. However. including gem and jewellery units. EOUs… supplying to an A/L holder. Govt. Energy/ water supply 4. Goods. 100% FDI investment permitted through Automatic Route similar to SEZ units. Duty free input/ raw materials 2. including studded jewellery. subcontract production processes to DTA through job work which may also involve change of form or nature of goods. Warehousing facilities Other facilities to EOU/EPZ/EHTP/STP: 1. 1.EXIM PROC & DOC 7. International level banking facility 7. 63 . subject to applicable duties. Plant/ Plot/ SDF 3. Will be allowed to retain 100% of its export earning in the EEFC account. For DTAs it is considered to be import. EOU/EHTP/STP/BTP units. Although the EOU… can sell upto 50% of Export performance in DTA. e. However.contracting shall be brought back to the unit within 90 days. 3.
the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. 6. the goods may be exported from the sub-contractor premises subject to the conditions that job work charges shall be declared in the export declaration forms. platinum. Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. 7. FREE TRADE & WAREHOUSING ZONES Objective: The objective is to create trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency. invoices etc. 8. In case of sub-contracting of production process abroad. commercial office-space. with one-stop clearance of import and export formality. and full repatriation of foreign exchange will take place to our country. water. These Zones would be established in areas proximate to seaports. Export of finished goods from the job worker's premises may be permitted provided such premises are registered with the Central Excise authorities. Status: The Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing. Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty on transaction value or destroyed in the presence of Customs/ Excise authorities or returned to the unit. EOU may. precious and semi precious stones. power. transportation and handling facilities. provided that the goods are exported directly from EOU and export document shall jointly be in the name of DTA/EOU. 8. For such exports. The scheme envisages creation of world-class infrastructure for warehousing of various products. Destruction shall not apply to gold. 10. Establishment of Zone: (i) Proposals for setting up of FTWZs may be made by public sector undertakings or public limited companies or by joint 64 . silver. on behalf of DTA exporter. no such excise registration is required and export may take place either from the job workers’ premises or from the premises of the unit. 9.EXIM PROC & DOC 5. communications and connectivity. airports or dry ports so as to offer easy access by rail and road. undertake job work for export. on the basis of annual permission from the Customs authorities. diamond. Subcontracting of both production and production processes may also be undertaken without any limit through other EOU/EHTP/ STP/SEZ/BTP units on the basis of records maintained in the unit (Standard InputOutput Norms). state-of-the-art equipment. Where the job worker is SEZ/EOU/EHTP/STP/BTP unit. to support the integrated Zones as ‘international trading hubs’.
Net foreign exchange earning shall be calculated cumulatively for every block of five years from the commencement of warehousing and/or trading operations as per formula applicable for SEZ units. as may be permitted. technical collaboration with experienced infrastructure (ii) Foreign Direct Investment would be permitted up to 100% in the development and establishment of the zones and their infrastructural facilities. Such equipment and materials as are sourced from the DTA shall be considered as physical exports for the DTA suppliers. after which they shall necessarily have to be re-exported or sold in the DTA. not exceeding three months. (iii) The developer shall be permitted to import duty free such building materials and equipment as may be required for the development and infrastructure of the zone. (iv) Packing or re-packing without processing. Re-export shall be permitted without any restrictions. arms and ammunitions. and labeling as per customer or marketing requirements could be undertaken within the FTWZ.EXIM PROC & DOC ventures in developers. customs duties as applicable would automatically become due unless the goods are re-exported within such grace period. (iv) Once it has developed the FTWZ. the developer shall also be permitted to sale/lease/rent out warehouses/workshops/office-space and other facilities in the FTWZ to traders/exporters. (v) The maximum period that goods shall be permitted to be warehoused within the FTWZ will be two years. (ii) Such goods shall be permitted to be re-sold/re-invoiced or re-exported. 65 . (ii) Exemption from Service Tax. However export of SCOMET items shall not be permitted except with the permission of InterMinisterial Committee. (iii) These goods shall also be permitted to be sold in the DTA on payment of customs duties as applicable on the date of such sale. NFE criteria: Units in FTWZs shall be net foreign exchange earners. Payment of duty will become due only when goods are sold/delivered to DTA. Functioning: (i) The scheme envisages duty free import of all goods (except prohibited items. hazardous wastes and SCOMET items) for ware housing. Entitlement of units (i) Income Tax exemption as per 80 IA of the Income Tax Act. On expiry of the two year period.
Drugs & Medical 66 . STC seeks to introduce new products. Chemicals. Jute Goods. Because of Corporation's in depth knowledge about the Indian market. explore new markets and undertake wide ranging ancillary functions such as Product Development. Tea. Financing. STC makes purposeful use of its world-wide connections. abundant experience. Sugar Extractions. Principal Items of Export Agricultural Commodities / Manufactured Products Wheat.EXIM PROC & DOC STATE TRADING CORPORATION (STC) The State Trading Corporation of India Ltd. up-to-date information about the market trends and long term perspective on various commodities to ensure competitive prices. HPS Groundnut. dealing largely with the East European countries during the early years of its formation. Besides negotiating. STC is able to supply quality products at most competitive prices and ensure that the goods reach the foreign buyer within the prescribed delivery schedule. Castor oil & Seeds. (STC) is a premier international trading house owned by the Government of India. Spices. it plays an important role in arranging import of essential items into India and developing exports of a large number of items from India. Opium. Coffee. Rice. contracting and shipping. Though. the Corporation has developed vast expertise in handling bulk international trade. Having been set up in 1956. today it trades with almost all the countries of the world. right quality and adherence to delivery schedules to the buyers abroad. Performance Indicators: Annual Turnover: 2005-06 Net Profit: 2005-06 Rs 7125 Crores (US$ 1608 million) Rs 39 Crores (US$ 8. It exports a large number of items ranging from agricultural commodities to manufactured products from India to all parts of the world. By virtue of infrastructure and experience possessed by the Corporation. Cashew. It also imports bulk commodities for Indian consumer as per demand in the domestic market. Exports by STC vary from traditional agricultural commodities to sophisticated manufactured products. Quality Control and Import of machinery and raw materials for export production.8 million) EXPORTS FROM INDIA STC exports a diverse range of items to a number of destinations throughout the world.
