EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

EXPORT IMPOR T PROCEDURE AND DOCUMENTATION

COURSE OVERVIEW

The world is forever changing, but the events that have taken place since1989 have been particularly dramatic. There have been border changes, in the name of country changes and technological innovations all of which have contributed to, altering the traditional depiction of countries in both shape and size. Our trading environment in terms of market structure and so we need new tools to deal with these new market dynamics. In this changing environment instead of just developing managers, executives, exporters and importers we need to develop them, to become good competitors. I am trying to provide a simple, verbiage-free and, above all, holistic compendium of principles and concepts pertaining to one of the most important areas of International Business. This course pack is designed in accordance with the requirement of this area, which is practically applicable in the organizations of the country. The main features of this course pack are: 1. In-depth analysis of the latest EXIM policy 2. Simplified explanation of the export-import Procedures. 3. Explanation of all the export-import Documentation. Export-import documentation and procedures is an important area of International Trade. Documentation and policy formalities are required to protect the interests of the buyer and the seller. This course pack has been divided into four parts, each part has its own importance in each of the organizations and countries. The explanations are given below: Part-I This part is related with the Introduction of International Marketing and Exim Policy, which tells about the modes of entry into the foreign market and about the dynamics of Import and export market.

Part II Under this part export finance plays very important role in export- import business. Adequate availability of export credit and attractive terms of payments followed by favourable exchange regulations facilitate the export import business. Shipment of export cargo is also a important area. Exporters are supposed to pack, mark and label the consignment in accordance with the requirements of the buyers. Apart from the selection of proper modes of transport, exporters are also required to comply with the legal aspects of the export business. Part III Government of India have setup several institutions for export promotion. At the same time, various incentives have been provided to the exporters to boost the export business. This part deals with the role of institutional infrastructure for export promotion and various export incentives and procedures for claiming export incentives. PART IV Import plays very important role in the economy of every country, rich and poor alike. Rich countries need to import capital goods, raw materials and technology to ensure an optimum utilization of their production capacity. Poor countries need to import technology and capital equipment to develop industries for accelerating pace of their development. For importing the goods various types of policies and documentations have been discussed in this part. The impact of liberal trade policy has also been highlighted in this part. I hope this study material will be helpful to all whether you are a student, entrepreneur, exporter, importer or marketers. Constructive suggestions for the qualitative improvement of the course pack, if any, will be received and honoured with deep sense of gratitude.

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EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

SYLLABUS

Description of Unit
This unit focuses on effective and efficient planning and management of various EXIM processes and Documentations thereof. It provides students with the knowledge and skills to manage the export Import documents and consignments for optimal result. At the end of module, the student will have a general appreciation of Export - Import Markets enabling them to integrate human and technological skills for achieving optimal solutions suited to the changing global business order. 2. Exporting & Export Procedures Legal aspect to Export Contract:- Meaning, Elements of Export contract, Meaning and Elements of Export Agency Agreement Export import policy of India: Objectives, Implications and short notes on EXIM Policy, Letter of Credit & Industrial dispute, Exemption of sales tax and Excise Clearance. What is Exporting: Introduction, hoe it is benefits to the country, why should a business export, special exporting problems, assessing export potential Export Processing order: Introduction, Objectives, Duty Drawback scheme, Refund of Central Excise and Tax Exemption, project export, Govt. support to project export, etc. Export Procedure: Meaning, Types and Procedure for settlement of Claim of Marine Insurance etc. Quality Control and preshipment Inspection etc. 3. Export Documents & Export Promotion Organization Export Credit Insurance & Overseas agents: objective, Introduction, Organisation Covering credit risk Basic principle of ECGC, Small exporters policy etc, Finding of an Agents, Methods of paying agents and relationship with the agents etc. Export Documentation: Explain all documentations like Commercial bills, shipping bills, airway Bill, Bill Of Lading Etc Export Finance: Introduction, Pre-Shipment Finance, PostShipment Finance, Role of Export Import Bank of India, Recent Developments in Export Finance etc.. Export assistance and incentives: Introduction, Export promotion Measure in India, expansion of product Base for exports, Rendering export price Competitive etc.. Export Promotion Organisation : Explain in short all promotional organisations. 4. State Trading &Import Trade Procedure State Trading Corporation: Introduction, Functions, Performance, Weakness and future plans, state Trading in India. State trading Organisation: Introduction, Discuss the Major State Trading Organisations like-HHEC,PEC, MMTC, etc.

Summary
To achieve this unit student must
• Examine concepts of Export Import Policy • Explore the procedures and how to make documents

relating to Import-Export
• Practical applications of all theoretical aspects for the benefits

of the organisation.

Content
1. Introduction of International Marketing Concepts of self Reliance: Introduction, Meaning, Importance & achievements Towards Self reliance. International Marketing & Policy of international Trade : Definition, Process, scope and Globlisation, Trade Barriers in International Marketing, Objectives, functions and Urgency Ground of WTO,GATT, and trading blocks Etc. Regulation of international trade and foreign trade in India: Introduction, Major laws Governing Export Import trade and FEMA act. ,Trends in Exports, trends in India’s Imports, Main Features of World trade in 1998, The Indian Textile Industry etc. Profit of the European Countries and Trade Agreement: Introduction, Objectives, trade policy of European Union., new generation Regulation etc. Programs on trade and economic operation, International Conferences.etc. Labelling, packaging of Export Consignment: Introduction, what is Labelling and packaging , Marking and New packaging rules.

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EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Import Trade Procedure: Introduction of Import, Liberalization of Import, Types of Import, Special schemes, Import procedure. Import documentation: Introduction, Capital Goods, Import Documents, Custom Clearance procedure for import goods , Retirement of Import Documents, Bill of Entry. Import Finance: Introduction, Objectives, Regulatory framework, Methods of import Finance

Suggested Leading and Links
• www.export911.com • Sak Onkvisit & John J.shaw- International marketing

(prentice-hall of india 1992)
• Gupta & Varshing International Marketing Sultan Chand &

Sons
• D.C. Kapoor-Export Management -Vikas Publishing House • Khurana: Export management- Galgotia Publishing House • Export –Import Procedures and Documentation- Acharaya

& Jain-Himalaya Publishing House.
• IGNOU Study materials.

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EXPORT IMPOR T PROCEDURE AND DOCUMENTATION

CONTENT
Unit No. Lesson No. Topic Lesson Pla n Course Requirements 1 Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 Lesson 8 Lesson 9 Lesson 10 Lesson 11 Lesson 12 Lesson 13 Lesson 14 Lesson 15 Lesson 16 Lesson 17 Lesson 18 Lesson 19 Lesson 20 Lesson 21 Lesson 22 Lesson 23 Lesson 24 Lesson 25 Lesson 26 Lesson 27 Lesson 28 Lesson 29 Law Relating to Settlement of International trade disputes Export- Import Policy of India Terms Used in EXIM Policy Export Procedure Procedures For Claiming Export Incentives Marine Insurance Export Documentation Export Finance Processing of An Export Order Export Assistance In India Export Promotion Organisations State Trading in India State Trading Organisation in India Import Trade Procedures Import Trade Documentation Import Finance Locating and Selecting Overseas Agents Export Documentation - I Export Documentation - II 71 78 86 93 105 113 119 137 144 150 156 164 172 178 185 190 196 200 209 National Economic Self-reliance Introduction To International Marketing Globalisation of Indian Economy International Marketing Environment International Marketing Environment WTO, GATT and Trading Blocs Regulations for International Trade Legal Aspect of Export Contract 33 41 49 57 20 1 8 Page No. vi xi

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EXPORT IMPOR T PROCEDURE AND DOCUMENTATION

CONTENT
Unit No. Lesson No. Lesson 30 Lesson 31 Lesson 32 Lessom 33 Lesson 34 Lesson 35 Lesson 36 Lesson 37 Lesson 38 Lesson 39 Topic Export Assistance In India Export Finance Export Promotion Organisations State Trading in India State Trading Organisation in India CASE- 18 - Mmtc Keeps Exports to S. Korea Intact Through Novel Tieups Import Trade Procedures Import Trade Documentation Import Finance 255 256 263 268 274 Page No. 218 224 232 240 248

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d. Each member of the Syndicate is expected to participate equally to solve the given problem. which is integrated together to form the project. While they are expected to present common solution. This helps in inculcating the culture of team work. It also helps those who are not as good in the subject as some of their other colleagues are. Presentation. The students may correct the error committed by them while submitting the assignment at the presentation stage. Net. ability to respond to queries. Approach adopted to find solution to a given problem. b. Each student is required to make self and peer evaluation in accordance with a format. b. Communication skills. All students of the syndicate are expected to submit the assignment individually. c. Ability to present his point view systematically/logically. e. The students are expected to have gone through the pre-study material and come prepared for discussion.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION COURSE REQUIREMENTS Class Participation It forms the backbone of the system of Continuous evaluation. they have the opportunity to express themselves as individuals and demonstrate their exceptional ability. Integration of the inputs to an unified Syndicate solution Assignments Each student is expected to submit two assignments per subject during the semester. Group Project This activity is also aimed at developing the culture of teamwork. We visualize that the quantum and quality of learning through discussion would be much superior to simple delivery of the course material in the classroom. Syndicate It refers to the group of students who are assigned same tasks to be performed. Different assignment is given to different Syndicate. e. Ability to take criticism. d. highlighting their advantages and defects. The system of assignment follows the procedure given below: a. correctness. Students may furnish additional data/information downloaded from the Internet/other literature and put up diverse views away from to syndicate solution. c. b. if any. f. practicability. g.1 d. Each member of the team gathers the desired data. use of technology and application of statistical tools. They shall be prepared to answer queries raised by the students as well as the faculty members. 11. etc. b. e. Completion of the assigned job within the allocated time frame. Initial discussion to identify the job description. quality of presentation (Slide /Power point presentation/OHP Film). The project report is evaluated for the following: a. Group Presentation Most professional courses train their students in developing presentation skills. xi . etc. The evaluation is made on the basis of the project report and presentation. In our system the assignments are executed by the Syndicates. Commitment to learning. The process is intended to identify the following aspects in a student: a. All the members of the syndicate are expected to share the presentation of the assignment executed by them. They may recommend deletion/modification/ addition to the syndicate solution. Recommendation. Statement of the problem/issues (correctness/quality). to gain significant knowledge. analysis. c. and their critical analysis. clarity of concept. The team members shall get together to decide at the share of the work.675. Desire to studiously go through the study material and research books. Research on existing practices. Suggested Solutions. This is a confidential document between the students submitting the assignment and the faculty member. End Semester Examination These examinations are conducted in the usual manner. The Syndicate accomplishes the assignment as under: a. Regularity to attend classes. Each student is expected to meet the attendance requirement of 75% in aggregate.

However.1 . and found camp alone at times. Self-reliance paves the path towards self-sufficiency. a more direct involvement with the production process or service. I believe that self-reliance is just being your own person and not always following behind one person and not to be influenced by negative things from negative people. adopted a policy of protectionism for bringing about all round development of their economies. Self-reliance is what you do using your mind. facing developing countries like India. Fortunately. You may find it difficult to understand what it is you need to know and be tempted to try and collect everything.LESSON 1: NATIONAL ECONOMIC SELF-RELIANCE UNIT I Introduction Meaning of Self-reliance Self-reliance and Indian Economy • • Importance.” —Henrik Ibsen (1828 . This knowledge of my local conditions comes from paying attention to the daily weather. you merely need to know who can assist and have something to trade. We get a day of two of wonderful growing weather and then. Achievements Self-reliance is the only road to true freedom. This knowledge can enable me to plan my food production so that it suits the weather it encounters Knowledge is the essence of being self-reliant. In general sense. Even where the required skills are beyond those possessed by the individual. That is an example of the Outlawz using self reliance. You avoid drowning by having a clear vision of where you are going. The trade policy of 1991 introduced many reforms to open up the Indian economy to foreign trade and to integrate it with the global economy in the new international economic order that taking shape with the setting up the WTO (world trade Organisation) in 1995. A community. even though self-sufficient. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Introduction Dear Friends. such as the IMF and the World Bank. it’s Fall. The success of these countries has prompted many economists and international agencies.” — Patricia Sampson Never wear your best trousers when you go out to fight for freedom and truth. This is why you should be your own person. See. self-sufficiency implies that a country is in a position to fulfil all its requirements of goods and services from domestic sources and is not at all dependent on import. South Korea and Taiwan. if I was I’d be concerned right now. may still want to engage in social exchange with other communities.Good Morning This is our first session with “National Economic Self-reliance. I also start seeds indoors six to eight weeks in advance (tomatoes) so that they can handle the cool temperatures when they are transplanted. If you live within a community you do not need to know how to do everything yourself. not an info-junky. You need to become. which is being able to depend on yourself alone and to do things by yourself without assistance from others.1906) A major goal of self-sufficiency is to enable the individual to directly produce. I am not yet counting on my garden to meet all my food needs. In such a 1 11. Singapore. cooked. Self-sufficiency can be interpreted in both a general as well as a partial sense. We accomplished self-reliance as a group because we were alone a lot doing things as a group without the counselors. including India. Meaning of Self-Reliance Self-reliance is being independent. blam. Such countries including Japan. often seek the company of other like-minded people. to advocate import liberalisation and export promotion as a panacea for many economic ills. If you are a homesteader living far beyond the sidewalks then this may need to be your goal. Hong Kong. because the individual has enhanced his or her knowledge base and reduced his or her dependence upon someone else to achieve the desired goal. Many developing countries adopted programmers of import liberalisation and export promotion in the 1960’s and achieved remarkable success. body and soul. This increases confidence. but someone who has an active curiosity and constantly strives to enhance their knowledge base. Most of the newly independent countries. and being one’s own person is its ultimate Reward. You have to learn to value the little tidbits of data that float your way and to do so while swimming in an information stream. The term self-reliance is often confused with self-sufficiency though they are not one and the same. You may drown while doing so. We hiked. Lets be active and make this lecture interactive and interesting with the discussion of self reliance and self sufficient. Self-reliance requires confidence and knowledge builds that confidence. just as individuals. However. I know what the weather can do and anticipate poor seasons by keeping a larder stocked with enough food so that if I have a bad growing year. we will not go hungry. the attitude of such countries changed radically in recent past. Communities may be self-sufficient unto themselves as they can produce all they need. can result in greater self-reliance. Following the footsteps of such countries. this strategy not only failed to boost up the stagnant traditional economies of such countries but also kept them aloof from the latest developments in the technological and-scientific fields in most of the developed countries of the world.675. the Government of India adopted the policy of the trade liberalisation in 1991. first of all we will discuss what is self-reliance? My tomatoes need heat and sun and the weather is giving me grey and cool.

Indian economy at that time was afflicted by severe problems like shortage of foodgrains. Though this benefited consumers in the short run but it had many adverse repercussions such as threat of political blackmailing from major foodgrains suppliers. was the persistent deficit in balance of payments.situation the possibility as exports can also be ruled out as. industrial development in India after independence manifested all the signs of underdevelopment. heavy chemicals and others were set up.Self sufficiency in foodgrains has always been considered and essential condition for India’s self reliance.e. the production of foodgrains in India was much less than its demand. As a result. We need to analyse these aspects of Indian economy in order to understand why economically backward country like India should become self reliant in these key areas of development. the industrial development in the India was confined to traditional indigenous industries producing handful of consumer goods such as cotton textile. At this juncture. absorbed form foreign economies. failed to raise adequate funds from foreign sources on account of certain political constraints. capital equipment. accorded a top priority to the programmes of industrial development as soon as planning process began in India. Unemployment is the major problem. if the country is not dependent on imports. Consequent to the Withdrawal of PL-480 programme by the US and subsequent launch of the Green Revolution strategy by India. India’s Achievements Towards Self-reliance So far India is not a completely self-reliant economy. The balance of payments situation right now is not precarious. Industries manufacturing intermediate good like iron and steel. including iron and steel. India had to depend on external foreign aid for meeting its import requirements. a. the world politics as whole was undergoing a revolutionary change but the developed countries. b. In short.on the eve of independence. whatever technologies are being utilized presently are obsolete and outdated technologies. scarcity of capital and technological obsolescence. it can be said that to be self-reliant a country need not be self-sufficient. which can fulfill the needs of providing job opportunities as well as help the economy in keeping with the modern world. India. The government. The reason not being a sudden rise in production of foodgrains. d. which hardly contribute to the economic development of the country. underdevelopment of agricultural as well as industrial sector. Scarcity of Capital: . Obsolete Technology:. India was purely an agrarian economy and this character of Indian economy has not changed over the past five decades. coal. science and technology and capital formation is quite significant. though its progress towards self-reliance in foodgrains. At the same time. a country is capable of meeting all its requirements either from domestic sources or has an ability to import them from abroad. foreign.. could not risk its freedom again by opening up its economy to the western world. donor countries taking advantage of the weak bargaining position of the capital recipient country impose highly objectionable conditions which can affect the autonomy of the decision making processes in the recipient country. exchange earned through exports has no relevance for such country. Importance of Self-reliance India won independence after about two centuries of colonial exploitation. However. non-ferrous metal.Accounting to the Central Statistical Organisation (CSO) the Gross Domestic Saving (GDS) rate was just 8. As a part of planned efforts. As a result. The second Five Year Plan was referred to as industrial plan and number of basic and heavy industries. sugar. however. Underdevelopment of Industrial Structure:. but the country’s dependence on MNCS for setting up power projects and large oil imports raise serious doubts about India’s capability to become completely self-reliant in near future. a. India had to import technology from outside. However. Hence. self-sufficiency in general sense is an unrealistic situation.95 in 1950-51. etc. Capital goods industries were almost non-existent.. At the time of independence. Shortage of foodgrains in the country often led to mass unrest and therefore India entered into the PL-480 agreement with the USA for the import of foodgrains. Self Sufficiency in Foodgrains :.1 . Therefore. paper and leather goods. were not prepared to abandon their imperialistic pursuit. In fact. cement.At the time of independence. However. like many other newly liberated countries.675. etc. i. The GDS rate did not show much increase during the planning period in the initial phase. Some of which are not at all suitable for Indian conditions. c. During the 1980s the imports of food grins in India reduced considerably. are being utilized presently are obsolete and outdated technologies. which country is facing even today. the other factor which compelled the government to seek foreign aid. The country. had a capacity much below the requirements. a very little attention was paid to the development of modern technology at home. and as a result capital-intensive methods of production are not suitable for our economy Therefore. a number of industries were setup in public sector. Self-reliance implies self-sufficiency in partial sense. cement. Besides the low rate of saving. Taking this into consideration India needs to develop its own technology. but because the country EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 2 11. The problem with foreign aid is that while giving loans. agricultural sector received a boost and due to assiduous efforts of more than a decade India achieved the dream of self-sufficiency in the production of foodgrains by 1977-78. Shortage of Foodgrains:.India is an overpopulated country with ready availability of efficient and cheap labor at hand. This rate was much below standard. self-sufficiency in partial sense implies that a country is in a position to fulfil all its requirements of goods and services either from domestic sources or has adequate foreign exchange to import goods and services it requires from abroad. in order to keep pace with world economy. bad impact on domestic producers. with the withdrawal of PL-480 programme by the US and subsequent launch of the Green Revolution strategy by India has removed obstacles to the development of agricultural sector in India and today we are self sufficient in the production of foodgrains. thus.

1% in 1999-2000.1 . Even n the atomic energy programme.At present India is facing a serious energy crisis and until it is solved the country cannot hope to become self-reliant. there is no doubt that the conditions since 1993-94 have been distinctly favourable in comparison to the conditions prevailing in the period 198081 to 1992-93.5% of GDP as against 1. However. Over the years agricultural research has played a crucial role in raising the production of foodgrains and today we are self-sufficient in the production of foodgrains.8% of GDP during the Seventh Plan. In 1993-94 the current account deficit was only 0. 71. This level of buffer stocks was much larger than that was required to sustain public distribution system and stabilize prices of foodgrains in the open markets. In addition of these significant developments. For the Seventh Plan 8. fabrication and commissioning of nuclear power reactors and all associated elements. However. India is capable of setting up big industrial units with indigenous machines and technical know-how.4% of GDP. e. capabilities relating to design and fabrication of satellites and of satellite launch vehicles have been developed which should lead in a few years to the possibility of launching and utilizing operational satellite on an indigenous basis. In January 2002. In fact. exports rose at an impressive rate of 20.675. Energy Crisis and Self Reliance:. the saving rate (Gross Domestic Saving as the percentage of Gross Domestic Product) was as low as 8. In 1996-97. the country has make a considerable headway in various areas of science and technology. These MNCss insist on exceptional rights and privileges for making investments in India. technical consultancy and turnkey projects. With appropriate fiscal measures if this black income is canalised for the development of the country. At the same time. India marched on the path of industrial development. 3 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11.0%.2% of GDP from 1.2%. As a result of boost given by the public sector and active participation of private sector later on. there is a strong case for selfreliance in science and technology. iron and steel and some other capital goods industries were set up in public sector. buffer stocks of foodgrains were more than 50 million tones. the current account deficit was 1. majority of basic and heavy industries such as heavy engineering. Today. the country realized this quite early and as a result. This shows that India’s capital base is reasonably strong. Today. Under these circumstance India has to depend on foreign MNCs for setting up power projects. Over the whole of the Eighth Plan period (1992-93 to 1996-97). In this year while imports increased at a rate of 10. engineering goods constitute one of the biggest export items.497 crore. a high degree of self-reliance has been attained in terms of design. imports of petroleum products in 2000-01 were as large as Rs.2% of GDP. Self-Reliance in Capital Formation:. Hence. it is not always possible to acquire the necessary technology on commercial terms. This fact clearly shows that the country has make a significant advance towards self-reliance in the realm of capital formation. And yet the country successfully handled the food problem without recourse to large imports. c. Self-Reliance in Capital Equipment:.Development of science and technology plays a crucial role in the economic development of a country. f.8% resources were mobilized through external assistance as against 26. the current account deficit declined to an annual average of 1. Domestic production of oil has stagnated for the last few years and our index of self-reliance in oil has come down from 70% in 1984-85 to 32. given the political environment at the international level.When India launched the programme of planned economic development in 1951.5% per annum. transmissions and distribution losses are high. As a result. Self-Reliance in Science and Technology:. d.9% resources had to be mobilized through external assistance. At this level of saving not much external assistance is required for realizing a modest rate of economic growth of around 5. plant and other capital equipments. these expectations were belied as 9.had been able to build up large buffer stocks of foodgrains from which supplies could be released in the years of bad harvests to match the demand. This because necessary because of the presence of large black income in the economy. In 2000-01 India’s current account deficit declined to 0. There is an acute shortage of power and energy resources in the country. The foreign exchange reserves were equal to eight and a half month’s imports. a noteworthy feature in India’s balance of payments in recent years has been improvements in the invisible account due to mainly a spurt in tourism earnings and shift of private transfers from illegal channels to banking channels. the economy would reach a still higher level of saving and its dependence on foreign aid would be reduced significantly. b. The State Electricity Boards are grossly overstaffed and are plagued with rampant corruption.The second Five Year plan laid the foundation of industrial development in India.4% in 2000-01. we are self-sufficient in the production machinery. This undoubtedly is a big achievement of economic planning. machine tools. Since initially the private sector did not come forth due to high investment and long gestation period. which is channeled to conspicuous consumption and thus play no role in the development of the economy. In 1986-87 and 1987-88 the country experienced serious droughts.3% for the Third Plan and 26.5% in 2000-01. The agricultural consumers are supplied power at very subsidized prices.9% Since then it has risen to over 20% and was 24. Balance of Payments Deficit and Self-reliance:Although India’s balance of payment position has always remained unfavourable. In the space programme. Over the years dependence on external assistance has declined. The planning Commission has hoped that the country’s dependence on external assistance would decrease further during the Eight Plan period. India’s competence in industrial technology has grown so much that it has now emerged as a leading Third World exporter of industrial know-how.4% for the three Annual Plans of the latter half of the 1960s. which has led to inefficient use of electricity.

increase in literacy. etc. philosophers. We became the followers of single tracked materialistic development without bothering about what could be essential for elevating the status of a diversified and illiterate society like ours. the impact of ‘religion’ has been confined to emotional excitation. when we talk of all round peace.1 . bureaucrats. the country has no choice but to depend on MNCs for expanding the capacity in the energy and power sector. Social status of women has not been ameliorated much as compared to that in the pre independence period. writers. Similar is the case of the economic exploitation of 4 11. where. over the years the goal of overall self-reliance has proved to be elusive because of the balance of payments problems created largely by oil imports and the serious crisis in the power sector which has lately gripped the to attain this objective. decrease in mortality rate. have we ever thought. After 50 years of political independence. industrialists. for the solutions to accelerate EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Article . families constitute the societies. planners. social disparity. it naturally persists and expands like the mutually supportive motion of the waves in an ocean. appear to have little effect in diverting the wrong trends. affects the others in corresponding proportions…. The national picture – especially in the Indian context. India’s advance towards the goal of self-reliance in the near future is somewhat doubtful. an ensemble of which is seen as the world….675. In this sector. Harmony of all musical nodes is necessary for the melody of a tune. our level best. personal favors or threats and fears in a society. The large number of literacy campaigns. The political and economic systems too are infected by these social evils in one form or the other…. are also counted as positive signs of progress. policy makers and managers. the social and religious systems have remained the areas of lesser attention. where. who design its political edifice. social welfare schemes. healthcare projects. energy sector units will not be financially viable and the power sector will remain starved of ingestible resources. do we deserve them? How can a democracy be healthy and strong unless the voters. religious misconceptions. familial and social spheres of common man’s life. our dreams of prosperous development were bound to be shattered in the long run…. superstitions. Despite significant progress in agriculture. economy. It is surprising to note that even the awareness generated during the great movement of India’s independence could not be channelized for similar revolution on the social front. …. where. the pricing policy is rationalized. blind faith.etc. ignorant and deprived of even the basic necessities of human life? How could we expect efficient. the weaker and the poor ones. its economic growth and industrialization. it is not clear where the nation is really headed? There certainly has been significant progress in some fields of science and technology. the ambitions and aspirations of the majority for luxuries and aplomb…. But. chose to remain culturally enslaved and confused. and we have the right to crown ourselves with the pride of the dignified values these stand for… But. we. have added to the complications of the challenging problems associated with national development. The egotistic and selfish attitudes of the learned and elite ones – including many of the journalists. social injustice prevails in almost every family – depriving its female members of the fundament human rights. the poor ones continue to increase in number. are made aware of their rights and responsibilities? How would we prevent biased voting influenced by caste. The condition is more pathetic on other facets of social development. progress and prosperity of the nation. “might is right”. To sum up. rather than resurrecting our original glory. unequal economic progress. Wealth of the nation. rapidly declining cultural values. science and technology. We hardly cared about the inherent nature. efficient cooperation and justified sharing in the national progress. It is indeed unfortunate that after over 2500 years of slavery. rising corruption in almost every walk of national life. Social anarchy accelerates the law and order problems at national level… Moral degradation and instability of the family institution is reflected in similar negative trends at the social levels too…. though implicitly. scientists. rather. where.1 Making our nation strong and self-reliant (Rashtra Samartha Aur Sashakta Kaise Bane?) Individuals make the families. Hence. Our democracy and our constitution are indeed the best in the world. This relationship is not hierarchical in nature. These trends are expected to persist for some time at least. and societies together form the nations. but imports have also increased. and attitudes of our masses. culture. familial and personal domains too. honest and responsible representatives to be elected from a society. The present scenario at global level depicts an arbitrary mélange of bright and gorgeous as well as dark and dull colors of positive and negative progress. we will have to ensure harmonious endowment of these prospects in its constituent social. bribery. the explosive growth of population. artists. convictions. whether or how much. and. etc. inefficiencies in the use of created capabilities are removed and rampant corruption is checked.As far as the power sector is concerned the problem is far more serious. blind faith and backward traditions? Some of us might think that this is not our duty to answer the above or to search. is equally blurred. show the depressing sides. Castism. Indications are that debt service on borrowings will increase in the years ahead. Under these circumstances. Self-reliance in agriculture. Recently export growth has accelerated. seem to have made the rich men richer… . Disturbance in the natural order of any component. the curse of dowry and similar absurdities of the customs and convictions born out of the pernicious era of ignorance and slavery – continue to dominate the Indian mind. the majority of voters are uneducated. without whose compatible response. Analogously. decreasing morality and reduced sense of responsibility in the personal. Excellent constitutional provisions have not been implemented to the extent as might have been planned by the architects of sovereign Indian democracy. until the State Electricity Boards are made autonomous. when we finally got the opportunity to breath in free India.

do we get to try best use of the limitless potentials of our lives because of the above attitude. His thorough discussions encompass comprehensive reviews of other authentic experts of the concerned topics. and sagacious scholar had envisaged that – “an absolute revolution would be necessary on the cultural front too. His trenchant views concerning the present state of the nation and its cultural and social system should open the eyes of the leaders. and illuminate the intrinsic world by the nitid glow of pure intellect and divine piety…. social reformer. After India’s independence. which had bestowed divine glory on this nation. which separates animals from humans.” It is this class of ideal citizens. The state of the nation today – after 50 years of political independence. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 5 .1 of religion (refer volume nos. he describes the qualities essential for a good leader. The volume also elucidates what is necessary in terms of policy decisions and planned reformative activities at national level towards righteous implementation of our constitution and prestigious progress of our democracy. He has specially called the awaken talents to feel the pains of the nation and share the collective responsibility of national development. He knew the psychology of Indian mind and the depth of its religious spirit…. His trenchant views should also be read by all those. who had sincerely participated in the movement of India’s independence. who try to politicize the concept of religion. chosen to dedicate his life for social and cultural reformation from the religious rather than political platform. if India were to be independent and progressive in the truest sense of the words…”. has now become a reality. Then. and realisations 11. Acharya Sharma was a dedicated freedom fighter. saint. creative and determined. but that is neither the end of our duties. Guidelines for viable economic techniques for progress of agricultural sector and small-scale industries are also presented here along with details on creative programmes of effective control of population growth. His definition. Mahatma Gandhi. We might be correct. after all we are not leaders. and. policy makers. Some of us do want to contribute in this direction. Dr. cultural and moral rise of a nation becomes possible only when religion – ideal philosophy of life. (Maharshi) Arvindo Ghosh. is given due place in the lives of its people. spiritual master. he had. altruist attitude and stability of mind are fundamental requirements in public service. self-confidence and sense of responsibilities in them too. or who exploit people’s faith for their vested political interests. nor. but we can certainly expand the peripheries of our immediate duties to inspire all others in our contact to educe greater faith in moral values. The leader should be some one who knows the enormous problems of the socioeconomic system of his nation. evinces that his vision was indeed real. 36. detailed information and feasible and creative programmes for each one of us to help ameliorate our personal. But then. Acharya Sharma therefore emphasizes the need of compatible conjugation of religion. Acharya Sharma’s mission of cultural and religious revolution and social reformation and welfare is based on the fundamental elements and principles of the original Indian culture – the culture.. politicians or activists. S. or. Right since he was a young volunteer in the non-violent freedom-struggle. It is in the context of establishing such virtuous tendencies. A leader has to be an efficient manager – of the national system. we might be either selfish. His deliberations on the role of religion in national development should be analyzed by all those who discard religion from the “prudent modes” of life and who are dead against the collaboration between the religious and political systems. He critically warns those who propagate communalism. familial and social lives by means of thoughtful orientation and collective contribution of our own potentials and talents. His guidance for the future development is realistic and takes into account the multifarious problems and impedance existing in the present system. What Acharya Sharma had warned 50 years ago. which has come forward to contribute in the constructive programmes and reformative activities of his mission. irresponsible or cynical in some respect. and other revered national heroes of India. The author also reminds each voter of the latter’s duties and rights. might be unaware of our duties and ignorant about the facts of – where our true welfare and ultimate interest would lie? Many of us think that the best we could do is to improve ourselves. we do care for altruist service of the nation. His sagacious deliberations would convince us that it is religion. that the linkage of religion with politics is advocated here.675. inspires courage and motivation to enable the voters come forward and strengthen the democratic system. who has the will and experience of solving people’s problems and also has vision to guide viable solutions. Religion is an integral and intimate component of human life. We may not generate movements. which can eliminate the smog of animal instincts and unethical passions.righteous progress of our beloved nation. who could initiate revolutionary movements. who is wise. how could it be separated from the social and national domains? In fact. increase our own integrity and efficiency in order to fulfill our immediate duties…. He was trained under the noble guidance of Pt. With reference to the reformation of political system. Political anarchy. but do not know how to proceed? This volume brings motivating guidance. piety of sentiments and strength of character of its citizens…. superstitions and prejudiced principles and traditions in the name of religion. Misconceptions and hypocrisy have no place in Acharya Sharma’s perspicuous explanations. innovative. because. Radhakrishnan. culture and politics. Integrity of character. righteous thinking. considering the psychological makeup of Indian public. at the same time. In his words – “the enlightened development of a nation progresses on the strong foundation of the prudence. coward. Madan Mohan Malviya. We don’t even believe in the purpose and success of any such movement these days…. unlike many other freedomfighters. planners and the intellectuals of today…. corruption and autocracy can be controlled by the righteous disciplines (ethics) of religion. philosophy. 53 of this series) are scientific and universal as they emanate from absolute understanding of human mind and realisation of the inner self. this great patriot.

The IAF is facing a similar situation on the jet trainer front. How fast to produce equipment designed and developed by our scientists and considered the best in the worked even by those who are leaders of defense industry in millitary advanced countries. The indigenisation of military machines is the need for the now millennium. keeping in view the present strategic compulsions.Acharya Sharma’s mission and its dedicated volunteers stand before us as guiding light and live evidences of how awaken talents would design the bright future of the nation. many times more has the flying. Few days earlier during a visit to Bangalore. which cannot be achieved and is not done by any production unit anywhere in the work.000 hours in Pakistan. with the result that production activist is halted for long spells. and there are no signs yet of its completion this is not due to HAL’s failure to complete the project in time. like the missiles. But the user have no funds to buy them and hence they cannot have the radar’s. The issue is of as much worry to the armed forces as it is for others. production plans halted for want of funds or foreign exchange problems can continue and the state-of the-art machinery supplied to the forces fully indigenously produced. Several MPs repeatedly asked the government during the just-conclude winter session of parliament as to what steps had been taken to meet the situation if the computers stop. the 6 11. At the moment. The Force has been asking for an advanced jet trainer since the mideighties. The public sector enterprise was the brainchild of Krishna Menon who as the Defense minister in the 1960’s has predicted the need for such an organization to design. (BEL) at Bangalore. This has happened with several projects. Suppose.2 Self reliance goal for now millenium In a couple of days from now we shall be in the Y2K – year two thousand. sophisticated military machines and weapon systems are computerized and for a common man. especialy those in the Bharat Electronical Ltd. They must be trained on a fast machine of an advanced jet before going in for a “Conversation” for supersonic fitter planes like the Jaguars and Mirages.Mahara had asserted that if we did not commit ourselves to indigenisation.8 and 2. this country will regain its lost prestige and set shining example before the world in the forthcoming century. develop and produce electronics systems for the future armament industry. but have not gone into full production stream for either lack of funds or availability of foreign exchange to import some crucial components which are not produced indigenously. thanks to the Defense scientists. most accidents are attributed to pilot error and of course. 0. we will have to import one”. to name a very few. Actually.000 flying hours.. say. The organization had designed and developed for indigenous production most modern sophisticated machines and lethal weapon systems. It has been variously estimated at 3. whether in private or public sector. It is only because of the Union Government’s failure to give the project ht priority it needed.8 in the UK.65 in the USA and 0. say. it is invariably abroad.675. Such items are many which have been tried and produced by the DRDO. for example. the problem for the situation is not the DRDO. It will be totally unwise to produce them indigenously. Most of the latest. and grown into an envy of the work. because the costs have escalated for the indigenous production of the components. Even if abroad. in the UK and the USA . as assured by Acharya Sharma. The low level radars which incorporate the latest and most sophisticated technology in electronics and communications. Remember. And within hours of entering the now millenium we would know whether or not the “bug” which worried the work. Instead efforts are on importantly . No special facility for the production of a small component of machinery can be raised. This and allied enterprises have developed consistently over a period of time under the Defense Research and Development Organization (DRDO). This compares poorly with 1.4 per 1. a few specially designed nuts and bolts are required for. It is at the production level. This arised following a feeling – and rightly too that the components which the defense-production units import at high costs should be indigenously produced by the private sector industry in adjoining areas of the Defense production units. This is something. incidentally. lack or training on there right type of aircraft. There are several reasons for high rate of accidents in the IAF. at times forever. we are denied that and the denial is considered as one of the main cause for the high rate of accidents in the IAF. despite the fact that the country has a potential to produce them. because in the absence of an advanced jet. a gas turbine engine. particularly when its demand is limited to a barely few pieces in an ear. Air Chief Marshal S. he told me “if we do not indigenously produce our own jet trainer. In this context. The chief of the Air Staff way back in 1991.1 . the fighter pilots training is suffering. India has already made giant strides in the software technology. “the IAF would cease to exist after the turn of the century”. a question is relevantly raised about the civil industry cooperation in import substitution efforts in defense production. It is by our collective endeavors and confidence that. as well as the imports which constitute between 25 and 30 per cent of the components used in its production. was real or imaginary will the computer fail or accept the change of the century. The light combat aircraft (LCA) project of the Hindustan Aeronautics Ltd. What would happen if the enemy attacks India on the now year’s day? No cause of alarm at all. The components have to be procured from wherever it is produced in bulk. a field in which India’s ship building industry has gone quite far. Their requirement should have been met at top priority basis. They are competent enough to meet the Y2K bug. raiders and pilotless aircraft.2 per 1. where not being produced. however. In case of Indian. like the fact that an IAF fighter pilot many . because it will evidently be not economically feasible to do that. Thus.K. has been hanging fire for over a decade now . of their interest! The result? Till today the IAF’s young fighter pilots do EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Article . The efforts to do that have no so far not progressed satisfgactorily for various reasons. The most glaring example of such a situation is the production of gas turbine engines for warships.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Question Bank Q1.675. What do you mean by self-reliance? What role does it play in the development of the developing economy like India? What are the achievements of Indian economy in the field of self-reliance? Q2. This.not have either an imported or an indigenously produced trainer.1 7 . requires cooperation of the civil industry. which can e achieved only if there is the political will to make self-reliance a goal for the next millenium. as pointed out earlier. The delay in the implementation of the AJT project is just one example to show how indigenous production efforts of the public sector defense industry are halted and last minute rush takes place to purchase from abroad off-the-shelf machinery at high costs. This tendency is required t be changed and efforts made to put all the emphasis on self-reliance in defense production. 11.

the definition stresses a relationship between a consumer and an organization. have nothing to do with consumer products. Multinational Corporations (MNCs) Globalise or Perish • • Process of International Marketing A study of international marketing should begin with an understanding of what mar-keting is and how it operates in an international context. developing suitable products and services to meet this opportunity. and distribution of ideas. Export Marketing and Domestic Marketing. Companies such as Boeing and Bechtel. Meaning. promote and direct the company’s flow of goods and services to consumers or users in more than one nation for a profit” (4 P’s) 8 11. In several ways. Because of the large num-ber of marketing textbooks. and services to create exchanges that satisfy individual and organizational objectives. Globalisation of the Indian Economy. Nonetheless. In effect. Only the word multinational has been added to the definition adopted by the AMA. pric-ing. which involves a transaction between’ two organiza-tions. Religion has been marketed internationally for centuries. Importance. That word implies that marketing activities are undertaken in several countries and that such activities should somehow be coordinated across nations. goods. this should be viewed as international marketing. Process Features. MNCs and TNCs joint ventures and foreign collaborations. a variety of definitions of marketing are currently in use. Introduction of International Marketing International marketing is a broader concept and includes export marketing. Today’s topic is “Introduction Of International Marketing” .EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 2 & 3: INTRODUCTION TO INTERNATIONAL MARKETING AND GLOBALISATION OF INDIAN ECONOMY Introduction International Marketing • • • • • Definition.When the United Nations promotes such concepts as birth control and breast feeding.. in par-ticular. it makes it clear that what is to be’ exchanged is not restricted to tangible products (goods) but can include concepts and services as well. Any definition is acceptable as long as it captures the essential idea and as long as the strengths and limitations associated with the defIniti9n are acknowledged. Special Problems. it excludes industrial marketing. His television programs have been shown in many countries. Yet most of these definitions are . the definition does offer several advantages. promotion. price. it care-fully describes the essential characteristics of international marketing. By placing individual ob-jectives at one end of the definition and organizational objectives at the other. pricing. and profit-seeking and nonprofit entities are frequently buyers. A definition adopted by the AMA (American Marketing Association) is used as a basis for the definition of international marketing given here: international marketing is the multinational process of planning and executing the conception. across twenty-nine time zones to ten million people in 195 countries. In the world of international marketing. tl1?ugh most people prefer not to view it that way. Export marketing is concerned with the production of goods in one country and marketing them in different countries of the world while international marketing is a broader concept and includes globalisation. Billy Graham.Before Discussing the International Marketing We will discuss “What is Marketing”? Marketing is the process by which the demand structure for products and services is anticipated or enlarged and satisfied. It closely resembles the AMA’s widely accepted and easily understood definition. promotion and distribution of ideas. for example. is a well-known exporter of religion.convergent in the sense that they all describe the basics of marketing in much the same way. The definition thus fails to do justice to the significance of industrial purchases. This process involves analyzing whether a marketing opportunity exist for the firm.1 . goods and services to create exchanges between nations that satisfy individual and organizational objectives”. quasi-government agen-cies. First. translated into 102 languages. Distinguish Between • Case Study Question Bank Dear students. Religion is also a big business. designing promotional strategy to persuade potential consumer of the desirability of the offering and transferring control over the use of the product from vendor to user so that the user may enjoy the benefits. This definition is not completely free of limitations. governments.675. American Marketing Association “The performance of business activities designed to plan. In 1995 he staged the most ambitious crusade of his fifty-year ministry by using thirty satellites to beam his evangelical message. securing distribution of the product. Definitions of International Marketing “International marketing is a process of planning and executing the conception.

and price) must be integrated and coordinated across countries in order to bring about the most effective marketing mix. b. place. Non-tariff barriers are in the form of quotas and licences.S. These barriers are of two types. although Italian consumers once preferred front-loading machines while French consumers insisted on top-loading models. Pep-siCo Inc. each country has a separate set of rules for collection of export proceeds and payment for imports. each country produces commodities for which it is best suited and exports surplus production. however.e. b. International Organisations: . In other cases. These organizations have been formed in order to promote world trade by removing unnecessary trade barriers and help underdeveloped countries to develop their export potentials. and its product strategy involves designing a car to meet U. technical know-how easy access produce commodities in excess of their requirements and exchange surplus production with other countries for the commodities they are deficient in. the definition recognizes that it is improper for a firm to create a prod-uct first and then look for a place to sell it. An exporter faces competition from three angles: • • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Exporters from his own country. d. International Marketing Research:.Technology plays an important role in building competitive strength. and that the distance between markets makes it neither more nor less important than the other parts of the mix. As in the case of wshers. has been able to use the more standardized models to break down national traditions. MNCs originating from countries like USE.. Similarly. e. There are various factors which give rise to interdependence among countries. Whirlpool Corp. a. international trade plays an important role in the economic development of a country. The slogan “Export or Perish” by Shri Jawaharlal Nehru is applicable to all the countries of the world. These companies have huge financial and physical resources and operate throughout the world c.. Trading Blocs: . Mazda.’s Frito Lay Division.Trade barriers are the artificial restrictions on the free movement of good from one country to other.International trade is subject to the rules and regulations framed by the international organisantions such as the World Trade Organization (WTO) and the United Nations Conference an Trade and Development (UNCTAD). which are subjects to fluctuation. innovations and inventions. market. h.Trading blocs are the associations of countries situated in a particular region whereby they come 11. all foreign Exchange Regulation Act.675. f. Therefore. In India. understands that it is no longer adequate to simply adapt a Japan-ese car to the U.International market is highly competitive. Finally. Trade Barriers:. i. Exporters from other countries. Rather than seeking consumers for a firm’s existing product. This generates additional income and saves 9 . For overseas markets. Foreign Exchange Regulations:. Importance of International Marketing No country in the world is self-sufficient in all its domestic requirements.The needs and requirements of individuals differ from region to region. each country imports commodities for which it has comparative cost disadvantage. a brand new product is created specifically for overseas markets). following this approach may result in foreign needs being satisfied in a new way (i. Tariff barriers are in the form of taxes and customs duties. Thus. Division of Labour and Specialisation: -Certain countries enjoy comparative cost advantage in the production of specific commodities due to favourable climatic conditions. tariff and non-tariff.S. buyers’ desires. an effective marketing research technique should be applied in order to understand the needs and requirements of consumers in different parts of the world. the process may call for a modified product. Japan and Germany dominate the world trade due to continuous research. Features of International Marketing The features of international marketing are as under:a. developed as well as developing. g.e. Dominance of MNCs / TNCs from Developed Countries: .1 on to a common understanding regarding rules and regulations to be followed while exporting and importing goods among them. Mazda’s widely acclaimed Miata was conceived and styled in Southern California and was engineered and built in Japan. The four Ps of marketing (product. the “multinational process” implies that the international marketing process is not a mere repetition of using identical strategies abroad. Local suppliers in importing country.Third. a multinational marketer may find it more desirable to use a certain degree of standardization if the existing market differences are some what artificial and can be overcome.Different countries have different currencies and conversion rates. it is often more logical to determine consumer needs before creat-ing a product. the definition acknowledges that “place” (distribution) is just part of the marketing mix. In some cases the mix may have to be adjusted for a particular market for better impact. For example. promotion. move) available products from one country to another. For example.. and the chip differs in both taste and texture from the American ver-sion.The international trade is dominated by MNCs and TNCs originating from developed countries especially form USA. European Union (EU).Price is an important factor that determines the success of an exporter in the highly competitive international market large-scale operations. Importance of Advanced Technology:. Japan and European countries. Fourth. viz. for chip for the British market. Three-faced Competition:. Therefore. for example. it is improper’ for any firms to regard their international function as simply to export (i. full utilization of installed capacity and transactions in bulk reduce overall cost of production and thereby price of the product. In some cases. Large Scale Operations: . 1973 (FERA). Increases National Income and Per-capita Income: Due to division of labour and specialization. Therefore.

Optimum Utilizations of Resources: . 11. Again.real income by making available imported articles at competitive rates. USE. etc. advertising. This helps overpopulated countries in soling their unemployment problem.675. an exporter may suffer a loss if there is a change in the exchange rate after entering into a contract with a foreign buyer.Customs formalities are different in different countries.International market is highly competitive. Three-faced Competition :. Customs and Traditions: Languages. an exporter can sustain international competition by upgrading the quality of product.International trade is spread over the world and therefore. if the resources remain unutilized or underutilized due to the want of demand in the domestic market. Customs Formalities: . Research and Development :. However.Balance of payments may be defined as the difference between the monetary value of exports and imports of a country. Trade Barriers: . For example in India. An exporter should try to get first hand information about such issues before exporting goods. a country suffers from an unfavourable balance of payments. Documentation Formalities:.A country can make optimum utilization of its natural and human resource by promoting exports. In order to solve the difficulties created by customs formalities. Global Peace: .International trade is subject to political as well as commercial risks. e. Among these countries are Mexico. there risks can be insured by taking suitable policies from the export Credit and Guarantee Corporation of India(ECGC).1 . Resolves Balance of Payments Crisis:. b. an exporter is required to prepare and file as many as 25 documents of which 16 are commercial and l9 are regulatory. g. Brazil. Diverse Languages. Some of the common problems of international marketing have been analysed below:a. Hug foreign indebtedness. insurance. During transportation goods are exposed to risk and uncertainties of transportation and perils of sea. viz. However. tariff and non-tariff barriers are in the form of taxes and customs duties. d. In order to survive cut-throat competition at international level. h. f. there are other problems such as long distance. c. India’s present balance of payment position was real bad. war and internal aggression. i. though now It is looking up. At the same time. Employment Opportunities:. f. Again delay is coursed due to lengthy customs formalities. Non-tariff barriers are in the form of quotas and licences. UK and Germany are highly developed in terms of technology while most of the Afro-Asian and South American countries are backward in technology. Many countries of the world that would otherwise be attractive markets have accumulated such high foreign indebtedness that they cannot even pay the interest on their foreign debt. time consuming and trade between countries of the world.In the age of nuclear weapons. transport. customs and traditions are very sensitive issues and must be taken into consideration while exporting goods to foreign countries.There are a number of documents to be filed with various authorities while exporting goods. International trade may be a medium for promoting exchange of ideas and thoughts and thereby help promoting international peace and friendly relations among the countries of the world. g. Long Distance:. Special Problems of International Marketing International marketing is a very complex and time-consuming process as it is subject to rules and regulations of both exporting as well as importing county. risk during transportation can be insured by taking suitable marine insurance policies. In order to solve such imbalance a country of the world. Thus. Losses on account of fluctuations in the exchange rates can be eliminated by entering into forward contracts. This directs the flow of technology from technically advanced countries to technically backward countries of the world. Local suppliers in importing country. the same can be well utilized by promoting exports of surplus production. innovations and inventions and cost reduction. every firm operating at the global level needs to undertake continuous research and development. For 10 example. these formalities are very lengthy. currency fluctuations and high degree of competition.. Political risks arise due to the political actions of the government(s). c. Nontariff barriers are in the form of taxes and customs duties. efforts are being made by the World Trade Organization(WTO) to eliminate and simplify trade barriers. Poland and Romania. Facilitates Transfer of Technology: . e. Commercial risks arise due to insolvency of buyer or buyer’s failure to accept goods.Trade barriers are the artificial restrictions on the free movement of goods from one country to other. It not only creates employment opportunities in the export sector sector but also in other related service sectors such as banking. When the outflow of foreign currency exceeds the inflow. there is a greater need of promoting dialogue between various countries of the world. an exporter can obtain assistance of the Clearing and Forwarding (C&F) agents. However. goods are to be transported over a considerable distance. High Risks and Uncertainties:. This leads to development of technology in backward and developing countries of the world.Some countries like Japan.An exporter faces competition from three angles:• • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Exporters from his own country Exporters from other countries. These barriers are of two types. These rates are subject of fluctuations.Development of exports brings about multiple increase in employment opportunities. However. h. d. Payment Difficulties: -Different countries have different currencies and conversion rates.

j. Unstable governments. High indebtedness, high inflation, and high unemployment in countries have resulted in highly unstable governments that expose foreign firms to the risks of expropria-tion, nationalisation, limits to profit repatriation, and so on. k. Exchange instability. High indebtedness and political instability force a country’s currency to depreciate, or at least add a lot of volatility to the currency’s value. The result is that foreign I investors hesitate to hold much of the foreign currency, and this limits trade. l. Foreign government entry requirements. Governments are placing more regulations on foreign firms, such as requiring joint ownership with the majority share going to the domestic partner, a high level of nationals hired for management; technological transfer of trade secrets; and limits on profit repatriation. m. Tariffs and other trade barriers. Governments often impose unreasonably high tariffs against imports in order to “subsidies” or protect their own industries. They also resort to invisible trade barriers such as withholding or slowing down import approval and requiring adjustments in imported products to meet their standards. n. Corruption. Officials in several countries require bribes in order to co-operate. They often award business to the highest briber rather than the best bidder. Kickbacks received by parties in Indian governments’ gun deal again is an example. o. Technological pirating. A company locating its plant abroad worries about foreign managers learning how to make its product and breaking away to compete openly. This has happened in such diverse areas as machinery, electronics, chemicals, phar-maceuticals. p. High cost of product and communication adaptation. A com-pany going abroad must study each foreign market carefully, become sensitive to its economics, politics, and culture and make some adaptations in its products and communications to suit foreign tastes otherwise it might make some serious blunders. q. International code of conduct for product to be traded or marketed in a particular country by UNCTAD and World Trade Organisation as per Dunkel proposals. A rapid increase in foreign exchange earnings through exports is vital for the success of our government’s programmes. To intensify the drive for export development, it is not sufficient to explore new markets for non-traditional products alone. Just as the export potential of primary commodities is limited, so is the growth potential of “non-traditional” items marketed in the traditional manner. A major breakthrough resulting in sizable additions to foreign exchange earnings is possible only if we: a. Identify new non-traditional products/services for export; b. Develop new ways of marketing them in new markets; and: c. Explore new marketing strategies for securing a fairly consistent and long term foothold in these areas.

India has already started moving in” this direction. Construction contracts, turnkey contracts,’ joint ventures in middle eastem Arab countries and African countries are indicators of this trend. The capital investment made by our country, especially during the last 40 years, in building a sophisticated industrial base and in training a very large number of people in the development and application of modern technology is likely to pay rich dividends in the near future. We should link our future efforts in this direction to a well defined international marketing programme for export development. It, therefore, becomes necessary to focus attention, on some of the more important emerging opportunities for international marketing development in the non-traditional sector so that we may gain insights into the types of integrated action needed at the corporate and national levels to convert these opportunities into viable business propo-sitions. International marketing is of growing importance to Indian business. It is the duty of an international marketer to support the economic deve-lopment of our country. One should try to sell a portion of one’s output abroad. Benefits are gained in the obtaining of quotas for imported materials in exchange of proof of the export of finished goods. Multinational Corporations (MNCs) A multinational corporation is an enterprise whose ownership and activities are spread in more than one country and its various branches function independently. It is a giant firm with its headquarter located in one country but conducts a variety of business operations like manufacturing, marketing, servicing, etc, in several other countries. For some, the multinational companies are an invaluable dynamic force and instrument for wider distribution of capital, technology and employment; for other they are monsters which our present institutions, national or international, cannot adequately control. Characteristics of Multinational Corrporations (MNCS) Multinational corporations (MNCS) are major actors in the world of international business. As shown by the GE case, it is desirable for companies to become more internationally inclined. Therefore, it is appropriscuss what an MNC is and the role it plays. The mentions of MNCs usually elicits mixed reactions. On the one hand. MNCs are associated with exploitation and ruthlessness. They are often criticized for moving resources in and out of a country as they strive for profit without much regard for the country’s social welfare. Varity Corp., a Canadian multinational firm, was criticized for its action in 1991 to relocate its headquarters from Toronto to the United States (Buffalo) in order to take advantage of the U.S –Canadian Free Trade Agreement. For a long time, Indian referred to MNCs as “agents of neocolonialism.” It was not until 1991 that socialist Indian began wooing multinational companies. Yet several years later, multinationals are still not so welcome. To many Indians, such MNCs as Pepsi Co, KFC. And Enron Corp. all are” foreign devils”

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

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In defense of MNCs, more and more of them have been trying to be responsible members of the society. According to a number of studies involving MNCs in Ivory Coast, Mexico, Morocco, and Venezuela, there is no evidence of MNCs being drawn to pollution havens, Furthermore, multinational enterprises have raised local wages. However only those joint ventures which receive foreign equity participation have benefited from technology transfer, while domestic competitors may be harmed by foreign entry. On the other hand, MNCs have power and prestige; additionally they create social benefit by facilitating economic balance. As explained by Miller, “with resources, capital, food, and technology unevenly distributed around the planet, and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is first essential. This instrument is, of course, the MNC. Regardless of whether MNCs are viewed positively or negatively, they are here to stay, and the important point is to understand when a company becomes a member of this elite group. MNC is not a one-dimensional concept. Similarly, globalization does not have a single definition. There is no single criterion that proves satisfactory at all times in identifying an MNC. Varying explanations have been used to define a multinational corporation, but these definitions are not necessarily convergent. As a result, whether a company is classified as an MNC or not depends in part on what set of criteria is used.
Definitions

annual sales. TNCs control one-third of the world’s private sector productive assets. Ownership of foreign assets is highly concentrated since half of the total is owned by just 1 percent of TNCs Interestingly multinationals overseas investment has progressed to the point Definition by Structure According to Aharoni, an MNC has at least three significant dimensions: structural, performance, and behavioral. Structural requirements for definition as an MNC include the member of countries in which the firm does business and the citizenship of corporate owners and top managers. Singers corporation, for instance, sells its sewing machines in 181 countries, thus satisfying the requirement with regard to the number of countries. Citicorp satisfies the requirement for multinationalism through the citizenship of members of its top management. The company has done as much as other major American MNCs to diversify its management. In Asia, a notice of Pakistan is in charge of the firm’s $800 million finance business for all of Asia except Japan. His colleague, an Indian national, heads the consumer business. They are two of the eight non-Americans in the elite group of fifteen executive vice presidents. Definition by Performance Definition by performance depends on such characteristics as earnings, sales, and assets. These performance characteristics indicate the extent of the commitment of corporate resources to foreign operations and the amount of rewards from that com-mitment. The greater the commitment and reward, the greater the degree of interna-tionalization. Parker Pens, with 80 percent of its sales coming from overseas, is more multinational (at least on the basis of foreign sales) than A.T. Cross, whose overseas sales account for only about 20 percent of overall sales. Japanese multinationals have shown willingness to commit their corporate re-sources to overseas assets. NEC has twentyfive manufacturing and forty-four mar-keting and service subsidiaries overseas, which employ 22,000 people. Half of Ricoh’s cameras are made outside Japan, whereas nearly 100 percent pf the firm’s copiers sold in North America and Europe are made there as well. Hitachi, a worldwide gi-ant, has fortyseven manufacturing subsidiaries and 130 sales and service companies worldwide. Hitachi makes TV s, automobile parts, PBXs, computer products, and large-capacity magnetic disks in the United States; TV tub’s in Singapore; CD play-ers and room air conditioners in Taiwan; refrigerators in Thailand; and parts for tur-bine generators in Canada. ‘Human resources or overseas employees are customarily considered as part of the performance requirements rather than as part of the structural requirements, though the desirability of separating lower-level employees from top management is ques-tionable. A preferable analysis would be to treat the total extent of the employment of personnel in other countries as another indicator of the structure of the company. In any case, the willingness of a company to use overseas personnel satisfied a significant criterion for multinationalism. Avon, for example, employs 370,000 Japan-ese women to sell its products house to house across Japan. Siemens, well-known worldwide
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EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

a. By Size b. By Structure:c. By Performance d. By Behaviour Definition by Size The term MNC implies bigness. But bigness also has a number of dimensions. Such factors as market value, sales profits, and return on equity, when used to identify the largest multinationals, will yield varying results. As an example, although General Motors is number thirty-six in terms of market value, it is number one in terms of sales and number two based on profits. It is not unusual for corporate size in terms of sales to be used as a primary requirement for judging whether or not a company is multinational. As a matter of fact, according to the United Nations Department of Economic and Social Affairs, companies “with less than $100 million sales can safely be ignored. Based on this definition, some 300,000 small and midsize German companies do not qualify even though these firms (called the Mittelstand, or midranking) contribute mightily, to Germany’s export success. These midsize firms account for two-thirds of the country’s gross national product and fourfifths of all workers. Many multinational corporations are indeed large. According to the World Investment Report of the United Conference on Trade and Development (UNC-TAD) there are some 40,000 transnational corporations (TNCs) with more than 250,000 foreign affiliates, altogether generating more than $5 trillion in
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for its consumer and industrial products, has some 300,000 employees in124 countries. By Behavior is somewhat more abstract as a measure of multinationalism than either structure or peiforml;1nce, though it is no less important. This requirements concerns the behavioral characteristics of top management. Thus, a company becomes more multinational as its management thinks more internationally. Such thinking, known as geocentricity, must be distinguished from two other attitudes or orientations, known as ethnocentricity and polycentricity. Ethnocentricity is a strong orientation toward the home country. Markets and consumers abroad are viewed as unfamiliar and even inferior in taste, sophistication, and opportunity. The usual practice is to use the home base for the production of stan-dardized products for export in order to gain some marginal business. Centralization of decision making is thus a necessity. Caterpillar Inc.’ s chairman recalled that, while making sales calls in Africa in his younger days, pricing decisions were often forced upon him from headquarters even though those decisions did not fit the local market.18 Polycentricity, ~e opposite of ethnocentricity, is a strong orientation to the host country. The attitude places emphasis on differences between markets that are caused by variations within, such as in income, culture, laws, and politics. The assumption is that each market is unique and consequently difficult for outsiders to understand. Thus, managers from the host country should be employed and allowed to have a great deal of discretion in market decisions. A significant degree of decentralization is thus common across the overseas divisions. A drawback of polycentricity is that it often results in duplication of effort among overseas subsidiaries. Similarities among countries might well permit the develop-ment of efficient and uniform strategies. Geocentricity is a compromise between the two extremes of ethnocentricity and polycentricity. It could be argued that this attitude is the most important of the three. Geocentricity is an orientation that considers the whole world rather than any partic-ular country as the target market. A geocentric company might be thought of as denationalized. or supranational. As such, “international” or “foreign” departments or markets do not exist because the company does not designate anything international or foreign about a market. Corporate resources are allocated without regard to na-tional frontiers, and there is no hesitation in making direct investment abroad when warranted. There is a high likelihood that a geocentric company does not identify itself with a particular country. Therefore, it is often difficult to determine the firm’s home country except through the location of its headquarters and its corporate registration. According to Ohmae, business is “nationality less,” and companies should attempt to lose their national identity. As such, a corporation should not mind moving its head-quarters to a more hospitable environment. 19 The chairman of Japanese retail giant Yaohan International Group, for example, moved the firm’s headquarters as well as his family and personal assets to Hong Kong to take advantage of Hong Kong’s low taxes and hub location in Asia. To reward his faith in China, the

Chinese government permitted Yaohan to build shopping malls in China.2o Geocentric firms take the view that, even though countries may differ, differ-ences can be understood and managed. In coordinating and controlling the global mar-keting effort, the company adapts its marketing program to meet local needs within the broader framework of its total strategy. The approach combines aspects of cen-tralization and decentralization in a synthesis that allows some degree of flexibility. The firm may designate one country subsidiary as its research and development cen-ter while appointing another subsidiary in another country to specialize in manufac-turing certain products. Although the corporation provides overall guidance so as to achieve maximum efficiency of its global system, the various aspects of the local op-erations mayor may not be centralized as long as they meet local market needs. Geo-centric firms compete with each other on a worldwide basis rather than a local level. Another study found evidence to support the hypothesis that there are four iden-tifiable stage in a firm’s internationalization. The four stages are: (1) Non-exporters. (2) Export intenders, (3) Sporadic Exporters, and (4) Regular Exports. The process shows how firms were initially constrained by resource limitations and a lack of ex-port commitment and how they can become more and more internationalized as more resources are allocated to international activity.26 At present, there is no conclusive evidence to show that, domestic firms have generally indeed progressed from one stage to another as prescribed on their way to become more internationally oriented. Likewise. No empirical evidence has been pro-vided so far to support a competing hypothesis that some firms are “born global” in the sense that their mission from the outset is to become MNCs. Types of MNCs: - Main three types of MNCs are given below: a. Transnational Corp.: - Incorporated or Unincorporated enterprises comprising parent enterprises and their foreign affiliates. b. Parent enterprise: - controls assets of other entities in countries other than its home country, usually by owning a certain equity capital state (usually 10% or more) c. Foreign Affiliate: - Is an incorporated or unincorporated enterprise in which an investor, who is resident in another economy, owns a stake that permits a lasting interest in the management of that enterprise, A subsidiary, associate, and branches are all referred to as foreign affiliates. I. Subsidiary: - Is an incorporated enterprise in the host country in which another entity directly owns more than half of the shareholding voting power and has the right to appoint or remove a majority of the members of the administrative, management, or supervisory body. II. Associate: - Is enterprise in the host country in which an investor owns at least 10% but not more than half of the shareholders voting power. III. Branch: - Is a wholly or jointly owned unincorporated enterprise in the host country.

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Host Country Related Issues
Technology Transfer and LDCs

There has been a significant controversy over the effects of technology transfer on the less developed countries. The supporters of MNCs claim that the developing countries derive general economic benefits from the technology transfer. On the other hand, the opponents accuse the MNCs of charging excessive prices on technology exports. Manipulation of transfer prices, the provision of technology that is too sophisticated and inappropriate for the best possible use of local resources, the provision of technology that is obsolete and only capable of producing inferior products, and not providing foreign capital. As we enter the 90s, there is a widespread belief among the developing countries that unless there is proper technology transfer, there may, in general, be inadequate industrial and economic development. Regulatory Measures Over the years, and following some bitter and costly experiences in the less developed countries, it became clear that technology was a particular kind of commodity which did not obey the same rules as those found in the markets of other commodities and which classical economic theory managed to embody sometimes into neat and appealing models and processes. The Kind of investment. Required, the way it is produced, and its various types of ownership imposed new rules and regulations on the trade of technology throughout the world, particularly when this transaction occurs between the developed and the less developed countries. It is the responsibility of the less developed countries to import appropriate technologies and develop their technological capabilities, and this development process needs proper regulatory effort. The technology regulation measures adopted by the developing countries in the 70s were significantly modified in the latter half of the 70s and 80s. Although fairly strict control over the process for technology acquisition has continued in certain countries, as in Brazil, the regulatory measures have been relaxed in other countries (India). In some countries, the inflow of foreign technology has been promoted by various incentives (China). The trend towards liberalisation in technology regulation has been accompanied by differentiation’s for different kinds of industrial technology. During the 80s, two ma or trends have become manifest in the developing countries: (1) in countries where the acquisition of foreign technology has not been regulated by the government or where its scope has been very limited, the governments are paying increasing attention to foreign technology and the conditions of acquisitions, and (2) where fairly rigorous regulatory norms were introduced in the 70s, there is an increasing relaxation and liberalisation for the acquisition of more advanced technologies. This trend Is continuing in the early 90s. Technological Needs The technology needs of the developing countries are great and diverse, mostly in the sector of agriculture, infrastructure, import substitution, and export stimulation. Because of the relatively low technological capability, the assimilation of foreign technology and its adjustment to different factor endowments

and conditions is also a far greater task for the developing countries. However, the trend has been that the developing countries since early 80s acquiring high technologies. Not all of them are eager to receive high technology transferred from the developed countries. The patterns of consumption and main trading orientation are similar in the developed countries in that they have a greater need to use high technology in their modem sectors. Many developing countries are in the process of moving from import substituting industrial development to export promotion strategies. These nations are attempting to pursue the Japanese model of technological development, with mixed results. ‘Me export promotion orientation has led many of them to seek ever higher levels of technology if export promotion strategies are to succeed. They should realise that the Japanese industry did not suddenly develop the ability to reap the advantages associated with vigorous export market penetration. Even though export specilisation was pursued as a deliberate goal early on in Japan, the policy makers realised that a prolonged period of protectionism (include exclusion of foreign goods and foreign direct investment wherever possible) would be necessary to build a strong home market before the domestic industry could reach internationally competitive production volumes and become effective in exporting. The question of appropriateness of technology has been considered in terms of economic development strategy and, second in terms of the choice of techniques in a firm of industry. From a practical stand point, the most important lesson that has emerged from the literature over the past two decades is that even the simplest o f theoretical constructions are much too opaque to enable one to assess what technology is appropriate for a specific set of circumstances. In recent years, it has become clear that it is dangerous to discuss appropriate technology in technical terms only. The issue of technology cannot be discussed in isolation of the problems of society, ends focusing only on technological problems without considering the social conditions existing in the country may produce infeasible or inappropriate technology. Hence the social, political, and economic factors existing in a country are crucial determinants of the type of technology that may be adopted in that country. It is up to each individual government to formulate and implement public policies to import appropriate technologies to suit the needs. Advantage of MNCs to the Host Country a. MNCs bring about increase in the national income and percapita income of the host country. b. They bring about increase in the level of investment, employment and income in the host country. c. They help the host country to solve the problem of trade deficit through export promotion and import substitution.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

d. They create employment opportunities in manufacturing as well as allied service sectors. e. They break protectionalism, create competition among domestic companies and thus enhance their competitiveness. f. The marketing skills of the MNCs are impressive particularly in providing marketing infrastructure.

