UNIVERSITY OF MUMBAI

A Project Report On
EXPORT PROCEDURE & DOCUMENTATION

SUBMITTED BY CHINNARAJ LAKSHMANAN T.Y.B.M.S. V–Semester PROJECT GUIDE PROF. MITESH PARMAR

MUMBAI COLLEGE OF ARTS, COMMERCE & SCIENCE JK KNOWLEDGE CENTER BEHIND MBPT HOSPITAL, VADALA (E), MUMBAI-37

Academic Year: 2010-2011

DECLARATION

I MR. CHINNARAJ LAKSHMANAN OF MUMBAI COLLEGE OF ARTS, SCI & COM OF T.Y.B.M.S. (SEMESTER V) HEREBY DECLARE THAT I HAVE COMPLETED THIS IN PROJECT THE ON EXPORT YEAR PROCEDURE 2010 – 2011. AND THE DOCUMENTATION KNOWLEDGE. ACADEMIC

INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY

DATE: PLACE: MUMBAI (CHINNARAJ LAKSHMANAN)

CERTIFICATE

I Prof. MITESH PARMAR HEREBY CERTIFY THAT MR. CHINNARAJ LAKSHMANAN OF MUMBAI COLLEGE OF ARTS, SCI & COM OF T.Y.B.M.S. (SEMESTER V) HAS COMPLETED THE PROJECT ON EXPORT PROCEDURE AND DOCUMENTATION IN THE ACADEMIC YEAR 2010 – 2011. THE INFORMATION SUBMITTED IS TRUE, ORIGINAL AND AUTHENTIC TO THE BEST OF MY KNOWLEDGE.

PROJECT GUIDE

BMS CO ORDINATOR

EXTERNAL EXAMINAR

PRINCIPAL

ACKNOWLEDGEMENT IT IS THE MATTER OF GREAT PLEASURE AND PRIVILEGE TO BE ABLE TO PRESENT THIS PROJECT REPORT ON EXPORT PROCEDURE AND DOCUMENTATION. I ACKNOWLEDGE MY INDEBTNESS TO VARIOUS AUTHORS FOR MAKING USE OF VALUABLE INFORMATION LIBERALLY. WHICH I FEEL IS AN OPPORTUNITY TO EXPRESS MY VIEWS ABOUT EXPORT PROCEDURE AND DOCUMENTATION. . PROF. IT IS DUE TO THE ENDURING EFFORT AND GUIDANCE OF MY GUIDE THAT ULTIMATELY MADE IT SUCCESS. I WISH TO RECORD A DEEP SENSE OF RESPECT AND GRATITUDE TO MY PROJECT GUIDE. I CANNOT JUST CONDONE THE VALUABLE OPPORTUNITY GIVE TO ME BY THE UNIVERSITY OF MUMBAI FOR COMPILING AND SUBMITTING THE PROJECT. MITESH PARMAR FOR HER ENCOURAGEMENT TO COURSE OF MY WORK. THE COMPILATION OF THE PROJECT IS A MILESTONE IN THE LIFE OF THE MANAGEMENT STUDENT AND ITS EXECUTION IS INEVITABLE WITH THE CO-OPERATION OF THE PROJECT GUIDE. IT IS MY PROUD PRIVILEGE TO EXPRESS MY DEEP SENSE OF APPRECIATION AND GRATITUDE TO MY PARENTS AND FRIENDS FOR THEIR SUPPORT AND CO-OPERATION IN THE COURSE OF THE PROJECT EITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIR VALUABLE CONTRIBUTION.

PROCESSING AN EXPORT ORDER FINANCIAL RISK INVOLVED IN FOREIGN TRADE EXPORT DOCUMENTS OCTROI QUALITY CONTROL PAGE NUMBE R 6 8 14 17 20 27 28 29 53 57 60 66 68 71 88 & PRE-SHIPMENT INSPECTION SHIPPING ANG CUSTOMS FORMALITIES SALES TAXES EXEMPTION PROCEDURE METHODS OF RECEIVING PAYMENTS AGAINST EXPORTS THE LETTER OF CREDIT PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK NEGOTIATIONOR 16 17 18 PURCHASE SHIPMENT THROUGH COURIERS CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM THE ECGC COVER. 91 92 112 INTRODUCTION .INDEX SERIAL NUMBER 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 CONTENT INTRODUCTION HOW TO SET UP AN EXPORT ORGANISATION HOW ONE BEGINS TO DO EXPORT EXPORT SALES & CONTRACT TERMS & CONGITIONS TERMS OF SHIPMENT – INCOTERMS.

Refund of Central Excise and Custom Duty on export is also made under the Duty Drawback Scheme of the Government. TWO CLASSES OF EXPORTS: Physical Exports: If the goods physically go out of the country or services are rendered outside the country then it is called as physical export.India has a mission to capture 2% of the global share of trade by 20010. The policies and procedures are different for Physical Exports and Deemed Exports as also the benefits available. E.g. Export is one of the lucrative business activities in India. the income from export business is also exempted to the specified extent under the Income Tax Act. Insurance. Exports can be of goods which can be moved physically from one country to another or can be of service rendered. Hospital. There is no Sales Tax on products meant for exports. the goods may be supplied to the manufacturer exporter who ultimately export a finished product of which this supply forms a part and ultimately go out of the country. The Foreign Trade Policy gives the list of supplies considered under the Deemed Export Category. The Foreign Trade defines exports as taking out of India any goods by land. The government may announce from time to time the types of supplies that may be considered as deemed export. Besides. Under Deemed Exports. sea. Deemed Exports: Where the goods do not go out of the country physically they can be termed as deemed exports. In a nutshell. 1961.g. Detailed list of services are given in the Foreign Trade Policy covering more than 160 items e. . Deemed Exports do not enjoy all the benefits that are available under Physical Export. Supply of fabrics to the garment exporter who exports the garments made out of the said fabric. up from the present level of less than 1%. Postal and Telecommunication etc. The government also provides various promotional schemes to the exporters for earning valuable foreign exchange for the country and for meeting their requirements for importing modern technology and essential inputs. This will be subject to certain conditions as prescribed by the DGFT.

and Customs. These procedures. we have to put phrase to distinguish it from “Deemed Exports” which is sales in India but considered as exports for limited purpose. TYPES OF EXPORTERS: Exporters can be basically classified into two groups • Manufacturer Exporter: As the exporter has the facility to manufacturer the product he intends to export and hence he exports the products manufactured by him. Customs Act etc. rules and regulations are laid down in the Exim Policy 2004-09. HOW TO SET UP AN EXPORT ORGANISATION . he procures the same from other manufacturers or from the market and exports the same.air. Exchange Control Manual. RBI. Accordingly Export documents are required to be prepared keeping in view of the requirement of the foreign buyers and our regulatory authorities. he can export product manufactured by him or he can export items bought from the market. But. it is mandatory on your part to follow certain procedures. An exporter can be both a manufacturer exporter as well as a merchant exporter. Once it is decided to export. Although the act does not term them as “Physical Exports”. rules and regulations as prescribed by various regulatory authorities such as DGFT. • Merchant Exporter: An exporter who does not have the facility to manufacture an item.

It can be set up easily without much expenses and legal formalities. A public limited company offers enormous potential for . a pubic limited company has a minimum of seven members. the number of its shareholders cannot exceed 50. The partnership firm can also be set up with ease and economy. It can be a private limited company or a public limited company. Company is another form of business organization. Capacity to bear the risk. Desire to exercise control over the business. it is advisable to form a partnership firm. Nature of regulatory framework applicable to anyone If the size of the business is small. therefore they should be formed within the parameters laid down by the Act. It can invite the public to subscribe to its capital and permit the transfer of share. 1932 and. the biggest disadvantage of sole proprietorship business is limited ability to raise funds which restricts the growth. it would be advantageous to form a sole proprietary business organization. is practically distributed amongst the various partners. On the other hand. However. The major disadvantage of partnership firm of business organization is that conflict amongst the partners is a potential threat to the business. It will not be out of place to mention here that partnership firms are governed by the Indian Partnership Act. A private limited can be formed by just two persons subscribing to its share capital. However. There is no limit on the maximum number of its members. The liability of the partners though joint and several. It is subjected to only few governmental regulations.The proper selection of organization depends upon • • • • Ability to raise finance. In order to avoid this disadvantage. public cannot be invited to subscribe to its capital and the members right to transfer their share is restricted. despite the fact that the personal liability of the partner is unlimited. Business can take benefit of the varied experiences and expertise of the partners. which has the advantage of distinct legal identity and limited liability to the share holders. Besides the owner has unlimited personal liabilities.

e. providing service from India to another country. acting on behalf of the buyer and charging Commission. a sole proprietary concern or a partnership firm will be the most suitable form of business organization. the same is to be registered with the Registrar of Companies.e.e.growth because of access to substantial funds. In case it is decided to incorporate a private limited company.e. It is advisable to open the account with a bank which is authorised to deal in Foreign Exchange. The liquidity of investment is high because of easiness of transfer of shares. attractive. Service provider i. NAMING THE BUSINESS Whatever form of business organization has been finally decided. For small business. buying the goods from the market or from the manufacturer and then selling it to foreign buyers. • • Buying Agent i. • • Manufacturer Exporter i. manufacturing the goods yourself for export. naming the business is an essential task for every exporter. The name and style should be soft. However its formation can be recommended only when the size of the business is large. short and meaningful. Sales Agent / Commission Agent / Indenting Agent i. Open a current account in the name of the organisation in whose name you intend to export. CHOOSING APPROPRIATE MODE OF OPERATIONS: You can choose any of the following modes of operations • Merchant Exporter i. acting on behalf of the seller and charging the Commission.e. STRUCTURE OF AN EXPORT ORGANISATION .

• • An office boy for doing leg work. excise department regarding packing and clearance of the goods for export. Then it is necessary to have marketing manager for each product so that the person can concentrate on a particular trade to enhance the business. if any. staff personnel for carrying out the day-to-day activities namely o Preparation of pre .shipment documents. For example if a company is transacting substantial volume of business in more than one product. • To look into the requirement of licenses. Depending upon the size of the business the numbers of personnel under each category may increase. A clearing and forwarding agent to handle the documents and the goods in the customs premises\ in the ports of lading. . their domestic as well as international competitors. claiming of export benefits fiiling of documents with the Government Authorities in Discharge of Export Obligations. filing of returns to the various Government Agencies which are mandatory. o Follow-up with the bank on dispatch of documents. prepare and keep an information bank of various transaction of the company. o Preparation of post shipment documents foe banks. availment of bank loans etc.• • • marketing manager for generating sales Commercial manager for looking activities of the execution of the orders. o Co-ordinating with clearing agents on the progress of the shipment to be made. o Co-ordinating with the ware house\C. receipt of payment.

listed by the RBI.REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING IMPORTER EXPORTER CODE (IEC) NUMBER. The Customs Authorities will now allow the exporter to export or import goods into or from India unless he holds a valid IEC number. . they will be allotted IEC No. Declaration by the applicant that the proprietor/partners/directors as the case may be of the applicant company. listed by the RBI. • • • • • Bank receipt ( in duplicate ) / Demand Draft for payment of the fees of Rs. which has been caution. One copy of PAN number issued by Income Tax Authorities duty attested by the applicant. importer/exporter shall intimate the same to the licensing authority. Where the applicant declares that they are associated as proprietor/partners/directors in any other firm. but with an additional condition that they can export only with RBI’s prior approval and they should approach RBI for the purpose. are not associated as proprietor/partners/directors in any other firm. • Each importer/exporter shall be required to file importer/exporter profile once with the licensing authority shall enter the information furnished in Appendix 2 in their database so as to dispense with changes in the information given in Appendix-2. which has been caution. One copy of Passport Size photographs of the applicant duly attested by the banker to the applicant. Before applying for IEC number it is necessary to open a bank account in the name of the company with any commercial bank authorized to deal in foreign exchange. 1000/Certificate from the banker of the applicant firm as per Annexure 1 to the form given. The duly signed application form should be supported by the following documents.

Import/Export of any commodity by that firm/company. IEC certificate will be issued in the form (copy enclosed). The registered office or the head office may apply for allotment of IEC No. the IEC once allotted is valid till it is revoked. such change should be intimated within 30 days to the concern authorities. However. Person importing or exporting goods for their personal use not connected with trade or manufacture or agriculture.IEC EXEMPT CATEGORIES. A copy of IEC No. is also endorsed to the concerned banker. this can be made operative by a formal request to the DGFT. address or constitution of the holder of IEC No. 25000\-. But. The following importer exporter is exempted from the requirement of IEC code number. Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF value of single consignment does exceed Indian Rs. . if no import or export is effected in the previous financial year. Whenever. VALIDITY : The IEC No allotted to a firm/company will be valid for all its branches/divisions units/factories as indicated in the IEC No. the same will be made inoperative. there is a change in the name. There being no date of expiry.. • • • Ministries \ Department of Central or State Government. APPLICATION FOR OBTAINING AN IEC NUMBER For obtaining IEC number apply in the prescribe form along with the documents listed above to Regional Licensing Authority (Office of the Regional DGFT).

IDENTITY CARD (For conducting transactions with the office of DGFT): As it is not always possible for the top man or directors. The RCMC shall be valid for 5 years ending 31st March of the licensing year. The licensing authority issues BIN in coordination with customs authorities. exporter should get himself registered with the Sale Tax Authority of is state after following the procedures prescribed under the Sales Tax Act applicable to his state. REGISTRATION WITH SALES TAX AUTHORITIES: Goods that are to be shipped out of the country for export are eligible for exemptions from both Sales Tax and Central Sales Tax. An application of Issuance of an identity card may be made in the form (Appendix-5) The document/ License/Certificate/Permissions may be delivered to the identity card holder and officials of the Licensing Authority(DGFT)shall not be responsible for any loss etc. For this exporter is required to contact DGFT online on web site. If the export product is that it is not covered by any EPC. . In case of loss of an identity card a duplicate card may be issued on the basis of an FIR & affidavit. In addition to obtaining the IEC No. An application for registration should be accompanied by a self certified copy of the Importer-Exporter Code number issued by the regional licensing authority concerned and bank certificate in support of the applicants financial soundness. RCMC in respect thereof may be issued by FIEO. This BIN is required to be mentioned on the shipping bills at the time of customs clearance of the export cargo. RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITH EXPORT PROMOTION COUNCILS – In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy. There is a provision of issuance of identity cards to the proprietors/partners/directors and their authorized representatives. For this purpose. promoters of the company to visit DGFT frequently. (RCMC). the exporter is also required to obtain Business Identification No(BIN). the exporter is required to register himself with an appropriate export promotion agency by obtaining registration-cum-membership certificate.

Also arrange to obtain Registration-Cum-Membership Certificate (RCMC) from the council. However. Following sequences can be followed: • Any one. one must simultaneously made a study and find out the prospective market. obviously he would like to export the product he manufactures as is or with possible modification as may be required by the market. The Preliminary Once you are ready with the product you wish to export and have found the market for the same. In case of a manufacturer. • Get yourself registered with the related Export Promotion Council and become a member. one has to identity the product to export. you are ready to proceed further. one must look for the product to be exported and the market where he intends to export. This has twin objectives: . must first of all get an Importer Exporter Code Number (IE Code). Approach the Export Promotion Council dealing in the product of selection to get more information. who wishes to export.HOW ONE BEGINS TO DO EXPORT Before entering into the venture of exports. For finding out the market for the selected product. the following methods will help. in case of a merchant exporter or a trader.This can be obtained by making a formal application to the office of the Regional Directorate General of Foreign Trade (DGFT). If the exporter is already in the trade in the domestic market and is familiar with the product it would be an advantage to export the said product of which he has reasonable knowledge. • • • Get statistical information as to imports of the product by various countries and their growth prospects in the respective countries Approach the chamber of commerce for their guidance to find out the market. Before selecting a product.

the transport charges. packing regulations.o Under the Foreign Trade Policy. Excise duty on the finished product subject to compliance of certain formalities. If the product is covered under any quota regulation. it is mandatory that an exporter gets him registered with the Export Promotion Council to avail of various export facilities. This you can get • From the directory of importers of the country .. customs regulations. Get information of the government’s regulations of the importing country as to restrictions on the quantity. product specification. find out the agency/council who are handling the quota distribution for the product and the availability of quota for exports. the next step is to find a prospective customer. • • If you are a manufacturer. To look for a Custom House Agent (CHA) (also know as freight forwarders or clearing agents) for handling the documents/cargo in the customs. o Being a member. requirement of specific documents/information etc. find out the provisions under the EXIM Policy of getting the raw materials duty free. frequency of operation etc. • • • Availability of Vessels/Airlines. you will have access to all the information relating to the product that could be made available by the council o Many foreign buyers send their enquiries for the imports to the Export Promotion Council. Get familiar with the excise formalities as goods meant for export can be cleared without payment of C. FINDING A CUSTOMS Once you have selected the market. Hence you will have few customers interested in your product. • • Understand the local government regulations in relations to the export of the product.