in respect of EPCG licenses with a duty saved of Rs. Capital goods means any plant. power generation sets. Petro-chemicals. The concept is to facilitate import of technology for line balancing. and expansion and to improve the quality and productivity of the resultant product. Principal Items of Import Agricultural Commodities / Manufactured Products Edible oils.EXIM PROC & DOC Disposables. Leatherwear. However. including those required for replacement. Sugar. vast infrastructure and above all an experience of over four decades in fulfilling the needs of the industry. STC serves the national objective by arranging timely imports at most competitive prices. Engineering & Construction Materials. (AFTER DBK) 6. Fertilizers. Gold & Silver. In the process. the same export obligation shall be required to be fulfilled over a period of 12 years. FMCG Goods. modernization. modernization. Scientific Instruments & Hospital/ Police equipments. refrigeration equipment. Capital goods also include packaging machinery and equipment. Processed Foods. machine tools. quality and pollution control. research and development. Hydrocarbons. Consumer Products. Fatty Acids. Pulses. technical upgradation or expansion. the Corporation makes best use of its strength in handling bulk imports. machinery. Minerals/Metals. Iron Ore. EXPORT PROMOTION CAPITAL GOODS SCHEME This scheme allows import of New Capital Goods and upto 10 yrs old second hand capital goods at concessional rate of duty (5% Import duty) subject to an export obligation of 8 times CIF value of imports to be fulfilled over a period of 8 years. Wheat. Second hand capital goods without any restriction on age may also be imported under the EPCG scheme. Steel IMPORTS INTO INDIA STC imports a number of essential commodities to cover the domestic shortfalls and hold the price line. Spares for existing plant and machinery can also be imported under the scheme. equipment or accessories required for manufacture or production of goods or for rendering services. catalysts for initial charge.100 crore or more. 67 . and equipment and instruments for testing. IT Products. Textiles and Garments.
agriculture. All EPCG licenses are valid for a period of 24 months. Exports of services can also be used to fulfill export obligation. Types: Tariff barriers include import duties. on the goods imported from abroad. They can be imposed quickly but it is difficult to remove due to the opposition of powerful vested interests. EPCG holder must declare a resultant product. EPCG license holder can source the capital goods from a domestic manufacturer who can apply for advance license for deemed exports so as to import inputs including components required for manufacturing the said capital goods. Meaning: Tariff barriers refer to duties and taxes imposed by the govt. horticulture. import quota. which will be produced by using the imported capital goods. etc Non tariff barriers includes import licensing . II. aquaculture. specific duties. Flexibility: Tariffs are not flexible. floriculture.EXIM PROC & DOC Capital goods may be used for mining. Non tariff barriers are various quantitative and exchange control restrictions imposed in order to restrict imports. Effectiveness: Tariff barriers are not very effective as they arise the price but the effect on demand may be limited. poultry and sericulture as well as for use in the service sector. non tariff barriers are more effective as they restrict imports within the required limits. 68 . IV. As a protective measure. animal husbandry. and valorem duties protective duties. The license holder will fulfill the export obligation over the specified period in the following proportions: Period from date License Block of 1st to 6th Year Block of 7th and 8th Year of Proportion of Export Obligation 50 % 50 % tARIFF BARRIERS v/s NON TARIFF BARRIERS: I. A multi product company can export other products manufactured by it to complete export obligation. consular formalities and so on III. A bond between the capital goods to be imported and resultant product has to be established. Quotas (non tariff barriers) tend to be more flexible more easily imposed and more easily remove.
Revenue Earning Capacity: Provide huge revenue to the government. X. IX.EXIM PROC & DOC V. VII. Objective of exchange regulation /control: 1. Non tariff barriers take longer time for introduction of changes. Formation Of Monopolies: Tariff barriers do not facilitate the formation of monopolistic group of production. Non tariff barriers restrict imports directly. HEALTH AND SAFETY REGULATIONS: Many countries have their specific rules and regulation regarding health and safety regulation as regards imports from other countries. countries impose restrictions on the use of foreign exchange earned through exports. 69 . Non tariff barriers can offer direct protection to home industries. Effect On Price: Tariff barriers affect (increase) the prices of imported items Non tariff barriers normally do not lead to rise in the prices of imported items. Such regulation mainly relate to food items and raw materials. If exchange control is to be made effective. In this sense. Non tariff barriers do not provide additional revenue to the government. Nature Of Protection: Tariff barriers do not offer direct protection to home industries. Under exchange control. health and safety regulation can be treated as non tariff barrier. it must be fairly comprehensive and strict. Exporters have to export goods with due consideration to such health and safety regulation. Effects On Imports: Tariff barriers restrict imports indirectly. VIII. The effects on imports are also slow XI. Imports are not allowed when such regulation are not followed properly. To restrict the demand for foreign exchange and to use the available foreign exchange as per the requirements of the national economy. VI. In addition to tariffs and quota many countries introduce foreign exchange regulations for restricting imports. Preferences: Many countries prefer tariff barriers as they give more revenue and are easy to introduce Not preferred as they do not provide additional revenue and need complicated procedure. Time Required For Effects: Changes in tariff are quick and give immediate effect in terms of import reduction. Non tariff barriers encourage the formation of the monopolistic group of procedures for their benefit.