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g. They help rapid industrialisation and improve general standard of living in the host country. Home Country Related Issues
MNCs and ITT

The primary “agent” of technology transfer from the home country is the multinational corporation (MNC). In the last two decades, there has been a rapid increase In the international technology transfer (ITT) agreements between firms in different countries. The commercialisation of technology, mostly in the form of royalties and licence fees for technical know-how and services, has increased considerably. For instance, receipts from the export of technology by the US MNCs increased from $5.2 billion in 1980 to $1 1.1 billion in 1988. These ITT trends have been the results of the profound changes in MNC’s corporate philosophy on the management of technology assets. MNCs are shifting their emphasis from being competitive in the domestic economy to maintaining global market positions. Besides, mounting costs of R & D. and in some cases, the difficulties in obtaining venture capital have contributed further to the release of competitive technology for foreign firms, the build-up of competitive production capabilities abroad, and the narrowing of international gaps in high technology industries. Thus, it appears that MNCs, especially the US MNCs, are (a) accelerating their technology transfer, and (b) transferring abroad their most sophisticated technology either as part of a global strategy or in an effort to safeguard their competitive position. Historically, most MNCs have restricted their ITT efforts to opportunities in the developed countries. After the 50s, dramatic changes took place In the less developed countries, and these markets opened up considerably. This development, along with the simultaneous partial saturation of some of the markets In the developed countries, has turned the attention of the multinationals towards the less developed countries. Recent research has pointed towards an Increased interest being exhibited by MNCs In transferring technology. ITT and Government Policy There is a considerable controversy over the effects of ITT on the home country. One group of people argue that ITT affects the home country’s economy negatively in terms of overall benefits, employment, and technological lead. Transferring current, state-of-the-art technology to the less developed countries raises serious concerns about the rates of return and guarantees of confidentiality. In some circumstances, government restrictions from the developed countries on technologies deemed militarily strategic, Impose an added barrier. Proponents of ITT, however, have gained a growing support for their notion that lIT benefits the home country economically and technically. They argue that there are circumstances wherein transfers of cur-rent technologies make good business sense, and firms posses, or have access to, much useful technology that is non-competitive in nature and which, in the hands of others, could in no way threaten home countries economic interests. The recent trend of accelerated outflow of technologies has heightened some developed countries’ policy makers’ concerns about the negative Impact of technology transfer on their countries. However, these policy makers are more concerned
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with the type of technology being transferred. In the past, technology transferred by MNCs to the developing countries was mature, standardised and of a type available from other sources as well. However, MNCs in the developed countries are increasingly transferring high technology to some developing countries in the recent years under the terms that assure rapid and efficient implantation of an internationally competitive production capability. For example, a growing proportion of R & D expenditure in automobile industry by MNCs is located in the labs of the less developed countries. This trend, some people believe, is one of the primary reasons responsible for the decline in the international competitive position of the developed countries. Advantage of MNCs to the Home Coutry a) MNCs create opportunities for domestic firms to market their products throughout the world. b) They create employment opportunities for the people of home country, both at home and abroad. c) They earn valuable foreign exchange for the country and therefore, strengthen the balance of payments condition of the home country.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Articles
Multinational Corporations and Global Production Networks
The Implications for Trade Policy

The objective of this report is to understand the role of multinational enterprises (MNEs) and production networks in economic activity, and to investigate their implications for the design of trade policies. The focus of the report is the European Union. MNEs account for a significant share of economic activities in Europe. 18 % of EU employees in manufacturing work in foreign owned subsidiaries and 8.6 % in subsidiaries owned by non-EU residents. The report also devotes particular attention to the activities of US subsidiaries in Europe and of EU subsidiaries in the US, the only ones for which comprehensive data are available. The empirical analysis in the report reveals a positive correlation between sectors with relatively high protection and a high presence of US FDI. This indicates that a substantial proportion of any rents created by restrictive trade policy is transferred to foreign firms. European trade policy is protecting those industries where subsidiaries’ sales dominate over imports from the US and where the US subsidiaries’ share in EU employment is large. The phenomenal increase of European networking in the CEECs following the Europe Agreements or between the US and Mexico after the implementation of NAFTA are good examples of how trade liberalisation, proximity and differences in factor costs jointly provide strong incentives for firms to split geographically their production processes. There are some strong arguments in favour of international coordination of foreign investment policies. A new investment agreement could take care of this need for co-ordination; however, extending existing trade agreements could also do at least part of the job.

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World is the Market The argument in favour of globalisation is not predicted on size of the nation but on various other factors including earning of competitive advantage on a global scale as a key theme. The advent of the Maruti has already revolutionised the automobile industry in India. True. but the core theme is the same. In fact. increasingly becoming common across the globe. Canon and Xerox copiers. Only. etc. 16 By competition. There appears to be greater cornmonalty in “wants” or “needs” across the globe than had been imagined. needs to be replaced by the slogan’Globalise or Perish’. “status” across the world. the exerts wave it like a flag . World Class a. has led to a consumer upthrust. Who would buy an Ambassador car when he can get a more sophisticated car? 4. IBM. Through globalisation. The benefit of global competition is manifold. It has been generally hypothesised that the concept of the world being the market can only be actualised by island economies like Japan. The general price line will drop. Globalisation The world has a new buzzword . The Yanks. 2.globalisation. a Porsche car satisfied this need while in India. the idiom may have to change somewhat. Competition is also International Fundamental to this concept is the nature of wants across the globe and the means of satisfying these wants. of a large number of foreign manufacturers. Manufacturing Scale: This does not mean sacrificing customisation. etc. Jain TV. new products will become available. the Japanese consumer electronics. It would appear that the differences in “wants” or “needs” were merely hypotheses. say. etc. Singapore. we have the need for. in turn. For example. Witness the entry. India sells the most expensive fertiliser in the world because of diseconomies. created it. in the US. DD has had to become far more user-friendly because of competition from Star TV. Is globalisation the first step to economic colonisation? Is this the way the rich nations are hoping to ensure their continued domination of the world economic scene? Or is it the panacea. More companies will follow suit if DD is unable to retain its viewership. Marlboro. Communication themes are. There will be more. The pressures are already being felt. and in diverse product fields. We are not yet a seamless world though there is a presumption that tariff and non-tariff (traditional) barriers would be less important. Phillips.675. Continental economies like India.1 . 3. Marlboro cigarettes. are better off advised to catering for their domestic economies which provide all the required economic benefits because of the size of the market. a firm is offering similar means of satisfying these wants across the globe. in the Indian context. Sony consumer electronics. But. etc. the very first objective of the Export-Import Policy is to establish the framework for globalisation of India’s foreign trade. So. which is the new consumer revolution that is taking place around the world. which have not stood the test on the ground. we are referring to alternate means of satisfying a given set of wants. Take the case of Doordarshan (DD). etc.. Louis Philipe. Global TV is a prime example of this phenomenon. are examples of catering for a world market. which will result in a truly better life for the citizens of those countries that practice it? How is globalisation different to exports? Are these two concepts in conflict? Or are they two sides of the same coin? If exports are going strong. etc. the German high performance cars. are examples of products that have jumped tariff and non-tariff barriers very successfully. the Brits mouth it. compared to global competitors. Globalisation has become the need of hour and India must keep pace with the changing international scenario. the new religion. We can already observe this phenomenon of global competition in India.Globalise or Perish –Meaning Globalisation of business has become a subject of very serious discussions in the national economic policies and corporate sector. In these blocs. or lose advertising revenue. Communications are Common Across the Globe EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The role of communications in fuelling globalisation is significant in that the awareness of products and product promises across the globe has increased. It will have to.even India is flirting with this concept. coined by Shri Pandit Jawaharlal Nehru. etc. Zee TV. it is probably a Maruti 1000. 11. This. a large advertiser is using Star in preference to DD to advertise its tyres. there will be immense improvement in the quality of goods available to the consumer. in turn. Some classic examples are the Honda motorbike. changing the news format. the slogan ‘Export or Perish’. through Ted Levitt. Globalisation means integration of the national economy of the country with rest of the world and opening up of the economy for foreign direct investment by liberalizing the rules and regulations and by creating favorable socioeconomic and political climate for global business. the US. LaCoste. Korea. aided by technology. The subject has assumed a great significance in the light of recent changes in the global business environment and the national economic policy. Toshiba products. such as Pierre Cardin. in readymade garments. it does mean some of our industries may well have to close down. Globalise or Perish In the wake of recent developments in the international environment. which is the engine of globalisation. competition is increasingly dependent upon the consumer/customer pull rather than on political determinants! Consumer pull becomes even more powerful as the technology content of the product increases. MRF. This places a burden on the costs of production. which. pushes up prices to the end-user. This is already happening with the creation of economic blocs. The notebook computer. something different. It seems to be taking various other decisions like showing daily movies. The petrochemical industry in India operates on a scale that is minuscule. why should one talk or bother about globalisation? Is there a conflict between the domestic and the global (non domestic) market? Concepts of Globalisation 1. Among the manufactured goods.

which provide a wide base for development of industrial units in India. There are strict restrictions on the mobility of factors of production in the international market. Distinction between –Domestic Marketing and Export Marketing Domestic Marketing 1. In order to compete at the international level. 5. Competition The degree of competition in domestic market is low as the domestic markets are generally protected by the government from external competit ion. there are also a number of favouable factors for globalisation of Indian business. animal manpower resource. experience. Why should India Globalise? Although India has several handicaps. greater market share. a firm has to operate at the optimum level in order to reduce its cost of production. forest resource. For example. d. privatization.Though labour productivity in India is low. g. removal of trade restrictions. and adherence to them. organizing. sell the product cheap. Globalisation of the Indian Economy Why an Indian Firm should Globalise? a. are assets which can contribute to the globalisation of Indian business. Since the socio-eco environment in different countries is different.A market niche is small segment of the market which is ignored or overlooked by the major players. Hence. one is referring to standards. e.The economic liberatlisation such as delicensing of industries. Government Policies and Regulations :.Liberalisation and globalisation of Indian economy has increased competition from foreign MNCs.. Export Marketing Export marketing is the process o planning.. Competition: . Spin-off Benefits: . a firm can afford to operate on a smaller scale. easy access to imported capital goods. saturation of the domestic market. d. provokes many Indian companies to look to foreign markets seriously to improve their competitive position and to increase the business. labour and capital are freely mobile in the domestic market. server barriers in the form of tariff and quota are present in order to restrict excessive inflow of foreign goods. The international trade is subject to strict government controls and restrictions. 2. f organizing.India has a variety of other natural resources. NRIs: . Transnationalisation of the World Economy: Transnationalisation of the world economy due to the growing interdependence and globalisation of markets is an external factor encouraging globalisation of Indian business. Scale of Operations Since the degree of competition in the domestic market is low.Though the margin of profit in the international market is low due to intense competition. Product Strategy Due to similar socio-economic environment.Globalisation provides certain spin-off benefits. Domestic Market Constraints: . The scope of export marketing is wider as the whole world constitutes a market.The growing domestic market enables the Indian companies to consolidate their position and to gain more strength to make entry into foreign markets or to expand their foreign markets or to expand their foreign business.In the recent years. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION One of the strategies of firms that are global in outlook is that they are willing to shift manufacture to areas where value addition is the greatest. An exporter faces an intense competition from his own country. a. Productivity: Going global is only possible when productivity is comparable on a global scale (Fig 1). minerals. Indian companies will have to globalise.Some companies may globalise in order the avoid constraints in the domestic market. Going global would require a firm to ensure that its standards for the product are globally comparable. e.Global market is spread all over the world.The large number of non-resident Indians. and hope to secure global market share. This is what is meant by the statement that every activity of the firm has to add value to the customer/consumer. given the right environment Indian labour can perform excellently.675. 7. Profit Advantage: . in order to survive intense competition. as in the earlier example. from other countries and local suppliers in the importing country. Hence. h. artificial restriction in the form of tariff and quota are negligible or the not present at all. such as energy. exposure and ideas.b. 8. Wide Base: . and time. 3. 11. etc. import liberalization. Quality: By quality.The growing population and disposable income and the resultant expanding international market provide enormous business opportunities to Indian manufactures. b. In export markets. i. would encourage globalisation of Indian business. f. Government Control The government exercises less control over domestic trade. While several countries are facing labour shortage. Trade Barriers In domestic markets. 4. Growing Domestic Market: . Such niches are particularly attractive for small companies. Human Resources:.The growing competition both from within the country and aboard. viz. space. there has been a considerable growth in the number of new and dynamic entrepreneurs who could make significant contribution to the globalisation of Indian business. Niche Markets:. directing and controlling activities related to exchange of goods between the different countries of the world.1 17 . 6. Malaysia is the world’s largest manufacturer of the Japanese air conditioners. Mobility of Factors of Production Factors of production such as land. It is a fallacy that we can dilute standards. cheaper or both. 5. Economics Liberalisation: . economies of scale. India has ample and cheap labour.Meaning Domestic marketing is the process of planning. who are resourceful in terms of l capital. Growth Opportunities: . Factors of Production Sourced Internationally c. Competition:. the goods of different quality standards (Product Adaptation Strategy) are required to be manufactured for different countries. j. Expanding Markets: . Scope The scope of domestic marketing is narrow and is restricted to the political boundaries of a country. b. Growing Entrepreneurship: .The incentives and assistance provided by the government and encouraging EXIM policy for internationalization may also initiate globalisation. etc. skill. directing and controlling activities related to exchange of goods between the different regions of a same country. This would be a case of manufacturer shifting to areas where factors of production are better. it certainly increases the overall profitability of the orgainisation due to economies of scale. This refers not only to labour productivity but also all other resources. The enormous growth potential of many foreign markets is a very strong attraction for domestic companies to globalise. a single product (Product Standardisation Strategy) can be marketed throughout the country. For example. c. f.

As the level of living of people goes up. cummin. whereas. Kameshwar Raos. Production and Exports of Spices It is necessary to know the macro view of production and exports scenario of spices. What kind of role can be played by Kerala Market Federation in order to achieve targets of exports in 2000 A. financial and trade sector to boost export business. Singh and Madhavan9. gin-ger. Saxena4. Deolanker6.D.? 4. Relaxation in formalities of exports for new entrants in export of spices in India apart from budget exercise. in the case of perennial. Commodity wise and countryMajor Issues 1. However. spices are divided into annual and perennial. In the case of export business of spices. 14 Murlidhar Rao1s and by others with a view to know strategy of production and diversification of exports of species as well as expansion of multilateral trade of spices. formation of special focus group of commodity exports and a host of other incentives directed at the export front. processors and exporters. the area does not change significantly unless. the production of spices needs to be on professional EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11. This case study examines the pattern of export growth in general and export of spices in particular with a view to suggest action plan to boost the exports up to the target of 2000 A. whereas. Commodity-wise and country-wise studies also highlight behaviour of world export market and share of Indian exports. However. chillies. there are studies undertaken by Gargl2. Problems faced in getting high yielding varieties and their use with technological change in production. Debroy7. What kind of action plan is necessary to achieve targets of production and exports of spices about 300 million dollars in 2000 A. All these studies attempt to measure growth rate of exports in general or showing policy measures for diversification of Indian export business. It is reported by Bureau of Indian Standards that there are 63 spices grown on two million hectares and having production of about 16lakh tonnes per annum.1 . Most of the spices are used in food processing as well as pharmaceuticals and perfumery and cosmetics industry . Government of India8. Inspite of either of the phenomenon. ever increasing domestic market is also considered as one of the significant factors for slow rate of growth of Indian exports.1 1. Directorate of Econom-ics and Statistics as well as state departments of trade. turmeric. Sandhu 13. exceptional change in price is found. Growth-led exports for India in the case of production of spices draw attention of growers. state government as well as central government. coriander. Attri2. Exact figures about productions of the spices and state-wise data is not available. Spices are used worldwide to enhance or to vary flavour of the food. packing and forwarding of spices. The weak mechanism of marketing. Most of the studies have shown projections of production and export. is playing a major role for production and exports of spices. 3. In India to boost exports with brand and specifica-tion of investment spices. 6. the second one examines trends and of production and exports of spices among overall export of India. By and large. Fiscal and financial incentives are provided to our corporate sector engaged in export business.D. They act as appetisers and some of the spicies have anti-oxidant properties. As corporate sector in India has” taken active interest and. Therefore. 8. UNCT AD. There is one school of thought believing that Indian trade has been essentially inward looking largely due to its size and ever expanding internal market. the third one offers action plan to reach the target of 2000 A. 5. cardmom. A Case Study on Spices Export Marketing Government of India has made special efforts through macroeco-nomic reforms in industrial. Retrospect Considerable amount of literature has grown to know export market-ing and diversification of export business by Indian economists. It is a controversy among the economists that there will be growth-led export or export-led growth in India due to economic reform process in India. 7. authors like Siddharthan10 and Sharmall attempted to throw light on implifications of economic reforms and liberalisation policy for possible solution of problems arising in export management.Case Study No. Decontrol and deregulation policy is welcomed by all exporters inclusive of exporters of spices. protection and storage of spices to stop wastage in export business. garlic and others and leading both in production and exports too. 18 2.D. estimates are available from Ministry of Agriculture. processing. Spices are grown in all states of India but their production differs from state to state largely due to climatic changes. consumption of spices tends to increase. Price fluctuation is affecting area under cultivation in different states of India. The case study is divided into 3 papers: the first one reviews literature that has grown in the recent past in area of exports of spices so as to sort our issues.shipment credit of spices. These include Pendse. deregulation of licensing.D in Indian case? This paper is not answering all the above issues but attempts to touch the last one regarding action plan and related policies to boost exports of spices in India. An attempt is also made for projection of production and growth of spices exports in Indian case. Considering popular economic theory of growth-led exports appear to be true in the case of production and export of spices. According to Bureau of Indian Standards. PNB3. Conservation. These include black papper. Role of banks and financial institutions to fund production technology and special export finance as pre-shipment and post. lack of appropriate price policy has also hindered higher productivity in the case of Indian spices.675. Role of Spices Board. there are 63 spices grown in India. Economic liberalisation and reforms opened new avenues for export growth in general and specific commodities in particular as policy measures like simplification of excise and custom procedures. it is necessary to glance through macroeconomic management of spices in India.

Crop improvement devices of farm management on professional base will pave a way for quality and quantity of spices for more exportable surplus. will have to take over the challenges to face in the process of globalisation of market for spices. In India 95% of the area under cultivation is in Kerala.0. Srilanka and Spain. Malaysia. Very recently researchers maintained that in the case of preshipment credit by banks. 150 crores. for India. In the case of pepper. Nowadays USSR. Indian spices need brand and name to cope with competition of global level through standards and specifications in the case of all 63 import spices exported from India.18. Q7. Earnings from Spices Trends of export earning both in terms of rupees as well as in dollars is rising. All potential exporters of spices should take advantage of the scheme. 2. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Question Bank Q1.58% and 1 % increase in normal effective exchange rate tends.45.5 % in 1990.55 and 2. USA and Italy are major buyers provided that our prices come down to international parity. Looking to direction of trade of spices USA and European countries were dominating. Q5. sixties. Corporate sector.7% and 1% increase in quantity of exports trends to increase the requirement by 1. tends to increase the credit required by 0. 2.06% considering the fact that banking sector will have to playa vital role to boost our export business. export earning in terms of dollars is not as high due to exchange rate policy and other technical reasons.1 as to protect interest of growers as well as small producers in particular in the case of spices and other items. 5. 417 kg in Malaysia and 3333 kg per hectare in Brazil. Role of the state would be vital for market intervention and price mechanism in order to save prices from crashing down so 11. The share of spices export in total exports in the fiscal year ending 1952. Q6. necessary both at farm level and corporate level.1970.000 crores in 2000 A.42 respectively. Q2. The eighth five-year plan of the Government of India aims at a growth rate of 10% in production compared to 4% in the seventh plan.9 during fifties. As against this in the case of postshipment credit.”Comment.73 hectares.87. 3. 925 kg in Indonesia. After the nationalisation of banks export credit as per concept of total credit has fallen from 9% in 1969 to 5. Q. Investment strategy under the central -sector scheme is Rs. and 2. ravages due to pest and diseases. 2. East European countries. There are other competitors like Brazil. It must be understood by the professionals in corporate sector of India that a country which is committed to globalisation needs to reproduce far more efficiently than it had been doing so far. 1960. At least. trend of exports of pepper is not steady but fluctuating from year to year after 1988.751 crores in 1993-94 to Rs. Distinguish between internationa Marketing and Domestic Markeinng. seventies and eighties respectively. Similarly. 19 . However. Explain the slogan”Globalise or Perish” in the context of the new millennioum. considering overall growth pattern of Indian export growth 2. Exports are necessary only for underdeveloped countries. it must be made sure for that the growers get reasonable return on their investment. Explain the role of MNCs in promoting exports. Indonesia. unscientific post-harvest technology of processing and storage of spices reduces actual usable production. The compound rates of growth of exports of spices in percent per year were 4. Concentrated R & D efforts for production and marketing is absolutely. In the case of exports of pepper pimento in the world had resulted in increase of per capita consumption in the importing countries. Define international marketing. it was 22239 million dollars in 1993-94 which is likly to be 66.2. 1 % increase in quantity of exports tends to increase the credit requirement by 1. Canada. export and process houses. 69. Elasticity of Indian exports of spices remained high with respect to world output of spices.5. Indian had been exporting roughly about 79% of production to the world market. 1 % increase in wholesale price. Enumerate its features.20. As a result productivity of pepper in India is as low as 230 kg per hectare consisting of 580 vines.7%. However. 4. What are the benefits of internationl marketing ? Q3.4. Quantity exported by Indonesia is in big bulk considering her export volume but there are quality differences. One can safely project as the basis of export earning of Rs. It is to be noted that export performance of Indian spices remain very high subject to the world level growth of output of spices.D. 2. 6. to increase the requirement by 1. The support price mechanism has to be worked efficiently in commodities where self-sufficiency is to be achieved. 3.000 million dollars in 2000 A. where 82% of pepper holdings are less than 3 hectares each and average holding is low as 0. 2. Briefly explain the special problems of international marketing.basis.1980 and 1990 were 4. This is so as uneducated growers do not know about high-yielding varieties in spices. in terms of dollars.675.D.

The exogenous factors are constraints under which a firm operates. structure of industry. for the people (consumers) . Influence of religion and tradition. The technological environment consists of:• • • • • • State of indigenous technology. Economic Environment :. automation and modernisation. may not survive. It is can described as: a. Tariff Barriers and Non-tariff Barriers. which cannot adjust to such a changing technological environment. For example. • Liberal and progressive policies of government. • Rising levels of income and employment. Trade Barriers • • • • a. The factors. Favourable or unfavourable. Objectives. These technological changes enabled international business’ to take the shape of multinational and transnational business. • Check over monopolies. Technological collaborations. General standard of living. Advalorem Duty and Specific Duty. 20 11. Social and Cultural Environment :. Tariff Barriers. • Just and equitable distribution of wealth in the economy. b.1 . Changes in the population pattern. Liberal or conservative. Non-tariff Barriers. Components. Role of social and cultural institutions. new products. becomes extinct in long run. b. amount of labour and capital. For example. • Continuous growth in quality and quantity of industrial output. Policy and legal framework ‘for research and development.675. Progressive or regressive. Definition. The changes in the international economic environment have been revolutionary after 1990. Exogenous factors keep on changing and business organisations have to adjust in order to survive.The endogenous factors consist of internal factors which a business unit can control and influence. market demand. can be classified as : a. influence nature and scope of business organisations operating at the global : level. which constitute international business environment. c. Technological Environment :. which cannot adjust to the changing environment. The analysis of internal environment factors indicates the strengths and weaknesses of the business firm while the analysis of external factors indicates the opportunities provided and threats posed by the environment to the business. technology to be used and marketing mix. Technology changes rapidly and the firm. The business unit.Nothing ever is permanent except change. The following factors determine international economic environment:• Type of economic system adopted by the country. Endogenous Factors :. Spread of education and its quality.International business is mainly affected by the economic policies adopted by the governments of various countries. Components of International Marketing Environment The various factors constituting the international marketing environment are : b. Distinguish Between • • Question Bank Definition of International Marketing Environment International environment consists of internal and external factors that may . Intermediate or appropriate technology.and through the people (executives and workers). International environment is a very important determinant of the business strategy. Exogenous Factors :. Technological improvement brings about new techniques of production. The global economic environment has become favourable due to the establishment of the WTO and emergence of the global market. Fiscal incentive for research and development. Social and cultural factors in various countries of the globe which affect the international business environment are :• • • • • • Attitude of the consumers and management. supply conditions and government policies.The exogenous factors consist of external factors which a business unit cannot control and influence.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 4 & 5: INTERNATIONAL MARKETING ENVIRONMENT International Marketing Environment • • Definition. Transfer of technology.The biggest environment is the social environment because business is carried on by the people (businessmen). e.

Definition of Trade Barriers Trade barriers are the artificial restrictions imposed by the governments on free flow of goods and services between countries. Such consumptions are known as conspicuous consumptions. d. Ecological Environment :.. people buy such goods when their prices are high in order to show off their wealth. Tariff barriers or fiscal controls. • External affairs and relationship.e. To Protect National Economy from Dumping :Dumping is the situation whereby a big MNC tries to sell its products at a price which is much below its cost of production. i. many times bring about practical difficulties in carrying on business operations. This gradually makes the country selfreliant. The factors which determine regulatory environment are :• • • • • • Industrial planning and policies. these protected industries develop competitive strength. These consumptions cannot be curtailed by charging high duties and hence. The factors which make up the international environment are :• • • • • • International socio-economic and political changes. Excessive imports may lead to erosion of valuable foreign currency from the country. whether capitalist or socialist. like diamonds and gold. capitalism or socialism.1 . Import and export trade. To Protect Home Industries from Foreign Competition:.Balance of payments is defined as the difference between inflow and outflow of foreign currency in the economy. Tariffs. Functioning of multinationals and transnationals. the government takes over some key units in the interest of the nation. and trading blocs are the techniques used for restricting free movement of goods from one country to the other. To Promote New Industries and Research and Development :-Developing countries. Non-tariff barriers or quantitative restrictions Objectives of Trade Barriers Trade barriers are imposed with different objectives under different situations as under :a. tariff and duties. Therefore. Generally. viz. like India.d. the domestic market can be thrown open to foreign competitors to enable domestic companies to improve further. • International relations and agreements. To Maintain Favourable Balance of Payments :.In every economy. Tax structure and subsidies. Gradually. Import controls. infant industries need protection from the government. Licensing system. e.International marketing environment is also affected by the international environment. b.In many of the developing countries. f. Existence of political parties.. The cost of production in such industries is very high and quality is poor in comparison to the international market. dual party or multi party system. Contribution of foreign capital. As a result. Parties in power. commands goodwill and reputation in the international market. Sometimes.In every economy. • Legislative and judiciary systems.Goods. To Curb Conspicuous Consumption :. duties. b. have inelastic demand. quotas. Trade barriers help in reducing imports and thereby improve balance of payments situation. the government has to use quotas and tariffs as instruments for controlling imports and conserve foreign exchange. taxes.Change in the government policies or government itself.675.Ecological degradation and its protection have become a major issue in most of the developed and developing countries of the world. A country. majority of basic and heavy industries are still in the initial stage of their development.e. g. h. i. c. series of acts and regulations have . trade agreements. private sector is subject to government control.been made by the government. having favourable balance of payments.. the domestic manufacturers may not be able to compete and will have to withdraw from the market. Therefore such industries need protection from foreign competitors. whether socialistic or capitalistic. are conducting research in various areas of technological development. To prevent this. Legal Environment :.Initially. These acts and regulations also affect the international marketing: environment. At that juncture. quotas should be fixed for their curtailment. Political environment in the country is created by the following factors :-• • • a. Government controls the functioning of private sector through its various policies and legislation. To Mobilise Public Revenue :. foreign exchange restrictions. International Environment :. In order to motivate the efforts of scientists and enable them to work with greater initiative such potential areas of development need protection from foreign giants. To Make Economy Self-reliant :. War and peace conditions. Trade barriers can be broadly classified into two categories 11. International trade cycles. In order to protect our precious environment. Policy regarding Foreign Direct Investment (FDI).The immediate solvency of any country depends upon its foreign exchange reserves. the government plays a key role in the 21 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Political system accepted by the country. Policy decisions on joint ventures and foreign collaborations g. Political Environment :. ideologies and policies of the government. e. f. the government may use tariffs to increase the price of dumped goods. To Conserve Foreign Exchange Reserves :.

S. On the other hand. for instance.. i. When export tar-iffs are levied.4 percent to 45 percent for one year and then declined to 35 percent. Purpose: Protective and Revenue Tariffs Tariffs can be classified as protective tariffs and revenue tariffs. Length: ‘Tariff Surcharge versus Countervailing Duty’ Protective tariffs can be further classified according to length of time. and distribution point. The classification scheme used here is based on direction. Compared to a protective tariff.) Product costs or prices are irrelevant in this case. 25~/square yard. with the latter being the less common one. and labor against foreign competitors by trying to keep foreign goods out of the country. Distribution and Consumption Trade Barriers Government Participation in Trade Administrative Guidance Subsidies Government procurement and stand trading Product Classification Product valuation Customs and entry Procedures Documentation License or permit Inspection Health & safety regulation Product Standards Packaging. Rates: Specific. length. which is. a revenue tariff is relatively low. American cars exported to Japan are subject to a vari-ety of import taxes.g. The aim of tariffs is to. 11. since Japan considers that the shipping cost adds value to a car. a government pro-vides an export subsidy by rebating certain taxes if goods are exported. The government undertakes various developmental activities. in contrast. of other measure of quantity. there is a reverse relationship between product value and duty percentage. Tariffs’ are in the form of customs duties and taxes imposed on internationally traded commodities when they cross the national boundaries. for a cheap product whose value is low. The purpose of a revenue tariff. Customs duties charged on import and export of goods can serve as a significant source of finance for such purposes. When Japanese and other foreign cars are imported into the United States. a duty when expressed as a percentage of this price will fall. The purpose of a protective tariff is to protect home industry. These classifications’1reiiot necessarily mutually exclusive. a country may be forced to impose trade restrictions. Brazil has a 50 percent import tax on imported “flyaway” planes. whereas the Japanese tax is more of a protective tariff. Ad Valorem. a tariff surcharge was used.economic development. rate. That is. The U. they usually apply to an exporting country’s scarce resources or raw materials (rather than finished manufactured products). To protect the local industry. Types of Tariff Trade Barriers Tariffs are extensively used trade barriers. in order to counteract trade barriers imposed by other countries.Tariff derived from a French word meaning rate. price. The South American markets. Because the duties are constant for lowand high-priced products of the same kind. whereas a countervailing duty is a permanent Surcharge. The distinction is based on purpose. or list of charges is a customs duty or tax on products that move across borders. a U.675. and combined. three kinds of tax rates must be distinguished: specific. is to generate tax revenues for the government. ad valorem. Based on a standard physical unit of a product. labeling & marking Product testing Product specifications Product Requirements Nontariff Barriers Quotas Export Quotes Import Quotes Absolute Tariff Voluntary (OMA & VER) Exchange & control Multiple exchange rates prior import deposit Credit restriction Profit remittance restrictions Financial Control Tariffs:.added Cascade Excise Turnover or equalization about 30 percent for goods sold in noncash (barter) transactions. Usually. $2/ton. which require enormous finance. When Harley Davidson claimed that it needed time to adjust to Japanese imports.Sometimes.S. The tariff on heavy motor-cycles jumped from 4. tax is a revenue tariff. Countervailing duties are imposed on certain imports when products are subsi-dized by foreign governments. On the other hand. Increase prices of imported goods and thereby reduce their demand and discourage their consumption. there is a 3 per-cent duty. Direction Import Tariffs Export Tariffs Protective Tariffs Revenue Tariffs Tariff Surcharge Countervailing Duties Specific Duties Ad Valorem duties Combined rates Single . the duty percentage will rise accordingly. $l/ gallon. Companies exporting from Russia must pay an average export tariff of about 20 pe{cent on a number of goods sold in cash transactions and an average export tariff of 22 .1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Purpose Time length Tariffs Tariff rate Production. this method is discriminatory and effective for protection against cheap products because of their lower unit value. car sold in Japan can easily cost twice as much as its price in the United States. purpose. These duties are thus assessed to offset a special ad-vantage or discount allowed by an exporter’s government. Direction: Import and Export Tariffs Tariffs are often imposed on the basis of the direction of product movement. they are specific rates of so many dollars or cents for a given unit of measure (e. Even the cost of shipping is taxed. and finally 10 percent in subsequent years. As product price goes up. etc. gauge. To Counteract Trade Barriers Imposed by Other Countries :. 20 percent. Tariff can be classified in several ways. and Combined How are tax rates applied? To understand the computation. A tariff sur-charge is a temporary action. President Reagan felt that it was in the national interest to provide import relief. Specific duties are a fixed or specified amount of money per unit of weight. agri-culture. As a result.stage Value . on imports or exports. have high import duties that hinder the import of fully built cars. 15 percent.

of-fers a mixed picture. Such pro-tection becomes even more critical when inflation increases prices of imports. their export prices become more competitive (i. and remit the balance to the government. it is a value-added tax similar to those found in most European countries. To protect bourbon.12 Regarding Korea and the Philippines. cascade.14 Since the IGE was imposed each time the goods changed hands. As a result. Border taxes can be used to raise prices of imports or lower prices of exports. On im-ports. value-added. U. These indirect taxes. there is a di-rect relationship between the total duties collected and the prices of products. ‘The GST taxes both goods and services and curbs exemptions. This tax is perhaps most common in the United States.e. Value added at that stage. county. Sellers in the chain collect the VAT from a buyer.5 percent for most products. Of the tax systems examined. In the United States the federal government collects a 3 percent excise tax on telephone services and collects 161t for each pack of cigarettes. frequently adjusted at the border. Combined rates (or compound duty) are a combination of the specific and ad valorem duties on a single product. and local excise taxes. their effect lessens with time because inflation reduces the proportionate effect. In other wants. the VAT may improve a country’s trade balance. lowers their export prices. Italian manufacturers min-imized transfers of goods by selling products directly to retailers. the tax was collected by Canada Customs. Table 3-2 on page 94 provides the V AT rates through-out the world. and consumed domestically. The single-stage sales tax is not collected until products are purchased by final consumers. for example. Al-coholic beverages and cigarettes are good examples. The VAT is supposed to be non-discriminatory because it applies to both prod-ucts sold on the domestic market and imported goods. this appears to be the most severe of them all.Ad valorem duties are duties “according to value.. That is. Another advantage is that ad valorem duties provide an easy comparison of rates across countries and across products. sold. are of four kinds: single-stage. The importance of the value--added tax is due to the fact that GATT allows a producing country to rebate the value-added tax when products are exported. Table 3-3 shows how the tax varies among the three systems. Prices of imports are raised by charging imported goods with (in addition to customs duties) a tax usually borne by domestic products. Because” of the hidden nature of the FST. where retailers and wholesalers make purchases without paying any taxes simply by show-ing a sales tax permit. and it. insurance.” They are stated as a fixed percentage of the invoice value and are applied as a percentage to the dutiable value of the imported goods. and excise. -If spe-cific duties were used.S. Cascade taxes are collected at each point in the manufacturing and distribution chain and are levied on the total value of a product. The new tax is a more broadly based Goods and Services Tax (GST).675.5 percent FST into their prices. A study in Europe showed no evidence that the VAT had any material impact on the balance of trade. the rebated VAT. The strength of this method is that it provides a contin-uous and relative protection against all price levels of a particular product. though in some countries only the rate producing more revenue may apply. respectively. This is the opposite of specific duties since the percentage is fixed but the total duty is not. noncumulative tax on consumption. exporters EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 23 . These four Kinds of indirect taxes are often adjusted at the border. For example. Single-stage sales tax is a tax collected only at one point in the manufacturing and distribution chain. The evidence. including taxes borne by the product at earlier stages. and city governments may have their own ex-cise taxes. It is a national sales tax levied at each stage of the production and distribution sys-tem. The rebate of this tax when the goods are exported. State. For exported products. in addition to an import tariff to pay federal. however. each time a prod-uct changes hands. deduct the amount of VAT they have already paid on their purchase of the product. in effect. Japan’s ad valorem tariffs on beef llnd processed cheese are 25 percent and 35 percent. The United States also has border taxes. the absolute amount of total duties collected will increase or decrease with the prices of imported products.68 per fifth on Scotch whiskey. a tax must be paid. was hoped by foreign manufacturers that the revival of wholesale organizations might facilitate imports of foreign consumer goods.1 the refund process to be anything but easy (see Marketing Strategy 3 -1). A value-added tax (VAT) is a multistage. the tar. though only on the. They are duties based on both the specific rate and the ad valorem rate that are applied to an imported product. An excise tax is a one-time charge levied on the sales of specified products.if may be l0¢ per pound plus 5 percent ad valorem. European Union customs officers collect the VAT upon importation of goods based on the CIF (cost. lower) when such products are relieved of the same tax that they are subject to when produced. For over thirty years a now-defunct cascade tax system of taxation in Italy (the IGE) hurt the development of large-scale wholesale business there. may have encouraged exporting. Canada replaces its Federal Sales Tax (FST). and freight) value plus the duty charged on the product. Foreign firms trying to get a refund from European governments have found 11. The IGE was re-placed by a value-added tax in 1973. both rates are used together. But the tax col-lected at a certain stage is based on the added value and not the total value of the product at that point. foreign firms found that they were not as price competitive as they had as-sumed. which had been 13. The FST was collected at the manufacturing stage of production on ‘domestic goods. state. many foreign marketers selling into the Canadian market did not’ realize that Canadian manufacturers had already built the 13. Based on this method. Under this system. the United States imposes an average tax of $2. even between middlemen. Since the tax applies to imports at the border but because it is fully rebated on exports. Distribution Point: Distribution and Consumption Taxes Some taxes are collected at a particular point of distribution or when purchases and consumption occur. by increasing profits from exports compared with the previous tax regime.

which have the same purpose as DISCs. Non-tariff barriers.g.” Subsidies can take many forms including. whose governments are responsible for the central planning of the whole economy. In this practice the state engages in commercial operations. because the government itself is now the customer or buyer who determines what. manufactures) and those paid on nonprimary products and primary minerals. technically named the Agreement on Interpretation and Application of Article VI. the multilateral treaty. A country may allow a corporation to shelter its profit from abroad.should benefit from the more transparent nature of the new GST and find it easier to plan export pricing. as the impact of tariffs. while nontariff barriers have become more prominent. Sheltered profit is another kind of subsidy. Michigan. Nontariff Barriers Tariffs. coupled with other forms of assistance. This tax is intended to compensate for similar taxes levied on domestic products. how. The Code’s rules also differentiate between subsi-dies paid on primary products (e. The types of participation include administrative guidance. Cash interest rate.675. The Subsidies Code. and budgetary subsidies are among the various subsidy policies of several Asian countries.” To get private firms to conform to the Japanese gov-ernment’s guidance. When the same tax rate is applied to the imported and domestic products. are more elusive or nontransparent. is Another study of the occurrence and importance of nontariff barriers also found significant variations across selected Pacific Rim countries. Tennessee. Japan’s government agencies’ administrative councils are influential enough to make importers restrict ‘their purchases to an amount not exceeding a cer-tain percentage of local demand. This guarantee of “national treatment” means that a foreign government must choose the goods with the lowest price that best meet. There is a greater impact on the import because the tax is usually levied on the full ClF. or applied with a view to creating ob-stacles to international trade. The United States in 1971 allowed companies to form domestic international sales corporations (DISCs) even though they cost the U. A new U.. American tobacco companies complained that Japan’s Tobacco and Salt Agency kept prices of their products artificially high and that sales representatives from this government tobacco monopoly participated in dis-crediting the advertising of American products. in order to attract foreign au-to makers to locate their plants in those states. can be viewed as subsidies. training of workers. Ohio. Laird and Yeats have documented the spread of nontariff barri-ers from 1966 to 1988 that have been applied unevenly across countries and indus-trial sectors. Often disguised. The Japanese government denies that such a prac-tice exists. The Code requires that tech-nical specifications not be prepared. duty-paid value. encouragement. Such business activities are either in place of or in addition to private firms. or prohibition. recommendations. The U. discouragement. The Government Procurement Code requires the signatory nations to guarantee that they will provide suppliers from other signatory countries treatment equal to that which they provide their own suppliers. freight. Inc. and tax breaks. Although government involvement in business is most common with the com-munist countries. Brazil’s re-bates of the various taxes.S. where. or recognized national standards. where appropriate. though generally undesirable. national technical regulations.S. The rules of the international agreement negotiated during the Tokyo Round of Multilateral Trade Negotiations (MTN) differentiate between export subsidies and domestic subsidies. rather than on the invoice value alone.1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 24 . XVI and XXIII of the General Agreement on Tariffs and Trade.. Government Procurement and State Trading State trading is the ultimate in gov-ernment participation.S. Any critical examination of this would demonstrate that the tax does not equalize prices at all. when. When the government is further involved in reselling imported products. Each category contains a number of different non-tariff barriers. Government Participation in Trade The degree of government involvement in trade varies from passive to active. even-tually ruled that a DISC was an illegal export subsidy. government. the effect is uneven. either directly or indirectly. as the largest buyer in the world. or fishery in its 11. corporate income tax. The specifications regardless of the supplier’s nationality. mat-ters become even more complicated. law allows com-panies that meet more stringent requirements to form foreign sales corporations (FSCs). The purchasing agency must adopt specifications geared toward performance rather than design and must base the specifications on international standards. GATT.S. through the agencies under its control. and Illinois. the practice is definitely not restricted to those nations. Subsidies According to GATT. Japan has been doing this on a regular basis to help implement its industrial policies. the impact of nontariff barriers can be just as devastating. the government uses a carrot-and-stick approach by exerting the influence through regulations. Many countries have a turnover or equalization tax. There are several hundred types of nontariff barriers. are at least straightforward and obvious. insurance. if not more. adopted. A primary product is any product of farm. Subsidized loans for priority sectors. and infrastructure. is required by the Buy American Act to give a bidding edge to U. There are several other kinds of subsidies that are not so obvious. recognizes that government subsidies’ distort the competitive forces at work in international trade. preferential rediscount rates. ‘sales tax. which are simply subsidies in disguise. This systematic cooperation between the government and busi-ness is labeled “Japan. suppliers in spite of their higher prices. value-added tax. “subsidy is a “financial contribution” provided di-rectly or indirectly by a government and which confers a benefit. These barriers can be grouped in five major categories. in comparison. state trading and subsidies Administrative Guidance Many governments routinely provide trade consultation to private companies. provided such services as highway con-struction. claiming that it merely seeks reports on’ the amounts purchased by each firm. and how much to buy. treasury more than $1 billion a year in revenue. forest. Tariffs have de-clined in importance.

trucks from other European countries for hours while looking for products’ nonFrench instruction manuals. certificate of origin. packing list. how-ever. In South Korea.g. The microchips were then installed after entry. which were banned. India requires license for all imported goods.S. such complicated and lengthy documents serve to slow down product clearance. as well as imports of counterfeit coins. Valuation Regardless of how products are classified. requiring customs documentation to be in French. In Japan a commodity tax of 15 percent is applied to the FOB factory price of Japanese cars. IS An article is considered prohibited if not accompanied by a li-cense. adding $1. inspection classifies and values products for tariff pur-poses. Customs resulted in a 100 percent punitive tariff on certain Japanese computers. the EU’s export subsidies for such manufactured products as pasta and wheat flour are banned by the international subsidies code. each product must still be val-ued. but it also de-termines whether some products should be banned altogether. This step is highly related to other customs and entry procedures. First. Usually. frozen and cured meat). The value affects the amount of tariffs levied. bills. or manufacturing costs) and how this value is constructed. A company can sometimes take action to affect the classification of its product. Documentation Documentation can present another problem at entry because many documents and forms are often necessary. Customs reclassified Nissan’s imported truck cabs and chassis from “parts” with 4 percent duty to “assembled vehicles” subject to 25 percent levies instead. and (3) permissible but nonactionable (green light) subsidies. arms. even held up. a separate license application had been required for any new cosmetic product. malt beverages. (2) permissible but actionable (yellow light) subsidies. Inspection Inspection is an integral part of product clearance. the fol-lowing shipping documents are either required or requested: commercial invoice. pro j(ml1(/ invoice. inspection prevents the importation of prohibited articles. phonograph records. and shipper’s export declarations. The boards were not classified as computers and were thus allowed to enter the United States duty-free. inspection determines whether products meet health and safety regu-lations in order to make certain that food products are fit for human consumption or that the products can be operated safely. goods may not be cleared through customs. printed matter. and health and safety regulations. import. and seditious materials.natural form or that has undergone such processing as is customarily re-quired to prepare it for transportation and marketing in substantial volume in inter-national trade (e. importations of distilled spirits. wines. Classification How a product is classified can be arbitrary and inconsistent and is often based on a customs officer’s judgment. license. Toshiba and NEC. insurance certificate. The process can be highly subjective. if an imported product is determined to have the accept-able minimum percentage of materials produced in a designated country. and explosives into the United States require a license issued by the Bureau of Alcohol. bill of lading. Fourth. Second. Japan simplified its licensing procedure in 1986. The new requirements categorize cosmetics into seventy-eight groups and list permitted ingredients. cars are valued on the ElF basis. and Firearms. foreign. since such products are not entitled to any subsidies.g.S. the United States has proposed the adoption of the “traf-fic light” approach to provide a framework for the classification of all subsidy pro-grams. For example. A customs appraiser is the one who’ determines the value. 25 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION .000 more to the final re-tail price of these cars. Product classification is important because the way in which a product is clas-sified determines its duty stams.) Customs and Entry Procedures Customs and entry procedures can be employed as nontariff barriers. For instance. they are not countervailable if provided according to criteria intended to limit their po-tential for distortion. Yet U. Previously. Based on a subsequent GATT agreement. Regarding permissible but nonactionable subsidies. There is considerable debate over what should be considered manufactured prod-ucts. controlled imports re-quire licenses or permits. The Code prohibits the use of export sub-sidies on nonprimary products and primary mineral products.S. These restric-tions involve classification. License or Permit Not all products can be freely imported. valuation. The permissible but ac-tionable subsidies are actionable multilaterally and countervailable unilaterally if they cause adverse trade effects. inspection. and narcotics.. it can be classified by a customs officer as having duty-free status. A marketer simply notifies the government of any new product using those ingredients. prohibited articles include books. there are three Lategories: (1) pro-hibited (red light) subsidies. inspection reveals whether imported items are consistent with those specified in the accompanying documents and whether such items require any li-censes. It is not always easy to obtain an import license. documentation. The U. import license. securities.675. since many countries will is-sue one only if goods can be certified as being necessary. according to the United States. Classification thus deter-mines if certain product categories are qualified for a special treatment. and the valuation of a product can be interpreted in different ways. postage stamps. sculptures. Tobacco. depending on what value is used (e. France. and the documents required can be com-plicated. immoral. Without proper documentation. For example. To combat subsidies. At the very least. as well as articles used for espionage or intelligence activities. and other like articles 11. Japan held up Givenchy’s import application because the company left out an apostrophe for its I’Interdit perfume.1 that are deemed subversive or injurious to national security or detrimental to the public interest. took advantage of the ruling’s loophole by importing boards without micro-processor chips. Documentation requirements vary from country to country. The EU’s position is that pasta and wheat flour are not manufactured products. Goods must be ex-amined to determine quality and quantity.. motion pictures. a ruling of the U. export. Most countries ban ob-scene. ammunition. at least at the time of entry. even when only a change in shade was involved. In the United States. Third.

NAFTA • Ethyl alcohal and mixtures there of for fuel use from the Caribbean and U. Peanuts.S. Upland cotton. Cotton having a staple length of under 1 -1/18. Whiskbrooms. Watermelons lap waste. Some quotas are global. and wearing apparel.10. Orange juice • . or Raw cotton otherwise prepared or preserved (except peanut Brooms butter).S. a combination of tariffs and quotas is applied with the primary purpose of importing what is needed and discouraging excessive quantities through higher tariffs. From a policy standpoint. a quota with industry participation). olives as described in Presidential Proclamation • Cheese.40.60. Tomatoes .5% butnot over 45% by weight • Anchovies. This may sound peculiar because the country appears to be acting against its own self-interest. wool apparel. blanched. wholl y or in part of broom corn • Chocolate crumb containing 5. X-ray devices. • Buttermix. Health and safety regulations are not restricted to agricultural products. syrups. the monitoring of trade volumes. Any deviation from the state-ments contained in invoices necessitates further measurements and determination. Tariff-Rate Quotas and butter oil. sliver waste. and ministers the Caribbean Basin Initiative (CBI) Special Accotton or man. Blended syrups • .made fiber. Insular Prossession • Presidential Proclamation 6411 implem8l1ted under number 9901. Be-cause this is a gray area. trade embargoes against Iraq and North Korea. The manufacturing process leaves a small hole in the top filled with a rubber stopper.60 HTSUS.000 units from Europe. Inspection can be used intentionally to discourage imports. . natural cheddar. have a potential for selling very well in the Japan-ese market. over 5. which are unilaterally imposed. Whereas an OMA in-volves a negotiation between two governments to specify export management rules. The U. Malted milk and articles of milk or cream Dried milk and dried cream described in item 9904. more delay. • Milk (whole) and cream. But a country’s unwillingness to accept these unfavorable terms 11.0005.S. Exhibit 3-5 lists products that are subject to tariff-rate and absolute quotas. manufacturers.000 big motorcycles from Japan and the first 4. Through the use of tariff quotas. microwave ovens.20. There are three kinds of quotas: absolute.14.675.5% or less by • .S. Other brooms. and roving waste. The regulations also apply to TV receivers. whether Peanuts or not advanced Sugars. Milk and cream. pro vided for in the Harmonized Tariff Schedule of the • Butter substitutes. HTSUS.50. Cotton having a staple length of 1-3/8" or more.5% or less butterfat. Customs Service administers import controls on certain cotton. Cotton card strips made from cotton having a Squash staple length under 1 3/16" and comber w aste. • . According to U. • . shelled or not shelled.1 26 . Metal baseball bats from the United States. made from unpasteurized 5924.Marketers should be careful in stating the amount and quality of products. a public disclosure is not necessary. • Dried milk described in it em 9904.S.5% by weight of butterfat. and cotton or man made Textile Articles fiber yarns The U. Both enable the importing country to circumvent the GATT’s rules (Article XIX) that require the country to reciprocate for the quota received and to impose that market safeguard on a most-favored-nation basis. In the case of a VER involving private industries. • . Japan thus bans the bats on the ground that the stopper might fly out and hurt someone.condensed and evaporated • .e. which are necessary to protect the public health and environment. This more than two-decade-old international agree-ment on textiles allows Western governments to set quotas on imports of low-priced textiles from the Third World. and this must be “ascertained” only after expensive on-dock inspection. and more expenses. Sugars. Voluntary Quotas A voluntary quota differs from the other two kinds of quotas. Customs Service ad cotton or Man-made fiber fabrics and make-ups. silk blend and other Imported from Canada: vegetable fiber articles manufactured or produced in Cotton or man -made fiber apparel. Ice cream. Absolute Quotas An absolute quota is the most restrictive of all.15. as well as in providing an accurate description of products. milk and aged not less than nine months. wool. Quotas Quotas are a quantity control on imported goods.15. Eggplant • . • . Animal feeds. Health and Safety Regulations Many products are subject to health and safety reg-ulations. designated countries. formed and cut fabric and accompanied by a properly certified form ITA -370P. provided for in subheading 2106. • Tuna fish. These controls are imposed on the basis of directives issued to the Commissioner of Customs by the Chairman of the Committee for the Implementation of Textile Agreements EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Two kinds of voluntary quotas can be legally distinguished: VER (voluntary export restraint) and OMA (orderly marketing agreement). but others are allocated to specific foreign countries. described in item 1604. Cotton or man -made fiber apparel. But a major obstacle is that every single bat must carry a stamp of con-sumer safety.00. The treaty has been criticized because advanced na-tions are able to force the agreement on poorer countries. a country may negotiate to limit voluntarily its export to a particu-lar market. .ups. The most extreme of the absolute quota is an embargo. wholly or in part of broom • Chocolate crumb and other related articles corn containing more than 5. it exempted from this tax the first 6.made fiber yarns cess Program on certain products which are made of U. a quota is not as desirable as a tariff since a quota gener-ates no revenues for a country. HTSUS. Chili peppers • . Commodities Subject to Import Quotas Absolute Quotas Administered by the Commissioner of Customs as • . country.S.S. Tariff Quotas A tariff quota permits the entry of a limited quantity of the quota product at a reduced rate of duty. satsuma mandarin oranges. HTSUS. This agreement usually specifies the limit of supply by product. Concern for safety was used by Japan against aluminum softball bats from the United States. Cheese • . this fear is unfounded. To appease the EU. Quotas can be used for export control as well. containing milk or milk derivatives. for instance. Milk and cream. Japan imposes strict quotas on oranges and beef. A voluntary quota is a formal agreement between na-tions or between a nation and an industry. chemical sub-stances. and molasses described in weight of butterfat.. Quantities in excess of the quota can be imported but are subject to a higher duty rate.40.20 and 9904. as shown in the case of the U. An export quota is sometimes required by national planning to preserve scarce resources. or more Onions and shallots but under 1-3/8. Sugar -containing products. and of butterfat. condensed or evaporated. the North American Free Trade Agreement and established trade preference levels on the • Meat (Australia and New Zealand) foll owing qualifying imported goods' • Milk and cream.. and molasses Sugars derived from sugar cane or sugar beets • . Fibers of cotton processed but not spun. cosmetics. further entries are prohibited. fresh or sour Imported from Mexico (New Zealand). wool apparel. fluid or frozen. Milk and cream. When the United States increased tariffs on imported motorcycles in order to protect the U. the OMA and VER can be applied in a discriminatory man-ner to a certain country. and voluntary. syrups. they are specific provi-sions limiting the amount of foreign products imported in order to protect local firms and to conserve foreign currency. fiber fabrics and made . • Dried milk containing 5. and volume. motorcycle in-dustry. It lilnits in ab-solute terms the amount imported during a quota period. man. it has lifted quotas on skimmed milk powder and tobaccos from Europe. tariff.10. or a zero quota. a VER is a direct agreement between an importing nation’s government and a foreign exporting industry (i. As implied. headings 9904.90. containg over 45% butterfat United States (HTSUS). HTSUS. Once filled. Generally. The largest voluntary quota is the Multi-Fiber Arrangement (MFA) for forty-one export and import countries. and consultation rights.

in particu-lar. OBJECTIVES The objective of tariff barriers is to The objective of non-tariff barriers is increase the price of imported goods to restrict the quantity of import and and thereby reduce their there by provide protection to consumption and import. barriers may be more people may continue to buy effective as they directly control the imported goods at a higher price. currency swaps. Many employ the various tactics such as countertrading. Credit restrictions apply only to imports. with such rates going up to 60 percent. usually at very favorable rates. and duties. purpose.. South Africa unified the two exchange rates. It is thus voluntary only in the sense that the exporting country tries to avoid al-ternative trade barriers that are even less desirable. MNCs have looked to legal loop-holes. Spain once used low exchange rates for goods designated for ex-port and high rates for those it desired to retain at home. 6. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 27 . any unapproved multiple currency prac-tices are a breach of obligations. 5.1 importer’s capital. some products and industries will benefit and some will not. For example. consular relations between the trading formalities. allows the unrestricted movement of capital. Effectiveness:As a method of controlling imports. etc. exporters may be able to get loans from the government. But with the application of multiple exchange rates. ASEAN countries share a common philosophy in allowing un-restricted repatriation of profits earned by foreign companies. By regulating all types of the capital outflows in foreign currencies. As a method of controlling imports tariffs may not be effective as non-tariff.675. the physical quantity of imports. criteria and quotas. whereas low rates may be used for other imports. if such loans are available at all. Quotas are still quotas regardless of what they are called. 3.on restrictions on physical units of a commodities imported and commodity imported or exported. Singapore. for example. To help initiate an aircraft industry. South Africa. and frequently they fail to achieve the desired goal. domestic industries. to defend the weak Italian lira. Prior Import Deposits and Credit Restrictions Financial barriers can also include specific limitations or import restraints. A government can require prior import deposits (forced deposits) that make imports difficult by tying up an 11. According to the IMF. For example. After arguing for quotas and price increases to gain extra monies to improve productivity and competitiveness. Other countries practice a form of profit remittance restriction by simply having long delays in permission for profit expatriation. But many countries regulate the remittance of profits earned in local operations and sent to a parent organization lo-cated abroad. restrictions. exported. Importers in Brazil and Italy must de-posit a large sum of money with their central banks if they intend to buy foreign goods. Or these firms may lend to each other in the currency desired by each party. foreign exchange countries. total volume of goods imported. that is. Multiple exchange rates may also apply to imports. trying to stem capital outflows. In 1995. Both of these barriers operate by imposing—certain financial restrictions on importers. The objectives of multiple exchange rates are twofold: to encourage exports and imports of certain goods and to discourage exports and imports of others. the automakers ended up using record profits to pay big bonuses to their executives. and other parallel schemes. Profit Remittance Restrictions Another form of exchange barrier is the profit re-mittance restriction. French exporter. Types:Tariff barriers. started in 1985 to re-quire nonresidents to transact capital transactions at a separately freely floating ex-change rate (i. as political uncertainty declined. Italy im-posed a 7 percent tax on the purchase of foreign currencies. These restrictive monetary policies are designed to control capital flow so that currencies can be de-fended or imports controlled. The high rates may be used for imports of particular goods with the government’s approval. Revenue:Tariff barriers generate revenue for Non-tariff barriers do not generate the government in the form of taxes any revenue for the government. the government either makes it difficult to get im-ported products or makes such items available only at higher prices. licensing. They always inhibit free trade. The example set by u. Distinction Between . the Brazilian government has required an importer of “flyaway” planes to deposit the full price of the imported aircraft for one year with no interest. 4. For instance.s. Meaning:Tariff barriers are in the form of Non-tariff barriers are quantitative taxes and duties charged . are classified on the Non-tariff barriers are in the form of basis of origin. Financial Control Financial regulations can also function to restrict international trade. a multinational firm wanting to repatriate a cur-rency may swap it with another firm that needs that currency. To overcome these practices. but importers will not be able to receive any credit or financing from the government. this system is condemned by the International Monetary Fund (IMF). Brazil uses progressive rates in taxing all profits remitted to a parent company abroad.will eventually invite trade retaliation and tougher terms in the form of forced quo-tas. In effect the importer is pay-ing interest for money borrowed without being able to use the money or get interest earnings on the money from the government. This means that there is no single rate for all products or industries. There are several forms that financial restrictions can take.e. Because multiple exchange rates are used to bring in hard currencies (through exports) as well as to restrict imports. 2. Importers must look for loans in the private sector-very likely at significantly higher rates. the financial rand). Nature:It is an indirect method of curtailing It is a direct method of curtailing imports by increasing the price of imports by imposing restrictions on imported articles. must exchange the foreign currencies for francs within one month. automakers is instructive. The financial rand was much more depreciated than the commercial rand exchange rate. Multiple Exchange Rates Multiple exchange rates are another form of exchange regulation or barrier. and the member may become ineligible to use the Fund’s resources. Japan agreed to re-strict and reprice some exports within Great Britain. such as prior import deposits and credit re-strictions. Exchange controls also limit the length of time and amount of money an ex-porter can hold for the goods sold.Tariff Barriers and Non-tariff Barriers Tariff Barriers Non-tariff Barriers 1.

28 .V. the Preparatory work for NTB elimination is being undertaken by the Interim Technical Working Group (ITWG) on CEPT for AFTA. Explain its components. “Trading Blocs create obstacles to international trade. Finally we have monopolistic measures involving state-trading or the use of a selected or limited group of importers. 84 (electrical appliances) and 85 (machinery) of the Harmonised System classification.V. sets imported.1 It is easy to calculate and administer as it can simply be calculated by multiplying the rate of duty with number of units imported or exported. For example. specific duty is not very popular as most of the countries use advalorem duties 5. which reports directly to the ASEAN Senior Economic Officials.O. Question Bank Q1. For example. For example. advalorem duties 5 In this case physical units of commodity are not taken into consideration.I. Q3. What are the different types of non*tariff barriers? When and why was the GATT agreement signed? What are the functions and objectives of the WTO ? Explain the Uruguay Round of GATT negotiations with special reference to India. V.” Examine critically. What are the different types of trading blocs? Q13. including submissions made by Member Countries. value of cloth imported or 10% of C. value of T. Q14. This working definition (see Table 3) adopted by the ITWG was based on a classification developed by the United Nations Conference on Trade and Development (UNCTAD). these products made up nearly 55% of Indonesia’s imports. These products are those in chapters 27 (minerals). Q5. Then the ASEAN Secretariat began compiling information on NTBs from a number of different sources.’ rare Paintine:s and statues.. the following measures have been identified as major NTBs affecting intraregional trade: customs surcharges. Advalorem Duty 1 Advalorem duty is a duty imposed on the total value of commodity imported or exported 2 It is difficult to calculate as it requires a proper assessment of the value of goods imported o* exported 3 It is levied on such goods whose quantification in terms of number of units is not possible. These measures are classified under broad 11. and monopolistic measures. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Specific duty is a duty imposed on each unit of a commodity imported or exported. Q4. 4 Generally most of the countries charge duties on the basis of value of goods imported or exported. i. Q11. Explain the MFN clause of the GATT. Explain the GSP under the UNCTAD. Main Considerations In this case value of commodity is not taken into consideration.675. Convenience Article-1 Non-Tariff Barriers Given the firm commitment made by the Member Countries on the programme of tariff reduction under the CEPT Scheme. over 64% of Malaysia’s imports. Table 3 Working Definition of Non-tariff Measures for Purposes of Implementing the Cept Agreement This section presents working definitions for the trade control measures adopted by the Interim Technical Working Group on CEPT for AFTA. number of T. Distinguish between Tariff and Non-tariff barriers.e. In spite of advantages over advalorem duty. Define Trading Blocs. submissions by the ASEAN Chambers of Commerce & Industry (ASEAN-CCI) and the UNCTAD’s Trade Analysis and Information System (TRAINS) database. sets and metres of cloth.500 on each T. Nature of Goods It is levied on such goods whose quantification in terms of number of units is possible. What are the objectives of trade barriers? What are Tariff Trade Barriers? How are they classified? Define Non-tariff Barriers. Define Trade Barriers. Q2. First.Advalorem Duty and Specific Duty Specific duty 1. Q9.B. Rs. Currently. attention has now shifted to non-tariff barriers. 4. The identification process involved a number of important steps. Q6. Technical measures and product characteristic requirements come in second involving more than 975 tariff lines. Significant progress has already been made in identifying those NTBs that affect intra-regional trade the most.F. In 1994. Second. Q7. Distinguish between Specific Duty and Advalorem Duty. When and why was the UNCTAD constituted? Q10. 5% of F. Now Article 5 of the CEPT Agreement calls on Member States to “eliminate other non-tariff barriers on a gradual basis within a period of five years after the enjoyment of concessions”. a working definition of NTBs had to be agreed upon. Define International Marketing Environment. Member Countries are working to develop detained work programmes on eliminating NTBs for endorsement by the ASEAN Economic Ministers Meeting scheduled in September 1995. Customs surcharges are applied to about 2.Distinction Between .5 on each meter of cloth imported or Rs. 3. Major NTB’s Identified Based on these various information sources. Q8. 2. and nearly 70% of Thailand’s imports. technical measures and product characteristic requirements. over 50% of the Philippines’ imports. Meaning Q12. the GATT Trade Policy Review. Table 4 gives us an indication of the most widespread NTBs in ASEAN. set imported. For example. it was decided to focus on those NTBs that affect the most widely-traded Products in the region.683 tariff lines.

variable components. the measures are further subdivided according to their characteristics. whichis required at the moment of the application for. It should be noted that Article VIII of GATT states that fees and charges other than customs duties and internal taxes shall be limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes.categories according to their nature. Advance payment of customs duties Advance payment of the totally or a part of customs duties. customs formality tax. depending on the country or sector. Cash margin requirement Obligation to deposit the total amount corresponding to the transaction value. threshold prices or trigger prices. stamp tax. are known as reference prices. the charges applied to primary products as such are called variable levies and those as part of a processed product. payment be required in foreign currency. the environment and wildlife. which are subdivided according to their corresponding objectives. minimum import prices or basic import prices. Customs surcharges/import surcharges between two prices of the same product.e. tax on transport facilities and charges for sensitive product categories. internal taxes and charges levied on imports. which are levied on imported goods in addition to customs duties and surcharges and which have no internal equivalent. Voluntary export price restraint The customs surcharge. the import license. i. before the opening of a letter of credit. or revert to determined international market values. They may increase the airport cost in a fashion similar to tariff measures. or a specified part of it. in a commercial bank. such as official prices. Finance Measures Measures that regulate the access to and cost of foreign exchange for imports and define the terms of payment. Four groups are distinguished: customs surcharges. to denominate the different administrative price fixing methods. and decreed customs valuation. n. the authorities of the importing country take into account the domestic prices of the producer or consumer establish floor and ceiling price limits. suspension of airport licenses. Additional charges A restraint arrangement in which the exporter agrees to keep the price of his goods above a certain level. to ensure human safety and to ensure national security. Administrative price fixing of import prices EXPOR T IMPORT PROCEDURE AND DOCUMENTATION By administrative price fixing.675. Advance payment requirements Customs duties and other charges on selected airports can be levied on the basis of a decreed value of goods (the so called “valeur mercuriale” in French). These prices. Within the broad categories. with no allowance for interest to be accrued on the deposit. (ii) to establish the domestic price of certain products because of price fluctuation in the domestic market or price instability in the foreign market. statistical tax. or the issuance of.e. to subsequently arrive at one of the following adjustment mechanisms. Primary commodities may be charged per total weight. compared for control purposes. animal health and life. plan health. Special mention should be made of the measures for sensitive product categories and technical regulations. anti-dumping measures or countervailing duties. Refundable deposits for sensitive product categories 11. for a given period of time. The decreed value de facto transforms an ad valorem duty into a specific duty. Variable charges Additional charges. and for a preestablished price.1 29 . etc. additional charges. Price Control Measures Measures intended to control the prices of imported articles for the following reasons : (i) to sustain domestic prices of certain products when the import price is inferior to the sustained price. registration fee on imported motor vehicles. by a fixed percentage or by a fixed amount. the municipal tax. Advance import deposits Obligation to deposit a percentage of the value of the import transaction for a given time period in advance of the imports. The measures initially adopted can be administrative fixing of prices and voluntary restriction of the minimum price level of exports or investigation of prices. Para-tariff Measures Other measures that increase the cost of imports in a manner similar to tariff measures. to control drug abuse. and (iii) to counteract the damage caused by the application of unfair practices of foreign trade. in advance. with no allowance for interest to be accrued. for the protection of human health. Decreed customs valuation Variable charges bring the market prices of imported agricultural and food products close to those of corresponding domestic products. while charges on processed foodstuffs can be levied in proportion to the primary product contents in the final product. The category of additional charges includes the tax on foreign exchange transactions. consular invoice fee. such as the export promotion fund tax. i. calculated respectively on the basis of the value and the quantity. are classified as additional charges.e. In the case of the EU.. is an ad hoc trade policy instrument to raise fiscal revenue or to protect domestic industry. Various terms are used.s. comprise various taxes and fees. Most of these measures affect the cost of airports in a variable amount calculated on the basis of the existing difference Advance payment of the value of the import transaction an /or related imported taxes. are known as para-tariff measures. Various other taxes. This practice is presented as a means to avoid fraud or to protect domestic industry. airport license fee. taxes for the special funds. application of variable charges. also called surtax or additional duty.

safety or dimensions. either directly or by referring to or incorporating the content of a standard. so that customs duties are not evaded or foreign exchange is not being drained. Table 4 Most Prevalent NTBS. technical regulations cannot be done away with because there are valid reasons for maintaining them. terminology symbols. special symbols for dangerous substances. to ensure national security. Inspection and Quarantine Requirements Compulsory testing of product samples by a designated laboratory in the importing country. Regulations Concerning Terms of Payment for Imports Marking Requirements EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Measures defining the information for transport and customs. and transactions are settled successively after a longer waiting period. quantity and price control of goods prior to shipment from the exporting country. On the other hand. Transfer Ddelays. Queuing takes place when the prescribed delays cannot be observed because of foreign exchange shortage. inspection of goods by health authorities prior to release from customs or a quarantine requirement in respect of live animals and plants. that the packaging of goods should carry (country of origin. including the applicable administrative provisions. The implementation of these measures by sensitive product categories can result in the application of one of the measures listed under codes ending in 71 to 79. 180 or 360 days for consumer goods and industrial inputs and two to five years for capital goods). Technical Regulations Formalities which are not clearly related to the administration of any measure applied by the given importing country such as the obligation to submit more detailed product information than normally required on the basis of a customs declaration. by giving exclusive rights to one or a limited group of economic operators. Packaging Requirements Minimum permitted delays between the date of delivery of goods and that of final settlement of the import transaction (usually 90.. In the case of surcharges this might mean something as simple as doing away with these surcharges. by number of Tariff Lines (Preliminary) Non-tariff Barrier Customs surcharges Additional Charges Single Channel for Imports State-trading Administration Technical Measures Product Characteristic Requirement Marketing Requirements Technical Regulations Number of Tariff Line Affected 2. The regulation may be supplemented by technical guidance that outlines some means of compliance with the requirements of the regulation.) Labelling Requirements Special regulations regarding the terms of payment of imports and the obtaining and use of credit (foreign or domestic) to finance imports. Special Customs Formalities Government-sanctioned exclusive rights of national insurance and shipping companies on all or a specified share of imports. In certain cases. marking and labelling requirements as they apply to a product. Queuing Measures regulating the kind and size of printing on packages and labels and defining the information that may or should be provided to the consumer. technical specification or code of practice. testing and test methods. Sometimes the private sector may also be granted exclusive import rights. etc. Single Channel for Imports Measures regulating the mode in which goods must be or cannot be packed. Compulsory National Services Compulsory quality. Product characteristics requirements Source: The ASEAN Secretariat Modality for Eliminating NTBs Since the measures that act as NTBs tend to vary greatly in their nature. weight. and defining the packaging materpackaging materials to be used. to prevent deceptive practices. for earlier social.1 Technical specifications prescribing technical requirements to be fulfilled by a product. Monopolistic Measures Measures which create a monopolistic situation. in order to protect human life or health or to protect animal life or health (sanitary regulation). Pre-shipment Inspection All imports or imports of selected commodities have to be channelled through state-owned agencies or state-controlled enterprises. to ensure human safety. 30 . a prior recognition of the exporter or certificate issuing service by the importing country is also required. in conformity with the importing country handling equipment or for other reasons. to protect plant health (phytosanitary regulation). to protect the environment and to protect wildlife. including administrative provisions for customs clearance.675. Testing. fiscal or economic reasons.683 126 65 10 568 407 3 3 Regulations that provide technical requirements. etc. packaging. such as prior registration of the importer or obligation to present a certificate issued by relevant governmental services in the country of origin of the goods. effected by an inspecting agency mandated by the authorities of the importing country. the requirement to use specific points of entry. Technical Measures Measures referring to product characteristics such as quality.The deposit refunds are charges which are refunded when the used products or its containers are returned to a collection system. such 11. Price control is intended to avoid under invoicing and over invoicing. NTB-elimination will mean a different thing depending on the measure concerned.