The following aspects may be considered before entering into a final contract with the buyer. • • • • • • • • • • • • Credit Worthiness of the Customer. By these processes one can only have the list of customers. getting feedback from the customers etc. One has to dialogue or correspond with these customers by sending samples. It is necessary to know the financial standing of the company which can be obtained through the bank channel or through the office of ECGC. NEGOTIATING CONTRACT. the business deal has to be concluded. Price Terms of Payment Type of packing and markings on the packages Mode of shipment & Shipment schedule Tolerance of quantity to be shipped Documentation requirement for the customer Documentation requirement of the government of importing country Compliance of the local governmental rules and regulations . Availability of the Steamer/Airlines and the frequency The freight charges The full product specification The quantity.• • • • • By writing to the Embassy of India in that country for assistance By writing to the chamber of commerce of that country By means of participation in a Fair/Exhibition abroad either directly or through the Export Promotion Council By participating in international fair if organized locally Through the personal contacts in that country. to ultimately select the customer with whom to deal with. Once the prospective customer is found.

however. Export contract may be sent in duplicate along with the Proforma Invoice to the overseas buyer. the requirements will vary from country to country.Before entering into contract one should take note of the above factors. description. There are certain. product to product and buyer to buyer. NATURE OF INTERNATIONAL TRADE COUNTRACTS. they may agree to adopt either the Law of the country of the buyer or that of the seller. The parties to all international trade contracts provide all their relative rights and obligations in several ways For example. They prefer to . While these are indicative. quality and quantity of goods. EXPORT SALES & CONTRACT TERMS & CONDITIONS Very often exporters do not enter into any formal contract and finalize the trade deal through the exchange of letters. The traders are normally reluctant to leave the determination of the rights and obligations by implications under the legal system of either’s country. delivery terms etc the situation will be quite different when the buyer and the seller to sale/purchase contract belong to different countries. peculiar characteristics of international trade contract which are not present in those for sales of goods in the domestic market Whereas the parties to a domestic trace contract normally needs only agree on the elements which are necessary for their particular trade transactions like price. cable. It is. telex etc. expedient that the parties (exporters & importers) incorporate all important terms & conditions of their trade deal in a separate document or contract that will avoid disputes arising out of uncertainty or ambiguity.

there is still no perfection or a device which would give the parties an accurate and complete idea of each others understanding of various trade terms. type . Exports of bonafide trade and technical samples of freely exportable items shall be allowed without any limit. Goods including edible items of value not exceeding Rs. export contract should be carefully drafted incorporating comprehensive but in precise terms. EXPORT OF SAMPLES\GIFTS. Nevertheless. except in the case of edible items. ENTERING INTO AN EXPORT CONTRACT In order to avoid disputes. the commercial practices and the rights and the obligations vis-à-vis each other so that the misunderstandings are practically eliminated. For this purpose. may be exported as a gift. storage and distribution methods. the Indian Council of Arbitration published in 1966 a booklet on “Standard Contract Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. mode of payment. There should not be any ambiguity regarding the exact specifications of goods and terms of sale including export price. it is necessary to enter into an export contract with the overseas buyer. It can be referred to by exporter for various clause to be incorporated in the Export Contract. STANDARD CONTRACT FOMS: Notwithstanding the efforts made by various national/international organizations like the United Nations Commission on the International Trade Law.in a licensing year. all relevant and important conditions of the trade deal. However items mentioned as restricted for exports in ITC(HS) shall not be exported as a gift without a licence/certificate/permission. 100000/. It was revised and reprinted in 1969 and 1977.make explicit provisions regarding the rights and obligations by including a set of detailed and precise terms and conditions in their contract.

Labeling and Marking Terms of Payment-. ARBITRATION: .of packaging. port of shipment. costs and technicalities. expeditious and informal remedy for settlement of commercial disputes. delivery schedule etc. The Arbitrator is usually an expert in the subject matter of the dispute. The dates for arbitration meetings are fixed with the convenience of all concerned. arbitration is the most suitable way for settlements of commercial disputes and it may invariably be used by businessmen in their commercial dealings. On the other hand. as they involve inevitable delays. arbitration provides an economic.Amount/Mode & Currency Discounts and Commissions Licenses and Permits Insurance Documentary Requirements Guarantee Force Majeure of Excuse for Non-performance of contract Remedies Arbitration clause It will not be out of place to mention here the importance of arbitration clause in an export contract Court proceedings do not offer a satisfactory method for settlement of commercial disputes. Standards and Specifications Quantity Inspection Total Value of Contract Terms of Delivery Taxes. The different aspects of an export contract are enumerated as under: • • • • • • • • • • • • • • • • • Product. Thus. Arbitration proceedings are conducted in privacy and the awards are kept confidential. Duties and Charges Period of Delivery/Shipment Packing.

The purpose of Incoterms is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade. they can sell and buy at FOB without discussing who will be responsible for the freight. developed by the International Chamber of Commerce(ICC) in Paris. F. the international commercial terms are grouped into E.and it is revised periodically to keep with changes in the international trade needs. the uncertainties of different interpretations of such terms in different countries can be avoided or at least reduced to a considerable degree. cargo insurance and other costs and risks. Under INCOTERMS 2000. EXW—exworks comes under grouped ‘E’. such as FOB. E. The exporter and the importer need not undergo a lengthy negotiation about the conditions of each transaction. The complete definition of each term is available from the current publication --. TERMS OF SHIPMENTS – INCOTERMS The INCOTERMS (International Commercial Terms) is a universally recognized set of definition of international trade terms. Once they have agreed on a commercial terms like FOB. designated by the first letter of the term. France.INCOTERMS 2000. The INCOTERMS was first published in 1936 --.g. relating to the final letter of the term. C and D. It is invaluable and a cost-saving tool. Incoterms deal with the number of identified obligations imposed on the parties and the distribution of risk between the parties. construction and operation or effect of this contract or the breach thereof shall be settled by arbitration in accordance with the rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties” (or any other arbitration clause that may be agreed upon between the parties). CFR & CIF. Thus. The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods.Arbitration clause recommended by the Indian Council of Arbitration:”All disputes or differences whatsoever arising between the parties out of / relating to the meaning. .INCOTERMS 1936 --. It defines the trade contract responsibilities and liabilities between buyer and seller.

for example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid) Quite often. otherwise clarification should be sought from the buyer before confirming the order. it would be best for importers not to deal in EXW (Ex Works) which would hold the buyer responsible for the export customs clearance. payment of export customs charges and taxes. from dealing in trade terms that would hold the seller responsible for the import customs clearance and/or payment of import customs duties and taxes and/or other costs and risks at the buyer’s end.In international trade. and other costs and risks at s PROCESSING AN EXPORT ORDER You should not be happy merely on receiving an export order. You should first acknowledge the export order. If you are satisfied on these aspects. it would be best for exporters to refrain. After confirmation of the export order immediate steps should be taken for . wherever possible. Similarly. and then proceed to examine carefully in respect of • • • • • • • • • Items Specification Pre-shipment inspection Payment conditions Special packaging Labeling and marketing requirements Shipment and delivery date Marine insurance Documentation requirement etc. the charges and expenses at the buyer’s end may cost more to the seller than anticipated. To overcome losses. hire a reliable customs broker or freight forwarder in the importing country to handle the import routines. a formal confirmation should be sent to the buyer.

Before accepting any order necessary homework should have been done as to availability of the production capacity.c. you should proceed to enter into a formal export contract with the overseas buyer. FINANCIAL RISKS INVOLVED IN FOREIGN TRADE As an exporter while selling goods abroad. the buyer should be advised to open the credit well in advance before effecting the shipment. The major risks which you have to undergo are as follows: • • • • Credit Risk Currency Risk Carriage Risk Country Risk You can protect yourself against the above risks by initiating appropriate steps. A specific insurance cover can also be obtained from ECGC . In the meanwhile.t. Ensure that the mode of payment is also agreed upon. It would be in the interest of the exporter to look into entering into forward contract to safeguard against exchange rate fluctuations. raw material e. you encounter various types of risks. In case of shipment against letter of credit. Credit Risks : You can cover your credit risk against the foreign buyer by insisting upon opening a letter of credit in your favour.procurement/manufacture of the export goods. Alternatively one can avail of the facility offered by various credit risk agencies.

(Exports Credit & Guarantee Corporation) to cover your country risk besides covering credit risk. Country Risk: ECGC provides cover to protect the exporter from country risks. RBI. there are categorized into 2 categories. bill of lading or combined transport document. of inspection of quality control. packing list. shipping instructions. due to the exchange rate fluctuations. EXPORT DOCUMENTS Any export shipment involved various documents required by various authorities such as customs. . Inspection and according depending upon the requirements. These are proforma invoice. Commercial Documents. certificate. application for certificate origin. certificate' of insurance. intimation for inspection. Carriage Risk: The carriage risk can be covered by taking an appropriate general insurance policy.Commercial documents are required for effecting physical transfer of goods and their title from the exporter to the importer and the realisation of export sale proceeds. A detailed procedure how an exporter can get himself protected against the above risks are given in separate chapters later. you can request your banker to book a forward contract. Currency Risks: As regards covering the currency risk. A. namely commercial documents and regulatory documents. mate's receipt. commercial invoice. excise. insurance declaration. : . Out of the 16 commercial documents in the export documentation framework as many as 14 have been standardised and aligned to one another.

Terms of delivery and payment. Name of the port of discharge and final destination. must be prepared strictly in accordance with the contract of sale. Number and packing description. Name and address of the consignee. Buyer's reference number and date. Description of goods giving details of quantity. Contents of Commercial Invoice • • • • • • • • • • • • • • • Name and address of the exporter. It is a prima facie evidence of the contract of sale or purchase and therefore. It is actually a seller's bill of merchandise. Commercial Invoice: Commercial invoice is an important and basic export document. Name of the country of origin of goods. Marks and container number. shipment advice and letter to the bank for collection or negotiation of documents.certificate of origin. 1. Signature of the exporter with date. Invoice number and date. Name of the country of final destination. Exporter's reference number. shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System. rate and total amount in terms of internationally accepted price quotation. However. Name and the number of Vessel or Flight. . It is also known as a 'Document of Contents' as it contains all the information required for the preparation of other documents. It is prepared by the exporter after the execution of export order giving details about the goods shipped. It is essential that the invoice is prepared in the name of the buyer or the consignee mentioned in the letter of credit. Name of the port of loading.

for all shipments to one or more destinations. For a regular exporter. this policy is not advisable as he will have to take a separate policy every time a shipment is made. but he can also insure the goods in case of FOB contract. This certificate states that the goods have been inspected before shipment. perils of sea. so this policy is taken when exports are in frequent. There are different types of policies such as • SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment. insurance company or the exporter. It is useful for accounting purposes to both exporters as well as importers. then it has to be renewed. Marine insurance policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. Open Cover Policy: This policy is generally issued for 12 months period. at the request of the importer.Significance of Commercial Invoice • • • • 2 It is the basic document useful in preparation of various other shipping documents. The open cover may specify . Inspection Certificate: The certificate is issued by the inspection authority such as the export inspection agency. and that they confirm to accepted quality standards. The exporter is bound to insure the goods in case of CIF quotation. • • Open Policy: This policy remains in force until cancelled by either party i. • Floating Policy: This is taken to cover all shipments for some months.e. theft etc. There is no time limit. marine insurance protects losses incidental to voyages and in land transportation. but the premium payment will be made by the exporter. 3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to fire on ship. It is used in various export formalities such as quality and pre-Shipment inspection excise and customs procedures etc. It is also useful in negotiation of documents for collection and claim of incentives. but there is a limit on the value of goods and once this value is crossed by several shipments.

etc. Cyprus. Iraq. 4. Certification' of goods by the Consulate of the importing country indicarer that the importer has fulfilled all procedural and licensing formalities for import of goods. Premium for air consignments are lowered as compared to consignments by sea. of the goods imported for the purpose of assessing import duties and also for statistical purposes. Significance of Consular Invoice for the Exporter • • It facilitates quick clearance of goods from the customs in exporter's as well as importer's country. One copy of the invoice is given to the exporter while the other two are dispatched to the customs office of the importer's country for the calculation of the import duty. Zanzibar. Ghana. Nigeria. quality. grade. • It also assures the exporter of the payment from the importing country. Uganda. The Consulate of the importing country certifies them in return for fees. . Consular Invoice: Consular invoice is a document required mainly by the Latin American countries like Kenya. • Insurance Premium: Differs upon product to product and a number of such other factors. This invoice is the most important document. Fiji.. type and condition of packing. such as. source. New Zealand. The main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume. In order to obtain consular invoice.the maximum value of consignment that may be sent per ship and if the value exceeded. Mauritius. Australia. etc. etc. Guinea. the exporter is required to submit three copies of invoice to the Consulate of the importing country concerned. which needs to be submitted for certification to the Embassy of the importing country concerned. the insurance company must be informed by the exporter. value. The exporter negotiates a copy of the consular invoice to the importer along with other shipping documents. Tanzania. Myanmar. distance of voyage.

Significance of Consular Invoice for the Importer • • It facilitates quick clearance of goods from the customs at the port destination and therefore. It facilitates quick calculation of duties as the value of goods as determine by the Consulate is considered for the purpose. of Origin: .Non-preferential certificate of origin is required in general by all countries for clearance of goods by the importer. Types of the Certificate of Origin (a) Non-preferential Certificate. Of the exporting country. • The goods produced in a particular country are banned for import in the foreign market. . the importer gets quick delivery of goods. It is issued by: ¬ • • The authorised Chamber of Commerce of the exporting country. Trade Association. Certificate of origin is required when:• The goods produced in a particular country are subject to’ preferential tariff rates in the foreign market at the time importation. 5. on which no preferential tariff is given. Certificate of Origin: The importers in several countries require a certificate of origin without which clearance to import is refused. The importer is assured that the goods imported are not banned for imported in his country. The certificate of origin states that the goods exported are originally manufactured in the country whose name is mentioned in the certificate. Significance of Consular Invoice for the Customs Office • • It makes the task of the customs authorities easy.

This certificate can be obtained from specialised agencies. etc. It is required by two member countries. APEDA. Development Commissioner. SAARC and SAPTA which can be issued by such agencies as EPCs. Director General of Foreign Trade. UK. Export Inspection Council (EIC) is the sole authority to print blank Certificates of Origin under BA. DCs of EPZs.e.. etc. For concession under Commonwealth preferences. FIEO. Germany. MPEDA.(b) Certificate of Origin for availing Concessions under GSP :. EIC. (d) Certificate for availing Concessions under other Systems of Preference:Certificate of origin is also required for tariff concessions. Commodity Boards and their regional offices. Development Commissioners of EPZs Certificate for availing Concessions under Commonwealth Preferences (CWP): Certificate of origin for the purpose of Commonwealth Preference is also known as 'Combined Certificate of Origin and Value'. i. Contents of Certificate of Origin . Canada and New Zealand of the Commonwealth. Handicrafts. namely. USA.. Australia. Marine Products Export Development Authority for marine products. • • • • • • • (c) Export Inspection Agencies.Certificate of origin required for availing of concessions under Generalised System of Preferences (GSP) extended by certain. Japan. under the Global System of Trade Preferences (GSTP).. the certificates or origin have to be submitted in special forms obtainable. Bangkok Agreement(BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions On imports and exports. BENELUX countries. countries such as France. from the High Commission of the country concerned. Italy. Jt. Textile Committees for textile products.

Marks and container number. It helps the buyer in adhering to the import regulations of the country. 6. Sometimes. in order to ensures that goods bought from some other country have not been reshipped by a seller. and undertaking to deliver the goods in the like order and condition as received. Signature and initials of the concerned officer of the issuing authority. Total number of containers and packages. • • • • It is to be submitted to the customs for the assessment of duty clearance of goods with concessional duty. Description of goods in terms of quantity. Name and the number of Vessel of Flight Name of the port of loading. a certificate of origin IS required. It is required when the goods produced in a particular country are banned for import in the foreign market.• • • • • • • • • • • • Name and logo of chamber of commerce. Name and address of the exporter. provided the freight and other charges as specified in the bill . Bill of Lading: The bill of lading is a document issued by the shipping company or its agent acknowledging the receipt of goods on board the vessel. Packing and container description. Name and address of the consignee. Seal of the issuing authority. Significance of the Certificate of Origin • Certificate of origin is required for availing of concessions under Generalised System of Preferences (GSP) as well as under Commonwealth Preferences (CWP). Name of the port of discharge and place of delivery. to the consignee or his order.

also called an air consignment note. the exporter intimates the importer about the shipment of goods giving him details about the date of shipment. As a receipt from the shipping company. Packing List: The exporter prepares the packing list to facilitate the buyer to check the shipment. so each airline has its own airway bill. Airway Bill: An airway bill. is a receipt issued by an airline for the carriage of goods. The difference between a packing note and a packing list is that the packing note contains the particulars of the contents of an individual pack.have been duly paid. and As a contract for the transportation of goods. As each shipping company has its own bill of lading. 7. It is also a document of title to the goods and as such. Airway Bill or Air Consignment Note is not treated as a document of title and is not issued in negotiable form. Shipment Advice to Importer:. 7. 9. Bill of Exchange: The instrument is used in receiving payment from the importer. The importer may prefer Bill of Exchange to LC as it does not involve blocking of funds. the name of the vessel. 8. A bill of exchange is drawn by the exporter on the importer. He should also send one copy of non-negotiable bill of lading to the importer. It contains the detailed description of the goods packed in each case.After the shipment of goods. to make payment on demand at sight or after a certain period of time. is freely transferable by endorsement and delivery. while the packing list is a consolidated statement of the contents of a number of cases or packs. the destination. etc. B Auxiliary Documents: These documents generally form the basic documents based on which the commercial and or regulatory . etc. their gross and net weight. Bill of Lading serves three main purposes: • • • As a document of title to the goods.