under this scheme. 6. To follow independent monetary and fiscal policies. Under this program. glass making machinery and transmission line projects. 70 . transport material.EXIM PROC & DOC 2. As per the provisions of the scheme.5%p. mining equipments. Indian exporters of plant and machinery and equipment are eligible for this scheme. 2009 Export Import Bank Of India Schemes for Export credit:a) Direct Financial Assistance to Exporters:Under this scheme. The limit authorized by the RBI for the program is Rs 50 crores. Assistance is generally in the form of deferred payment suppliers credit foreign currency6 and rupee term loans to project exporters and finance for export consultancy and technology services. To protect domestic industries 3. Export Import Bank Of India Schemes for Export credit . c) Export Bills rediscounting:EXIM bank provides funds. To maintain over valued exchange rates 5. Commercial banks in India which are eligible to deal in foreign exchange are allowed to rediscount their short term export bills with EXIM bank for unexpired usance period of not more than 90 days. EXIM bank offers financial assistance to export oriented units on concessional terms with a view to enhance their competitiveness in overseas markets. for a period of not more than 90 days against short term usance export bills that have an unexpired usance of a maximum of 90 days. This enables banks to fund post-shipment export credit to Indian exporters. b) Finance for Export Oriented units:This program was introduced by EXIM bank in 1984 to provide term finance to export oriented finance.a. textile machinery. The rate of interest charged on the financial assistance extended by the EXIM bank has been 8. commercial banks have been encouraged to assume part of the risks of EXIM banks funding for various export contracts. Export oriented units set up in Free Trade Zones and export units recognized by the Government of India are 100% export oriented and are eligible for financial assistance under this program. So far the scheme can facilitate the exports of products like commercial vehicles. To check the flight of capital 4. After the introduction of the Risk Syndication Scheme. To earn revenue in the form of difference between selling and purchasing rates of foreign exchange. construction projects.May 21st. the assistance may be granted in participation with commercial banks but the commercial banks have been hesitant to assume larger risks involved in bigger projects. assistance is provided in the form of credit on medium term basis for periods exceeding 6 months to enable the exporters to extend deferred credit to importers.
they provide information and guidance to exporters as regards foreign markets. EXPORT PROMOTION Since 1951. packaging. d) Finance for Export Marketing:The Export Marketing Fund (EMF) was started by EXIM bank to finance Indian companies export marketing activities.a. market intelligence and benefits of marketing research to exporters.5%. the Government of India has started a number of institutions to assist the export trade sector. 71 . For example. They also provide education/training facilities. establishing overseas operations and travel to India by buyers overseas. advertising of Indian goods abroad and procedure and formalities in export trade transactions. FEATURES OF EXPORT PROMOTION ORGANIZATIONS. Government provides financial support to such organizations and see that they offer service to Indian exporter and foreign buyer. participation in international trade fairs and exhibitions. 1. Foreign trade organization can be better described as organization for export promotion. 3. They only help exporters in finding out suitable markets guide them through suitable information about foreign markets and inform them about government policies and incentives offered.p. 2. Foreign trade organization for export promotion indirectly helps Indian exporters in their export promotion efforts. Service organization: Foreign trade organizations are basically service organizations and not trading organizations. The EMF program covers desk research. 4. they do not participate directly in export trade. Such institutional agencies provide organizational support to exporters.EXIM PROC & DOC The interest rates chargeable to such assistance are 7. Such finance covers upto 50% of the total cost of marketing activities incurred by the exporters in the form of grants. Easy availability of service: The service of foreign organizations are available easily and economically to all exporters as they are established basically for the benefit of exporting community. Government initiative in formation: The GOI look initiative in establishing many foreign trade organizations in order to develop institutional infrastructure for promoting large-scale exports. Their contribution in export promotion is collective and also indirect in character. Create favourable image: Foreign trade organizations are performing well in certain areas such as awareness about India’s export potential. However. and documentation. product inspection services. These autonomous bodies are connected with export promotion activities. favourable impression in foreign countries about India’s industrial and technological developments and finally creation of favourable image of India in foreign countries. minor product overseas travel.
apparels. Providing information: To assist exporters to understand. plastic and linoleum. sports goods.EXIM PROC & DOC 5. spices. They also serve as a bridge between the government and industry for export development. marine products. there are 20 EPCs functioning in the country out of which 11 are under the ministry of commerce. They perform both advisory and executive function. electronics and computers software. Acting as liaison: To carry on an effective liaison with industry and trade in order to identify the problems in export activities. handicrafts. etc. The EPCs has been established with an object to develop a specialized effort in export promotion. tobacco. the problems faced by exporters. the specific help needed by the manufacturers and present the same to the Government in order to enable it to evolve appropriate export policies. interpret and implement the export policies and export assistance schemes of Government. The EPCs are registered under the Indian companies Act 1956 as non profit seeking quasi-government organizations to give direct institutional stimuli to the Indian exporter. The functions of all EPCs are more or less identical. Government recognition: Government gives due recognition to foreign trade organizations and enables them to work with official status and recognition. Sending trade delegations: To make arrangements for sending trade delegations and study teams to one or more countries for promoting the 72 . projects and services. which are useful for bank finance and benefits of government incentives and facilities. They issue certificates.. Provide non-financial service: Foreign trade organizations do not provide financial services to exporters. cotton. At present. producer and businessmen. engineering goods. Providing assistance: To provide assistance in export promotional activities such as external publicity. textiles. gems and jewellery. The council assists in the promotion of export of a particular group of products. Collecting data: To collect complete data on export growth. handlooms. participation in fairs and exhibitions. carpets. 7. EXPORT PROMOTION COUNCILS (EPCs) The establishment of export commercial council (EPCs) is one major step taken for promotion and diversification of Indians export trade. These councils deal with various commodities like basic chemicals and allied products. promotion of exclusive exhibitions and trade fairs of specific products. FUNCTIONS/ROLES OF EPCS 1. Operating since long: the foreign organizations are operating in India since long. 5. They are popular with exports and their services are useful for export promotion. cashew. leather manufactures. 6. wools and woolen. 3. 4. 2. The EPCs are also known as the Registering Authorities under the import policy for registered exporters. However. every EPC performs functions relating to specific commodity with which it is directly connected. silk.