” The dominant thread in the protests against globalization is America’s international trade relationships. or health reasons.. (b) prioritisation of products/NTBs. and (c) trade value. The first criterion would rely on the private sector’s or exporters’ complaints. These criteria can be used singly or in combination with each other to set priorities. Normal trade status would have a direct and positive effect on the high tech sector of our economy. because either the product is obsolete or there is a superior Chinese product available. In the case of monopolistic measures or state monopoly. Presumably. and looking into how greater transparency. Next month. and (d) obtaining a mandate from the ASEAN Economic Ministers to implement the work programme. and in fact.1 31 . Compulsory National Services Government-sanctioned exclusive rights of national insurance and shipping companies on all or a specified share of imports. The NTB elimination process. they should give a robust indicator of the degree to which NTBs exist in that product or sector. No one wants a repeat performance of last year’s Seattle protests. The price wedge gives an indication of how much trade is hindered since if there are no trade barriers presumably importation would tend to wipe out this price difference.C. Member Countries are now in the process of verifying the list of NTBs and products covered by these measures compiled by the ASEAN Secretariat. Tariffs would be put on a level playing field for telecommunications equipment. The difficulty with this criterion is that it is difficult to find the price data to make this sort of comparison. It can convene the expert panels or expert groups that will be involved in assessing how far ASEAN can go in harmonising technical standards or developing mutual recognition agreements. where all three criteria Article-2 Trade Tariffs: The Next Generation This week the authorities responsible for public safety in Washington. Critics maintain that China has a history of eliminating tariffs only after they are no longer needed to keep American products out. However. the elimination of these measures as NTBs might mean harmonizing product standards or developing mutual recognition of standards across Member Countries. These criteria are in order of importance: (a) number of private sector complaints. There is also some work along these lines currently being done on Sanitary and Phytosanitary (SPS) measures for agricultural products. The action plans involve compiling information on technical measures in ASEAN countries covering agricultural products. Chinese consumers who buy American-made telecommunications equipment pay a tariff – an unnecessary and unfair tax – on top of the price of the product. Single Channel for Imports converge. As pointed out above. Other ASEAN-wide Activities Bearing on NTBs Although. They can be used jointly. for earlier social. General Features of the Process for Eliminating NTBs There has already been an agreement on the general features of the process for eliminating NTBs in ASEAN. and vandalism. At issue is a difficult-to-understand.675. Under the Senior Officials of the ASEAN Ministers of Agriculture and Forestry (SOM AMAF) is a Working Group on SPS measures which have come up with action plans on NTB elimination in the areas of crops. Decision of the Seventh AFTA Council The Seventh AFTA Council has tasked these Working Groups to finalise their Action Plans by November 1995 providing a detailed timetable of all their activities. which makes it difficult for American companies to sell their products in China. Several criteria have already been considered by the Interim Technical Working Group on CEPT for AFTA (ITWG) to identify which products/measures have to be dealt with first. will require the assistance of ACCSQ. but powerful. looting. by giving exclusive rights to one or a limited group of economic operators. it is recognized that expertise from different ASEAN bodies will have to be tapped for carrying out this work eventually. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION All imports or imports of selected commodities have to be channelled through state-owned agencies or state-controlled enterprises. In which case. have been on high alert. D. these criteria are not mutually exclusive. The disadvantage of this criterion is that it does not tell us whether the NTB present in the sector hampers trade or not. (b) difference between domestic and world prices. they are in a better position to tell how different measures existing in the country of destination acts as a trade barrier. The idea is to limit the trade-hampering effects of technical regulations or measures. the trade value criterion would prioritise those NTBs/products which is traded most widely (both within and outside the region). American consumers who purchase telecommunications equipment simply pay for the products.as public safety. 11. fiscal or economic reasons. Finally. specially that bearing on technical standards. The advantage of this criterion is that the ASEAN Secretariat already has this information. (c) developing specific work programmes. livestock and fisheries. environmental concern. The second criterion is the price divergence between domestic and world prices. One of these bodies is the ASEAN Consultative Committee for Standards and Quality (ACCSQ) which has already set up a Task Force to deal with NTB elimination. mutual recognition and harmonisation of SPS standards can further liberalise intraASEAN trade in agricultural products. The process Involves (a) verification of information on NTBs. the process of NTB elimination might mean creating a window for competition and market access by other ASEAN Member Countries successively after a longer waiting period. The fact that there is extensive trade in this product may indicate that the NTB is not an important hindrance to trade. Measures which create a monopolistic situation. Sometimes the private sector may also be granted exclusive import rights. Congress is expected to vote on legislation to make our trade relationship with China normal – to make it match our relationship with other countries. fear of “globalization. the work on NTB elimination is now currently centered in the Interim Technical Working Group on CEPT for AFTA (ITWG).

It is only sensible that a high rate of growth also demands a larger marketplace for these new ideas and new products. every trade barrier and tariff removed on a type of product – like telecommunications equipment – is a trade barrier and tariff that will no longer harm the next generation of American-made products. Continued growth demands new ideas and the innovation of new products.675. There is little doubt that China is the largest marketplace on Earth.1 . not after the fact. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 32 11. Let’s hope that Members of Congress understand that it is time to eliminate barriers to trade and tariffs on American-made high-tech products.However. American high-tech workers excel in this respect. Normal trade relations would work to remove tariffs and trade barriers when they are a real threat.

Principles The Guiding principles of WTO (many inherited from GATT) are • United Nations Conference on Trade and Development (UNCTAD) • • • Background. World Trade Organisation (WTO) Objectives The Uruguay Round negotiations concluded on 15th April 1994 at Marrakech. more viable and durable multilateral trading system.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 6: WTO. b. Functions. d. investment. Most Favoured Nations (MFN) Clause. employment and income growth throughout the world. Uruguay Round.675. According to the Marrakech declaration . To secure implementation of the significant tariff cuts and also reduction of non-tariff measures agreed in the trade negotiations. To ensure . It is to provide a forum for further negotiations on matters covered by the agreements as well as on new issue and responsible for settlement of disputes among member nations. Objectives.. • • 11.1 33 . GATT Negotiation Rounds. (signed by all WTO members) and plurilateral (signed by a group of members for specific issue) that have been negotiated under Uruguay Round or will be negotiated in future. To effect substantial reduction in tariffs and other barriers to trade and to eliminate the discriminatory treatment in international trade relations and. Freer trading system – with barriers coming down through negotiations Predictable trading system-foreign companies. c. Second: National Treatment. Fourthly.the results of the Uruguay Round would strengthen the world economy and would lead to more trade. To act as a management consultant for the promotion of international trade. non-tariff barriers and other measures) would not be raised arbitrarily. the World Trade Organisation (WTO) was established on 1st January 1995 with the following objectives :a. To allow for the optimal use of the world’s resources in accordance with the objective of sustainable development. b. Generalised -System of Preference (GSP). d. To develop an integrated. g. Imported goods should not be discriminated against the domestic goods – same treatment to be accorded to both. more and more tariff rates are to be ‘bound’ against subsequent increases. WTO – Functions The WTO is the umbrella organisation responsible for overseeing implementation of all agreement-multilateral • • Non-discrimination.full employment and a large and steadily growing volume of real income and effective demand. e.GATT AND TRADING BLOCS World Trade Organisation (WTO) • • • • • • GATT . f. Trading Blocs • • Opportunities and Threats. greater flexibility and special privileges. The main functions of the WTO as set out in Article III are : a. To facilitate the implementation. it is responsible for periodic reviews of Trade Policies of the member nations.Background. More competitive trading system – by discouraging ‘unfair’ practices in the guise of export subsidies and dumping products at below cost More beneficial to less developed countries – by giving more time to adjust. h. which in practice means two things. administration and operation of the Multilateral Trade Agreement and the Plurilateral Trade Agreements. investors and governments should be confident that trade barriers (including tariffs. g. Any Trade concession offered by one member of WTO to another member must be offered to all members. Types. To raise the standards of living. Functions. e. To provide for Dispute Settlement Mechanism in order to adjudicate the trade’ disputes which could not be solved through bilateral talks between the member countries. To protect and preserve the environment. In order to implement the final act of Uruguay Round agreement of GAIT. To co-operate with other international institutions like the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD)and its affiliated agencies to achieve greater coherence in global economic policy making. To act as a watchdog of international trade: f. WTO. Meaning. First: Most Favoured Nation (MFN) Treatment. To expand production of goods and services and international trade. Morocco. c. To ensure that developing countries secure a share in the growth in international trade commensurate with the needs of their economic development.

integrated circuits and patents.3% in developing countries and by 20% in developed countries over a period of 6 years.WTO -The Uruguay Round The VIIIth and the latest round of Multilateral Trade Negotiations is known as Uruguay Round because it was held in Pantadel Este in Uruguay in September 1986. wood and wood products. the difference of opinion between the U. c.675. geographical appellations. Favoured Nations (MFN) Clause Non-discrimination is one of the most important principles of the WTO. It is important to note that of these seven areas.Article XXIV provides for the formation of Customs Union and Free Trade Areas. However. The results of Uruguay round are to be implemented by the newly set up WTO. The major highlights of the Uruguay Round are:a. however. This principle is known as the Most Favoured Nations (MFN) Clause. Liberalisation of Trade in Agriculture and Textile Goods :. However. Trade in Services :. industrial designs. Because of the complexities of the issues involved and conf1ict of interests . Customs Union and Free Trade Areas :. Patents:. ‘technology. pharmaceutical. tariffs would be totally eliminated in several sectors like steel. went much beyond goods to services. which were in existence prior to the formation of the GATT. e. Again direct subsidies to be cut by :36% over the same period.ofPayments Restrictions Committee on Budget. and Administration Committee on Trade and Environment Committee on the Agreement on Trade in Civil Aircraft Committee on the Agreement on Government Procurement Committee on the International Dairy Arrangement Committee on the Arrangement Regarding Bovine Meat 34 11.One of major areas of objection in India is about TRIPs agreement. if should be noted that liberalisation of agriculture by developed nations would benefit developing countries more as there is no reciprocity on the part of developing countries to liberalise agricultural sector in their countries. The Uruguay Round. member countries of the European Union are allowed to freely import and export not only goods and services but also factors of production such as capital and labour between them. India remains unaffected by these provisions. h. According to this Clause. However. The TRIPs agreement includes seven areas of intellectual property rights namely copyright. which has replaced the GATT. leading to farmers’ agitation. a member nation of the WTO must give the same most favourable treatment with.These were the highly protected sectors in developed as well as developing countries. Expansion in the Sphere of Activities :. For example the United States preferences to Philippines fall under this category. nations of the world are allowed to form Customs Union and Free Trade Zones. As per this clause. WTO-Most. trademark. Subsidies:. there are some exceptions . the service sector largely unaffected. For example.among the participating countries. The Uruguay Round successfully brought about liberalisation of both these sectors by dismantling the MFA and reducing import barriers on agricultural goods.While developing countries have to cut tariffs by 24% over the period of next 10 years. Similarly. trade secrets. the developed countries are committed to effect tariff cut by 36% over a period of 6 years. it is only in the area of patents that India’s present policy laws and regulations are not in conformity with TRIPs agreement. as also Common Wealth Preferences (CWP). etc.S.The traditional concerns of the GAIT were limited to international trade in goods. Establishment of the WTO :. The principle of non-discrimination requires that no member country shall discriminate between the members’ of WTO in the conduct of international trade. In industrial countries. Grandfather Clause :. and European Community (EC) on this issue left. b. d. Farmers’ Interest :. which it gives to any other member country. Tariff Cut:. investment and information.Contrary to the wrong propaganda in India.1 .Article 1 (2) permits contracting parties to continue with the preferences received or granted under different arrangements. This non-discriminatory treatment ensures that any tariff reduction or other trade concession is automatically extended to all contracting parties of the WTO.to the MFN principle :a.Export subsidies to farmers to be cut by 13. Ministerial Conference General Council Dispute Settlement Body Trade Policy Review Body Secretariat (Director General) EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Council for Trade in Goods Council for Trade in Services Council for Tra de-Related Aspects of Intellectual Property Right (TRIPs) Committee on Trade and Development Committee on Balance. f. trade in textiles was restricted by the Multi-fiber Agreement (MFA). respect to tariffs and related matters to other members. if the USA gives ‘ a preferential treatment to Pakistan in respect of tariff reduction then the USA must give the same preferential treatment of tariff reduction to all the members of WTO. Finance. For example. All these are applicable provided the value of subsidies is more than 10% of the value of output. Farmers were patronised in various ways such as import of subsidised inputs and export subsidies. Agriculture subsidies in India are much below 10% of the total value of output and therefore.One of the major achievements of the Uruguay round is the making of rules and regulations more transparent which has made unilateral actions more difficult. the Uruguay Round agreement regarding patenting of seeds does not prevent farmers from retaining seeds for their own use or exchange of seeds. ‘the Uruguay Round could not be concluded in December 1990 as’ it was originally scheduled: This round concluded in 1993. But it prohibits any change in the margin of preferences granted’ or received. g.Developing countries were very apprehensive about the proposal to liberalise trade in services. b.

Created in January 1948. launched in Punta del Este. GATT is a mul-tilateral trade agreement with oversea. The only exception is that an advanced country should not expect reciprocity from less-developed coun-tries. Better utilisation of the resources of the world. there is a world organization in Geneva known as the General Agreement on Tariffs and Trade GATT). however. The Chinese. The result is that sooner or later international trade and marketing can be disrupted. Each country must be concerned with the implications that its concessions for one country would mean for other countries. The Dillon Round 1960-61.g. c. Trade Related Aspects of Intellectual Property Rights (TRIPs) and Trade Related Investment Measures (TRIMs). The VIIIth Round. The other noneconomic rea-sons-improvements in terms of trade.1 canned mushroom duties. e. The Geneva Round. d. Seven successive rounds of multilateral trade negotiations under GAIT auspices produced a decline in average tariff on industrial products in industrial countries from more than 40 percent in 1947 to about 5 percent in 198. Reductions of barriers should be mutual and reciprocal because any country’s import increases caused by such reductions will be offset by export increases caused by other countries’ reduction of restrictions. The four basic principles of. but this requirement can be waived by the President. 1973-79. The Torquay Round. eight rounds of negotiations are over. tackled trade in services. to Brazil).675. The first six rounds of Multilateral Trade Negotiations were concentrated almost exclusively on reducing tariffs. This concept is the basis of the principle of the most favored nation (MFN). b. its code requires international bid-ding on major projects. the Uruguay Round. h. and they are not considered by GATT to be valid reasons for refusing to reduce tariffs. In the meantime. GATT is intended to achieve a broad. a. Ensuring full employment and a large and steadily growing volume of real income and effective demand. The Annecy Round. 2.S. Countries should protect domestic industries only through tariffs. Those who are not GATT’s members include some Latin American and African countries as well as many others in southern Asia and the Middle East. For example. The granting of MFN status to China was done largely for political rea-sons.Negotiation Rounds EXPOR T IMPORT PROCEDURE AND DOCUMENTATION So far. There should be no other restrictive devices such as quotas prohibiting imports. from 45 percent to 10 percent. After China first received MFN status from the United States in 1980. the Tokyo Round. the only valid reason for tariffs in world business is for the protection of an infant industry.S. Uruguay. and balance of payments-are “beggar-thy-neighbor” policies which create gains at the expense of others. On the other hand. d. 1950-51. The Soviet Union. tackled non-tariff barriers also. such as some revenue raising. Russia. The preamble of the GATT mentions the following as its important objectives :a. b. Each round took several years. Other understandable reasons include defense or noneconomic concerns. 1947. of course. According to this principle. Member countries will consult each other concerning trade problems. g. The Uruguay Round. 1964-67. income. mushroom imports. if a country decides to ‘temporarily protect its local industry because that industry is seriously threatened. The United States does not accord MFN status to communist countries that re-strict emigration. 1986-1993. global trade greatly expanded as the volume of trade in manufactured goods increased twenty--fold. The GAT T. which is the cornerstone of GAIT. Raising the standard of living. have been quite vocal with their unhappiness with this threat. The Tokyo Round. The Uruguay Round The Uruguay Round of multilateral trade negotiations. GATT provides the forum for tariff negotiations and the elim-ination of trade discrimination. mushroom imports from China jumped from nothing to nearly 50 percent of all U. remained unable to gain MFN status and denounced the U.WTO Organization Chart General Agreement on Tariff and Trade (GATT) Background Virtually all nations seek to pursue their own best interests in international trade. To prevent or at least alleviate any problems. The agreement provides a framework for negotiation and embodies results of negotiations in a legal instrument.. The MFN principle thus moves countries away from bilateral bargaining to multilateral (or simultaneous bilateral) bargaining. The Kennedy Round. in September 1986. GATT are: 1. This increase owed much to the decline of 11. The Geneva Round 1956. and it has been labeled the locomotive that powers international commerce. 3. and free worldwide system of trading. 4. According to GATT. Trade should be conducted on a nondiscriminatory basis. action. then the newly erected barriers must apply to all countries even though the threat to its industry might only come from a single nation.1e United States longer than China. aimed 35 . reductions accorded France by the United States should be extended to other countries with which the United States exchanges the MFN agreement (e. Its members account for some 90 percent of world trade. when needed and if permitted. . f. countries should grant one another treatment as favorable as treatment given to their best trading partners or any other country. For example. Expansion of production of goods and services and international trade.8. c. Likewise. the continuing trade and political conflicts have led many politicians and groups to demand that the United States stop renewing MFN status for China. despite having traded with tl. 1949. The VIIth Round. did finally receive MFN status later on. multilateral.

to foster cooperation. Developed nations offered to reduce trade protection to their agriculture and textile industries in exchange for less-developed countries’ greater imports of services and greater respect for intellectual property.000-page agreement in 1994. Although the benefits derived from the creation of GAIT are rarely disputed. the expansion of LDCs’ manufacturing capa-bilities. Since 1964. UNCTAD:. As a result.Functions The main functions of UNCTAD are :36 . EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. b. and others. To secure a larger voice for developing countries . The gains of these countries are limited as compared to those of the developed countries. writes new rules of trade for intellectual property and ser-vices. did not want to give up their ban on rice imports. That does not mean that the developing countries like India are losing. spe-cial international programs to help the least developed countries. and strengthens the dispute-settlement process. This goal led to the establishment of a tariff pref-erence system for LDCs’ manufactured products. In spite of GATT’s nondiscrimina-tion principle. places. Not surprisingly. Under this scheme. The main function of the UNCTAD is to promote international trade with a view to accelerate economic development. the widening gap between the industrial and developing countries. UNCT AD also played a key role in the emergence of a maritime shipping code. To promote a more equitable international economic order.675. To formulate the principles and policies for international trade and problems related to. Generalised System of Preferences (GSP) was introduced. the United Nations Conference on Trade and De-velopment (UNCTAD) was created as a permanent organ of the UN General As-sembly. economic development. and to enhance the interrelationships between trade and other economic policies that affect growth and development. This led to intense dissatisfaction among the developing countries and a need was felt for the formation of an international organization for the development of underdeveloped and developing countries of the world. intellectual property rights. South Korea. advanced nations agreed to grant such preferences to LDCs’ goods. Agricultural disputes even led to violent protests by farmers in France. on the other hand. an LDC’s exports will usually be lower in value than its imports. e. The Cairo Conference of developing nations. which was held at New Delhi in 1968. and traderelated investment. UNCTAD . Thus. held in July 1962. 11. with an internal of four years. and the acquisition by LDCs of advanced technology. This most ambitious and comprehensive global commercial agreement in history provides for a phase-out of the Multifiber Arrangement (MFA) over a 10-year period while re-forming trade in agricultural goods. delegations from more than 100 countries were finally able to conclude negotiation at the end of 1993 after seven years of talks. at different stages of economic development and having different economic and social systems c. Fortunately. the vari-ous countries’ varying interests repeatedly stalled the talk. passed the “Cairo Declaration of Developing countries” convening the United Nations Conference on Trade and Development (UNCTAD). thus exacerbating the country’s poverty status. the UNCTAD has conducted so far ten’ conference at different. To promote international trade and economic development of less developed and developing countries. in contrast.Generalised System of Preferences (GSP) At the Second UNCTAD Conference. Inability to reach an agreement led to consecutive continuations o f the Uruguay Round in 1990 and 1991. scheme launched by the UNCTAD to encourage exports from developing countries to developed countries. The goal of UNCTAD is to encourage development in Third World countries and enhance their export positions. the general dissatisfaction of developing countries with the GATT and the need for a new international economic co-operation in the field of trade and aid encouraged the establishment of the UNCTAD. France wanted to veto the accord between the United States and the EU which cut production supports. The program seeks to assist LDCs through the stabi-lization of prices of primary products. Hence. However. Japan. As a result. it was strongly advocated that meager exports from developing countries would reduce their importing capacity and thereby would hamper the development of the world trade as a whole. The agreement also lowers tariffs by greater than one-third ($700 billion). which are then converted by advanced nations imo manufactured products for export back to LDCs.to liberalize trade further. export subsidy payments. The Uruguay Round attempted to deal with new areas such as services. The Generalised System of Preferences (GSP) is a. Lee Kuan Yew o f Singapore once called GATT the General Agreement to Talk and Talk. To promote trade ‘and economic co-operation particularly between countries. wanted to keep import quotas for Third World textile imports for 15 more years while de-manding the EU to drop quotas on imported films and TV programs. LDCs do not necessarily embrace GAIT because those countries believe the benefits are not evenly distributed. The 109 nations signed the 22. In response to LDCs’ needs. Tariff reduction generally favors manufactured goods rather than primary goods. an immediate need for boosting exports from developing countries was felt.1 It is true that the functioning of the WTO has mainly benefited developed countries. the developed countries are expected to grant a special duty concession on imports of specified manufacturers and semi manufacturers from the developing countries.in decisionmaking. and import tariffs. Efforts by UNCT AD led to the establishment of the New International Economic Order (NIEO) program. United Nations Conference on Trade and Development Background a. The United States. To secure execution of the principles and policies framed for international trade and solving problems related to economic development. Japan and South Korea. and international aid targets. to strengthen GAIT’s role. f. The UNCTAD was established by the UN General Assembly in 1964. LDCs rely mainly on exports of primary products.

3. Such blocs have liberal rules for member countries while a separate set of rules is laid for non-members. On the other hand. with other trade blocs. attempts to coordinate national economic policies to minimize disruption to intrabloc economic transactions. economies of scale decrease the average cost of production by making it more efficient. a group of nations as a whole can produce. Furthermore. Austria. a company may still choose to import the product even with the disadvantages that this entails. Canada. Definition –Trading Blocs The definition of a trading bloc varies widely. Switzerland.1 . However. However. Hungary. the EU’s share of worldwide inward foreign direct investment flows increased from 28% to 33% during the period from 1982 to 1993. d. In fact. Therefore. the development of economies of scale may mean that there are only a few producers of each product. countries should specialize in producing those goods in which they have a comparative advantage. Japan. a trading bloc is defined by four characteristics. domestic production is riskier in that a certain amount of sales have to be made for the initial investment to be profitable. trading blocs may assist in attracting foreign direct investment. This leads to the 37 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION a. b. European Union (EU). These can be grouped in two categories: competition and scale effects. trading blocs favor the lower marginal costs of locally producing products rather than importing them. c. trading blocs arise. 2. However. Competition and scale effects refer to the benefits that arise from the possible increase in foreign direct investment. By specializing in the production of these goods. Many nations are not large enough to support the production of goods with large economies of scale because they lack large enough markets in which to sell their products or from which to obtain inputs. and therefore consume. For example. Such countries in the process of industrialisation. or common market. or in multilateral forums. the USSR. According to this definition. Objectives of GSP Trading blocs are created because according to the theory of comparative advantage. this was observed to be the case in Mexico where foreign direct investment more than doubled the year after it joined NAFTA. Due to this factor. Sweden. It is subject to certain stringent quantitative limitations. Association of South East Asian Nations (ASEAN). To improve competitiveness . strives to reach common positions in negotiations with third countries.The European Economic Community (EEC) countries and a number of other countries. 11. that is. Finland.675. The value added requirements and process criteria must be complied with. those goods that they have a lower opportunity cost of production than other nations. they also become increasingly dependent on their trading partners. The GSP facility is available only to the developing countries. However. Trading blocs provide many economic benefits to their members. one definition that encompasses the main attributes of trading blocs and touches on the reasons that countries may have for forming such an organization is that given by the United States National Policy association. participates in a special trade relationship established by a formal agreement that promotes and facilitates trade within that group of countries in preference to trade with outside nations by discriminating against nonmembers. such as the USA. Importing has the disadvantages created by tariffs and by other trade barriers that may be used. by increasing market size and making markets more competitive. and 4. Norway. the need arises to develop economic alliances to gain buying and selling power. since smaller countries with fewer resources and land are generally less powerful than larger nations. customs union. and therefore often lead to an increase in foreign direct investment. b. When foreign firms want to supply a product to a country. By allowing for bulk production. The preferential rates of duty under the scheme differ from country to country. Bulgaria and Poland have introduced the GSP. from the formation of economies of scale. To promote market accessibility of products from LDCs and thereby help. To promote exports from developing countries of the world and thereby to promote their economic development. It is applicable for a period of 10 years from its institution by the preference granting countries. Meaning of Trading Blocs Trading Blocs are the associations of countries situated in a particular region whereby they come on to a common understanding regarding rules and regulations to be followed while exporting and importing goods among them. as nations become more specialized. Trading blocs can provide these and consequently allow for economies of scale to be achieved. and from increased competition as separate national markets become more integrated into a single market. Creating large markets not only serves an important function by increasing the amount of foreign direct investment. they have two options: to import it or to build a local plant. The GSP facility is subject to the following conditions: a. e. as countries become more specialized in the production of goods. trading blocs bring producers in member countries into closer contact. Similarly. a greater quantity of each product. it also allows for economies of scale. However. By creating larger markets. has attained or has as a stated goal the deepening of trade liberalization or integration with the objective of establishing a free trade area. Australia. it: 1. it becomes necessary to trade with countries that need these goods or that have resources that are not available in that nation. New Zealand. Hence. thereby increasing competition among them.’ h.of exporters from the developing countries by giving them an exemption or concession in duties. c. which could lead to the establishment of high monopoly prices. and trade and location effects. following the formation of the European Union. It is available only on the products included in the GSP list. Czechoslovakia.

Therefore trading blocs result in a more efficient market. the Common Agricultural Policy (CAP) of the European Union. External economies of scale due to improved infrastructure (e. thereby ensuring that production is allocated to those firms with a comparative advantage in production. Canada and Mexico. Consumers and firms will buy products from the cheapest source without price distortions. For example.g. e. transport and telecoms links) Greater international bargaining power. Elimination of trade barriers within the region would encourage the efficient firms to expand their business activities in all countries within the region. The countries will be represented at trade negotiations with organisations such as the World Trade Organisation by supra-national organisations e. Healthy competition within the region would help the less efficient firms in c. They may have a fixed exchange rate regime such as the ERM of the EMU. Latin American Free Trade Association (LAFTA).g. collude and merge.675. Consumers get better quality goods and services at competitive price. leading to greater monopoly power. This will involve common monetary policy. Asia Pacific Economic Cooperation (APEC) and COMESA. f. North American Free Trade Area (NAFTA) between the USA. imports from other member countries will become cheaper. c. Each member is allowed to determine its own commercial policy with respect to non-members.erosion of monopoly positions and consequently promotes efficiency gains within firms. the European Union. Indeed. the Europe Union (EU) is moving towards a political union similar to one created by 52 states of America. Types of Trading Blocs be some form of political integration where the national sovereignty is replaced by some form of over-arching political authority. price. More rapid spread of technology Country may lose resources to more efficient members. d.Opportunities and Threat The prime objective of the Trading Blocs is to promote trade between different regions of the world. e. acquiring competencies in order to challenge the efficient firms. quality.g. Some people view world trade as consisting broadly.1[4] Trading blocs also result in trade and location effects. of intra-regional trade and inter-regional trade. Political Union :. producers in nonmember nations will also experience these changes and have to adapt their pricing and the quality of their products to be able to compete in a more efficient market. Customs Union :. Firms may co-operate. Static Effects of a Country Joining a Trading Bloc • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Trade patterns change Trade creation: Joining bloc allows access to cheaper goods from other members. The country can export to other members goods in which it has comparative advantage. 38 11. • Trading Blocs can be classified on the basis of the degree of integration among different economies :• • • • • Dynamic Advantages of Joining a Trading Bloc • • • • • Free Trade Areas Customs Unions Common Market Political Unions Economic Union a. Increased competition between members. This will increase the market’s efficiency by allowing a greater quantity of products to be manufactured with the same amount of resources and consequently result in higher levels of consumption. Free Trade Area :. This effect is not only felt by producers in the member states. b. For example. By eliminating tariffs. tariff-free production inside bloc Access to larger markets leads to internal economies of scale. and become depressed region.A customs union is a more advanced form of economic integration which not only provides for internal free trade between the member countries but also adopts a uniform commercial policy against the nonmembers. delivery and customer service will improve. For example. Trade diversion: consumption shifts from low-cost producers outside bloc to higher cost. Common Market :. d. European Economic Community (EEC). For example. The overall business performance in ‘terms of productivity. The regionalism offers certain advantages and poses certain threats. so demand patterns will change. High administrative costs of trading bloc. or to geographical centre.This is a common market where the level of integration is more developed. The member states may adopt common economic policies e. Opportunities a. b.This is the simplest form of economic integration whichprovides for internal free trade between member countries.1 . Economic’ Union :.Political union is the ultimate type of economic integration whereby member countries achieve not only monetary and fiscal integration but also political integration. The ultimate act of integration is likely to Dynamic Disadvantages of Joining a Trading Bloc • • • • Trading Blocs . Diseconomies of scale if firms become very large. they may have integrated further and have a single common currency.A common market allows free movement of labour and capital within the common market in addition to having free movement of goods between the member countries and having common commercial policy is respect to non-members. the European Union (EU) has introduced a common currency Euro 2000.

Needlessly. are tempting enough to lead the gullible to believe that the future indeed is headed towards a sad end. and considering their enterprise and resourcefulness. in my opinion. and of course. our “infants” are being exposed to unfair or unequal battles. c. and even the British could not destroy the country. By Anirban Ghosh EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. WTO has two significant functions. my humble advice to the soothsayers of doom is – do not crib and cry about the pitfalls. even its agreements are ratified in Member’s parliaments Article. so that the “infants” realise that if they do not “grow up” in a certain specified time frame. There is fear that Indian industry will be thrashed to oblivion by the influx of imports. and the self-proclaimed augurers predicting chaos and disaster. Every time it sprung back. GATT was ad hoc and provisional. this will help them build global brands. But. We must realise that if we do not allow our “infants” to walk the world. India is on the threshold of a complete metamorphosis. Its history provides ample evidence to substantiate this fact. Convert them into your strengths. WTO has member nations. WTO and its agreements are permanent. The triumph of success cannot be fully savoured unless the bitterness of failure has been tasted. we will fight on the streets. . I am sure they will come out on top. 11. This will drive them to conform to globally competitive standards and cutting edge technologies in order to survive.. it had new self-confidence and inner strength to propel it to a higher dimension. If we find that in the process. from 1948 to 1994. bruised. The less developed countries of the region mostly become consumption centres while the advanced countries of the region become the production centres. the British troops won the battle. there is always the option of exercising the tariff barrier. TRIPS and Dispute Settlement body. Come April.g. who will squeeze the country to fill up their coffers. GATT covered Trade in goods only. one. Services and Intellectual property as well. and the economy will be at the mercy of foreign companies. The removal of trade barriers provides opportunities to the efficient firms to enter the different markets within the region. GATS. It is believed that the foreign goods will beat the Indian products in all parameters – price. value. Throughout its life. just like their colonial counterparts did in the past. WTO covers Trade in Goods. the domestic producers will have to spruce up their operations to match their foreign competitors. Greeks. Structure and Decision Making Process of WTO The Agreement establishing WTO provides that it should perform the following four functions: 1. Believe me. rulers of Ghazni and Ghor. they will do this. Employment opportunities in the region increase. it was merged in WTO on 1st Jan’95. during our lifetimes. taste the bitterness of failure and acquire new experiences. It will make India what each one of us dream it will. with the skeptics painting their pictures of gloom. Its ruling cannot be blocked. we will fight on the mountains – we shall never give up”. In turn. b. India is historically a very resilient nation. become. which GATT did not have. mature individuals we would want them to become. is.. snob- Annexure-II Functions. face new adversities. So. It will help India get stronger. The Mongols. If decisions cannot be reached by consensus. being the resourceful lot they are. The resources of the less efficient countries are exploited by the firms from the advanced countries of the region. It discourages trade with non-members as trade with nonmembers is subject to strict rules and trade barriers. WTO is more democratic in character that GATT. First it shall facilitate the implementation administration and operation of the Uruguay Round legal instruments and of any new agreements that may be negotiation in the future. because the tariffs will be removed after the expiry of the specified period. With the LPG factor coming in. Threats a. Difference Between GATT and WTO • GATT signified two things – GATT the body and GATT – the agreements. WTO should be viewed as an ally and not an adversary.1 39 . over-hyped. though logical to a certain extent. Second. quality. e. battered. have only been a chimera. This realisation will drive them to strive towards excellence. I will end with a quote from Sir Winston Churchill’s speech to the British troops during World War II – “We will fight on the beaches. as that is the only way the nation will survive and find prosperity.675. have been conveniently overlooked by the harbingers of Rubicon Day. and the economy will be opened up to foreign goods by the lifting of quantitative restrictions. The arguments. we must ensure that this tariff is imposed on a short-term basis. GATT – the agreement rests in WTO alongside other agreements. they will never grow up into the complete. Every time it sprung back. they will have to face competition. thus far. meet new challenges. but with that never-say-die attitude. which. I must agree. GATT had contracting parties. the matter is decided by voting. each WTO member having one vote. Trade Policy Review Mechanism – a periodic process to examine a country’s trade policies and to note changes. its in-built Dispute Settlement mechanism. I add. or not. The argument about infant industry protection. The less developed countries become still poorer whereas the advanced countries of the region become still richer. • • • • • WTO is inherently superior system than GATT having a sound legal basis. To sum up. WTO includes now GATT. I would like to say a few things which intentionally. This endangers the survival of the less efficient firms. GATT – the body no longer exists.I India and WTO – A New Paradigm As the D’day draws close.

The enhancement of the export capacity of developing countries through mobilizing domestic and external resources including development assistance and foreign investment. During the two years between meetings. which oversees the implementation and operation of GATT 1994 and its associate agreements. Q2. b. Third. Question Bank Q1. Decision – Making Process The agreements stipulates the WTO shall continue the GATT practice of decision making by consensus. When a consensus is not possible the WTO agreement provides for decision by majority vote with each country having one vote. Q5.” Examine critically. Thus UNCTAD has been articulating the views on the developing world on the issue of trade and development from time to time. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The major achievement of UNCTAD II (1968-72) has been the acceptance by the developed countries of the resolution on the Generalized System of Tariff Preferences (GSP) in 1971. the functions of the conference are performed by the General Council The General Council meets as a Dispute settlement body when it considers complaints and takes necessary steps to settle dispute between member countries. 4. “Trading Blocs create obstacles to international trade. Another significant development is that the UNCTAD VIII held in Cartgagena de Indias. Explain the MFN clause of the GATT. Columbia called for action to halt the protectionism in order to bring about furniture liberalization and expansion of World Trade. to the benefit to all.2. Council for trade in services. Ten such conferences have been held so far with last conference 40 11. Council for TRIPS which oversees the operation of the Agreement of TRIPS. 2. it shall be responsible for the settlement of differences and disputes among its member countries.1 . Second. Define Trading Blocs. It is expected to meet every two years. Consensus is deemed to have been reached when at the time a decision is being taken. it shall provide a forum for future negotiations among member countries on matters covered by the agreements as well as on new issues falling within its mandate. Q6. What are the different types of trading blocs? Annexure – III Unctad: Its Objectives And Working The united nation conference on Trade & Development (UNCTAD) was established by the United Nations Generals Assembly as one of its permanent organs in December in 1964. 3. particularly that of developing countries with a view to accelerating economics development. Fourth. being held at Bangkok in Thailand in 2000. strengthening technological capabilities etc. Q3.. Q4. it shall be responsible for carrying out periodic reviews of the trade policies of its member countries. which which oversees the implementation and operation of GATTs and 3. Under this scheme developed countries grant concession in the import tariff on the import of various manufactured or the semi-manufactured items of import from the developing countries. The main recurring themes of the conference relate to the following: a. not a single member country voices opposition to its adoption. It is also indicates the various committees established by the WTO Agreement itself and the other committees that have been established for detailed work at the operational level under the various associate agreements. Q8. When and why was the UNCTAD constituted? Explain the GSP under the UNCTAD. It has 166 members including India. its main objective is to promote international trade. The rule of consensus prevents “tyranny of the majority” particularly where a sizeable section of opinion strongly opposes the decision being taken. Each of the developed countries agreed in terms of resolution to formulate a scheme called GSP scheme to implement this resolution. Council for trade in Goods. When and why was the GATT agreement signed? What are the functions and objectives of the WTO ? Explain the Uruguay Round of GATT negotiations with special reference to India. c. Q7. The tariff concession is granted subject to the rules of origin criterion laid down under each of the scheme. At this meeting the developed countries particularly USA had demanded the linking of labour and environment issues with the trade agenda. The Xth conference of the UNCTAD held at Bangkok in Thailand in the February 2000 has called for declining of the issue relating to labour and environment with the trade. …. The expansion and diversification of export of goods and services of the developing countries. in particular the developing countries and to ensure that environment and that trade policies were mutually supportive with a view to achieving sustainable development. The conference of Government Minister concerned with trade and development is held every four years in different capitals of the member – states. Structures of WTO The apex WTO body responsible for decision making is the Ministerial Conference. Despite these provisions decision on all important policy matter are expected to continue to be taken by consensus. It is also responsible for carrying out reviews of the trade policies of individual countries on the basis of the reports prepared by the WTO secretariat. The general council is assisted in its work by the: 1. The stabilization and strengthening of international commodity markets on which most developing countries remain dependent for exports earning. and the need for the developed countries to adopt policies and measures to support this aim.675. It assumes importance in the backdrop of the Seatle Round of the WTO meeting in December 1999 to decide the agenda for the Millennium Round of international trade negotiations.

many intermediaries like shipping companies. 1962. say in the USA. so as to avoid all future conflicts and disputes. the office of Director General of Foreign . 1992. The policy determines .among other things :a. 1962. No export or import shall be made by any person except in accordance with the provisions of this Act. These intermediaries are from different countries and trade terms and usages differ across the countries. International Commercial Practices • • Question Bank Introduction One of the distinctive features of international marketing is that exporters have to deal with different legal systems. airlines. all orders made under the latter Act shall continue the be in force if these are not inconsistent with the provisions of the Foreign Trade (Development and Regulation) Act. Customs Act. restricting and otherwise regulating the import or export of goods as and when required: c. it is advisable for the exporters to enter into written export contracts. 1963. b. But an Indian exporter exporting his products to an importer. International Commercial Practices. by Order published in the Official Gazette. At the same time. However. empowers the Central Government to make provisions for the development and regulation of foreign trade by facilitating imports and increasing exports. Development and Regulation :. which replaced the. as may be made by or under the Order. the product is subject to quota restrictions or licensing arrangements. Under the authority of this Act. Main Provision of the Act. c.1 41 .675. Whether there is any floor price regulation regarding that product. 1992 The Foreign Trade (Development and Regulation) Act. and d. since the buyer and the seller are at a great geographical distance from each other.An Indian manufacturer operating in domestic market is well aware of the fact that he is governed by the Indian laws and is subject to the jurisdiction of Indian Courts. Whether the export of. • • • Foreign Trade (Development and Regulation) Act. Definition. in all cases or in specified classes of cases and subject to such exceptions. make provision for prohibiting. Foreign Trade Development and Regulation Act.The Act also empowers the Central Government to make provisions for prohibiting. This is technically referred to as the conflicts of laws. 1973. Export Import (EXIM) Policy :1. Foreign Exchange Regulation Act (FERA). b. INCOTERMS. 1947. if any . Objective of the Act The objective of the Act is to provide for the development and regulation of foreign trade by facilitating imports into and augmenting exports from India and for matters connected therewith or incidental thereto. restricting or otherwise regulating.Trade (DGFT) brings out the export import policy and lays down the procedures. 1993. Whether export of a product is banned.Introduction and Concept. Uniform Customs and Practice for Documentary Credits (UCP). Whether export of a product is canalised through a Government undertaking. b. d.2000. Came into force on the 19th June 1992.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 7: REGULATIONS FOR INTERNATIONAL TRADE Introduction Major Laws Governing India’s Export Import Trade • Foreign Trade (Development & Regulation) Act. 1992. if any. must contend with the fact that US laws may also have influence over their contractual relations as well as settlement of dispute. The Act lays down that the Central Government may from time to time formulate and announce the EXIM policy and may also amend it keeping in mind the national priorities. 2. arising ‘out of the contract. c. which can be settled in advance by incorporating specific provisions in the contract as to the proper law governing the contract and jurisdiction.. Prohibition and Restriction :. the import or export of goods. • Objective of the act • India’s foreign trade Policy. The Central Government may also.. Main Provisions of the Act a. • • • Regulation and management of foreign exchange Pre-shipment Inspection & Quality Control Act.The Act. incorporating all the’ necessary details. Laws Governing India’s Export Import Trade The major laws influencing Indian exporters and importer~ are: a. Pre-shipment Inspection and Quality Control Act. 11. Therefore. e. 1992. Customs Act. insurance companies and banks are involved in the transaction. Imports and Exports Control Act. the orders and rules made under this Act and the export and import policy. 1963. • Foreign Exchange Regulation Act (FERA).

It was expected that many exporters would find the Reprouternore attractive now. fertilizer and edible oil should be protected. waste.Where any person makes or attempts to make any export or import in contravention of any provisions of this Act or the EXIM Policy. Hence. Removal of all import licensing for capital goods and raw materials. The new Rep scheme gave maximum incentive to exporters whose import intensity was low. appendices and licences. In three years time our objective will be to remove all import licencing for capital goods and raw materials.o.3. except for a small negative list in 3 years. 2. 8. However. Suspension of cash compensatory support.o. Rep will become the principal instrument for export-related imports. As a result. iii. except for a small negative list. iv.Where any contravention of any condition of the licence is suspected. 10. while the purpose of imposing exchange control on payments is to restrain the demand and contain it within the permissible limits. the Commerce Minister noted: For several decades.1 42 . Abolition of unlisted OGL and v. This system has led to delays. 4. Director General of Foreign Trade (DGFT) :. In the light of the substantial liberalization of the trade regime. 1991.conserve the non-sterling area currencies and utilise them for essential purposes.b. the Commerce Minister announced a new package of incentives for Export oriented U5Jits (EOUs) and Export Promotion Zones (EPZs).e. Penalty for Contravention :. 3. Chidambaram.b. for exporters who wish to go through advance licensing. value. Search. India’s Foreign trade Policy The then Commerce Minister. 11. e. Mr. All exports will now have a uniform Rep rate of 30 per cent of the f. Exchange control means regulating the demand for and supply of foreign exchange with the objective of making rational use of available foreign exchange for various purposes according to a scheme of priorities laid down by the policy. we have a bewildering number and variety of lists. announced a major overhaul of trade policy on July 4. 7. all other imports should be linked to exports by enlarging and liberalizing the replenishment licence system. inefficiency and corruption. Advance licensing had been an alternative to the Rep route for obtaining imports for exporters. agricultural. decided that while all essential imports like POL. 1962 (52 of 1962) and all the provisions of that Act shall have effect Accordingly. On August 3. g. Rationale of Foreign Trade Policy Giving the rationale for the new policy.675.b. mainly to. 1973 In India. All supplementary licences shall stand abolished except in the case of the small scale sector and for producers of lifesaving drugs/equipment. For this purpose. he shall be liable to a penalty not exceeding one thousand rupees or five times the value of the goods involved. For example.. on payments as well as on receipts. trade policy in India has been formulated in a system of administrative controls and licenses. Foreign Exchange Regulation Act (FERA). it will now be called Exim scrip and can be freely traded. The goal of the government was to decanalise all items except those that are essential.o. i.The Act empowers the DGFT to issue. Importer Exporter Code Number (IEC No. 6. value. inspect and seize such goods. whichever is more. To describe Rep as a licence is a misnomer. ii. f. and also the recent changes in exchange rates (after devaluation). rate of 30 per cent of f. Inspection and Seizure :. The Government. The Exim policy contained a category known as Unlisted OGL. The emergency powers were later placed on a statutory basis by the 11. All goods to which any Order under sub section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act. Human intervention-described as discretion-at every stage. 1991 entailing i. An enlarged and uniform Rep. Cash Compensatory Scheme (CCS) was abolished from July 3.The Act empowers the Central Government to appoint the Director General of Foreign Trade (DGFT) for advising it in the formulation of the EXIM policy and its execution. 1973 Meaning: of Exchange Control EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. Exchange control is usually imposed on both. No person shall make any import or export except under IEC No. This was a substantial increase from the present Rep rates. Foreign’ Exchange Regulation Act. Exports which earlier had very low replenishment rates of five per cent or 10 per cent will now gain considerably. their judicious use. which vary between five per cent and 20 per cent of f. 1991. The purpose of introducing the exchange control on receipts is to pool the countries foreign exchange reserves to facilitate. this route would remain open. value. exchange control was introduced on the outbreak of the Second World War on 3rd September 1939 by virtue of the emergency powers derived under the financial provisions of the Defense of India Rules. therefore. This category stands abolished and all items falling under this category may be imported only through the Rep scheme. the following major reforms were announced 1.) :. suspend or cancel the Importer Exporter Code (lEC) Number. 5. has stifled enterprise and spawned arbitrariness. 9. P. All items now listed in the Limited Permissible List OGL items would hereafter be imported through the Rep route. documents and conveyances subject to such requirements and conditions as may be prescribed. Abolition of all supplementary licenses except in the case of small scale sector and producers of life: Saving drugs/ equipment. All additional licences granted to export houses shall stand abolished. any person authorised by the Central Government may search.

1 43 . but where redemption or any form of return such as interest or dividends is payable in Indian currency. But for the purposes of FEMA. services. It provided for imprisonment of even a very minor offense. drafts. “Person resident in India” means :i. money orders. including contingent liabilities. stocks. “Capital Account Transaction” means a transaction which alters the assets or liabilities. or 11. ii. debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency. 1973. the Foreign Exchange Regulation Act (FERA). means bringing into India any goods or services. payments due in connection with foreign trade. “Indian currency” means currency which is expressed or drawn in Indian . a need was felt to remove the drastic measures of FERA and replace them by a set of liberal foreign exchange management regulations. 1973. every artificial juridical person and any agency. It has laid down the areas where specific permission of the Reserve Bank or Government of India is required. bonds. Introduction and Concept of Foreign Exchange Management Act ( FEMA) The Foreign Exchange Management Act (FEMA) is a law to replace the draconian Foreign Exchange Regulation Act. a person residing in India for more than one hundred and eighty-two days during the course of the preceding Financial year but does not include :a. cheques. a Hindu undivided family. iii. remittances for living expenses of parents. and short-term banking and credit facilities in the ordinary course of business. outside India of persons resident in India or assets or liabilities in India of persons resident outside India. “Person” includes an individual. travelers cheques. In rest of the cases. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. in the form of shares. expressed or drawn in Indian currency but payable in any foreign currency. The meaning of these terms may differ under other laws or under common language. 1947. iv. “Foreign Security “ means any security. travelers cheques. a person is presumed innocent unless he is proven guilty. a person was presumed guilty unless he proved himself innocent whereas under other laws. the terms will signify the meaning as defined there under. The Act was later replaced by a more comprehensive legislation. “Export”. whether incorporated or not. Therefore FEMA was enacted to replace FERA.rupees but does not include special bank notes and special one rupee notes issued under section 28A of the Reserve Bank of India Act. a person who has gone out of India or who stays outside India. ii. payments due as interest on loans and as net income from investments. “Foreign Exchange” means foreign currency and includes :i. bills of exchange and promissory notes. Definition FEMA contains definitions of certain terms which have been used throughout the Act. other current business. for or on taking up employment outside India. “Current Account Transaction” means a transaction other than a capital account transaction and includes :- i. under FERA nothing was permitted unless specifically permitted. “Import”. “Currency Notes” means and includes cash in the form of coins and bank notes. deposits. “Authorized person” means an authorized dealer. drafts. 1934 by the Ministry of Finance. letters of credit or bills of exchange drawn by banks.. with its grammatical variations and cognate expressions. means :i. an association of persons or a body of individuals. a firm. whereas FEMA seeks to make offenses relating to foreign exchange civil offenses. money changer. office or branch owned or controlled by such person. the specific provisions laid down in the Act or Notifications issued by the Reserve Bank or Government of India under the Act. or for carrying on outside India a business or vocation outside India. Unlike other laws where everything is permitted unless specifically prohibited. credit cards or such other similar instruments. viz. letters of credit. a company. postal notes. off-shore banking unit or any other person for the time being authorized to deal in foreign exchange or foreign securities. Any offense under FERA was a criminal offense liable to imprisonment. with its grammatical variations and cognate expressions. spouse and children residing abroad. travelers cheques. credits and balances payable in any foreign currency. iii. but payable in Indian currency. as may be notified by the Reserve Bank. institutions or persons outside India. Let us take up some of the more important ones. incur liability in accordance with.enactment of the Foreign Exchange Regulation Act. the taking out of India to a place outside India any goods. no such permission would be needed and a person can remit funds and acquire assets. drafts. expenses in connection with foreign travel. With liberalization.675. postal orders. Under FERA. spouse and children. Hence the tenor and tone of the Act was very drastic. ii. and includes transactions by way of giving guarantees or surety for any debt. provision of services from India to any person outside India. obligation or other liability of (1) a person resident outside India or (2) of a person resident in India and owed to a person resident outside India. “Foreign currency” means any currency other than Indian currency. letters of credit or bills of exchange. i. “Currency” includes all currency notes. education and medical care of parents.

Payments due as interest on loans and as net income from investments. bonds and debentures. loan or any other form of transfer of right. processing. transactions relating to lotteries. for any other purpose.EFC) account holders and Residents Foreign Exchange (RFC) account holders are permitted to freely use the funds held in such accounts for payment of all permissible current account transactions. any person or body corporate registered or incorporated in India. and includes transactions by way of giving guarantees or surety for any debt. spouse and children India authority irrespective of the amount. “Security” means shares. football pools. “Transfer” includes sale. expenses in connection with foreign travel. obligation or other liability of (1) a person resident outside India or (2) of a person resident in India and owed to a person resident outside India. medical assistance.1 . amusement or the purveying of news or other information. or iii. For all cash exports. branch or agency outside India owned or controlled by a person resident in India. services. effective from June 2000. FEMA describes an elaborate redressal machinery for totCl1 justice and fairness tothe implicated while deciding on the question of contravention. broadly from two angels :• Capital Account Transactions :-Capital account transactions relate to movement of capital Or transaction which alters the assets or liabilities. chit fund. which are totally prohibited.5% of FOB value of exports has been abolish • • • • • b. stocks. 44 11. Main Provisions of the Act a. branch or agency in India owned or controlled by a person resident outside India. A few current account transactions need permission of appropriate Government of India authority irrespective of the amount. a. insurance. These include. in such circumstances as would indicate his intention to stay outside India for an uncertain period. savings certificates. The Act provides that :• • Residents going abroad for business purposes or for’ participating in conferences or seminars will not need RBI permission to avail foreign exchange up to US $ 25. in such circumstances as would indicate his intention to stay in India for an uncertain period. iv. FEMA is a civil law unlike FERA. financing. mortgage. the burden of proof under FEMA will be on the enforcement agency and not on the implicated. an office. Remittances for living expenses of parents. pledge. a person who has come to or stays in India. Application of FEMA may be seen. The Act also contains comprehensive and transparent rules for foreign investment in India and Indian investments abroad and permits Indian companies engaged in certain specified sectors to acquire shares of foreign companies engaged in similar activities by share. Such transactions are permitted freely subject to a few restrictions as given below :• • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Certain current account transactions would require RBI permission if they exceed a certain ceiling. banned magazines and a few others. Contraventions under FEMA will be dealt with through civil procedures.iii. iii.Transactions which do not fall in capital account category are current d. swap or exchange through issue of ADRs/GDRs up to certain specified limits. The erstwhile ceiling of 12. The Exchange Earner’s Foreign Currency (E. but does not include bills of exchange or promissory notes other than Government promissory notes or any other instruments which may be notified by the Reserve Bank as security for the purposes of this Act. deposit receipts in respect of deposits of securities and units of the Unit Trust of India or of any mutual fund and includes certificates of title to securities. including contingent liabilities. for any other purpose. transactions in property and investments and lending and borrowing money. purchase. education and medical care of parents. ii. entertainment. other current business. title. and short-term banking and credit facilities in the ordinary course of business. or for carrying on in India a business or vocation in India. legal assistance. • account transactions. “Service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking. otherwise than i. Government securities. Under FEMA. boarding or lodging or both. ii.000 per trip irrespective of the period of stay. spouse and children residing abroad. Payments due in connection with foreign trade. outside India of persons resident in India or assets or liabilities in India of persons resident outside India. real estate. the foreign exchange proceeds from exports must be brought back to India within 180 days. but does not include the rendering of any service free of charge or under a contract of personal service. Unlike in FERA. gift. except where exports are made on deferred payment.675. • Current Account Transactions :. There are seven types of current account transactions. possession or lien. transport. there is no longer any ceiling as a percentage of FOB value of exports for payment of commission. supply of electrical or other energy. for or on taking up employment in India. exchange. c. an office. For example. terms or on consignment basis.

i. in consultation with the Central Government. prohibit. acquisition or transfer of immovable property in India. or resident in India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorized person) without a corresponding inward remittance from any place outside India. containing true and correct material particulars. if the full export value of the goods is not ascertainable at the time of export. by a person resident in India. office or other place of business. direct any exporter to comply with such requirements as it deems fit. or transferring any security or acknowledging any debt. own. expects to receive on the sale of the goods in a market outside India. any borrowing or tending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. export. the Reserve Bank cannot impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business. The Reserve Bank may. held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. for carrying on any activity relating to such branch. import or holding of currency or currency notes. j. own. transfer or invest in foreign currency. for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines. receive otherwise through an authorized person. A person resident in India may hold. d. c. other than a lease not exceeding five years. No person resident in India can acquire. by a person resident outside India. Any person may sell or draw foreign exchange to or from an authorized person if such sale or drawal is a current account transaction.Regulation and management of foreign exchange Except with the general or special permission of the Reserve Bank. transfer or issue of any security or foreign security by any branch. prohibit. held or owned by such person when he was resident in India or inherited from a person who was resident in India. office or other place of business by a person resident outside India. deal in or transfer any foreign exchange or foreign security to any person not being an authorized person. or regulate establishment in India of a branch. office or agency in India of a person resident outside India. then.1 . security or any immovable property situated in India if such currency. security or property was acquired. 45 11. restrict or regulate the following :a. any borrowing or lending in foreign exchange in whatever form or by whatever name called. transfer or invest in Indian currency. the Central Government may. b. c. h. A person resident outside India may hold. the limit up to which foreign exchange shall be admissible for such transactions: However. impose such reasonable restrictions for current account transactions as may be prescribed. b. furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realization of the export proceeds by such exporter. The Reserve Bank can. such person shall be deemed to have received such payment otherwise than through an authorized e. Where any person in. no person can :a. security or property was acquired. having regard to the prevailing market-conditions. transfer or issue of any foreign security by a person resident in India. b. b. having regard to the prevailing market conditions. by order or on behalf of any person. enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire. by regulations. furnish to the Reserve Bank or to such other authority a declaration in such form and in such manner as may be specified. specify:a. or drawing. deposits between persons resident in India and persons resident outside India. by regulation. Any person may sell or draw foreign exchange to or from an authorized person for a capital account transaction. However. make any payment to or for the credit of any person resident outside India in any manner. or for the credit of any person. possess or transfer any foreign exchange. including the amount representing the full export value or. any class or classes of capital account transactions which are permissible. foreign security or any immovable property situated outside India except with the general or special permission of the Reserve Bank. own. any payment by order or on behalf of any person resident outside India in any manner. restrict. transfer of immovable property outside India. transfer or issue of any security by a person resident outside India. any asset outside India by any person Financial transaction means making any payment to. is received without any delay. issuing or negotiating any bill of exchange or promissory note. Every exporter of goods must :a. in public interest and in consultation with the Reserve Bank. other than a lease not exceeding five years. The Reserve Bank may. or receiving any payment for. g. the value which the exporter. f. hold. obligation or other liability incurred (i) by a person resident in India and owed to a person resident outside India or (ii) by a person resident outside India. e. The Reserve Bank may. foreign security or any immovable property situated outside India if such currency.675. giving of a guarantee or surety in respect of any debt.

the EIA of Mumbai has jurisdiction over Maharashtra. Presently.1963. Inspection by Buyer’s Agency EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The Export Inspection Council is responsible for the operation of this Act.Every exporter of services shall furnish to the Reserve Bank or to such other authorities a declaration in such form and in such manner as may be specified. c. Uniform Customs and Practice for Documentary Credits (UCP). Establish. 1990 and 2000 in order to bring these terms in line with current international trade practices. Specify the type of Quality Control or Inspection. The Export Inspection Agencies (ElAs) has a network of nearly 62 offices throughout India. For this purpose the overseas buyers nominate their own persons or agencies to supervise the production of goods and carry out inspection before the shipment. there are several trade terms that are used at the international level. CIF. These terms define the various trade terms like. The Act empowers the Government to :a. jute and leather products such as footwear. 1993 :-In order to ensure uniformity of interpretation in international trade.f..e. Notify commodities. the government has exempted agriculture and food products. These terms were known as “INCOTERMS 1936”. 1962 The Customs Department is vested with the task of carrying out physical as well as documentary check on all the goods crossing the Indian customs frontier. INCOTERMS. b. 1963 Export (Quality Control & Inspection) Act. which mayor may not be equivalent with the Indian standards including stipulations under the. All export consignments will be checked by the customs authorities at port or airport with a view to. Sometimes. Coir. a large number of exportable commodities have been notified for compulsory pre-shipment inspection. Where any amount of foreign exchange is due or has accrued to any person resident in India. Paris. To supplement the work of the agencies. prior to the export. the Government has also established five Export Inspection Agencies. are widely used in international business:. have been recognised under the Exports (Quality 46 11. Pre-shipment Inspection and Quality Control Act.675. 1967. Food and agricultural products. For carrying out pre-shipment inspection: of various goods a number of existing agencies.. d. etc. they are applied in nearly all the countries. The quality control and inspection of various export products is administered through a network of more than fifty offices located around major production centres and ports of shipment. These agencies work under the administrative and technical control of the Export Inspection Council.1 . 1963. For example. Some of these items are. a. Quality Control Regulations. the Government of India has introduced compulsory Quality Control and Pre-Shipment Inspection for 90% of the items of export under one or the other system as per the Export (Quality Control and Preshipmer1t Inspection)’ Act. . In addition. foreign buyers lay down their own standards and specifications. These terms are codified by the International Chamber of Commerce (ICC) under the title ‘INCOTERMS’. both the Government as well as private. e. such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank. c. In this connection. goods being shipped are those which are declared in the documents and that no under or over invoicing is involved. 2000 :.. International Commercial Practices Apart from the Indian laws. The UCP for documentary credit has been subscribed to by India also. d. 1963 Control and Inspection) Act. import and export contracts are also subject to the provisions of certain international commercial practices. FOB. course of international trade of a notified commodity. 1980. The latest in the line of revisions is the UCP . ascertaining that the. Textiles. from 1st January 1994). and codify the respective rights and obligations of the two parties under various contract terms. the. etc. Gujarat and Goa.. which updates and consolidates the previous UCP 400. Prohibit the export in the.In order to have uniform export terms for delivery of goods and payment. These have been revised and brought up to date several times. organizations may be recognized as agencies for inspection and /or quality control. These ElAs have certain specific areas under their jurisdiction. adopt or recognise one or more standard specifications to a “notified commodity. a. In order to promote exports of quality goods as per the international standards. Amendments and additions were later made in 1953. unless it is accompanied by a certificate under Section 7 that the commodity satisfies the conditions related to Quality Control or Inspection or it has affixed or applied to it a mark or seal accepted by the Central Government that it conforms to the s1andard specifications applicable to it. containing the true and correct material particulars in relation to payment for such services. Engineering goods. b.500 (w. which will be applied to a notified commodity. fruit products and fish and fishery products from compulsory preshipment inspections. Under the Act. Customs Act. one each at Mumbai. which shall be subjected to Quality Control or Inspection or both. The INCOTERMS were first introduced in 1936. provided that the exporter has a firm letter from the overseas buyer stating that the overseas buyer does not require pre-shipment inspection from official Indian inspection agencies. C&F. Cochin Chennai and Delhi in 1966 exclusively for export inspection. Chemicals and allied products. the International Chamber of Commerce has worked out the Uniform Customs and Practices for Documentary Credits... Kolkata. b. Recently. the following two documents prepared by the International Chamber of Commerce (ICC) .

to make any payment in rupees i. therefore. 2001. These conditions are the minimum requirements for the use of these terms but the terms can be added to or modified so as to incorporate the buyer and seller’s specific needs. regulations. in accordance with the Agreement on Safeguards. with a more liberal dispensation for such imports from the developing countries. Article-2 Committee on Commerce The Foreign Trade (Development And Regulation) Amendment Bill. in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors.1 47 . to a person resident outside India. provided the requirements of any law.675. introduced in the Rajya Sabha on the 24th April. 1992 or under any other law. rules. d. to receive any payment a. seeks to amend Foreign Trade (Development and Regulation) Act. and payment to. 2. 11. if imports of such articles are in such increased quantities as to cause or threaten to cause serious injury to domestic producers of like or directly competitive articles. for examination and report. made in foreign currency notes directly from out of India. 2001 The Foreign Trade (Development and Regulation) Amendment Bill. a person resident outside India In pursuance of the provisions of Section 3 of the Foreign Exchange Management Act.1 The proposed Bill further seeks to empower the Union Government to make rules to provide for the manner in which articles liable for import restrictions may be identified and for the manner in which the causes of serious injury or causes of threat of serious injury in relation to such articles b. has been referred to the Department-related Parliamentary Standing Committee on Commerce. 3.in certain cases . the Reserve Bank is pleased to permit 1. The present Bill. ii.All INCOTERMS must be expressed by the appropriate threeletter code and include the naming of a physical place of handover and . India continues to remove quantitative restrictions on imports. made in rupees by order or on behalf of a person resident outside India during his stay in India out of rupee funds provided by him by sale of foreign exchange to an authorised dealer or a money changer in India. 1992. as its Chairman. to enable the Union Government to take corrective steps through imposing quantitative restrictions on imports by way of emergency action. any person. a company in or resident in India. 1999 (42 of 1999). by means of postal order issued by a post office outside India or by a postal money order issued by such post office. directions applicable for making such payments are duly complied with.the further naming of the carrier or Vessel. In pursuance of the new liberalized economic policy and with a view to fulfilling international obligations. lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India. with Shri Sikander Bakht. provided that such modification does not contradict the basic INCOTERM itself. FEMA/16/RB-2000 dated 3rd May 2000 Reserve Bank of India (Exchange Control Department) Central Office Mumbai 400001 Receipt from. by means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act. 2. a person resident outside India Notification No. 2001. The terms must be used for the correct form of transport if they are to offer any protection to the parties involved. The Agreement on Safeguards enables member-countries to impose quantitative restrictions by way of emergency action. Rajya Sabha. a person resident in India. Important Note: Certain INCOTERMS are Multimode certain others are restricted to moves where the main carriage is by sea transport only. towards meeting expenses on account of boarding. Member. rules or regulations for the time being in force. (P. The buyer and seller must use the expression INCOTERMS 2000 to conclude the term. 3. Gopala Rao) Executive Director Note: To obtain an aligned printout please download the PDF or WORD version to your machine and then use respective software to print the story. 1.r. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Article-1 Foreign Exchange Management Act Receipt from and payment to. and travel expenses to and from and within India. c. subject to the condition that the foreign exchange received pursuant to clauses (b) and (c) shall be offered for sale or caused to be offered for sale to an authorised dealer or a money changer within seven days of receipt thereof. to make payment in rupees to its whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration. made by means of a cheque drawn on a bank situated outside India or a bank draft or travellers cheque issued outside India. thereby clearly indicating INCOTERMS 2000 as the source of reference for definition.

675. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Question Bank Q1. Why and when was the Pre-. Q3.nic. Rajya Sabha Secretariat. 2001. Ground Floor. 2001. 2001. latest by the 15th June. The Standing Committee. institutions and organisations. No. institutions and organisations may send copies of memoranda containing their suggestions on the Bill. Deputy Secretary. 5. at its sitting held on the 21st May. The text of the Bill is also available on the official website of the Rajya Sabha Secretariat at http://rajyasabha. Parliament House Annexe.in/<![endif]> New Delhi 22nd May. New Delhi. 3034262 E-mail: watts@sansad.shipment Inspection and Quality Control Act enacted? Q4. can be had on a request made in writing to the above mentioned officer.in Website: http://rajyasabha. engaged in import/export of articles and/or interested in / having knowledge of the subject-matter of the Bill. which was published in the Gazette of India (Extraordinary) Part-II dated 24th April.nic. Explain the provisions of the Foreign Tracie (Development & Regulation) Act. 4.nic. 1992. What do you mean by exchange control? Explain the provisions of FERA. 1973 with respect to exchange control. to Shri Surinder Kumar Watts.1 . The individuals. and to hear oral evidence.in (Surinder Kumar Watts) Deputy secretary Tel. 2001. indicating whether they would also be interested in giving oral evidence before the Committee. 007. 48 11. Q2. Copies of the Bill. Write a note on UCP 500 and INCOTERMS 2000.may be determined and for the manner in which import restrictions may be imposed. decided to invite views/suggestions on the provisions of the Bill from State Governments/Union Territory Administrations and individuals. Room No.

j. A constructed contract is one where the existence of a contract can be inferred from relevant documents. Yet this ‘common’ aspect of the term has resulted in the myriad definitions found all over the world for FOB. For FOB to apply. commercial invoice or letter of credit. This is especially true in the case of export of products from small scale and cottage industries like handicrafts. Those relating to credit contracts. The exporter must. An agreement would be treated as a contract if it is made by the free consent of the parties competent to contract. There has to be a contract if exports are to be made. Warranties and After sales service. Product standards and specifications such as quantity. b. The basic legal issues can broadly be classified into a. d. The elements of an export contract also depend upon the nature of product being exported. Sources of Selecting Overseas Agent. garments. Elements of Export Contract There is no standard format of export contract as the elements of export contract may vary from individual to individual. Accordingly. Provisions relating to export and import licences and permits. transaction to transaction and country to country. Laws governing contract. the seller must be in the physical position of being able to load the cargo over the rail under their own direct 11.1 49 . generally all export orders. Therefore. rail or air transport. b. Taxes and Charges. some of the elements of the export contract are common. the importer and exporter. jewellery.price per unit. Performa invoice. Those relating tos settlement of international trade disputes. Marine insurance. cleared for export by the seller. absence of written contract does not mean that there is no-contract at all. d. Some of these directly contradict others. i. letter of credit. there is no application for FOB in road. product liability and promotion. c. Branding. Product Liability. f. Those relating to export-import contracts. Packing specifications and Marking and Labeling. telex messages. However. Jurisdiction and Procedure for settlement of disputes. Meaning Elements FOB Contract CIF Contract Meaning. Elements. Mode of payment. There exists. Remittance of Commission to Overseas Agents. a fairly large part of India’s exports is carried out without the backing of written export contracts. ~iz. risk and responsibility pass from the seller to the buyer when the goods pass over the (named or unnamed) ship’s rail at the (named) port of loading. it is expressed as being Monomodal and it can only be used for transactions where sea freight is the main carriage. Promotion Laws Relating to Export Agency Agreement • • • • Laws Relating to Product • • • Question Bank:Introduction An international marketer has to face a number of legal issues in implementation of the corporate export-marketing plan. Inspection and Documentation.of detailed documentation and written agreements signed by both. branding. e. In defining FOB as an INCOTERM. and many are supported by domestic legislation making such definitions unique to a specific country or port. are invariably quoted on the basis .675. c. as an INCOTERM. if any. viz. These elements are:a. total contract price. Meaning of Export Contract Export contract can be understood within the framework of the definition of the term contract as defined under the contract law. however. make sure that all the information on FOB Contract FOB (Free On Board) is one of the commoner trade terms in use. Those relating to products. in such cases. what is known as a ‘constructed contract’. contract is defined as an agreement enforceable by law. quality specifications. Terms of delivery and Credit period. However. Under INCOTERMS 2000. Currency. g.e. Those relating to the export agency agreement. e. h. inducing those for long term supply contracts and project exports. etc.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 8: LEGAL ASPECT OF EXPORT CONTRACT Introduction Laws Relating Export Contract • • • • which agreement is required are available on any or all of these documents. However. Thus the export would be treated as an export contract if it meets the essential requirements of the contract. Mode of transport and Time and place of delivery. for a lawful consideration and with a lawful object and are not expressly declared to be void. i.

or is unable to take the goods. ship's rail at the named port of and shipment. or because the vessel nominated by him fails to arrive on time. a non-negotiable sea waybill. they have no influence over the party loading the vessel. are borne by the importer. subject to the provisions The buyer must bear all risks of loss of of B5. the fails to arrive on time. taxes and other charges as well as the costs of carrying out customs formalities payable upon import of the goods and for their transit through any country.control i. Free on Board» means that the seller delivers when the goods pass the ship’s rail at the named port of shipment. risk and expense. destination) are made known to the seller before the contract of sale is concluded.marking B9 Inspection of goods The seller must pay the costs of those The buyer must pay the costs of any checking operations (such as checking pre-shipment inspection except when quality. the exporter undertakes to pay all expenditure till the loading of goods on board the ship. this control often cannot be achieved as the seller is either not allowed into the harbour area or. If the parties do not intend to deliver the goods across the ship’s rail. inducing documentation charges. the FCA term should be used. weighing. and q Any additional costs incurred. All expenditure thereafter. however. the seller must render the buyer. provided. The INCOTERM FOB still has an application in some markets. the loading is undertaken by the seller’s own labour. however. Generally. that the goods have been duly appropriated to the contract. all customs formalities for necessary for the export of the goods. all customs formalities paragraph 14). either • where applicable (Refer to because the vessel nominated by him Introduction paragraph 14) . that the goods have been duly appropriated to the contract. or its equivalent electronic message. b) Contract of insurance No obligation (Refer to Introduction paragraph 10). or because the payable upon export. manner customary at the port on board the vessel nominated by the buyer. from the modern deep-sea export perspective. A8 Proof of delivery. The FOB term requires the seller to clear the goods for export. where applicable (Refer to Introduction where applicable (Refer to Introduction paragraph 14) . the document referred to in the preceding paragraph may be replaced by an equivalent electronic data interchange (EDI) message. A7 Notice to the buyer B7 Notice to the seller The seller must give the buyer sufficient The buyer must give the seller sufficient notice that the goods have been notice of the vessel name. that is to say.. measuring. subject to the provisions The buyer must pay of B6. counting) such inspection is mandated by the which are necessary for the purpose of authorities of the country of export.675. the import of the goods and. taxes and other charges accordance with B7. or is unable to costs of customs formalities take the goods. Further this process would have to be monitored by both the seller and buyer or their representatives. a negotiable bill of lading. transport document or B8 Proof of delivery. official authorisation and carry out. and required delivery time. or closes for cargo earlier than the time notified in accordance with B7. and q From the agreed date or the expiry date of the agreed period for delivery which arise because he fails to give notice in accordance with B7.packaging . pay q All costs relating to the goods from • all costs relating to the goods until the time they have passed the ship's such time as they have passed the rail at the named port of shipment. This term can be used only for sea or inland waterway transport. or by an agent that is under the contractual control of the seller. in conformity with the contract of sale and any other evidence of conformity. authorisations and formalities B2 Licences. where necessary. A6 Division of costs B6 Division of costs The seller must. Contract of carriage No obligation (Refer to Introduction paragraph 10) q Contract of insurance No obligation (Refer to Introduction paragraph 10) B3 Contracts of carriage and insura nce a) Contract of carriage The buyer must contract at his own expense for the carriage of the goods from the named port of shipment. loading point delivered in accordance with A4. Authorisations and Formalities The seller must obtain at his own risk The buyer must obtai n at his own risk and expense any export licence or other and expense any import licence or other official authorisation and carry out. Note that the use of an ‘on-board’ Bill of Lading or mate’s receipt could be appropriate in recording the passage of risks under FOB making FOB one of the few terms still unavoidably dependant on such documents Free on Board (FOB) is the most frequently used price quotation in the international market. THE SELLER'S OBLIGATIONS THE BUYER'S OBLIGATIONS A1 Provision of goods in conformity with the B1 Payment of the Price contract The buyer must pay the price as provided in The seller must provide the goods and the contract of sale. but these are more and more in the minority. Unless the document referred to in the preceding paragraph is the transport document. which may be required by the contract. delivering the goods in accordance with A4. etc. Where the seller and the buyer have agreed to communicate electronically. all duties. the commercial invoice. or closes for cargo necessary for export as well as all earlier than the time notified in duties. Buyer’s & Seller’s Obligations FOB Free on Board EXPOR T IMPORT PROCEDURE AND DOCUMENTATION A5 Transfer of risks B5 Transfer of risks The seller must. 50 11. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. shipment. an inland waterway document. even in those extreme circumstances where they are. buyer has failed to give appropriate notice in accordance with B7.1 . that is to say. to the extent that the circumstances relating to the transport (for example modalities. delivery in accordance with A4. unloading charges. A4 Delivery B4 Taking delivery The seller must deliver t he goods on the The buyer must take delivery of the date or within the agreed period at the goods when they have been delivered in named port of shipment and in the accordance with A4. and q Where applicable (Refer to Introduction paragraph 14). The seller must provide at his own expense packaging (unless it is usual for the particular trade to ship the goods of the contract description unpacked) which is required for the transport of the goods. such as ocean freight marine insurance. clearly set aside or otherwise identified as the contract goods. or a multimodal transport document).e. A9 Checking . Packaging is to be marked appropriately. clearly set aside or otherwise identified as the contract goods. bear all risks of loss of or damage or damage to the goods to the goods until such time as they have q From the time they have passed the passed the ship's rail at the named port ship's rail at the named port of of shipment. for their transit through any country. A3 Contracts of carriage and insurance a. at the latter's request. transport document equivalent electronic message or equivalent electronic message The seller must provide the buyer at the The buyer must accept the proof of seller's expense with the usual proof of delivery in accordance with A8. A2 Licences. Under this quotation. provided. every assistance in obtaining a transport document for the contract of carriage (for example.

c. been delivered in accordance with A4 and receive them from the carrier at the named port of destination. The GIF term requires the seller to clear the goods for export.’ a. Insurance and Freight) represents the condition of CFR with the addition of Insurance. may be required by the contract. This term can only be used for sea and inland waterway transport. Insurance and Freight CIF Contract Terms beginning ‘C’ are ‘Contracts of Dispatch’. in conformity with the The buyer must pay the price as provided in the contract of contract of sale and any othe r evidence of conformity. The seller is required to obtain insurance on minimum coverage only. The carrier used. or its equivalent electronic message. As an INCOTERM risk passes from the seller to the buyer when the cargo crosses the ship’s rail at the origin port. all customs formalities necessary for the export of the goods. he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements. the C terms represent exceptional risk-management opportunities and are actively pursued as a consequence. packing and marking of the goods. the point of transferring risk and the point at which responsibility for cost is also transferred are simultaneous. The seller must provide the buyer. To obtain cargo insurance as agreed In the contract and to provide the buyer with the insurance’ policy or other evidence of insurance cover. Consequently. From the seller’s perspective. where necessary.1 51 . To provide goods and the commercial invoice. as well as any additional costs due to events occurring after the time of delivery. e. b. in conformity with the contract: of sale. b) Contract of insurance No obligation (Refer to Introduction paragraph 10) A4 Delivery B4 Taking delivery The seller must deliver the goods on board the vessel at the port The buyer must accept delivery of the goods when they have of shipment on the date or within the agreed period. Insurance and Freight» means that the seller delivers when the goods pass the ship’s rail in the port of shipment. They differ from other INCOTERMS as they segregate the point at which risk and responsibility passes from the point at which costs pass. the seller contracts for insurance and pays the insurance premium. Under the Cost. To deliver the goods on board the vessel at the part Of shipment on the date or within the period stipulated f. The buyer must take risks for a period of carriage during which the buyer has no means of controlling or limiting those risks. counting. goods during carriage.A10 Other obligations B10 Other obligations The seller must render the buyer at the The buyer must pay all costs and latter's request. No obligation (Refer to Introduction paragraph 10). B3 Contracts of carriage and insurance a) Contract of carriage The seller must contract on usual terms at his own expense for the carriage of the goods to the named port of destination by No obligation (Refer to Introduction paragraph 10) the usual route in a seagoing vessel (or inland waterway vessel as the case may be) of the type normally used for the transport of b) Contract of insurance goods of the contract description. upon request. CFR (Cost and Freight) has a long history and outside of INCOTERMS a definition with consensus is difficult. where applicable (Refer to Introduction paragraph 14). all customs formalities for the import of the goods and for their transit through any country. However.e same obligations as under C&F contract but with the addition that he has to procure marine insurance against the buyer’s risk of loss or damage to the. Under all other terms. The seller contracts for insurance and pays the insurance premium. it is often inappropriate to use either in a modern port and reference should be made to the notes on this subject under FOB. The buyer must consider this disparity before accepting a C termed contract. To obtain any export licence or other official authorisation and carry out all the customs formalities necessary life the exportation of the goods. This term can be used only for sea and inland waterway transport. However. The CIF term requires the seller to clear the goods for export. where applicable (Refer to Introduction paragraph 14) . Should the buyer wish to have the protection of greater cover. with the necessary information for procuring insurance.675. authorisations and formalities The buyer must obtain at his own risk and expense any import licence or other official authorisation and carry out. A2 Licences. Cost. for their transit through any country. 11. every charges incurred in obtaining the assistance in obtaining any documents documents or equivalent electronic or equivalent electronic messages messages mentioned in A10 and (other than those mentioned in A8) reimburse those incurred by the seller issued or transmitted in the country of in rendering his assistance in shipment and/or of origin which the buyer may require for the import of the goods and. the responsibilities for the costs of transit only pass from the seller to the buyer at the destination port. which sale. CFR and CIF are Monomodal expressions used when the main carriage is by sea and both are suited to the use of Bills of Lading. To arrange for the carriage of the goods to the named port of destination by the usual route in a seagoing vessel and to pay its costs and freignts. To pay the costs. been delivered on board the vessel. of checking quality. are transferred from the seller to the buyer. Because the ship’s rail is seen as triggering these terms. This is the first of only two terms that place a compulsory responsibility for insurance on the seller. THE SELLER'S OBLIGATIONS A1 Provision of goods in conformity with the contract THE BUYER'S OBLIGATIONS B1 Payment of the price The seller must provide the goods and the commercial invoice. weighing. risk and expense.] Seller’s &Buyer’s Obligations CIF Cost. With the ‘C’ terms this is NOT the case. CIF (Cost. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods.3). authorisations and formalities The seller must obtain at his own risk and expense any export licence or other official authorisation and carry out. the buyer considers insurance as an optional responsibility. To give the buyer sufficient notice’ that the goods have. in CIF the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. Under all other terms. If the parties do not intend to deliver the goods across the ship’s rail. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. A3 Contracts of c arriage and insurance a) Contract of carriage B2 Licences. the costs incurred for carriage and the timing of the carriage are all under the seller’s control. The buyer should note that under the GIF term the seller is required to obtain insurance only on minimum cover (Refer to Introduction paragraph 9. the CIP term should be used. measuring. or its equivalent electronic message. Insurance and Freight (CIF) contract the seller has tl1. Buyers are disadvantaged with contracts of dispatch. g.

with the necessary information for procuring insurance. negotiable sea waybill or an inland waterway document) must cover the contract goods. If the agent is sound! Obviously no principal’ will think of terminating the agreement. if the principal wants to reserve the right of contacting specific groups of buyers. When such a transport document is issued in several originals. A9 Checking . • all costs relating to the goods until such time as they have pay been delivered in accordance with A4.The agency agreement should also provide for the renewal’ or termination procedure. b. Contractual Products :. at his own expense. h. upon request.O. bear all risks of loss of or damage to the goods from the agreed date or the expiry date of the period fixed for shipment provided. counting) which are necessary for the purpose of delivering the goods in accordance with A4. While concluding an agency agreement.: The identity of the parties must be made explicit. Customers :. The’ problem of. for their transit through any country unless included within the cost of the contract of carriage. 52 • Minimum order size. Arbitration is the best method of settling international disputes. both present and future. Contracted Territory :. Other Miscellaneous Elements :- A7 Notice to the buyer The seller must give the buyer sufficient notice that the goods have been delivered in accordance with A4 as well as any other notice required in order to allow the buyer to take measures. A4. provided. especially whether the agency is assignable or not. should be made clear. no dispute can arise if the agency agreement is clearly drafted. termination arises only when the agent is not effective. assumes full credit risk c) A commission agent. B9 Inspection of goods The buyer must pay the costs of any pre-shipment inspection except when such inspection is mandated by the authorities of the country of export.The agreement should explicitly indicate the products for which the agency is being concluded. In the modern competitive~ world. Settlement of Disputes :~ Generally. It incorporates the conditions mutually agreed upon by the agent and the principal for the conduct of business. (d) Normally. that is to say. every assistance in obtaining any documents or equivalent electronic messages (other than those mentioned in A8) issued or transmitted in the country of shipment and/or of origin which the buyer may require for the import of the goods and. The seller must provide at his own expense packaging (unless it is usual for the particular trade to ship the goods of the contract description unpacked) which is required for the transport of the goods arranged by him. Where the seller and the buyer have agreed to communicate electronically. Renewal and Termination :. This would help in preventing inter-. Mary Hill. Parties to the Contract :. taxes and other charges payable upon export. • Mode of commission payment. for the goods from the agreed date or the expiry date of the period fixed for shipment. it is advisable to agree upon the’ mechanism for settling disputes while entering into the agency agreement. Packaging is to be marked appropriately. transport document or B8 Pro of of delivery.territorial disputes between agents in the different areas. Since. d. and seller's account under the contract of carriage. Acceptance or Rejection of Orders:. however. e.packaging . clearly set aside or otherwise identified as the contract goods. B6 Division of costs agent abroad who is well versed with the conditions prevailing in the overseas market. Elements of Export Agency Agreement An export agency agreement is a legal document. and • where applicable (Refer to Introduction paragraph 14). A8 Proof of delivery. subject to the provisions of A3. clearly set aside or otherwise identified as the contract goods. with the necessary information for procuring any additional insurance. that the goods have been duly appropriated to the contract. where necessary.’ . gets an a reed rate of (c) The distributor earns much hi her commission. for their transit through any country.1 . from the exporter and sells them on his account b) A coinmission agent neither takes the title (b) A distributor purchases goods and to the. This is must when the transaction involves credit terms and the principal is not sure of the creditworthiness of the buyer.675. a full set of originals must be presented to the buyer. goods nor takes another sort of credit therefore takes the title of goods and risk. where necessary. Distributors. and • all costs relating to the goods from the time they have been delivered in accordance with • the freight and all other costs resulting from A3 a). Commission agents. pay The buyer must.The principal may reserve the right to accept or reject orders secured by the agent by mentioning the fact in the agreement. accordance with A8 if it is in conformity with the This document (for example a negotiable bill of lading.. Still. B10 Other obligations The buyer must pay all costs and charges incurred in obtaining the documents or equivalent electronic messages mentioned in A10 and reimburse those incurred by the seller in rendering his assistance in accordance therewith. b. subject to the provisions of B6. enable the buyer to sell the goods in transit by the transfer of the document to a subsequent buyer (the negotiable bill of lading) or by notification to the carrier. Difference Between’ a Commission Event and a Distributor Commission Agent Distributor A. it is implied that the agreement is for the entire product range. measuring. • all additional costs incurred if he fails to give notice in accordance with B7. bear all risks of loss of or damage to the goods until such time as they have passed the ship's rail at the port of shipment. whenever he is entitled to determine the time for shipping the goods and/or the port of destination. every product requires extensive sales efforts for the promotion of the product in the market. The buyer must.sales services after sales services EXPOR T IMPORT PROCEDURE AND DOCUMENTATION A6 Division of costs The seller must. and contract of carriage. The buyer must provide the seller. risk and expense. upon request. f. then the same should be clearly mentioned in the contract. a non. subject to the provisions of B5. 11. however well designed and competitively priced they may be. give the seller sufficient notice thereof. an agent does not. however.. and charges were for the seller's account under the for their transit through any country if they were for the contract of carriage. unless such costs and all duties. the document referred to in the preceding paragraphs may be replaced by an equivalent electronic data interchange (EDI) message. the • unloading costs including lighter age and costs of customs formalities necessary for export as well as wharfage charges. that the goods have been duly appropriated to the contract. weighing.contract. The seller must provid e the buyer. However. which are normally necessary to enable him to take the goods. enable the buyer to claim the goods from the carrier at the port of destination and. Meaning of Export Agency Agreement ‘Products don’t sell themselves. commission agent solicits orders and (a) A distributor. the Indian firms should consider the following points :a. Sales agents are of two types :a. A10 Other obligations The seller must render the buyer at the latter's request. all duties. should he fail to give notice in accordance with B7.An agent is expected to contact all potential customers. and • where applicable (Refer to Introduction paragraph 14).A5 Transfer of risks The seller must. that is to say. and • all costs and charges relating to the goods • the costs of insurance resulting from A3 b). unless such costs and charges which were for the seller's account under the contract of were for the seller's account under the carriage. be dated within the period agreed for shipment. and including the costs of loading the goods on board. g. B5 Transfer of risks The buyer must bear all risks of loss of or damage to the goods from the time they have passed the ship's rail at the port of shipment. Otherwise.The territory for which the sole agency is being granted should be explicitly mentioned. taxes and other charges as well as the costs of carrying out customs formalities payable upon import of the goods and. unless oth erwise agreed. and whilst in transit until their arrival at the port of • any charges for unloading at the agreed port of discharge destination. transport equivalent electronic message document or equivalent electronic The seller must. provide the buyer message without delay with the usual transport document for the The buyer must accept the transport document in agreed port of destination. it is advisable to appoint an. c. which establishes a commercial relationship between the principal and the agent.marking The seller must pay the costs of those checking operations (such as checking quality. himself purchases good passes them on to t he exporters. provide any (d) A distributor mayor may not Provide . it is a very costly affair for an exporter to maintain sales force abroad as well as it’s difficult for him to keep track of latest trends in overseas market. B7 Notice to the seller The buyer must.

Deduction from Invoice Value :. Export Promotion Councils (EPCs) and Commodity Boards (CBs) c. - a. b. f. C&F or CIF value of the export. trade magazines and other similar specialised journals.Where the exporter does not wish to utilise his EEFC account.In the cases where. The erstwhile ceiling of 12. Non-EEFCCases: . The proposal for payment of commission abroad in above cases requires the sanction of the Working Group consisting of representatives from RBI.The application submitted to the bank should be accompanied by the following documents :• • Invoice (attested copy).any ceiling as a percentage of FOB value of exports for payment of commission. Total value of export invoice. Reserve Bank has delegated powers to authorised dealers for the remittance of commission to the overseas agents. No remittance of commission is allowed in respect of exports financed under credits extended by the Government of India to any foreign government. is not permitted. the bank may convey instructions to this effect to its foreign correspondent while forwarding the documents. Manufacturer’s and exporter’s associates abroad. turnkey projects and construction contracts abroad. the authorised dealers remit the commission in the usual manner.If the application is found in order. c. However. giving the following particulars :• • • • • • IEC number allotted by the Regional Licensing Authority. which is intended to identify the goods or services of the seller or group of sellers and to differentiate them from those of competitors. 11. Commission on the Project & Service Exports on Deferred Payment Terms Special rules are applicable to remittance of commission on exports on-deferred payment terms. which is authorised dealer in foreign exchange. Customs or Shipping bill no. symbol or design. It is obligatory for Indian exporters to declare the commission to be payable to the overseas agents.relating thereto.1 A brand is a name.• Rate of commission in case of an agent and rate ‘of discount in case of distributor. d. • Samples of products to be provided to the agent and the conditions. 53 . c. Remittance by Bank: . or a combination of them. • Expiration or earlier termination of the agreement Sources of Selecting Overseas Agents a. • Sales promotion allowance. Reserve Bank has delegated powers to authorised dealers for the remittance of commission to the overseas agents. Indian trade missions and representatives abroad and foreign countries trade missions and representatives in India. d. EXIM Bank and ECGC. Federation of Indian Chambers of Commerce and Industries (FICCI). remittance of commission in advance. there is no longer’. installation. Web sites of various organisations and institutions. stocking. sales promotion.There is no restriction on payment of commission to overseas agents and the payment procedure for remittance is also quite simple.5% of FOB value of exports has been abolished. distributors and sales representatives to the Customs on the relative GR/SDF/PP/SOFTEX form. e. In cases where exporters desire to deduct commission directly from the bill proceeds. exporters desire to deduct commission directly from the bill proceeds. g. including advertisement and traveling allowance. Documentary evidence in support of the amount to be remitted. inter alia. e. Procedure for the Payment of Commission to the Overseas Agents EXPOR T IMPORT PROCEDURE AND DOCUMENTATION • Responsibility of the agent in terms of product. Payment of Commission :. Branding d. h. before shipments of goods.American Marketing Association. b.’ . term.The exporter is required to make an application (in duplicate) on his letterhead to the bank. However. Details of commodity exported. Rate of Commission Under the Foreign Exchange Management Act (FEMA). Advertisements in newspapers.’ Full name and address of the agent or distributor. a. if any. b. Letter to Bank:. to be granted to the agent or distributor. Banks dealing in foreign exchange. Documentary Enclosures :. such bank should be authorised to remit commission under the delegated powers. etc.’ the bank remits the commission. effective from June 2000. The exporters are allowed to pay commission either from their Current or Cash Credit account or from EEFC account maintained by them with the authorised dealers. if any.The exporters are permitted to utilise their Exchange Earners Foreign Currency (EEFC) account for remittance of commission to the overseas agent. i. The exporter can gather information about the overseas agents from b.e. EEFC Account: . Methods of Payment of Commission to the Overseas Agents a.675. the bank accepts invoices showing deduction on account of commission. Remittance of Commission to the Overseas Agents Rules for Remittance of Commission to the Overseas Agents The applicants for remittance of commission must clearly indicate whether the commission is payable on FOB.

675. b. magazines. Loss of consumer faith and consumers. to the buyer or the consumer or the channel of distribution. manufacturing and selling a product. The different advertising media are newspapers. and so on. e.1 54 .injuries or damages from products they make or sell. Advertising plays an important role in informing. Popular brands of MNCs from developed countries command goodwill in. it may not achieve success unless the promotion is appropriate and adequate. etc. samples. Sales promotion activities include trade fairs and exhibitions. Various Elements of Promotion Mix a.It is any paid form of non-personal presentation and promotion of ideas.Brand Piracy Remedies against Brand Piracy EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Brand piracy refers to counterfeiting of popular brand names in the international market. a counterfeiter may register a large number of well-known brands in his name and then sell such brand names to those interested in counterfeiting. To initiate Legal action against counterfeiters. To introduce some special mark or other distinctive feature such as packing. Brand piracy takes place in case of outstanding brands where people are brand loyal. Therefore. b. c. personal selling. plays a very important role in marketing. Pre-emption: In countries where law permits wholesale registration of brand names. Legal action may be taken against any or every party involved in the manufacture and distribution of the products. The US Supreme Court established the Principal of Strict Liability in 1953 which states that the aggrieved party need not prove negligence on the part of the manufacturer but hold him strictly liable for any injury resulting from a defective product. television. sales promotion. etc. Poor quality. and educating the present and potential customers. Recognized Bases of Product Liability a. Faking: Faking mean copying a popular brand with minor unnoticeable differences. c. . study the relevant laws and regulations of the country and make sure that his products comply with such laws or carry out necessary modifications in his products to meet the requirements of the law. distributors and retailers. Forms of Brand Piracy Product liability can be define4. Advertising :. many manufacturers produce jeans in India and put a label of Calvin Klien on it. 11. These factors must be blended together in order to accomplish the firm’s promotion objectives. publicity. goods and ‘services by an identified sponsor. Reason for the Growth of Brand Piracy a. b. MNCs are the worst sufferers of brand piracy.Simon MaJaro Promotion mix consists of different techniques of communication such as advertising. reasonable care in designing and Promotion Marketing Communication. World Trade Organisation (WTO) is making some efforts to prevent international brand piracy. government. • • • • Causes unfair competition for MNCs. the market and generally people tend to become brand loyal. the manufacturer must exercise. Consequences of Brand Piracy a. Sales Promotion :. therefore. The nature of the export marketing communication mix is determined by the marketing environment and the company’s objectives and resources. their relative effectiveness vary from country to country and so do their availability and efficiency. in which the supplying company aims to tell each one of these receiver why they should buy or handle the product. To withdraw the brand from the market. . ‘The word communication in marketing simply means the transaction of a message. persuading. Technological know-how required to produce a counterfeited product is easily available. contests. for any consequent. such as consumers. • Loss. Such warranties must be taken into consideration while designing. which prove to be injurious to the welfare-of consumers. Losses arising out of product liability can be insured by taking appropriate’ product liability insurance policy. The laws in some countries where counterfeiting of brand names is done are not strict.Sales promotion is defined as shortterm incentives offered to encourage purchase or sale of a product or service. radio. protective seal. The best remedy is to get the brand name registered with appropriate authority. b. b. a. Any negligence on the “Part of the manufacturer while manufacturing the product or negligence on the part of seller while selling the product which may cause consumers to suffer injuries or d(Ul1age. c. there are express warranties as well as implied warranties of merchantability. packaging and trade fairs and exhibitions. Imitation: Imitation means copying a popular brand. The exporter must. or promotion. public relations. To create awareness among consumers about the counterfeited brands. c. gifts. games. d. Product’ Liability a.. Counterfeiters capitalise on such loyalty by pirating the brand name in one or the other way. However. both domestic and international. as the responsibility borne by the manufacturers. Even if a product is very good. For example. Under some contracts of sale. government. a Seiko watch may be copied as Reiko watch. But it also affects others. Loss of market share and profit. For example. irrespective of whether he was negligent or not. It is common in case of consumer goods and consumer durables.’ . of revenue for the.

Sales promotion efforts of a firm must be supported or complemented by the other elements in the promotion mix. Q3. language used. fax. the agencies you hold at the moment. • RBIs prior permission is also required in the following cases:• • • • For remittances exceeding US $ one lakh per project for any consultancy service procured from outside India. application systems. For use and/or purchase of trade marks/franchise in India. However. Persons with export earnings of more than Rs. Please let us have details of your organisation. is of high unit value and the number of customers is limited. and others. must be taken into consideration. Some Guidelines Governine: International Promotion Mix export earnings are less than Rs.. prevent it? What are the recognized bases of product liability? What are the various elements a promotion mix? Questions Q1. d. Case Study -1 On Overseas Agent Selection (Adapted from CBI News Bulletin) Study the letter below. an overseas agent. Regulations regarding sales promotion differ in different countries. personnel or actions. international packing standards.675. It may be favourable or unfavourable. etc.Personal selling is defined as oral presentation in a conversation with one or more prospective consumers for the purpose of effecting sales. New Information Technologies :. h.There have been dramatic changes in the information technology over the last few years. We enclose~ illustrations and price lists of our products and should be grateful if you could let us have your comments. For example.Publicity is unpaid form of advertising whereby a news item is carried in the mass media about a firm and its products. While designing the packages.10 lakhs during each of the two preceding years do not require any permission from the RBI. The publicity unit or the public relations department may influence the media owners to write a positive story about the company and its products. c. environmentalists. These modes are considered to be some of the driving forces of internationalization.lotteries. Personal selling may be preferable when the product is technical in nature. The letter has been sent to potential agents whose names have been given to the Managing Director of Garments Company Limited by his country’s trade representative in Turkey.Attractive and durable packing not only protects the product but also acts as a silent salesman. Dear Sirs. policies. the foreign television company in foreign countries and not in India alone. you mean by brand piracy? What remedies are available to. Q6. the area you cover and the commission rate you would expect on products of this sort. Effective communication and skilful salesmanship is needed to convince and induce the target customers to buy the company’s products. they are required to submit to the Authorised Dealers in Foreign Exchange a certificate from a Chartered Accountant certifying that :• EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The applicant exporter satisfies the criteria of having export earnings of ore than Rs. Indian Trade Promotion Organisation (ITPO) looks after trade fairs and exhibitions of Indian products. and The advertisement for which foreign exchange is being remitted will be broadcast by. Managing Director Garments Company Ltd. Prior permission of the Reserve Bank of India is required for advertisement on foreign television by a person whose 11. 55 a. unless the payment is made from their Exchange Earners Foreign Currency (EEFC) Account. employees. Q4.Trade fairs and exhibitions playa leading role in publicising the products of the exporters. which are widely used in the field of international marketing. Q7. What do. a newspaper may publish an article on the company or its products or activities. For royalty and payment of lumpsum fees under technical llaborations What do. etc. the firm intends to create a positive impression on the government agencies. Publicity :. e. you mean by export contract? What are its elements? Explain the obligations of the buyer and the seller under FOB-& CIF Contract. by bringing potential buyers and suppliers in contact with each other and imparting information about the relevant developments around the world. creditors. discounts.1 . Yours faithfully. factors such as the size and shape of the packages. video and computer conferencing. Our trade representative in Turkey informs us that your company may be in a position to take up the Turkish agency for our range of leather jackets. They believe in maintaining good and cordial relations with their consumers.Modern business houses are becoming more of consumer oriented. Trade fairs and exhibitions. Q5.10 lakhs during each of the preceding two years. Q2.1Q lakhs during each of the preceding two years. f. An attractively designed packaging can attract the attention of the prospects and can induce them to act upon their buying decisions. Public Relations :. New information technology modes include electronic mail. consumerists. In India. which may include present and potential customers. dealers as well as intermediaries. Trade Fairs and Exhibitions:. Packaging :. shareholders. Through public relations. b. suppliers. Personal Selling :.’ What are the elements of export agency agreement? Explain the procedure far remittance of commission to. their colours. corporate and public databases. g. play an important role in international marketing.

Yours faithfully. well. mail-order agents and institutional buyers such as the armed forces.Here are the replies First reply: from the Universal Agency Company Dear Sirs. Evirgen Third reply: from the Turkish Garment Agency Dear Sir. My wife helps with the correspondence and we currently represent the ABC Glove Company of London in Turkey. the Ahmed Garment Company. We are certainly interested in the agency for your most attractive range of leather garments. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 56 11. We expect to receive a minimum 10% commission. I represent the Jones Garment Company. I have employed one representative to cover eastern Turkey and I will cover the west myself. Thank you for your letter of 1st November. well established. Y. We enclose a full list of the 200 firms we represent.675. From: Quickwork Represent a Tives. Your agency is of great interest to me as I specialise in leather products.garment distribu-tors. Then list the four potential agents in your order of preference based on the information given in the letters and explain the reasons for your ranking. reflect on the additional information you would require on each agent and how you would try to obtain it. I am confident that your excellent products would fit in very well with my programme. We employ 20 salespersons covering the whole of Turkey and 50 head office staff. I have already shown the illustrations to a garment shop in Izhmir and I expect they will give me an order in a day or two. We should be happy to work for a 5% commission. Istanbul Letter Received. Ship 1000 Pieces. which we are sure would sell well in Turkey provided they are introduced by a large.known firm of agents such as ourselves. We usually work on a 7. Now that you have studied the replies. I have been an agent for the last six months and I cover Turkey using my home as my office. engineering sup-plies and building equipment. You are required to draft an agreement with the selected agent. departmental stores. I am very much interested in becoming the agent for Your impressive range of leather garments. Yours faithfully. Second reply (handwritten): from Y.1 . and you will see that they will include well-known names in the field of clothing. Agency Accepted With Thanks. Evirgen Dear Sir. Fourth reply: fax from Quickwork To: The Garment Company Limited. Thank you for your letter. Assorted Sizes At Once At Your Acc:Ount 60 Days Credit At Prices. As Per Your List Plus Charges Delivery Our Wareagent Istanbul. ~Ylli 2a. Thank you for your letter of November 1st. the Fungko Brush Company and six shoe manufacturers.5% commission. hardware. Yours faithfully. I am sure I can provide your with good business. We have also employed a secretary at our office in Bursa and we are in close and regular contact with the wholesale and retail leather .

if desired by the beneficiary. Re-imbursement of Payment:. Importer’s Request: . Procedure for Opening Letter of Credit Laws Relating to Settlement of International Trade Disputes • • • • Litigation. they deal in documents. Enforcement of International Arbitration. then he runs the risk of non-payment. As such. The terms and conditions of the export contract form part of the letter of credit and are known as the terms and conditions of the letter of credit.e.. requires an assurance that the payment would be released to the exporter only when he has supplied the goods as per the terms and conditions stipulated in the export contract. b.The issuing bank issues letter of credit in favour of the exporter and sends it to its branch located in exporter’s country (advising bank).f. The operations of Letters of Credit have been regulated and are governed by the articles of ‘Uniform .f.e.The exporter takes the possession of the letter of credit fr6m the advising bank. which scrutinises the documents and makes payment to the exporter. 4. The issuing bank may also request advising bank to add its confirmation. e. He should check the relevant details in the letter of credit and in case there is any discrepancy.The documents forwarded to the issuing bank by the negotiating bank are handed over to the importer and the amount is debited to his account. c.Customs and Practice for Documentary Credits’ of International Chamber of Commerce adopted by more than 165 countries which were latest revised in 1993 for implementation w. Documents to Importer :. f. 1st January 1994. The exporter requires an assurance for payment of the goods if he has sent the shipment as per export order. g. Arbitration. the same should be brought to the notice of the advising bank. The banks do not deal in goods.675.The exporter fulfils the shipping and customs procedure and collects the required documents from various authorities for negotiation. importer may also have the feeling that if he makes advance payment to the exporter and he does not supply the goods of the quality desired by him on the due date. Shipment of Goods: . Both the parties would be able to conduct their part of the transaction smoothly if there is an assurance to them as regards protection of their interests. This assurance is pro-vided by the importer’s bank and is known as Letter of Credit or the Documentary Credit. the importer has to specify to the bank the documents which it should examine as an evidence to the effect that the exporter has sent the shipment in strict compliance with the terms and conditions of the export contract. Importer Approaches bank to Open to L/C Importer’s Bank sends L/C Advising Bank (in exporter country) Exporter Question Bank Meaning of Letter of Credit The D /P and the D / A modes of payment suggest that there is a certain degree of lack of confidence of the parties in each other. 3. Procedure for Arbitration.The negotiating bank gets the payment reimbursed from the issuing bank. The following is the procedure for opening a letter of credit: a. Issue of Letter of Credit: .EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 9 & 10: Laws Relating to Credit Contracts (Letter of Credit) • • • • • Meaning Parties Procedure Types Advantages The operations of Letters of Credit have been regulated and are governed by the articles of ‘Uniform . The importer on the other hand. 1st January 1994.Customs and Practice for Documentary Credits’ of International Chamber of Commerce adopted by more than 165 countries which were latest revised in 1993 for implementation w. Authenticates L/C & send it to Procedure for the Issue of Letter of Credit Contents of Letter of Credit A Letter of Credit generally contains the following information: 57 .If the method of payment agreed between the importer and exporter is through letter of credit then the importer requests his bank to open a letter of credit in favour of exporter. The essential characteristic of the Letter of Credit is that it relies on the doctrine of strict compliance for release of payment to the exporter against the draft( s ) drawn by him. Receipt of Letter of Credit: .. Negotiation of Documents: . d. 11. either by paying the amount of letter of credit or by requesting credit to that extent. The exporter is not willing to send the goods on D /P or D / A basis because he is not sure as to whether the importer would make the payment and if the importer doesn’t pay.The exporter submits the required documents to the negotiating Bank. 1. Similarly.1 2. Letter of Credit refers to a written undertaking made by the importer’s bank to the exporter that the payment shall be made to him provided the shipment is sent by him in strict compliance with the terms and conditions of the export contract. then he would also suffer loss.

The responsibility. services and or other performances to which the documents may relate. 15. Commercial invoice:.. Usual documents prescribed in letters of credit are discussed below:1. CFR. health and Sanitary Certificate to be submitted to the negotiating bank. Mode of advice of the Letter of Credit i. Documents Required under Letter of Credit An exporter should scrutinise the Letter of Credit carefully before proceeding to execute the export order. 17. Status of transhipment i.g. importer 3. FOB. Hence it is necessary that the beneficiary tenders documents in conformity with the requirements of letter of credit. He can consult his Banker for this purpose. The description of the goods. 11. All the terms and conditions are acceptable and can be complied with. the price and any other charges which may be on account of buyer. if given by the seller.As the goods must conform to agreed quality standards all letter of credit require an Inspection Certificate. How the credit shall be available e. 13. Terms of delivery i.e. acceptance or negotiation 6..The applicant or opener is the buyer or importer of goods who opens the letter of credit through his bank in favour of exporter. Parties to Letter of Credit According to Article 4 of the Uniform Custom and practice for documentary credit in credit operations all parties concerned deal in documents and not in goods. Description of goods. Precautions to be Taken by the Beneficiary on the Receipt of Letter of Credit EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 9.Beneficiary is the exporter of goods in’ whose favour the letter of credit is opened by the importer through his bank.675. List of documents required to be submitted by the beneficiary. railway receipt in case the goods are sent by land route. The person whom payment is to be made is called “payee” who can be either the drawer himself or a third person. the seller). the exporter. applicable in case of floating OR open cover contains a declaration regarding value of ach shipment and is signed by the exporter himself. It should be ensured that the Letter of Credit does not include any condition that is unaccept-able or cannot be complied with. Complete and correct name and address of the applicant i. 5. quantity and the unit prices are as per the export contract.:. 6.As shipment is the most crucial condition for payment all letter of credit insist on lodgment 58 The following parties are involved in the operation of a letter of credit :a. 2. Complete and correct name and address of the beneficiary i. 14.Insurance policy is a legal evidence of contract of insurance showing full details of risks covered. 7. Airway bill is used in case of air consignment. by mail or teletransmission. There is no clause in the Letter of Credit that requires payment of costs or charges not agreed to with the importer. Bill of exchange:. The Inspection certificate has to be submitted as a proof of the goods having been inspected by a qualified government or private agency. 7. Transport documents:. He should examine the following points to ensure that: 1. quantity of the items and the unit price. CIF etc.It is an instrument drawn by one person(the seller of the goods) on another(the buyer) directing him to pay to or to the order of drawer(i. Insurance certificate . 11. The Letter of Credit appears to be a valid Letter of Credit.1.It is document of content. 2. Transfer of the Letter of Credit allowed or not. 2. Port of discharge and the place of final destination. Insurance certificates not normally acceptable unless specifically provided in the letter of credit.. Beneficiary: . Bill of Lading is issued by the shipping company in case goods are sent by a sea vessels. 4. The name of the drawee of the draft and the tenor of the draft. Time period for the presentation of documents for negotiation by the beneficiary after the dispatch of the shipment. The port of loading and the port of discharge are as per the export contract.Analysis and Weight Certificate.1 . Inspection Certificate:. Amount of letter of credit 5. 12. 10. The last date for sending shipment and the time allowed for presentation of the documents are acceptable.e.e.. Applicant or Opener: . 6. Insurance policy Certificate:.e.e. It is document through which payment is arranged. of documentary evidence in support of exporter’s contention of having shipped the goods. Type of the Letter of Credit/Documentary Credit 4. whether allowed or not. The date and place of expiry of the Letter of Credit. The type of Letter of Credit and its terms and conditions are as per the agreed terms and conditions of the export contract. The documents required under the Letter of Credit can be obtained and presented for negotiation..e. Packing List:. It also contains information about any discounts. 8.e. by payment. b. It contains details about the goods sold. 5. 3. 4.this gives details of the individual parcels shipped to the buyer. most letters of credit require that the exporter will prepare the bill called the draft and submit it to the banker along with other documents. 3. A correctly completed commercial invoice should conform to the sale contract. 16. whether allowed or not. Besides some letters of credit require documents such as Certificate of Origin .. Status of partial shipment i. deferred payment. The last date of sending shipment.

In case the beneficiary has tendered additional documents which are not stipulated in the Letter of Credit.Negotiating bank is a bank situated in the exporter’s country through which documents are negotiated by the exporters. A Letter of Credit is known as irrevocable Letter of Credit if its terms and conditions can be cancelled/ modified only with the ex-consent of the beneficiary. the issuing bank must give notice to this effect by telecommunication or by other expeditious means without delay but in any case before the close of the seventh banking day following the day of receipt of the documents. There is no question of minor or major discrepancy in documents. the advising bank and confirming bank are one and the same. The advising or confirming bank informs the seller that the credit has been issued 2. Negotiating Bank: . I. Form of Documentary Credit or Letter of Credit The form of documentary credit is the irrevocable documentary credit or the Letter of Credit. The documents are considered dis-crepant if they do not appear on their face to be in compliance with terms and conditions of the Letter of Credit or on their face appear to be inconsistent with one another. Issuing Bank: . Thus. However.675. 3 The issuing bank asks another bank. 11. In case the documents are non-discrepant.Advising bank is the branch of issuing bank situated in the exporter’s country. thereafter. Advising Bank: . the bank undertakes that the drafts will be honoured.Confirming bank is the bank situated in the exporter’s country. the bank has the right to reject any document. According to these guidelines. 1. then it shall. f.c. Such branch receives the letter of credit and looks after its onward transmission to the beneficiary. Such documents are termed as no discrepant documents. the issuing bank would examine only those documents which have been stipulated in the Letter of Credit. Such notice should be given to the bank from which it had received the documents or to the beneficiary if it received the documents directly from him. to advise or confirm the credit. the issuing bank may.. In such an eventuality. In such a case. The buyer instructs his bank the issuing bank to issue a credit in favour of the seller 2 AD VI SIN G/ D IN CO N FI RMI N G/ O MI N EGO TIATI NG GO TI AT I N G BANK AN K 3. In case the issuing bank fails to examine and determine whether the documents are discrepant or not within the time limit of seven banking days. Many times. It is important to emphasize here that the issuing bank will have the time not later than seven banking days from the day following the receipt of documents to approach the applicant and take the decision accordingly and communicate the same to the concerned party that is pre-senter of documents or the beneficiary within the prescribed time limit of maximum seven days. in its sole judgment. 1 The buyer and seller enter into a sales contract providing for payment by documentary credit. Any discrepancy makes the documents liable for non-acceptance. an importer cannot get the terms and condi-tions of the Letter of Credit modified/cancelled without EXPOR T IMPORT PROCEDURE AND DOCUMENTATION SE LL E R SE L (Benefiiciary) (B ene cia ry 1 BUYE R UYE (Appllicant) (A pp ic ant 4 4. I SS UIN G S NG B AN K B NK Chart on relationship among the parties to the letter of credit Doctrine of Strict Compliance The operation of letter of credit as a mode of payment is based on the doctrine of strict compliance. us ually in the country of the seller. Confirming Bank: .1 59 . which is not in strict conformity with what is asked for in the letter of credit. exporter’s bank. The issuing bank is allowed a reasonable time not exceeding seven banking days following the day of the receipt of documents to examine them and determine whether the documents are discrepant or not. approach the applicant to waive of the discrepancy or the discrepancies and if the applicant agrees to the request t of the issuing bank then it would make the payment to the beneficiary otherwise the issuing bank would act according to the decision of the applicant. The only risk under this mode of payment is when the documents submitted have discrepancy. the issuing bank makes the payment against the draft / s drawn under the Letter of Credit In case the issuing bank comes to the conclusion that the documents are discrepant. d.e. who issues a letter of credit in favour of the exporter on the request of the importer. Lithe goods are shipped on a date later than stated in the Letter of Credit or any document is missing or there is a spelling mistake in a document. e. Under this doctrine. The banks follow the international standard banking practices to determine whether the documents stipulated in the Letter of Credit are in compliance with the terms and conditions or not.Issuing bank is the importer’s bank. be precluded from raising the issue of discrepancy to reject the documents. which guarantees the credit on the request of the issuing bank. then it would not make the payment and return the documents to the beneficiary or the other party through whom it had received them. The standard banking practices are given in the Uniform Custom and Practices for Documentary Credits number 500 (1993 revision) as published by the International Chamber of Commerce. it will be under an obligation to make the payment against the draft/ s drawn under Letter of Credit. the issuing bank and the confirming bank( if any). If the documents required are without any discrepancy and are as per requirement in the Letter of Credit. then the issuing Bank shall not examine them and return them to the beneficiary without any responsibility. then it amounts to discrepancy in the document. This doctrine provides that issuing bank would make the payment if the documents as specified under letter of credit appear on their face to be in compliance with the terms and conditions of the Letter of Credit. Such notice must state all the discrepancies in the documents.

Green clause Letter of Credit 7. Confirmation of credit. Negotiable Letter of Credit 4. This enables an exporter to obtain funds in advance before waiting for the due date.payment by the issuing bank EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 60 11. This means that the irrevocable Letter of Credit is an insurance against commercial risks to payment. then it cannot claim the amount from the exporter. A Letter of Credit is deemed to be an irrevocable Letter of Credit unless it is specifically marked otherwise. the bank through which the documents are pre-sented for negotiation for realisation of the export proceeds. if the irrevocable Letter of Credit does not provide for its confir-mation.e. Once.1 . Thus. In case it fails to obtain the payment from the issuing bank for any reason. On the other hand. It is the most desirable to opt for confirmation in the case of those countries which are politically unstable or the financial standing of the issuing bank is not very good. the draft is jointly accepted by the bank and the importer. This arrangement is beneficial for the exporter as it enables him to protect himself against the political risks involved in transfer of funds from the importer’s country to the exporter’s country. Such a Letter of Credit involves lot of risk to the beneficiary as its terms and conditions can be modified/ cancelled while the goods are in transit or though the documents have been presented but before payment could be made. Sight or Usance Letter of Credit 2. Kinds of Letter of Credit There are various kinds of Letter of Credit depending upon the features added to it as desired by the applicant. the beneficiary under the Letter of Credit. thus. the issuing bank and the confirming bank. the usance draft is accepted jointly by the issuing bank and the importer. Thus. operates as an insurance against the political risks to payment. Restricted Credits Sight or Usance Letter of Credit A Letter of Credit is known as Sight Letter of Credit or the Letter of Credit at sight if it involves payment to the exporter against sight draft. This kind of situation may arise when the importer’s country is at war or is faced with civil/ ethnic disturbances leading to the imposition of financial emergency or temporary financial crisis leading to the ban on the transfer of funds out of the country. i.. the exporter gets the payment even before the documents are scrutinised by the issuing bank.the express consent of the ex-porter. On the other hand. The banks normally do not issue the revocable Letter of Credit unless there is a specific request to this effect from the applicant. An irrevocable Letter of Credit gives an assurance to the beneficiary that the issu-ing bank commits itself to honour the draft/s drawn by the exporter under the credit provided that all the stipulated documents are presented and these are in strict compli-ance with the terms and conditions of the Letter of Credit. The negotiating bank i.675. A specimen of the letter of credit is given as annexure I to this chapter. In such a case. then the it would release the payment under the terms of the credit to the exporter subject to an undertaking from the exporter that in case the issuing bank does not release the payment then he would refund the amount to the negotiating bank. the negotiating bank reserves to itself the right to take recourse to the beneficiary in the event of non. Once the payment is made by the confirming bank ( it is usually located in the exporter’s country)/ then it claims the amount of Letter of Credit from the issuing bank. would examine the documents and if the same are found to be non discrepant. Such risks are bankruptcy of the importer. The exporter should take the decision regarding confirmation carefully as it involves cost in terms of payment of confirmation charges to the bank. dishonest intentions of the importer to make the payment or the liquidity problems faced by him and would not affect payment to the exporter. In this case. It is important to understand that confirmation of Letter of Credit is possible only if there is a clause in the Letter of Credit which permits the advising bank or any other negotiating bank to add its confirmation. With recourse or without recourse Letter of Credit 10. Back to back Letter of Credit 9. revoked or cancelled without the consent of the beneficiary and even without giving prior notice to the beneficiary regarding the likely change in the Letter of Credit. without recourse to the beneficiary. In such a situation. Revocable and Irrevocable Letter of Credit 12. then the Letter of Credit is known as Usance Letter of Credit. This means that the advising bank assumes the primary liability for making payment to the beneficiary as if it were the issuing bank. the exporter will face the problem of realising payment directly from the importer. Standby Letter of Credit 11. if an exporter wants confirmation of Letter of Credit then he must negotiate for this with the importer so that he can get this clause included in the Letter of Credit.e. Confir-mation of Letter of Credit is. Red clause Letter of Credit 6. in fact. if the pay-ment is to be made against usance draft. The different kinds of the Letter of Credit are as follows: 1. Revolving Letter of Credit 5. then it would be known as unconfirmed Letter of Credit Negotiable Letter of Credit A Letter of Credit is known as negotiable if the issuing bank authorises the negotiating bank to honour the draft/s drawn under the terms of the credit. On the other hand. Transferable Letter of Credit 8. An irrevocable confirmed Letter of Credit is the most beneficial form of credit for the exporter as he has obtained assurance of payment from two banks namely. it becomes the first class commercial paper which can be discounted through any commercial bank before the due date. Confirmed or Unconfirmed Letter of Credit An irrevocable Letter of Credit is confirmed when the advising bank add? its confirmation to the Letter of Credit. Confirmed or Unconfirmed Letter of Credit 3. a Letter of Credit is known as revocable if its terms and condi-tions can be amended.

If the unutilised amount cannot be carried over. On the other hand. The second letter of credit is known as the back-to -back letter of credit.000 per month for a fixed period of say. The confirming or the nominated bank recovers the amount of advance with interest out of the payment realised under the credit. The issuing bank would have the right of recourse against the applicant Le. The exporter can request for the issue of import letter of credit on the strength of the export letter of credit. This kind of credit is very useful in those cases where the importer is making imports through an agent in the exporting country.1 the credit given to the exporter to cover the period of storage of goods at the sea port. For example. 2. maintain the list of reliable exporters for the supply of goods to their Principals in the foreign country. Transferable Letter of Credit Transferable letter of credit is a credit which authorises the advising bank to trans-fer part or full amount of the credit to any other party at the request of the beneficiary. Revolving Letter of Credit A revolving letter of credit is one which provides for the renewal of the amount of the credit without any amendments to the letter of credit in relation to a given time period or a given amount.675.000. the importer runs the risk of accepting the shipment of goods from a party other than with whom the order was placed and the party supplying the goods may not have had any business dealings in the past with the importer. an exporter who has received a letter of credit for the export of goods may have to import goods from another country for the execution of the order. The credit is consid-ered Cumulative if the unutilised amount of one time period can be carried over to the next period. This means that the liability will fall on the applicant. For example. In case the issuing bank agrees for negotiation by any bank then the credit would be called Unrestricted.Back letter of credit is a credit which is issued at the strength of another letter of credit. three months. Red Clause and Green Clause Letters of Credit A Red Clause letter of credit is a kind of credit which enables the confirming bank or the nominated bank to make advances to the beneficiary even before the presentation of the documents. The transferable credits help the buying agents to transfer part of the credit amount to differ-ent exporters who have been given the orders for the supply of goods to the importer. In this case. One opened in favour of the primary beneficiary or the original exporter. Thus.000 every month for a period of three months irrespective of whether any credit was utilised or not by the beneficiary during the month..cumulative. the letter of credit is known as Green Clause letter of credit if it provides for 11. original exporter to present the documents within the time limits set by the primary letter of credit With Recourse or Without Recourse Letter of Credit A letter of credit is with recourse when under the terms of the credit. Such agents.s and the docu-ments and claim payment for the goods supplied. while the face value of the letter of credit is $20. then the negotiation is restricted to the nominated bank and the credit is then called the restricted credit. Thus. This clause states the amount that can be advanced to the beneficiary and in certain case it may cover even the full amount of the letter of credit. In this case. The foreign supplier may ask for payment against letter of credit. Thus. It is important to ensure that the second letter of credit specifies all the documents required by the first credit and the time limits set for presentation of the documents in such a manner that it will enable the primary beneficiary Le. Instead of opening letter of credit for each import. known as buying agents in the exporting country. However.000 for three months: The revolving credits are opened in those cases where the importer regularly im-ports goods from a certain exporter. the first beneficiary becomes the applicant for opening of the second letter of credit. In case the name of the negotiating bank is stated in the letter of credit. In case the documents presented by the exporter are found to be discrepant then the bank which had given the advance will have the right to demand repayment of the advance amount with interest from the issuing bank. the undertaking of the issuing bank is for the total amount of $60. The credit opened in favour of the second beneficiary who would supply goods to the first beneficiary. then the credit would be called Non. the importer saves on the transaction costs by opening the revolving credit. the back. A confirmed letter of credit is without recourse to the beneficiary and the uncon-firmed or the negotiable credits are always with recourse to the beneficiary. It is without recourse when the negotiating or the nomi-nated bank cannot approach the beneficiary to refund the payment under the letter of credit. The revolving credit may be cumulative or non-cumulative. The disadvan-tage of revolving credit from the point of view of the importer is that he enters into long term commitment with a particular supplier and thereby deprives him of the possible of opportunities of making imports at competitive rates in future. Standby Letter of Credit Standby letter of credit is an assurance to the beneficiary that the applicant shall perform his part of the obligation undertaken by him under the contract between the applicant and the benefi- EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 61 . a letter of credit may revolve initially for an amount upto $20. the transferee gets the right to make presentation of the draft/. The revolving letter of credit may be revocable or irrevocable. once the credit is transferred. the negotiating bank or the nominated bank cannot approach the beneficiary for the refund of the payment made under the letter of credit..Back Letter of Credit Back -to.000 in revolving periods each for $20. This facility of payment would be available to the exporter only if it is stated in the Letter of Credit that the payment is allowed by negotiation and the name of the bank(s) allowed to negotiate is also stated in the Letter of Credit. Since this clause used to be written customarily in red ink hence the name Red Clause letter of credit.under the credit. the importer. the amount of credit shall be renewed for $20. Back -to. Whether such a clause would be included in the letter of credit or not depends upon the agreement between the exporter and the importer.to-back letter of credit involves two separate letters of credits as follows: 1.

In the case of a letter of credit. Settlement of Payment under Letter of Credit The procedure for the settlement of payment against the export shipment sent under a letter of credit depends upon the payment mode stated in the letter of credit.In India an exporter can obtain pre-shipment finance from commercial banks on the strength of a letter of. Advantages of Letter of Credit Advantages of Letter of Credit to Exporters c.Since in the case of a letter of credit. in fact. a letter of credit assumes timely delivery of goods to the importer. The subject matter of this kind of letter of credit could be : 1. the importer is in a better position to negotiate the terms of trade with foreign suppliers which otherwise is not possible. Documents Released 3. c. The beneficiary (exporter) sends the shipment as per the terms and conditions of the credit.A letter of credit is honoured only after the exporter dispatches. The possible options are rejection of documents. e. Informs Beneficiary (exporter) submits documents to 7. 4B. Delivery in Time :. 4. ignoring the discrepancies and making payment to the beneficiary or sending documents to the beneficiary for removal of the discrepan-cies. Payment on account of any default by the applicant in the performance of any obligation undertaken by the applicant.The letter of credit received from the importer can be discounted with the confirming bank and money can be realised immediately. the importer cannot do so because it is obligatory for him to accept goods and make payment once he gets the documents negotiated in his favour.The importer may refuse to accept goods in the case of other methods of payment. A confirmed letter of credit is more secured due to double guarantees from the issuing bank and the confirming bank. Payment Settlement Procedures The above procedure would be changed depending upon the type of payment settlement procedure specified under L/e. Helps to Procure Pre-shipment Finance: . Thus. Guaranteed Shipment :. Issuing Bank (L/C opening Bank) 5 A. Prevents Bad Debts: . Thus. Therefore. Account of exporter credited Beneficiary (Exporter) Bank forwards them to Remittance sent 6. the importer is assured of the delivery of goods in time. Overdraft Facility ::The importer may also get a letter of credit issued in favour of the exporter on the basis of overdraft facility extended to him by the issuing bank. Prevents Blockage of Finance: . the sequence of steps involved in this procedure is as follows: 1.ciary. This prevents blockage of funds.Shipment of goods cannot be delayed once a letter of credit is issued. 62 Procedure for Settlement of payment Under L/C. It is. e. Repayment of the money borrowed by the applicant from the beneficiary or 2. credit issued by the importer’s bank in his favour. Better Terms of Trade :. after fulfilling the required formalities the exporter gets immediate payment. The issuing bank would follow one of the options as desired by the applicant. Thus. At the same time. the risk ‘of bad debts is less. 2. the importer gets possession of goods without making actual payment. b. d. the payment is I guaranteed by the issuing bank and therefore. called beneficiary’s bank. Importer’s Obligation: . But in case the documents are found to be discrepant then the issuing bank may approach the applicant to decide the course of action it would take in regard to the discrepant set of documents. Revocable and Irrevocable Letter of Credit Under the revocable letter of credit. after getting letter of credit unnecessary delays caused by import regulations can be avoided. the issuing bank retains the right to cancel or modify the credit. No Advance Payment:. Payment on account of any indebtedness undertaken by the applicant or 3. Whereas in an irrevocable letter of credit. But in the case of the letter of credit. The set of documents as stated in (2) above are presented by the exporter to his bank. Restricted Letter of Credit This refers that negotiations under a credit may be restricted by the issuing bank to a named bank. The various types of settlement procedures are as follows: 11. b. a kind of performance guarantee to support the beneficiary in the event of default by the applicant. the issuing bank gives a binding undertaking to the beneficiary. The issuing bank scrutinises the documents and if the same are found to be non discrepant.The importer is not required to make any advance payment to the exporter once a letter of credit is issued. the shipping documents to the importer. 3. Exporter collects the required set of documents and draws the Bill of Exchange as per the requirements of the credit. Fulfilment of Import Regulations: . The beneficiary’s bank forwards these documents to the issuing bank 5. .1 Remittance EXPOR T IMPORT PROCEDURE AND DOCUMENTATION a. Generally. For advise to Discrepant Documents Security of Documents NonDiscrepant Importer Advantages of Letter of Credit to Importer a. payment is assured.The letter of credit is issued by the issuing bank after the importer complies with the import regulations and exchange control regulations in his country.675. d. then it sends the remittance to the beneficiary’s bank for its onward credit to the beneficiary.