The offer made by the exporter is in the form of a proforma invoice. Application of the Certificate Origin: In case the exporter has to obtain Certificate of Origin from the concerned authorities. the shipper has to give details of the shipment to the insurance company for necessary insurance cover. the documents requirement are different. Details of goods such as packages. Name of the Vessel \ Aircraft. Value for which insurance to be covered. These documents also do not have any fixed formats and the number of such documents will wary according to individual requirements. in respect of obtained the same from the office of the Textile Committee or Export Promotion Council. Name & address of buyer. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship when the cargo is loaded on the ship. While the simple invoice copy will do for getting C\O from the chamber of commerce. Proforma Invoice: The starting point of the export contract is in the form of offer made by the exporter to the foreign customer. The mate's receipt is first handed . The detailed declaration will cover: • • • • • Name of the shipper \ exporter. The mate's receipt is a prima facie evidence that goods are loaded in the vessel. value in foreign currency as well as in Indian Rs. Etc. an application has to be made to the concerned authority with required documents. Declaration of Insurance: Where the contract terms require that the insurance to be covered by the exporter. 2. 4.documents are prepared. 1. It is a quotation given as a reply to an inquiry. quantity. It normally forms the basis of all trade transactions. 3.

e. Drawback copy. The cargo is moved inside the dock area only after the shipping bill is duly stamped. export application dock challan or port trust copy of shipping bill and receipt for payment of port charges. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the different government departments and bodies in order to comply with various rules and regulations under the relevant laws governing export trade such as export inspection. Export promotion copy. . Out of 9 regulatory documents four have been standardised and aligned. C. These are shipping bill or bill of export. the exporter or his agent collects the mate's receipt from the Port Trust Authorities. Customs copy. ex port trade control. foreign exchange regulation. The mate's receipt is freely transferable. required by the customs authorities for granting permission for the shipment of goods. etc. exchange control declaration (GR from). Port trust copy. 1. It must be handed over to the shipping company in order to get the bill of lading. After making payment of all port dues. customs. Shipping bill is normally prepared in five copies :• • • • • D. This is required by certain nations who have strained political and economical relations with the so called “Black Listed Countries”. Exporter's copy. i. Shipping Bill: Shipping bill is the main customs document. certified by the customs.over to the Port Trust Authorities. Other Document: • Black List Certificate: it certifies that the ship/aircraft carrying the cargo has not touched the particular country on its journey or that the goods are not from the particular country. Bill of lading is prepared on the basis of the mate's receipt.

• Freight Payment Certificate: in most of the cases. This certificate is printed in a special way by the Commonwealth Countries. such as name of the exporter and the importer. USA for imposing preferential tariff rates. the shipping company may issue a separate certificate for payment of the freight charges instead of declaring on the main transport documents.09. However if the exporter does not want these details to be disclosed to the buyer. .• Language Certificate: Importers in the European Community require a language certificate along with the GSP certificate in respect of handloom cotton fabrics classifiable under NAMEX code 55. This certificate should contain special details as to the origin and value of goods. Generally four copies of language certificate are prepared by the concerned authority who issues GSP certificate. • Insurance Premium Certificate: this is the certificate issued by the Insurance Company as acknowledgement of the amount of premium paid for the insurance cover. This document showing the freight payment is called the freight certificate. • Combined Certificate of Origin and Value: this certificate is required by the Commonwealth Countries. quality and quantity of the goods etc. This certificate is required by the bank for arriving at the fob value of the goods to be declared in the bank certificate of realisation. A copy is sent along with the other documents for realisation of export proceeds. which are useful for determining import duty. All other details are generally the same as that of Commercial Invoice. the B/L or AWB will mention the transportation and other related charges. • Customs Invoice: this is required by the countries like Canada. Three copies are handed over to the exporter.

e. It is just like consular invoice. which requires certification from Consulate or authorised mission. Guaranteed Remittance (G.e.R/SDF/PP/SOFTEX). • SDF FORM: to be completed in duplicate and appended to the Shipping Bill for export declare to the customs offices notified by the Central Government which have introduced EDI system for processing Shipping Bill.or SDF. Various declarations required as per custom procedure. Certificate of origin. • • PP FORM: to be completed in duplicate for export by post. magnetic tape/discs and paper media. Export order/Sales contract/Purchase order. Packing list. all exports to which the requirement of Exchange Control Declaration Form: declaration apply must be declared on appropriate forms as indicated below unless the consignment is of samples and of ‘No Commercial Value’ • GR FORM: to be completed in duplicate for exports otherwise than by post including export of software in physical form i. Certificate of Inspection. Pre-Shipment Documents: • • • • • • • • • Shipping bill. Letter of Credit Commercial invoice. SOFTX: to be completed in triplicate for export of software otherwise than in the physical form i.• Legalized Invoice: this is required by the certain Latin American Countries like Mexico. magnetic tapes/discs and paper media. stationed in the exporter’s country. .

Open Policy: This policy remains in force until cancelled by either party. . i. perils of sea. so this policy is taken when exports are infrequent. Open Cover Policy: This policy is generally issued for 12 months period. The open cover may specify the maximum value of consignment that may be sent pre ship and if the value exceeded. but he can also insure the goods in case of FOB contract. for all shipments to one or all destinations. Floating Policy: This policy is taken to cover all shipments for same months. insurance company or the exporter.These forms are available for sale in Reserve Bank of India MARINE INSURANCE POLICY Goods in transit are subject to risks of loss of goods arising due to fire on the ship. Marine Insurance Policy is one of the most important document used as collateral security because it protects the interest of all those who have insurable interest at the time of loss. For a regular exporter. at the request of the importer.e. but the premium payment will be made by the exporter. The exporter is bound to insure the goods in case of CIF quotation. Marine insurance protects losses incidental to voyages and in land transportation. then it has to be renewed. this policy is not advisable as he will have to take a separate policy every time the shipment is made. but there is a limit on the value of goods and once this value is crossed by several shipments. the insurance company must be informed by the exporter. thefts etc. There are different types of policies such as Specific Policy: This policy is taken to cover different risks for a single shipment. There is no time limit.

The place where claims are payable together with details of the agent to whom claims may be directed & Any other details. engineering.Insurance Premium: Differs upon from product to product and a number of other such factors. The name of the assured & description of the risk covered. Premium for air consignments are lower as compared to consignments by sea. At present. the Government of India has introduced Compulsory Quality Control and PreShipment Inspection of over 1050 items of export under Export (Quality Control and PreShipment Inspection) Act 1963. such as. type and condition of packing etc. coir. the export items that are subjected to compulsory inspection includes food and agricultural products. QUALITY CONTROL AND PRE-SHIPMENT INSPECTION Realizing the importance of the need for supplying quality goods as per international standards. as applicable. jute and footwear. chemicals. Products . A description of the consignment. Compulsory Pre-shipment Inspection: • • • • • • • Foods and Agriculture & Fishery Mineral & Ore Organic & Inorganic Chemicals Refectories & Rubber Products Foot wear & Foot wear components Ceramic Products & Pesticides Light Eng. distance of voyage. The sum insured & the date of issue. The Insurance Policy Normally Contains: • • • • • The name and address of the insurance company.

Cochin. EIA of Mumbai has jurisdiction over Maharashtra.for the last three years no compliant. of India has set up Export Inspection Council (EIO) The EIC has set up 5 Export Inspection Agencies (EIA).Products Jute Products Coir & Coir Products Exemption from compulsory Pre-shipment Inspection: • • • • • Status Houses Certification by Units IPQC – approved by EIA EUO/EPZ/SEZ Firm Letter from the overseas buyer Specified products such as Eng/Fishery average level of Rs. Calcutta. EIC has recognized three systems of inspection namely: • • • Self-Certification In-Process Quality Control Consignment Wise Inspection Self-Certification: Under this system. Gujarat and Goa. Systems of Quality Control: For the purpose of pre-shipment inspection. Delhi and Chennai. The manufacturing units which .1. Govt. The EIAs has a network of nearly 60 offices throughout India. The EIAs are located one each at Mumbai.• • • Steel . complete authority is given to the manufacturing units to certify their own products and issue certificates for export.5 Cr. For instance. Each EIA is given certain jurisdiction for inspection purpose. For monitoring pre-shipment inspection.

1 lakh in a year to the concerned EIA In-Process Quality Control (IPQC): In this system.and maximum of Rs. the goods are repacked with EIA seal The inspector then makes a report to Deputy Director of EIA The Dy. Units approved under the above two systems are often known as .2. a rejection note is issued. each and every consignment is subject to compulsory inspection. The EIA deputes inspector to inspect the goods After the inspection.have been recognized under this scheme have to pay a nominal yearly fee at the rate of 0. Constant vigil and surveillance are kept on units approved under IPQC “Export worth Units”. o It is to be noted that goods marked with ISI/AGMARK/BIS14000/ISO 9000 are not required to be inspected by any agency o Overseas buyer may depute his own inspection team to inspect the goods and self- certification system.500/. Consignment wise Inspection: Under this system. because of their consistent standards of quality. Over 800 units all over India are operating under this system. The exporter has to follow a certain procedure such as: • • • • • • He has to make an application to Export Inspection Agency with certain documents.1% of FOB price subject to minimum of Rs. Director of EIA then issues Inspection Certificate in triplicate if the inspection report is favorable If the inspection report is not favorable. companies/units adjusted as having adequate level of quality control right from raw material stage to the finished product stage including packaging are eligible to get the inspection certificate on a formal request by the exporter.

and that the duty has been properly determined and paid. SHIPPING AND CUSTOMS FORMALITIES (As per the Prevailing Law i. The custom authorities grant this permission only when it is being satisfied that the goods being exported are of the same type and value as have been declared by the exporter or his C&F agent. ICA 62) The shipment of export cargo has to be made with prior permission of. Norms: • • • • • • Adequate Testing Facility Raw Material Testing & Process Control After Sales Services & Maintaining Product Quality Control on bought out components Meteorological Control & PKG.. Independent Quality Audit & Houses. Fumigation: For ensuring that no insects or bacteria are carried with the export certain types of export products are fumigated before shipment. The goods cannot be loaded on board the ship unless a formal permission is obtained from the custom authorities.e. and under the close supervision of the custom authorities. if any. The fumigation is carried out in the port of shipment.o Inspection of textile goods is conducted by Textile Committee in respect of those exporters who are registered with the textile committee. The custom procedure can be briefly explained as follows: .

He then makes an endorsement of “Examination Order” on the duplicate copy of shipping bill regarding the extent of physical examination of the goods at the docks. The documents include: o ARE-1 (Original and duplicate) o Excise gate pass (Original and duplicate transporters’ copy o Proforma Invoice o Packing List o GRI form (Original and duplicate) o Customs Invoice (where required in the importing country) o Original letter of credit/contract o Declaration form in triplicate o Quality Certificate o Purchase memo o Labels o Licence (if any required) including advance licence copy o Railway receipt/lorry way bill o Inspection Certificate by Export Inspection Agency • Verification of Documents: The Customs Appraiser verifies the documents and appraises the value of goods. All documents are returned back to the agent or exporter.• Submission of Documents: The exporter or his agent submits the necessary documents along with the shipping bill to the Custom House. except o Original Copy of GR to be forwarded to RBI o Original copy of shipping bill o One copy of commercial invoice .

• Loading Goods: The goods are then loaded on the ship. the goods are moved inside the docks. The shipping company issues bill of lading. The customs examiner examines the cargo and records his report on the duplicate copy of the shipping bill. If CPO finds everything in order. The Mate’s Receipt is sent to the Port Trust Office. The customs examiner then sings the “Let Export Order” • Let Export Order: The Let Export Order is then shown to the Customs Preventive Officer. The C&F agent pays the port trust dues and collects the mate’s receipt. The CPO is in charge of supervision of loading operations on the vessel. The Bill of Lading is issued in: o 3 negotiable copies of Bill of Lading . The CPO supervises the loading operations. Carting Order is issued only after verifying the endorsement on the duplicate copy of shipping bill. • Storing the Goods in the Sheds: After securing the carting order. he endorses the duplicate copy of shipping bill with the “Let Ship Order” This order helps the exporter/shipper to load the goods on the ship. along with other documents. the Chief Mate (Cargo Officer) of the ship issues the “Mate’s Receipt”. The carting order is issued by the superintendent of Port Trust. The C&F agent then approaches the CPO and gets the certification of shipment of goods on AR Forms and other documents • Obtaining Bill of Lading: The Mate’s Receipt is then handed over to the shipping company (on whose vessel the goods are loaded).• Carting Order: The exporter’s agent has to obtain the carting order from the Port Trust Authorities. The goods are then stored in the sheds at the docks. After loading is completed. The Carting Order enables the exporter’s agent to cart goods inside the docks and store them in proper sheds. Carting Order is the permission to bring the goods inside the docks. • Examination of Goods: The exporter’s agent then approaches the customs examiner to examine the goods.

a prescribed for ARE 1 has to be filed in by exporter. In addition to the invoice.o 10 to 12 Non-negotiable copies of Bill of Lading. value of goods. Processing of ARE-1 Form: The Excise Officer/Inspector will make endorsement on all copies of ARE-1. • Filling up of ARE-1 form (Annexure-20): The ARE-1 form needs to be filled in four copies. A fifth (Optional) may be filled in by the exporter. excise duty chargeable. • Information to Range Superintendent of Central Excise (RSCE): The ACCE will inform the RSCE under whose jurisdiction the goods are intended to be cleared for export • • Deputation of Inspector: The RSCE will then depute an inspector to clear the goods. etc. The negotiable copies have title to goods. The invoice contains details like name of the exporter. and in certain cases at the port. which can be used at the time of claiming other export incentives. • Application to Assistant Commissioner of Central Excise (ACCE): The exporter has to make an application to ACCE regarding the removal of goods from the factory/warehouse for export purpose. The invoice is to be prepared in triplicate. PROCEDURE OF EXCISE CLEARANCE: The common procedure of excise clearance under “bond” and under “rebate” is discussed as follows: • Preparing of Invoice: The export goods have to be cleared from the factory under invoice. In case of export under Bond. whereas non-negotiable copies do not have title to goods but are used for record purpose. The ARE-1 copies have distinct color for the purpose of verification and processing. the invoice should be marked as “For Export without payment of duty”. The handling of ARE-1 Form is done as follows: . either at the factory or warehouse.

e. In case of export after payment of duty. This copy can also be handed over to the exporter in a tamper proof sealed cover to be submitted to ACCE/MCCE. excise officer with whom bond was executed will get 2 copies.o The inspector returns the original and duplicate copies to the exporter o The triplicate copy is sent to officer (ACCE or Maritime Commissioner (MCCE) to whom bond was executed or letter of undertaking (LUT) was given. The application must be supported by . these copies well be sent to excise rebate audit section at the place of export. the basic procedure is same as above. This will enable him to keep track to ensure that all goods cleared from factory or warehouse without payment of duty are actually exported. duplicate and the 5 th copy (optional) will be submitted to customs officer. under claim of rebate. The duplicate copy will be sent directly to the ACCE\MCCE i. The customs officer will examine these copies and then export will be allowed. He will cite shipping bill number and date and other particulars of export on ARE-1. except that the triplicate copy (by excise inspector) and duplicate copy(by customs officer)will be sent to the officer to whom rebate claim is filed. o At the time of export. If claim of rebate is by electronic submission. original. • Refund or Release of Bond: The exporter should make an application to the excise officer for refund or release of bond. one from RSCE (or excise inspector) when goods are cleared from factory and other Custom Officer after export. o The 4th copy will be retained by the excise inspector. o The customs officer will then make endorsement of export on all copies of ARE-1. o The 5th copy is also handed over to the exporter. o The original copy and quintuplicate (optional) will be returned to the exporter.