They provide various services to Indian exporting communities. Opening office abroad: To open offices abroad to help exporters in consolidating the existing exports and diversifying to new products. Co-operation with EIC: To provide co operation to the export inspection council on quality control and preshipment inspection of export goods. discussion and to motivate them for export promotion. 73 . Make available publications: The bulletins and publications of the council provide reliable information about foreign markets regularly. Offering guidance: To offer guidance to member on various matters like utilization of GSP. 10. Disposing applications: To provide assistance to members for speedy disposal of export assistance applications 11. This certificate is useful for securing the benefits of various concessions and incentives offered by the government for export promotions. insurance of goods and joint ventures aboard. Solving transport problems: To help members to resolve their transport problems. Settling disputes: To help the member in settling their trade disputes through peaceful negotiations. Indicating export opportunities: To collect and supply market information to exporter and thereby to help them to take benefits to take benefits of export opportunities available abroad. As a result. Providing trade inquiries: Information about trade enquiry receive by the council are circulated among members. 13. All members are given Registrations-Cum-Membership Certificate (RCMC) for the respective EPC. The EPCs helps Indian exporters through these functions in direct or indirect ways. 7. Each EPC has its working committee which elected by the members EPCs do not provide financial or other type of direct assistance. 16. 2. Motivating exporters: To create consciousness among exporters through seminars. 12. All exporters of products. are entitled to become member of the council. 8. The members have to pay an annual subscription fee for the services rendered to them by the council. Concessions: To assist members in getting freight and other concessions for shipping conferences. 15. Issuing certificate of origin: To issue certificate of origin to Indian exporters certifying the origin of goods. SERVICES OFFERED BY EPCS 1. coming under the purview of council. export finance.EXIM PROC & DOC export of specific products and to circulate the reports of specific products and diversifying to new products. 14. members get the intimation much in advance of the publication. 9. 6. They are purely advisory in character. Registering authority: To ct as registering authority under the import policy for registered exporters and to help them in expanding overseas market for their products.
The difference is that the commodity boards look after the export promotion of primary and traditional items of exports while the EPCs look after the export promotions of non traditional items like engineering goods. market research. traders and exporters. 11. These boards are supplementary to EPCs and function on the same lines.EXIM PROC & DOC 3. Explore overseas markets: The benefits of market service. The CBs are foe promoting exports of specific commodities particularly the traditional commodities including tea. The councils use various media of communication for this purpose. Create export consciousness: The EPCs are raising exports consciousness amongst Indian manufactures. 12. Obtain incentives: Exporter can get the benefits of various incentives and facilities provided by the government by joining the EPC. undertaken by the EPC (Exploration of overseas markets) are available to member of EPC. 8. Settle disputes: Trade disputes of exporters can be settled peacefully and amicable through the co-operation EPC. Provide publicity: Exporter can give wide publicity to his products under the council’s publicity plans. These boards have open foreign offices. 9. They act as a connecting link between Indian manufacturers and foreign importers. The commodity boards are autonomous bodies. etc while promising export potential. The contribution of EPCs in the area of export promotion is certainly remarkable. publicity and assistance to manufacturers and exporters. Sponsor trade delegation: Exporter can join the trade delegation sponsored by the EPC. 74 . coffee. 7. rubber and handloom items. chemicals. marketing and other export problems 10. ACTIVITIES OF COMMODITY BOARDS: Commodity boards take active interest in introduction of new methods of cultivation of commodities. 5. Solve problems: The difficulties and problems of the exporters are solved by the council by approaching proper authorities. The functions and activities of commodity boards are similar to that of EPCs. Overall guidance: Exporter get timely help and guidance from the EPCs as regards financial. 6. etc. Display products: Exporter can display products in the trade fairs and exhibitions arranged by the EPC. commodity boards have been established by the GOI for many commodities with high export potential. COMMODITY BOARDS Along with EPCs. Help to government: The export promotion councils are helping the government in framing export policies and programmes. product developments programmes. computers. 4.
EXIM PROC & DOC They participate in international trade fairs/exhibitions and also undertake market service and other research activities. The functions of all boards are rather identical as they are basically concerned with the export promotion of specific commodities. All India handicraft board 7. Cardamom board 6. every commodity board deals with one specific commodity only. All India handloom board As the name indicates. guidance and various other services to the members and help them in their export promotion efforts 4.the boards offer advice to the government on export matters such a fixing quota for exports and signing trade agreements 2. producers and cultivators of various commodities. Tea board 2. Central silk board 9. the following nine commodity boards are operating 1.any exporter concerned with the export of specific commodity can get himself registered with concerned board 3. Advice to government. These boards offer different services to exporters. Provide information. Trade delegations are often sent by these boards for promoting exports. Rubber board 4. Coir board 8.the commodity boards provide trade information.the boards participate in trade fairs and exhibitions aboard 5. growers. Services of commodity boards The commodity boards are statutory in character an operate under the administrative control of the ministry of commerce These boards offer the following services: 1.the boards also sponsor trade delegations and conduct market surveys for the benefit of their members Role of commodity boards in export promotion: 75 . Registration facility. Sponsor trade delegation. Trade fairs and exhibitions. Preshipment inspection of export items is also arranged by some CBs. Coffee board 3. Tobacco board 5. Operating commodity boards At present.