The confirming bank examines the documents and if found non discrepant. The draft is drawn on the Accepting Bank with specified tenure i. exporter tenders documents evidencing shipment of goods to the bank where credit is available by acceptance (Accepting Bank). it releases the payment to the beneficiary i. 4. 2. 4. The basic procedure remains the same as outlined above with the only difference being that the negotiating bank will release the payment to the beneficiary against the draft drawn under the L/C after satisfying itself that the documents presented by the beneficiary are non discrepant. be noted that in case of negotiable credit or the confirmed credit the negotiating bank/ confirming bank will release the payment to the beneficiary on due date even before the reimbursement is received from the issuing bank. The beneficiary i. 2.e. 4. The nominated bank which accepted the draft sends the documents to the issuing bank informing that it has accepted the draft drawn by the beneficiary. In case the documents are found to.. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11. the confirming bank will not release payment to the exporter and would seek the advise of the issuing bank for taking suitable action in the matter. 3. 4..1. 3.e. 3. The exporter presents the documents to the confirming bank after sending the shipment as per the terms and conditions of the letter of credit. It may however. the time when payment is to be made and is also presented along with the documents. 2. The issuing bank sends the documents to the buyer. Procedure for Settlement of Payment in Case of Confirmed Letter of Credit The procedure for settlement of payment in the case of confirmed letter of credit is explained below: 1. The issuing bank checks the documents and sends reimbursement to the negotiate. 5. The Accepting Bank then sends the documents to the Issuing Bank stating that it has accepted the draft. In case the confirming bank has released payment to the exporter but it fails to get its reimbursement from the issuing bank then it cannot take recourse to the exporter and in such an eventuality it would be the loss of the confirming bank. Settlement under negotiable letter of credit. The Issuing Bank sends document to the applicant (i. . Settlement by Deferred Payment The procedure for retaliator of payment under deferred payment arrangement is as follows: 1. Settlement by deferred payment. The Issuing Bank checks the documents and if these are as per credit requirements then it makes payment to the Accepting Bank at maturity. be discrepant..675. 5. 5.e. 3. a draft may be prepared by the exporter to be pre-sented to the nominated bank for acceptance of the liability as regards payment at a future date. The exporter submits an undertaking to the negotiating bank that it will refund the amount to the bank if the payment is not received by the negotiating bank from the issuing bank. The negotiating bank after making payment to the beneficiary sends the docu-ments to the issuing bank.. importer). The nominated bank accepts the draft and returns it the exporter. The beneficiary presents the documents to the nominated bank for deferred credit and the nominated bank makes payment to the beneficiary at a future date against presentation of conforming documents. In this case the exporter is not required to prepare any draft. Procedure for Settlement of Payment by Acceptance The procedure for settlement of payment by acceptance is as follows: 1. 3. Procedure for Settlement of Payment in the Case of Transferable Letter of Credit In case a part or whole amount of the letter of credit has been transferred then the transferee becomes the beneficiary and would present the document for negotiation in the same manner as if he were the original beneficiary. The accepting bank or the nominating bank releases payment to the beneficiary. The issuing bank releases the documents to the importer. then it accepts the draft and returns it to the beneficiary. The confirming bank then sends the documents to the issuing bank for claiming reimbursement for the payment made. It is the responsibility of the issuing bank to make the payment on due date.1 63 .e.exporter. 4. 5. 6. the importer.in bank if the documents are non discrepant. The Accepting Bank makes payment to the beneficiary. The Accepting Bank checks the documents and if these are as per the credit require-ments. 2. The issuing bank sends reimbursement to the confirming bank if the documents are found to be non-discrepant. 2. However. Procedure for Settlement under Negotiable Letter of Credit The procedure for settlement of payment under negotiable letter of credit is as follows: 1. The issuing bank releases the documents to the applicant i. Settlement under confirmed L/ e. The issuing bank scrutinises the documents and if the same are found to be non discrepant then it reimburses the amount of the draft to the accepting bank/nominating bank. Settlement against acceptance. The dates on which payment is made is always defined as a certain number of days from the date of presentation of the documents.e.

e. if one party withdraws from the agreement. Conciliation. saving on the cost and the possibility of maintaining the cooperative relationship among the parties involved. The term “litigation” is sometimes to distinguish lawsuits from “alternate dispute resolution” methods such as “arbitration” in which a private arbitrator would make the decision. Litigation is at NRC’s 64 11. Litigation is most often used as the final remedy after all other collection efforts have failed. Non-payment of discounts and commissions by the seller. it does not mean they will exclude mediation from being applied as a form of dispute settlement. This is done by persuading the importer directly or through Government authorities or local chamber of commerce to agree for amicable settlement. In the meantime. 1. Similar to conciliation. Using legal action to recover a debt. Litigation is one way that people and companies resolve disputes arising out of an infinite variety of factual circumstances. If the incidence of disputes is heavy. Calcutta. conciliation often fails to reach a mutually satisfactory solution. but also the image of the country. 2.. Arbitration 1. mediation is based on the respect for the free will of the parties and an informal negotiating atmosphere. i. The importers can approach the Directorate General of Commercial Intelli-gence & Statistics. the stipulation of the agreement will have a legal binding effect upon all the parties involved. This. both civil and criminal. of the Ministry of Commerce in case they have any complaint against the Indian Exporter and want settlement of the dispute through conciliation. Definition of Litigation Amicable settlement of disputes through the good offices of an impartial third party is termed as conciliation. A dispute is in “litigation” ( or being “litigated”) when it has become the subject of a formal court action or law suit. 5. due to the participation of the third party. Inspite of written agreement and all the precautions taken. Difference in the interpretation of quality standards. Litigation is not suitable for settlement of trade disputes as it is beset with inordinate delays. International Chamber of Commerce) have their mediation rules or include the rules of meditation in their arbitration rules. the agreement reached through conciliation lacks the legal binding effect upon the parties and therefore. As a consequence.Law Relating to Settlement of International trade disputes Written orders rather than based on verbal orders conveyed personally by the importer.1 . disputes are inevitable in international trade. in turn. Mediation EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Mediation is a process where the parties involved in a dispute resolve their dispute with the assistance of a third party (the Mediator). NRC’s Tandem Program offers full follow through to litigation forwarding. the proportion of disputes settled through conciliation is relatively small in international trade. There are Four ways of settling a dispute. In comparison with litigation and arbitration. Indian exporter can approach Indian Government Trade Representative abroad for settlement of the dispute through conciliation. New Delhi has also been endeavoring to conciliate in a large number of complaints from foreign importers and vice versa. high costs and uncertainty of the final decision. including a simple procedure. if the arbitration body makes an award in accordance with the mediation agreement reached by the parties. forms the basis of disputes between the parties to a trade transaction. Although some arbitration institutes may not have particular mediation rules. If it is not settled by agreement between the parties it would eventually be heard and decided by a judge or jury in a court. litigation and arbitration . 3. The advantage of mediation is that. Difference in interpretation of the clauses in the agreement. when warranted. disputes do arise. it not only spoils the name and trade prospects of the exporter concerned. but two are the well recognized methods for settlement of dispute. In case the conciliation efforts fail the matter can be settled through arbitration-. 3. Conciliation Mediation Litigation Conciliation refers to a process where parties resolve their dispute by direct negotiation on a voluntary basis without the assistance of a third party. Furthermore. or “mediation” which is a type of structured meeting with the parties and an independent third party who works to help them fashion an agreement among themselves. mediation requires less cost and is a simpler process. Non-remittance of sale proceeds by the buyer. China International Economic and Trade Arbitration Commission. Litigation 4.675. One of the ways to minimise trade disputes is to use standard contract forms. However in practice. How to settle the disputes? Settlement of Industrial Disput Similar to domestic trade. a copy of the same is given at the end. Indian Council of Arbitration has evolved the contact form. 6. Also the study of court process. Indian Council of Arbitration. 4. There are a number of alternative ways to settle a dispute in international transactions. The written export orders/ agreements/contracts form the basis of exports business. commercial practices etc There is a need to reduce to the minimum the incidence of disputes. new dispute may likely arise. Many permanent arbitration institutes (e. Disputes arise due to the breach of contract either by exporter or importer. the process of reaching an agreement among the parties will be accelerated.g. as a way of dispute settlement.Conciliation A controversy before a court or a “lawsuit” is commonly referred to as “litigation”. 2. For example dispute may be the result of the following: 1. Difference due to language problems. has a number of advantages. The Mediator is mostly a permanent arbitration institute. 2. Non-supply or short supply or delayed supply of goods. 3.

and arranged in two ways. d. i. Documents and other evidence are submitted. The nature of questions/matters to be referred to arbitration. the prevailing party often has the ability to have it issued as an enforceable order of a court of law. Requires Concrete Evidences :. A schedule will be set. “submission agreement” refers to the agreement between the parties usually. Future Disputes clause is an insurance of a quick and just settlement of possible future dispute. Model Arbitration Clause The Indian Council of Arbitration has suggested the following clause for insertion in the agreement.Since the litigation procedure is lengthy and time consuming. Under the Arbitration Act.1 . meaning and operation or effect of this contract or breach thereof shall be settled by arbitration in accordance with Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties” Basic Advantages of Arbitration a.Generally. “ All matters of dispute or differences whatsoever arising between the parties out of business transaction or relating to the construction. and d. Cases that are arbitrated are generally resolved faster than conventional lawsuits because there is less bureaucracy and court congestion is not a problem.” After the arbitrator’s award has been issued. Different Laws and Procedures :. time-consuming . the arbitrator will make an “arbitrator’s award. An unequivocal statement as to the finality and binding nature of the award given by the arbitral body. either through “future disputes clause” or “submission agreement”. to submit the dispute after it has arisen.option and may not be a cost-effective solution on low-balance accounts Basic Limitations of Litigation international level. but the technical rules of procedure followed by a court do not apply. and where and when the hearing will be conducted. Bitterness and Disruption of Trade Relationship :Acrimony and bitterness usually accompany litigation and irrespective of which party wins. such trade practices and procedures have to be proved before the court by expert witnesses having knowledge and experience in the field. c. At the same time. Lengthy and Time Consuming :. but are usually waived since arbitration briefs have been submitted. It takes years for settlement o f a dispute in a court of law. The parties decide whether the arbitration will be binding or non-binding and then select the arbitrator.. f. it causes inconvenience to the litigants and disturbs their mental peace. After carefully review. when all witnesses must be disclosed. Arbitration is the reference of a dispute to one or more independent third person(s) who act(s) as judge and jury. the 65 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION a. Witnesses (both percipient -those who saw and heard . written. Once all evidence has been submitted to the arbitrator. On the other hand. the time. Future disputes clause provides for reference of the dispute for arbitration by the agreed agency. e. Quickness: .675. the parties agree to be bound by the arbitrator’s decision. The arbitration clause-Future Disputes Clause-must provide for:a.The court proceedings are open to the public and judgments of higher courts are also published. 4. At the arbitration hearing. many times it results into a breach or disruption of the long standing trade relationships between the parties. Closing arguments may be presented. Once the matter has been submitted to the arbitrator (and when each side has paid his/her respective share of the arbitrator’s fee). place and date of hearings in a court of law may not be convenient to parties to litigation. In advance of the arbitration. arbitration is the voluntary submission of a dispute to one or more impartial persons for final and binding determination. Adverse Public Image:. longer the time higher is the cost and other expenditure.and’ formalistic. b. b. c. This may cause litigants to expose their internal and private affairs and trade secrets and the reputation of the organisation may be affected adversely. Opening statements can be presented. Due to above limitations arbitration is preferred to litigation as a method of dispute settlement at the 11. Arbitration bas certain advantages over litigation. witnesses are placed under oath and written evidence is submitted. to one or more arbitrators. At the same time. Inconvenience to the Parties :.International trade transactions involve parties from different foreign countries whose laws and procedures are not same~ International trade laws and procedures are rather complicated.e. The venue of arbitration and the number of arbitrators who would hear and decide the dispute. the arbitrator will contact all parties. Court process is generally very slow. Usually the arbitrator is selected from a panel or list of available arbitrators. In an arbitration. Therefore. an agreement can be reached to resolve the matter through arbitration. It is a substitute for court proceedings. when arbitration briefs (written statements covering the facts and the law of the given controversy) are to be submitted. Basic Steps are Involved in Arbitration After all parties have been informed of the controversy. each of the respective parties is allowed to present his/her evidence concerning the controversy. which includes when all documents must be exchanged. Arbitration According to Indian Council of Arbitration (lCA). Name and rules of procedure of the arbitral body to which dispute is to be referred.as well as experts) are examined and cross-examined.Arbitration procedure is simpler and much quicker than litigation. judges and lawyers are not well-versed with the practices and procedures of the international trade. the matter is taken under submission. This means that the arbitrator will take some time to consider all of the evidence that has been presented.

and c. Therefore. Usually an arbitration case may be settled between four months to one year. b. and can be appealed only on limited grounds.If the parties to the export contract desire to settle all future’ disputes 11. Law for the Enforcement of Foreign Awards in India India is one of the parties to the 1927 Geneva and. 1923. However. and Enforcement) Act. These conventions include: a. these Conventions. arbitration preserves the privacy and trade secrets of the parties involved in the arbitration.The costs and expenses involved in arbitration are much less than in those involved in the litigation. sometimes a party against whom the decision is made. d. the parties choose an arbitrator having knowledge and experience in the line of trade to which the dispute relates. Arbitration. g. 1937. However.1 . Inclusion of Future Dispute Clause: . does not either comply with or delays compliance with the award. The new Act has strengthened and clarified the provisions relating to international commercial arbitration. Disadvantages of arbitration 1. couples with a less-confrontational discovery process minimizes and allows the parties to quickly get on with their lives. arbitration can take place either in the exporter’s or importer’s . More frequent utilization: Employees can more easily challenge personnel decisions. the other incidental expenses are rather moderate and low. The Arbitration Act. it is always advisable to specify in the export contract as to which laws the contract is subject to in case a dispute arises in future. Prior to 1996. difficulties may arise when an award is to be enforced in country other than where it is’ given. Besides. e. The Arbitration (Protocol and Convention) Act. 1940.arbitrators have to make the award within four months from the date of entering on the reference. b. which are parties to any of the international conventions relating to the enforcement of foreign awards. This helps in avoiding unnecessary delay caused due to lack of knowledge on the part of judges. 1996 has repealed the earlier Acts. which is just 2 percent of the claim value or even less in institutional. European Convention on International Commercial Arbitration. 1961. c. which do not adhere to either the 1937 or the 1961 Convention or other similar international regulations. Sound and Cogent Decision: . viz.Arbitration hearing takes place in very friendly and cordial atmosphere and thereby promotes friendly trade relations between the parties. This is because there exists a wide disparity and complexity in the laws and procedures of different countries in respect of enforcement of such awards. However. b. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The Arbitration Act laid down the framework within which domestic arbitration was carried in India while the ‘other two Acts dealt with foreign awards.country. 1958. Procedure for Arbitration a. Confidentiality: Unlike court cases. 1927. But. enforcement of arbitral awards in countries. as a tradeoff to the far greater cost savings which arbitration offers. is somewhat difficult. To overcome this problem. Privacy: . However. employers should accept the possibility of increased challenges. several multilateral international conventions have been organised for attaining uniformity and certainty in the enforcement of arbitral awards in different countries. Limited appeal rights: By law. Arbitration fee. the 1958 New York Convention. arbitrators’ decisions are meant to be final. Geneva Protocol on Arbitration Clauses. Apart from the. India has enacted the Arbitration (Protocol and Convention) Act. 1961. arbitral awards are also enforceable under bilateral treaties between different countries. f. Releasing these difficulties. The case will not be tried in the newspaper. As a commitment to the provisions of these conferences. In this case. Geneva Convention of the Execution of Foreign Arbitral Awards. Enforcement of Indian Awards in Foreign Countries Similarly. Promotes Goodwill: . a.. New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Depending upon the export contract.In arbitration. Therefore. respectively. 1961. Inexpensiveness: . statutory provisions on arbitration were contained in three different enactments. a number of countries have provided for legal remedies for the enforcement of awards rendered therein. The Foreign Awards (Recognition. The arbitrator is a person chosen by the parties themselves on the basis of their faith and confidence in him. arbitration becomes international when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. Enforcement of International Arbitration In the case of international transactions.675. 1937 and the Foreign Awards (Recognition and Enforcement) Act. 2. awards made in India are also enforceable in foreign countries. the law applicable to an arbitration proceeding depends upon the terms and conditions of the export contract and the rules of conflict of laws. giving effect to the two Conventions. Reducing the Psychological Costs of Litigation: The speed of arbitration and the informality of the process. c. and d.Arbitration proceedings are not open to public and arbitrators’ decisions are not published in law reports like the court decisions. h. Quality of the Decision: Arbitrators knowledgeable in employment law may render more rational and predictable decisions that juries which may be swayed by emotion. arbitration proceedings are not public. The whole 66 philosophy behind the system of arbitration for settling commercial disputes is that the awards should be voluntarily honoured by the parties concerned. the Arbitration and Conciliation Act.

” Either depostions and interrogatories will be restricted or else there may be none.1 . and appeals. supply of sub-standard goods. Initiation of Arbitration: .The whale philosophy and. 3. 2. With this objective in mind. Advantages of Arbitration over Litigation 1. The majority of complaints from foreign buyers are with regard to qual-ity. spirit behind the system of arbitration far settling commercial disputes are that the awards are voluntarily complied with by the parties concerned. It is final. 4. Original (or duly certified copies) of such documents and information relevant to the case.When the Bench of arbitrators signs the award. Arbitration is not appealable. Udyog Bhawan. Other complaints are usually for unethical commercial dealings on the part of Indian exporters and can be categorized as non-supply of goods after confirmation of the orders. the parties by registered past provided the’ arbitration Costs have been fully paid. Ministry of Commerce. strangers and news media will not be allowed in court. Enforcement action in the office of Director General of Foreign Trade against erring exporters can be taken under the existing rules & regulations depending on the offence as follows:Non-payment of commission. The appointment of arbitrator is made in accordance with the Council’s Rules.. in addition to. But. the parties to. Arbitration can be set in two to three weeks or.relating to the contract through arbitration.Arbitrators are not known for awarding huge amounts for punitive damages. the arbitration about the amount of fees and charges payable in respect of the arbitration and the award declared. 5.Arbitration can be done with or without lawyers — your choice. b. pain and suffering and other non-economic damages. does not either 11. mental anguish. cases pertaining to a period on or after. two to three months instead of two to three years for a trial setting. Litigation costs in arbitration are substantially less than in court. usually written. There is little or no “discovery. If the export contract does not provide for an arbitration clause then the parties to the contract later by an agreement. Enforcement of Awards: . consideration the previsions of the export contract. be f1leq before the court. d. new trials. the court fees. fees is determined by the ‘Bench’ on the basis of the amount of suit and the time spent an the case. f. The work relating to dealing such complaints oi foreign buyers has been centralised with the ‘Nodal Officer’ and its assist-ing cell viz. the Secretary gives a notice in writing to. non-adher-ence to the delivery schedule etc.The arbitration proceedings are held at such places) in India or abroad as the bench may determine taking into. c. amount to breach of contract for which action can be taken under clause 7 of the Export(Control) Order. shall pay the prescribed fee to. g.The party desirous to ‘apply for arbitration should make an application to the Secretary along with prescribed registration fees and the following details: • • • comply with or delays compliance with the award. This applies to the cases pertaining to a period prior to 19-06-1992. sometimes a party against wham the decision is made. Deciding the Venue: . The Panel includes qualified and experienced parsons from various lines of trade and the legal profession. non-payment of agreed commission. 7. by which the Central Government or Director General of Foreign Trade or an authorised officer may debar an exporter from export-ing any goods if he commits a willful breach of contract. In arbitration. New Delhi. 6. To.675. Arbitration is private. 19-6-1992 enforcement action is taken in terms to Foreign 67 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The names and addresses of the parties to the disputes. indulgence in unethical commercial dealings. an enduring relationship with foreign buyers is of the utmost importance. the Secretary constitutes a Bench far the adjudication of the’ dispute or difference. addition.The fees and expenses incidental to the ‘arbitration procedure and the award’ include: • • • Registration fee Administrative fee and Arbitrator’s fee The registration fee is fixed while the amount of other two. Guidelines for Settlement of Ttrade Dispute Exporters should project a good image of the country abroad to promote exports. It also’ includes persons of various foreign nationalities. non-adher-ence of delivery schedules. In. Declaration of Awards: . the Indian Council o f Arbitration (ICA). Fees and Expenses: . traveling expenses incurred by the arbitrator or the Secretary and applicable stamp duty is also included in the total cost. The Secretary sends a true’ copy o f the ward to. or appeals. should be settled as soon as possible. overcame this problem. whenever they arise. Action against Erring Exporters A. which wishes the award to. Court is public. submit a controversy to one or more arbitrators for ‘arbitration. new trials. the Trade Disputes Cell in the office of the Director General of Foreign Trades. Full details of the applicant’s case. Arbitration generally has no rehearings. and trade disputes. Post-trial proceedings can take longer and cost more than the original trial. then the same can be done by inclusion of ‘Future Dispute Clause’ in the export contract. Court cases are always subject to rehearings. However.. Constitution of Bench: On receipt of the application. “ e. a number of countries have provided far legal remedies far the enforcement of awards rendered therein. at most. The party. This is called a ‘Submission Agreement’. The Bench consists of o ne or three arbitrators selected form a ‘Panel of Arbitrators’ maintained by’ the Council.

. suppression of facts or misrepresentation and where the licen-see has contravened any law relating to Custom or Foreign Trade or the Rules & Regulations relating thereto....6 of the Export-Import Policy AM 1997-2002 empowers the Director General of Foreign Trade to take action against an exporter........ Wet the above named parties have entered into this contract for the sale/purchase etc .. Specimen Contract Form for Sale. Rule 11 of the Foreign Trade (Regulation) Rules.. b) Price .] 11..675..... Facilities of Arbitration The following institutions provide the facilities of arbitration.. (2) to the interests of other persons engaged in exports or imports and (3) has brought disrepute to the credit or the goods of the country... 1/ Council House Street Calcutta....] c) Shipment ......... Export Promotion Councils. Sector 9(4) empowers the Director General of Foreign Trade or the of-ficer authorised by him to grant licence....e. It is also desirable to mention the exchange rate......... corrupt or fraudulent practice Adequate opportunity is to be provided to the exporter to explain his stand before resorting to penal action by way of issuance of Show Cause Notice. d... quality and description of export goods to the best of his knowledge and belief and to certify that the quality and specification of the goods are in accordance with the terms of the export contract and has also to subscribe a declaration at the foot of such a document that the statements made by him are true. c. (state correct name and complete address of the parties). as per rules B. 1992 and Rules framed there under namely: a.... subject to the following terms and conditions: a) Goods . 1993 lays down the conditions for such cancellation under Section 9(4) of the said Act...... may also take appropriate necessary action and view on the application furnished by the exporters for registration if.......... 1992. to suspend or cancel any licence granted under the Act... 3. 1962...... has made an export in a manner gravely prejudicial to (1) trade relations of India with any foreign country.... Tansen Marg. Certain export products have been notified for Compulsory Quality Control & Pre-shipment Inspection prior to their export....e... the Rules & Orders made there under........ Rule 10 of the Foreign Trade (Regulation) Rules. Export and Imports 1.. e... the Registering Authorities viz.... An agency for inspection/ certification of quality and/ or quantity may also be stipulated.Trade(Development & Regulation) Act.... Indo-German Chamber of Commerce ‘Himalaya House’ Kasturba Gandhi Marg New Delhi. Port of shipment and of delivery should be mentioned.... Purchase Transactions.. where the Director General of Foreign Trade has inter alia reason to believe (a) that the exporter has committed an economic offence as a specified by the Government or b..... 1..... (date) at . Name and Address of the parties . [Specify date and delivery and maximum period upto which deliv-ery could be delayed and for which reasons..... freight) etc.. The Director General of Foreign Trade has powers under Section 5 of the Foreign Trade (De-velopment & Regulation) Act. Paragraph 14. 1963 as amended in 1984.... against exporters who do not conform to the standards and or provisions of Act as laid down for such products.................... (state briefly the purpose of the contract) on this . New Delhi 110001 2..... Section 11(2) of the Act provides for imposition of fiscal penalty in cases where a person makes or abets or attempts to make any import or export in contravention of any provisions of the Act. Quantity [describe the quan-tity/ quality and other specifications of the goods precisely as per agreement... (place). to direct any Registering Authority to register or deregister an exporter or otherwise issue such directions to them consistent with and in order to implement the provisions of the Act. f......... Mode of Payment ..... terms.. 1993 requires an exporter to state in the shipping bills or any other documents prescribed under the Customs Act.. there are reasons to believe that he has indulged i any form of unfair. Besides..... [Quote the price..... A list of other organisations can be obtained from the ICA. Penal action can be taken under the Export (Quality Control & Inspection) Act.. any Rules or Orders made there under or the Export-Import Policy.. the Policy or the Handbook..... personal hearing etc.. FOB (free on board)/CFR (Cost and Freight/CIF (Cost insurance... prima facie. payment against L/C(letter of credit)/DA(document against acceptance)/DP (Document againstPayment) etc... 2.1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 68 . if it comes to his notice or he has reason to believe... Section 8 empowers the Director General of Foreign Trade to suspend or cancel the Importer Exporter Code Number which is a prerequisite for any export or import..... Directorate General of Commercial Intelligence & Statistics. i. That any per-son has made an export import in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interests of other persons engaged in imports or exports or has brought disrepute to the credit or the goods of the country...... Commodity Boards etc. the value. in the currency agreed upon and describe the mode of payment i.. The Indian Council of Arbitration Federation House.... This includes cases where the licence has been obtained by fraud.

.. when the goods are delivered at the seller’s place of work/pass the ship’s rails/ are covered by insurance etc. may also be specified.. 62340”. 2000 Place of Expiry: India Gentleme EXPOR T IMPORT PROCEDURE AND DOCUMENTATION We hereby open our irrevocable Documentary credit in your favour available by your draft(s) at sight drawn on ourselves for 100% of invoice value bearing the bearing the clause..00. [requirement to be specified precisely. Any other special condition. ‘meaning 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”.00 USD Fifteen Thousand US Dollars Date of Expiry: January 22. Signed commercial invoices in original and 05 copies.... 3. 2. Annexure I: Specimen of Letter of Credit Republic National Bank of New York INTL DET Renaissance Center Letter of Credit Division DLI Nvilleavenue...02 Copies Goods Description: Ladies Coordinate Dress(as per approved sample)... (or any other arbitration clause that may be agreed upon between the parties).. Commercial visa .. “drawn under Republic National Bank of New York credit no. Quantity: 300 Suits Prices: USD50 per suit CFR. The amount of each draft negotiated. Your draft must be accompanied by the following documents: 1.e.. E-UNIT NO. 11.d) Packaging and mar king. 5.... must be endorsed on the reverse of this credit by the negotiating bank.. g) [The property or ownership of the goods and the risk shall finally .000. Unless otherwise specified. etc. India Partial Shipment ... India 110019 Amount: 15. all charges other than ours are for the account of credit number of Issuing Bank: 62340 A special handling charge of a minimum of USD 40. in addition to telecommu-nication charges.. pass on to the buyer at such stage as the parties may agree... Newyork.....N.. 3.675. We hereby agree with you and negotiating banks or bankers that drafts drawn under and in compliance with the terms of this credit will be duly honored upon presen-tationand delivery of the documents as specified to the drawee... Okhla Industrial Area New Delhi. New York Shipment From: New Delhi... We suggest negotiating bank forward to us all documents in one mailing. i. State also the party responsible for the insurance].. if so desired by the beneficiary... 10467 SWIFT: MNBD US 33 Fax: (313)222-9115 MC 2140 New York 10467 M.. prevalent in or relevant to the particular line of trade or transaction.... will be deducted from the proceeds of each set of documents presented for payment or negotiation if such documents contain discrepancies and we are required to contact our customer for approval of payment and! or to communicate with the correspondent bank effecting negotiation. if any.1 69 ... Exporters E-120. Passing of the property in goods and of risk. with date of negotiation... 4... i... [state the type of insurance cover required. f) Brokerage/Commission ... Max Avenue Bronx..600~0103-001. [If any payable may be mentioned]. H Block Connaught Circus New Delhi..... Documents must be presented within 005 days after the date of issuance of the transport document(s) but within the validity of the’ credit.... FP A(free from particular average)/WA (with average)/ All Risks.. NY 10467 Advising Bank: ANZ Grindla YS Bank International Dept. Airways bills consigned to us and marked” freight prepaid”. 1324......: Not Allowed Transportation to: New York Additional Conditions We are advised insurance will be covered bybuyer.. as per agreed terms..1999 Credit Number of Issuing Bank: 62340 Applicant: Pra Veena Stores Inc..] Arbitration Arbitration clause recommended by the Indian Council of Arbitration: “All disputes of differences whatsoever arising between the parties out of or relating to the construction.] e) Insurance . India Beneficiary: We request you to notify the credit to the beneficiary after adding your confirmation...... Bank of Bank Instructions Transhipment: Not Allowed Confirmation of our telecommunication Irrevocable Documentary Credit /Transferable Dateofissue:November27...e. GSP Certificate of Origin (Form A) 01 Copy.. Packing list in 06 copies...

Can the shipment be sent as per the expiry date? Can the following functions be • • • • • • • Performed well in time to meet the expiry date? Production and packing Inspection. Is the value of the Letter of Credit correct? Is it equal to the amount of the export order? Does it cover any extra-agreed costs. Why is the arbitration a superior method of settling international disputes? What machinery is available far the enforcement of arbitral awards? Explain the procedure far arbitration. Q6. Are the goods described accurately enough to identify them properly and are the quantities and other units correct ? 13.675.This credit is subject to the uniform custom and practices for documentary credits (1993 revision). Are the terms of delivery the same as quoted (e. Are partial shipments allowed? 8. Annexure 2: Guidelines for Scrutiny of Letter of Credit The exporter should examine the letter of credit in all its aspects to ensure that its terms and conditions are acceptable.What kind of insurance cover is required to cover the specific risks? Can the insur-ance cover be obtained? 15. CIF) in the offer? And do they and the price match properly? 5. Presenting them to the bank. Define. such as freight or inspection fees? 4. Q2. Can the transport document required in the letter of credit be obtained? 70 11. Can the documents as specifies in the letter of credit be presented within the time mentioned in the Letter of Credit? It should be remembered that the maximum time limit for presentation of shipping documents is 21 days from the date of issuance of the transport documents under the exchange control regulations in force in India. FOB. Q4. Settlement procedure under Deferred payment iii. Are the names and addresses of the exporter’s firm and importer’s firm correctly spelt? 7. Is the price of the product(s) same as agreed? 6. Why is it considered to. Is it payable when and where as desired? • At sight. Letter of Credit.Are there any contradictions in the letter of credit such as requiring bill of lading for airfreight? EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Question Bank Q1. or • • • 14. 10. At a later date. Is the letter of credit of the type desired by the exporter? 2.Can the documents called for in the letter of credit be obtained in time? It should be noted that some documents such as inspection certificate or the consular invoice may take some time to arrange. International Chamber of Commerce. What are the different types of letter of credit? Explain them. Q5. Red Clause Letter of credit.1 . The various reference points to check the letter of credit are as follows: 1. if required Shipment Chamber of Commerce and/ or Consular work Obtaining the inspection certificate Assembling and checking documents. Doctrine of strict compliance. 16.500. In India with little or no delay or Abroad 3. Q7. Revolving Letter of Credit v. 11. then it can be exported only against the export license? Would it be possible to obtain the license? 12. Usance Letter of credit iv.g. Publication No. ii. be the safest method of settling international transactions? Explain the procedure far opening a letter of credit. Q3. Is the item of export a restricted item? If so. Is transhipment allowed? 9. Write notes on:i.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 11: LAW RELATING TO SETTLEMENT OF INTERNATIONAL TRADE DISPUTES • • • Introduction industrial dispute in india Settlement of international trade Disputes Litigation Arbitration Enforcement of International Arbitration • Procedure for arbitration Introduction Written orders rather than based on verbal orders conveyed personally by the importer. Increasing trend of mandays lost. But the two most prominent forms of protest are strikes and lockouts. 4. The share of lock-outs for the years 1985811i 1987 was 65 per cent and 60 per cent respectively of the total mandays lost. 2. therefore. gheraos. the share of lock -outs in total 71 Industrial Disputes in India There are conflicts between employers and workers. For example dispute may be the result of the following: 1. From the side of the workers. It jumped to 138 lakh mandays in 1966 and further to 206 lakh mandays in 1970. the total number of mandays lost during 1977 was 2531akhs. commercial practices etc There is a need to reduce to the minimum the incidence of disputes. How to settle the disputes? lost in industrial disputes. These conflicts take various forms of protest. As against a loss of 127 lakh mandays during 1976.slow. and (d) more frequent use of lock-outs I the employers to punish the workers emboldened by e New Economic Policy since 1984 in favour of private sector. demonstrations etc.1 . This. tension is created between the employers and the employees. Disputes arise due to the breach of contract either by exporter or importer. dismissals. these disputes take the form of retrenchment. The total time loss due to strikes and lock-outs during 1110 was 219 lakh mandays. there is a marked increase in the number of mandays lost due to lock-outs. Difference due to language problems. ii. This results in loss of production and decline in national income. a copy of the same is given at the end. etc. The situation slightly improved during 1978 but deteriorated further in 1979 and nearly 439 lakh mandays were lost during 1979. Difference in the interpretation of quality standards. Non-supply or short supply or delayed supply of goods. As against a total loss of 38 lakh mandays in 1951. The rival factions tried eke out concessions from the Governments which were either unstable or on their way out. lockouts.. essential to know the nature and trends of industrial disputes. with the lifting of the emergency. but also the image of the country.the trend of mandays lost due 10 strikes and lockouts during fifties and sixties. Obviously. The mandays lost due to Bombay textile strike are estimated be 548 lakhs-414 lakhs during 1982 and 1341akhs during 1983. With the declaration of emergency in 1975. the factors responsible for their occurrence and the methods used to remove them. 6. It is.675. go. 5. this trend had started since 1971. here i~ a need to probe the factors leading to strikes and lock-outs. This is a serious matter and should be probed in greater depth because this reverses . the employers too started flexing their muscles. If the incidence of disputes is heavy. particularly since 1976. a record of 4021akh mandays were lost. The number of mandays lost during 1982 (including those due to Bombay Textile Strike) was 748 lakhs. Rise In the share of lock-outs In Manday lost it would be of interest to study the relative share of strikes and lockouts in industrial disputes. The written export orders/ agreements/contracts form the basis of exports business. 3. Trends in Industrial Disputes and their Nature A close perusal of the table 3 reveals the following: i. It stood at 366 lakh mandays during 1981. labour urnest again manifested itself. it not only spoils the name and trade prospects of the exporter concerned. From the side of employers. Strikes accounted for 58 per cent of the . However. Non-payment of discounts and commissions by the seller. In other words. One of the ways to minimise trade disputes is to use standard contract forms. Indian Council of Arbitration has evolved the contact form. It appeared as if the trade unions were on the war path. Whether a strike is a success or a failure. Inspite of written agreement and all the precautions taken. the forms of protest are strikes.a time loss during 1981 and lock-outs accounted for 42 per cent. (c) growing indiscipline Dong the workers on account of irresponsible trade lion leadership. There has been a growing trend in terms of workers involved and mandays 11. In fact. the fear of MIS A (Maintenance of Internal Security Act) and DIR (Defence ofIndia Rules) were responsible for the reduction in industrial disputes. political instability in the country had its impact on the attitude of trade union leadership. Difference in interpretation of the clauses in the agreement. soon after the installation of the Congress (I) government in 1980. The main factors responsible for the spreading of industrial unrest are: (a) the discredited trade union leadership who lost their image during emergency as champions of . in turn. Non-remittance of sale proceeds by the buyer.labour were out to build their image through strikes. The position deteriorated further during 1973-74 on account of a rapid rise in prices and during 1974. However. forms the basis of disputes between the parties to a trade transaction. the loss was of the order of about 70 lakh mandays in 1956. disputes do arise.

However. Many permanent arbitration institutes (e. but the involvement of workers in lock-outs on the average was for a period of 53 days. litigation and arbitration . China International Economic and Trade Arbitration Commission. but two are the well recognized methods for settlement of dispute. In 1951. disputes are inevitable in international trade. has a number of advantages. In case the conciliation efforts fail the matter can be settled through arbitration-. as a way of dispute settlement. whenever they tried to raise their head against exploitation. Mediation Mediation is a process where the parties involved in a dispute resolve their dispute with the assistance of a third party (the Mediator). Although some arbitration institutes may not have particular mediation rules.675. The same situation prevailed in 1994. mediation requires less cost and is a simpler process. This clearly points out to the fact that State gave unbridled power to the business and industrial magnates to punish the workers. 2. Since lock-out is a form of punishment : the capitalists inflict on the workers. New Delhi has also been endeavoring to conciliate in a large number of complaints from foreign importers and vice versa. The advantage of mediation is that.mandays :t has been on the increase. if one party withdraws from the agreement. Even during 1998 and 1999. the average life of the lockouts has shown a continuously growing trend. 3. conciliation often fails to reach a mutually satisfactory solution. Conciliation Mediation Litigation 1. The Mediator is mostly a permanent arbitration institute. the share of lockouts in total mandays lost was 58 per cent and 60 per cent respectively. By 1961. 1. : loss of mandays due to lockouts was’ of the order of percent in 1989. Indian exporter can approach Indian Government Trade Representative abroad for settlement of the dispute through conciliation. Similar to conciliation. during 1976. lockouts accounted for 66% of mandays lost. of the Ministry of Commerce in case they have any complaint against the Indian Exporter and want settlement of the dispute through conciliation. From a low figure of II mandays in 1961. 3. The relatively high share of lock-outs in mandays lost suggests that whereas the State has been emphasizing measures for settlement of industrial disputes holding labour responsible for strikes.78 percent of the man-days t was through lock-outs. There are a number of alternative ways to settle a dispute in international transactions. the agreement reached through conciliation lacks the legal binding effect upon the parties and therefore. there is a strong need to make an analysis of the phenomenon of lock-outs so as to control their repeated use against the working class. However in practice. i. This figure further shot up to 107 and 92 days in 1989. but in 1971 this had changed to 8 days and 34 days respectively.e. the proportion of disputes settled through conciliation is relatively small in international trade. There are Four ways of settling a dispute. man-days lost was through lock-outs. new dispute may likely arise. oppression and misery. This is done by persuading the importer directly or through Government authorities or local chamber of commerce to agree for amicable settlement. saving on the cost and the possibility of maintaining the cooperative relationship among the parties involved. when lock-outs accounted for 68 per cent of total mandays lost.1 . the process of reaching an agreement among the parties will be accelerated. this risen to 40 per cent and by 1971 it rose up to 47 perent. If it is not settled by agreement between the parties it would eventually be heard and decided by a judge or jury in a court. In the meantime. Mandays lost due to lock-outs were 78 per cent of total mandays lost during 1976-a record achievement against working class. Litigation is not suitable for settlement of trade disputes as it is beset with inordinate delays. The authoritarian forces m e to ruthlessly muzzle the voice of the working class. due to the participation of the third party. Arbitration 11. 2. In comparison with litigation and arbitration. Indian Council of Arbitration. The culmination of this trend was witnessed during the emergency. it would be of interest to study the average number of days a worker was involved in a strike or a lock-out. As a consequence. Even during 1997. the stipulation of the agreement will have a legal binding effect upon all the parties involved. high costs and uncertainty of the final decision. it does not mean they will exclude mediation from being applied as a form of dispute settlement. Litigation A controversy before a court or a “lawsuit” is commonly referred to as “litigation”.g. if the arbitration body makes an award in accordance with the mediation agreement reached by the parties. the average number of days a worker was involved in strike was 5 days. During 1961 the average number of I a worker was involved in strikes and lock-outs was lays and 11 days respectively. Furthermore. The importers can approach the Directorate General of Commercial Intelli-gence & Statistics. Calcutta. the average life of the lockout went up to 53 in 1976. A trend analysis from 1961 to 1981 reveals that where as average life of the strike has remained between 8 113 days. Litigation is one way that people and companies resolve disputes arising out of an infinite variety of EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 72 4. Conciliation refers to a process where parties resolve their dispute by direct negotiation on a voluntary basis without the assistance of a third party. International Chamber of Commerce) have their mediation rules or include the rules of meditation in their arbitration rules. Conciliation. Settlement of Industrial Dispute Similar to domestic trade. mediation is based on the respect for the free will of the parties and an informal negotiating atmosphere. including a simple procedure.Conciliation Amicable settlement of disputes through the good offices of an impartial third party is termed as conciliation. only 26 percent of . During 1976.

At the arbitration hearing. Bitterness and Disruption of Trade Relationship :Acrimony and bitterness usually accompany litigation and irrespective of which party wins. Litigation is most often used as the final remedy after all other collection efforts have failed. On the other hand. the arbitrator will contact all parties. when all witnesses must be disclosed. c.e.1 . an agreement can be reached to resolve the matter through arbitration. the matter is taken under submission. NRC’s Tandem Program offers full follow through to litigation forwarding. Once the matter has been submitted to the arbitrator (and when each side has paid his/her respective share of the arbitrator’s fee). Basic Steps are involved in Arbitration After all parties have been informed of the controversy. but the technical rules of procedure followed by a court do not apply. Lengthy and Time Consuming :. or “mediation” which is a type of structured meeting with the parties and an independent third party who works to help them fashion an agreement among themselves. Inconvenience to the Parties :. and where and when the hearing will be conducted. 73 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11. longer the time higher is the cost and other expenditure. Future disputes clause provides for reference of the dispute for arbitration by the agreed agency. and arranged in two ways.and’ formalistic. b. but are usually waived since arbitration briefs have been submitted. when arbitration briefs (written statements covering the facts and the law of the given controversy) are to be submitted. Requires Concrete Evidences :. The parties decide whether the arbitration will be binding or non-binding and then select the arbitrator. the prevailing party often has the ability to have it issued as an enforceable order of a court of law. i.as well as experts) are examined and cross-examined. d. This may cause litigants to expose their internal and private affairs and trade secrets and the reputation of the organisation may be affected adversely. Closing arguments may be presented. and d. Usually the arbitrator is selected from a panel or list of available arbitrators. A schedule will be set. At the same time.Arbitration According to Indian Council of Arbitration (lCA). It takes years for settlement o f a dispute in a court of law. Court process is generally very slow. such trade practices and procedures have to be proved before the court by expert witnesses having knowledge and experience in the field. The arbitration clause-Future Disputes Clause-must provide for:a. b.Since the litigation procedure is lengthy and time consuming. The venue of arbitration and the number of arbitrators who would hear and decide the dispute. In an arbitration. Once all evidence has been submitted to the arbitrator. to one or more arbitrators. In advance of the arbitration. many times it results into a breach or disruption of the long standing trade relationships between the parties. when warranted. which includes when all documents must be exchanged. “submission agreement” refers to the agreement between the parties usually. Opening statements can be presented. witnesses are placed under oath and written evidence is submitted. Documents and other evidence are submitted. time-consuming . Also the study of court process. e. Future Disputes clause is an insurance of a quick and just settlement of possible future dispute.” After the arbitrator’s award has been issued. After carefully review. Different Laws and Procedures :. Adverse Public Image:. the time. Cases that are arbitrated are generally resolved faster than conventional lawsuits because there is less bureaucracy and court congestion is not a problem. each of the respective parties is allowed to present his/her evidence concerning the controversy. The term “litigation” is sometimes to distinguish lawsuits from “alternate dispute resolution” methods such as “arbitration” in which a private arbitrator would make the decision. Therefore. Arbitration is the reference of a dispute to one or more independent third person(s) who act(s) as judge and jury.. Witnesses (both percipient -those who saw and heard . 4. either through “future disputes clause” or “submission agreement”. Definition of Litigation A dispute is in “litigation” ( or being “litigated”) when it has become the subject of a formal court action or law suit. The nature of questions/matters to be referred to arbitration.International trade transactions involve parties from different foreign countries whose laws and procedures are not same~ International trade laws and procedures are rather complicated. written. f. the parties agree to be bound by the arbitrator’s decision. Using legal action to recover a debt. At the same time. place and date of hearings in a court of law may not be convenient to parties to litigation. An unequivocal statement as to the finality and binding nature of the award given by the arbitral body. arbitration is the voluntary submission of a dispute to one or more impartial persons for final and binding determination.675. c. Name and rules of procedure of the arbitral body to which dispute is to be referred.Generally. Arbitration bas certain advantages over litigation.The court proceedings are open to the public and judgments of higher courts are also published. It is a substitute for court proceedings. Litigation is at NRC’s option and may not be a cost-effective solution on low-balance accounts Basic Limitations of Litigation a. to submit the dispute after it has arisen. Due to above limitations arbitration is preferred to litigation as a method of dispute settlement at the international level. it causes inconvenience to the litigants and disturbs their mental peace. judges and lawyers are not well-versed with the practices and procedures of the international trade.factual circumstances. the arbitrator will make an “arbitrator’s award. both civil and criminal. This means that the arbitrator will take some time to consider all of the evidence that has been presented.

To overcome this problem. the arbitrators have to make the award within four months from the date of entering on the reference. However. Law for the Enforcement of Foreign Awards in India India is one of the parties to the 1927 Geneva and. But. Depending upon the export contract. This is because there exists a wide disparity and complexity in the laws and procedures of different countries in respect of enforcement of such awards. b. The Arbitration Act. European Convention on International Commercial Arbitration. India has enacted the Arbitration (Protocol and Convention) Act. 2. Releasing these difficulties.In arbitration. Inexpensiveness: . viz. a number of countries have provided for legal remedies for the enforcement of awards rendered therein. In this case. 1937 and the Foreign Awards (Recognition and Enforcement) Act. Arbitration. More frequent utilization: Employees can more easily challenge personnel decisions. sometimes a party against whom the decision is made. difficulties may arise when an award is to be enforced in country other than where it is’ given. 1958. which is just 2 percent of the claim value or even less in institutional. Therefore. Prior to 1996. The Arbitration (Protocol and Convention) Act.The costs and expenses involved in arbitration are much less than in those involved in the litigation. giving effect to the two Conventions. Reducing the Psychological Costs of Litigation: The speed of arbitration and the informality of the process.. Apart from the. and d. does not either comply with or delays compliance with the award. several multilateral international conventions have been organised for attaining uniformity and certainty in the enforcement of arbitral awards in different countries. statutory provisions on arbitration were contained in three different enactments. Privacy: . c. h. Limited appeal rights: By law. arbitration becomes international when at least one of the parties involved is resident or domiciled outside India or the subject matter of the dispute is abroad. and Enforcement) Act. This helps in avoiding unnecessary delay caused due to lack of knowledge on the part of judges.Arbitration hearing takes place in very friendly and cordial atmosphere and thereby promotes friendly trade relations between the parties. The case will not be tried in the newspaper. The Arbitration Act laid down the framework within which domestic arbitration was carried in India while the ‘other two Acts dealt with foreign awards. c. the Arbitration and Conciliation Act. 1996 has repealed the earlier Acts. 1961. f. it is always advisable to specify in the export contract as to which laws the contract is subject to in case a dispute arises in future. e. The arbitrator is a person chosen by the parties themselves on the basis of their faith and confidence in him. Sound and Cogent Decision: . couples with a less-confrontational discovery process minimizes and allows the parties to quickly get on with their lives. New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards. 1923. 1940. The whole philosophy behind the system of arbitration for settling commercial disputes is that the awards should be voluntarily honoured by the parties concerned. “All matters of dispute or differences whatsoever arising between the parties out of business transaction or relating to the construction. a. respectively. Therefore. 1961. The new Act 11. meaning and operation or effect of this contract or breach thereof shall be settled by arbitration in accordance with Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties” Basic Advantages of Arbitration a.Model Arbitration Clause The Indian Council of Arbitration has suggested the following clause for insertion in the agreement. Disadvantages of arbitration accept the possibility of increased challenges. However. and c. the law applicable to an arbitration proceeding depends upon the terms and conditions of the export contract and the rules of conflict of laws. b.Arbitration proceedings are not open to public and arbitrators’ decisions are not published in law reports like the court decisions. These conventions include:a. Geneva Convention of the Execution of Foreign Arbitral Awards. 1927.Arbitration procedure is simpler and much quicker than litigation. arbitration proceedings are not public. g. As a commitment to the provisions of these conferences. as a tradeoff to the far greater cost savings which arbitration offers.1 1. The Foreign Awards (Recognition. b. Quality of the Decision: Arbitrators knowledgeable in employment law may render more rational and predictable decisions that juries which may be swayed by emotion. arbitrators’ decisions are meant to be final. Confidentiality: Unlike court cases. arbitration can take place either in the exporter’s or importer’s . the parties choose an arbitrator having knowledge and experience in the line of trade to which the dispute relates. Promotes Goodwill: . Quickness: . 1961. these Conventions. arbitral awards are also enforceable under bilateral treaties between different countries. Under the Arbitration Act. the 1958 New York Convention.country. Geneva Protocol on Arbitration Clauses.675. the other incidental expenses are rather moderate and low. employers should 74 . and can be appealed only on limited grounds. d. Besides. However. Usually an arbitration case may be settled between four months to one year. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Enforcement of international arbitration In the case of international transactions. arbitration preserves the privacy and trade secrets of the parties involved in the arbitration. 1937. Arbitration fee.

There is little or no “discovery. fees is determined by the ‘Bench’ on the basis of the amount of suit and the time spent an the case.The arbitration proceedings are held at such places) in India or abroad as the bench may determine taking into. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Procedure for Arbitration a. mental anguish. Initiation of Arbitration: . Enforcement of Awards: . d. the Indian Council of Arbitration (ICA).675. Posttrial proceedings can take longer and cost more than the original trial. The Panel includes qualified and experienced parsons from various lines of trade and the legal profession. Litigation costs in arbitration are substantially less than in court. Full details of the applicant’s case. However. two to three months instead of two to three years for a trial setting. does not either comply with or delays compliance with the award. In arbitration. In. Fees and Expenses: . Arbitration is not appealable. usually written.The party desirous to ‘apply for arbitration should make an application to the Secretary along with prescribed registration fees and the following details: • • • The names and addresses of the parties to the disputes. 4. With this objective in mind. an enduring relationship with foreign buyers is of the utmost importance. sometimes a party against wham the decision is made. and trade disputes. whenever they arise. But. strangers and news media will not be allowed in court. which wishes the award to. Udyog Bhawan. New Delhi. The Secretary sends a true’ copy of the ward to. addition. Court cases are always subject to rehearings. Arbitration is private. “ e. Constitution of Bench: On receipt of the application.The whale philosophy and. submit a controversy to one or more arbitrators for ‘arbitration. The Bench consists of o ne or three arbitrators selected form a ‘Panel of Arbitrators’ maintained by’ the Council. new trials. a number of countries have provided far legal remedies far the enforcement of awards rendered therein. spirit behind the system of arbitration far settling commercial disputes are that the awards are voluntarily complied with by the parties concerned. The majority of complaints from foreign buyers are with regard to qual-ity. which do not adhere to either the 1937 or the 1961 Convention or other similar international regulations. then the same can be done by inclusion of ‘Future Dispute Clause’ in the export contract. pain and suffering and other non-economic damages. at most.When the Bench of arbitrators signs the award. the Trade Disputes Cell in the office of the Director General of Foreign Trades. The party. the parties by registered past provided the’ arbitration Costs have been fully paid. Original (or duly certified copies) of such documents and information relevant to the case. Arbitration can be set in two to three weeks or. f. b. Arbitrators are not known for awarding huge amounts for punitive damages. 2. awards made in India are also enforceable in foreign countries. c. Other complaints are usually for unethical commercial dealings on the part of Indian exporters and can be categorized as non-supply of goods after confirmation of the orders. in addition to. traveling expenses incurred by the arbitrator or the Secretary and applicable stamp duty is also included in the total cost. 3. non-adher-ence to the delivery schedule etc.The fees and expenses incidental to the ‘arbitration procedure and the award’ include: • Registration fee • • Administrative fee and Arbitrator’s fee The registration fee is fixed while the amount of other two. Deciding the Venue: . the court fees.. new trials. This is called a ‘Submission Agreement’. consideration the previsions of the export contract.1 75 . g. 11. the arbitration about the amount of fees and charges payable in respect of the arbitration and the award declared. Ministry of Commerce.If the parties to the export contract desire to settle all future’ disputes relating to the contract through arbitration. Arbitration generally has no rehearings. overcame this problem. The appointment of arbitrator is made in accordance with the Council’s Rules. Inclusion of Future Dispute Clause: . be f1leq before the court. 5. Arbitration can be done with or without lawyers — your choice. or appeals. To. Court is public. the Secretary constitutes a Bench far the adjudication of the’ dispute or difference. which are parties to any of the international conventions relating to the enforcement of foreign awards. and appeals. It is final. 7. Declaration of Awards: . The work relating to dealing such complaints oi foreign buyers has been centralised with the ‘Nodal Officer’ and its assist-ing cell viz.has strengthened and clarified the provisions relating to international commercial arbitration. Enforcement of Indian Awards in Foreign Countries Similarly. the Guidelines for Settlement of Trade Dispute Exporters should project a good image of the country abroad to promote exports. is somewhat difficult. It also’ includes persons of various foreign nationalities. Advantages of Arbitration over Litigation 1. enforcement of arbitral awards in countries. should be settled as soon as possible. non-payment of agreed commission.” Either depositions and interrogatories will be restricted or else there may be none.. the Secretary gives a notice in writing to. parties to. shall pay the prescribed fee to. 6. If the export contract does not provide for an arbitration clause then the parties to the contract later by an agreement.

(state correct name and complete address of the parties).. any Rules or Orders made there under or the Export-Import Policy........ (2) to the interests of other persons engaged in exports or imports and (3) has brought disrepute to the credit or the goods of the country. Quantity [describe the quan-tity/ quality and other specifications of the goods precisely as per agreement.. Section 11(2) of the Act provides for imposition of fiscal penalty in cases where a person makes or abets or attempts to make any import or export in contravention of any provisions of the Act.. New Delhi 110001 2. An agency for EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11... Facilities of Arbitration The following institutions provide the facilities of arbitration.... Sector 9(4) empowers the Director General of Foreign Trade or the of-ficer authorised by him to grant licence. Purchase Transactions........ the value. (state briefly the purpose of the contract) on this . the Registering Authorities viz. The Director General of Foreign Trade has powers under Section 5 of the Foreign Trade (De-velopment & Regulation) Act........ there are reasons to believe that he has indulged i any form of unfair. A list of other organisations can be obtained from the ICA..... 1992. 2.. 1962. the Rules & Orders made there under... if it comes to his notice or he has reason to believe.. Besides..... 1/ Council House Street Calcutta.....6 of the Export-Import Policy AM 1997-2002 empowers the Director General of Foreign Trade to take action against an exporter.. by which the Central Government or Director General of Foreign Trade or an authorised officer may debar an exporter from export-ing any goods if he commits a willful breach of contract. 1993 requires an exporter to state in the shipping bills or any other documents prescribed under the Customs Act.. has made an export in a manner gravely prejudicial to (1) trade relations of India with any foreign 76 country. may also take appropriate necessary action and view on the application furnished by the exporters for registration if. This includes cases where the licence has been obtained by fraud. Tansen Marg. personal hearing etc. 3. e...... Rule 10 of the Foreign Trade (Regulation) Rules..... 19-6-1992 enforcement action is taken in terms to Foreign Trade(Development & Regulation) Act.. Commodity Boards etc.. 1993 lays down the conditions for such cancellation under Section 9(4) of the said Act...Action against erring exporters A..... corrupt or fraudulent practice Adequate opportunity is to be provided to the exporter to explain his stand before resorting to penal action by way of issuance of Show Cause Notice...... amount to breach of contract for which action can be taken under clause 7 of the Export(Control) Order... The Indian Council of Arbitration Federation House... Specimen Contract Form for Sale... against exporters who do not conform to the standards and or provisions of Act as laid down for such products. to suspend or cancel any licence granted under the Act... where the Director General of Foreign Trade has inter alia reason to believe (a) that the exporter has committed an economic offence as a specified by the Government or b. (place).. to direct any Registering Authority to register or deregister an exporter or otherwise issue such directions to them consistent with and in order to implement the provisions of the Act. Enforcement action in the office of Director General of Foreign Trade against erring exporters can be taken under the existing rules & regulations depending on the offence as follows:Non-payment of commission. as per rules B.. suppression of facts or misrepresentation and where the licen-see has contravened any law relating to Custom or Foreign Trade or the Rules & Regulations relating thereto. (date) at .1 .. c. Name and Address of the parties ... Penal action can be taken under the Export (Quality Control & Inspection) Act.675... indulgence in unethical commercial dealings. Certain export products have been notified for Compulsory Quality Control & Pre-shipment Inspection prior to their export. prima facie. However.. the Policy or the Handbook.. Section 8 empowers the Director General of Foreign Trade to suspend or cancel the Importer Exporter Code Number which is a prerequisite for any export or import.. 1992 and Rules framed there under namely: a. Export Promotion Councils... Rule 11 of the Foreign Trade (Regulation) Rules.. This applies to the cases pertaining to a period prior to 19-06-1992. d. Wet the above named parties have entered into this contract for the sale/purchase etc . quality and description of export goods to the best of his knowledge and belief and to certify that the quality and specification of the goods are in accordance with the terms of the export contract and has also to subscribe a declaration at the foot of such a document that the statements made by him are true. Export and Imports 1..... supply of sub-standard goods... That any per-son has made an export import in a manner gravely prejudicial to the trade relations of India with any foreign country or to the interests of other persons engaged in imports or exports or has brought disrepute to the credit or the goods of the country. non-adher-ence of delivery schedules... Directorate General of Commercial Intelligence & Statistics.. cases pertaining to a period on or after. Paragraph 14........ 1963 as amended in 1984. f. 1.. Indo-German Chamber of Commerce ‘Himalaya House’ Kasturba Gandhi Marg New Delhi. subject to the following terms and conditions: a) Goods .....

.... Brokerage/Commission . e.... (or any other arbitration clause that may be agreed upon between the parties).. f... [Specify date and delivery and maximum period upto which deliv-ery could be delayed and for which reasons..... [The property or ownership of the goods and the risk shall finally .... 11... prevalent in or relevant to the particular line of trade or transaction. What machinery is available far the enforcement of arbitral awards? Q3.... [Quote the price. b..... Question Bank Q1....e. It is also desirable to mention the exchange rate. Mode of Payment .....1 77 .... [state the type of insurance cover required.675........... i. [requirement to be specified precisely...e..e..... pass on to the buyer at such stage as the parties may agree........ [If any payable may be mentioned]. when the goods are delivered at the seller’s place of work/pass the ship’s rails/ are covered by insurance etc...........] EXPOR T IMPORT PROCEDURE AND DOCUMENTATION c....... Port of shipment and of delivery should be mentioned.. Passing of the property in goods and of risk.. i. Why is the arbitration a superior method of settling international disputes? Q2. Price .inspection/certification of quality and/ or quantity may also be stipulated. Any other special condition... in the currency agreed upon and describe the mode of payment i. etc.... State also the party responsible for the insurance].] Shipment .. 3................] Insurance ... payment against L/C(letter of credit)/ DA(document against acceptance)/DP (Document againstPayment) etc..........] d.. Arbitration Arbitration clause recommended by the Indian Council of Arbitration: “All disputes of differences whatsoever arising between the parties out of or relating to the construction.. Explain the procedure far arbitration.. Packaging and mar king... i.. terms.. as per agreed terms....... g. FP A(free from particular average)/WA (with average)/ All Risks..... ‘meaning 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”....... may also be specified...e.. freight) etc... FOB (free on board)/CFR (Cost and Freight/CIF (Cost insurance......

i. the Government of India also announced on January 30. Promoting exports and augmenting foreign exchange earnings. General Objectives of the Exim Policy Government control import of non-essential items through an import policy. there are two aspects of trade policy. 78 ii. Implications. therefore. all-out efforts are made to promote exports. Regulating exports wherever it is necessary for the purposes of either avoiding competition among the Indian exporters or ensuring domestic availability of essential items of mass consumption at reasonable prices. Foreign Exchange Management Act. This Act has replaced the earlier law namely. and augmenting exports from India. This shift in the focus is the outcome of the emphasis on liberalisation and globalisation as a part of the process of economic reforms initiated in India since June 1991. exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. Export (Quality Control and Inspection) Act. The text of this strategy is given as Appendix VII at the end of the book.1992Besides. The present chapter explains legal framework affecting foreign trade of India particularly with reference to Export-Import Policy. the imports and Exports (Control) Act1947. Legal Framework for Foreign Trade of India In India. The application of the provisions of the Foreign Trade (Development & Regulation) Act 1992 has been exempted for certain trade transactions vide Foreign Trade (Exemption from application of Rules in certain cases) Order 1993 • • • • • • • Export-Import Policy 2002-2007 Introduction Trade policy governs exports from and imports into a country. Objective. policies and procedures related thereto.2002 to 31. Thus. Export control is. the legal framework for the regulation of foreign trade is mainly provided by the Foreign Trade (Development and Regulation) Act.1 . The government of India announced sweeping changes in the trade policy during the year 1991.01).3. improving export performance. formulated keeping in view.675. the trade policy Le. 1992.Import Policy was announced on 31. the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. In other words.07 with the. A comparison of the nomenclature of the two Acts makes it very dear that there is a shift in the focus of the law from control to development of foreign trade. and Meaning The foreign trade of India is guided by the Export-Import (EXIM) Policy of the government of India arid is regulated by the Foreign Trade (Development and Regulation) Act. • General Objectives.. This policy is thus.2002 for a period of 5 years with effect from 1. Customs and Central Excise Duties Drawback Rules. Highlights. to guide the formulation the Export-Import Policy: 2002 . 1992. In India. At the same time.6% (2000 . The present Export .. It covers both the trade in merchandise and services. 1963.4. in general.2002 a Medium Term Export strategy. 1995. Implications.3. Export-Import Policy 1997-2000 Objective. It is one of the various policy instruments used by a country to attain her goals of economic develop-ment. It is prepared and announced by the Central Government (Ministry of Commerce). Garments Export Entitle-ment Policy: 2000-2004. The main objective of the Foreign Trade (Development and Regulation) Act is to provide for the development and regulation of foreign trade by facilitating imports into.IMPORT POLICY OF INDIA • Export-Import policy of India • • • Introduction Meaning aims at developing export potential.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 12: EXPOR T. encouraging foreign trade and creating favourable balance of payments position. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exports of items specially needed within the country. with respect to imports and exports from the country and more especially export promotion measures. EXIM Policy contains various policy decisions taken by the government in the sphere of foreign trade. Government of India in terms of section 5 of the Foreign Trade (Development and Regulation) Act. As a result. The main objective of the Government policy is to promote exports to the maximum extent. India’s EXIM policy.e. 1999 --and the Customs and Central Excise Regulations. the national priorities for economic development and the international commitments made by the country.2007 co-terminus with Tenth Five Year Plan. export-import policy is formulated by the Ministry of Commerce. the policy Aims at i. objective of achieving a share of 1 % in world trade by the end of 2006 . It also discusses the preferential trading arrangements affecting exports and imports of India. Highlights.2007.07 from the present I share of 0. 2002 . the new Export11. It is essential that the entrepreneurs and the export managers understand the trade policy as it provides the vital inputs for the formulation of their business growth strategies.

g.’ consumables and capital goods required for augmenting production. Under the zero duty EPCG Scheme. To generate new employment. To provide quality consumer products at reasonable prices. industry and services. intermediates. Liberalisation • • c. the policy was made for the duration of 5 years. components. b. except those coming under negative list. Opportunities and encourage the attainment of internationally accepted standards of quality. To enhance the technoloca1 strength and efficiency of Indian agriculture. Export Promotion Capital Goods (EPCG) Scheme • • The duty on imported capital goods under EPCG scheme has been reduced from 15% to 10%. A very important feature of the policy is liberalisation.1 79 . The policy has focussed on the need to let exporters concentrate on the manufacturing and marketing of their products globally and operate in a hassle free environment. Export houses and all forms of trading houses are eligible for additional SIL of 1 % on exports of products from SSIs from North Eastern States. waiving of the condition on export proceeds realisation. The objectives will be achieved through the coordinated efforts of all the departments of the government in general and the ty1inistry of Commerce and the Directorate General of Foreign Trade and its network of Regional Offices in particular. d. intermediates. f. e. packaging materials. restructuring the schemes to achieve further liberalisation and increased transparency in the changed trading environment. It is effective from 1st April 1997 to. strengthening of the Advance Licensing System. for export purpose.675. c. 2002). The new EXIM Policy 1997-2002 aims at consolidating the gains made so far. The need for further liberalisation of imports and promotion of exports was felt and the Government of India announced the new Export-Import Policy (1997. etc. Such trade activities also help in stimulating expansion and diversification of production in the country. b. It has substantially eliminated licensing. To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits fro~ expanding global market opportunities. All goods. Advance Licence Scheme • • Objectives of the Exim Policy 1997 -2002 The principal objectives of the EXIM Policy 1997 -2002 are as under: a. Additional SIL has been declared for exploration of new markets and for export of agro products. The thrust area of this policy was to liberalise imports and boost exports. It recognises the fact that there is no substitute for growth.value of unfulfilled exports. as a specified percentage of FOB value of exports. Imports Liberalisation • Of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have been transferred to Open General Licence (OGL) List.31st March 2002. Duty Entitlement Pass Book (DEPB) Scheme • Under the DEPB. an exporter may apply for credit. • Such credit can be can be utilised for import of raw materials. rationalisation of schemes related to Export Oriented Units and units in the Export Processing Zones. the period for export obligation has been extended from 12 months to 18 months. thereby. made in freely convertible currency. It focusses on the strengthening the domestic industrial growth and exports and enabling higher level of employment with due recognition of the key role played by the SSI sector. The steps were also taken to boost the domestic industrial production. Special Import Licence (SIL) • • • • 11. The more aspects of the export-import policy (1992-97) include: introduction of the duty-free Export Promotion Capital Goods (EPCG) scheme. SIL on exports from SSIs has been increased from 1 % to 2%. Further it will be achieved with a shared vision and commitment and in the. 150 items from the restricted list have been transferred to SIL. To stimulate sustained economic growth by providing access to essential raw materials. best spirit of facilitation in the interest of export. parts. In order to bring stability and continuity. Highlights of the Exim Policy 1997-2002 a.Import policy came into force from April I. e. which creates jobs and generates income. A further extension for six months can be given on payment of 1 % of the. Period of the Policy • This policy is valid for five years instead of t}:1ree years as in the case of earlier policies. 20 crore to Rs. This policy has further simplified the procedures and reduced the interface between exporters and the Director General of foreign Trade (DGFT) by reducing the number of documents required for export by half. The effort has been made to simplify and streamline the procedure. 5 crore for agricultural and allied! Sectors Under Advance License Scheme. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. improving their competitiveness. quantitative restrictions and other regulatory and discretionary controls. the threshold limit has been reduced from Rs. This was an important step towards the economic reforms of India. In this policy import was liberalised and export promotion measures were strengthened. Import has been further liberalised and efforts have been made to promote exports. 1992. may be freely imported or exported. components.

5 crore from Rs. the threshold level has been reduced from Rs. (AMOUNT IN RS. most DGFT transactions will be on line so as reduce paper work and avoid delay in disposal of applications. the EXIM policy 1997-02 has permitted 100% foreign equity participation in the case of 100% EOUs. 11. SIL on exports from ‘SSls has been increased from 1 % to 2%. Globalisation of Indian Economy :• • The EXIM policy 1997-02 proposed to prepare a framework for globalisation of Indian economy. • h. j. • m. Additional SIL of 1 % for export of agro products. EOUs and units in EPZs in agriculture and allied sectors can sell 50% of their output in the domestic tariff area (DT1) on payment of duty. Impact on. Under the zero duty EPCG Scheme. k. SSI Units : • • • c. The regime of high protection is gradually’ vanishing. delivery schedules and after sales service.• The SIL entitlement of exporters holding ISO 9000 certification has been? Increased from 2% to 5% of the FOB value of exports.these items are consumer goods items. However. • In the EXIM policy 1997-02. ‘Export houses and all forms of trading houses are eligible for additional SIL of 1 % on exports of products from SSls from North eastern States.” The Indian economy has been exposed to more foreign competition.. Import of computer systems has been brought under the purview of EPCG scheme. 5 crore for agriculture and allied sectors. which states. Indian industry’s have also been given an opportunity to globalise their business by allowing them to import machineries and raw materials from abroad on liberal terms.high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. 20 crore to Rs. in order to survive. In order to encourage foreign investment in India. Additional SIL of 1 % has been declared for export of agro products. Impact on the Indian Industry :• • Software units can undertake exports using data communication links or through courier service. This will improve the quality and productivity of the Indian industry.Many encouraging steps have been taken in order to give a boost to Indian agricultural sector.the zero duty EPCG Scheme. Double weightage ‘will be given for agro exports in calculating the eligibility for export houses and all forms of trading houses. improvement in quality. • 80 . Full Convertibility of Indian Rupee on revenue account would also give a fillip to foreign investment in India. CRORES) FOR 2000-01 PERIOD FOB Criterion NFE Criterion Annual Average FOB value of Annual Average FOB value of FOB value of export made FOB value of export made export made during during export made during preceding 3 preceding during preceding 3 preceding licensing licensing years licensing years licensing years 15 22 12 18 75 112 62 90 375 560 312 450 1125 1680 937 1350 This is evident from the very first objective of the policy. Deemed Exports :Deemed exports facilities have been extended to oil and gas sectors in addition to power sector. Agriculture Sector : • • • Double weightage for agro exports while calculating the eligibility for export houses and all forms of trading houses. the threshold level has been reduced from Rs. By 1998. Indian companies will have to pay due attention to cost reduction. The reduction of duty from 15% to 10% under EPCG scheme will enable Indian firms to import capital goods. Computerisation of DGFT Offices :• • l. a series of reform measures have been introduced in order to give boost to India’s industrial growth and generate employment opportunities in non-agricultural sector. EOUs’ and units in EPZs in agriculture and allied sectors can sell 50% of their output in the domestic tariff area (DTA) on payment of duty. 20 crore to Rs. liberalisation of imports by transferring 542' items from restricted list to OGL and SIL list would adversely affect the growth of . 5 crore for agriculture and allied sectors. as most of . foreign companies may bee attracted to set up manufacturing units in India. b. Due to liberalisation of procedural formalities. “To accelerate the economy from low level of economic activities to. Export Houses and Trading Houses :The criteria for recognition of export houses and all forms of trading houses has been modified. consumer goods industry in India. Reduction of threshold level to Rs.1 • • • d. Under . . Impact on Agriculture :. It means. 20 crore under EPCG scheme will benefit SSls.675. Software:• • • At the same time. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION • • EH TH STH SSTH i. Foreign Investment • • Implications of the Exim Policy 1997– 2002 The major implications of the EXIM Policy 1997-2002 are :a. and units set up in EPZs.

Besides these.2002 had accorded a status of exporter to the business firm exporting services with effect from1. In order to achieve this the policy has also extended the benefits given to exporters to deemed exporters. This would encourage Indian industries to undertake research and development programmers and upgrade the quality of their products.675. Thus. textiles.e. b.2007 deals with both the export and import of merchandise and services. It also enabled the foreign trade grow in an environment of liberalization from licensing procedures. Murasoli Maran announced the Exim policy for the 5 year period (2002-07) on March 31. This would lead to import substitution. consumables and capital goods required for augmenting production and providing services. Specifically. Units in SEZ would be permitted to undertake hedging of commodity price-risks. 1. Such business firms are known as Service Providers.4.2 of the policy is relevant for his business enterprise then he should also refer to the corresponding para of the Handbook of Procedures Volume. There is a para-by-para correspondence between the Policy and the Handbook of Procedures Volume-I. Special Economic Zones (SEZs):a. An exporter will have to refer to the Handbook of Procedures Volume-I to know the procedures. the globalisation policy of the government may harm the interests of SSls and cottage industries. 2. the Exim policy removes quantitative restrictions (QRs) on exports. exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the 11. quantitative restrictions. To stimulate sustained economic growth by providing access to essential raw ma.2007 • • • Handbook of Procedures Volume I Handbook of Procedures Volume II ITC(HS) Classification of Export. the policy aims to reduce transaction cost to trade through a number of measures to bring about procedural simplifications. so as to build up a strong domestic production base. Oil. In addition. Impact on Self-reliance:• • One of the long-term objectives of the Indian planning is to become self-reliant. Objectives of the Export-Import Policy: 2002 .2007 The export-import policy 1997-2002 carried forward the process of liberalization and globalization set in motion by the process of economic reforms initiated since June. To enhance the technological strength and efficiency of Indian agriculture. Offshore Banking Units (OBUs) shall be permitted in Special Economic Zones (SEZs). electronic hardware etc. This objective is well reflected in the EXIM Policy 1997-02.I to know precisely what is to be done t01ake advantage of the policy provision. The Export-Import Policy has been described in the following documents: • Export. The Handbook of Proce-dures Volume-II provides a very vital information as regards the standard input-output norms in regard to items of export from India. It is worth mentioning here that the Export -Import Policy: 1997 . provided such transactions are undertaken by the units ‘on stand. power and natural gas sectors have also been brought under the purview of deemed exports.alone basis. One can refer to these notices either by visiting the relevant web site of the authority concerned or by referring to various trade magazines which circulate them. and 3. Impact on Quality Upgradation :• The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to 5% of the FOB value of exports. In addition to these policy documents. gems and jewellery. thereby improving their competitive strength while generating new employment opportunities and encourage the attainment of internationally accepted standards of quality.Import Items The main policy provisions are given in the policy document entitled “Export -Import Policy 2002-2007”. f. 81 • • • However. These reforms had aimed at restructuring the Indian economy to increase the productivity and competitiveness of foreign trade enterprises in order to achieve a higher rate of growth in exports. Export-Import Policy 2002 – 2007 The Export. if an exporter finds that para 6. 2002. The policy aims at encouraging domestic sourcing of raw materials. the small scale sector. Based on these norms. as they may not be able to compete with MNCs. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION • Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods. components.1 .intermediates. the agencies and the documentation required to take advantage of a certain provision of the policy. discretionary bureau-cratic controls and cumbersome documentation procedures. The policy regarding import or export of a specific item is given in the document entitled “ITC (HS) Classifications of Export Import Items”. The main thrust of the policy is to push India’s exports aggressively by undertaking several measures aimed at augmenting exports of farm goods.1999. Duty Exemption Scheme/Duty Remission Scheme. The present Export-Import-Policy: 2002-2007 aims at facilitating the growth in exports to attain a share of at least 1 % of global merchandise trade by the end of 2006-07. indus-try and services. an export enterprise should also refer to the various policy circulars and trade notices issued by various regulatory authorities deal-ing with different aspects of foreign trade.Import Policy: 2002. main objectives of the present policy are as follows: 1. To provide consumers with good quality products and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers Features of Exim Policy Union Commerce and Industry Minister Mr.Import Policy: 2002 . except a few sensitive items.terials. 1991.

following benefits would be available to small-scale sector. d. 5 crore • • instead of Rs. 5 crore instead of Rs. woollen knitear in Ludhiana. No limit on export of samples. • Market Access Initiative (MAl) for creating focused technological services and marketing abroad to the recognised associations of units in SSI. Diversification of Markets :• • limit for trimmings and embellishments. Velcro tape. b. • Duty Entitlement Passbook (DEPB) rates for all 2. e.c. Textiles :• Sample fabrics permitted duty free within the 3% b. f. Cottage Sector and Handicrafts :• An amount of Rs.Exim (2002-07) policy initiated a number of measures which would help employment orientation. certificate. • Entitlement for Export House Status at Rs. Exemption from compulsory negotiation of documents through banks. the remittance would continue to be received through banking channels. Enhancement in normal repatriation period from 180 days to 360 days. butter. ITPO portal to host a permanent virtual exhibition of Indian export products. except jute and onion. vegetables. 5 crore under Market Access Initiative (MAl) has been earmarked for promoting cottage sector exports coming under the Khadi and Village Industries Commission (KVIC). • EPCG facility for the common service providers in Growth Oriented a. ragi and jowar. woollen blankets in Panipat. these areas.o. Chemicals and Pharmaceuticals :- development of website for virtual exhibition of products from the handicrafts sector. d. poultry and dairy products. 82 11.15 crore for others. • Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well. 100% retention of foreign exchange in Exchange Earner’s Foreign Currency 1EEFC) account. rivets. • Additional items such as zip fasteners. • Licensing regime for rough diamond is being abolished. bajra. • Removal of restrictions on export of all cultivated kinds of blended fabrics permitted. Four existing EPZs have been converted into SEZs and 13 New SEZs have already been given approval. • Entitlement for Export House Status at Rs. b. and customs clearances for both imports and exports on self-declaration basis. Setting up of “Business Centre” in Indian missions abroad for visiting Indian exporters/businessmen. • Transport subsidy for export of fruits. • 20 Agricultural Export Zones have been notified.675. Free import of equipment and other goods used abroad for more than one year. Units in SEZ shall be permitted External Commercial Borrowings (ECBs) for a tenure of less than three years.b. • Entitlement to duty free imports of an enlarged list c. Leather:Duty free imports upto 3% of f. 65% of DEPB rate for pesticides formulations. However. floriculture. Gem and Jewellery :• Import of rough diamonds is allowed freely at 0% customs duty. or less. Strategic Package for Status Holders: • • • Licence. Among them were the following: a. • Market Access Initiative (MAI) scheme for the No other export obligation for units in EHTP. Electronic Hardware :Conversion of the Electronic Hardware Technology Park (EHTP) into zero duty regime under the ITA (Information Technology Agreement)-I • Net Foreign Exchange as Percentage of Exports (NEEP) to be made positive in 5 years. grain and flour of barley. • • • • • foods exported in retail packaging of 1 kg. reduced to 7% and for all merchandised unstudded jewellery to 3%. Small Scale Industry :With a view to encouraging further development of centres of economic and export excellence such as Tirpur for hosiery. Agriculture :• Removal of quantitative and packaging restrictions on wheat and its products. inlay cards. Projects: • of items as embellishments upto3% of FOB value of exports. • 3% special DEPB rate for primary and processed Technology Oriented a. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION eyelets. • Value addition norms for export of plain jewellery (other than wild) varieties of seed. pulses. toggles. c.1 . value combined to leather garments has been extended to all leather products. Employment Oriented Measures:. cord and cord stopper included in input output norms. Priority finance for medium and long term capital requirement as per conditions notified by the RBI.15 crore for others. permissions. Reimbursement of 50% of registration fees on registration of drugs. maize.