Here the exporter has to • • Obtain permission from the Customs for getting the container to his mills premises for stuffing (House Stuffing) Inform the C. If the copies match. A special Lock is used to lock the doors of the container. The excise officer crosschecks the original copy of ARE-1 form and the duplicate and triplicate copies of ARE-1 form.original copy of ARE-1 form. Such cargo has to be taken to the docks where the goods will be consolidated (combining the cargo of other exporters to make up quantity for a full container) by the agent and loaded into a container. (Generally called box rate) Alternatively. Samples from the goods will be drawn. then refund is given or the bond is released. An exporter gets the benefit on the freight amount for a full container.Excise Authority will supervise the loading. Here the examination of the cargo is done at the docks. FACTORY STUFFING OF CARGO Clearance of goods to docks: If the goods meant for export is of a small quantity which may not be sufficient to make one full container. the cargo is said to be less than container load (LCL) cargo. he can have a container allotted to him and get the same to his Mills Premises. as required under the customs permission.Excise Authorities at least 24 hours before bringing the container for loading. The goods meant for exports can be stuffed into the container under the supervision of the regional Central Excise Authority.(There are also inland container depots approved by the customs where the goods can be consolidated and stuffed into the container by the agent under the supervision of the customs officer) If the goods meant for export is of sufficient quantity to make up a full container. seal the container and certify the invoice as directed in the permission given by the custom authorities. The C. the exporter has the option to take the goods to the docks and get them examined and stuffed into a separate container. Such samples will be sealed and . if necessary. which he had received earlier.

he cannot utilize the facility of sales tax exemption. provide the exporter is registered with the Sales-Tax Department. I Registration Procedure • Application: The exporter must apply to the Sales Tax Officer (STO) under whose jurisdiction the head/ registered office of the exporter is located. If the exporter is not registered with the sales tax department. such containerized goods are not subject to further examination in the customs. SALES TAX EXEMPTION PROCEDURE Export good are exempted from the payment of sales tax. Therefore. Then the container is moved to the dock for loading. They will be directly taken for loading. The examiner in the docks may arrange to send the sample for testing. Generally. .forwarded along with the container. The exporter can claim exemption from sales tax (on purchases or sales for export purpose). it is necessary for the exporter to get his organization registered with sales tax department.

. Number to the exporter. The STO. where goods are already purchased for export purchase. o Copy of the Invoice . if required. o Other Relevant documents. the STO grants Sales Tax Reg. the exporter should submit: o A copy of Letter of Credit o A copy of Letter of Credit /Export Order. Exemption Procedure • Obtaining Form ‘H’: the registered exporters need to apply to the concerned STO for obtaining Form ’H’. • Security Bond: The STO normally requires the exporter to provide a security bond from another firm which is registered with the Sales Tax Department. • Granting of Sales Tax Reg. Number may cal the exporter for necessary clarifications. The STO verifies the inspector report. o Partnership Deed or Memorandum and Articles of Association along with Incorporation Certificate. • Inspection: The inspector visits the office of the exporter and inspects the necessary books and other documents. o A copy of shipping bill duty certified by customs. before granting the ST Reg. Number: After completing necessary formalities. • Report by Inspector: The Sales Tax Inspector makes a report to the STO for registration or otherwise. II.• Deputation of Inspector: The STO may depute an inspector to visit the office of the exporter and inspect: o Relevant books showing sales/ purchases.

The seller than sends on copy of Form ‘H’ to STO along with the Return of Sales Tax. The Form ‘H’ needs to be prepared in triplicate. the exporter fills the relevant details in ‘Form H’. • Filling the details in Form ‘H’: After export of goods. The other copy is retained by seller. METHODS OF RECEIVING PAYMENT AGAINST EXPORTS Before we proceed to understand the concept of Letter of Credit. The STO then affixes the exporter’s company stamp on the Form ’H’. and each method of payment involves varying degrees of risks for the exporter. The exporter retains one copy.The exporter has to affix the prescribed court fee stamp on each of the Form ‘H’ issued. and other two copies are sent to the seller from whom the exporter purchased the goods for export purpose. The STO may issue refund order to the exporter. The methods are: . let us understand the various types of payment methods available against export. METHODS OF PAYMENT There are three methods of payment depending upon the terms of payment.

as un the case of open account method. this is the most unpopular methods as a foreign buyer would not be willing to pay advance of shipment unless: • • B. and There is heavy demand for the goods (a seller’s market situation). if required.• • • • • Payment in advance Documentary Bills Letter of Credit Open Account Counter Trade A. The economic/ political conditions in the buyer’s country are unstable. PAYMENT IN ADVANCE This method does not involve any risk of bad debts. The seller is not willing to assume credit risk. At times. a certain per cent is paid in advance. say 50% and the rest on delivery. provided entire amount has been received in advance. DOCUMENTARY BILLS: Under this method. the exporter agrees to submit the documents to his bank along with the bill of exchange. However. The goods are specifically designed for the customer. . The minimum documents required are • • • full set of bill of lading commercial Invoice Marine Insurance policy and other document. This method of payment is desirable when: • • • The financial position of the buyer is weak or credit worthiness of the buyer is not known.

If the importer fails to pay on due date. Documents against Acceptance. In case of D/A as compared to D/P bills.e. the exporter need not wait for payment till bill is met on due date. LETTER OF CREDIT (L/C): .There are two main types of documentary bills: • • Documents against Payment. if all other alternatives fails. Necessary arrangements will have to be made to store the goods. the risk involved is much grater. In India. as he can discount the bill with the negotiating bank and can avail of funds immediately after shipment of goods. will have to start civil proceedings to receive his payment. Under this system. the exporter has certain advantages: • • The document remain in the hands of the bank and the exporter does not lose possession or the ownership of goods till payment is made. Other reason may include that the exporter may not be able to allow credit and wait for payment. ECGC covers losses arising out of such risks. However. Documents against payment (D/P): The documents are released to the importer against payment. if a delay in payment occurs. The risk involved that the importer may refuse to accept the documents and to pay against them. the exporter. as the importer has already taken possession of goods which may or may not be in his custody on the maturity date of the bill. The risk involved can be insured with ECGC. credit allowed for a certain period. as compared to D/A. Documents Against acceptance (D/A): The document are released against acceptance of the Time Draft i. The reason for non-acceptance may be political or commercial ones. This method indicates that the payment is made against Sight Draft. C. say 90 days.

A letter of credit can be defined as “ 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 variety of the L/C”. it is more secured as company to other methods of payment (other than advance payment).This method of payment has become the most popular form in recent times. THE LETTER OF CREIDT Introduction The cycle of a business transaction can be said to be complete prima facie when the buyer has received the product he desires to buy and the seller gets his payment in due consideration of the product supplied. .

Tough there are many merit and demerits in each of the different mode of payments we have discussed earlier. even the safety and security under the Letters of Credit may prove to be no better than a mirage for a man in the desert. . we shall now deal in detail about the mode of payment under the Documentary Credit. let me say it is as much a dubious instrument as is a safe instrument. Hence. More and more ingenious methods are adopted to circumvent the provisions of UPC 500 by fair or foul means. the buyer is equally keen that he gets what he wants by the paying for the same. Hence. Generally.While the seller is keen to receive the payment for his supplies. how co-operative are the exporter’s bank and how good are the L/C opening bank and the reimbursement bank. This document is known as Documentary Credit. and there are no clauses of ambiguity. though exporters are complacent once they get the letter of Credit on hand feeling that their payment is secured. this is an Undertaking by a Bank associated with the buyer to make the payment for the supply of goods by a seller subject to compliance of various requirements that may be specified in the document of undertaking by the Bank. If one does not understand the implications of the terms and condition of a letter of credit. A Documentary Credit is also called a Letter of Credit (L/C). There are ample cases of frauds under the Letter of Credit. sufficient care is to be taken by the exporter to ensure that instrument is received in order and the conditions of the L/C can be well complied with. he is sure to land in trouble at once stage or another. in relation either to the buyer or to the seller. What is a Documentary Credit? To say in simple language. the provisions under UCP 500.

.CONTENTS OF A LETTER OF CREDIT A letter of credit is an important instrument in realizing the payment against exports. unit rate. needless to mention that the letter of credit when established by the importer must contain all necessary details which should take care of the interest of Importer as well as Exporter. terms of shipment like CIF. This is only an illustrative list. Let us see shat a letter of credit should contain in the interest of the exporter. quantity. • • • • • • • • • • • • • • • name and address of the bank establishing the letter of credit letter of credit number and date The letter of credit is irrevocable Date of expiry and place of expiry Value of the credit Product details to be shipped Port of loading and discharge Mode of transport Final date of shipment Details of goods to be exported like description of the product. FOB etc. LC is the most secured form of payment in foreign trade. So. Type of packing Documents to be submitted to the bank upon shipment Tolerance level for both quantity and value If L/C is restricted for negotiation Reimbursement clause PROCEDURE INVOLVED IN THE LETTER OF CREDIT The following are the step in the process of opening a letter of credit: • Exporter’s Request: The exporter requests the importer to issue LC in his favor.

Note: as soon as an L/C is received ensure that the same is authenticated. In order to have uniformity and to avoid disputes. . Exporters. executives involved in international trade. Shipment of Goods: Then exporter supplies the goods and presents the full set of documents along with the draft to the negotiating bank. Negotiation: The exporter’s bank negotiates the document against the letter of credit and forwards the export documents to the L/C opening bank or as per their instructions. He should see it that the L/C is confirmed. Meaning that the genuineness of the L/C is certified by the Advising Bank by an endorsement with the marking ‘AUTHENTICATED’ OR ELSE THE L/C IS OF NO USE. • • • • Receipt of LC: the exporter takes in his possession the L/C. Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if they are in order makes the payment to the exporter. Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank with also request to inform the beneficiary that the L/C has been opened. in short known as UCP 500 effective from 1-1-96.• • Importer’s Request to his Bank: The importer requests his bank to open a L/C. exporters. the ICC Paris has evolved uniform customs and practices of documentary credit (UCPDC). They provide the comprehensive and practical working aid to banker. • • Realization of payment: The issuing bank will reimburse the amount (which is paid to the exporter) to the negotiating bank. Document to Importer: the issuing in turn presents the documents to the importer and debits his account for the corresponding amount. if so required by the beneficiary. These are rules have been adopted by more than 150 countries. The issuing bank may also request the advising bank to add its confirmation to the L/C. lawyer. He May either pay the amount of credit in his current account with the bank. Different Type of Documentary Credits. importers. transporters.

There are various types of Documentary Credit opened by a bank in favour of it’s customer depending upon the requirement. It is suggested to have an unrestricted L/C or L/C which may be restricted to the bank of the beneficiary’s choice. the bank who confirms the L/C takes the .e. Negotiation of document is restricted to that particular bank. • Confirmed/Unconfirmed Documentary Credit: Confirmed Documentary Credit is one in which the beneficiary has the option to have the L/C confirmed by a bank in the beneficiary country i.e. cannot be revoked or cancelled unilaterally by the buyer without the consent of the beneficiary (Seller). Let us talk about few types of Documentary Credit which are in common use.A Seller must always ask for an Irrevocable Letter of Credit. no seller will entertain a revocable L/C. • Revocable / Irrevocable Documentary Credit :A Revocable Documentary Credit can be revoked (cancelled) by the buyer at his own discretion and this does not require the consent of the seller. Hence. • Restricted/ Unrestricted Documentary Credit: A Documentary Credit stipulates the name of the bank who is authorized to negotiate the document for claming the reimbursement. Contrary to this. obviously. it may say ‘Negotiation by any bank’ which means the beneficiary is free no negotiate the document through the bank of his choice. This is beneficial because he can negotiate the documents through his own bank where he is having an account. In this case the beneficiary is obliged to negotiate the documents only through the specified bank i. Since the bank is not alien to him. a revocable L/C is as goods as no L/C. an Irrevocable Documentary Credit once established and advised to the beneficiary. The risk factor here is that the L/C may be cancelled even after the shipment is done and before the beneficiary present the documents to the bank for claiming the reimbursement. he will not face any practical/procedural difficulty in negotiating the document. On the contrary if no specific bank is nominated for negotiation.

o With resource LC: In this type the exporter is held liable to the paying/ negotiating bank. the negotiating bank makes advance payment to the exporter in resource of letter of credit either by discounting bills against letter of credit or by . in an unconfirmed L/C. if the draft drawn against LC is not honored by the importer/issuing bank. if as and when the documents reach the opening bank. but only to the issuing bank or to the confirming bank. o Without (Sans) Resource LC: In the case of sans (without) resource letter of credit. if the importing country’s regulation changes and the money is not allowed to be repatriated. Further. The beneficiary do not stand the risk of waiting for the document to reach the opening bank who will have the final say so to the compliance under the L/C before making the payment. By this process the final payment will be made in the beneficiary’s country by the bank which confirms the L/C immediately upon negotiation of the documents. • With Resource and Without (Sans) Resource Letter of Credit: The revocable or irrevocable LC can further be classified as with resource and without resource LC. the payment is also made immediately after negotiation and without recourse to the beneficiary i.responsibility of making the final payment to the beneficiary upon negotiation of the document in strict compliance with the terms and conditions of the Letter of Credit. Normally. the payment once made by the confirmed bank cannot be revoked.e. The negotiating bank can make the exporter to pay the amount along with the interest. the negotiating bank only accepts the documents and pays for the same with recourse i. this will eliminate the risk.e. the negotiating bank has no recourse to the exporter. The beneficiary is fully at the mercy of the opening bank for payment. It is suggested to ask for a Confirmed L/C. Moreover. On the contrary. and the opening find some discrepancy in the documents it may refuse to make the payment or seek clarification for the applicant before reimbursement. which it has already paid to the beneficiary.

$. and then one can call for a Revolving Documentary Credit.to be shipped every month.. the amendments that may be warranted every time.. The buyer can open an L/C for a value of US. In an automatic Revolving Credit. the anxiety of non-receipt of the L/C on time. the negotiating bank can ask the exporter to pay back the money along with certain other expenses.with validity for 12 months stipulating shipment every month for a value of US$.e.$. the bank and the exporter are saved from the routine of opening one L/C every month. For e. in the case of with resource letter of credit. the beneficiary can transfer the L/C opened in his name in favor of a third party who may effect the shipment and negotiate the documents and claim payment under the said L/C.US. 75000/-and by adding a clause to make 12 shipment of like value the L/C stands replenished for the full value of the L/C after each shipment is made the documents are negotiated for which payment are also made immediately for the value of the shipment.g. However. A revolving Documentary Credit may have cumulative effect i. The main benefit in this L/C is that the buyer. may be for a period of one year on a monthly basis. The salient feature of this L/C is that the buyer opens an L/C which can take care of shipments. • Transferable/Non-transferable Documentary Credit: In a transferable L/C. then the negotiating bank cannot get the money back from the exporter or hold him liable to pay the amount. if a particular shipment is not made. if the issuing bank fails to make payment or dishonor the letter of credit. an exporter enters into a contract for supply of 5000 pairs of Trousers valued approx. For the exporter. then the value is added to the value for future utilization. In such an instance.purchasing the bills of exchange.75000/. say. the bank charges for opening number of L/Cs etc. sans Resource letter of credit is more safe as compared to With Resource letter of credit. • Revolving Documentary Credit: Where an exporter is having a regular shipment for a particular customer and the value of each shipment may also be of more or less equal value.75.000/. the bank is liable for the total amount covering the entire shipment and where it is non-automatic its .

This is not permitted in India. This type of L/C is mainly common in U. Where there are continuous shipments like the one stated above one can call for a Revolving Letter of Credit. It is called a red-cause LC because it is generally printed/ typed in red ink. A standby Documentary Credit is generally common on open account trading where the seller may expect some security for getting his payment. the red LC enables the exporter to obtain packing credit facility for the purpose of processing the goods. • Green Clause LC: The Green LC in addition to permitting packing credit advance also provides for the storing facilities at the port of shipment. Thus this L/C is used in case of nonperformance while the other types of L/Cs are generally for some performance. • Stand by Letter of Credit: This is aimed at providing a security to a seller in case the buyer fails to perform his part. The assignee is not a party to the letter of credit but he only derives the benefit as per the L/C. this is more beneficial to the assignee because he receives his part of the money once the documents are negotiated by the first beneficiary in whose name the L/C is opened.A.responsibility is restricted to the value of one shipment. • Red Clause LC: The red clause LC is the usual irrevocable LC with further authorities the negotiating bank to make advance to the beneficiary for the purpose of processing the export goods. In automatic Revolving Credit the value of the credit is automatically replenished by an amendment. Thus.S. • Assignable Documentary Credit: In this type of L/C the benefit is shared between the first beneficiary and the parties whose names are assigned on the L/C. Such credits are paying on first presentation and the only document required therein is a simple declaration of non-performance along with the statement of claim. Calls for an L/C as necessary. . Green LCs is extensively used in Australian wool creditors.