Along with exporters. Functions of EIC 76 . Trade information and guidance is given to exporters. The activities of commodity boards are expanding in recent years. food and agriculture. The boards participate in trade fairs and exhibitions and also sponsor trade delegations. At present preshipment inspection covers nearly 1056 items which includes engineering. chemicals. To maintain high quality of goods to be exported as regards quality of goods exported and thereby to create a good market 2.EXIM PROC & DOC Commodity boards play a constructive and positive role in the export promotion of primary and traditional commodities such as tea. Their role is certainly unique and praise worthy as export promotion organizations.The functions/activities of commodity boards include market research. footwear. these boards offer varied services to government as well as exporters of these commodities. etc. producers and cultivators of different commodities. rubber. introduction of new varieties and products for exports and so on……. Objectives of EIC 1. The EIC was established in 1964 with headquarters at Calcutta. These services of commodities boards indicate the active interest which the boards take in export promotion and their positive role in promoting exports of traditional commodities. These boards have made substantial contribution in promoting exports of traditional Indian commodities. jute. coir. The functional areas of commodity boards are extremely board based . THE EXPORT INSPECTION COUNCIL (EIC) The Export Inspection Council is a statutory organization set up under the Export (Quality Control and Inspection) Act. handlooms. There is diversification in functions/activities and services offered by commodity boards. introduction of new methods of cultivation. They also act as a connecting links between India manufacturers/exporters and foreign importers. coir and so on. To check unfair practices of exporters as regards quality of goods exported to inferior quality goods prove to be too costly to the country in the long run 3. coffee. publicity. All these functions are directly and indirectly useful for export promotion of agro based production. services are also offered to growers. 1963 to adopt measures for the introduction and enforcement of quality control and compulsory preshipment inspection of various exportable commodities. handicrafts. Market surveys are conducted for the benefit of exporters and timely advice is given to government on export matters. The quality control and pre-shipment inspection is one useful provision for maintenance of quality of export items.
To make arrangements for voluntary pre-shipment inspection of commodities not covered by the compulsory inspection. The EIC only ensures that adequate controls are exercised by periodic inspection and testing of export consignment at random. in order to study the complaints of overseas buyers regarding quality and suitable follow-up actions. At present. The EIC also keeps watch on such export worthy units through periodical surprise visits. The activities of EIC are important as India can promote exports only by manufacturing and exporting quality products in global markets. In addition. the EIC has also set up Quality Development Centre (QDC) are also started at Mumbai.EXIM PROC & DOC 1. Exports worthy units are given self certification status by EIC. These centers arrange workshop and training programmes for personnel connected with quality management at the industry level. It is developed by the International Standards Organization (ISO) and provides common standard of products and services worldwide. Such export worthy unit is eligible to obtain certificate of quality control and inspection for their export consignments without physical inspection of their consignments. and Delhi. 2. such units are allowed to export without quality inspection by an outside agency. Such companies adhere to 77 . The EIC provides technical guidance to industry for upgrading the manufacturing units so as to introduce in process quality control and self certification systems. developed nations prefer to import from the suppliers who have obtained ISO 9000 certification to their products. Role of EIC EIC plays an important role in raising the quality standards of export commodities and also creating goodwill for Indian abroad. The EIC has also set up quality complaints cells at Mumbai. To advise the government regarding measures for enforcement of quality control and inspection in relation to commodities intended for export. Calcutta. The EIC has also in creating goodwill for Indian goods abroad. In India we have BIS 14000 which is equivalent to ISO 9000. Chennai. EIC also issues certificates of origin under the generalized systems of preference. Cochin. The ISO 9000 series of standards have been adopted by more than 100 countries. Calcutta. Naturally. In process quality control is the responsibility of concerned manufactures and they are expected to take necessary precautions in this regards. A note on ISO 9000 Quality standards recognized at the global level is called ISO 9000. In order to create quality consciousness among Indian exporters. etc. the EIC may recognize a manufacturing unit as an “export worthy unit” only after ensuring that the unit is adequately supported with the facilities for the enforcement of the quality control fixed by the Council. Cochin.
It makes available finance to exporters of capital and manufactured goods. two years gestation period before exporting. existence of an individual base and the need for a larger area of land. The government has introduced cent percent Export Oriented Units Scheme from 31st December. machinery. Indian companies with ISO 9000 certification do maintain good quality standards and in their case quality inspection from EIC is not required. exporters of software and consultancy services and to overseas joint-ventures and turkey and construction projects. ports of exports. etc.907 crore. spare parts. 4. 1982 to finance. 6. The EOUs are mainly concentrated in the engineering. plastics. ISO 9000 is essentially a mark of quality assurance. However. They export practically the entire or atleast 75% of their total production abroad and help the country is promoting exports. These units can sell upto 25% of their production in domestic tariff area. This bank is the main financial institution in India foe coordinating the work of institutions engaged in financing export and import trade. It is compulsory to the EZP schemes.. obtained ISO 9000 certification for their product. without the payment of import duty. The government policy is for encouraging such units to export more. 1.EXIM PROC & DOC strict quality control norms.. This 100% export oriented units (EOUs) scheme is in operation since 1981. for the production of goods which are to be exported. They need not pay excise duty when they use the domestic raw materials. They are given special concessions such as five year tax holiday. 1990. 5. Benefits of 100% EOUs: 1. As on 31st March. 1980 in order to have local advantages in production and all facilities of a FTZ. 176 units had commenced production and achieved exports worth about Rs. chemicals. now. 3. such units are supposed to produce and export their production (75%) for a period of 10 years . Many Indian companies have. 100% EXPORT ORIENTED UNITS (100% EOUS). This benefit is similar to the convenience given to export worthy units. Such units may be located at any place and may be of any size. availability of technological skills. 2. hinterland facilities. after paying appropriate duties. Lengthy procedure needs to be followed for obtaining ISO 9000 certification. Such units are permitted to import raw materials. etc. facilitate and promote foreign trade in India. It finances R & D and techno economic studies. They have better opportunities to export as compared to other countries which have not secured this certification. EXPORT-IMPORT BANK (EXIM BANK) Exim bank was established on January 1. It also provides goods on deferred 78 . 100% EOUs need not be located in the FTZs. granites and food processing. It adopts the same production regime but offers a wider source of raw materials.