Dgft:• • Duty Exemption Entitlement Certificate (DEEC) book to be abolished. Procedural reforms a. to be entitled for licences without any verification against execution of Bank Guarantee. f. The EXIM 2002-07emphasises all-round development of Indian economy by giving due weightage to different sectors of the economy. That is why.’ c. Advance Licence:• Fuel costs to be rebated for all export products. The maximum fee limit for electronic application under various schemes has been reduced from Rs. b. . 1.675.1 83 . • c. EPCG licences ‘of Rs. Redemption on the basis of Shipping Bill and Bank Realisation Certificate. 5 crore. Export obligation fulfillment period extended from 8 years to 12 years in respect of units in Agricultural Export Zones and in respect of companies under the revival plan of BIFR.5 lakh to Rs. by ECGC insurance package.• • Focus Latin American Countries (LAC) has been extended upto March 2003. Direct negotiation of export documents to be permitted. Trust based a. Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realisation Certificate for documents negotiated directly. Enhancement in normal repatriation period from 180 days to 360 days. No Present Market Value (PMV) verification except on specific intelligence’ Same DEPB rate for exports whether as CBUs or in CKD/SKD form. Sikkim and-Jammu and Kashmir so as to offset the disadvantage of being far from ports. he shall be entitled to claim benefit under some other scheme. 100% retention in Exchange Earners Foreign Currency (EEFC) accounts. Supplies under Deemed Exports to be eligible for export obligation fulfilment along with deemed export benefit • • b. Sikkim and Jammu and Kashmir:• Transport subsidy for exports to be given to units located in North East. Links with the Commonwealth of Independent States (CIS) countries to be revived. The percentage of physical examination of export cargo has already been reduced to less than 10% except for a few sensitive destinations. d. This would enhance the cost competitiveness of our export products. the policy has been described as :• Employment Oriented. Penal interest rate for bonafide defaults to be brought down from 24% to 15%. Withdrawal of Advance Licence for Annual Requirement (AAL) scheme. All-round Development of Indian Economy:. 1. DEPB for transport vehicles to Nepal in free foreign exchange. • • • • • DEPB rates slashed on 8 out of 10 items. • Growth Oriented. No penalty for non-realisation of export proceeds in respect of cases covered. • The new 8 digit commodity classification for imports introduced by the Director General of Foreign Trade (DGFT) would also be adopted by the Customs and Director: General of Commercial Intelligence and Statistics (DGCI&S) shortly. Customs :Adoption and harmonisation of the 8 digit Indian Trade Classification (ITC) Harmonised System (HS) code. . Focus Africa has been launched for developing trade relations with the Sub-Saharan African region. Banks :• • • • Implications of the Exim Policy 2002-07 The implications of the EXIM Policy 2002-07 are as follows :a. Newcomers. Same day licensing introduced in all regional offices. Export Promotion Capital Goods (EPCG):• • • • c. Optional facility to convert from one scheme to another scheme. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. North Eastern States. Neutralising High Fuel Cost:• Duty Neutralisation Instruments a. e.00 lakh. The exporters can avail Advance Licence for any value. Reduction in rates only after due notice. 100 crore or more to have 12 year export obligation period with 5 year moratorium period. In case the exporter is denied the benefit under one scheme. on export of Rs. Duty Entitlement Passbook (DEPB) Scheme :• Value cap exemption granted on 429 items to continue. Fixation of special brand rate of drawback within 15 days. The exporters exporting to these markets shall be given Export House Status. 11. No seizure of stock in trade so as to disrupt the manufacturing process affecting delivery schedule of exporters. This will eliminate the classification disputes and hence reduce transaction costs and time. g. • Technology Oriented. Import and export of samples to be liberalised for encouraging product up gradation b. c.

Launching of Focus Africa programme would help exporters to diversify their exports to these markets. Implications on Industrial Sector :-• Liberalisation of EPCG scheme would help Indian help in development of specific geographical areas for export of specific products. d. 3% special export proceeds from180 days to 360' days -would help Indian industries to be more competitive in offering liberal payment terms to foreign importers. woollen blankets in Panipat. industry and services. Implications on Development of Cottage Industries : The small scale sector. permissions and customs clearances DEPB rate. quality up gradation and would also enable sick units to revive. c. etc. priority finance for medium and long term capital’ requirement and 100% retention of foreign exchange in Exchange Earner’s Foreign Currency (EEFC) account would definitely benefit Indian industries and would encourage Indian producers to enter the export field.675. the following measures have been taken in the EXIM Policy 2002-07:-• Setting up of “Business Centre” in Indian missions abroad would enable India exporters and businessmen to visit abroad. 84 11. alongwith the cottage and handicraft sector. • Licence. • Extension of export obligation fulfilment period from 8 industries to promote. In order to achieve this. • To generate new employment opportunities • To attain internationally accepted standards of quality. • To enhance the technological strength and efficiency of These steps would lead to development of new centres of economic and export excellence. Policy 2002-07 aims at achieving a quantum jump on jewellery exports as well. • Extension of repatriation period for realisation of years to 12 years in respect of units in Agricultural Export Zones. Saharan African region. • Identification of 20 “Agricultural Export Zones would and Jaipur airports as well. • Abolition of licensing regime for rough diamonds services at internationally competitive prices.In order to promote Indian industries to diversify their business and markets. • Entitlement for Export House Status at Rs. woollen knitwear in Ludhiana. • Availability of Market Access Initiative Scheme for creating focused technological services and marketing abroad. These steps would encourage units in cottage industries to develop their export potentiality. the following facilities have been extended to this sector :• Incentives such as Market Access Initiative (MAl). • Launching of Focus LAC (Latin American Countries) in entitled for facility of EPGC Scheme. 5 crore instead of Rs. Diversification of Indian Industrial Sector :. has been contributing to more than half of the total exports of the country. • Other measures such as transport subsidy.• This has also been reflected in its objectives :• To facilitate sustained growth in exports.15 crore for others. EPCG facility. • Value addition norms for export of plain jewellery reduced to 7% and for all merchandised unstudded jewellery to 3% • Personal carriage of jewellery allowed through Hyderabad certain agricultural products and on export of all cultivated varieties of seed would give a major boost to the export of these items. Implications on Agricultural Sector :. Extension of this programme upto March 2003 would enable Indian exporters to consolidate the gains of this programme. certificate. the following benefits have been made available to the small scale sector :• Common service providers in these areas shall be North East. b. Implications on Gem and Jewellery Industry : Having already achieved leadership position in diamonds. • Exemption from compulsory negotiation of documents through banks would help exporters to save bank charges. • Entitlement for Export House Status at Rs. f. especially for promotion of exports from agricultural sector.Agriculture being the backbone of Indian economy. • There is a tremendous potential for trade with the Sub- instead of Rs.With a view to encourage further development of centres of economic and export excellence as Tripura for hosiery. • Transport subsidy for exports from units located in free imports upto 3% of FOB value of exports. the EXIM. Implications on Small Scale Industry :. 5 crore Novernber 1997 has greatly accelerated Indian trade with Latin American countries. e. • To provide consumers with good quality goods and custom duty. g. In recognition of the export performance of these sectors and to further increase their competitiveness. Sikkim and Jammu and Kashmir would offset the disadvantage of being far from ports. the following steps have been taken in the new EXIM Policy :• Import of rough diamonds is allowed freely at 0% EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Indian agriculture. would definitely give a fillip to exports from agricultural sector.1 . the EXIM policy has initiated a series of measures for its growth and development. duty for both imports and exports on self-declaration basis.15crore for others. • Removal ‘of quantitative and packaging restrictions on would help the country emerge as a major international centre for diamonds. • To stimulate sustained economic growth.

I would give encouragement to setting up of more units in EHTP. (iii) Export Promotion. Explain the effect of EXIM Policy 1992-97 on the following:(i) Foreign Exchange.675. Explain the major highlights of EXIM policy 1997-02. (ii) Technology Upgradation. What is an EXIM Policy? What are its objectives? Q2. • Fixation of special brand rate of drawback within 15 days. • Reduction of the maximum fee limit for electronic application under various schemes from Rs. • Penal interest rate for bonafide defaults to be brought down to 15%. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION (EHTP) into zero duty regime under the ITA (Information Technology Agreement). i. Commercial Borrowings (ECBs) for tenure of less than three years in SEZs would provide opportunities for accessing working capital loan for these units at internationally competitive rates. Explain the major highlights of EXIM policy 2002-07. Implications on Technology Upgradation :• Conversion of Electronic Hardware Technology Park Q4. • Reduction. • Foreign Inward Remittance Certificate (FIRC) to be accepted in lieu of Bank Realisation Certificate for documents negotiated directly.Various procedural simplifications would reduce transaction costs and save time.00 lakh. What are the objectives of EXIM policy 1997-02 ? Q3. • Newcomers to be entitled for ljcences against execution of Bank Guarantee. Questions Bank Q1. Implications on Procedural Formalities :. Some of such steps include :• Adoption of a new 8 digit commodity classification for imports by Customs and Director General of Commercial Intelligence and Statistics (DGCI&S) would eliminate the classification disputes and hence reduce transaction costs and time. • Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods. • Same day licensing introduced in all regional offices. • This would also encourage Indian industries to undertake research and development programmes and upgrade the quality of their products. • No seizure of stock in trade. What are the objectives of EXIM policy 2002-07 ? Q6. • No penalty for default where payment is covered by ECGC policy. Q. 11. h. 1. • Liberalisation of import and export of samples would encourage product upgradation.51akh to Rs.7 Explain the implications of the EXIM Policy 2002-07. in percentage of physical examination of export cargo to 10%. 1.• Permission granted to External. Q5.1 85 . • Optional facility to convert from one scheme to another scheme.

Foreign Direct Investment (FDI) upto 100% is allowed through automatic I route for all manufacturing activities except arms and ammunition. Counter Trade. items of defense equipments.00 6908.675. millions) 7292. c.40 2190. Kochin and Surat have been converted SEZs and 13 New SEZs have already been given approval.8sembling. Creating special windows under existing rules and regulations of the Central Govt. under the I . repair. Units in SEZ shall be permitted External Commercial Borrowings (ECBs) for a tenure of less than three years.00 3043.10 7625. processing.Zone Kandla SEZ SEEPZ. b. 86 11. Special Package’s for SEZs in the Exim Policy 2002-07 a.Legal Prospective Eligibility a. provided such transactions are undertaken by the units on stand.50 2002-2003 (Rs. Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs b. Kandla. The scheme was announced at the time of annual review of EXIM Policy effective from 1. hazardous chemicals.80 52256. Open general Licence. h. The basic idea is to establish the zones as areas where export production could take place free from all roles and regulations governing imports and exports and to give them operational flexibility. SEZ units are eligible for a corporate tax holiday upto 2010. Goods going into the SEZ area from DTA shall be treated as.70 Special Economic Zones. Export Obligations. SEZ Cochin SEZ Surat SEZ Noida SEZ Madras SEZ Vishakhapatnam SEZ Faltz SEZ Total : 2000-2001 (Rs millions) 5278.20 2807. And psychotropic substances.00 2585.60 9804.4. Procurement of raw materials and exports of finished products are exempted from central levies e. brewing of alcoholic drinks. f. Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported c.10 10011. remaking.90 51937. b. e. goods coming from the SEZ area into DTA shall be treated as if the goods are being imported. narcotic. reconditioning. The entire production of the units in the SEZs must be.1 . c:l.70 8191 3572. c.00 3118. Note On Special Economic Zones (SEZS) Special Economic Zones (SEZs) Scheme in India was conceived by the Commerce and Industries Minister Murosoli Maran during a visit to Special Economic Zones in China in 1999. silver or platinum jewellery and articles thereof. and State Govt.70 85523. SEZ units may be set up for manufacture of goods and rendering of services d. Units in SEZ would be permitted to undertake hedging of commodity price-risks. Special Economic Zone (SEZ) is a specifically delineated duty free enclave. exported and DTA sales is permitted only on the payment of full applicable customs duties.2000. Four existing EPZs namely.30 91895.00 2001-2002 (Rs millions) 4759. trading. which shall be deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. g. cigarettes and tobacco. SEZ units may be set up (or manufacture of goods and rendering of services. (AEZs) Negative List for Exports.7 5123.80 10342.90 2530.90 60830. Offshore Banking Units (OBUs) shall be per1Ilitted in Special Economic Zones (SEZs).90 100533.. j.20 2704. State Trading Enterprises Policy will not apply to SEZ manufacturing units. SEZ units can retain 100% of their exports proceeds in Exchange Earner’s Foreign Currency (EEFC) account. eligible for deemed export benefits. provisions of section 10A of the Income Tax Act. reengineering including making of gold. Realisation of exports proceeds extended to 12 months from the date of export. Features of Special Economic Zones (SEZS) a. deemed exports and the domestic suppliers are.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 13: TERMS USED IN EXIM POLICY Notes • • • • • • Special Economic zones (SEZs) Agriculture Export zones. Santacruz.80 5199. i.alone basis. production. Export performance of the four functional SEZ Export performance of the four functional SEZ are as given below. Similarly.20 9236. d. .00 622. for SEZ is developing a framework State Government have a lead role in the setting up of SEZ.

Materials. SEZ units may procure goods required by it without payment of duty. other than trading/ service unit. b. and services in DTA in accordance with the import policy in force. trading or any other service activity as may be delegated by the BOA). Dta Sales and Supplies a. waste scrap arising out of the production process. Approvals and Applications a. Supplies made to bonded warehouses set up under the Policy and/or under Section 65 of the Customs Act. The Central facility for software development can also be accessed by units in the DTA for export of software e. subject to RBI clearance. from bonded warehouses in the DTA set up under the Policy and/or under Section 65 of the Customs Act and from International Exhibitions held in India. rejects. SEZ unit may. DTA sale by service/trading unit shall be subject to achievement of positive NFE cumulatively. Export of Special Chemicals. on payment of applicable duty. c. including capital goods. c. b. provided they are not prohibited items of imports in the ITC(HS). free of cost or on loan from clients. iv. operation and maintenance of units in the Zone Leasing of Capital Goods a. all types of goods for creating a central facility for use by units in SEZ. SEZ units. whether new or second hand. source the capital goods from a domestic/foreign leasing company. partly processed goods. SEZ units. b. Applications for setting up a unit in SEZ other than proposals for setting up of unit in the services sector (except software and IT enabled services. Supplies of goods and services to such organizations which are entitled for duty free import of such items in terms of general exemption notification issued by the Ministry of Finance. Goods shall include raw material for making capital goods for use within the unit. In other cases approval may be granted by the Board of Approval.1 87 . may import/procure from DTA. if any. DTA sale shall be subject to achievement of NFE cumulatively.Export and Import of Goods a. In such a case the SEZ unit and the domestic/ foreign leasing company shall jointly file the documents to enable import/ procurement of the capital goods without payment of duty. on the basis of a firm contract between the parties.675. However. The performance of SEZ units shall be monitored by the Unit Approval Committee b. Gem & Jewellery units may also source gold/ silver/ platinum through the nominated agencies f. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION iii. Supply of services (by services units) relating to exports paid for in free foreign exchange or for such services rendered in Indian Rupees which are otherwise considered as having been paid for in free foreign exchange by RBI. SEZ unit may import/procure from the DTA without payment of duty all types of goods and services. 11. required by it for its activities or in connection therewith. The performance of SEZ units shall be monitored as per the guidelines given in Appendix 14-II of Handbook (Vol-I). SEZ units may export goods and services including agroproducts. The units may also export by-products. d. sub-assemblies and components except prohibited items of exports in ITC (HS). Net Foreign Exchange Earning (NFE) SEZ unit shall be a positive Net Foreign exchange Earner. including capital goods. Net Foreign Exchange Earning (NFE) shall be calculated cumulatively for a period of five years from the commencement of production according to the formula given in Appendix -14-II of the Handbook (Vol-I) Monitoring of performance a. including by-products. Organisms. v. Supplies to other EOU/SEZ/ EHTP/ STP units provided that such goods are permissible for procurement by units Supplies against special entitlement of duty free import of goods. any permission required for import under any other law shall be applicable. without payment of duty. Legal Undertaking The unit shall execute a legal undertaking with the Development Commissioner concerned and in the event of failure to achieve positive foreign exchange earning it shall be liable to penalty in terms of the legal undertaking or under any other law for the time being in force. The following supplies effected in DTA by SEZ units will be counted for the purpose of fulfilment of positive NFE: i. SEZ unit may sell goods. ii. may also export to Russian Federation in Indian Rupees against repayment of State Credit/Escrow Rupee Account of the buyer. shall be approved or rejected by the Units Approval Committee within 15 days as per procedure indicated in Annexure to Appendix 14-II of Handbook (Vol-I) . Similarly for units undertaking manufacturing and services/ trading activities against a single LOP. SEZ units may import/procure goods and services from DTA without payment of duty for setting up. The units shall also be permitted to import goods required for the approved activity. Proposals for setting up units in SEZ requiring Industrial Licence may be granted approval by the Development Commissioner after clearance of the proposal by the SEZ Board of Approval and Department of Industrial Policy and Promotion within 45 days on merits. Equipment and Technologies (SCOMET) shall be subject to fulfillment of the conditions indicated in the ITC (HS) Classification of Export and Import Items.

Export through Exhibitions/Export Promotion Tours/ Export through Show Rooms Abroad/Duty Free Shops Sez. b. as one time option. i. 88 11. semi-precious stones. SEZ units shall be eligible for wastage as applicable for sub-contracting and against exchange iv. Export goods for holding/ participating in exhibitions abroad with the permission of Development Commissioner. No cut and polished diamonds. 1992. including studded jewellery. as the case may be. may on the basis of annual permission from the Customs authorities take out inputs and equipments to the DTA farm subject to the procedure indicated in EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Appendix 14-II of the Handbook (Vol-I) Exit from SEZ scheme d. may sub-contract part of the production or production process through other units in the same SEZ without permission of Customs authorities subject to records being maintained by both the supplying and receiving units. Display/sell in the permitted shops set up abroad or in the show rooms of their distributors/agents e. Capital goods imported/procured may be transferred or given on loan to another SEZ/EOU/ EHTP/ STP unit with prior permission of the Development Commissioner and Customs authorities concerned. d.contracting shall be brought back to the unit within 30 days. Export through Status Holder SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/ status holder recognized under this Policy or any other EOU/SEZ/ EHTP/ STP unit. and finished goods in stock. SEZ units engaged in production/processing of agriculture/horticulture products. that may be imposed by the adjudicating authority under Foreign Trade (Development and Regulation) Act. b. beads and articles. on behalf of DTA exporter. subject to the unit satisfying the eligibility criteria of that Scheme and standard conditions for exit indicated in Appendix 14-II of Handbook (Vol-I). Subcontracting of part of production process may also be permitted abroad with the approval of the Development Commissioner. Transfer of goods in terms of sub-paras (a) and (b) above within the same SEZ shall not require any permission but the units shall maintain proper accounts of the transaction. Goods. Sub-contracting by SEZ gems and jewellery units through other SEZ units or EOUs or units in DTA shall be subject to following conditions. The DTA unit undertaking job work or supplying jewellery against exchange of gold/silver/platinum shall not be entitled to export benefits. Inter-unit Transfer a. other than gem and jewellery unit . including partly processed/semi-finished goods and services from one SEZ unit to another SEZ/EOU/ EHTP/STP unit. Set up show rooms/retail outlets at the International Airports. precious. b. All units. c. SEZ unit may opt out of the scheme with the approval of the Development Commissioner. b. SEZ unit may also be permitted by the Development Commissioner. Such exit from the scheme shall be subject to payment of applicable Customs and Excise duties on the imported and indigenous capital goods. the exit shall be subject to penalty. a.1 . iii. with the annual permission of Customs authorities. SEZ units may transfer manufactured goods. provided the finished goods are exported directly from SEZ units. precious and semi-precious stones (except precious and semi precious stone having zero duty) shall be allowed to be taken outside the zone for sub-contracting. contained in the said jewellery.675. Units May a. finished or semi finished. shall be allowed provided the goods are not in commercial quantity. Supplies of Information Technology Agreement (ITA1) items and notified zero duty telecom/electronic items indicated in the Appendix 14-II of Handbook. may subcontract a part of their production or production process through units in the DTA or through other SEZ/EOU/ EHTP/ STP. the DTA units will be entitled for refund of duty paid on the inputs by way of Brand Rate of duty drawback. including gem and jewellery. a. c. Export of jewellery is also permitted for display/ sale in the permitted shops set up abroad ii. Goods imported/procured by a SEZ unit may be transferred or given on loan to another unit within the same SEZ which shall be duly accounted for. b. taken outside the zone for sub. but not counted towards discharge of export performance c.vi. Scrap/waste/remnants generated through job work may either be cleared from the job worker’s premises on payment of applicable duty or returned to the unit. For such exports. SEZ units other than gems and jewellery units may be allowed to undertake job-work for export. SEZ unit. c. Personal carriage of gold/ silver/ platinum jewellery. Sub-contracting a. to exit from SEZ scheme on payment of duty on capital goods under the prevailing EPCG Scheme. In case the unit has not achieved positive NFE. Receive plain gold/silver/platinum jewellery from DTA in exchange of equivalent quantity of gold/silver/ platinum. raw materials etc. Personal Carriage of Export/Import Parcel Import/ export through personal carriage of gem and jewellery items may be under-taken as per the procedure prescribed by Customs. Import/export through personal carriage for units.

will be available in case of disposal in DTA. the developer shall be eligible for the following entitlements a. However destruction shall not apply to precious and semi precious and precious metals d. c. Goods or parts thereof. private. Income tax exemption as per 80 IA of the Income Tax Act. Capital goods and spares that have become obsolete/ surplus may either be exported or disposed of in the DTA on payment of applicable duties. Exemption from CST. silver mould and rubber moulds through all permissible mode of export including through couriers agencies/post EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Sale of Un-utilised Material/ Obsolete goods a. b. diamond. including samples made in wax moulds. Samples:-SEZ units may. and precious and semi precious stones.Export /Import By Post/ Courier Goods including free samples. cases not covered by these provisions shall be considered on merits by the Development Commissioner. Replacement/repair of Goods a. Goods may be transferred to DTA/abroad for repair/ replacement. unless otherwise specified. consumables. for valid reasons. on the basis of records maintained by them. as applicable. raw material. with a view to promote agricultural exports from the country and provide remunerative returns to the farming community in a substantial manner. the Ministry of Commerce. b. All activities of SEZ units within the Zone. it has been decided to identify product d. operation and maintenance of infrastructure facilities in SEZs. to utilize the goods. without any limit. silver. In fact. GOI. Management of SEZ a. all existing EPZs have been asked to convert themselves into SEZs.675. on furnishing a suitable undertaking to Customs authorities for bringing the goods back within a stipulated period 11.1 89 . may be exported/imported by airfreight or through Foreign Post Office or through courier. The benefit of depreciation. No duty shall be payable in case capital goods. on being imported/ indigenously procured and found defective or otherwise unfit for use or which have been damaged or become defective after import/ procurement may be returned and replacement obtained or destroyed. including export and re-import of goods shall be through self certification procedure Setting up of SEZ in Private/Joint/ State Sector A SEZ may be set up in the public. processed or packaged and scrap/waste/ remnants/rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the Zone with the permission of Custom authorities. the goods may be brought back from the foreign suppliers or their authorised agents in India or the indigenous suppliers. save that. with the intention to give primacy to promotion of agricultural exports. including capital goods and spares. joint sector or by state Government as per details indicated in Appendix 14-II of the Handbook(Vol-I). supply or sell samples in the DTA for display/ market promotion on payment of applicable duties. b. Exemption from Service tax d. quality testing and R & D purpose under intimation to Customs authorities and subject to maintenance of records.For development. goods manufactured. Export Zones (AEZs) have been set up by. Destruction as stated above shall not apply to gold. A note on Agriculture Export Zones (AEZS) Agricultural. No duty shall be payable in case scrap/waste/ remnants/ rejects are destroyed within the Zone after intimation to the Custom authorities or destroyed outside the SEZ with the permission of Custom authorities. platinum. some units are not interested in the conversion on account of the sale into DTA at concessional rate of duty is not available in SEZs. Difference between SEZS and EPZS The main difference between the SEZ and the EPZ is that the SEZ is an integrated township with fully developed infrastructure on international standards whereas EPZ is just an industrial part. The general provisions of Policy relating to export of replacement/ repaired goods shall apply equally to SEZ units. Destruction shall however not apply to gem stones and precious metals. Further. subject to the procedure prescribed by Customs. two years after their import/procurement and use by the units. registered charitable hospitals etc as per the details given in Appendix 14-II in Handbook (Vol-I) Entitlement for SEZ Developer: . SEZ unit may be allowed by Customs authorities concerned to donate imported/ indigenously procured computer and computer peripherals without payment of duty. including gem stones and precious metal components for jewellery making. The Government has asked such units to move out to the Domestic Tariff Area (DTA). The goods sold in the DTA and found to be defective may be brought back for repair/ replacement under intimation to Development Commissioner. b. c. Disposal of Rejects/Scrap/ Waste/Remnants Rejects/scrap/waste/remnants arising out of production process or in connection therewith may be sold in the DTA on payment of applicable duty. spares. to recognized non-commercial educational institutions. and on prior intimation to Customs authorities:a. Export free samples. SEZ will be under the administrative control of the Development Commissioner. testing or calibration. In case an SEZ unit is unable. Remove samples without payment of duty. In the event of replacement. However. Import/ procure goods without payment of Customs/ Excise duty c. it may dispose them in the DTA in accordance with the import policy in force and on payment of applicable duties or export them b. c.

Agricultural and Processed Food Products Export Development Authority (APEDA) will supplement. plant protection. The export obligation may be offset by the service provider by earning foreign exchange in lieu of services rendered. b. storage and related research & development. Onions & Garlic AEZ would be identified by the State Government. Assistance shall be provided to the exporters. in Rupees (3) 6 crores 30 crores 150 crores 450 crores Average NFE earnings made during the preceding three licensing years. EPCG Scheme Agriculture exporters shall be eligible for the facility of EPCG scheme as described in Chapter-6 of the Policy.7. The negative list of exports. etc. in Rupees (1) (2) EXPORT HO USE 4 crores TRADING 20 crores HOUSE STAR TRADING 100 crores HOUSE SUPER STAR 300 crores TRADING HOUSE FOB value during the preceding licensing year. processing. Duty Free Replenishment Certificate (DFRC) and Duty entitlement Passbook (DEPB) Schemes. pesticides. vapour treatment heat treatment plant. The agricultural exporters are entitled to imports of inputs like. storage and related research and development. packaging. packing material etc. all institutions and agencies of the Union Government for intensive delivery in these zones. etc. However such equipments shall not be sold or leased by the licence holder. efforts of the State Governments for facilitating such exports. Some Important Agricultural Export Zones Location West Bengal Karnataka Uttaranchal Punjab Uttar Pradesh Punjab Andhra pradesh Name of product (s) Pineapple Gherkins Lychee Vegetables Potatoes Potatoes Mangopulp & Fresh Vegetables Location Maharashtra Tripura Uttar Pradesh Maharashtra Jammu &Kashmir Tamil Nadu Madhya Pradesh Name of Product (s) Grapes & Grape Wine Pineapple Mangoes Mangoes Apple Flowers Potatoes. market studies etc. efforts will be made to provide improved access to the produce/ products of the Agriculture and Allied sectors in the international market. cold storage. Duty Exemption/remission Scheme a. The units setup in the notified Agriculture Export Zone shall be entitled to the benefits available under the scheme.1 90 . under Advance Licence. pesticides.exporters are entitled to import of capital goods under EPCG Scheme.prohibited. insecticides. growers’ organisations. within its schemes and provisions. The agriculture . State Agricultural Universities and all institutions and agencies of the Union Government for intensive delivery in these zonesSuch services which would be managed and co-ordinated by State Government would include provision of pre/post harvest treatment and operations. setting up common infrastructural facilities such as sorting.. which would be managed and co-ordinated by the State Government. Category Average FOB value during the preceding three licensing years. X-ray screening facility etc. The export obligation shall be determined in accordance with paragraph 6. State Governments may identify product specific Agri export zone for end to end development for export of specific products from a geographically contiguous area.specific Agricultural Export Zone from geographically contiguous area. Facilities for Units Located in AEZS a. as per the EXIM Policy 11. packaging. packing materials. grading. The agriculture exporter shall be eligible for recognition as Export House/Trading House/Star Trading House/ Super Star Trading House on achieving the performance level as mentioned below. under Advance Licence/DFRC/DEPB scheme as given in Chapter-7 of the Policy subject to the eligibility criteria and conditions enumerated under the scheme. trade association for conducting surveys/feasibility studies. Objective In a fast changing international trade environment and with a view to providing remunerative returns to the farming community in a sustained manner. in Rupees (4) 3 crores 15 crores 75 crores 225 crores NFE earned during the preceding licensing year. State agricultural universities and. etc. transport equipment/ refrigerated vans. restricted through licensing or otherwise to be canalised through a designated government agency. APEDA will supplement. the double weightage on FOB or NFE on the export of agriculture product for recognition as status holders shall be available. would include provision of pre-harvest and post-harvest treatment and operations.5(v) of the Policy. Such services. This facility shall also be available to service providers. efforts of State Governments for facilitating such exports. fertilizers. A service provider in the Agriculture Export Zone may import equipment under the EPCG scheme for supplying services to agriculture exports. who may evolve a comprehensive ‘package of services provided by all State Government agencies. b. packaging. within its schemes and provisions. polishing. in Rupees (5) 5 crores 25 crores 125 crores 375 crores EXPOR T IMPORT PROCEDURE AND DOCUMENTATION In addition to the double weightage available under paragraph 12. Information Requirements A database on agricultural products and markets including aspects of commercial intelligence relevant to exports will be established. Such exporter shall have the facility to move or to shift the capital goods within the zone provided he maintains accurate record of such movements.2 of the Policy but the licence holder shall not be required to maintain the average level of exports as specified in sub paragraph 6. processing. insecticides. A note on Negative List of Exports 2002-07 The negative list consists of goods the import or export of which is either . plant protection. The agriculture exporter shall be entitled to the facility for import of inputs like fertilizers. State Government may evolve a comprehensive package of services provided by all State Government Agencies.675.

instead of money payments. Manufactured articles and shavings of Shed Antlers of Chital and Sambhar. Such as bangali finches. National Agriculture Coopertive Marketing Federation Of India (NAFED) Tribal Coopertives Marketing Federation of India (TRIFED). Whole human blood and all products derived from it. Tallow.2 :. Some of the canalised items are :Items Onions (Except Banglore Rose onion and Krishnapuram onion) Niger Seeds Canalising Agency Export permitted through Specified STEs Tribal Cooperative Marketing Federation of India(TRIFED). Advantages of Export Obligations a. All items of plants as specified by the DGFT. Sandalwood items as notified by the DGFT. . Chemical fertilizer of all types. Item Description Military stores as notified by DGFT Procedures or Conditions 'No objection certificate from the Department of Defence Production and supplies. Special chemicals as notified by the DGFT. silkworm seeds and silkworm cocoons. items are banned from exports :• • • • • • • • • • • • d. and Chrome ore. fat and/or oils of any animal origin excluding fish oil. b. Freely Exportable Items :. exported without an export licence through designated State’ Trading Enterprises (STEs).Applies to the items that can be exported on fulfilment of the conditions against each of the items. Seaweeds of all types. Human skeleton.The prohibited items are completely banned from exports.The canalised items can be. Prohibited Items :. ready-made garments. b. Beef. Sea shells. importers will be required to export compulsorily. A note on Counter Trade Counter trade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods. value or both. Silkworm. Paddy (Rice in husk). export of such items is subject to certain procedures or conditions. Due to. d. OGL No. Exotic birds as notified by the DGFT. However. Red sanders wood in any form. which can be exported without any restrictions or licensing formalities to all permitted destinations.3 :. Canalised Items :. Crude oil 11.The restricted items are allowed for exports under special licence issued by the DGFT.1 91 . NEW Delhi. Exotic birds. Gum Karaya Iron ore.1 :. OGL No. b. fables or textile it’s wit imprints of excerpts or verses of the Holy Quran. Fresh and frozen silver prom frets of weight less than 300 gms. Objectives of Export Ob1igation a. New Delhi.Kathiawadi.The freely exportable items. The following categories of. White finches and Zebra finches. The following four OGLs are in operation :a. Horses . b. . The EPCG scheme enables the Indian exporters to import capital goods at 5% customs duty subject to export obligation. export obligation.Applies to export by land to any country adjacent to India and having no sea port of its own. Peacock tail feathers including handicrafts and articles made there of. A note on Export Obligation Export obligation means the obligatioI1 of the importer to undertake export of product or products in term of quantity. as may be prescribed or specified by the licensing or competent authority in order to compensate for the imports undertaken. contains the following four categories of export items:a. can be exported without an export licence or permission from the DGFT. Fodder including wheat and rice straw. Some of restricted export items are as follows:• Dress materials. OOL No. This would increase exports and would generate foreign exchange for the economy. • • • • • • • • • c. OGL No. c. Deoiled groundnut cakes containing more than 1% oil.Promotion Council Subject to registration of contracts with the Agricultural and processed Food products export Development Authority (APEDA) EXPOR T IMPORT PROCEDURE AND DOCUMENTATION All forms of wild animals including their parts and products. The main objective of export obligation is to compensate for the outflow of foreign currency due to imports undertaken under certain schemes such as EPCG scheme. Accessibility to imported raw materials and capital goods subject to export obligation would enhance the competitiveness of Indian exporters in terms of quality up gradation. Subject to Pre-shipment inspection. manganese ore. Restricted Items :. Marwari and Manipuri breeds.2002-07. Bones and bone products Basmati Rice A note on Open General Licence (OGL) List Open General Licence (OGL) list contains those items.675. as specified. Metals and Minerals Trading Corporation (MMTC) Indian Oil Corporation Limited.Applies to export of bonafide samples. Subject to a certificate from Chemicals and Allied Products' Export . Applies to items that can be exported directly by the canalising agency mentioned against each items.4:.

In the modern economies, most transactions involve monetary payments and receipts, either immediate or deferred. As against this, counter trade refers to a variety of unconventional international trade practices which link exchange of goods, directly or indirectly, in an attempt to dispense -with currency transactions. The Philippine International Trade Corporation (PITC) is tasked with countertrade, an international transaction premised on some form of reciprocity. It is used to leverage government importation with trade and investments to be provided by foreign suppliers. Counter trade helps government offices or other local institutions by facilitating the introduction of investments, technology transfer, research and development, donations, specialized training/skills and related activities without additional cost to the government. Forms of Counter Trade a. Barter: Barter refers to direct exchange of goods against goods of equal value, with no money and no third party involved in it. b. Compensation Deal: Under this arrangement, the seller receives a part of the payment in cash and the .rest in products. c. Buy Back: Under the buy back agreement, the supplier of plant, equipment or technology agrees to purchase goods manufactured with that equipment or technology. d. Counter purchase : Under the counter purchase agreement, the seller receives the full payment in cash but agrees to spend an equivalent amount of money in that country within a specified period. d. Trade-for-Debt or Debt-for-Goods. A loan or credit obtained by the government is paid for (fully or partially) in goods or services of the debtor country. e. Offset. Foreign suppliers commit to introduce investments, technology transfer, training and skills upgrade, research and development, donation or other similar products that will promote the industrial and economic growth of the country as well as provide employment opportunities, support social and civic programs, generate/save foreign exchange, and fund and support environmental projects for sustainable growth. Checklist for Counter-trade Counter-trade and barter are trading techniques used by countries with a limited supply of foreign currency, but which need to import goods. Instead of paying in precious hard currency, the customer asks to pay in goods. In many cases these will not be goods for which there are already established trading patterns, rather they will be goods that would not otherwise be exported. This will mean that there is unlikely to be a means of pricing them (as there would be, for example, for a fixed grade of a mineral). • Use a lawyer to write the agreements

• • •

Insure the risk of the trader’s insolvency Arrange payment for sales of the customer’s (exported) product before you lose control of your goods Use an escrow account for receipts, and export goods to the value of the amount of hard currency in escrow (foreign exchange permission for the escrow account may be needed from the buyer’s country) Ask the customer to provide a government guarantee for any shortfall of the amounts expected from the proceeds of sale counter-traded goods, especially if you are committing resources to make goods to order Insure the risk of non-honoring of the government guarantee Obtain political risk cover on the buyers country in relation to the risk of frustration of your export contract and on the frustration of the import contract.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

• •

Question Bank
Q1. Write a note on the Negative List of Export. Q2. Write a brief note on canalisation of exports. Q3. Explain Niche Marketing as an export strategy. Q4. Write note on the Open General Licence (OGL). Q5. Write note on the Special Economic Zones. Q6. Write note on the Agriculture Export Zones.

Use a counter-trade specialist (e.g a commodity trader with counter-trade expertise)

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EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

LESSON 14: EXPORT PROCEDURE
Introduction
Export Procedure
• • • • • •

A partnership firm under the Indian Partnership Act, 1932.); A sale trader should seek permission from the local authorities, as required.

Registration’ Stage. Shipment Stage. Pre-shipment Stage Post-shipment Stage. Introduction. Concept of quality Need of Inspection Types of Inspection Procedure. Methods Procedure for Registration. Procedure for Exemption. Introduction. Conditions Procedure.

Quality Control and Pre-shipment Inspection
• • • • • •

b. Opening-Bank Account: - The’ exporter should open a current account in the name of the firm or company with a commercial bank which is authorised by the Reserve Bank of India (RBI) to deal in foreign exchange. Such bank also serves as a source of pre-shipment and post-shipment finance for the exporter. c. Obtaining Importer-Exporter Code Number (lEC No.): - Prior to 1.1.1997, it was obligatory for every exporter to obtain CNX number from the RBI. However, since then, IEC number issued by the Director General for Foreign Trade (DGFT) has replaced the CNX number. The application form for obtaining IEC number should be accompanied by fee of Rs. 1000. d. Obtaining Permanent Account Number- (PAN): Export income is subject to a number of exemptions and deductions under different sections of the Income Tax Act. For claiming such exemptions and deductions, the exporter should register his organisation with the Income Tax Authorities and obtain the Permanent Account Number (PAN). e. Obtaining Sales Tax Number: - Exportable goods are exempted from sales tax, provided, the ‘exporter or his firm is registered with the Sales Tax Authorities. , For this purpose, the exporter is required to make an application in the prescribed form to the’ Sales Tax Office (STO) in whose jurisdiction his {exporter’s). Office is situated f. Registration with, Export Promotion Council (EPC) :: It is obligatory for every exporter to ,register with the appropriate Export Promotion Council (EPC) and obtain the ‘Registration-cum-Membership Certificate’ (RCMC). The benefits provided in the current EXIM Policy are extended only to the registered exporters having valid RCMC. g. Registration with ECGC: - The exporter should also register with the Export Credit and Guarantee Corporation of India (ECGC) in order to secure overseas payments against political and commercial risks. It also helps the exporters in obtaining the financial assistance from commercial banks and other financial institutions. h. Registration with other Authorities: - The exporter should also register with various other authorities, such as: • • •

Sales Tax Exemption
• •

Procedure for Excise Clearance
• • •

Shipping and Customs Formalities Procedure for Realisation of Export Proceeds Question Bank

Introduction
Export procedure consists of several commercial and regulatory formalities, which an exporter is required to complete during the course of export trade transactions. These formalities are very complex and time-consuming and involve considerable documentation. Hence, the exporters must possess adequate knowledge of such formalities. At the same time, it should be ensured that the rules- and regulations. of not only exporting country but also of importing Country are duly complied with. Last but not least, it should be ensured that all the required documents, whether commercial or regulatory, are prepare and filed with the appropriate authorities.

Registration Stages
The exporter is required -to register his organisation with a number of institutions and authorities, which directly or indirectly help him in the smooth conduct of export, trade. The registration stage includes: a. Registration of the Organisation: - The form of organisation selected by the exporter must. Be registered under the appropriate Act of. the country.)

Federation of Indian Export Organisation (FIEO), Indian Trade Promotion Organisation (ITPO),

A joint stock company under the Companies Act, 1956.);

Chambers of Commerce (COC), • Productivity Councils, etc.
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Shipment Stages
Export, cargo can be exported to the overseas buyer by sea, air or land. However, shipment by sea is the most popular and generally resorted to, as it is comparatively cheaper. Besides, the ship’s capacity is far greater than other modes of transportation. Nevertheless, transportation by air is utilized for export of expensive items like, diamonds, gold, etc. The shipment stage includes the following steps.:a. Reservation of Shipping Space: - Once the export contract is finalised, the I exporter reserves the required space in the vessel for shipment. On accepting the exporter’s request, the shipping company issues a Shipping Order. The original copy of the shipping order as given to the exporter and the duplicate instruction by the shipping company to the commanding officer of the ship that the goods as per the details given should be received on board. b. Arrangement of Internal Transportation up to the Port of Shipment :-The exporter makes necessary arrangements for transportation of goods to the port either by road or railways. On loading goods into the railway wagon, the railway authorities issue a ‘Railway Receipt’, which may be either ‘freight paid’ or ‘freight to pay’. It serves as a title to the goods. The exporter doses the railway receipt in favour of his agent to enable him to take delivery of the goods at the port of shipment. c. Preparation and Processing of Shipping Documents :As the goods reaches the port of shipment, the exporter should issue detailed instructions to the C&F agent for the shipment of cargo along with a complete set of the documents listed below:• Letter of Credit along with the export contract or export order.
• • • • • • •

moved into the port area and stored in the appropriate shed. f. Customs Examination and Issue of ‘Let Export Order’: - The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his presence. The same can be arranged for at the factory or warehouse of the exporter by making an application to the Assistant Collector of Customs. The Customs Examiner, if satisfied, issues a formal permission I’ for the loading of cargo on the ship in the form of a ‘Let Export Order’. g. Obtaining ‘Let Ship Order’ from the Customs Preventive Officer: - ‘Let Export Order’ must be supplemented by a ‘Let Ship Order’ issued by the Customs Preventive Officer. The C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs Examiner, to the Customs Preventive Officer who endorses it with the ‘Let Ship Order’. h. Obtaining Mate’s Receipt and Bill of Lading: - The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate’s Receipt to the Port Superintendent The Port Superintendent, on receipt of port dues, hands over the Mate’s Receipt to the C&F Agent. The C&F Agent surrenders the Mate’s Receipt to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to three negotiable and two to three non-negotiable copies of Bill of Lading.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Pre-shipment Stage
Pre-shipment stage consists of the following steps: a. Approaching Foreign Buyers: - In order to secure an export order, a new exporter can make use of one or more .of the techniques, such as,’ advertising in international media, sales promotion, public relation, personal selling, publicity and participation in trade fairs and exhibitions. b. Inquiry and Offer: - An inquiry is a request from a prospective importer about description of goods, their standard or grade, size, weight or quantity, terms of payments, etc. On getting an inquiry, the exporter must process it immediately by making an offer in the form of a Performa invoice. c. Confirmation of Order: - Once the negotiations are completed and the terms and conditions are finalised, the exporter sends three copies of Performa Invoice to the importer for the confirmation of order. The importer signs these copies and sends back two copies to the exporter. d. Opening Letter of Credit:- The documentary credit or letter of credit is the most appropriate and secured method of payment adopted to settle international transactions. On finalization of the export. Contract, the importer opens a letter of credit in favour of the exporter, if agreed upon in the contract. e. Arrangement of Pre-shipment Finance: On securing the letter of credit, the exporter procures a pre-shipment finance from his bank for procuring raw materials and other components, processing and packing of goods and transfer of goods to the port of shipment.

Commercial Invoice (2 copies) Packing List or Packing Note. Certificate of Origin. GR Form (original and duplicate) ARE-I Form. Certificate of Inspection, where necessary (original copy)

Marine Insurance Policy. d. Customs Clearance: - The cargo must be cleared from the Customs before it is loaded on the ship. For this, the above mentioned documents, along with five copies of shipping bill, are to be submitted to the Customs Appraiser at the Customs House. The Customs Appraiser ensures that all the formalities relating to exchange control, quality control, pre-shipment inspection and licensing have been complied with by the exporter. After verification, all documents, except the original GR, original copy of Shipping Bill and one copy of Commercial Invoice, are returned to the C&F agent. e. Obtaining ‘Carting Order’ from the Port Trust Authorities: - The C&F agent, then, approaches the Superintendent of the concerned Port Trust for obtaining the ‘Carting Order’ for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is physically

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f. Production or Procurement of Goods: - On securing the pre-shipment finance from the bank, the exporter either arranges for the production of the required goods. or procures them from the domestic market as per the specifications of the importer. g. Packing and Marking: - Then the goods should be properly packed and JXl8.rkedwith necessary details such as port of shipment and destination, country of origin, gross and net weight, etc. If required, assistance can be taken from the Indian Institute of Packing (IIP). h. Pre-shipment ‘Inspection’ - If the goods to be exported are subject to compulsory quality control and pre-shipment inspection then the exporter should contact the Export Inspection Agency (EIA). For obtaining an inspection certificate. i. Central Excise Clearance: - The exporters are totally exempted from the payment of central excise duty. However, the exemption should be* claimed in one of the following ways: • Export under Rebate.

called ‘Negotiable Set of Documents’. The set normally contains: • • • • • • • • • •

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Bill of Exchange, Sight Draft or Usance Draft. Full set of Bill of Lading or Airway Bill. Original Letter of Credit. Customs Invoice. Commercial Invoice including one copy duly certified by the Customs. Packing List. Foreign exchange declaration forms, GR/SOFTEX/PP forms in duplicate. Exchange control copy of the Shipping Bill. Certificate of Origin, GSP or APR Certificate, etc. Marine Insurance Policy, in duplicate.

Export under bond.

j. Obtaining Insurance Cover: - The exporter must take appropriate policies in order to insure risks: • •

ECGE policy in order to cover credit risks. Marine policy, if the price quotation agreed upon is CIF.

d. Dispatch of Documents :- The bank -negotiates these documents to the importer’s bank in the manner as specified in the L/C. Before negotiating documents, the exporter’s bank scrutinises them in order to ensure that all formalities have been complied with and all documents are in order. The bank then sends the Bank Certificate and attested copies of commercial invoice to the exporter. e. Acceptance of the bill of exchange: - Bill of Exchange accompanied by the above documents is known as the Documentary Bill of Exchange. It is of two types:

k. Appointment of C&F Agent: - Since exporting is a complex and time- consuming process, the exporter should appoint a Clearing and Forwarding (C&F) agent for the smooth clearance of goods from the customs and preparation and submission of various export documents.

Documents against Payment (Sight Drafts): - In case of sight draft, the drawer instructs the bank to hand over the relevant documents to the importer only against payment. Documents against Acceptance (Usance Draft): In case of usance draft, the drawer instructs the bank to hand over the relevant documents to the importer against his ‘acceptance’ of the bill of exchange.

Post Shipment Stage
The post-shipment stage consists of the following steps: a. Submission of Documents by the C&F Agent to the Exporter: - On the completion of the shipping procedure, the C&F agent submits the following documents to the exporter:• • • • • •

A copy of invoice duly attested by the Customs. Drawback copy of the shipping bill. Export promotion copy of the shipping bill. A full set of negotiable and non-negotiable copies of bill of lading. The original L/C, export order or contract.

d. Letter of Indemnity: - The exporter can get immediate payment from his bank on the submission of documents by signing a letter of indemnity. By signing the letter of indemnity the exporter undertakes to indemnify the bank in the event of non-receipt of payment from the importer along with accrued interests. e. Realisation of Export Proceeds :- On receiving the documentary bill of exchange, the importer releases payment in case of sight draft or accepts the usance draft undertaking to pay on maturity of the bill of exchange. The exporter’s bank receives the payment through importer’s’ bank and is credited to exporter’s account. f. Processing of GR Form: - On receiving the export proceeds, the exporter’s bank intimates the same to the RBI by recording the fact on the duplicate copy of GR. The RBI verifies the details in duplicate copy of GR with, the, original copy of GR received from the Customs. If the details are found to be I in order then the export transaction is treated to be completed. g. Realisation, of Export” Incentives: - If the exporter is eligible for export incentives, then he should submit claim

Duplicate copy of the ARE-I form. b. Shipment Advice to Importer: - After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer. c. Presentation of Documents to Bank for Negotiation: Submission of relevant documents to the bank and the process of getting the payment from the bank is called “Negotiation of the Documents” and tile documents are

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for the same accompanied by the bank certificate to the appropriate authority.

2 Compulsory Inspection Compulsory pre-shipment inspection is conducted by the following agencies of the Government of India:
• • • •

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Quality Control and Pre-shipment Inspection
Concept of Quality Quality of a product is defined as a set of attributes or specifications including packaging specifications in relation to a given product. It is the manufacturer who first decides the quality of a product before introducing it in the market. This may be done keeping in view the national or the inter~ national standards of quality as laid down by the respective national or international standards bodies. The level of quality - high medium or low-depends upon how rich or poor these specifications are. It the specifica- tions are of very high order, the level of quality would be high; on the other hand, if the specifications are poor or weak, then the quality would be termed as low quality. Between the high and low quality lies the medium range of the quality. These quality specifications may then be modified during negotiations with the foreign buyer to suit his/ her requirements. Finally, the quality of the export product is determined with reference to the specifications as laid down by the buyer. Thus, quality should be understood in its relative sense and not in the absolute sense of the term. Need for Pre-shipment Inspection An exporter faces competition not only from the fellow exporters from his own country but also from other Countries. He should formulate a proper quality strategy to gain a competitive edge over others in the market. The goods should be properly inspected to ensure that the quality of the export goods is maintained as desired by the buyer. Goods of poor quality spoil not only their own market but also bring bad name to the image of the country itself. I t is, thus, in the business interest of the exporter to send shipment of the right quality to the buyer. This would also facilitate effective penetration and sustenance in the export markets by improving the brand image of the goods. The Government of India had also recognised the need for effective pre-ship-ment inspection long back in 1963 itself when the Export (Quality Control and Inspection) Act, 1963 was enacted to provide for sound development of the export trade through quality control and pre-shipment inspection. Types of Pre-shipment Inspection There are primarily two different types of pre-shipment inspection namely: I. Voluntary Inspection II. Compulsory Inspection 1. Voluntary Inspection The following are the different forms of voluntary preshipment inspection of the export shipments: 1. By the exporter himself 2. By the buyer’s representative 3. By the buying agent in the exporter’s country 4. By the inspection agencies in the private sector

Export Inspection Council through its Export Inspection Agencies Textile Committee Development Commissioner (Handicrafts) Central Silk Board

Voluntary Inspection 1. Inspection by the exporter himself The primary responsibility for inspection of the goods rests with the exporter himself. He should conduct the inspection of the goods during the process of manufacturing, at the stage of finished product and also in regard to the packaging and packing materials. It is essential that the manufacturer should install proper quality control system in the factory to check the quality at all stages of manufac-ture of the goods. The merchant exporter should enter into an arrangement with the supplier of goods to provide for inspection during the process of manu-facture as well as for the finished product. If needed, the services of qualified quality control personnel should be taken for this purpose. 2. Inspection by buyer’s representative Many a time, the foreign buyer may arrange for inspection of goods through his own representative in the exporter country before the goods are dispatched by the exporter. The exporter can send the shipment only when the buyer’s representative issues a satisfaction report to the exporter. The advantage to the exporter is that the buyer cannot raise the question of substandard quality or the poor quality of the goods once his representative clears the shipment of the goods. 3. Inspection by buying agent In cases where the export order is placed with the exporter through a buy-ing agent in his country, the goods can be dispatched only after the buying agent has issued the satisfaction report to the exporter. Buying agents conduct inspec-tion at different stages to ensure the shipment conforms to the quality requirements of the exporter. The buying agent conducts inspection of the quality at the time of purchase of the raw materials, during the manufacturing process; at the finished product stage and finally before packaging and packing of the goods. The exporter can send the shipment only after getting this certification of inspection from the buying agent. 4. Inspection by private sector agencies Sometimes, the buyer may specify an inspection agency in the exporter’s country to satisfy himself as regards quality of the goods. In such a case, the exporter should approach that agency in his country and get the pre-shipment inspection completed. In India, one of the leading agencies in the private sector is the SGS India Ltd. with its head office in Mumbai. The exporter should ascertain the procedure and documentation formalities of the agency
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If . c.1964. For example. established on 1. Issue of Rejection Note:. The EIAs has a network of nearly 62 offices throughout India. However. Declaration regarding importer’s technical specifications. 97 .the report is favourable. Chemicals and allied . c. Engineering ‘goods. b. Besides. The Council. the EIA of Mumbai has jutsdiction over Maharashtra. 1. and prohibit the export in the course of International Trade of a notified com-modity unless it is accompanied by a certificate issued under Section 7 that the commodity satisfied the condition relating to quality control or inspection.If the inspector is satisfied with the quality of goods. Gujarat and Goa. Where such facilities are not available. Details of packing specifications. d. Application to EIA :. Some of these items are: a. Packing and Sealing of Goods :. in favour of EIA towards inspection fees. he issues order for packing of goods in his presence. The Government of India has established five Export Inspection Agencies one each at Bombay.675. is a statutory body corporate with its own seal.1. e. the consignment is marked and sealed with the official seal of the Export Inspection Agency (EIA). the units not approved under Self-certification or IPQC systems are required to undergo the following procedure :a. 1963. Deputation of Inspector :. the Deputy Director of EIA issues a rejectioI1 note. the EIA deputes an inspector to conduct the pre-shipment inspection at the exporter’s factory or warehouse. The exporter should keep goods ready for inspection on the day: and time allotted for inspection. • • • • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION notify commodities which shall be subject to quality control or inspection or both prior to export.e. specify the type of quality control or i(inspection which shall be applied to a notified commodity.If the report submitted by the inspector is not favourable. Crossed cheque/D. 11. • • • The original copy is required to be submitted to the Customs. Spot checks may also be’ carried out whenever required. Inspection’. The most significant legislation to provide for sound envelopment of the export trade through quality control and pre shipment inspection is the Export (Quality Control and Inspection) Act 1963. the Deputy Director of EIA issues’ an inspection certificate in triplicate. Inspection and Testing :. adopt or recognise one or more standard specifications for a notified commodity. the Government of India has’ introduced compulsory Quality Control and’ Pre--Shipment Inspection for 90% of the items of export under one or the other system as per the Export (Quality Control and Preshipment Inspection) Act. establish.1966. or it has affixed or applied to it a mark or seal recognized by the Central Government as indicating that it conforms to the standard specifications applicable to it under clause ( c ) Copy’ of letter of credit. After packing.concerned so that the inspection of goods can be arranged to ensure timely shipment of goods. d. Agency issues the* Inspection Certificate on the basis of their performance reports as submitted by the EIA’s officials during the checks at all levels of production carried out by them.2. Textiles. the Government of India have established the Export Inspec-tion Council to advise the Government regarding measures for the enforcement of Quality Control and Inspection in relation to commodities intended for export.D. who are approved under Self-Certification and IPQC. jute and leather products such as footwear. Cochin. before the expected date of shipment along with the following documents:• Copy of export contract. inspection may be carried out at private independent laboratories. Cochin. The Government of India has set up Export Inspection Council (EIC) to monitor the. ‘ Procedure for Pre-shipment Inspection Those exporters.The exporter has to apply in the prescribed Intimation for Inspection’ form (in duplicate) to EIA at least 7 days. Delhi and Chennai under section 7 of the Export (Quality Control and Inspection) Act 1963 w. the Export Inspection Council has also recognized number of private agencies to act as inspection agencies to issue pre shipment inspection certificate” In order to promote exports of quality goods as per the international standards. quality of goods meant for exports.1 b.EIA. Under this Act. Compulsory Inspection Compulsory pre shipment inspection is carried out by various agencies of the Government in accordance with the regulations framed by the Government of India from time to time. The triplicate copy to be retained by the exporter for his record. After getting the ‘Intimation for. Calcutta. These agencies work under the administrative and technical control of the Export Inspection Council. Food and agricultural products. have to submit their applications in a prescribed ‘Intimation for Inspection’ form to the Export Inspection Agency The Export Inspection. Delhi and Chennai.f. The exporter is required to arrange for facilities required for the inspection. etc. Kolkata. The duplicate copy is dispatched to the importer. Submission of the Report to EIA and Issue of Inspection Certificate :. The EIC has set up five Export Inspection Agencies (EIA) at Mumbai. Under this Act. The report prepared by theinspector is submitted to the Deputy Director of .The inspector conducts inspection randomly and prepares the report to be submitted to EIA. Commercial invoice giving evidence of FOB value of export consignment. e. the Central Govern-ment is empowered to • • • • These EIAs have certain specific areas under their jurisdiction. f.products. Coir.

the EIA convenes a meeting of the Appellate Panel. Star Trading Houses and Super star Trading Houses. which amongst other include the following: 11.The exporter can file an appeal against the rejection note within 10 days from the date of the receipt of such note. The Inspector will examine the goods in the exporter’s premises with reference to the agreed specifications. the exporter submits the following documents to the Export Inspection Agency: i. The decision of the Appellate Panel is final and is binding on both the parties. BIS-14000. Application (Notice of Intimation) ii. Exporters who are registered with the Textile Committee.675. The Agency will issue certificate of inspection ‘on the declaration by the unit. Goods marked with ISI. Copy of Export Contract iv.Export Inspection Agency. which should not be inferior to the notified specifications. Importer’s Technical Specifications. export-oriented manufacturing /processing units are approved as “export. the Government enacted the Export (Quality Control and Inspection) Act as a single compre-hensive legislation to provide for the sound development of export trade of India. Methods of Quality Control and Pre-shipment According to the prevailing law in India. the exporter and the . there has been a qualitative change in the inspection system also. each arid every export consignment is subjected to a detailed inspection by the Export Inspection Agencies based on a financial sampling plan. a fairly large number of export goods are sub-jected to compulsory quality control and / or inspection by the agencies authorized by the Government of India before being allowed to be exported from the country. self-certification system has been introduced which is based on the concept that a manufacturing unit having established reputation for its products with sufficient in-built responsibility for quality assurance. Approved 100% EOUs and EPZ units. a. After a preliminary visit by the officer of the agency. On the basis of these recommendations. It submits its report to the. The Inspection Certificates carry a specific validity period within which the export consignment must be shipped. Units Exempted from the Inspection Procedure a. Note :. and iii. Procedurally. A Copy of Commercial Invoice iv. Inprocess Quality Control Under this system. Copy of Commercial Invoice iii. agency with its recom-mendations. There are three systems for quality control and inspection.1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 98 . The panel reviews the inspection report and if necessary examines the consignment again. ii. Consignment-wise Inspection Under this system. If the sample is found to conform to the recognised specifications/standard . These agencies have trained manpower and are equipped with laboratory facilities to carry out inspection tests and issue inspection certificates. could be permitted to certify its own products for export. ‘For the approval of a unit. Self-certification With the experience gained over the years in operating the Compulsory Quality Control and Pre-shipment Inspection Scheme in India. Importer’s Technical Specifications This application will be registered in the office of Agency. which have a network of offices spread all over the country. Trading Houses. Samples may be drawn and sent to the laboratory. which will appoint an Inspector for carrying out physical examination of the goods. The application is to be made on pre-scribed form known as Notice of Intimation along with: i.worthy” units because they possess the requisite infrastructure for manufacturing/ processing products of standard quality. for obtaining the Inspection certificate. Inprocess Quality Control. ISO9000. b. the Export Inspection Council was set up to formulate and supervise the inspection schemes with the help of Export Inspection Agencies. Crossed Cheque/Demand Draft for fee iii.g. Crossed cheque or Demand Draft for the inspection fee ii. it is to apply to the Export Inspection Agency on the prescribed Performa. Appeal against Rejection. On receipt of these “document(s. a manufactur-ing unit found qualifying against the prescribed norms. if required. Such a unit is allowed to inspect and clear goods for export without-an inspection by the Export Inspection Agency. The original of the certificate is to be submitted to the customs authorities for clear-ance of goods for export. This system is applicable to all the notified products by the Export Inspection Council other than those for which the In process Quality Control system is applicable. Export Houses. investigates the quality control facilities of the unit right from the raw material stage to packing. Self-certification. an inspection certificate for export is issued to the exporter. The original certificate is for the customs authorities. the unit is accorded the status of an export-worthy unit. Thereafter. These are: i. b. AGMARK. Consignment-wise Inspection. Items notified under the Export(Quality Control & Inspection) Act 1963 have also been exempted from compulsory preshipment inspection provided the exporter produce a firm letter from the overseas buyer to the effect that he does not want preshipment inspection from any official Indian inspection agency. which becomes the basis for the issuance of the Inspection Certifi-cate. the Inspector prepares the Field Inspection Report. For obtaining the inspection certificate under this system. This panel thoroughly. However this exemption would not be available if the item happens to be a potential health hazard or safety hazard. In 1965. For the purpose of operating this system. the Agency will issue inspection certificate in triplicate. On receiving the appeal. Recently. the exporter has to apply to the Export Inspection Agency well in advance to avoid ship- ment delays. a panel of experts will be appointed. Accord-ingly.

Granting Sales Tax Number:. Raw Materials /Bought out Components d.On receiving the security bond the STO grants sales Tax Registration number to the exporter. Application to STO :. The exporter has to affix required court fee stamp on each H form issued to him.675. in: the case of a partnership firm. Central Excise duties on the inputs used in manufacturing export products as well as on final export products is either exempted through production under bond or is refunded after export.a. a.The manufacturer submits ‘Sales tax return’ with one copy of “H” form to the STO and other copy is retained by him for reference.1 . Shop and Establishment Act and other licences. Such exemption is granted on both . The’ exporters are totally exempted from the central excise duty.. e. Process Control f. Certificate under Municipal Act. After-sales-service. However. export goods are either exempted from such taxes or these taxes are levied at the central. Import and excise duties levied on production and packing inputs are refunded under the Drawback Rules. Procedure for Registration with the STO Sales tax is a tax imposed by the State government on goods sold in or outside India. Product Quality b. Le. exportable goods are exempted from sales tax. Submission of a Security Bond:. b.The registered exporter is required to apply to the concerned STO for obtaining H form. b. Central Excise Formalities It is common practice all over world that the exports are not to bear the burden of indirect taxes. d. Required court fee stamps. Inspection of Documents: .• • • • • Sales and purchase register. 11. This duty is collected at source. Quality Audit h. Organisation and personnel for Quality Control e. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION c. in the case of a company Partnership deed. Sales Tax Claim:. Memorandum and Article of Association.a. before removal of goods from the factory premises. Design and Development c.The exporter is required to make an application in the prescribed form to the Sales Tax Office (STO) in ‘whose jurisdiction his (exporter’s) office is situated. 99 Statement of Sales and Purchase.After shipment of goods the exporter is required to fill up necessary details in ‘H’ form which is prepared in triplicate. Two latest passport size photograph of the applicant.The inspector inspects relevant books and documents such as. House rent or tax receipt. j. The following is the procedure for registration with the Sales Tax Authorities . such security bond should be supported by another firm registered with the STO. He should submit the following documents. The Government of India has laid down procedure for either getting the duty refunded or exemption from payment of duty. • • • A copy of letter of credit or confirmed export order.a. Partnership deed or Memorandum and Article of Association in original. Goods exported. The exporter retains one copy with himself and gives the other two to the seller/ manufacturer from whom he had purchased goods for export purpose. Procedure for Exemption from Sales Tax The unit approved under this system is recognised by notification under section 7 of the Act as the Agency for Quality Control and Inspection of specific products manufactured in the unit. A copy of invoice where goods are purchased from the local market for export purpose. The system removed the need for the manufacturing unit to seek certificate of inspec-tion from an outside Agency which provides an added advantage in the mechanism of exportation. Processing of ‘H’ Forms :. On receiving the application. The STO verifies the report and may call the exporter personally if certain clarifications are required. Laboratory g. c. and House-keeping and Maintenance • • Ration card.The inspector drafts a report’ and submits it to the STO. On receiving sales tax return the STO issues refund order for the refund of sales tax already paid. A copy of the shipping bill duly certified by the customs authority. The application should be accompanied by the following documents. Packaging i. provided the exporter or his firm is registered with the Sales Tax Authorities. But for claiming this exemption he is required to apply in “H” form to the concerned STO.The exporter is required to submit a security bond to the STO before getting the sales tax registration number. Xerox copy of the first and last page of the rationing card of proprietor or partners or directors. Report by the Inspector :. in the case of a company. • • • • • • • On getting the sales tax registration number the exporter is eligible for sales tax exemption. Certificate of Incorporation. Excise Duty Refund Excise duty is a tax imposed by the Central gO\1ermnent on goods manufactured in India. b. state and local levels on the inputs as well as on the final products. Any other relevant documents. Goods purchased from the local market for export purpose. Obtaining “H” Form:. STO deputes an inspector to visit the office of the exporter. Factory Act.