• Documentary LC: Most of the L\C is documentary L\C. It is a ancillary credit created by a bank based on a confirmed export LC received by the direct exporters. Payment is being made by the bank against delivery of the full set of documents as laid down by the terms of credit. and obtains another LC in favour of domestic supplier. The correspondent/ agent of the bank honors all the cheques drawn on this credit by its holder up to the amount mentioned in LC. The important documents required to be submitted by the exporter under documentary LC includes the following: o Bill of Lading /Airway Bill or any other transport document o Commercial Invoice o Insurance Policy o Shipping Bill o Certificate of Origin o Combined Invoice and Certificate of Value and Origin o GSP/CWP certificate o Packing List o Certificate of Quality Inspection o Bill of Exchange o Any other document if required. as a security. A letter of credit may call for some or most of the above documents and may also call for some other documents specific to the shipment. The direct exporter keep the original LC (received from issuing bank) with the negotiating or some other bank in India. Traveler’s .• Back-to-Back LC: Back-to Back LC is a domestic letter of credit. 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. • Traveler’s LC: Traveler’s LC is issued to the person who intends to make a journey abroad.

In case of cheque. he has to carry a number of cheque. If the payment is delayed beyond this time. the holder can withdraw up to the amount of the cheque. Here. Payment under a documentary credit can be of the following types: • payment at Sight: In this mode. In case of a confirmed L/C. then the negotiation bank is obliged to make the payment upon submission of a clean document by the beneficiary. • Deferred Payment Scheme: In this case the payment is to be made at a future date as stipulated in the L/C. • Acceptance Credit : This type of credit requires a usance draft to be drawn on a nominated or accepting bank. The payment is made by the nominated/accepting bank on the due date as per instructions of the negotiating bank. If the bank acts swiftly and without prejudice. generally NO draft is required as the due date of payment is defined in the L/C. • Negotiation Credit: Here the payment is made by the negotiating bank upon negotiation of the documents if it prepares to take the risk and will recourse to the beneficiary. the holder can draw any amount up to the limit mentioned in the LC. the final payment is made by the confirmed bank on due date and by the issuing bank or its nominated bank if the L/C is not confirmed. the payment is made by the L/C opening bank or its nominated bank or by a confirming bank on presentation of the documents in full conformity with the L/C. In case of traveler’s LC. though an exporter has every right to ask for .LC has more advantages as compared to traveler’s cheques. Expect in the case of confirmed L/C there is always a time lag between the date of negotiation of the document and the date of receipt of the payment. one gets payment within a week’s time. If the credit is confirmed. and he need to carry only one paper of LC. Types of Payments under a Documentary Credit. This is a grey area. The L/C may or may not call for draft at sight for the full value of the documents. In case of a confirmed L/C the payment on due date is made by the negotiating bank (confirming bank). Again.

no justice is done to the exporter for the delayed payment. In case of telex/swift the . on persistent approach by the exporter/their banker. The Expiry Date of the L/C The Validity Date for shipment.(The L/C Opening Bank) the name and address of the buyer on whose behalf the credit is Issued.(Description) Details of document required for claiming the payment from the Opening bank. If the L/C received in mail the signatures are got to be verified by the advising bank. Documentary Credit must stipulate the Type of Credit as detailed above and inter alia will also stipulate the Following details : • • • • • • • • • • • • the name of the Bank issuing the Documentary Credit. in actual practice. The name and address of the Seller (Beneficiary) The Maximum Value the opening bank undertakes to pay to the Beneficiary. The name and address of the bank authorized to negotiate the documents. As soon as an L/C is received ensure that the L/C is authenticated. Generally the exporter has to forego lot of money in correspondence through the negotiating bank because every communication of the bank is charged to the exporter. Feature of a Documentary Credit A documentary credit is a document in writing issue by the bank on behalf of its customer (The Buyer).compensation.(The Applicant) the name and address of a bank in the country of the seller the credit through Whom the L/C is to be advised to the seller. does a defaulting bank comes forward to compensate for the delayed payment. The Reimbursement Clause. It is no surprise many exporter suffer this loss silently. Very rarely. The date of issue of the credit. The Details of the product to be shipped.

bank should endorse on the document authenticated and then only the L/C is a valid document. As time changes and the international transactions faces new aspects. Taking into the consideration of the various developments in the transactions under the Documentary Credit the ICC has been reviewing these rules and updating the same. the UCP 500 has attempted to take care most of the queries that one may encounter normally. Hence one is suggested to be familiar with all the 49 Articles as detailed in the UCP 500 of 1994. As soon as the letter of credit is received a through scrutiny is to be undertaken to ensure that . The ICC Uniform Customs and Practice was first published in 1993. attempts will be made to get the UCP 500 revised. While all the elements and events that one may encounter in each and every organization can not be explained. Scrutiny of letter of credit Mere receipt of letter of credit is no guarantee of payment. While the above details are the minimum that a Documentary Credit may have in actual practice there can be other stipulations mutually agreeable to the buyer. seller and the opening bank as also the negotiating bank. The UPC 500 covers all the procedural aspects relating to the transactions under a Letter of Credit. There are many ifs and buts before the documents are submitted to the bank against the letter of credit for realization of proceeds from the opening bank. The guidelines for the interpretation and usage of Letter of Credit are governed by the UCP 500 (Uniform Customs Practice for Documentary Credit) published by the International Chamber of Commerce (ICC).

The validity of shipment and expiry are correct. The documents that are required can be submitted. Any change must be advised by the importer through the opening bank only as a sort of amendment to the original credit. That the credit is available for negotiation without restriction. quality. then necessary clause is incorporated by the opening bank on the credit. The unit price and the terms of contract are correct. The terms and conditions stipulated can be complied with. The requirement may differ for different exporter and the scrutiny has be done relative to the requirement. DOCUMENTARY CREDIT IN GENERAL . The details of product description. Any oral and written agreement by the importer about change in the credit directly to the exporter should not be accepted as it is not valid under the credit. The letter of credit has been opened in accordance with the terms of the contract. Last but not the least. There is sufficient % of tolerance of quantity and value. he should immediately request the buyer to make necessary change in the letter of credit and the opening bank issued necessary amendment in this respect.• • • • • • • • • • • • First and foremost that the credit is properly authenticated by the advising bank. the credit has a reimbursing clause enabling the negotiation bank to get reimbursement of the money paid to the exporter against the documents. if the exporter finds that some change are required to be made in the credit. and value are in order. In case of exports requires the credit to be confirmed by the local. There are only few suggestions. The name and address of the beneficiary has been spelt properly. AMENDMENTS TO THE CREDIT On scrutiny of the letter of credit.

Make sure that all the documents as called for by the Credit can be submitted without any exception. If not possible. Care are should be taken to ensure that there are NO spelling mistakes. Bear in mind every amendment costs you badly. call for amendment extending the validity as required. A bank strictly deals in documents and the documents are expected to be cent percent in line with details give in the Documentary Credit. the best is calling for a Documentary Credit for any shipment. or”.Of all the various type of payments. if there is no provision as to from where the exporter is going to get paid for. Hence. Ask for amendment where you cannot copy with the terms. the value of documents. The opening bank may specify the reimbursement clauses as follows: . However. of the rest of the modes of payment. the rates if specified. It is suggested that the exporter gives the full details as to the various requirements to the buyer for incorporation in the L/C. and quantity of each of the items. Unless the L/C specifies the tolerance for the quantity and value. or such small things. Now let us see how we can take care of the interest of the exporter while an L/C is established. The last but not the least is the Reimbursement clause (Getting the funds for the shipment made). A discrepancy is a discrepancy and there is nothing like minor discrepancy or major discrepancy as far as the bank is concerned. Check the description of the product properly. on no account. could exceed the limits of the L/C. There is provision for a tolerance of the quantity up to 5 percent more or less than stipulated in the L/C even if the L/C does not specify tolerance exclusively and unless tolerance is prohibited 0 specifically. the exporter should follow the quantity and value as stipulated in the L/C. Ensure that the Validity for shipment and for negotiation of documents can be complied with. omission and commission of “. this puts the buyer totally at the mercy of the seller and unless the buyer feels unavoidable he will not be prepared to make advance payment. this will avoid the necessary of asking for amendments and will save both time and money. the whole exercise of the L/C is futile. Obviously. An L/C without this clause is no L/C. the most safest as far as the exporter is concerned is to get an advance payment in full for the value of shipment to be effected.

(Many a times the advising bank and confirming bank are one and the same).• The negotiating bank to send the documents to the opening bank who will. I for one prefer the reimbursement clause as in b) so that on one hand my bank sends the documents to the opening bank and at the same times claims the reimbursement from nominated bank. PARTIES TO LETTER OF CREDIT • • • • • Applicant: the buyer or importer of goods. • The negotiating bank can claim reimbursement directly from a nominated bank (say ABC Bank. . These are some of the aspects one should take care to ensure that the L/C established in his favor is in order and that he can comply with all the provision thereof. Beneficiary: the party to whom the L/C is addressed. The seller or supplier of goods. Advising Bank: issuing bank’s branch or correspondent bank in the exporter’s country to which the L/C is sent for onward transmission to the beneficiary. New York) either upon negotiation of documents or after a period of ¾ days of negotiation subject to the documents being submitted by the beneficiary is strictly in conformity with terms and condition of the letter of credit. arrange for reimbursement as claimed by the negotiation bank. upon receipt of the documents. However. • Negotiation Bank: the bank to whom the beneficiary present his documents for Payment u Under L/C. Issuing Bank: importer’s bank who issues the L/C. one is advised to make a checklist and take a note of each and every condition of the L/C for compliance at the right time. Confirming Bank: the bank in beneficiary’s country which guarantees the credit on the request of the issuing bank.

one should restrict the involvement of the number of the banks to the minimum. there are certain elements which may be . would like to ensure that the document submitted against a Letter of Credit are strictly in full conformity of the L/C. to safeguard the interest of the buyer. More the number of the banks. While the articles of UCP 500 come safeguard the interest of both the buyer and the seller. As far as possible. SPECIAL NOTE Though one may strongly feel that a Letter of Credit is the safest mode of payment. more the time in the transmission of the L/C. In the like manner the opening bank. Where the opening bank prefers to advise the L/C through its own branch in the beneficiary country or through another bank of its choice. we have two advising bank. and the seller desires to negotiate the document which is not the advising bank. there are every possible of discrepancy in the documents either between different documents or between the document or between the document and the L/C. since several documents are involved. then the L/C may be advised to the beneficiary directly by this bank or if it instructed to advise the L/C through the buyer’s nominated bank then it does so. Here. in addition to multiplicity of bank charges. Where an L/C stipulates that the Negotiation is restricted to a specific bank which is not the Advising Bank or Where the L/C is not restricted. the Negotiating bank soft pedal some of the discrepancies which they feel may not be pointed out by the opening bank as discrepancy to favour its customer.• Reimbursing Bank: the bank which will reimburse the negotiating bank for the value of the credit. one will face innumerous practical difficulties in so far as compliance with the terms and conditions of the L/C. For mastery of the operation under the Letter of Credit one is advised to completely study the various articles of the UCP 500 so that one can be clear in his mind as to the various provisions available under the Documentary Credit which will stand good while negotiating the documents with the bank. then we have a separate Negotiating Bank.

Opening bank establishes the L/C. As a prudent exporter one should be very careful in selecting his customer apart from taking other safety measures. Opening bank advises the L/C through his associate or through the bank. If the customer is too good. A study of such book as above may help one to take adequate care. The buyer complies with the L/C requirements and submits the relevant documents. The Unconfirmed L/C. To the bank for claiming reimbursement.outside the definition of the UPC 500. . Sometimes it may be the buyer who is at the receiving end and some time it may be the other way. It will be no surprise if one comes across newer and newer dubious methods being adopted by the contracting parties. TOTAL OPERATION UNDER THE LETTER OF CREDIT. one may relax and term the L/C as the best method to receive payment. Also there is certain flexibility provisions in the UPC 500 which one might like to exploit to his favour. unless both the buyer and the seller follow the business ethics there is every chance that one gets cheated by the other. in spite of the L/C being the safest method to ensure the payment. The Bank in the beneficiary country which receives the L/C sends the Original L/C to the customer either directly or through the bank Specified in the L/C. But. Nominated by the beneficiary. The negotiating bank negotiates and sends the documents to the opening bank or as Directed. So. If the customer turns out to be unscrupulous then he can play havoc. • • • • • • The Buyer makes an application to his bank to open an L/C. and you have been dealing with them for a long time. This is applicable to both the seller and the buyer. the brain is always working in multi directions. Meantime pays the beneficiary. There are books on fraudulent us of the Documentary Credits.

pay order. Once the credit is received. The Confirmed L/C. banker’s cheque. the negotiating bank may have to follow the subsequent steps since he has to receive his money from the opening bank. the nominated bank advises the negotiating bank of the credit. However payment of export can be received directly from the overseas buyer in the form of bank draft. Thus the negotiating bank gets the credit for the L/C documents. PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK NEGOTTIATION /PURCHASE Document against exports should normally be realized through an authorized dealer foreign exchange. However.• • Advises the opening bank or the reimbursement bank the details of his Accounts and the nominated bank where the proceeds are to be credited. All the steps from 1to6 as far as the beneficiary are concerned since the payment is made to the beneficiary without recourse. personal cheque foreign .

or by air. . (unless the payment terms offered are “deferred payment terms”). the exporter should approach his bank (authorized dealer) with a formal request to realize sale proceeds from the foreign buyer. • Submission of Documents to the Bank: The exporter should submit the following documents o Bill of Exchange o Full set of Bill of Lading o Commercial Invoice Copies o Certificate of Origin o Insurance Policy o Inspection Certificate o Packing List o GR (duplicate copy to forward it to RBI) o Bank Certificate o Other relevant documents. Take care to submit various documents in a proper manner and within the prescribed time schedule. the exporters have to realize the full value of exports within 180 days from the date of shipment. either by sea. It is obligatory to submit the shipping documents to an authorized dealer within 21 days of the date of shipment (subject to certain exceptions). he is a customer of the authorized dealers through whom documents are to be negotiated and prima facie the instrument of payment represents export proceeds realization. foreign currency traveler’s cheque.currency notes. etc. the exporter should apply for extension in prescribed form ETX (in duplicate) to RBI. Where it is not possible to realize the sale proceeds within the prescribed period. Apply to the Reserve Bank for extension of time in case you feel there is likely to be a delay in realizing export proceeds. In India. Without any monetary limit provided the exporter’s track record is good. The following are the steps in realizing export proceeds: • Approaching a Bank: After dispatch of the goods.

This is because. . Common Document Discrepancies o Credit Expired o Late shipment o Presented after permitted time from date of issue of shipping documents o Short Shipment o Credit Amount Exceeded o Underinsured o Description of goods on invoice differ from that of credit o Mark and numbers differ between documents o Bill of lading. • Letter of Indemnity: If the exporter wants immediate payment from his bankers. then his bankers may provide advance payment only when the exporter signs an indemnity letter. because it is customary to dispatch two sets of documents. The implications of an indemnity letter is that in the event of refusal of payment by the issuing bank in respect of LC. • Verification of Documents: The bank will verify the documents to find o Whether the required documents are in order. then the negotiating bank can ask the exporter to pay back the money advanced along with necessary charges.The above documents need to be submitted in two complete sets. Insurance documents. the importer can get at least the other set and clear the goods. if one set is misplaced or delayed in transit. Bill of Exchange not endorsed correctly o Absence of Documents called for under credit. one after the other. o Whether the required documents are attested by customs and other authorities.

o Weight in different document differs. o Bill of exchange drawn on wrong party. o Insurance cover expressed in currency other than that of credit.o Insurance certificate submitted instead of policy. Letter of credit and the laws relating to foreign exchange control. o Absence of signature. o Amount shown on invoice and bill of exchange differ. Discounting of bills: the bank may discount or negotiate the bills drawn against LC. where required on documents. o Transshipment/part shipment undertaken where expressly forbidden. o Shipment not make to port specified. If any scrutiny. o Absence of freight paid statement on B/L in CFR of CIF shipment. and make immediate payment to the SHIPMENT THROUGH COURIERS . The overseas branch of the bank then submits the document to the importer’s bank. the bank dispatches them to its overseas branch/correspondent branch as early as possible. o Bill of lading doses not carry shipped on broad stamp. o Bill of exchange not drawn as per tenor stated in credit. • Dispatch of documents: before the submission of documents for negotiation/collection. • exporter. the documents are in order. the bank examines them thoroughly with reference to the terms and conditions of the buyer’s order. o Insurance risks covered not being those specified in credit. o Class of Bill of lading no acceptable-charter party or House B/L. and the importer’s bank hands it over to the importer. if so required.