Functions of Exim Bank: Exim bank has classified its functions into two categories viz. (1). Non fund based assistance. especially to developing countries. Import of goods is duty free but the entry of foreign nationals is not free in the FTZs. Cochin. These zones have emerged as effective instruments to boost exports of manufactured products. Santacruz. Advisory and other services.. financing of Indian machinery. The basic idea behind setting up EPZs/FTZs is to provide an internationally competitive duty free environment for export promotion at low cost so that exporting units will operate successfully in the international markets.EXIM PROC & DOC payments. A free trade zone is an area or industrial belt near a sea/airport where a manufacturing unit can import goods duty free provided the products manufactured are for exports only. Assistance in Indian exporters. The units operating at the free trade zone are expected to export their production to the full extent. Falta. EXPORT PROCESSING ZONE (EPZ)/ FREE TRADE ZONE (FTZs) As a part of export promotion drive. and Vishakhapatnam). NON FUND BASED ASSISTANCE. The zones are expected to provide favorable environment for export production. Chennai. manufactures goods consultancy and technological services. the government of India has established free trade zones (also known as export processing zones) in different parts of country. At present. (2). Fund based assistance. Noida. there are seven export processing zones operating in India (Kandla. Guarantees and bonds. Assistance to Indian commercial banks. The purpose is to offer certain special insensitive in the zones and their by to encourage manufacturers to promote exports. FUNCTIONS OF EXIM BANK FUND BASED ASSISTANCE. Custom clearance facilities are also offered within the 79 . Each zone provides basic infrastructure facilities in addition to a whole range of fiscal incentives. Assistance in overseas parties.
Along with EPZs. spare parts. Facilities/incentives offered to units operating in FTZs: Exemption from import duty on capital goods. state or joint sectors. The inter-ministerial committee or private EPZs has already cleared the proposal for private EPZs to be set up in Mumbai. The entire production in such zones is usually meant for exports. (iii) exemption from central excise.EXIM PROC & DOC zone. raw materials etc supplied to the zones from the rest of the country are treated as exports and are eligible for admissible export benefits Fiancé is provided on concession term Exemption is given from municipal taxes and sales tax Cash subsidy benefit is offered on investment in fixed assets Items banned for the rest of the country can be imported with few exemptions in the free trade zones. raw materials. 3. Such incentives and concessions include (i) duty free import of capital goods and equipment. (v) advance import licenses of raw materials to meet one year requirements. Tirunelveli and Kancheepuram and at greater Noida. The normal facilities for manufacturing activities are provided by the government in the FTZs 4. Free trade zones (FTZs) are industrial estates which from enclaves from the national customs territory of a country and are usually situated near sea ports or airports. tooling and packaging. Special concession and incentives are offered to units for promotion of exports. manufacturing units undertaking to exports their production of goods may be set up in Electronic Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs) set up in different parts of the countries. Government has recently permitted development of EPZs by the private. Items manufactured in and exported form the zone are exempted from the export control order but prescribed export duty has to be paid Goods manufacture within the zone and meant for exports are exempted from central excise and other levies 80 . Surat. (ii) exemption from customs and other taxes on imported raw materials. Advantages/ role of FTZs 1. Suitable vast area with infrastructure facilities is selected for such free zones. Exemption from import licensing as all imports to the FTZs have been placed under OGL Capital goods. 2. (iv) liberal policy for import of technical know how.
So far 18 proposals for establishment of EPIPs have been sanctioned.Visvesvarya industrial research and development centre (nonprofit organization) and is located in Mumbai city. importers. It brings under one roof all the agencies. This is how the services of all export related agencies are available at the world trade centre. with more than 200 members spread over 60 countries. At this centre offices of all agencies and institutions connected with the foreign trade are located. The activities of WTC are useful to Indian exporters in different ways. Objectives and functions of WTC: 1. The centre has also started showrooms where Indian goods are displayed and information is supplied to overseas buyers. 1994 with a view to involving the state governments in production.EXIM PROC & DOC Transport subsidy is provided to units operating in the zones Foreign exchange sanctioned including blanket permit for export promotion is granted. They include export promotion councils. WORLD TRADE CENTRE World trade centre (WTC) is one more export trade organization and is useful to Indian exporters in different ways. government agencies and so on. Providing education and training to export personnel in regards to exports procedures 3. It provides for 75% (limited to rupees 10 cores) grand to state governments towards creation of such facilities. consultancy firms. business know how and sources of information connected with international trade. An exporter can establish contact with all such agencies by visiting the office of world trade centre. It is promoted by M. Conducting research and development activities relating to foreign trade 81 . Sale of goods permitted to Indian domestic market against value added is at least 30% Manufacturing units in the free trade zone are now allowed to offload up to 25% of their production in the domestic tariff area under the payment of relevant duties Five – year income tax holiday on profits earned. New York. As a supplement to EPZs a centrally sponsored export promotion industrial park (EPIP) scheme has been introduced in August. Providing information to Indian exporters on various matters relating to exports 2. WTC is a regular member of world trade center’s association.