The market price of the excisable goods at the time of exportation is not less than the amount of rebate of duty claimed. Following documents should be filed for claiming rebate: a. 6 copies of AR4/AR5 Forms should be presented to the Range Superintendent at least 24 hours before the goods are to be removed from the factory. If custom officer is satisfied. interest against non-sanctioning of excise refund. Such bond should be supported by an appropriate bank guarantee to safeguard excise department’s financial .(without Payment of Excise Duty) a. Application in prescribed form. the 5th copy is retained by Range Superintendent for his record and future reference. The procedure for export of excisable goods (Except to Nepal and Bhutan) is subject to certaiI1) conditions and limitations :Conditions and Limitations :. Export under Rebate :. 100 Conditions for Central Excise Clearance As a part of further simplifications and rationalisation of excise rules announced by the Finance Minister. The exporter is required to furnish a General Bond (Surety or Security) to the Assistant Commissioner of Central 11. The documents required under Rule 12 are: 1. The amount of rebate of duty admissible is not less-than Rs. The officer returns original and sixtuplicate copies to the exporter and sends duplicate copy to the Rebate sanctioning Authority. and sixtuplicate copies of AR4/AR5 Forms are to be submitted to the Export Department of Customs House alongwith other shipping documents to prove that formal central excise clearance has been obtained from the jurisdictional Central Excise Authority. Invoices to be filled in four copies. Export under Bond :.Under this system.675. iii. b. All 6 copies of AR4/ AR5 Form are to be presented to the Range Superintendent before clearance of the cargo. “Allowed to export under claim for Central Excise Rebate”.The original. Conditions and Limitations :. d. Rebate may be either claimed from Jurisdictional Assistant Collector of Central Excise or Maritime collector. The excisable goods. ii) Maritime Central Excise Authority located at the port. But in those cases where physical examination by the central excise officer is solicited before the clearance of the cargo. b. vii. Duplicate copy of AR4 in sealed cover received from customs officer. Under the Self-Removal Procedure (SRP) Presence of the central excise officer at the factory at the time of clearance is not necessary. in favour of excise authorities.(under Payment of Excise Duty) a. the fourth copy is sent to the Chief Accounts officer (CAD) of the Maritime Central Excise Collectorate concerned. c. Following endorsement are to be given in all the 6 copies of AR4/ AR5 Forms. The sixth copy is also to be given to exporter or his authorised agent. which are to be exported under claim for rebate.1 . Original copy of AR4/AR5 Form. f. the amount of duty applicable to the goods to be cleared is debited and the balance is shown in the balance column iv. After verifying the details given in the afore-mentioned documents. x. duplicate and sixtuplicate copies of AR4/ AR5 Forms. viii. for a sum equivalent to the amount of excise chargeable on such goods. he would make endorsements in the original. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. In PLA the credit balance of the deposit account spent by the individual manufacturer with the central excise authority is shown. The excisable goods must be exported within 6 months from the date on which they were cleared for export from the factory of manufacturer or his warehouse. duplicate. an exporter is required to execute a bond. are to be marked as export cargo ‘in individual packages. vii. Rebate claim may be filed either from Maritime Collector or Jurisdictional Assistant Collector of Central Excise. 2. this leads to blockage of finance.However. Personal Ledger Account (PLA) is to be filled in specifying the amount of duty applicable to the export consignment as debit. b. necessary clearance must be obtained by the exporter in one of the following ways:a. if required Duly attested (copy of Bill of lading Duly attested copy of shipping Bill (Export promotion copy) Disclaimer certificate in case where claimant is other than exporter. c. the triplicate copy is sent to the Maritime Central Excise Collectorate-Refund section. The procedure followed is as under: i.Under this system. The exporters prepare four copies of Invoices giving all detail of the consignment. Refund Procedure under Rule 12: The authorities involved in the Rule are: i) Jurisdic-tional Central Excise Authority known as Central Excise Range Superintendent under whose jurisdiction the manufacturing unit is located. an exporter is required to pay excise initially and can claim it from the Central Excise department after the shipment of goods. the Range superintendent allows clearance of the cargo from the factory for onward transmission to the port of shipment. Procedural Formalities Let us now discuss various procedural formalities of excise rebate. a new set of Central Excise Rules. The excisable goods can be exported directly from a factory or warehouse after the payment of excise duty. Each time when goods are cleared. e. These marks and numbers are to be specified on AR4/AR5 Forms. However. AR 4/AR 5 Form to be filled in six copies. having jurisdiction over the port wherefrom the goods are to be shipped. The original and duplicate copies of AR4/ AR5 Forms are handed over to the exporter. 2001 has come into effect from 1 st March 2002. 500. ix. xi. all the 6 copies.

Sealing of Goods :. Procedure for Central Excise Clearance The following is the procedure for obtaining central excise clearance :a. 3.1 .The ACCE informs the.Original-White. in whose area the exporter’s factory or warehouse is located. Th quintuplicate copy of ARE-I is returned to the exporter for claiming any other incentive.Quadruplicate . by filling up four copies of ARE-I form having the following distinctive colours for easy verification and processing :1.675.” The exporter is required to make an application to the Superintendent or the Inspector of Central Excise.. Extra Copy . On receiving instructions from the ACCE the range superintendent deputes an inspector for clearance of goods for exports.Excise or the Maritime Commissioner for a sum equivalent to the duty chargeable on the goods.Green. b. Processing of ARE-I Forms:.ARE-I as endorsed by the inspector are processed as under:- EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ARE-I (Original) ARE-I ARE-I (Duplicate) (Triplicate) ARE-I (Quadruplicate) retained by the Range Superintendent ARE-I (Quintuplicate) Retained by the exporter for claiming other export incentives Return to the exporter Submitted to he Commissioner of Custom at the port of shipment Sent to the Maritime Commission or sent to the excise Rebate Audit Section In case rebate is to be claimed by EDI Returned to the Exporter Returned to The Exporter Claim of Excise refund ARE-I (Original) ARE-I (Duplicate) ARE-I (Triplicate) ARE-I (Quadruplicate) ARE-I (quintuplicate) The superintendent or Inspector of Central Excise returns the original and duplicate copy of ARE-I to the exporter.Blue. b. having jurisdiction over the factory of production or warehouse of the exporter. 2. he seals each package or the container in the manner as m9:Y be specified by the Commissioner of Central Excise and endorses each copy of the application.Pink. The excisable goods must be exported within 6 months from the date on which they were cleared for export from the factory of manufacturer or his warehouse. d. 101 11. The quaruplicate copy of ARE-I is retained by the superintendent or Inspector of Central Excise.Duplicate-Buff. range superintendent. Triplicate .The inspector verifies the goods mentioned in the application and the particulars of duty paid or payable. If satisfied. 5. Application to the Assistant Collector of Central Excise (ACCE) :. The triplicate copy of ARE-I is sent to the Maritime Commissioner at the port of shipment or to the excise Rebate Audit section in case rebate is to be claimed by electronic declaration on Electronic data Inter-change (EDI) system of customs. Information to the Range Superintendent :. 4. c.

These are: 1. ‘the Customs Officer ensures that the goods being exported are in accordance with different regulations. When export is under bond. • Duplicate copy of ARE-I received from the custom Legal Framework Section 50 of the Indian Customs Act requires the exporter to file a declaration in a prescribed form and submit supporting documents to enable the customs authorities to check declarations made by the exporter. Refund of Duty:. (iv) direction for the customs officer in the docks for physical examination of goods. customsauthorities. iii) verification and determination of rate of duty and collection of the duty amount.a. to assess and realise export duty/cess/charge according to the customs Tariff Act and any other fiscal legislation. to provide export data through the customs returns. Submission of the claim :.. There are four types of Shipping Bill/ Bill of export. Physical examination of goods in the docks in accordance with the examination’ order given at the Customs House. iv. Dutiable Shipping Bill/Bill of Export for those goods which attract export duty/cess. iii. Customs Clearance Stages There are four stages of customs involvement. In other cases (Le. Supervision of loading by the Customs Preventive Officer. Processing of documents at the Customs House i. • Duplicate copy of Central Excise Invoice under which Central Excise was paid on goods cleared for exports. 3. Cancellation of Documents :. to check that all the relevant regulatory provisions enforced by various authorities in the country have been duly complied with in respect of export. Export . b. Examination of Goods at the place of Export:.Commissioner of Central Excise compares details listed in the different copies of ARE-I • • • ii. 2. the person incharge of the conveyance vessel. is paid for the period between the expiry of three months and date of refund. to ensure that nothing goes out of the country against the laws of the land and that prohibitions and restrictions regarding outward cargo are duly enforced by the.For claiming rebate. etc. and 4. • Duly attested copy of Shipping bill. sort and value as have been declared by the exporter. The goods are of the same type.lf any refundable amount is not paid to the applicant within three months from the date of filing the claim. The objectives of the customs control are: i.duplicate and quintuplicate copy of the AREI to the Commissioner of Customs. vehicle.e. interest at a rate of 20% p. and v. g. The duplicate copy received from the Customs officer.At the port of shipment the exporter presents goods together with original . the Chief Excise Accounts Officer issues a cheque. die main office.Order. particularly in terms of the following :a. the Chief Excise Accounts Officer issues a letter Confirming credit given in the exporter’s bond account. This stage involves: i) checking up of documents to ensure that all relevant documents have been submitted.1 The original copy received from the exporter. f. to ensure authenticity of the value of outward cargo according to the customs valuation rules to check over and under invoicing. Customs Clearance Formalities According the Section 40 of. Under rebate on excise duty. cannot permit loading of export cargo at the Customs Station unless and until a.e. formal permission to the export given by the authorised Customs Officer is presented.If the excisable goods are not exported. known as Shipping Bill.675. If satisfied he certifies the goods for export by an endorsement on all the copies of ARE-I. a. These are: i. 102 . 1. (Quality \ Control and Inspection) Act and Foreign Exchange (Regulation) ‘Act are complied with. The triplicate copy received from the Central Excise officer.Assistant or Deputy. Provisions of Export (Control) . If he is satisfied that the exports are not under claim for duty drawback. The original and quintuplicate copies are returned to the exporter while the duplicate copy is sent to the Maritime Commissioner. Verification of the Application :. Documentary Requirements For movement of goods by air or by sea. the customs permission for shipment is given on a prescribed document. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Customs officer. the Customs Act. aircraft. he sanctions the rebate. The duty or success leviable thereon has been properly determined and paid c. h. ii) verification of quantity and value of goods. the exporter is required to submit the following documents along with the prescribed application in form “C” to the assistant or Dupty Commissioner of Central Excise or Maritime Commission of Central excise:• Original copy of ARE-I duly endorsed by the Before granting the permission. The Commissioner of Custom examines the Consignments. 2. Post-shipment endorsements by the Customs Preventive Officer. the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise cancels the export documents on request of the exporter. by road/rail) the document is known as Bill of Export. officer in a sealed cover. The rebate claim can also’ be claimed by electronic declaration on Electronic Data’ Inter-change (EDI) System. • Duly attested copy of Bill of Lending or Airway Bill. 11.

g. to the Customs Preventive Officer who endorses it with the’ ‘Let Ship Order’. The same can be arranged for at the factory or warehouse of the exporter by making an application to the. If the exporter fails to deliver the goods in that period. The C&F agent submits the duplicate copy of Shipping Bill. GR Form (original and duplicate) ARE-I Form. pre-shipment inspection and licensing have been complied with by the exporter.1 Bill of Exchange. c. Drawback Shipping Bill/Bill of Export for those goods which are covered by the Duty Drawback scheme. Submission of relevant documents to the bank and the process of getting the payment frain the bank is called “Negotiation of the Documents” and the documents are called ‘Negotiable Set of Documents’. if satisfied. hands over the Mate’s Receipt to the C&F Agent. Customs Examination and Issue of’ Let Export Order’:The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his presence. on receipt of port dues. The Customs Examiner. Contract registration certificate (wherever applicable) ix. Obtaining ‘Carting Order’ from the Port Trust Authorities :. Declaration regarding truth of statement made in the Shipping Bill iii. which is very important from exporter’s point of view.The C&F agent. Any other documents Shipping and Customs Formalities The following is the procedure for shipping and customs clearance a. ii. duly endorsed by the Customs Examiner. the exporter 01' his agent is required to submit the following set of documents alol1gwithwith five copies of shipping bill to the Customs Appraiser at the Custom House • • • • • • • • Appraiser is considered for all future transactions. Shipping Bill (in duplicate. Assistant Collector of Customs. Exporter or his agent submits the following documents to the customs department. Letter of credit (wherever applicable) x. Packing List xi. f. Obtaining ‘Let Ship Order’ from the Customs Preventive Officer :. Free Shipping Bill/Bill of Export for those goods which neither attract export duty/ cess nor are covered by the Duty Drawback scheme. EX-bond Shipping Bill/Bill of Export for those goods. After obtaining the Carting Order. iv. approaches the Superintendent of the concerned Port Trust for obtaining the ‘Carting Order’ for moving the cargo inside the dock. The Port Superintendent.ii.675. then. the cargo is physically moved into the port area and stored in the appropriate shed.‘Let Export Order’ must be supplemented by a ‘Let Ship Order’ issued by the Customs Preventive Officer. Presentation o/Documents to the Bank for Negotiation :After shipment of goods.The Customs Appraiser assesses the shipping bill and values the goods.the customs. Valuation of the Goods :. especially for the claim of incentives. Original Contract wherever available or correspondence leading to contract viii. i.The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate’s Receipt to the Port Superintendent. The above procedure is now processed through Electronic Data Interchange (EDI) System. One copy of Commercial Invoice: The validity of assessed shipping bill is for one month only. Sight Draft or Usance Draft. Quality Control Inspection Certificate (wherever required) vii. which are shipped from . issues a formal permission for the loading of cargo on the ship in the form of a ‘Let Export Order’. bonded warehouse. Verification of Documents :.The Customs Appraiser verifies the details listed in each document and ensures that all the formalities relating to exchange control. the exporter is required to submit the shipping documents to an authoiised dealer within 21 days of the date of shipment for negotiation. except : • • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Original copy of GR to be forwarded to the RBI. Procedure for Realisation of Export Proceeds The following is the procedure for the realisation of export proceeds :a. Original copy of Certificate of Inspection. All documents are returned to the exporter or his agent. The set normally contains :• Letter of Credit along with the export contract or export order Commercial Invoice (2 copies Packing List or Packing Note Certificate of Origin. d. quality control. 103 . he issues a ‘Shipping Bill Number’. Invoice copy G iv. b. Marine Insurance Policy. The Shipping Company issues two to three negotiable and two to three non-negotiable copies of Bill of Lading. The value of goods as determined by the Customs 11. he will have to undergo the above procedure again. Original copy of Shipping Bill. R Form v. e. Export Licence (wherever required) vi. where necessary. The II C&F Agent surrenders the Mate’s Receipt to the Shipping Company for obtaining the Bill of Lading. triplicate or quadruplicate) duly filled in and signed. If satisfied. iii. Obtaining Mate’s Receipt and Bill of Lading :. AR4/AR5 Forms (original and Duplicate) xii. Preparation and Submission of Export Documents :For the clearance of cargo from customs.

Invoice including one copy duly certified by the Customs. Packing List.1 104 . Exchange control copy of the Shipping Bill. It is of’ two types :Documents against Payment (Sight Drafts) :. Marine Insurance Policy. Realisation of Export Proceeds :.On receiving the documentary bill of exchange. The exporter’s bank receives the payment through importer’s bank and is credited to exporter’s account.675.The bank negotiates these documents to the importer’s bank in the manner as specified in the L/C. Q2. Explain the procedure involved in post-shipment stage of export.On receiving the export proceeds the exporter’s bank intimates the same to the RBI by recording the fact on the duplicate copy of GR. the drawer instructs the bank to hand over the relevant documents to the importer only against payment. The bank then sends the Bank Certificate and attested copies of commercial invoice to the exporter. Despatch of Documents :. Documents against Acceptance (Usance Draft) :{p case of usance draft. Before negotiating documents. the drawer instructs the bank to hand over the relevant documents to the importer against his ‘acceptance’ of the bill of exchange. 11. d. What are the different methods of Quality Control and Pre-shipment Inspection? Explain the procedure for pre-shipment inspection. Letter of Indemnity :.Bill of Exchange accompanied by the above documents is known as d1e Documentary Bill of Exchange. List the authorities with which an exporter is required to register before exporting. Q6. The RBI verifies the details in duplicate copy of GR with the original copy of GR received from the Customs. the importer releases payment in case of sight draft or accepts the usance draft undertaking to pay on maturity of the bill of exchange. Foreign exchange declaration forms. etc. • Acceptance of the Bill of Exchange :. Customs Invoice. GSP or APR Certificate. Original Letter of Credit. Explain the procedure involved in pre-shipment stage of export. If the details are found to be in order then the export transaction is treated to be completed. Q4. • • c. Q3.• • • • • • • • • Full set of Bill of Lading or Airway Bill. GR/SOFTEX/PP forms in duplicate. Explain the procedure involved in shipment stage of export. the exporter’s bank scrutinises them in order to ensure that all formalities have been complied with and all documents are in order. Commercial.In case of sight draft. Q5. in duplicate. By signing the letter of indemnity the exporter undertakes to indemnify the bank in the event of non-receipt of payment from the importer along with accrued interests. Certificate of Origin. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION b. Questions Bank Q1. Processing of GR form:.The exporter can get immediate payment from his ‘bank on the submission of documents by signing a letter of indemnity. e.

Ministry of Finance of the Government of India. Exporters have to see. This alone will ensure fuller realisation of export incentives on a regular basis. The task of the exporters has been rendered further difficult and complicated because of the fact that each incentive. as per the existing rules. Objectives • • • • • • Introduction You have learnt about the infrastructure and various export incentives provided by Govern-ment of India in previous chapter.1 . etc. Drawback is given both to the manufacturers. components and packing materials used in export products are refunded back to the exporter. exporters or merchant-exporters and export/trading houses.basis. Need for Procedural Formalities Procedural formalities prescribed for claiming various exportincentives need timely and proper compliance on the part of exporters. etc. Unfortunately. Under these rules. Moreover. exporters have to take necessary care and precautions at the time and stage of export-shipment to claim the export incentives. sales tax. you should be able to: explain the need for procedural formalities of export incentives describe the process of claiming duty drawback explain the methods of claiming excise incentives under various schemes of central excise rules describe various facilities of duty exemption scheme describe the procedure of exemption under income-tax. Thus. Thus the drawback refers to the rebate of duty chargeable on any imported or excisable material used in the manufacture of goods exported from India. refund) under the incentive scheme of duty drawback. Hence. Delays and cuts in the realisation 11. It may be desirable to prepare an action plan by the export department of the firm for filing claims of export incentives to different authorities on a planned basis. These incentives are instrumental for the export promotion in India. exporters are also required to follow different procedural and documentary formalities in each case.e. import duties and central excise duties on material inputs for export products are allowed to be . However. Duty Drawback Scheme The scheme of Duty Drawback is governed by the ‘Customs and Central Excise Duties Drawback Rules’ compiled and notified by ‘Drawback Directorate’ of the Department of Revenue. You will also be acquainted with various facilities of duty exemption scheme and tax exemption scheme..e. customs duties and central excise duties on raw materials. the basic documents required for filing these claims emanate from the process of physical shipment of export cargo. Moreover. i. besides multiplicity of authori-ties to be approached for realising claims of export incentives. export incentives are to be claimed on post.export . In this Unit. that the claims of export incentives after the shipment are not adversely affected due to incomplete or inadequate information in the documents supporting the fact of actual shipment of export cargo. and will render the export effort unremunerative on the other. after effecting exports.disbursement authority has prescribed its own exclusive procedure and documentary requirements for processing claims of export incentives. exporters are required to comply various procedural formalities for fuller realisation of export incentives on a regular basis.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 15: PROCEDURES FOR CLAIMING EXPORT INCENTIVES • • • • Objectives Introduction Need for Procedural Formalities Duty Drawback Scheme Drawback Rates Procedure for Claiming Duty Drawback Refund of Central Excise Export Under Claim of Rebate Under Rule 12 (i) (A) Export Under Claim for Rebate of Duty on Excisable Materials used in the Manufacture of Export Goods Rule 12 (i)(B) Export of Goods Under Bond Under Rule 13 • of export incentives will upset the fund-flow position of the export firm on the one hand. you will learn the procedure of claiming incentives under duty drawback rules and central excise rules. This calls for the need for a total plan of action from factory to realisation of incentives against each export transaction. drawnback (i. It is therefore. Levy of 105 • Duty Exemption/Remission Scheme Duty Exemption Scheme Duty Remission Scheme • Tax Exemption Income Tax Exemption Sales Tax Exemption • • Let Us Sum Up Terminal Questions After studying this unit. According to the Drawback Rules 1995.675. draw-back has been permitted not only on materials/ inputs used in the manufacture but also processed or subjected to any other operation for export of goods from India. essential for the exporters to develop a complete understanding about the procedural and documentary formalities for timely prepa-ration and submission of claims of export incentives to the appropriate authorities on a regular basis. In other words. on post-export basis. exporters in India are required to approach a number of authorities for realisation of export incentives against each export transaction.

The Shipping Bills and other documents are scrutinised and examined by the concerned customs officer. Govern-ment of India. Exporters have to make sure that no separate claim is being made for rebate of central excise duties under the Central Excise Rules. it should also have a declaration that exports are being made under a claim of duty drawback. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. In addition. The documents prescribed for such application are as under: i. Any other documents. he will determine the amount or rate of drawback in respect of such goods. Copy of Test Report (if required) vii. However. product description. Drawback will also not be admis-sible if MODV AT is availed of. A copy of such application should be sent directly to the Director (Drawback). Insurance certificate whenerever necessary. as the case may be. Sometime the amount or rate of drawback are not determined in respect of export goods. Ministry of Finance or with the Customs House/Central Excise Collector ate in whose jurisdiction their manufacturing unit is located. Copy of packing list. If satisfied. OBI Statement I iii. He may request that a provisional amount be granted to him towards on export of such goods. for making provisional claims of duty drawback an exporter may be required to execute a general bond for the amount of drawback claim. Brand Rates or Special Brand Rates: These are fixed on the individual request of an exporter/manufacturer. At the same time. The application must be submitted within 60 days from the date of export. Declarations (if required) viii. Drawback will not be allowed if the total foreign exchange spent on inputs used in the goods exported is more than the FOB value of the exports or the value addition is negative. Documents: The claim for duty drawback is filed alongwith the following documents: i. are sanctioned. well in advance in the Export Department or Central Registra-tion Unit at the port or ICD Container Freight Station/Air Cargo Complex. Application for Fixation of Drawbacks Rates’. They are: i. In such cases the manufacturer or exporter of such goods may apply in the prescribed form . New Delhi for fixation of Brand Rate. 11. he may. The Custom Officer gives examination report on both the copies of shipping bills and returns duplicate and triplicate copies to the exporters and original copy is retained. the customs/central excise officer will verify the application and forward to the Director (Drawback). The amount is credited in the ledger account of the exporter maintained in the Drawback section. New Delhi. Draw-back will also not be allowed if the export value of goods is less than the value of the im-ported material used in the manufacture of the export goods or where the sale proceeds of the exported goods are not received within the specified limit. he endorses ‘Let Export’ order on both copies of the shipping bills. ii. in quadruplicate if any export assistance is applicable. All Industry Rates: These are published in the form of notification by the government every year and are normally valid for one year. Copy of export contract or letter of credit. Bills with suitable examination order are returned to the exporters for presenting them to the Docks Appraising Officer. The DBK Shipping Bill must indicate the DBK Schedule No. v. Interest at such rate as may be fixed by the Board would be leviable in case payment against a claim for drawback is not made within three months of filing the claim in the prescribed manner. If claims are found admissible and in order. The exporters are 106 required to file the drawback copy of shipping bill in triplicate. Certificate from the Jurisdictional Excise Superintendent (if applicable) x. iii. The rates at which the incentive of duty drawback will be granted to individual exporter have been specified product-wise in the drawback schedule specified under the drawback rules. of the export product. Ministry of Finance. pending determination of the amount or rate of drawback. etc. Exporters present duplicate and triplicate copy of shipping bills duly examined by the customs office to the Docks Appraising Officer alongwith the export goods. Relevant facts including the proportion in which the material or components are used in the production or manufacture of goods and duties paid on such material or components. DBK Statement II iv. Drawback Rates Two types of drawback rates are available. DBK rate and total amount of drawback claim. apply in writing to the Drawback Directorate. with the Collector of Customs at the port from which the said goods are exported. Copy of AR4 form. Procedure for Claiming Duty Drawback The claim of Duty Drawback (DBK) is processed and passed for payment. Where an exporter desires that he may be granted the incentives of drawback provisionally. Declaration regarding not availing MODV AT ix.interest on delayed payment of drawback has also been permitted.675. The application should be submitted to the Department of Revenue. Triplicate copy of the shipping bill is deemed to be a claim for the drawback. Duplicate and Triplicate copies of the Shipping.1 . after making the application. Application for Fixation of Drawback Rates ii. If the officer finds it in order. DBK Statement III v. Copy of communication regarding rate of drawback (if applicable) vi. there should also be a declaration that the duties of customs and central excise have been paid in respect of the material inputs used in manufacture of export goods as also in respect of container or packing materials. iv. wherever applicable. primarily on the basis of the relevant information given in the drawback copy of shipping bill. Ministry of Finance. The Government have also provided simplified procedure of brand rate fixation without insisting on pre-verification of data by the Drawback Department. On receipt of the application.

1944 as amended from time to time. After the proof of exportation. only one Rules 12 operates for exports under claim for rebate of duty. The credit is given against their Duty Drawback entitlements pending scrutiny. The scheme is governed by the section. Refund of Central Excise Refund of central excise is an important fiscal incentive for export promotion. Form C: It is an application for refund of excise duty. quadruplicate. It can be elaborated as under: i. The exporter delivers triplicate. the equivalent amount is again entered on the credit side. and 91-BB of Central Excise Rules have been integrated into Rule 13. the Government of India have authorised the Reserve Bank of India to instruct the commercial banks (Authorised Dealers in Foreign Exchange) to grant interest-free credit to the exporters. product description. Rule 13. make an application in writing to the Drawback Directorate for fixation of appropriate amount or rate of drawback. both on finished product and raw materials. the credit balance of the deposit account opened by individual manufacturers with the Central Excise Authority is shown. Export under Claim of Rebate under Rule 12(I)(A) Under the Central Excise Rule 12(i)(A). For this purpose. PLA is not needed in case of exporters under bond because the duty has not been actually paid. exports should not bear the burden of indirect taxes. In PLA.fourth of the duties paid on the materials or compo-nents used in the production or manufacture of the said goods. Both AR4 and ARS forms can be used for export in Bond or under Rebate of Central Excise duty. It contains details like AR4 Form No. the quintuplicate to the office copy.If the rate of drawback is less than three. Let us first learn how they are used. The jurisdictional superintendent shall examine the information and verify the facts of payment of duty. Such interest-free credit is being made available to exporters in India for a period of90 days. Let us discuss the procedure in detail. AR4/ AR5 Forms: It is prepared in sixtuplicate. Drawback on export by post: Where goods are to be exported by post under a claim of drawback. The rule permits to grant rebate on all excisable goods except mineral oil and goods supplied as ship stores. AR4 Form is also used where finished stage duty is paid and a rebate thereof is to be claimed after export. Documents: The major excise document are: Invoices: Invoices are prepared in four copies. Duty Drawback Credit Scheme: As an export promotional measure. The original copy is for the buyer. the scheme is applicable only for export of such products for which Drawback rates have already been determined either on allindustry rate basis or on brand-rate basis. he may within sixty days from the date of export. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. 1995 . the outer surface of the packing must be marked as ‘DRA WBACK.675. The. The sealing of goods is done by the Central Excise Officers. rebate of duty paid on export of duty paid goods shall be granted. drawback rate and amount. 12A and 191A of the Central Excise Rules. AR4 Forms are prepared in sixtuplicate. the amount of duty actually levied on the consignment is shown as debit entry. He sends the triplicate copy to the rebate sanctioning authority. quadruplicate to the chief accounts officer in the collectorate headquarters. At the time of removal of a consignment. In India. name and address of the factory and its licence number. Removal of Goods Without Examination: Exporters are allowed to remove the goods for export without getting the goods examined by the Central Excise Officers. Form AR5 is used where goods are manufactured/exported without the payment of duty or inputs (input stage duty). These forms should be deliv-ered within twenty-four hours of the removal of the consignment. The exporter retains the original and duplicate copies of AR4 Forms for presenting along with the consignment to the customs officer. AR5 form is also used where inputs stage duty is not paid but duty on finished goods is paid and the rebate thereof is to be claimed after export. Form A R4 is to be used in case of exports in Bond. duplicate for the transporter. triplicate for the 11.1 Central Excise Officer and fourth copy for manufacturer’s record. Hence. Manufacturer’s of export product are required to register their factories with the local Central Excise Authorities. The rebate is granted on the duty levied at finished product and on inputs for this finished product. The procedure and documents required for such application is the same mentioned earlier for fixation of drawback rates. In such cases. if exemption is not possible. of all goods without payment of duty on finished item (not on inputs). the exporters will submit to the postal Authorities a Drawback Claim Form instead of a shipping bill giving details regarding drawback schedule number. It can be elaborated as under: i. sanction and payment by the Custom House.EXPORT’. Exports under Central Excise Seal (After Examination): Exporters are allowed to remove the goods for export in a seal. excisable goods are free from the incidence of excise duty levied by the central government. exporters are required to 107 . AR4 form is to be used where either finished stage duty is not paid or its rebate is to be claimed later on. If the is satisfied with the information. As you know. However. and date of Shipping bill. AR5 form is used where no duty is paid on production inputs and the finished stage duty is also not paid on account of their export being made in bond. he will sign and put stamp on R4 Forms. In lieu of the Rules 12. tariff classification of the goods exported and shipment details. sealed exportable goods are not examined by the customs officers at the port. by opening Personal Ledger Account (PLA). quintuplicate and sixtuplicate copies to Superintendent of Central Excise having jurisdiction over the factory or the warehouse.duty paid raw material for manufacture and exp0l1 of excisable goods. 37 of the Central Excise and Salt Act. It has been amended on September 22. This rule is applied for exports of goods in bond and utilisation of non. ii. 191-B. exportable goods are either exempted from such taxes or these taxes are refunded. The facility is available on export of goods to all countries other than Nepal and Bhutan. retained by the central excise officer and sixtuplicate to the exporter.

If the officer is satisfied with the details of exportable goods. He returns original. should be submitted at least twenty four hours before the removal of the exportable goods.675. assemblies. he allows the export of the goods. Procedural Formalities: The manufacturers are required to prepare ARS Forms in Sixtuplicate. The facility of input stage credit is availed under MODV A T provisions under Chapter V AA of Central Excise Rule. The Superintendent of Central Excise shall examine and verify the facts. The superin-tendent of central excise or his inspector may go for sealing of goods. relevant information and verifies the factors of payment of duty. Finished goods may also be exported after payment of Central Excise duty leviable on finished goods under claim of Rebate (Rule 12(i) (a)). Submission of Forms at the Customs Officers: The exporters present the original. duplicate and sixtuplicate copies of AR4 forms. duplicate and sixtuplicate copies to the exporter for presenting to the customs officer at the port. The officer shall examine and verify the information furnished by the manufac-turer. 1944. He would hand over two sealed samples to the manufacturer or his authorised agent for delivering to the custom officer at the point of export. The exportable goods under AR5 form will be moved directly from the place of manufacture to the place of export. The custom officer examines and verifies the goods and other relevant facts. Duly attested copy of Shipping Bill (Export Promotion Copy) vi. intermediate goods. he ensures that it is not broken. if necessary. In order to claim this rebate on the input stage. quadruplicate to the chief accounts officer at his collectorate headquarters and retains the quintuplicate copy for records. sub-assemblies. the manufacturer may avail the facility of export. The manufacturer of finished goods are required to file a declaration in quintuplicate to the Collector of Central Excise having jurisdiction over the factory. The exporter shall use the sixtuplicate copy for the purposes of claiming drawback. If he is satisfied he shall sanction the rebate either in whole or in part as the case may be. The officer sends triplicate copy to the rebate sanctioning authority. The claim should be f1iled in the prescribed form alongwith original copy of the AR4 form duly endorsed by the custom officer certifying the export of the goods. components. he would sign on all six copies of AR4 forms and allow the clearance of goods. He returns original and sixtuplicate copies to the exporter. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. The rebate may be granted on the duty paid on raw materials. The Superintendent shall draw samples wherever feasible in triplicate. Original copy of AR4 form iii. the export must be in the name of the exporter. Export under Claim for Rebate of Duty on Excisable Materials used in the Manufacture of Export Goods (Rule 12(i)(b) Under Central Excise Rule 12(i)(B) rebate has been granted on the duty paid on raw materials inputs used in the manufacture of the finished goods exported from India’ except to Nepal or Bhutan. The packages are required to be marked legibly in ink or oil colour in a durable manner with progressive number. accessories. consumab1es. The exporters are required to tile the claim within six months from the date of export. The custom officer makes endorsement on the original. He examines the goods. The rebate of input stage may be claimed on the export pf all finished goods whether excisable or not. if required. Two sets of the sealed samples are handed over to the exporters for delivering to the customs officer at the port. He would retain the third 11. he will allow the clearances for exports by signing and putting stamp on AR5 forms. The officer retains third set for his record. the finished goods are exported under claim for duty drawback. The Collector of Central Excise may nominate suitable officer for verifying the declaration. Disclaimer Certificate in case claimant is other than exporter. Application in prescribed form ii. In case of export under seal. The rebate on input stage can not be claimed where: i. Maritime Collector of Central Excise or Jurisdic-tional Assistant Collector will compare the original AR4 form with the triplicate copy of AR4 form received from the Superintendent. parts and packing materials required for manufacture of export goods.1 108 . Duly attested copy of Bill of Lading v. semi. Rebate may be granted on any excisable materials used in the manufacture and packing of the goods exported.finished goods.submit 6 copies of AR4 forms to the superintendent of central excise having jurisdiction over the factory or warehouse. Where export goods are dutiable. iv. The finished goods are exported in discharge of export obligation under a Value Based Advance Licence or a Quantity Based Advanced Licence issued before 31 -03-1995. the details of materials required and their consump-tion ratios. If the officer is satisfied. These for. Filing Claim for Rebate: Exporters have been granted option of claiming rebate either from Maritime Collector or Jurisdictional Assistant Collector of Central Excise. He may also draw samples. and sends duplicate copy to the rebate sanctioning authority. Duplicate copy of AR4 form in sealed cover received from custom officer. Central Excise. in triplicate. he may grant permission to the applicant for manufacture and export of finished goods under claim for Rebate of Central Excise duties paid on materials/ inputs used in the manufacture of finished goods. If he is satisfied. iii. The declaration shall contain details of finished goods to be exported. He shall submit them to the Jurisdictional Superintendent of Central Excise atleast 24 hours before the removal of the goods for export from the factory. without payment of Central Excise duty on finished goods under Central Excise Bond (Rule l3(i)(a). certificates and declaration made by the manufacturer. If the Superinten-dent is satisfied. duplicate and sixtuplicate copies of AR4 forms to the customs officer at the port alongwith the con-signment. Documents: Following documents are required to be tiled for claiming rebate: i.

A II the excisable items and the raw materials required for their production are covered under this scheme. AR4/AR5 forms and execute the relevant bond for this purpose. Manufacturer exporters who have executed B 16 bond are not required to execute separate bond to cover duty on goods exported without payment of duty. Export of Goods under Bond under Rule 13 The exporters have been permitted to export the excisable goods without the payment of central excise duty. the same should be claimed in the combined application for rebate. Original copy of AR5 form duly endorsed by the custom officer. Suitable 11. In this case. If the Assistant Collector is satisfied. There are also provisions for export under bond on a regular basis. Sixtuplicate copy will be presented in the custom house for record. Duplicate copy of Central Excise Invoice (Where rebate under Rule 12(i) (a) is also being claimed). v. For this purpose. On acceptance of the proof of export the bond account shall be credited to the extent the debit was made while permitting the exports. Duly attested copy of Bill of Lading! Airway Bill. He would send the triplicate copy to the authority before whom the bond is executed. If he is satisfied. He may draw the samples in triplicate When necessary. The export-ers can execute a consolidated B 1 general bonds to cover a series of export from his factory or B 16 bonds with the prescribed excise authority. He would give the original and sixtuplicate copies to the exporter. debit shall also be made whenever exports are allowed against the bond. iii. He would send quadruplicate copy to the Chief Account Officer and retain the quintuplicate copy for his record. The exporters shall retain the original and duplicate copies for present-ing to the custom officer at the point of export alongwith the consignment. Claiming of Rebate: The application for rebate is made to the Jurisdictional Assistant Collector of Central Excise. the custom officer would make endorsements in the original. The exporter will use the original copy of AR5 form for claiming rebate from the Jurisdictional Assistant Collector of Central Excise. Quadruplicate copy to be given to Chief Accounts Officer at the Collectorate headquarter. Duly attested copy of Shipping Bill (Export Promotion Copy). iv. B 1 (Surety) and B 1 (Security) bonds are to be executed for an individual excisable consignment. exporters are allowed to remove the goods without the examination of Central Excise Author-ity. The custom officer shall examine them carefully. If he is satisfied. he would a How the clearance of goods. the exporter shall submit AR4/AR5 forms in sixtuplicate to the Jurisdictional Superintendent of Central Excise.1 109 . Triplicate copy will be sent to the Jurisdic-tional Assistant Collector of Excise. Sixtuplicate copy will be returned to the exporter. quadruplicate. he may clear the goods for shipment. Merchant exporters other than registered exporters shall execute B I bond with 25% security/ bank guarantee. Exporters shall prepare Invoices. The forms should be submitted within twenty four hours of the removal of goods. Removal of goods after the examination of Central Excise Authority: In this case. After the shipment of the goods. This is covered under Rule 14. duplicate and sixtuplicate copies of the AR5 forms shall be presented by the exporter or his agent to the customs officer at the point of export alongwith the goods. duplicate and sixtuplicate copies of the AR5 forms by putting his signature and stamp. The third set will be retained for his record. the amount of bond is determined on the basis of the excise duty involved in export transaction over a period of time. Where exports are under claim for rebate under Rule 12(i) (a). The Jurisdictional Superintendent of Central Excise shall examine the consignment and relevant information. quintuplicate and sixtuplicate copies of AR4/AR5 forms to-the Jurisdictional Superintendent of Central Excise. whenever ‘any block transfer are made in favour of other central excise authority. Procedure: Packages in which goods to be exported are packed. Removal of Goods Without the examination of Central Excise Authority: As you have learnt. The original. If the Excise Officer is satisfied. Duplicate copy of the AR5 form received from the custom officer in a sealed cover (if obtained).. He shall return original and duplicate copies of AR4/ EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. The running bond account shall be credited after the block transfer is returned by the other authority There are six types of bonds. are required to execute B 1/B 16 bond with 100% security/bank guarantee. shall be legibly marked in ink or oil colour or in such other durable manner as the Commissioner of Central Excise may allow. These are: Bl (Surity) and BI (Security). Running Bond Account is maintained. Exporters ~e required to execute a bond with the Central Excise Authority equivalent to the amount of excise duty on the basis of their estimate. Two sets of sealed sample will be returned to the exporter for delivering to the customs officer at the point of export. Manufacturer-exporters other than those registered with EPCs and Central Excise. debit shall be made in the account. generally regarded as transit period.675. The Superintendent of Central Excise will hand over original.set for record. Exporters are required to submit the application forms twenty four hours before the removal of goods. he would a How the clearance of goods. Exporters shall prepare AR4/AR5 Forms in sixtuplicate. duplicate and sixtuplicate copies of AR5 forms to the exporter. Documents: Following documents should be submitted for filing claims: i. Bl (General Surity). he will sanction the rebate. and B1 (General Security). The duplicate copy will be sent to the Assistant Collector of Central Excise. Exporters are required to maintain a bond account of requisite value with the Central Excise Authority of the region. B 16 (General Surety) and B 16 (General Security). Export Houses. They will deliver triplicate. The export consignment shall be sealed by the Superintendent of Central Excise before permitting clearances. etc. Shipping Bill and sealed samples. The Excise Authority shall examine the goods and relevant information.

He would return original and sixtuplicate copies to exporters. repairing etc.AR5 forms to the exporter for presenting to the Custom Officer at the point of export. Such licences other than the advance licence for deemed export. Duplicate copy of AR4/AR5 forms in a sealed cover received from Custom Officer. duplicate and sixtuplicate copies of AR4/AR5 forms. ii. Duty Remission Scheme EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Duty Remission Scheme consists of Duty Free Replenishment Certificate and Duty Entitlement Passbook Scheme. Let us discuss them in detail. Such inputs shall be subject to the payment of additional customs duty equal to the excise duty at the time of import. This certifi-cate shall be issued for import of inputs. Compliance with Export Policy: The restricted goods may be exported without specific export licence under advance licence issued with prior import condition. required for manufacture of the product for executing export orders. Let us learn them in detail. to the fulfillment of a time bound export obligation as specified in the policy.675.. Quintuplicate copy shall be retained for records. iv. packing materials. are exempted from payment of basic customs duty. Duty Remission Scheme enables post export replenishment/remission of duty on inputs used in the export product. duplicate and sixtuplicate copies of AR4/AR5 forms to the custom authority at the point of export alongwith the consignment. Duty Free Replenishment certificate shall be issued only in respect of export products covered under the Standard Input Output Norms (SIONS) as notified by DGFT. The validity period of this licence shall be 12 months. iii. Let us learn them in detail. Duly attested copy of Shipping Bill (Export Promotion Copy). The licences are subject. In such case. Duty Exemption Secheme Registered exporters are eligible for the facility of duty free import of raw materials. The duplicate copy will be sent to the authority before whom the bond was executed. surcharge and special additional duty. The licences sha1l be exempted from basic customs duty. having same quality. Advance Licence for Intermediate supply: Advance licence may be issued for intermediate supply to a manufacturerexporter for the import of inputs required in the manufacture of goods to be supplied to the ultimate exporter/deemed exporter holding another advance licence. The custom officer will check the consignment and verify the relevant information. surcharge and additional customs duty only. anti-dumping duty and safeguard duty. technical charac-teristics and specifications as used in the end product indicated in the shipping’ bill. which are physically incorporated in the export product. Back to Back Inland Letter of Credit: An advance licence holder except advance licence for intermediate supply and the holder of DFRC may avail the facility of back to back inland letter of credit instead of Advance Release order. The triplicate copy shall be sent to the authority with whom the exporters have signed the bond. supplied free of cost may be permitted for the purpose of jobbing without a licence as per the terms of notification issued by Department of Revenue . Export Obligation: The Period for fulfillment of export obligation shall be as prescribed in the policy. Quadruplicate copy will be sent to the Chief Account Officer at the headquarter. the exported product shall be manufactured only out of the imported inputs under advance licence. Duly attested copy of Bill of Lading. Duty Exemption Scheme enables import of inputs required for export production. The certificate shall be subject to a minimum value addition of 33%. An advance licence for deemed export can also be availed by the sub-contractor of the main contractor to such project. Prohibited Items: Prohibited items shall not be imported under this scheme. Duty Exemption Scheme Advance licence for deemed export: Advance licence can be issued for deemed export to the main contractor for import of inputs required in the manufacture of goods to be supplied to the categories mentioned in the policy. DFRC and the material imported against it shall be freely transferable. as per SION. Advance Licence: An advance licence is issued for duty free import of inputs subject to actual user condition according to the EXIM Policy. the custom officer would make endorsements on original. Advance licence can be issued for: i) physical exports ii) Intermediate supply and iii) Deemed exports The licences are issued to the manufacturer exporter or the merchant exporter. Documents: Following documents shall be filed by the exporter as a proof of export of goods i. he would clear the goods for shipment. 110 11. An advance licence is issued under duty exemption scheme to allow import of inputs. If he is satisfied. Original copy of AR4/AR5 forms. The licences and/or materials imported there under sha1l not be transferable even after completion of export obligation. After the shipment of the goods. The exporters shall present original. compo-nents. The scheme allows drawback of import charges on inputs used in the export product. The licences are issued to make a positive value addition. etc.1 . surcharge. for re-export: Import of goods including restricted items. additional customs duty. The sixtuplicate copy shall be given to the exporter in a sealed cover for handing over to the Custom Officer. Duty Free Replenishment Certificate (DFRC): This certificate is issued to a merchant exporter or manufacturer exporter for the import of inputs used in the manufacturer of goods without payment of basic customs duty. Advance Release Orders: An advance licence holder except advance licence for intermediate supply and the holder of DFRC intending to source the inputs from indigenous sources/ cenalising agencies / EOU/ EPZ/ SEZ/ EHTP/ STP units in lieu of direct import has the option to source them against advance release orders denominated in foreign exchange/ Indian rupees. if any. The other provisions under DFRC are as follow: Jobbing.

The exporter should enclose the following documents for issuance of Form-H. Sales Tax Exemption Purchase of goods meant for exports are exempted from sales tax. The supplier submits original of Form-H and proof of export to the Sales Tax Authority. Rebate on royalties. iii. iv. Let us sum up Exporters are required to comply various procedural formalities for fuller realisation of export incentives on a regular basis. parts. Copy of Invoice duly certified. television software. Under this scheme. i. etc. Government of India have provided various schemes of export incentives. used in the goods exported.1 111 . iii. xi. viii. The neutralisation is provided by way of grant of duty credit against the export goods. The seller will then submit the proof of export along with Form-H to the sales tax Authorities. xii. Duty drawback can be claimed by the exporter at EXPOR T IMPORT PROCEDURE AND DOCUMENTATION In order to promote export. There is a provision for tax exemption of plantation subsidy. components and packing materials used in export product are refunded to the exporters on postexport basis. The other provisions are as follow: Validity: DEPB shall be valid for a period of 12 months from the date of issue. There is a Provision for deduction of the profit from business of export or transfer of film software. Applicability of drawback: The exports made under the DEPB scheme shall not be entitled for drawback. Transferability: DEPB and / or the items imported against it are freely transferable. iv. Therefore exporters have to take necessary care and precautions at the time and stage of export shipment.675. an exporter may apply for credit as a specified percentage of FOB value of exports made in freely convertible currency. ii. dividends etc . ii. may avail the facility of DEPS. etc. who are not desirous of availing the licensing facility. Tax rebate is given on remuneration received on services rendered outside India. The part of the profits derived from export of specified goods or merchandise of exporters and/or the supporting manufacturers is deducted from the total profit. However. Value addition: The following formula is used for value addition. Copy of confirmed export order. The major incentives are: i. sportsman. commissions. The objective of this scheme is to neutralise the incidence of customs duty on the import content of export product. A’ specified amount of profits of companies engaged in the business of hotel or of a tour operate or a travel agent is deducted from the total profit. Tax relief is provided to playwrights. whether imported or indigenous. duly certified by the customs authority. artiste. The profits from export or transfer of film NT software. Let us now discuss them. The holder of DEPB shall have the option to pay additional customs duty. vi. There is a provision for tax relief to an Indian Company or resident taxpayer by giving a specified deduction of 50% of 11. There is a provision for ten year tax holiday to units in FTZ/EPZ/1 00% EOU ending with the year 20 I 0-20 11.from certain foreign enterprises are granted. plus any other imported materials used on which the benefit of duty drawback is being claimed. etc. Duty Entitlement Passbook Scheme (DEPB): The exporters. vii. This credit is made available for the import of raw materials intermediates components. the exporter should first get the items concerned covered under his local sales tax registration certificate and apply for issuance of Form-H. Value addition = A-B/Bx 100 A = FOB value of the export realised /FOR value of supply received B = CIF value of the in ported inputs covered by the licence. various taxes and duties have been exempted. Export incentives are to be claimed on post-export basis. along with Form-H. if any. Admissibility of drawback: In case of advance licence. telecast rights are partially deducted. Copy of letter of credit. There is a provision for the tax relief on export of computer software and for the import of system. Tax relief is provided on remuneration received from abroad by teachers. Proof of export can be in the form of export-invoice and Bill of Lading (non-negotiable copy) or Airways Bill or postal receipt etc. The exporter has to fill-in Form-H in triplicate and issue original and duplicate copies to the supplier and retain the triplicate copy for his own record. v. Exporters have to furnish adequate information in the documents support-ing the fact of actual shipment of cargo for the export claims. Income Tax Exemption As a measure of export promotion. Copy of shipping bill. packing material etc. the drawback shall be available in respect of any of the duty paid materials. Thus for availing the benefit of sales tax exemption. ix. in cash as well. x.Re-import of exported goods under advance licence: Goods exported under advance licence/ DFRC/DEPB may be re-imported in the same or substantially the same form subject to the specified condition. various tax incentives are granted under the incomtax act. Tax Exemption: the profits from project exports in computing the taxable income. Under the scheme of duty drawback customs and central excise duties on raw materials. the purchaser of goods has to be a registered dealer for the class of goods meant for exports: He is allowed to furnish a satisfactory proof of export of goods to the seller of goods. Professors. TV news software.

What is duty remission scheme? Explain various provisions for duty remission scheme? 6. 112 11. The major documents are Invoices andAR4/ARS Forms. 2. Registered exporters are eligible for the facility of duty free import of raw materials.the all industry rates as specified in drawback rules or at the brand rates as determined separately on the request of the exporter. making a claim of duty drawback on exports. Excisable goods are free from the incidence of excise duty levied by the central government both on finished product and raw materials. Rule 13 permits the export of goods under bond.1 . Explain the procedure for: a.675. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 3. Rule 12(i)(A) of Central Excise permits rebate of duty paid on export of duty paid on finished goods. The scheme is governed by the customs and central excise duties drawback rules. required for the manufacture of the product for executing export orders. claim of duty drawback under ‘duty drawback credit scheme’. Rule 12(i)(B) permits rebate on the duty paid on raw materials/ inputs used in the manufacture of the finished goods exported from India. 5. Explain the formalities claiming sales tax exemption. b. Analyse the need for action-plan by an exporter for timely and proper compliance with different formalities for claiming export incentives. b. Discuss the formalities prescribed under Central Excise Rules for: a. c. Discuss the procedure for obtaining Advance Licence under Duty Exemption Scheme. Terminal questions 1. claiming rebate of central excise under Rule export under central excise bond under Rule 13 4. Duty Exemption Scheme enables imports of inputs required for export peoduction.. compo-nents. Duty Remission Scheme enables post export replenishment/remission of duty on inputs used in the export product. packing materials etc. fixation of brand-rate for duty drawback.

c. no person can enter into a valid contract of insurance unless he has insurable interest in the object or the life insured. Damage to the ship and cargo due to dashing of the waves. cargo or marine insurance is an insurance cover for marine cargo. Thus the insurer would not pay for the loss to the goods if they are stolen because of unworthy packing in case the policy covers the risk theft.e. air or land. air cargo and post parcels. piracy and such other risks. Introduction Marine Insurance is a contract under which the insurer undertakes to indemnify the insured against losses. a marine insurance policy must specify: 11. All export consignments should preferably be insured even if the terms of sale do not provide for it. recognized by law.a person can take policy on his ship an owner of the goods can take policy on cargo and person entitled to receive freight can take policy on freight. The insured. In other words we can say that the marine insurance policy provides a commercial indemnity rather than indemnity in a strict legal sense. Principle of indemnity i. the insured must disclose to the insurer all the material facts or circumstances which are known to him or which ought to be known to him in the ordinary course of business. 4. 3. marine insurance is used to cover transportation by any of the following modes of transit singly or jointly: a. the contracts of insurance only indemnify a loss resulting from risk covered under the policy. It provides insurance or protection to goods in ‘transit’ and also extends to storage of goods provided such storage is incidental to transportation. air cargo and post cargo parcels. 2. the Insurance Act. Without insurable interest such contracts are merely wagering agreements which are not valid contracts.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 16: MARINE INSURANCE • • • • • • • • • • Introduction Meaning Principle Features Types of Marine Insurance Insurance Claim Procedure for Filling Marine Insurance Documents for claim ISO-9000 ISO-14000 Marine Insurance Contract is an agreement where by the insurance company (insurer) undertakes to indemnify the owner (insured) of a ship or cargo against risks which are incidental to marine adventure. 1963 defines a contract of marine insurance as an insurance cover for marine cargo. Here perils of the sea include :a.e. i. The parties to a contract of insurance of follows: 1. 1963). Sea. However the cargo owner are usually allowed a reasonable anticipated profit.e. Contents of an Insurance Policy According to section 25 of the Act. Causal proxima: This principle implies that the insurer becomes liable to pay for loss if the insured peril or risk is the proximate cause of loss. Destruction of the ship and cargo by the crew or captain of the ship. In this case the proximate cause of loss is the faulty packing which facilitated the goods to be stolen. Post. Sinking of ship. b. Principle of utmost good faith i. All such persons have insurable interest in the subject matter.Thus. e. b. the on who either procures an insurance policy or becomes beneficiary thought the insurance. 1963. pilferage and non delivery. d. cargo or marine insurance is an insurance cover for marine Insurance Act. Thus. Dashing of the ships on the rocks. Principle of insurable interest i. Insurable interest is understood as an interest in the preservation of a thing or continuance of a life. Fire or explosion on the ship. 2.1 113 . d. Since this is not covered under the risks specified in the policy the insurer would not indemnify the loss. (Section 3 of the Marine Insurance Act. All goods on consignment basis must be insured by the exporter only.675. Spoilage of cargo due to sea water. Rail/road. Air. e. f. Thus one can have an insurable interest only when one would stand to benefit financially by the continuance of the life or object insured otherwise financial loss would result. Principles Governing the Contract of Insurance The contracts or insurance are based on the following principles: 1. Inland water voyages. caused due to perils of the sea. The insurance company also known as underwriters who assume the liability when the loss takes place. e. Meaning of Marine Insurance Cargo (Marine) insurance is governed by the Marine Insurance Act. The purpose of cargo insurance is to protect goods against physical loss or damage during transit.e. Section 3 of the Marine Insurance Act.

as the case may. Time Policy 4.e. (Institute of London Underwrites) and other clauses. which contains no insurance condi-tions. It must be noted that Duration Clauses. The subject matter insured and the risk insured against losses. This policy is not negotiable to the overseas buyers and the claims under the his policy are paid in India in rupees. then he is required to declare that: a. The assignment is done by endorsement and delivery. are part of the Institute Cargo Clauses. It comes into being when either a specific Voyage (and time) policy or an open cover or an open policy is procured. Similarly the buyer to whom the goods are sent can also insure by virtue of his acquiring an interest in the goods at a later date. Thus these policies are always on agreed value basis. In practice insurance is effected either by shippers/exporters or buyer depending upon their contract of sale of goods. iii. iv. The assignment of insurance policy is allowed in terms of section 52 and 53 of the Marine Insurance Act 1963. The voyage or period of time or both. Specific Cover Policy 1.L. The duration of the marine insurance policy is based on the institute cargo clause yet it is provided to include the period of transit. the warehouse-to-warehouse cover is deemed to be effective. the time of discharge of the goods and the time of arrival of the goods. According to the Indian Stamp Act. In this way. exporting firm) and the signature of the director or partner. 10% more than the CIF value to account for the anticipated profits. Insurable interest of the claimant must exist at the time of loss of the cargo. The terms and conditions of the insurance are set out in the appropriate I. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Who can Insure? The shippers/exporters have an insurable interest by virtue of their ownership of goods and they can insure. For creating transferability. Unvalued Policy 7. 6. The value of the insurance policy is the sum agreed between the insured and the insurer. Specific Voyage Policy 2. Open Cover 3. Hence. Floating Policy 3. ii. which provide warehouse-to-warehouse cover. He is defraying the insurance charges in respect of the shipment in question on account of the overseas buyer and he undertakes to add the amount on the invoice and recover the same from the buyer in an approved manner. or of some person who effects the insurance on behalf of the insured.i. The contract of marine insurance is a contract of commercial indemnity and not pure indemnity because this insurance provides for indemnity against the loss of profits as well.1 . Features of Marine Insurance Policy The basic features of marine policies are as follows: 1. The sum or sums insured. unless specifically deleted. Insurance and Freight) 2. There are mainly three types of sales of goods in the overseas trade as follows: 1. Valued Policy 6. covered by the insurance.675. That is why the marine insurance policies are taken for a value equal to 110% of the CIF value of the goods i. Types of Marine Insurance Policies The contract of cargo insurance in international trade transactions takes three forms. Mixed Policy 5. The marine cargo insurance policies are freely assignable as the consignee finally takes the goods pass through various hands before the consignee finally takes their delivery. Fleet Policy 8. 5. The clauses cover mainly the perils and risk covered under the policy as well as conditions related to the insurable value and claims. In case the exporter is paying insurance premium on behalf of the foreign buyer.U. v. 1. insurance charges on the shipment have to be borne by him in terms of his contract with the overseas buyer and that he is not making payment on behalf of any non resident. amount of profit that the parties would have earned from the sale of those goods.A Marine Insurance Policy can be assigned either before or after the loss. 4. Since contracts of insurance provide for indemnity the loss suffered by the insured is not just the loss suffered by the insured is not just the loss represented by the value of the goods but also the 114 11. The stamp duty is recoverable from the insured. Specific Voyage Policy A Voyage policy covers the risks that may arise during a journey from specific place to another. It is recommended by the Reserve Bank of India that the exporter should obtain the seller’s contingency insurance to protect himself against the possible loss to the goods taking place before the insurable interest passes on to the buyer. 3. Generally the duration of the policy covers time upto 30 days after arrival of the goods in case of air shipments and 60 days after the arrival of shipments by sea to allow for the transportation of cargo from the final port of discharge to the warehouse of the importer. The insurance policy comprises “MAR” Policy form. the policy is required to be assigned by blank endorsement by writing “for and on behalf of” followed by the name of the insured (e. B or C and War and Strike Clauses) which contain insurance conditions. The name insured. each policy must be stamped. 2. And the Institute clauses (A. voyage policy also becomes a Time policy.. FOB(Free on board) These terms of sale are agreed upon mutually by both the parties to the contract. CIF (Cost. The name or names of the insurer or insurers. CFR(Cost and Freight) 3. b.g.

It is taken in case of hull insurance. the insurance company may hold the open cover null and void for all subsequent shipments. insurance of the ship. the notice period for cancellation of War and strikes risks is seven days and for shipments from/to USA it is 48 hours. i. The insured can obtain’ insurance cover within these agreed conditions.i. This stipulation does not cover war and strikes risks for ocean voyage. vi.g. It is also called as ‘Open Policy. its issue.e.Under this policy. if the loss in an accident is more than this amount.General insurance business in India is. An open cover may be cancelled by either party by giving 30 days notice in writing. Open policy is an enforceable contract of insurance and is hence.In this case. claim will be awarded with reference to insurable value calculated on the basis of c. agreement between the insured and the insurer is reached about the subject matter (e. packing conditions. 3. Open Cover Open cover is an insurance arrangement designed specifically to the need of those firms. For ocean voyages other than from/to USA.This policy is taken for a fleet of ships or vessels belonging to the same company. 10 lakhs. 4. if the insured does not willfully report shipments. rates and other conditions of the cover. which have substantial import export turnover and frequent transactions.. viii. 20 lakhs. It is determined only in the event of loss. Unintentional failure to report shipment will be condoned by the insurance company. Instead it is an agreement under which the insurance company would honour and accept declarations of shipment of cargos and issue stamped specific certificate of insurance against each declaration. open cover is not an enforceable contract. ii. if an exporter intends to insure with a foreign company. Thus. For example. Mixed Policy :. ii. It is customary to make an open cover agreement subject to two limitation clauses--Par Bottom and Par Place clauses.There are various types of. Fleet Policy :. the insured is to proceed to claim the loss recovery from the insurer. This policy is not advisable for a regular exporter. Specific Cover Policy :. the insurer can refuse to pay. vi. in an open cover. For example. 6. No premium is charged when an open cover is issued. v. It is suitable for those companies. When the loss takes place. if the limitation clause was for Rs. 5. is insured for a specific period of time. which own a number of vessels. it has much in a common with the open cover. Procedure for Obtaining Marine Insurance Policy The following is the procedure for obtaining marine insurance policy :a. Open policy is subject to cancellation by either party after giving 15 days notice of cancellation in writing. the value of subject matter is agreed upon between the insured and the insurer at the time of taking out the policy. as declarations are made. However. Thus. the sum insured may exhaust prior to the expiry of the policy.f. Therefore. the value of subject matter is not agreed upon at the time of taking out the policy. except that: i. The validity period of an open cover is twelve months. iv. Unvalued Policy :. Main features of an open cover arrangement are as follows: i. Selecting the Insurance Comp.e ship and/or cargo. the insurance company will pay only Rs. Valued Policy :. Insurance Claim When there is a loss. and Open policy is for an agreed amount. iii. voyages.This policy is taken to cover different risks for a single shipment. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION iii. risks covered. 8. as he will have to take a separate policy every time he exports.675. The duty of the insured is to declare each and every shipment as soon as known.This type of policy is taken for a specific period and for a definite voyage. duly stamped. goods) insured. a policy can be taken for two months for the voyage starting on 2nd June 2001 from Bombay to Singapore. The effect of these clauses is to limit the liability of the insurance company to an agreed amount. Such firms are spared the inconvenience of negotiating insurance contracts every time the transaction is to be made. series of consignments with all stipulations of the open cover. This policy benefits clients with substantial turnover and a large number of dispatches. 7. 10 lakhs and the loss were Rs. the subject matter of insurance. However. :. Time Policy :.In this case. marine insurance policies issued by the 115 vii. Floating Policy Also known’ as open policy. Under an open cover arrangement. but the insurance companies usually require the insured to furnish either a bank guarantee or cash deposits towards payment of premium against each declaration. 3.lf he does not fulfill these responsibilities. it covers a 11. This facilitates easy settlement of claims in the event of loss. then prior permission of the RBI must be obtained. Deciding the Appropriate Type of Policy :.2. b. the sum insured is of paramount importance. plus 10 per cent. Unlike an insurance policy. Even though the open policy ceases on expiry of one year from the date of. against which a series of consignments may be dispatched and declared as a result of which the sum insured will gradually diminish by the amount of each declaration until it is finally exhausted. The cardinal principle about insurance claims is that the insured has to fulfil the clearly defined responsibilities. the monopoly of General Insurance Corporation ((TIC) of India and its four subsidiaries.1 . i. the loss will be partly recoverable upto the agreed amount.

Landing Remarks :. port authority and others. Payment on marine insurance. Application to the Insurance Company :. Insurance Survey Report. port authority.numbers and kind of packages. Appointment of the Surveyor:. Date of issue and the period of policy.GIC to suit the requirements of the exporters.In the event of claim arising. despatch the exporter’ should apply to the insurance company in the’ prescribed ‘Declaration Form’ giving the following details :• • • • • • • • • • • Whether the packing was sufficient ?If not. Processing of the Policy :. Value of packages. Copy of packing list showing weight specification. Reply received.covered for insurance. in all cases. the duties of the insured or his agent are: i. Submission of Claim :-” The insured should submit the following documents to finalise claim properly :• • Original policy. e. In particular. ii. the marine insurance company or its nearest office or its overseas agent as mentioned’ in the policy should be intimated’ about the loss without delay The claim on carriers. Ship Survey Report.When the goods are ready for .675. policy’ call . If the loss was not apparent at the time of taking delivery of cargo. Finalisation of the Claim :. Responsibilities of the Insured It is the duty of the insured or his agents. the insurance company appoints a surveyor to determine the cause and extent of loss. Issue of the Insurance Policy :. The insurance company issues the insurance certificate (in triplicate) as per the declaration given by the exporter policy generally contains the following details :• • • • • • • Claim billon duplicate. Any other documents required by the Insurance Company Name and address of the exporter. from carriers or Port Trust Authorities and/or correspondence exchanged. certifies that insurance charges op the shipment in question have to be borne by him.? c.After the completion of all the formalities the exporter has to produce the Bill of Lading and the name. The second copy of the policy is sent to the importer and the third copy is retained . give notice in writing to the carriers and other 11. make an application to the agents of the carriers. of the .from carriers Port. If the loss or damage is apparent or visible. inter alia. The following details are necessary in the Survey Report : 116 iii.1 . Transportation from the warehouse to its final destination. Original invoice and packing list. Risk to be. customs and -bailees should be filed within the prescribed time limit under registered post with an acknowledgement due.On receiving the intimation. Lodge claim on the carriers. Copy of Bill of Lading. Copy of claim lodged with carriers.On verification. The following documents. Original’ Insurance Policy duly discharged. Description of the goods insured. Original Invoice. d.The exporter submits the original policy to the bank with his other documents. Description of goods. The following procedure should be followed in the event of/ occurrence of marine loss :a. Special instructions regarding the procedure to be followed in the event of loss.The insured should also obtain landing remarks from the Port Authorities. if the insurer is satisfied with the claim. Type of policy and description of the risks covered. customs and bailees. port authorities and other intermediaries for any missing packages.by the exporter for his own information Procedure for Filing Marine Insurance Claim e. customs authority and the insurer (or agent) to arrange joint survey within 3 days of discharge of cargo from the vessel (7 days in case of air consignment). c. it is also his duty to protect rights of the insurer of recovery from the carriers. Port trust Landing Remark Certificate. The insurance premium charges may vary from company’ to company and country to country. are required to be submitted by the exporter to the insurance company:• • • • • • • • • • • d. :. Payment of Premium. Marks. b. . etc. What improvements are recommended ? How claim could have ‘been minimised ? EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Address of the exporter and importer. f. Further. to take such measures as may be reasonable to avert or minimise a loss.ship ~ the insurance company. Special conditions and warranties. Any other information as required: Was’ there failure of jnsured to protect interest by not taking measures to avoid or ‘minimise loss or not protecting the rights of recovery . The exporter should decide the appropriate type of policy tailing into consideration his requirements. the claim is paid in Indian rupees irrespective of the currency in which relative policies have been issued. the insurer may settle the claim in foreign currency. be made in rupees’ provided exporter. it pays the amount of claim to the insured or the person authorised to ‘receive the claim as per the policy. Amount of sum assured and premium paid. Where the claimant is not the resident of India. Intimation of Loss :. If the claimant is of Indian origin.

and related activities in the world with a view to facilitating the international exchange of goods and services. Full set of Bill of Lading in respect of total loss claims. c. A landed but Missing Certificate from port authority in case where package has landed but is missing. ii. The ISO-9000 Series of Standards evolved by the International Standards Organisation has been accepted worldwide as the EXPOR T IMPORT PROCEDURE AND DOCUMENTATION vi. Insurance survey Report or other documentary evidence to substantiate cause and extent of loss. To develop cooperation in the sphere of intellectual. Dock Receipt. Copies of correspondence exchanged with carriers to examine whether the claimant has taken necessary measures. Any other document as may be asked for by the insurers. d. v. Original insurance policy or certificate of insurance duly endorsed by the insured. Copy of invoice with packing/weight list. In case of short landing claims. providing assistance to bring the goods back to India if the situation so demands. Export Declarations. xii. v. In case of any missing package. etc h. every exporter should avail services of Clearing and Forwarding (C&F) agents who are expert and well versed with the customs-and shipment procedures. appoint C&F agent to provide him the required services. To promote the development of standardisation . Railway. Triplicate copy of Bill of Entry (in case of India) . scientific. 4.. Ship Master’s protest or an authenticated copy of extract from ship’s Log book in case vessel encountered heavy weather or other casualty during the voyage. . The exporter should negotiate with these agents the amount of fees payable to them in relation t the desired services. provide the following services. A note on ISO 9000 The discussion on quality control or pre-shipment inspection will remain incomplete if due consideration is not given to ISO 9000. inter alia. Forwarding of banking collection papers. Certificate of Origin. Preparation and processing of shipping documents. port authority. the GA Deposit Receipt and GA CounterGuarantee. The selection of a good and reliable agent should be made keeping in view the agency commission the services offered and his experience in the product/country for transportation. customs and port authorities should be filed within the time-limits prescribed under the relevant laws Documents for Claims The claims on the insurers should be submitted duly supported by the following documents: i. 3. xiii.675. 2.parties within 3 days of delivery of cargo (7 days in case of air consignment). vii. technologically and economic activity. iii. viii. clearance may be made only after a joint survey. Letter of subrogation duly stamped and signed. and xvi. Port authority Landing Remarks certificate.the exporter’ must appoint a competent C&F agent who is able to. There are no standaredised rates of charges taken by these agents . Consular Invoice. f. For smooth and timely shipment of goods. and various charges payable by exporters. Arrangement for loading of goods on the board. the C&F agent offers various services to the exporter. The International Standards Organisation (ISO) is a nongovernmental organisation established in 1947. g. vii. port authority and customs authority. Thus. xv. Equipped with information on shipping lines and freight to different destinations. Making arrangements for assessment of damage to the gods t file claim with the insurance company. Warehousing facilities before the goods are transported to docks. In the event of General Average claim for refund of GA Deposit. Otherwise non-negotiating copy of the Bill of Lading. If missing packages are traced subsequently. etc. Booking of shipping space or air freighting and advice on relative cost of sending goods by sea and air. iv. Transportation of goods to docks and arrangement of warehousing at port. a Short Landing Certificate issued by the carrier or port authority. b. Lodge a proper monetary claim on carriers. Providing assistance to locate the goods in case the shipment is misplaced or the cargo is stranded at some port. xiv. Essential Services a. Copies of Letter lodging claims on the carriers. and b. The objectives of ISO are :a. etc. Airway Bill. Therefore. xi. 11. as applicable. A Note on Clearing and Forwarding Agents Export-import procedures are very complex and time-consuming. iv. Obtaining marine insurance policies.. providing warehousing facilities abroad atleast in some of the major international markets in case the importer refuses to take delivery of the goods for any reason. The claims on carriers. Casualty report when a vessel is missing or lost. While planning for distribution logistics the exporters should in the first instance. e. ix. get a log entry made with the port authority and lodge a claim on carrier and port authority. x.1 117 . Joint ship survey Discrepancy Certificate issued by the carriers. Optional Services The following services are provided by the leading C&F agents at the specific requst of the exporter: 1. Bills of Lading.

document and maintain an effective and economic quality control system. e. when such loss can’t be legally recovered from the intermediaries. value of goods plus a percentage (generally. as in the case of c. g. Increased customer confidence in the company. Gaining management commitment. concepts and guidelines for the series. It contains basic definitions. It provides protection against total loss (actual and constructive) and partial loss (general average and particular average) against maritime. international standards on quality management and quality assurance. Conducting audits of the environmental management system. The ISO-9000 is also the hallmark of a good quality oriented system for suppliers and manufacturers. Removing the need for multiple assessments of suppliers. The insurance value is agreed on the basis of the c. b. 11. Writing a quality policy. f. h. Write a note on Clearing and Forwarding agents and ISO 9000. to one of quality management. Questions Bank Q1. e. extraneous. development. Identifying business procedures. Linking quality to cost-effectiveness. Training employees in regard to their environmental obligations. which is in the nature of a financial indemnity. They spell out how a company can establish.f. The ISO-9000 Series of Standards are generic and not specific to any particular product. which cause loss or damage may be due to natural calamities (Act of God) as well as man. Methods of Implementation of ISO-9000 a. The policies are generally fixed on the basis of standard terms and conditions stated in the Institute Clauses Institute cargo. a. ISO-9002 It covers production and installation system.legal and commercial. Cargo clauses also provide warehouse-to-warehouse cover. installation and servicing systems. Management education. Since law protects the intermediaries who handle and transport cargo. The cargo insurance policy can have a very wide scope to cover all possible perils and losses. The insured has certain responsibilities to fulfil. Top management’s commitment to-continuous improvement. The Institute cargo clauses fall under three kinds A. Giving customers what they need. war and strike clauses. d.675. which will demonstrate to the customers that the company is committed to quality. he should follow the laid-down procedure and file the claim with necessary documents. Traders obtain insurance covers in international business because of two reasons . A marine insurance contract is between the insured and the insurance company. the cargo-owners will be able to recover loss from the insurance company. Nominating a quality representative. Integrating environmental considerations in operating procedures. e. What are the steps involved in filing marine insurance claim? Q5. ISO-9004 It provides guidelines for internal use by a producer developing its own Quality opportunities System to meet business needs and take advantage of ISO-9000 d. Writing work instructions. Not only should he perform his duty to protect his direct interest but also that of the insurance company by lodging claims against the third parties. The insurance company undertakes to make good the loss to the maximum value as agreed with the insured perils or risks. Band C. Identifying responsibilities. The perils. but related. Creating and ‘implementing environmental policies. if he is to recover the loss from the insur-ance company without a hitch. They can be used by manufacturing and service industries alike. e. d.1 118 . Objectives of ISO-9000 a. contract. Loss is payable only when it has been proximately caused by the insured peril. ISO-9003 . f. e. Let us Sum Up Marine insurance or Cargo is the practice of providing risk cover to the cargo-owners against loss or damage that the cargo may suffer in transit due to accidents and mishaps. Q3. war and strike perils. insurance cover is essential to be obtained by the exporter when it is the requirement under an export contract. The ISO-9000 Series is a set of five individual. What are the methods of realising various export incentives? Q2. Commercially. d. Listing down procedures. It deals with a company’s system for managing its day-to-day operations as they have an impact on the environment. It is thus clear that the ISO-9000 Series of Standards constitute the concept of Total Quality Management (TQM). Explain the different types of marine insurance policies. made accidents. ten percent).f. A shift from a system of inspection. production. b. c.i. Writing a quality manual.14000 180-14000 is a series of standards on environmental management tools and systems.norm assuring high quality of goods. b. Environmental Management System. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION A Note on ISO. Insurance policies to cover the payable customs duties are also issued in case of import cargo. It covers only final product inspection and test. Q4.i. compliance and pollution prevention. ISO-9001 It covers design. Explain the procedure for obtainiI1g marine insurance policy. Further. Clause ‘c’ gives the least and Clause’ A’ provides the maximum covers.