Export Terms & conditions: Export of any item can be affected by courier.In addition to the exporter by sea. . rail or road. except the following. Consigner for a commercial consideration. air. exports are also allowed by courier under the courier imports or exporters (clearance) Regulation Act.0000/Goods where weight of individual packet is more than 32 kg. EPCG. • • • • • Goods which are subject to cess. Goods proposed to be exported under DEPB. 1998. These regulations shall apply for clearance of goods carried by authorized courier on outgoing flights on behalf of exports. AL (Advance License) Where the value of goods is more than Rs. 25. Goods proposed to be exported with claim of duly drawback.

CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM It is brought to the notice of all exporters. 2. . The computerized processing of shipping bills would be in respect of the following categories: • • • • • • • • • • Duty Free white shipping bills Dutiable shipping bills (Cess) DEEC Shipping Bills EPCG Shipping Bills DEPB Shipping Bills DFRC Shipping Bills 100% EOU Shipping Bills Re export.1`5-09-2004. DATA ENTRY FOR SHIPPING BILLS 2.2 Exporters/CHAs would be required to submit at the SERVICE CENTRE the following documents.f.(for credit of Drawback amount) in the Customs Computer Systems before an EDI Shipping Bill is filed. CHAs Licence Nos. CHAs. Trade and General Public that the computerized processing of Shipping Bills under the Indian Customs EDI (Electronic Data Interchange) System – (Exports). importers. will commence w. and the Bank A/C No.e.1 Exporters/CHAs are required to register their IE codes. Jobbing Shipping Bills Drawback Shipping Bills Other NFEI Shipping Bills The procedure to be followed in respect of filing of shipping bills under the Indian customs EDI System-Exports at CFS-Mulund shall be as follows: 2.

. Printing of a S/Bill for Remote EDI System .. the checklist will be printed by the Data Entry Operator and shall be handed over to the Exporters/CHAs for confirmation of the correctness. Forms. the CHA/Exporters will make corrections. the option of Remote EDI System would also be made available. After completion of data entry... as applicable The formats should be duly completed in all respects and should be signed by the exporter or his authorized CHA ..6 The Service Centre operators shall carefully enter the data on the basis of declarations made by the CHAs/Exporters.• • • • 2. After the exporters/CHAs become conversant with the EDI procedures. The operator shall make the corresponding corrections in the date and shall submit the shipping bill. in the checklist and return the same to the operator duly signed.60/Rs.20/- Amendment fees (for a block of five items) .4 Initially. The operator shall not make any amendment after generation of the checklist and before submission in the system unless the corrections . which are incomplete or unsigned will not be accepted for data entry 2. Rs. . data entry for Shipping Bills will be allowed to be made only at the Service centre.3 A declaration in the specified format SDF declaration Quota/Inspection Certificate Drawback/DEEC/DFRC/DEPB Declarations etc. 2.. 2.10/Rs.5 The schedule of charges to be levied for data entry at the Service Centre is as follows: Charges for S/Bills having up to five items Charges for additional block of five items . Thereafter.. In the Remote EDI system (RES) Exporters/CHAs can electronically file their shipping bills from their offices..10/Rs.. if any.

1 Under the revised EDI procedure there would be no GR-1 Procedure. The operator shall endorse the same on the checklist in clear and bold figures. It would be filed at the stage of “goods arrival” One copy of the declaration would be attached to the original copy of the S/Bill generated by the system and retained by the customs. 2.8 The declarations would be accepted at the service centre from 10. The certificates would be submitted to customs and registered in the system.7 The system automatically generates the S/Bill Number. Declarations received up to 16.9 The validity of the S/Bill in EDI System is fifteen days only.made by the CHAs/Exporters are clearly indicated on the checklist against the respective fields and duly authenticated by CHA/Exporters signature.The second copy would be attached to the duplicate S/B (the exchange control copy) and surrendered 3. The exporters are required to obtain a certificate from the bank through which they would be realizing the export proceeds. 3. a certificate would have to be obtained from each of the banks. 3 PROCEDURE FOR GR-1 3. Exporters(including CHAs) would be required to file a declaration in the form SDF.30 hrs.30 hrs will be entered in the computer system on the same day. It should be noted that no copy of the S/Bill would be available at this stage. The customs will verify the details in the declaration with the . the exporters would need to mention the name of the bank and the branch code as mentioned in the certificate from the bank. 2. 2.00 hrs to 16. the exporter has to file the declaration afresh. These would have to be submitted once a year for confirmation or whenever the bank is changed. If the exporter wishes to operate through different banks for the purpose.2 by the exporter to the authorized dealer for collection/negotiations. After expiry of fifteen days from the date of filing of shipping bill.3 In the declaration form to be filled by the exporters for the electronic processing of export documents.

the Engineering Export Promotion Council. the existing arrangement of filing GR-1 forms would continue. S/B number should be indicated on the invoice when goods are presented for examination. AEPC certification even on S/B form would be accepted. the Cotton Textiles Export Promotion Council.e. 1. Drug Controller and of the Archaeological of Survey India would be obtained on the Invoice.information captured in the system through the certificates registered earlier. 1. the Agricultural Produce Export Development Agency (APEDA). This transitional facilitation measure will be available for a period of two months i.1 The processing of S/Bs involving allocation of ready-made garments quota by the Apparel Export Promotion Council (AEPC) will change with the introduction of the system. the no objection of the Asst. The quota certification on export invoice should be submitted to Customs along with other original documents at the time of examination of export cargo. QUOTA ALLOCATION AND OTHER CERTIFICATION.4 The certificate of other agencies. in these cases. the Central Silk Board and the All India Handicraft Board should also be obtained on the invoice. such as. • OCTROI PROCEDURES.4 In the case of S/Bs processed manually. The quota allocation label will be pasted on the export invoice instead of S/B. upto 30th November 2004. 3.. However. the Wildlife Inspection Agency under CITES. Allocation number of AEPC would be entered in the system at the time of S/B data entry.2 As a transitional measure.3 For determining the validity date of the quota. . the relevant date would be the date on which the full consignment is presented for examination and the date to recorded in the system. 1. 1. Similarly.

However. ARRIVAL OF GOODS AT EXPORT EXAMINATION SHEDS IN CFS 2. the exporters and CHAs will be responsible for the delay in shipment of goods and any damage. the date entry form and the declaration.25.10 lakh Free Trade Sample S/B for FOB value above Rs. 1. without prejudice to any other action that may be taken. PROCESSING OF SHIPPING BILLS 3. a fresh declaration would need to be filed 2. The CONCOR would endorse the quantity of goods entering the CFS on the reverse of the checklist 2. In case of delay. Commissioner (AC/DC Exports): • • • Duty free S/B for FOB value above Rs. brought for the purpose of examination (and subsequent: “Let export” Order) in the CFS on the strength of S/B shall be discontinued. the following S/B shall require clearance of the Assistant Commissioner/Dy. 3.5 The exporters would have to make use of export invoice or such other documents as required by the Octroi Authorities for the purpose of octroi exemption.1 The existing procedure of permitting entry of goods. The CONCOR will permit entry of the goods on the strength of the checklist. 2.2 The goods should be brought for examination within 15 days of filing of declaration in the Centre. One lakh .1 The S/B shall be processed by the system on the basis of declaration made by the exporter. deterioration or pilferage.The transitional arrangements would be the same as in the case of AEPC certification.3 If at any stage subsequent to the entry of goods in CFS it is noticed that the declaration has not been registered in the system.000 Drawback S/B where the drawback exceeds Rs.

through terminals of the Exporter / CHA..2 SEO will verify the quantity of the goods actually received against that entered in the system. the AO / AC / DC may call for the sample s for confirming the declared value or the checking classification under the drawback schedule / DEEC / DEPB / DFRC / EOU etc.1 On receipt of the goods in the Export Shed in the CFS. whether the S/B has been cleared by Asstt. it should be replied through the Service Centre or.1 above. 3. 4. the exporter will contact the system examining officer (SEO)and present the checklist with the endorsement of CONCOR on the declaration. After all the queries have been satisfactorily replied to. Commissioner /Dy. He may also give special instruction for examination of goods. CUSTOMS EXAMINATION OF EXPORT CARGO 4.3 of this PN the following categories of S/Bills shall be processed buy the Appraiser (Export Assessment) first and then by the Asstt/Dy. He will also present additional particulars in the prescribed form. AC / DC will pass the S/B 4. before the goods are taken for examination. the exporter should check up with the query counter at the Centre.3 Apart from verifying the value and other particulars for assessment.2 Subject to the provisions of para 20. ARE-1(AR-4)etc. along with all original documents such as Invoice. In case AC / DC raises any query. Commissioner: • • • • • DEEC DEPB DFRC EOU EPCG 3. The system would identify the Examining Officer (if more than one are . He will enter the particulars in the system.3. in case of EDI connectivity. Packing List.4 If the S/B falls in the categories indicted in para 6. commissioner.

GENERATION OF SHIPPING BILLS 5. In case of DEPB there are 7 S/B. No examination order shall be given unless the goods have been physically received in the Export Shed. the case would be adjudicated following the principles of natural justice.3 The Examining Officer may inspect and/or examine the shipment.physical examination. however. the system would print 6 copies of the S/B in case of Free and scheme S/B. as per instructions contained in the checklist and enter the examination report in the system. 4. If the Appraiser/Supdt. then . He would hand over the original documents to the Examining Officer. will mark the electronic S/B to AC/DC Exports. the Appraiser/Supdt. He will then mark the Electronic S/B and forward the checklist along with the original documents to the Appraiser/Supdt. 5. Where the exporter disputes the views of the Department. be clarified that Customs may examine all the packages/goods in case of any discrepancy. in Charge. is satisfied that the particulars entered in the system conform to the description given in the original documents (including AEPC quota and other certifications) and the .1 As soon as the Shed Appraiser/Supdt. He will also forward the documents to AC/DC and advise the exporters to meet the AC/DC for further action regarding settlement of dispute.gives “Let Export” order. It may. he will proceed to give “:Let Export” order for the shipment and inform the exporter. the declaration and all original documents with him.4 In case of any variation between the declaration in S/B and the documents or physical examination report. SEO would write this information on the checklist and hand it over to the exporter. the S/B would be processed finally. would retain the checklist. The system would also indicate the packages(the quantity and the serial numbers) to be subjected to examination. In case the Exporter agrees with the views of the Department. If the S/B (DEPB) is assessed provisionally. 4. There will be no written examination report.available)who would be carrying out physical examination of goods. The Appraiser/Supdt.

. 4. E. Exporters copy Customs copy ExchangeControl Copy E. TR-1. MOT charges will be required to be paid by exporter when the goods are examined by Customs for allowing “Let Export” beyond the normal office hours. TR-2 Copies The original AEPC quota and other certificates will be retained with the S/Bills and recorded in the Export Shed. 2. In addition. the Appraiser/Shed Supdt.EP copy will be generated only after AC/DC finalises the assessment.2 For the time being the present manual system for payment of Merchant Overtime (MOT) charges will continue. Custom’s Copy 3. no charges would be required to be paid if the exporter wants the goods to be entered in CONCOR (CFS) only for meeting the quota deadlines.1 6.will sign. On the examination report the Appraiser/Shed Supt. 5.oo PM. Exporter’s copy 2. TR-2 Copies Other Scheme S/Bills 1. 6.. On all the copies. 3.P. Exchange Control Copy 4.Copy 6.3 1. 5. PAYMENT OF MERCHANT OVERTIME (MOT) 6. Examination Offer as well as exporter’s representative/CHA will sign.2 The distribution of S/Bills is as follows: DEPB Scheme S/Bills • • • • • • 5. Scheme Bill Copy 5. No charges would be required to be paid on normal working days when the examination itself is being done for “Let Export” upto 05.Copy TR-1. Name and ID Card number of the Exporters representative/CHA should be clearly mentioned below his signature.P.

11 QUERIES 11. during examination. AC/DC may.1 With the discontinuation of the assessment of S/B in the Export Department.1 Where the Appraiser of Customs orders for samples to be drawn and tested. Where corrections are required to be made after the generation of the S/B No. if any. but would need prior approval of AC/DC (Exports) The S/B will remain pending and cannot be printed till the exporter replies to the query to the satisfaction of the Assistant Commissioner/Dy. can clarify doubts.1 Corrections/amendments in the checklist can be made at the service centre provided the system has not generated the S/B number. No registers will be maintained for recording dates of samples drawn. The disposal of the three copies would be as follows: • • • 7. Commissioner 12 AMENDMENTS: 12. Three copies of the test memo will be sprepared and signed by the Examining Officer. market value enquiry etc. if he deems necessary. In case where the need arises for the detailed answer from the exporter. the Examining Officers will proceed to draw two samples from the consignment and enter the particulars thereof along with name of the testing agency in the system. the Appraiser and Exporter. there should not be any queries. The exporter.7. DRAWAL OF SAMPLES 7. order for sample to be drawn for purposes other than testing such as visual inspection and verification of description. or.2 Original to be sent along with the sample to the testing agency Duplicate copy to be retained with the second sample Triplicate to be handed over to the exporter. after the . a query can be raised in the system buy the Appraiser.

AC/DC should check the status of the goods. 13. the exporter will surrender all copies of the S/Bill to the Appraiser for cancellation before amendment is approved in the system.Commissioner would be required. Commissioner(Exports) will approve the amendments on the system. Where the “Let Export” order has been given.1 AMENDMENT OF FREIGHT AMOUNT If the freight/insurance amount undergoes a change before “Let Exports” is given. approval of Additional/Jt. after the permission for amendments has been granted. 13./Dy. the Addl. Where the print out of the S/B has already been granted./Joint Commissioner (Exports) would allow the amendments 12. before granting permission. on the basis of an application made by the exporter. RECONSTRUCTION OF LOST DOCUMENTS: . Assistant Commissioner/Dy. CANCELLATION AND BACK TO TOWN PERMISSIONS. • • If the goods have not yet been allowed “Let Export”.2 In both the cases. the Asstt. Non-intimation of such changes would amount to misdeclaration and may attract penal action under Customs Act 1962.1 AC/DE (Export) will give permission for issue of short shipment certificate. 14. amendments will be carried out in the following manner. corresponding changes would also need to be made in the S/B with the approval of AC/DC Exports. 15. Commissioner may allow the amendment. The S/B particulars would need to be cancelled /modified in the system before granting such permission. SHUT OUT. But if the change has taken place after the “Let Exports” Order. SHORT SHIPMENTS. shut out or cancellation of S/B.goods have been brought in the docks/CFS. 14.

1 EXPORT OF GOODS UNDER CLAIM FOR DRAWBACK The scheme of computerized processing of drawback claims under the Indian Customs EDI system-Exports will be applicable for all exports through CFS. The misprint copy shall be cancelled before such permission is granted 17 17. 16 RE-PRINT OF SHIPPING BILL: 16. The cess amount indicated should be paid in the Bank of India.2 In respect of goods to be exported under claim for drawback. a certificate can be issued by the Customs stating that “Let Exports” order has been passed in the system to enable the goods to be accepted by the Shipping Line. which are subject to export cess the corresponding serial number of the Cess Schedule should be clearly mentioned. Extension Branch of CFS. as a result of which the print out(after the “Let Export” order) has not been generated or there is a misprint. 18. 18. under a receipt. the exporters will file declaration in the form. However. reprints can be allowed where there is a system failure. since extra copies of S/B are liable to be misused. for export.1 Similarly.1 Duplicate print out of EDI S/B cannot be allowed to be generated if it is lost.1 EXPORT OF GOODS UNDER CESS For export items. The declaration in the form would also be required to be filed when the export goods are presented at the Export Shed for examination & “Let Export” .15. Permission of AC/DC (exports) would be necessary for the purpose. Drawback will be sanctioned on the basis of the “Let Export” order already recorded on the system. A printed challan generated by the system would be handed over to the exporter. 18.

18. the drawback claims will be processed through EDI system by the officers of drawback branch on first come first serve basis.7 After actual export of the goods. 18. This is required to be done to enable direct credit of the drawback amount to the exporters account.3 The exporters who intend to export the goods through CFS under claim for drawback are advised to open their account with the Bank of India branch situated at CFS-Mulund. the same will be shown on the terminal and a printout of the query/deficiency may be obtained by the authorized person or the exporter from the service centre. The claims will be processed. It would not be possible to accept any shipment for export under claim for drawback in case the account number of the exporter in the bank is not indicated in the declaration form. the Customs and Central Excise duties drawback rules 1995 and conditions prescribed under different sub-headings of the All Industry rates as per notification number 26/2003-Cus(NT) dated 1. based on the Train Summary/Inward way bill. If any query has been raised or deficiency noticed. The status of the S/Bill and sanction of drawback claim can be ascertained from the “query counter” set up at the service centre. obviating the need for issue of separate cheque by post. submitted by CONCOR. The exporters are advised to reply to such queries expeditiously and such replies shall be got entered in the EDI system at the service . 18. The exporters are required to indicate their account number opened with the Bank of India branch at CFSMulund.4 The exporters are also required to give their account number along with the details of the bank through which the export proceeds are to be realized.5 Export declarations involving a drawback amount of more than rupees one lakh will be processed on screen by the AC/DC before the goods can be brought for examination and for allowing “Let Export”: 18. 18. There is no need for filing separate drawback claim.6 The drawback claims are sanctioned subject to the provisions of the Customs Act 1962.2003 as amended by notification number 12/2004-Cus(NT) dated 29-01-04.4.