EXIM PROC & DOC 4. Arranging seminars and workshops on matters relating to export trade 5. Arranging buyer-seller meetings for export promotion. Activities of WTC: 1. Provides space for exhibitions: the WTC provides space an facilities to exporters to arrange exhibitions of export items 2. Publications: the WTC publishes booklets, magazines and other information literature which gives information about new developments in the field of import and export trade 3. Provision of trade information service: the WTC has set up a computerized trade information service called IMPEX on India’s imports and exports 4. Seminars and workshops: the WTC arranges seminars and workshops periodically in order to give the latest available information to Indian exporters 5. Meetings with overseas buyers: the WTC arranges meetings of overseas buyers and Indian businessman are also arranged occasionally for direct negotiations and trade deals 6. Training facility: the WTC conducts short term training courses for the education of young Indian exporters. EXPORT HOUSES (EH) According to the dictionary of management by D. French and H. Saward, export house means an enterprise specializing in selling goods to foreign buyers. An export house may act: (1) As a merchant buying a manufacturer’s products and attempting to sell them abroad; (2) As an agent for manufacturer, promoting and arranging the sale of his products abroad; (3) As an agent for foreign buyer, seeking sources of supply in the export house’s country and arranging purchases there.” An export house acts as a professional middleman exclusively devoted to export marketing. It acts as a middleman and gets income for the services rendered. An export house conducts various activities such as procuring goods, finding buyers’ abroad (collection of foreign orders), making arrangements for transportation, preparation of shipping and other documents and customs clearance. It relieves manufacturers from the entire botheration of export procedures. Export houses are operating in other countries since long. This was felt in India after 1958 for promotion of exports. The government also felt to give legal recognition to export houses with sizeable export performance and offer them certain facilities. In India, merchant exporters and manufacturer exporters who fulfill certain conditions laid down by the 82
EXIM PROC & DOC government are eligible for recognition as registered export houses. Even 100% EOUs and units operating in the EPZs are eligible to function as export houses. Export house certificate: in India, an export house is defined as a registered exporter holding a valid export house certificate issued by the director general of foreign trade. Recognition to a business house is given after taking into account certain factors such as (a) ability to export difficult items to newer destinations, (b) maintenance of a high standard of ethics and, (c) diversion of a part of net profits towards trade development. For the issues of such certificate, the business house/firm must be registered with the federation of Indian export organizations (FIEO). Secondly, it should have sufficient experience, professional expertise and funds for handling export trade. Recognition of export houses in India is based on their capacity to export the products which are classified by the government of India in two broad types: (a) select product, and (b) nonselect products. Select products are manufactured through technological processes. They include engineering goods, chemicals and electronic goods. The non-select products are actually traditional items of exports. They include tea, coffee, jute, iron ore, etc. Eligibility criteria for an export house: The Eligibility criteria for export house recognition are made liberal in the Exim policy statements issued since 1990. The Eligibility criterion for export house is: annual average FOB value of exports during the preceding three licensing years should be Rs. 15 crore. As per the modified Exim policy 1997-2002, all exporters who maintain export house status for three successive terms or more will be eligible for a golden status certificate which will entitle them to all benefits accruing from such status in perpetuity, irrespective of their performance in future. Recognized export houses are given the following import facilities and foreign exchange facilities: (A) Import facilities: 1. REP are admissible to them. In addition, REP licenses can be transferred to them by others. 2. They can import items placed on open general license (OGL) as per export-import policy. 3. They can get additional license as provided in Exim policy. 4. They can avail of import license to the extent of 100% of their value of REP licenses earned against their own exports made during the previous year. 5. Te export houses may be allowed to import capital goods against REP/ additional licenses so as to enable them to set up servicing centers for 83
EXIM PROC & DOC the benefit of their supporting manufacturers and other exporting units. They may be allowed to import non-OGL capital goods, other than the banned list items, upto Rs. 40 lakhs CIF during the licensing year as per Exim policy. They can import one electronic telephone exchange (PBX/PABX) for use in their offices. They are free to import technical designs and other documentation for a value not exceeding Rs. 10 lakhs against REP/Additional licenses issued in their favour. The export houses are also eligible to claim raw materials and components through IRMAC. The purpose is to enable them to supply raw materials and components to the actual users.
6. 7. 8. 9.
(B) Foreign Exchange Facilities: RBI may allow registered/recognized export house to utilize foreign exchange upto Rs. 2.5 per cent of F.O.B. value of its total exports during the previous year subject to a maximum of Rs. 10 lakhs for the following purposes: 1. Foreign exchange expenditure on promotional activities permitted under the code of grants-in-aid for exports efforts; 2. Import of testing instruments and equipments for packing and tagging and their spare parts for setting up common service centres; and 3. Setting up warehouses and offices abroad without obtaining prior approval of the RBI. The permission given by the RBI in this regard must be used within one year of its issue as the permission itself is valid for one year from the date of issue. The EH can cross the limit of 2.5 per cent of F.O.B. value of its exports foe certain purposes like exploring foreign markets, undertaking research and development for upgrading product technology, opening of showrooms to display Indian goods abroad, participating in exhibitions and advertising of Indian goods abroad. Export houses operate mainly at the port towns. They are useful to Indian manufacturers in securing foreign markets for their products. They also give various services to their suppliers i.e. manufacturers. Such services may be financial and/or technical. PREFERENTIAL TREATMENT THROUGH TRADING BLOCS Some countries from small regional and offer special concessions and preferential treatment to member-countries as result, trades develop among the member countries and give benefits to all participating members. However trade with non members is discouraged. This naturally acts as non tariff trade barrier. Even trade agreements and join commissions are used as non tariff barriers as they restrict free movement of goods at the international level. CONSULAR FORMALITIES Consular formalities are one type of non tariff barrier on trade, particularly imports. Some importing country imports strict rules regarding consular 84
EXIM PROC & DOC documents necessary for importing goods. Such documents include import certificate of origin and certified consular invoice. Penalties are provided for non compliance of such documentation formalities. The purpose of consular formalities is to restrict imports to some extent and not to allow free imports of commodities which are not necessary or harmful to national economy or social welfare. IMPORT LICENSING Import licensing is an alternative to quota system. It is useful for restricting the total quantity to be imported. In this system, imports are allowed under license permission from the government. importers have to approach the licensing authorities for permission to import certain commodities. Foreign exchanges for imports are provided against such license issued. Such licensing for imports exists in many countries. Import licensing may be used for controlling the quantity of imports. QUOTA SYSTEM: Quota system or quantitative restriction is one important non-tariff trade barrier. Under quota system, the country fixes in advance the limit of import quantity of a commodity that would be permitted from various countries during a given period. Such quotas are usually administered by requiring importers to have licenses to import particular commodities. The impact of quotas on imports is direct as the imports are not allowed over and above a specific limit fixed. Tariffs restrict imports in an indirect manner. In this sense, quotas are superior to tariffs. They are used in many developing countries in places of tariffs or in conjunction with tariffs. Types of quotas: There are different types of quotas and a country may introduce any type of quota as per the need of the situation. The types of quotas are as noted below: (1)Tariff quotas: A tariff quota combines the features of the tariff as well as quota. Here, the imports of a Commodity up to a specified volume is allowed duty free or at a special low rate duty. Imports in excess of this limit are subject to a higher rate of duty. 2)Unilateral quotas: In unilateral quota system, a country on its own fixes a ceiling on quantity of import of a particular commodity.
1. especially among developed countries to regulate their imports of labour-intensive products from developed countries. regulations and restrictions imposed by the government on imports. The objectives behind introducing tariff and non tariff trade barriers are more or less identical. Such restrictions are called non tariff barriers. there are some quantitative restrictions which can be imposed in order to restrict imports from abroad. (4)Mixing quotas: Under the mixing quota. 6. Non tariff barrier include different rules. Consumption Of Foreign Good Reduces to a considerable extent and the attraction for imported goods is brought down considerably. 4. They create favourable atmosphere for industrial development and generation of employment opportunities. Non tariff barrier are normally useful for reducing the total quantity which can be imported from abroad. The balance growth of world trade is adversely affected due to non-tariff barriers. In addition. Imports From Abroad Are Discouraged. 5. negotiations are made between the importing countries and a particular supplier country and the quantity to be imported is decided. They also raise the prices just as tariff does. This facilitates increase in the domestic production. Such barriers restrict the quantity of goods imported. All such quantitative restrictions are also called invisible tariffs or non. 86 . 3. A quota represents a ceiling on the physical volume of imports of a commodity. Tariffs Give Substantial Revenue To The Government. Tariffs Remove Or At Least Reduce The Deficit in the balance of trade and balance of payments. the producers are obliged to utilize domestic raw materials upto a certain proportion in the manufacturing of a finished product. 2. BENEFITS/ ADVANTAGES OF TARIFFS. Such barriers have become common in the post World War II period.tariff trade barriers. Effects of quotas: NON TARIFF BARRIERS MEANING Along with different types of tariffs.EXIM PROC & DOC (3)Bilateral quotas: In bilateral quota. restricted or even eliminated to a considerable extent. it also creates employment opportunities as there is encouragement to domestic production. Protection Is Given To Home Industries and manufacturing activities. Any measure introduced for restricting free flow of goods among the countries of the world can be treated as non-tariff barrier. Tariffs Encourage Research And Development Activities within the country.
. The lower rate is made applicable to a friendly country or the country with which bilateral trade agreement is entered into. Some people believe that tariffs enable a nation to improve its economy. for example. On the other hand. two rates of duty on all or some commodities are fixed. 87 . tariffs are classified into following 3 categories: 1) Single Column Tariff: Under this system. Tariffs avoid competition from foreign manufacturers and this may lead to monopolistic tendencies among domestic industries. may raise its tariffs to protect against tariffs raised by other countries. countries with which such bilateral trade agreements are not made. rates are uniform for all countries and discrimination between countries sending goods is not made . The higher rate is made applicable to all other countries that is. 9.2) Double Column Tariff: Under this double column tariff .International rate.Preferential rate.EXIM PROC & DOC 7. . The first two rates are similar to lower and higher rates while the preferential rate is substantially lower than the general rate and is applicable to friendly countries with trade agreement or with close trade relation. 3) Triple Column Tariff: Under this triple column tariff 3 rates are fixed. most economists believe that tariffs lower the standard of living throughout the world by reducing trade. On The Basis Of Trade Relations Between The Importing Country And Exporting Country: Here. 8. In brief. Tariffs may be used to influence the political and economic policies of other countries.General rate. the tariff rates are fixed for various commodities and the same rates are charged for imports from all countries. Tariffs create favourable impact on the economy of the country imposing them in a number of ways. They are: . A country. CLASSIFICATION OF TARIFFS D.
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