19.No. 18. in the same manner as given in the Public Notices issued by DGFT. The exporter should specify the SS No. 18. except that drawback would be sanctioned only after the original band rate letter is produced before the designated customs officer in the office of Asstt/Dy. of group code No. Bank will also send a fortnightly statement to the exporters about the payments of their drawback claims.62 (Chemicals) are at a specific percentage of credit rate for the relevant bulk drug. (DEPB Cell) . of relevant Group is clearly mentioned (item-wise details). The exporters/CHAs are advised to fill Item No.2 DEPB Credit in respect of items like formulations. For proper calculations of DEPB rate. exporters are required to ensure that correct Group Code No.01 for provisional drawback. The bank will credit the drawback amount in the Account of the exporter on the next day and will handle accounts of the exporters as per their instructions. 19.centre .No. formulations of which are being exported. injections etc. The system will calculate the said specific percentage of the DEPB rate of such bulk drugs. 19. 19. of Group Code 62 of the bulk drug of which such injections have been made.9 All the claims sanctioned in a particular day will be enumerated in a scroll and transferred to the Bank through EDI. The claim comes in queue of the EDI system after reply to queries/deficiencies is entered by the service centre. of drawback as 98. of the goods being exported and the item No.1 EXPORT OF GOODS UNDER DEPB While filing information as per the format. Commissioner (Export) and is entered in the system.8 Shipping Bills in respect of goods under claim for drawback against brand rates would also be processed in the same manner. exporters/CHAs are advised to claim export under the specific Sl.3 All the DEPB S/Bills having FOB value less than Rs.5 lakhs and/or DEPB rates less than 20% will be assessed by Appraiser/Supdt. if they are exporting injections and thereafter mention Sl.

5 There is a provision for changing the Group Code No. exporters are advised to apply for .However.P./Item No.5 lakhs and/or credit rate 20% or more will be assessed by AC/DC (Export) .Copy DPB copy For record of Customs For record of Exporters For office of DGFT For use in the import cell of ICD Bangalore for registration of licence. 19. the exporter accepts the lower value as determined by customs. For negotiating the export documents in bank Exchange Control Copy TR-1TR-2 copies 19. The EP copy of the shipping bill shall be used by the Exporters to obtain DEPB licence from DGFT./Dy./Value for DEPB credit purposes and such changes will be reflected in the print out of the S/Bill. for credit purposes. Exporters are required to apply for the DEPB Licence at the B value accepted by Customs and not the value declared by them. Seven copies of S/Bill will be printed for the purposes mentioned against each as under : Customs Copy Exporter’s copy E. the S/Bill having FOB value more than Rs. such lower value will be entered by Appraiser (DEPB Cell) AC/DC (Export) or by Appraiser (Exam) for each item(s) Printout of S/Bill at item level will indicate for FOB value as well value for DEPB credit purposes. Such charges may be done by Appraiser/Supdt. Any query at the time assessing by Appraiser (DEPB cell) or AC/DC (Export) may be obtained from the service centre and reply to the query has to be furnished through service centre. (DEPB Cell) AC/DC(Export) as well as by Appraiser/Supdt. 19. goods may be brought and entered in the system. The examining officer will feed the examination report and “Let Export” order will be given by Appraiser/Supdt. Commissioner(Export).) The credit will be allowed by the DGFT at the rate/value (for credit purposes only) as approved by Customs. as DEPB is issued on the basis of exchange rate applicable on the date of Let Export.4 If the group code No.(Exam.6 In case.. Item No. in the EDI system. and FOB value declared is accepted by the Appraiser/Supdt (DEPB Cell) or Asstt. However.

19. DEPB entitlement etc. The words “NOT VALID FOR DEPB” will be printed on all the copies of S/Bill and the exporters will be not be eligible for DEPB licence against provisionally assessed S/Bills.43 of EXIM Policy 2003 edition) 19.DEPB Licence at the value accepted by Customs at the time of export multiplied by exchange rate on the date of Let Export(LEO) (As per para 4. of Customs. In such cases.8 Registration of DEPB Licence: . The procedure of Provisional Assessment shall be applicable mutates mutandis to above cases as well and the cases will be finalized after necessary reports etc. In such cases wherever market value has been found to be less than twice the credit claimed. arte received and unprinted copy of S/Bill meant for DEPB Licence shall be released thereafter for printing. EP copy of S/Bill will not be printed and only 6 copies will be printed. the exports will be allowed provisionally after taking samples ‘for market enquiry.. In such cases where samples are drawn subject to market enquiry the copy of the S/Bill for claiming DEPB will be generated after determination of value on the basis of market enquiry and handed over to the exporters duly signed by Appraiser/Supdt. the market value will be mentioned in the EP copy of S/Bill as under : “Market value of the goods is Rs………. However.and credit not to exceed 50% of the market value” Sample may also be drawn for the other purposes such as Chemical test.. market enquiries about value will be conducted in such cases and either after issue of the Show Cause Notice the market value will be determined or may be accepted by the Exporters on his own.7 In case the exporter does not accept the value determined by the customs.

If the amount of credit as per customs computer matches with the credit as per DEPB licence. The exporters are advised to obtain licences for the items exported un DEPB scheme and not for non-DEPB items. The computer at the time of registration of licence will calculate admissible credit on the basis of exchange rate on the date of realisation of export proceeds (as per bank realisation certificate) for DEPB items only and at customs approved value at the time of export. computer will generate printout regarding verification of the exports giving details like S/Bill No. rate of credit. Before registration. the verification will not be possible because S/Bill will not be in the verification queue. In cases of S/Bills assessed provisionally. date . the licence shall be obtained for 50% of the present market value of the goods. The same procedure will be followed for DFRC Licences also. the concerned officer will verify the S/Bill(s) in the Licence from the computer ensure that exports have been affected and value mentioned is as determined by customs at the time of export. DEPB licence will be registered on the basis of printout of verification report duly signed by AC/DC (Export). Similarly in cases where market value of the goods is less than twice the credit availed. If the amount of licence is more than the amount of credit calculated by the system.The DEPB Licence in respect of exports made from this customs station will be required to be registered at the same station. FOB value as approved by customs and amount of credit etc. If the lower value for credit purposes has been accepted at the time of export. If a DEPB Licence is having S/Bills exported from other ports in the same city the exporters can get the licence registered at any of the ports from where he intends to import the goods in the city after verification about exports from other ports from where exports were affected. the licenses shall be obtained only for such lower value and not for FOB value declared in S/Bill or as per Bank realisation certificate. it will not be possible to register a licence and reference will be made to DGFT for correction of amount of credit. .

20.

EXPORT OF GOODS UNDER 100% EOU SCHEME 20.1 The exporters can get the export goods examined by Central

Excise/Customs Officer at the factory even prior to filling of S/Bill. Self sealing facility is also available. He shall obtain the examination report in the form to this Public Notice duty signed and stamped by the examining officer and supervision officer at the factory. The export invoice shall also be signed and stamped by both the officers at the factory. Thereafter the goods shall be brought to the concerned customs warehouse for the purpose of clearance and subsequent “Let Export”. The exporters/CHA shall present the goods for registration along with Examination Report, ARE-1, Export Invoice duly signed by the Examining Officer and supervising officer at the factory, check list, declaration in form and other documents such as document of transportation, ARE-1, etc., to the examiner in the concerned shed. After registration of goods, the shipping bill will be marked to an examiner for verification of documents and seal. If seal is found intact the S/Bill will be recommended for LEO, which will be given by the shed appraiser. However if seal is not found intact, the goods will be marked for examination and LEO will be given if the goods are found in order. 21. 21.1 EXPORT OF GOODS UNDER EPCG SCHEME All the exporters intending to file shipping bills under the EPCG scheme should

first get their EPCG licence registered with the Export section. For registration of EPCG licence, the exporter/CHA shall produce the Xerox copy of EPCG licence to the service centre for data entry. A printout of the relevant particulars entered will be given to the exporter/CHA for his confirmation. After verifying the correctness of the particulars entered, the said printout will be signed by the exporter. Thereafter, the original EPCG licence along with the attested copy of the licence and the signed printout of the particulars shall be presented to the Appraiser/Supt (EPCG Cell)The Appraiser/Supdt. (EPCG Cell) would verify the particulars entered in the computer with original licence

and register the same in EDI system. The registration number of the EPCG Licence would be furnished to the exporters/CHA, who shall note the same carefully for future reference. The said registration number would need to be mentioned against respective item on the declaration form filed for data entry of the s/bill, at the time of export of goods. All the EPCG S/Bill would be processed on screen by the Appraiser/Supdt.(EPCG Cell) and the AC/DC (Export). After processing of the EPCG S/Bill by the Appraiser EPCG Cell and AC/DC Export, the goods can be presented at the Customs warehouse for registration, examination and “Let Export” as in the case of other export goods. After train summary is submitted to CONCOR, the S/Bill will be put to Appraiser queue for logging/printing of ledger. After logging/printing of ledger, the EPCG bill will be moved to history tables. 22 22.1 EXPORT OF GOODS UNDER THE DEEC SCHEME Only shipping bills pertaining to DEEC books issued on or after 1.4.95 will be

processed on the EDI system. 22.2 All the exporters intending to file s/bills under the DEEC scheme including those

under the claim for drawback should first get their DEEC Book registered with the CFS Mulund. The registration can be done in the service centre. The original DEEC book would need to be produced at the service centre for data entry. A print out of the relevant particulars entered will be given to the exporter/CHA. The DEEC Book would need to be presented to the Appraiser/Supdt., DEEC Cell, who would verify the particulars entered in the computer with the original DEEC and register the same in the EDI system. The registration No. of the DEEC Book would be furnished to the exporter/CHA, which would need to be mentioned on the declaration forms at the CFS for export of goods It would not be necessary thereafter for the exporter/CHA to produce the original DEEC book for processing of the export declarations 22.3 Each book will be allotted a Registration No. should be indicated on the shipping bills in the relevant columns.

22.4

Exporters/CHAs that will be filling S/Bills for export of goods under the DEEC Scheme would be required to file additional declarations regarding availment/non-availment of MODVAT or regarding observance/non-observance of specified procedures prescribed in the Central Excise 1944 in the form. The declaration should be supported by necessary certificates (ARE-1 or for nonavailment of MODVAT) issued by the jurisdiction Central Excise authorities. “Let Export” would be allowed only after verification of all these certificates at the time of examination of goods. The fact that the prescribed DEEC declaration is being made should be clearly stated at the appropriate place in the declaration being filled in the service centre or through RES-Mode.

22.5

All the export declarations for DEEC would be processed on screen by the Appraiser/Supdt., Export Department and the AC/DC Exports. The said processing would be akin to the processing of Bill of Entry on the EDI System with provisions for query/reply. After the declarations have been so processed and accepted, the goods can be presented at the Export Shed along with DEEC Books registered in the4 EDI System so that the export declarations are processed expeditiously.

22.6 22.7 •

Further, exporters availing of DEEC benefits in terms of various notifications should file the relevant declarations. It is further clarified as follows: While giving details relating to DEEC operations in the form the exporters/CHAs should indicate the S.No. of the goods being exported in the column titled “ITEM S.NO.IN DEEC BOOK PART E”

If inputs mentioned in DEEC Import book only have been used in the manufacture of the goods under export, in column titled “Item Sr.No. in DEEC Book Part C” the exporters/CHAs are required to give S.No. of inputs in Part-C of the DEEC Book and Exporters need not fill up column titled “DESCRIPTION OF RAW MATERIALS”

If some inputs which are not in Part-C of the DEEC Book have been used in the manufacture of the goods under export and the exporter wants to declare such

23.) 25. In the beginning.” the relevant Sl. EXPORT GENERAL MANIFEST: Landing wise. if the inputs used are indigenous and “M”. if the inputs used are imported. the steamer agents are required to enter the manifest in the Customs Computer System through the Service Centre on payment of the prescribed fee. t the Customs electronically. of the Schedule relating to Cess should be mentioned. Till such time.e. GRIEVANCE HANDLING approached by exporters or their CHAs for settlement of any problems faced at any stage of the export clearance. In column titled “Cess Schedule Sl. 25. CFS-Mulund may be 24. arrangements will be made for the electronic delivery of Export General Manifest through EDI Service Providers. Commissioner of Customs. (In due course. input materials utilized as per SION should be clearly mentioned in the declaration mentioned at Annexure A at the time of filing.inputs. “IND/IMP”.1 All the steamer agents shall furnish the Export General Manifest. all the EGMs will have to be entered at the Customs Computer System only.No. 24.No. House Bill of THE ECGC COVER . he shall give the description of such inputs in column titled “DESCRIPTION OF RAW MATERIALS” • • In the Col. the exporters are required to write “N”.1 The Asstt. EXPORT OF GOODS UNDER DFRC SCHEME: The details pertaining to export products i. Commissioner/ Dy.

For e. still there could be some elements of risk which we will study later here. Insurance... This was transformed into Export Credit & Guarantee Corporation Ltd. there could be break out of war.. The financial status of a customer may take drastic turn and an established customer may go bankrupt within a short period of time. Industry etc. in a business things may change.g. any other mode of payment will have some risk. of India set up the Export Risk Insurance Corporation (ERIC) in 1957. Moreover.The abbreviated form for Export Credit and Guarantee Corporation is ECGC. takes care to ensure that the customer with whom he is dealing have some credit worthiness.. and all transactions could be sealed. the balance of payment position of the country may become unfavourable. What is the guarantee that he will get paid for the supplies he has made? With a view to provide support to Indian exporters. This is a company wholly owned by the Govt. But. of India and functions under the administrative control of the Ministry of Commerce and managed by the Board of Directors representing Government. but there are other environment which prevents him from effecting the transfer of funds through the bank. in 1983. This he may be able to do either through the local agent who is in a better position to know about the customer or through a bank or through any of the exporter’s associates if happens to be in the area of the customer etc. Needless to say that an exporter before entering into a contract with the overseas buyer for making any supply. Though one may insist for a Letter of Credit. Banking. the buyer may be willing to make the payment. As the name indicates this is a sort of guarantee or a sort of cover for the exporter. the Govt. in 1964. These are the risk factors for the exporters. Except getting an advance payment for the full value of the supplies. Trade. there may be some coup of the government etc. In order to give the Indian identity a sharper focus the name was again changed to Export Credit & Guarantee Corporation of India Ltd. . Let us now see what this is all about.

The litigation procedure might be time consuming and the exporter can never be sure of getting his full payment. provided the exporter has taken an ECGC cover. However. the importer makes the3 payment. An exporter can either agree for sight payment or can made shipment on credit terms for say 60 days. For each type of cover an exporter has to take Policy specific to the respective requirements. It takes up the responsibility of paying the funds to the exporter and makes all efforts including legal proceedings to recover the dues from the customer. In respect of sight bill. the exporter is totally at a loss. SHIPMENTS (COMPREHENSIVE RISKS) POLICY also called STANDARD POLICY . An ECGC cover a safeguard his interest to a great extent. The Policy that is most commonly taken by the exporters is the Standard Policy or otherwise called the Shipments (Comprehensive Risks) Policy. In case the customer goes bankrupt or become insolvent. WHAT ECGC OFFERS FOR PROTECTION OF EXPORTER’S INTEREST ? ECGC offers various types of insurance cover to protect the exporter’s interest. small exporters will get broke even with one such transaction. before the title of the goods is passed on to the customer. more will be the risk factor for the exporter. Here the ECGC comes into picture. Therefore. In project exports the period of payment may extend to some years. there is almost no risk because the customer has to make payment first before he retires the documents. 90 days etc. in respect of usance bill (credit bills) the buyer retires the documents by accepting the usance draft and takes delivery of the goods. While big units may be able to absorb the one time loss.Take the case of an exporter who has made supplies and before the payment is received the buyer goes bankrupt or there comes some new provision or policy of Government of the importing country preventing repatriation of the funds to other countries what recourse the exporter has to recover his dues. Longer the period of cre3dit given to the customer.. before the due date of payment.

: Commercial Risks Insolvency of the buyer Failure of the buyer to make payment within a specified period. • Any other cause of loss neither occurring outside India nor normally insured by general insurers and beyond the control of both the e porters and the buyer. civil war. Risks not covered under the Policy The Standard Policy does not cover losses on account of following risks: .50 lakhs. Political Risks • Imposition of restrictions by the Govt.For exporters with an annual export turnover in excess of Rs. revolution or civil disturbances in the buyer’s country New import restrictions or cancellation of a valid import licence Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer. • • • War. of the buyer’s country or any government action which may block or delay the transfer of payment made by the buyer. (Credits not exceeding 180 days) The risks covered this Policy is as follows effective from the date of shipment. Buyer’s failure to accept the goods subject to certain conditions. the Shipments (Comprehensive Risks) Policy is the one intended for covering shipments on cash basis or on short-term credit basis.

Exchange rate fluctuations Failure of the exporter to fulfill the terms of the export contract or negligence on his part. Shipments to Associates: . However. For specific requirements an exporter can opt for different policy from the various services offered by the corporation Exclusions: Shipments made against advance payments received or shipments against confirmed letters of credit which has the confirmation from the bank in India may be excluded. Shipments Covered The Standard Policy is meant to cover all the shipments that may be made by an exporter during a period of 24 months ahead. ECGC may also agree to exclude certain items if the exporter is dealingt in different distinct products. selected buyer or selected markets. The premium for cover under political risks will be less than that under the comprehensive policy. shipments against confirmed L/C may be covered for political risks only.• Commercial disputes including quality disputes raised by the buyer unless the exporter obtains a decree from a competent court of law in the buyer’s country in his favour • • • • • • Causes inherent in the nature of the goods Buyer’s failure to obtain necessary import or exchange control clearance from authorities concerned Insolvency or default of the agent of the exporter or of the collecting bank Loss or damage to goods which can be covered by general insurers. The policy cannot be issued for selected shipments.

Step 2. he expects that at any given time his outstanding will be say Rs. Open Policy: An exporter desiring to get the ECGC cover has to approach the office of the ECGC making a Proposal. Shipments on Consignment basis: Shipments on consignment basis can be covered only against political risks.Shipments to buyers i. However such shipments can be covered against political risks. The exporter can have cover for such shipments.e. if he has obtained Credit Limit on such buyers on open delivery terms and also pays the premium at rates applicable to open delivery terms. After verification of the details of the exporter. HOW TO GET ECGC COVER Step 1. He must make his home work and be clear as to what will be his total turnover during a year ad what will be the maximum amount he expects to be outstanding from various buyers at a given point of time.50/. shipments by air are not covered under the policy.50 lakhs with a validity of say 2 years. However.lakhs then he can apply for a policy for this amount. This is the first step. Once this is clear he can apply for an Open Policy for the maximum amount that he expects to be outstanding at a given point of time. the ECGC may issue a open policy for Rs. Suppose. are normally excluded from the Policy. - Credit Limit on Individual Buyer . the foreign buyers in whose business the exporter has financial interest. the exporter may cover such shipments for payments under open terms. Shipments by Air Since the buyer is able to take delivery of the goods even without retiring the bank documents.

Once the limit is taken from ECGC. USA. it charges a premium on the value of the shipments actually made. Step 3 – Payment of Premium and filing of monthly returns For the risk the ECGC takes. Then the exporter has to apply to ECGC in the prescribed form for getting limit fixed for the customer. Based on the value of business dealing. no risk will be covered for that shipment. For each and every customer he has to apply to the ECGC to have a limit of liability fixed. On receipt of the application. Based on the credit report. This table which gives the premium amount payable is framed based on the following. C1. Canada. C & D countries.10 lakhs. or through the customer’s bank or through some reputed independent agency. The premium amount will be less for group A countries and will be increased gradually to group B. B2. That is to say. UK are grouped in category A. The various countries around the globe are divided into different groups and are classified as A1. suppose the exporter expects that from customer A the outstanding may be Rs. . the exporter is free to make his shipments to the various customers. B1. For e. it will advise the exporter of the same. as a next step the exporter must make out the list of the customers to whom he expects to make shipment.g. Similarly. ECGC will determine the limit that can be fixed for the customer. A2. If shipment for any customer is made before getting the limit fixed by ECGC.C2 & D.Once the open policy is taken.100 of exports. The countries are grouped according to their economic standard.10 lakhs is in order. If it feels that a limit of Rs. the exporter can have the limit fixed to all his customers. he has to declare the maximum amount of bills he expects to be outstanding from each customer at a given point of time. ECGC will check for the credit worthiness of the customer either through their own net work of offices globally. This is calculated as per the table to be supplied by ECGC which shows the premium per Rs.

180 days etc. The exporter has to work out the total premium applicable on the shipment effected and make payment to the ECGC The exporter is also expected to file a Monthly Return in a separate form listing all the Bills which are not paid on due date. The slab is for credits up to 90 days. The policy that is issued for shipment not covered under L/C is called Comprehensive Policy meaning that the policy will cover both the commercial and political risks. an exporter can have a separate ECGC Policy for shipments under L/C. the premium will be least for group A countries and for the shorter credit period and will be maximum for group D countries and for maximum credit period FILING OF MONTHLY RETURNS: The exporter has to send a monthly return in the prescribed form to ECGC declaring the list of various shipments made and the amount of premium payable as per the premium table. Longer the credit period greater is the premium. . the political risk relates to the country’s policies which may prevent the repatriation of funds or there could be outbreak of war preventing financial transactions etc. so that ECGC is periodically aware of the defaulters. In case of any eventuality when the buyer goes bankrupt.The premium for group D countries will be more because they are all economically weaker countries and payment risks are high Again the premium table is based on the period of credit. if any. he may prefer a claim with ECGC for payment. 120 days. Thus. Here the exporter will have the policy covering only the political risk since under L/C. However. the bank stands as a guarantor and there is no commercial risk. All the above relates to shipments not covered under L/C. While commercial risk is that of the buyer going bankrupt.

The cover is only when the party goes insolvent or there are some political risk due to which the exporter is not in a position to get the payment immediately or on due date. pilferage etc. damages to the goods.An exporter must cover all his exports under ECGC. The premium for L/C shipments will be relatively less than that on comprehensive policy. The cover is on whole turnover basis. and are NOT under L/C. He cannot be selective to certain countries or certain buyer. including bills on sight basis. This cover must be distinguished from the general insurance.50 lakhs is eligible for this policy Period of the Policy: Exclusions permitted: 24 Months Export to Associates Letters of Credit Consignment Exports Risk Covered: Commercial Risks Political Risks LC Opening Bank Risks Percentage of Cover: 90% . the buyer may take a separate policy to cover the political risks. For all shipments under L/C. STANDARD POLICY An exporter whose annual export turnover is more than Rs. Note: ECGC cover is not for non-payment on account of dispute on quality. theft. VARIOUS POLICIES OFFERED BY ECGC: 1.

adjustable Important Obligations of the Exporter • • • • • Obtaining valid credit limit on buyers and banks Monthly Declaration of shipments and payment of premium Declaration of payment overdue by more than 30 days Filing of claim within 24 months Sharing of recovery Highlights • • • • • 2.Minimum Premium: Rs.10. Lowest Premium Rate NCB OF 5% every year Discrepancy cover of LC Automatic Approval fort resale/shipment upto 25% of GIV Increased discretionary limit SMALL EXPORTERS POLICY 12 Months Exports to Associates Letters of Credit Consignment Exports Risk Covered: Commercial Risks Political Risks LC Opening Bank Risks Period of the Policy: Exclusions Permitted: . 000/.

Declaration of payment overdue by more than 30 days Filing of claim within 24 months Sharing of recovery. 000 adjustable Important Obligations of the Exporter: • • • • • Obtaining valid credit limit on buyers and banks Quarterly Declaration of shipment and payment of premium. Highest coverage/compensation Lowest premium rate NCB of 5% every year Discrepancy cover for LC Automatic approval for resale/shipment upto 25% of GIV Increased discretionary limit SPECIFIC SHIPMENT POLICIES – SHORT TERM (SSP-ST) These policies can be availed of by exporters who do not hold our Standard Policy or by exporters having standard policy.Percentage of Cover: 95% for commercial risks 100% for political risks Minimum Premium : Rs.2. Exporters can pick and choose the contract/shipment to be covered and indicate the type of cover required. Period of Policy : . in respect of shipment permitted to be excluded from the purview of the standard policy. Highlights • • • • • • 3.

Selection for Insurance cover Other exports not to be declared “Add on” Marine Insurance Cover Premium rate reduced proportionately on higher share of loss to exporter. An exporter not holding the standard policy can avail of this to cover their shipments to one or more buyers.The policy would be valid for shipment(s) made from the date of the policy upto last date allowed under the relevant contract for shipment. EXPORTS (SPECIFIC BUYERS) POLICY The specific buyer policy provides cover for shipments made to a particular buyer or set of buyers. Exporters holding Standard Policy can also avail this . Risk Covered: • • • • Commercial Risks Political risks LC Opening Bank Risk Insolvency risk on agent on conditions 80% Percentage of Cover: Important Obligations of the exporters: • • • • • • Upfront premium payment Statement of shipment made Payment Advice slip Statement Of Overdue Filing of Claim within 12 months from due date Sharing of recovery Highlights: • • • • 4.

Submission of shipment declaration quarterly 3. EXPORTS TURNOVER POLICY Turnover Policy is for the benefit of large exporters who contribute not less than Rs. The policy envisages projection of the export turnover of the policyholder for a year and the initial determination on the premium payable on that basis.10 lakhs per annum towards premium.Policy for covering shipments to individuals Buyers. Filing of the within 12 months from due date 5. Declaration of payment overdue for more than 30 days 4. Sharing of recovery Highlights: 1 2 3 Selective buyer can be insured Option to exclude LC exports Premium rate can be reduced proportionately 5. . Deposit Premium on Quarterly in advance 2. Period of the Policy: Risk Covered: 12 Months Commercial Risks Political Risks Insolvency or default of LC Opening Bank Percentage of Cover: 80% Important Obligation of the Exporters: 1. if all shipments to such buyers have been permitted to be excluded from the purview of the Standard Policy. subject to adjustment at the end of the year based on actual.

4. BUYER EXPOSURE POLICY : The Buyer Exposure Policy is to insure the exporters having large number of shipments with simplified procedure and rationalized premium. Simplified procedure for payment of premium 10% of projected premium is waived when exports increase beyond projection Increased discretionary limit Premium will be payable in four equal quarterly installments in advance Submission of quarterly statement of shipments Declaration of overdue payments Filling of claim within 24 months from due date Sharing of recovery 6. An exporters can chose to obtain exposure based cover on the selected buyer. The option to exclude LC shipment is available. If the exporter has opted for commercial and political risks cover. failure of LC opening bank . 5. 3. 3. Highlights: 1. 2.Period of the Policy : 12 Months Risk covered: Commercial Risks Political Risks LC Opening Bank Risks Percentage of Cover: 90% Important Obligation of the Exporter 1. The cover would be cover against commercial and political risk. 2.

2. If exporters opts for only political risks for LC exports premium at a less rate is offered Period of the Policy: Risk covered: 12 months Buyer Risk LC Opening Bank Risks Political Risks Percentage of Cover: 90% for Standard policyholder and 80% for others Important Obligations of the Exporter: 1 2 3 4 5 6 7 Highlights: 1. 4. 3.000 as per latest Bankers Almanac is available.with World Rank up to 25. 5% discount premium if paid in advance Declaration procedure waived Exporter to approach only for default in claim One Policy for one buyer Premium Payable in advance Option to pay the premium quarterly in advance is available Premium non refundable Obtaining approval for extension in due date beyond 180 days Declaration of overdue payments Filing of claim within 12 months from due date Sharing of recovery .

ecgcindia. MULTI-BUYER EXPOSURE POLICY Some exporters export to large number of buyers. Option to pay the premium quarterly in advance is available 3. If the transaction is on LC terms. In order to meet the needs of such exporters. Premium non refundable 4. Obtaining approval for extension is due date beyond 180 days 5. Multi buyer exposure policy is introduced. Filing of claim within 12 months from due date 7. Sharing of recovery .7. Cover would be available for exports to the buyers in countries listed under open cover category as long as the buyer is not in “default buyers list” maintained by the Corporation and available on its website www.com. The number of shipments made by them is also quite high. For banks with World Rank upto 25000 as per Latest Bankers Almanac Cover in respect of exports to restricted over countries would not be available under this policy Period of Policy: Risk Covered: 12 Months Buyer Risks Political Risks LC Opening Bank Risks Percentage of Cover: 80% Important Obligations of the Exporters: 1. Declaration of overdue payments 6. Premium payable in advance 2. failure of the LC opening bank in respect of exports against LC will also covered.

as and when orders are received. Protection up to Aggregate Loss Limit and Individual buyer up to 10% of All. 8. A method increasingly adopted by Indian exporters is consignment exports where goods are shipped and held in stock overseas ready for sale to overseas buyers. Thus separate Credit Insurance Policy is introduce to cover exclusively shipments on consignment basis taking into account their special features. Reduced premium rates available on conditions 3.Highlights: 1. providing adequate incentives and simplifying procedures considerably Period of the Policy: Risks covered: • • Commercial Risks on stockholding agent and/or ultimate buyer Political Risks 90% for Standard Policyholders and 80% for others 12 Months Percentage of Cover: Important obligations of Exporters: • • • Advance deposit of premium in advance on quarterly or monthly basis Obtaining credit limit on ultimate buyers beyond the discretionary limit Quarterly/Monthly statement of actual exports . All buyers in open countries covered on conditions 6. Policy is best suited for exporters who make frequent shipments 2. CONSIGNMENT EXPORTS POLICY (STOCKHOLDING AGENT) Economic liberalization and gradual removal of international barriers for trade and commerce are opening up various new avenues of exports opportunities to Indian exporters of quality goods. No declaration required 5. 5% reduction on total premium on lump sum payment 4.

• • • Overdue declaration Filing of claim Sharing of recovery Highlights: • • • • • 9 Covers only the consignments exports Rationalized premium for 360 days Automatic cover for ultimate buyers upto discretionary limit Commercial risks on agents covered Extended period for realization upto 360 days CONSIGNMENT EXPORTS POLICY (GLOBAL ENTITY) A method adopted by India exporters is consignment exports where goods are shipped to their own branch office overseas ready for sale to overseas buyers. providing adequate incentives and simplifying the procedures considerably. Thus separate credit insurance policy is introduce to cover exclusively shipments by the exporters to their branches overseas on consignment basis taking into account their special features. Period of the Policy: Risks covered: • Commercial Risks on overseas branch on conditions 90% for Standard Policyholders and 80% for others 12 Months Percentage of Cover: Important obligations of Exporters: • • Advance deposit of premium in advance on quarterly or monthly basis Obtaining credit limit on ultimate buyers beyond the discretionary limit . as and when orders are received.

To standard policy will be applied for whole turnover services policy and specific shipment policy (SSP-ST) premium rates will be applied for Specific Service Policy. The premium rates applicable. SERVICES POLICIES Services Policies offer protection to Indian firms against payments risks involved in rendering services to foreign parties. Period of the Policy: Risks covered: • • • Commercial Risks on ultimate buyers Political Risks LC Opening Bank Risks 90% for Standard Policyholders and 80% for others 12/24 Months Percentage of Cover: . A wide range of services. The exporters can opt for whole Turnover Services Policy or for Specific Services Policy depending on the nature of services provided. hiring or leasing can be covered under these policies.• • • • Quarterly/Monthly statement of actual exports Overdue declaration Filing of claim Sharing of recovery Highlights: • • • • • Covers only the consignments exports Rationalized premium for 360 days Automatic cover for ultimate buyers upto discretionary limit Commercial risks on agents covered Extended period for realization upto 360 days 10.

at its own cost. MATURITY FACTORING The Maturity Factoring scheme. 8. recovery. thus effectively addressing the needs of exporters to avail of prefinance (advance) on the receivable. facilitating collection of receivable on due date.Important obligations of Exporters: • • • • • • Advance deposit of premium in advance to cover premium Obtaining credit limit on services receiver Monthly statement of actual service provided Overdue declaration Filing of claim Sharing of recovery Highlights: • Option to select the type of cover. One important feature is the very role and special benefits envisaged for banks under the scheme. for their working capital requirements. as designed by ECGC has unique features and does not exactly fit into the conventional mould of maturity factoring. The changes devised are intended to give the clients the benefits of full factoring services through the maturity factoring scheme. Benefits: • • • 100% credit guarantee protection against had debts Sales register maintenance in respects of factored transaction Regular monitoring of outstanding credits. of all recoverable had debts .

Exporters Obligations: • • • Registration and obtaining permitted limit on the buyer Payment of factoring charges with statement of exports made Inform developments .Setting up Charges and Factoring Charges • The factoring application fee payable initially is Rs.10.after of this. the exporter will have to pay a processing fee equal to 0.000/.For setting up permitted limits on each of the overseas customers.2000/. the factoring charges payable as and when an exports bill is to be factored depends on the country to which the exports is made and the credit period.05% of the permitted limit sought subject to minimum of Rs.

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