Introduction At the outset it must be mentioned that improved system of documentation for exports announced by the government of India on 31 March . Consular Invoice 11 Bill of Entry 12. the Cus-toms Officer. Distinguish Between:• • • procedural formalities. 1991 is fine and should be adopted by the exporters as far as possible. Certificate of Origin and consular Invoice Mate’s receipts and Bill of Lading. Treatment in this chapter is therefore slightly exhaustive of documents where the old requirements have also been kept in view while introducing master documents. however ensures that the goods being exported are in accordance with the different regulations. otherwise exporter could be in problem and his payment may be stopped. Shipping Bill 10. The documents material to an export sales contract are not many in number. Commercial Invoice 5. in case of goods to be exported in a vessel or aircraft. in turn. has to 119 . With these countries Indian exporter could jolly well use the improved version of documents announced by the government of India as per the New Exim policy 1992-97. In some cases prior amendment of the statutes. The documents use differed in size and layout. Legal Provision According to the Customs Act (Section 40). caused delays at different stages in the processing of documents. The resultant mass of paperwork caused much inconvenience and inordinately long delay in the movement of goods. cannot permit loading of export Cargo at the Customs Station unless and until the formal permission to export given by the proper Customs Officer. is presented. Packing List 6. This is partly due to the nature of export trade itself involving as it does a number of intermediary organizations and authorities at different stages of export activity between the seller and the buyer. policies and regulations they stem from One of the ways in which this has been done is through the use of standardized document in our export trade. Notwithstanding the need for such an approach to the procedure generated problems. Provisions of Export (Control) Order. these documents has to be completed individually.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 17: EXPOR T DOCUMENTATION 1. and ultimately in the realization of export proceeds.675. even through minor. Export documentation work constitutes a heavy charge on our export activity. Certificate of Origin 9. GR Form 14. costly. Mate’s Receipt 7. hold up of consignments at checkpoints and terminals. This meant evolving not only simple export documents and procedures in each of the individual areas of export activity but also ensure their compatibility and harmony in the totality of export operation. Aircraft. There was a need for a total approach to the problem. Bill of Lading 8. Introduction 2. vehicle. the Indian exporter has to ascertain from the importer of his requirements and must comply to his dictates for documentation. generate a lot of paperwork and 11. It is complex cumbersome and costly. b. Commercial Invoice and Consular Invoice.. For the remaining countries (other than 80 countries where UN key Layout (Master Documents) is not in use. The Duty or Cess leviable thereon has been properly determined and paid. However a word of caution would be in order. All these. Airway Bill 13. Moreover exporter prepares export documents not for his own convenience but largely to meet the requirements of the overseas importer who largely conveys it through the Letter of Credit. which. The goods are of the same type. The basic dictum for the exporter’s comply 100% the Letter of Credit requirements for Documentation. The procedural and documentary formalities associated with exports have been evolved and practiced over the years by different authorities/organizations to suit their own convenience without much regard to the repercussions they might have on the total export activity. c. Proforma Invoice. particularly in terms of the following: a. However the problem is complicated due to the heavy paper work and the procedural formalities that are required to be complied with before the essential documents can be procured. Master Documents and Aligned documentation System 3. it has been appreciated that the task of procedural simplification is a containing an long-term one requiring. despite the fact that most of the information requirements are common to a number of them Because of the difference in their sizes and designs.1 The Customs Act (Section 50) further states that the exporter. Export (Quality Control and Inspection) Act and Foreign Exchange (Regulation) Act are complied with. Before granting the permission. To date we have arrangements with only 80 countries around the word where UN key Layout(Master documents) are followed. etc. the person incharge of a Convey-ance-vessel. 4. This method of preparation of documents was susceptible to errors and discrepancies. sort and value as have been declared by the exporter.

applications and documents are required to be filled in for obtaining Export Licences. The Pre-shipment documents on a Standard Layout were first introduced by Sweden in 1956 followed by Denmark. as an evidence of shipment and title of goods and b. Brings in uniformity in documentation. are required for effecting physical transfer of goods and their ‘title’ from the exporter to the importer. etc. Erasures and strike over in typing or changes or additions made in ink must never be indulged as these only arouse the suspicion that the documents have been tampered with. The documentary require-ments are both regulatory and operational in nature and have to comply with the Rules and Regulations of the Indian Government as well as the importing country for different types of products.1 .675. Generates as many copies as required of Commercial and Regulatory Documents from their respective Master Copies through Photo-copying Machines. which look harmless sometimes assume a men. Documentation Practices in India In India. have adopted this ADS system. Standarised Pre-shipment Export Documents The Government of India has made it mandatory for every exporter to use standardised preshipment export documents w. Different forms in respect of each of these documents used in the country were examined from the point of view of standardization and putting them in to an aligned system. etc. It was later that most of the European coun-tries. These documents are important for two reasons: a. on an average. 2. speed. Ensures economy. Minor discrepancies of any kind either in the date itself or in the typing in the documents. There is a plethora of documents in export trade . an exporter has to prepare and execute various documents at different tages of sending the shipment of goods to the im-porter. Dispenses with the conventional documentation practices. Facilitates expeditious checking and processing of documents at dif-ferent stages. Export Trade Control. for obtaining payment The various documents are therefore. This is popularly known as Aligned Documentation System (ADS). acing form. These requirements are different for different types of products. In addition. 1991. The Commercial documents are those which. involves the preparation of several document declarations and certificates. The main purpose of the documents accompanying a shipment is to pro-vide a specific and complete description of the goods so that they can be assessed correctly for Duty purpose and meet the Import Licensing require-ments or Import Quota Restrictions imposed on the goods for clearance pur-pose. of vital interest to the exporter and the Bank which is the usual media of payment.present the Shipment Bill and other connected documents to the proper officer. 3. Customs. based on UN Layout Key. Packing List. If there are any discrepancies in the documents and or if the required documents are not produced. The ADS Methodology involves the preparation of documents on a uniform and standardA4 size of paper. the importer may not be able to get the goods when the ship carrying them arrives. etc. The EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 120 11. If the documents are not the correct ones or if they are not filled in correctly to the last. Shipping Bill. Any export ship-ment therefore.different forms. because of the complexity of documentation.f September 1. Commercial and Regulatory. must rectify them immediately before dispatching them to the Bank of buyer. accuracy and convenience. There are also several documents required for submission to the Port Authorities. Certificate of Origin. Bill of Lading. This makes it possible to prepare one Master document embodying the informa-tion common to all the documents included in the aligned series and to run off all the aligned documents from the same Master document with the help of suitable marking reproduction techniques. Finland and Norway. the same should be supplied as. The Government of India. for ob-taining payment and export finance and for claiming export benefits like Duty Drawback. Whether two or twenty copies of the Invoice are required by the buyer. for Customs Clearance and shipping. Australia. will find it a good idea to have the various documents prepared for him by a Shipping and Forwarding Agent or should take advice from a fellow exporter. Advantages:. The documents are aligned to one another in such a way that. These documents are classified into two categories namely. The experienced exporter. The documents taken up for standardization include: Invoice. Any alteration or addition made by an Authority issuing the documents must be endorsed properly. When exporting for the first time. Export Documentation Once the goods are ready. therefore identified some export documents for standardization with the help of the concerned official and commercial interests in the country. the buyer probably has some reasons for it. complet-ing Preshipment Inspection. about 25 documents are associated with the Preshipment stage to export transaction. 5. exporters should. the common items of information are given the same relative slots in each of the documents included in the System. always find out from their buyers the documents required for the product concerned. USA. Regulatory Preshipment documents are those which have been prescribed by different Government Departments/Bodies in compliance of the require-ments of various Rules and Regulations under relevant laws like Exchange Control Regulations. This may seem obvious but it bears emphasis since both the requirements and penal-ties are greater beyond comparison in export than in domestic trade. by Customs of Trade. mate’s receipts. with the signa-tures of the person issuing the documents only. on the basis of which the Customs Authorities grant neces-sary permission. The Exporter should also develop a habit of thoroughly scrutinising the docu-ments for any possible errors or discrepancies and if any errors or discrepan-cies are found.The ADS system offers the following advantages: 1. 4.e. the shipment may not be allowed for import or may even be confiscated by the Customs of the importing country. Accuracy and completeness are a prime necessity in documents covering export shipments. a few more documents are required if the export product(s) fall(s) within the purview of the Export Assistance Schemes and Facilities.

Common items of information are given . of commercial document which include among others. Proforma invoice 2. inspection. shipment advice and letter to the bank for collection or negotiation However. Commercial Invoice packing List Shipping Instruction intimation of Inspection certificate of Inspection Insurance Declaration Certificate of Insurance Shipping Order EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Master Documents All these problems of late have been avoided by following a system which provides an alternative to the repetitive. Earlier. Therefore simplification of export documentation and procedures are key measures to promote exports. Each document had to be individually prepared.the. Out of the 16 commerce documents in the export documentation framework as many as ‘14 have been standardised and aligned to one another. certificate. It will thus help in expediting decision-making process. this system is reported to have made for simplicity. These aligned documents are in time with the proforma used by countries with whom more than 80% of India’s foreign trade is transacted. 10. Shipment Advice 11. there were a plethora. same relative slots in each of the documents. combined transport document. exporters prepare only two master documents.one for commercial use and the other for regulatory documents meant for customs.master documents contain all the information that was common to individual documents. packing list. unproductive and time consuming work necessitated by the exporter’ compulsion to prepare separately a number of documents all containing practically the same information. Under this system. Certificate of Origin 14.from which the repetitive information could be reproduced in one run on all the documents leaving only the information specific to individual documents to be filled in separately. These are performance invoice.1 121 . 4. Any information on the master which is not required on a particular document can be omitted by different masking techniques at the reproduction stage The two master documents. The two. 3. 6. certificate of insurance.675. As a result. shipping order and bill of exchange could not be brought within the fold of the Aligned Documentation System.shipment stage:1. application for certificate origin. In the new set up attempts have been made first to standardize and simplify each document and secondly to align them to each other using as far as possible the UN Key Layout. 5. For the purpose of Aligned Documentation System documents. The news system standardized these document and aligned then to each other on basis of united nations key layout which has already been adopted by most of Indians trading partners. have been. Application for Certificate of Origin 13. invoice. Commercial Documents :. United nations key Layout has mace it possible to many countries to reproduce in one run the repetitive information on all the export documents from just one document called the ‘Master Document’.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. speed. Mate’s Receipt 11.common items of information appearing in each of these documents were recorded to develop a common denominator a master documents. Aligned Documentation System (ADS) is based on the UN layout key. It is expected that as fallout of the introduction of the new system. a self propelling process towards further rationalization of documentation and procedural requirements would get in motion in all the conceived organizations. And at the end of it the exporter should be able to spend his resource and energy more on export production and marketing than on meeting the demands of archaic export procedures. packing. The exporters now can save atleast 50% of the time and cost on documentation. 9. intimation for. accuracy and economy in documentation work. The following are the 16 Commercial documents generally involved at the pre. Bill of Exchange 15. different forms used in the international trade transaction are printed on paper of the same size and in such way that the. which will further reduce the delays and time component currently involved in export effort. insurance declaration. commercial invoice. Thus now instead of typing out 25 documents. shipping instructions. of inspection of quality control. exports in these countries have been able to reduce the documentation costs by 50 to 70%. The new system also includes simplification and relaxation of related procedures.Commercial . This system is known as the’ Aligned Documentation System’. Already in use in a number of countries. mate’s receipt. certificate of origin. Virtually eliminate the chances of errors and facilitate electronic transmission of export documentation and data. classified as under a. 7. Bill of Lading/Combined Transport Document 12. shipment advice and the exchange control declaration form. RBI and port trust-have maximum advantage of alignment and minimum cost and time for preparing individual documents. Thus the one run method of preparation of Documents involves the use of standardized and aligned documents. list intimation for inspection insurance declaration form. Earlier Indian exporters were required to submit 25 documents to various agencies and authorities merely to ship the goods. 8. The documentation of simplified export documents has reduced the burden of the exporters and has given a push to the country’s ongoing export drive. convenience. bill of lading or.

675.1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 122 . Both the Master document and the mask over it are then fed to the photocopying machine. etc. as discussed earlier.5 cms * 21. Guidelines for Regulatory Documents and Master Document II Paper size and specification As against the Commercial documents which are designed onA4 size of paper. by all users.5 cms. as it seeks to present the common requirements on the front side of each of these documents. Regulatory Documents: .005 in. thickness) with white opaque patches to blank out unwanted information from the Master document or it may also be cut from an opaque white plastic sheet. After the’ desired information is typed on Master document . While the front side of these three Regulatory documents can be prepared 11. Receipt for Payment of Port charges 6. Insurance Premium Payment Certificate Out of the above 9 Regulatory documents. measuring 297mm * 210mm with standard margins . The receipt for payment of Port Charges has been incorporated in the Export Application/ Dock Challan/Port Trust Copy of Shipping Bill. which is specially required to be given in any par-ticular documents. Vehicle Chit 7. Similarly. Export Application/Dock Challan/Port Trust Copy of Shipping Bill 5.5 cms * 19. the relevant mask is laid over it. GR Forms and the Port Trust docu -ments will have a common pre-printed Declaration. thus one document has been completely eliminated. however need to be blanked out to prevent its reproduction on the blank forms of the Regulatory documents with pre-printed titles.8 cms and right 0.004 in. Besides. does incorporate several pieces of information which are not required by the Customs but are required by the Reserve Bank of India under the Foreign Exchange Regulations Act. involves the use of standardised trade documents aligned to one another. Freight Payment Certificate’ 9.II) from which the front side of all the three documents can be run off at one go without/using any mask. The paper to be used for these documents should be of consistent specifications.2 cms. customs. The size of the individual boxes should be strictly as per specifications. foreign exchange regulation. Reproduction technique The three Regulatory documents under reference have been so aligned that their respective common data requirements have been accommodated on the front side of each of these documents. These are shipping bill or bill of export. or 0. export application dock challan or port trust copy of shipping bill and receipt for payment of port charges. can be either pre-printed or inserted in the relevant box as and when required. The form of Shipping Bill. As the documents are to be generated mechanically.In fact. The desired information is then automatically reproduced on the relevant document through transparent or open portion of the mask.shipment stage of an Export Transaction are given below:1. Guidelines for Commercial Documents and Master Document 1 Paper size and specifications The ADS. however.16. The captions inside boxes should be printed in 6 points. Maximum tolerance is 1 mm. the exporters will also attach other relevant Declaration(s) with the Shipping Bill/Bills of Ex-port. these are some details which are required by the Customs Authorities but not required by the RBI. bottom 1. exchange control declaration (GR from). Needless to emphasis that accu-racy in layout and printing is an essential requirement. four have been standardised.II. as per the printed statement to this effect on these documents. 6mm width and 180mm in length. this minor conces-sion on the part of each of these authorisation is not only desirable but also necessary. Any additional information.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. as to the correctness of the particulars furnished in these documents.5cms. The blank forms of shipping Bills/Bills of Export.10mm top.5 cms. The mask for the photocopier may be made of a transparent polyester film (of 0. AR-4 Form 3. the Port Trust document may also have on its face some information with which Port Authorities are hardly concerned. The Master document in respect of the Standardised Forms of Shipping Bill/Bill of Export. should be strictly adhered to. Conversely. Regulatory documents are to be prepared on foolscap size of paper measuring 34. The measurements of individual boxes. left 1.5 cms.I. In the interest of alleviating the burden of the Exporter in the preparation of these documents individually and to facilitate preparation of these three documents from a single Master document. All the docu-ments under the system are to be prepared onA4 size of paper. Letter to the Bank for Collection/Negotiation of Documents b. top 1. The paper should be stable in conditions of 50 to 60% relative humidity. The inside measure-ment are 31. ex port trade control. Master document I :-The Master document will be. Exchange Control Declaration (GRIPP) Forms 8. Shipping Bill/Bill of Export 4. The caption Master document – II would. The regulatory documents associated with the pre.inone. these four documents have been reduced to only three. 20mm left. Gate Pass-I/Gate Pass-II (now deleted) 2. it is important for the paper to be of a consistent specification. The margins are. sansserif face and should be located as near to the top left of the boxes as possible. Out of 9 regulatory documents four have been standardised and aligned. Exchange Control Declaration (GR) Form and the Port Trust documentis a sort of three. with grammage of 70 to 85 gm. typed on a sheet of paper in light blue ink. This makes it possible to prepare a single Master document (as illustrated in Master document . It is proposed to conduct training and orientation programmes at all export centers to familiarize the exporting community with the new system. as indicated in the Master document .

Some of the forms for preparing documents have been standardised under the Aligned Documentation System introduced w. viz. As the Master document II embodies all the information which is common to the front side of the three Regulatory Documents it would need to be prepared separately. the dupli-cate copy is to be used as the receipt for payment of Port charges. The triplicate copy of this document will serve the purpose of the Shipper’s copy as record of shipment and payment of Port charges in respect to the goods handled by the Port Trust. With the adoption of the Aligned Documentation System involving the use of two Master documents. As the Port Trust document incorporated the receipt for payment of port charges (called Export Application at Bombay Port). On the reverse of the Port Trust document Export Application/Dock Challan/Port Trust copy of Shipping Bill. Declaration of Exports as per Exchange Control Regulations of the country. Each copy of the three documents should be signed in ink by the exporter Forwarding Agent.e. It will be useful if the following points are kept in view while completing the Master Document-II from which the Regulatory documents are to be generated: i. All the columns in Master document. depending upon the type of Shipping Bill of Export required to be filled.f. keeping record of receipt and shipment of goods. it will be possible for the exporters and other concerned agencies bodies to avail the advantages of ‘System approach’ to Export documentation. exporters can get these forms through Authorised 11. Other purposes. except when made On ‘’Value Payble” or “Cash on Deliv-ery” basis Used for exports to all countries by Parcel Post under arrangements to realise proceeds through Postal channels on “Value Payable” or Cash on Delivery” basis. 1. iii. Shipping Bill for Dutiable goods and Shipping Bill for goods under Claim for Duty Drawback. namely. VP/COD forms are to be submitted in a single copy. viii. The three documents with the requi-site number of copies may be photocopies from the Master Document. Transportation of the goods. For Shipping Bills for Export of Duty Free Goods. and having due regard to the layout of the documents. Appropriate Form should be used depending upon the type of goods to be exported.I. scribed. vii. 2.space has been provided for completion of carting permission and Customs formalities. Six versions of Master document-II have been designed and Forward-ingAgentsExporters should use the relevant Master document-II. it is necessary that typewriter and not a fountain pen should be used by the exporters. As regards Shipping Bills different forms have been designed for different types of Shipping Bills.1 123 . Master Document-II (A): For shipping Bill for Export of Duti-able goods and Shipping Bills of Ex-port goods under Claim for Duty Drawback. PP. v. . Need for Preparing Export Documents Export documents have to be prepared for various purposes.10. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. All exports to which the requirement of declaration applies must be declared on appropriate forms as indicated below: GR Form: PP Form Used for exports to all countries made otherwise than by Post. Master Document-II (B): Master Document-II (E): Master Document-II (E): Master Document-II (F): VP COD FORM vi. Shipping Bill for Duty Free goods Exbond. This seeks to do away with the practice for Kacha Notes of any interim document required to be issued by the Master of Vessel prior to the issue of ‘Mate’s Receipt’ in respect of consignments shipped on-board. Used for export of Computer Software in nonphysical form. While the original of the Port Trust document is meant for SOFTEX GRIPP forms are printed in distinctive colours and each set bears a printed number which appears on both copies of the Form. necessary provision has been made on the reverse side of these documents. No masks need to be used. The Caption Master document-II should be suit-ably covered to prevent its impression on the documents to be gener-ated through the Master. They are avail. Par-ticulars have also been made for acknowledgement of goods ‘on Board’ by the Master of Vessel. so that it becomes a legally valid document. 3.675. 4. 1. Customs clearance of the goods.1991.II should be completed and nec-essary information typed within the relevant boxes or columns with-out any overlapping. With a view to achieving total legibility. While Export Declaration are to be made in a set of to copies (original and duplicate) of GR or PP form. Shipping Bills for Duty Free goods. Used for exports to all countries by Parcel Post. able for sale with Reserve Bank of India. Declaration forms :-There are four main declaration forms which are pre. iv. as the case may be. For Bills of Export of Duty Free Goods For Bills of Export of Goods Ex-bond.from Master Document . For Shipping Bills for export of Goods Ex-bond.II on Bank forms of the documents with pre-printed captions. VP/COD and Softex Forms. A separate Form exists for Bill of Export. However. These are called GR. it may be necessary for the Exporters/ Forwarding Agents to prepare this docu-ment in triplicate.

will be available to exporters only after shipment has been effected. the Authorised Dealer is satisfied on the basis of standing and track record of the exporter and arrangements made for re-alisation of the export proceeds that he could do so. The Form will be countersigned by the Au-thorised Dealer only if the Post Parcel is addressed to his Branch or Correspondent Bank in the country of import. the Author-ised Dealer will countersign the Form. Where required under letter of credit. irrespective of the terms of the contract. Disposal of Copies of Export Documentation Form i. Export Declaration Forms have utmost importance and are binding on the exporter. The information requirements of the document have been determined after examining a number of forms of invoices used by leading export organizations and after series of discussions with the representatives of the Department of Customs and Central Excise and the Federation of Custom House Agents’ Associations in India. The concerned Overseas Branch or Correspondent Bank is to be instructed to deliver the Post Parcel against payment or acceptance of relevant Bill. and Date. For Post Parcel addressed directly to the consignee. freight and insurance should be furnished in all cases. The standard document in respect of the invoice based on the United Nations Key Layout. ETD (port of EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. Invoices based on the suggested design will be acceptable not only in many countries but will also help facilitate processing of documents at various stages. The value declared by exporter will also be verified by Customs and they will also record the assessed value. It is therefore necessary. Insured Value and No. the duplicate copy will again be returned to exporter for submission to an Authorised Dealer. b. iv. i.e. iii.e.Dealers also. It should be clearly indicated in the form whether the export is on ‘Outright sale basis’ or ‘on Consignment basis’ and irrelevant clauses must be struck out. that enough care is taken while de-claring exports on these forms with special reference on the following points: i. 4. and particularly in respect of the B/L No. Under the item ‘Analysis of Full Export value’. The Declaration given at the bottom (left hand) of the Invoice follows the UN recommendation. the application is rejected. Name and address of Authorised Dealer through whom proceeds of exports have been or will be realised should be specified in the rel-evant column of the form. the full value of the shipment has been received in advance by the exporter through an Authorised Dealer. such information will need to the banks for negotiation. which in greater or lesser detail reproduce information from it. No reference is en-tertained by the Reserve Bank in such cases. this information. The invoice is a basic document. 3. or ii. The standard Invoice can be reproduced from the master by masking only three columns. and Date on the invoices. 124 11. Customs will give their running Serial number on both the copies of the GR Forms after verifying the particulars and admitting the corresponding Ship-ping Bill. However. But for this. a break up of the full export value of goods under FOB value. software prepared on magnetic tape and paper media as well as in non-physi-cal form by direct data transmission through dedicated earth stations/satel-lite links. VP/COD Forms are sold directly to exporters by Reserve Bank of India. As a document of contents it must fully identify the overseas shipment and serve as a basis for the preparation of all other documents. The export of computer software in physical form is subject to normal declaration on GRIPP Form and regulations applicable thereto will also be applicable to such exports. Details of commission and discount due to foreign agent or buyer should be correctly declared otherwise difficulties may arise at the time of remittance of such commission. which has been accepted as the basis of this document in many entries. Notify Party. an exception to submission of GR forms to the Customs Authorities has been made in case of deep Sea fishing. But under the present procedure for customs clearance and shipment of export cargo. etc. It’s the exporter’s bill for goods and sets forth the terms of sale. If the Authorised Dealer is not satisfied about the standing.. of Original Bs/L No.After examination of goods and certifying the quantity passed for shipment. PP Forms are to be first presented to an Authorised Dealer for counter signature. a. an irrevocable Letter of Credit for the full value of export has been opened in favour of exporter and has been advised through Authorised Dealer concerned. Export Invoice Invoice is a document of content. The exporter should strictly follow the requirements of the importer in regard to invoicing. as the case may be. provided 1. The export of computer software may be undertaken in physical form i. of the exporter. or 2. Duplicate copy of GR Form will again be presented to Customs at the time of actual shipment . In the case of VP/COD Forms only one copy is required to be com-pleted and submitted to Post Office along with the relative parcel at the time of dispatch. the rest of the information can be reproduced from the master The information referred to in the preceding lines can be given above the columns for Country of Origin and Final Destination in the order of name of shipping line. However. GR Forms covering export of goods other than jewellery should be completed by the exporter in duplicate and both the copies should be submitted to Customs at the Port of Shipment.675.1 . export of software in non-physi-cal form is fraught with many risks and special guidelines have been framed for handling such exports.

Name and address of the exporter. i. Commercial Invoice Commercial invoice is an important and basic export document. On the other hand. These marks could be either in the form of symbols (say. Besides fulfilling 11. Similarly. Thus. rectangle. Commercial Invoice is a document of contents that describes details of goods sent by exporter. h. it must contain the name and address of the buyer. usually written serially. the total invoiced value should be net of any commission or discount.) or numerical. c. e. exporters are advised to use Continuation sheets’ to the Invoice. the exporter needs this document for a number of other purposes including: i) obtaining export inspection certificate ii) getting excise clearance iii) getting customs clearance and iv)securing incentives. It is proposed to conduct training and orientation programmes at all export centers to familiarize the exporting community with the new system. It may be useful for the importer in obtaining import licence or foreign exchange. In other words. the exporter should not describe them as ‘’Ten Thousand Blouses and Ten Thou-sand Skirts”. Mode of transportation. Sometimes description of the goods includes the number of packages and the type of packing material. part shipment is permitted. Contents of Proforma Invoice a. Provisional invoice number and date. the obligation under the export contract. this document is prepared at both the pre. 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 country of final destination. Name of the country of origin of goods. It is prepared by the exporter after the execution of export order giving details about the goods shipped. in other words. Name of the port of loading. it should be the realisable amount of goods as per the trade terms. if a contract describes the goods as “Ten Thousand Pairs of Blouses and Skirts”. Number of packing descriptions. There may be cases when exports are required to give detailed descriptions or specifications of the various items forming part of the consignment exported in one lot. though logically both the descriptions mean the same. Every package under a shipment is numbered. b. triangle. These are private marks. n. Every shipment has identification marks. ETA (destination port) and B/L No. It is actually a seller’s bill of merchandise. It normally forms the basis of all trade transactions. Name of the port of discharge and final destination. Value and Origin Clauses can be printed on the back side of the Standard Invoice. However. The description of goods must correspond exactly with the description given in the contract or the letter of credit It means that there should not be any difference (including spelling) between these descriptions. quantity shipped should not be more than the contracted quantity. It is the statement of account. This is the first basic and the only complete document among all commercial documents for the shipment. unless the contract permits part shipment. Unless required by the buyer. Importance of Proforma Invoice a. if the contract specifies shipment to be made in “ten new gunny bags’” the exporter should send the contracted goods and describe them as needed. Exporter’s reference number. Signature of the exporter with date. Commercial invoice must describe the goods shipped by the exporter. The offer made by the exporter is in the form of a proforma invoice. Description if goods given details terms of internationally accepted price quotation. a star. If the commercial invoice wrongly describes the shipment as “ten gunny bags” instead of “ten new gunny bags’” the bank may refuse to honour shipping documents and not pay for them. In the first place. unless it is specifically prohibited. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Proforma Invoice The starting point of the export contract is in the form of offer made ‘by the exporter to the foreign customer. g. l.shipment). The name and address given in the commercial invoice should be the same as given in the export contract or the letter of credit. Second function of the commercial invoice is that it is the seller’s bill given to the buyer. description of goods and quantity of goods. such as Sea or Air or Multimodal transport. The quantity described on the commercial invoice should neither be less or more than the contracted quantity.675. The commercial invoice must specify the serial numbers given in a particular consignment. It is a quotation given as a reply to an inquiry. Thus. Thus. amount and authorised signatures with designation.shipment and post shipment stages. b. Buyer’s reference number and date. f. It is also known as a Document of Contents as it contains all the information required for the preparation of other documents. in the Buyer’s column and below the Consignee’s Column can be utilised for incorporation of any other information which may be special to a transaction. which are made on the packages. It forms the basis of all trade transactions. the exporter should not ship less than contracted quantity. which identify the cargo with various documents. unit price. m. etc. As a bill. Unused space. Marks and container number. Name and address of the importer. In such cases. if the goods are being shipped under a letter of credit. k. Sometimes a contract requires a detailed I breakup of the amount to be recorded on the invoice for enabling the customs authority in the importing country to calculate import duty. It is actually a seller’s bill of merchandise. which must contain identification marks and numbers. and Date. j.1 125 . d. This is so even if the exporter may not be charging for the additional quantity.

. i. Contents of Commercial Invoice a. g. Signature of the exporter with date. while the packing list is a consolidated statement of the contents of a number of cases or packs. Invoice number and date. e. the amount should neither be less nor more than the stipulated amount in the contract or the letter of credit. f. l. d. Name of the port of loading. Qualified Mate’s Receipt :.675.:-8hipment inspection. if any. h. 11. mode and date of shipment and terms of payment. their gross and net weight. The mate’s. g. Name of the port of discharge and final destination. As in the case of quantity to be recorded on the invoice. it can be self. Name and address of the exporter. It is the basic document useful in preparation of various other shipping documents. Contents of Commercial Invoice a. It must be handed over to the shipping company in order to get the’ bill of lading. h. b. b. Significance of Commercial Invoice a. The commercial invoice also sets forth the terms of sale ( i. Bill of lading is prepared on the basis of the mate’s receipt. rate and total amount in terms of internationally accepted price quotation. Invoice number and date. Name and the number of Vessel or Flight. Name and address of the exporter. if he is satisfied that the goods are . c. o. fob/cif /c&f). manner as to permit checks of the contents by the customs on arrival at the port of destination as well as by the recipient. j. Signature of the exporter with date. n. d. Under a letter of credit.certified by the exporter on the commercial invoice.etc. the consignee. l. Name and the number of Vessel or Flight. Description of goods giving details of quantity. when the goods are not packed properly and the shipping company does not take any responsibility of damage to the goods during transit. can be given in the blank space in the lower third portion of the document. Normally. The first is to be sent with the shipping documents. It is also useful in negotiation of ~documents for collection and claim of incentives. e. Number and packing description. The only exception is that if the contract or the letter of credit permits part-shipment. 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. After making payment of all port dues. Name of the country of origin of goods. Terms of delivery and payment. excise and customs procedure etc. b. one to the shipping agent and the remaining retained by the exporter. i. It contains the detailed description of the goods packed in each case. Packing List This may be shown on invoice or separately. The exporter prepares the packing list to facilitate the buyer to check the shipment. e. It can also serve as a packing list and a certificate of origin. if any. k. The mate’s receipt is a prima fade evidence that I goods are loaded in the vessel. Special information. k. the exporter or his agent collects the mate’s receipt from the Port Trust Authorities. When the law in an importing country does not specifically require a separate certificate of origin issued by a third party. an individual invoice can be less than the total amount. b. Types of mate’s receipts a. unless otherwise specified the commercial invoice must be made out in the name of the applicant I of the credit. Name ‘and address of. Name and address of the consignee. Buyer’s reference number and date. Marks and container number. A packing list shows details of goods contained in each pack of shipment. Name of the country of final destination. Clean Mate’s Receipt :. the contents of cases or containers or of a shipment with its weight and description set forth in such a 126 . The packing list is a relatively simpler document and the whole of the information can be reproduced from the master by masking information not desired on the packing list. Description of goods in terms of quantity and special remarks. It is useful for accounting . two copies in advance to the buyer.1 d. Marks and container number. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 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. Name of the country of origin of goods. ‘ f. It is used in various export formalities such as quality and pre.purposes to both exporters as well as importers. Look at Annexure I where the format of Commercial invoice has been given. etc.The Commanding Officer of the ship issues a qualified mate’s receipt.as the case may be. Exporter’s reference number. m. Name of the port of discharge and final destination. Name of the country of final destination.The Commanding Officer of the ship issues a clean mate’s receipt. ten copies of the packing note/list should be prepared.packed properly and there is no defect in the packing of the cargo or package. Exporters themselves according to the requirements of their business devise the format of Commercial invoice. The mate’s receipt is first handed over to the f Port Trust Authorities. Name of the port of loading. Number and packing description. j. e. receipt is freely transferable. and should contain item by item. c.

the contract will provide for the amount of claim which carrier will be required to pay to the cargo owner. c. Total number of containers and packages. a ship). l.. Law courts all over the world have held that in case of a dispute. liable for the loss or damage. in such cases. Packing and Container description. It must be endorsed in blank by the shipper. d. It must be handed over to the shipping company in order to get the bill of lading. It is a document of title (This is the most significant function of the bill of lading). to the consignee or his order. b. receiving. shipowner) in providing space. 3. It is an acknowledgement of goods received for export on board the ship. The bill of lading is a document issued by the shipping company or its agent acknowledging the receipt of goods on board the vessel. and apparent order and condition of the goods. this contract will mention the responsibility of the carrier (e. Name and logo of the shipping line. j. Bill of lading is the only evidence to file a claim against the shipping company in the event of non-delivery. this document indicates that the contracted goods have been either given into the charge of the shipping companies or shipped by the exporter by the named ship on the date specified on the bill of lading. it must contain leading identification marks. It is a receipt given by the shipping company for cargo received by it. it is not considered as a Conrad by itself. When goods are to be carried by any carrier (say. It is a transferable document. 2. number of packages or quantity or weight or any other unit of account. Further. and volume in terms of cubic meters.A bill of lading qualified with certain adverse remarks such as. the aggrieved party may produce any other evidence. d.Contents of Mate’s Receipt a. Significance of Mate’s Receipt a. b.” is termed as a claused bill of lading. k. e. the contract will provide for the circumstances in which the carrier can be held 11. It enables the exporter to clear port trust dues to the Port Trust Authorities. m. Gross weight in kg. Thus. iii. “goods insufficiently packed in accordance with the Carriage of Goods by Sea Act. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Bill of Lading Bill of lading is issued by the shipping company or its agents stating that goods are either being shipped or have been shipped. In particular. Marks and container number. Trans-shipment B/L: It has similar characteristic as the Through B/L except that in this case the first carrier acts only as an agent for effecting Trans-shipment of cargo. b. Bill of lading is a receipt issued by the shipping company on its agents. As a result. If shipment is according to the contract terms. Shipping bill number and date. For the bill of lading to be negotiable in fact three requirements must be fulfilled: 1. the ship owner does not have a defence that his maximum liability is as printed in the bill of lading.A bill of lading acknowledging receipt of the goods apparently in good order and condition and without any qualification is termed as a clean bill of lading. Container status and seal number. d.g. is freely transferable by endorsement and delivery. Name and the number of vessel. Name and address of the shipper. It is also a document of title to the goods and. the ship owner may have agreed to a higher amount of liability than the standard amount. Claused Bill of Lading :. Let us first understand the meaning of the term “evidence of the contract of affreightment”. Look at Annexure 2 where a speci-men of bill of lading has been given. Signature and initials of the Chief Officer. f. Thus. which is the title of goods. it serves many purposes in international commerce. the exporter gets the right to demand the sale amount from the importer while the importer is entitled to get delivery of the goods at the destination. if there is any loss or damage to the cargo when it is in the custody of the carrier. ii. c. Essentially a transport document. goods may be shipped from Bombay to Dubai and transhipped from Dubai to a port in Latin America. h. g.It covers goods being transhipped enroute but where the first carrier has the responsibility as the principal carrier for all stages of the journey. Any other evidence could be a specific agreement in which for example. Law requires that as a receipt. It must be signed by the steamship company. the contract of affreightment will contains terms and conditions of carriage. Clean Bill of Lading :. Bill of lading. Name of the port of loading. This document evidences the contract of affieightment (transport) between the shipping company and the shipper (exporter or importer). instead it is the most important evidence of the contract. Name of the port of discharge and place of delivery. it must be made out to the order to the shipper. For example. as such. loading carrying and unloading of the cargo. is prepared on the basis of the mate’s receipt. in case the carrier is to be I liable for loss or damage. Types of bill of lading a. Description of goods in terms of quantity. Through Bill of Lading :. i.675. A bill of lading serves three main purposes:i. which may controvert a printed clause in the bill of lading.1 127 . A bill of lading also contains printed terms and conditions of the contract of affreightment on it However. c. defective delivery or short-delivery of the cargo at the destina-tion. provided the freight and other charges as specified in the bill have been duly paid. and undertaking to deliver the goods in the like order and condition as received.

and won. The exporter should not ship goods under this kind of B/L as goods can be released by the shipping company at the destination without the presentation of the ‘original ‘B/ L. Packing and container description. the documents are said to have become “stale” and B/L in such case will be known as Stale B/L A State B/L is one which is tendered to the paying bank at so late a date that it is impossible for it to be dispatched to the consignee in time to reach him before the goods themselves arrive at the destination port. Transferability can be created by filling.When the freight is not paid and is to be collected from the consignee on the arrival of the goods. or a negotiating or paying. A bill of lading is not a negotiable instrument. j. g. 1. The Design of Bill of Lading The design for the bill of lading is based on the Standard Bill of Lading recommended by the International Chamber of shipping. a claimant of title to goods is required to surrender an original BIL (also popularly known as negotiable copy of B/L) for claiming goods from the shipping company or its agents. so the goods had to be stored at the docks until the Bill arrived. the exporter may lose hold over goods and may not get paid. b. it enables the goods to be resold by the importer before goods reach the destination. it can be transferred through endorsement in the same manner as in a cheque. However. the bill of lading has to be made in such a way that the’ goods are consigned to the ‘order of a party.1 . Description of goods in terms of quantity. if B/L is prepared in the following way. For creating transferability. Sometimes the buyers may also specify the last date or the number of days after shipment by which the documents must be submitted to the bank. the bill of lading is marked. Freight Collect Bill of lading: . e. the bill of landing is marked. Where the exporter does not follow this stipula-tion. The words Unto Order May be typed in the Consignee box and the name and address of the Consignee given in the box for the Notify Party. Marks and container number. Stale Bill of Lading :.e. In some case. c. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 128 11. bank or any other party as provided in the contract or letter of credit. Name of the port of loading. freight paid. f. even before the goods reach the destination. Example An exporter sent off his goods but forgot to send the Bill of Lading to the customer. Similarly. the bank becomes the first endorsee. i. maintaining that because the exporter’s fault. Thus. f. Name and address . The Chief Officer of the ship through the port trust issues bank forms of bills of lading are supplied by shipping companies to shippers who prepare these documents and present them for signature at the shipping to the shipper. He sued the exporter for the costs of the storage. Name and logo of the shipping line. The Standard Bill of Lading included in the aligned series can be reproduced from the master by using the relevant mask. including B/L. Name of the port of discharge and place of delivery. Shipping bill number and date. Notifying party is the party to whom the shipping company is to send “notice of arrival”.up these columns in the following manner: Consignor: ABC Company. these bills of lading are based on the old pattern. The other details on the bill of lading will be completed by the office of the shipping company before the document is signed and handed over to the shipper in exchange for the mate’s receipt. Thus. if payment in advance has been received or if goods are being shipped under irrevocable letter of credit. h. London By not striking-off the words “Or Order Of “and. writing the name of the negotiating bank. Freight Paid Bill of Lading :. though it is transferable by endorsement and delivery. In contrast to the “Order BIL” is the consignee-named B/L The consignee-named B/L is made out in the name of a specific party. Contents of Bill of Lading a. According to international commercial practice.When freight is paid at the time of shipment or in advance. Total number of containers and packages. What is the purpose of transferability of the bill of lading? Transferability enables the banks to pay money to the exporter against surrender of shipping documents. Hence. Bill of lading is a document of title that will enable the lawful holder of any of the original Bill to take delivery of the goods at the stipulated port of destination. m.A bill of lading that has been held too long before it is passed on to a bank for negotiation or to the consignee is called a stale bill of lading. n. the charges had been incurred. Amount of freight paid or payable. BIL along with other shipping documents must be presented to the bank not later than twenty.of the shipper. k. Without this document the customer was unable to obtain the goods at the Port of destination. Such bill of lading is known as freight bill of lading. title to goods cannot be transferred to a third party. However. There are three main columns in B/L. the consignee named B/L is a valid document. For example. Container status and seal number. The party could be either the exporter himself. g. Name and the number of vessel.one days of the date of shipment as given in BIL. Gross weight in kg. Consignee or Order of and Notifying party. The customer sent the storage charges to the exporter.675. d. Signature and initials of the Chief Officer. These are Consignor (Shipper). and volume in terms of cubic metres. New Delhi Consignee: (Or Order of) Bank of XYZ. freight collect and is known as freight collect bill of lading. While preparing “To Order Bills of Lading care should be taken to mask the Consignee box also. if payment from the importer has not been secured. A number of shipping lines in India’s overseas trade are already issuing bills of lading on the ISO A4 size paper. New Delhi Notifying party: KNM. Title to goods will be transferred from the negotiating bank to the paying bank to importer on endorsements by the negotiating and the paying banks in succession.

Non preferential Certificate of Origin :. Significance of Bill of Lading for Importers a.which is transferable by endorsement and delivery. etc. The goods produced in a particular country are banned for import in the foreign market. b. on which no preferential tariff is given. UK. the certificates or origin have to be submitted in special forms obtainable from the High Commission of the country concerned.675. c. Delivery of the goods can be taken by the importer because of the second set. Significance of Bill of Lading for Exporters a. b. Handicrafts. DCs of EPZs. require it. The goods produced in a particular country are subject to preferential tariff rates in the foreign market at the time importation. 129 Significance of Bill of Lading for Shipping Company a. Germany. It is ari acknowledgement indicating that the goods mentioned in the document have been received on board for the purpose of shipment. It is useful to the shipping company for collection of transport charges from the importer if not collected from the exporter. c. It acts as a document of title to goods. Contents of Certificate of Origin a. two copies. Bangkok Agreement (BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions on imports and exports. The number of copies to be made out will be indicated by the importer before the shipment takes place. SAARC and SAPTA which can be issued by such agencies as EPCs. If however. The exporter sends the bill of lading to use bank of the importer so as to enable him to take the delivery of goods.Certificate of origin for the purpose of Commonwealth Preference is also known as ‘Combined Certificate of Origin and Value’. It is only rarely that a bill of lading would be drawn this way. b. A clean bill of lading certifies that the goods received on board the ship are in order and good condition. The exporter can claim damages from the shipping company if the goods are lost or damaged after the issue of a clean bill of lading. Name and address of the exporter. the bill of lading is not transferable. BENELUX countries. namely. of origin required for availing of concessions under Generalised System of Preferences (GSP) extended by certain countries such as France. Director General of Foreign Trade.1 . The exporter can give an advance intimation to the foreign buyer about the’ shipment of goods by sending him a nonnegotiable copy of bill of lading. Development Commissioners of EPZs. an endorsement which names the transferee to whom delivery is to be made or by an endorsement in blank to be bearer. • • • • • • • Export Inspection Agencies. It is useful for claiming incentives offered by the government to exporters. Textile Committees for textile products. Italy. The consignee or consignor as the case may be. b. Two member countries. convert the blank endorsement into a special endorsement by inserting. however. e. Commodity Boards and their regional offices. Types of the Certificate of Origin a. It is a contract between the shipper and the shipping company for the carriage of the goods to the port of destination. Australia. It is then called the “endorsement in full” Sending of Bill of Lading to Importer B/L are mad out in sets and any number of copies may constitute the set according to the requirements of the particular transaction and the importer. the name of a person to whom delivery is to be made. Development Commissioner. MPEDA. etc. The certificate of origin states that the goods exported are originally manufactured 11. EIC.Certificate. can transfer the B/L either by a special endorsement. Trade Association of the exporting country. For concession under Commonwealth preferences. This certificate can be obtained from specialised agencies. The holder may. In case there is no such indication. so that if one is lost. APEDA. Le. . Certificate for availing Concessions under other Systems of Preference :.Endorsement on Bill of Lading By practice and custom he bill of lading has been transferable.e.Nonpreferential certificate of origin is required in general by all countries for clearance of goods by the importer. It is issued by :• • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The authorised Chamber of Commerce of the exporting country. Certificate of origin is required when :a. Origin under BA. USA. Marine Products Export Development Authority for marine products. One set of documents is sent by the first class airmail and the second by the following mail. Canada and New Zealand of the Commonwealth. the bill requires the goods to be delivered to a particular named person and does not include a reference to his assignees. d. i. Certificate for availing Concessions under Commonwealth Preferences (CWP) :. b. in the country whose name is mentioned in the certificate. normally. Export Inspection Council (EIC) is the sole authority to print blank Certificates of . Certificate of Origin The importers in several countries require a certificate of origin without which clearance to import is refused. d. It. Japan. Name and logo of chamber of commerce. e. Name and address of the consignee. Certificate of Origin for availing Concessions under GSP:. c.Certificate of origin is also required for tariff concessions under the Global System of Trade Preferences (GSTP). FIEO.

White Shipping Bill for export of Duty Free goods prepared in tripli-cate in the Standardised Format. green. unit rate. It is required when the goods produced in a. Standardised Formats of the Bill of Export are also available with the booksellers who deal with Exim publications. This is of Three Types. Four copies of Packing list giving contents. h. Certificate of origin is required for availing of concessions under Generalised System of Preferences (GSP) as well as under Commonwealth Preferences (CWP). c. e. gross and net weight of each Package. c. Free Shipping Bill is used for export of goods which neither attracts any Duty/Cess nor is entitled to Duty Drawback on their exportation. 2. Description of goods in terms of quantity. Port trust copy. total FOB/CIF value. yellow and pink for the purpose stated above. the clearing and forwarding agent of the exporter prepare this document. Like the shipping bill. Drawback copy. Drawback Shipping Bill or Bill of Exports is used in the case of goods which are entitled to Drawback.Duty-free shipping bill is useful for exporting the goods on which there is no export duty. e. Seal of the issuing authority. Port authorities in India have specified documents for bringing the cargo into the shed for shipment as well as for payment of port charges. Total number of containers and packages. Application for export is used for seeking customs permission of export goods to the neighboring countries like Bangladesh by road. Purchase Order e. Ship. GR Forms in duplicate for shipments to all countries.. quantity. “Dutiable” and “Drawback” cargos. Signature and initials of the concerned officer of the issuing authrity. Green Shipping Bill for export of goods under claim for Duty Draw. b. c. Export promotion copy. Packing and container description.back prepared in quadruplicate in the prescribed Form. i. following colours have been provided to different kinds of shipping bills Types of goods Drawback Shipping Bill Dutiable shipping Bill Duty free Shipping Bill By Sea Green Yellow White By Air Green Pink Pink EXPOR T IMPORT PROCEDURE AND DOCUMENTATION k.1 . namely. of this Invoice is to be pasted on the duplicate copy of Shipping Bill). f. correct and full description of goods. Contract. Customs copy. Shipping bill is normally prepared in five copies :a. b. Shipping Bill Shipping bill is the main customs document. ping Bill for Shipment Ex-bond is for use in case of imported goods for Re. the exporter has also to file another document known as “Form D”. This document is called port . j. Marks and container number.Drawback shipping bill is useful for claiming the customs drawback against goods exported. for claim-ing duty drawback. 3. However. It is to be submitted to the customs for the assessment of duty and clearance of goods with concessional duty. d. It helps the buyer in adhering to the import regulations of the country. Pink Shipping Bill for export of Duty Free goods ex-Bond prepared in triplicate in the prescribed Form. in order to ensures that goods bought from some other country have not been reshipped by a seller. Name of the port of loading.Dutiable shipping bill is required for goods which are subject to export duty. l. Sometimes. t. Significance of the Certificate of Origin a. Dutiable Shipping bill is used in case of goods subject to Export Duty/Cess but mayor may not be entitled to Duty Drawback. certified by the customs. Name and the number of Vessel of Flight. of packages. ‘ b. a certificate of origin is required. exports and which are kept in Bond. Dutiable Shipping Bill :. white. b. particular country are banned for import in the foreign market. Duty-free Shipping Bill :. Letter of Credit.e. Where the goods are to be cleared by the Land Customs. d. i. g. Four copies of Invoices indicating all relevant particulars such as no. Customs declaration form for goods sent by post parcel is a standard form for all types of cargo.e. The Formats presented for the Shipping Bill are as under: 1.675. Name of the port of discharge and place of delivery. Following documents are required for the processing of a Shipping Bill: a. In order to facilitate easy recognition and quick processing. quantity. Bill of Exports are also of four types i. c. etc. Drawback Shipping Bill :. Types of Shipping Bill Based on the incentives offered by the government.trust copy of shipping bill in Bombay dock challan in Calcutta and Export application in Madras and Cochin. (One copy 130 11. required by the customs authorities for granting permission for the shipment of goods. Yellow Shipping Bill for export of Dutiable goods prepared in triplicate in the prescribed Form. The cargo is moved inside the dock area only after the shipping bill is duly stamped. Bill of export is prepared instead of Shipping Bill. for export of “Free”. Inspection/Examination Certificate.d. Exporter’s copy. customs authorities have introduced three types of shipping bills:a. e. river or rail. 4.

the exporter is required to submit three copies of invoice to the Consulate of the importing country concerned. Significance of Consular Invoice for the Importer a.1 131 .. h. required by the customs authorities for granting permission for the shipment of goods. drums etc. quantity and details of each case. Bill of entry for home consumption (white in colour): where an importer wants to get his goods cleared in one lot. source. b. Details about packages. b. Shipping bill is the main customs. description of goods. cleared in small lots. Whether Indian or foreign merchandise to be re-exported i. For the purpose of giving information in the bill of entry form. The customs authorities may ask the importer to supply other documents like invoice. e. Name and address of the importer. 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. master or agents and flag. In order to obtain consular invoice. The bill of entry is drawn in triplicate. Myanmar. document. Significance of shipping bill a. grade. b. Country of final destination. The importer is assured that the goods imported are not banned for imports in his country. etc. he has to present the Bill of entry for home consumption. the importer gets quick delivery of goods. New Zealand. unserviceable stores. i.e. 1971. Iraq. passengers baggage b. Total number of packages with total weight and value. empty bottles. of reasonable value . in order to verify the correctness of the information supplied in the bill of entry form. f.. Significance of Consular Invoice for the Exporter a. Bill of Entry is not required in the following cases: a. Name of the vessel. of the goods imported for the purpose of assessing import duties and also for statistical purposes. necessary information about the goods imported must be given to the customs authorities “in a prescribed form called bill of entry form. quality. etc. kennels of cargos containing live animals or birds. g. b. FOB price and real value of goods as defined in the Sea Customs Act. It makes the task of the customs authorities easy. yellow in colour): Where an importer wants to shift goods to a warehouse and thereafter gets his goods. marks and numbers. When goods are imported is a particular country. d. a document.675. d. Significance of Consular Invoice for the Customs Office a. The main purpose of the consular invoice is to enable the authorities of the importing country to collect accurate information about the volume. b. The Consulate of the importing country certifies them in return for fees. on the strength of which clearance of imported goods can be made. the importer has to pay the necessary import duty. e. f. Bill of entry for warehousing (into bond.bill is also necessary for the collection of export incentives offered by the government. It facilitates quick clearance of goods from the customs at the port of destination and therefore.Contents of shippining bill a. Ghana. d. which needs to be submitted for certification to the Embassy of the importing country concerned. ship’s stores in small quantities for personal use. For this purpose. favour parcels c. It also assures the exporter of the payment from the importing country. Duly endorsed shipping . Bill of entry is. Guinea. Fiji. Tanzania. the goods of the stated values and description in the specified quantity have entered into the country from abroad. c. goods are classified into three categories namely :1. Ex-Bond Bill of Entry (Green in Colour): When an importer wants to remove goods from the warehouse. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Bill of Entry The bill of entry is a document. 3. Mauritius. prepared by the importer or his clearing agent in the prescribed form under Bill of Entry Regulations. Certification of goods by the Consulate of the importing country indicates that the importer has fulfilled all procedural and licensing formalities for import of goods. This invoice is the most important document. Australia. c. Reason may be that he is unable to pay duty leviable on all goods at one instance or may be because of storage problem. Nigeria. The exporter negotiates a copy of the consular invoice to the importer alongwith other shipping documents. he has to present an Ex-bond bill of entry which is green in colour. certified by the customs. he has to present ‘into bond’ bill of entry. 2. Uganda. The cargo is moved inside the dock area only after the shipping bill is duly stamped. mail box and post parcels. 11. Name and address of the exporter. which states that. Zanzibar. dunnage wood. c. boxes. Cyprus. broker’s note and insurance policy. Consular Invoice Consular invoice is a document required mainly by the Latin American countries like Kenya. value. etc. It facilitates quick calculation of duties as the value of goods as determined by the Consulate is considered for the purpose. e. Name of the port at which goods are to be discharged. It is useful to the Customs Appraiser while determining the actual value of goods exported.g. It facilitates quick clearance of goods from the customs in exporter’s as well as importer’ country.

Contents of Airway Bill a. When Certificates as such appear on the Invoice. b. Amount of freight paid or payable. b. the RBI has introduced the GR procedure. Name of the airport of departure and destination. h. consignee and the first carrier. the authorised dealer will report the transaction to the RBI. the person who is directed to pay is called the “Drawee” and the person who is entitled to receive payment is called the “Payee. that the goods are of particular origin or manufactured/packed at a particular place and in accordance with specific contract. Certified invoice At times the exporter is called upon to certify on the Invoice. 132 11.1 . Customs authorities. will certify the value declared by the exporter on both the copies of the GR form at the space earmarked and will also record the assessed value. There is no prescribed form of this Invoice. f.. before the appropriate Consulate/Cham-ber of Commerce Embassy as the case may be. e. It is a contract between the airlines or his agent to carry goods to the destination. Within 21 days from the shipment of goods. It acts as a customs declaration form. is a receipt issued by an airline for the carriage of goods. Other Documents Customs Invoice Countries like U. d. Description of goods. Gr Form GR Form is an exchange control document required by the Reserve Bank of India (RBI). Packing and container description. For example. In order to ensure this. Marks and container number. separate forms are not used but all the entries are made in one form. It is prepared either in an international currency or Indian Rupees depending on the terms of the contract. Since. g. In India. It is the document” of instructions for the airline handling staff. f. the existing declaration in GR form has been replaced by a declaration in form SDF (Statutory Declaration Form). Canada.. b. c. Total number of containers and packages. Name and address of the exporter. Importance of Airway Bill a. Legalised/visaed Invoice These are the Invoices sworn for their genuine-ness by the seller as being correct. d.copy ‘of GR form together with a copy of invoice will be retained by the authorised dealer till full export proceeds have been realised and thereafter submitted to the RBI. so each airline has its own airway bill. an exporter has to realise the proceeds of the goods he has exported within 180 days of their shipment from India. d. GR form is to be submitted in duplicate to the Customs at the port of shipment along with the shipping bill. a Bill drawn in US dollars is EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Airway Bill An airway bill.” When it is drawn on a foreign firm it is termed as a Foreign Draft or Bill of Exchange. Name and address of the importer. After the documents have been negotiated. Signature and initials of the issuing carrier or his agent. Name of the port/ dock where goods are to be cleared. A nominal charge is collected by them from the seller for doing this. The names and addresses of the consignor. cargo by sailing vessels from customs ports when landed at open bundles only The importer has to fill up a separate bill. also called an air consignment note. need Customs’s In-voice. exporter must lodge the duplicate copy of GR together with relative shipping documents with the authorised dealer named in the GR form for negotiation of export bills. e. They will then return the duplicate copy of the form to the exporter and retain the original for transmission to the RBI. The duplicate.g. The free goods are marked as free in the entry form itself.675. c. On account of introduction of Electronic Data Interchange (EDI) System at certain customs offices where shipping bills are processed electronically. c. Customs will give their running serial number on both the copies after admitting the customs shipping bill. it is called as a Certified Invoice. g. . it contains details about freight it also represents freight bill. These Invoices are required by some of the Latin American Countries. and they bear the stamp and authentication of the Consulate/Chamber of Commerce Embassy as being in order.S. Other relevant documents. Bill of exchange/draft A Bill of Exchange also known as Draft contains an order from the credit to the debtor to pay a specified amount to a person mentioned therein. Value of goods. The importer has to pay the duty before securing the possession of the goods. As per the exchange control regulations. h. Description of goods in terms of quantity. Accordingly. Rate and amount of import duty payable.A. As each shipping company has its own bill of lading. The maker of a Bill is called the “Drawer”. The Invoice Forms are generally available at the Consular Officer of the importing country and are required to be signed and witnessed after duly filling out the same. i. Airway Bill or Air Consignment Note is not treated as a document of title and is not issued in negotiable form. Import licence number of the importer. etc. It is generally made out on a special form prescribed by the Customs Authorities of the importing country and helps for allowing entry of goods in the importing country at preferential tariff rates. Container status and seal number. Contents of Bill of Entry a. the Bill is known by the name of currency in which it is drawn.of entry form for different classes of goods.

This includes the details of export cargo. A Bill of Exchange or Draft is of two types: (I) ‘Sight Draft’ or ‘Draft at Sight’ and (ii) “Usance Draft” or “Usance Bill”. However. The Language Certificate is issued in quadruplicate. Antiquity certificate This Certificate is required in the case of export of antiques. car/lorry numbers. As there is no Aligned document for Draft the same can be prepared by the Exporter in the usual format Certificate of inspection Inspection Certificate. the bills are drawn in sets and two sets of documents. Bill of Lading/Airway Bill number and date. . usually depending upon the goods which are being imported.e. Weight note This document is used to confirm that the Packets/Bales. Car/Lorry ticket This Ticket is prepared for admittance of cargo through the Port gate. Certificate of conditioning Certificate issued by a Competent Office in which. Unless and until the Draft is received. Each one bears a reference to the other. breadth. depth. The Exporter only advises ). Languages certificate Importers in the European Economic Community Countries require Languages Certificate along with the GSP Certificate in respect of hand loom cotton fabrics classifiable under NEMEX Code 55. including drafts are mailed to the foreign correspondent through an authorised dealer for presentation to the Drawee (importer). the dry weight of wool or silk is reckoned and certified. the Port of destination. etc.e. This Certificate is generally required to be issued by one of the authorised independent Inspection Agencies/Surveyors in the exporter’s coun-try. for disposal arrangement. live stocks. Black list certificate This is to certify that the ship/aircraft carrying the goods has not touched a particular country on its journey or that the goods are not of a particular country. are of a particular weight and not more than the stipulated weight as per contract. It may at times give gross weight and net weight of the whole consignment. The Shipping Advice is prepared in Aligned docu-ment. quantity and description. etc. Health/veterinary/sanitary certificates When the goods that are exported are foodstuffs. quantity. for realisation of export proceeds. i.09.known as ‘Dollar Bill’ and when prepared in rupees. etc. description of goods. a certificate from the Health /veterinary/ Sanitary Authorities is called for by the overseas buyers. The Languages Certificate is issued by the Textile Committee against a small fee. This is also known as ‘Vehicle Ticket or Gate Pass’. payment immediately after the Draft is presented to him. When the Drawer i. The Certificate is issued in the Aligned document Form. on the basis of the ascertained humidity factor. This certificate is usually called for when countries have strained political relations with another. Short shipment form Short Shipment Form is an application to the Cus-toms Authorities at Port advising the short shipment of goods and for claim-ing the return of the Duty and/or Cess paid on such short shipping goods.675. Shut out advice It is a statement o(packages shut out by a ship and is prepared by the shed concerned and sent to the exporter showing the particu-lars of packages. When it is charged on weight basis. Manufacturer’s/supplier’s quality/inspection certificate This is a Certifi-cate to the effect that the goods which have been manufactured/supplied are as per the requirement of the Contract of Sale. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11. Shipping advice A Shipping Advice is used to inform the overseas customer about the shipment of goods. shipper’s name.. the Negotiating/Collecting Bank does not hand over the Shipping documents and the buyer cannot take delivery of goods. along with other documents.. Certificate of chemical analysis To ensure that the quality and grade of items like metallic ores. some countries require a Manufacturer’s Certificate to the effect that goods shipped have actually been manufactured and are available. Manufacturer’s certificate In addition to the Certificate of Origin. This is because the importer desires to know if the goods are fit for human consumption. importers may require the exporter to send a Certificate of Chemical Analysis from a recognised analyst. This Certificate contains the name of vessel. it is called a ‘Sight : Draft’. is the same as specified in the Sale Contract.. marine products. He should transit one copy to his overseas importer.1 133 . When the goods are shipped by Sea. name of the vessel with date. is needed under some contracts or by some countries. Certificate of shipment This Certificate is issued by the Shipping Agent and ensures that a certain lot of goods have been shipped. the weight declared by exporter is accepted. It is issued by the Archaeological Survey of India. pigments.his importer about the Invoice number. indicating that goods have been inspected before shipment. being termed as ‘Rupees Bill’. three copies of which are given to the exporter. the port . importer to make . marks on packages. of packages. length.of export. etc.e. description of goods and quantity and the date of sailing of the vessel. Indian exporters should apply for this certificate simultaneously or sepa-rately. exporter expects the Drawee i. hides. Certificate of measurement from the Indian Chamber of Commerce or any other approved organisation may be obtained by the exporter and given to the shipping company for calculation of necessary freight. Certiflcate of measurement Freight can be charged either on the basis of weight or measurement.

3. 4. Evidence:. 7.1 .It is not a It is a negotiable instrument negotiable document. Issuing Authority:.Details of Fright:-It does not It does specify whether bill of lading is specify whether the fright is paid on freight paid or not. 134 11. ~ Stale bill of lading. acknowledging the receipt of goods on board the vessel. Negotiability:. 6.It is prepared before the I t is prepared on the basis of the mate's bill of lading. Title of Goods:.It is of two types : It is of several types : ~ Clean mate's receipt.Distinction between . 8. ~ Clean and claused bill of lading.It is an evidence of goods having been loaded on board the ship It is issued in order to enable the importer to take the delivery of goods at the port of destination. or his mate. Types:. Purpose:-It is issued in order to enable the exporter or his agent to secure bill of lading from the shipping company. ~ Qualified mate's receipt ~ Transhipment bill of lading.Mate’s is a receipt by the Bill of lading is the Official document Commanding Officer of the ship when issued by the shipping company the cargo is loaded on the ship.675. goods on not. Sequence:. 9.It is issued by It is issued by the shipping company or the Commanding Officer of the ship its agent. It is a contract between the shipper and the shipping company for the carriage of goods from the port of loading to the port of destination. 2.It is not a title of It is a document of title of goods goods.Mate’s Receipt and Bill of Lading EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Mate’s Receipt Bill of lading 1. Meaning:. ~ Freight Paid & Collect bill of lading 5. receipt.

The goods exported are originally manufactured in the country whose name is mentioned in the certificate 2. 3. etc. Meaning:.It contains the terms and It contains accurate information about the conditions of sale as well as detailed volume. of the goods imported." of the goods imported to the authories of the importing country for the purpose of assessing import duties. source. of description of the goods to be exported the goods exported 5.Distinction Between . value. Consular Invoice Consular invoice is a certificate issued by the Consulate of the importer's country situated in the exporter's country certifying the volume.1 135 .Commercial invoice is the statement of account of sale prepared by the exporter after the execution of export order giving details about the goods shipped.The certificate of origin states that. excise and customs procedures. of the goods imported.grade. quality.source. purpose:. Consular invoice is required in order to provide accurate information about the volume. grade. Cost:. Distinction Between .Issuing Authority : It is issued by the It is issued only by the Consulate of the. source. Chambers of Commerce. etc. quality. purpose:-Certificate of origin is required q For claiming the benefit preferential tariff rates. source. value. 4.. 3. 2. It is required in order to provide accurate information about the volume. value. value. quality. 11. Legislation :-It does not require any legislation from the Consulate of the importing country situated in the exporting country. of the goods imported to the authorities of the importing country for the purpose of assessing import duties. etc. etc. q In case goods' produced in a particular country are banned for import in the foreign market.Certificate of Origin and Consular Invoice EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Certificate of Origin 1. country.. it is prepared by the exporter himself he needs not to pay any charges for the same. quality..It is required : ~ In preparation of various shipping documents. It does require legislation from the Consulate of the importing country situated in the exporting county. Consular Invoice Consular invoice is a certificate issued by the Consulate of the importers country situated in the exporters country certifying the volume.since.675. etc. grade. It is a secondary document and as such is It is a primary document and is required for required when desired by the importer the preparation of various other shipping documents 4. quality. grade.Commercial Invoice and Consular Invoice Commercial Invoice 1. Meaning:. Export Promotion importer's country situated in the exporter's Councils or Authorised Trade Associations. Contents:. value. ~ In negotiation of documents for collection and claim of incentives. ~ In pre-shipment inspection. Significance:.

Main documents for these purposes are GR/PPVP/ COD/SOFTEX FORM (under Foreign Exchange Management Act).. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Questions. Export Licence/Permit.675. Import documents include IEC No and Bill of Entry. With the help of this system. Commercial invoice performs many functions.not difficult to understand if one knows the reasons of making documents at different stages of export transactions. i. Q9. Ans. Commercial perspective helps in protecting the respective interests of the exporter and importer.. Distinguish between Commercial Invoice and Consular Invoice. Drawback shipping bill is used for export of goods entitled to duty drawback. Bill of lading! Airway bill.. he will have to get the Registration-Cum-Membership Certificates from the concerned export promotion organization. Q8. vii.. In line with system.. Under the Foreign Exchange Regulations. is the document prescribed by the Indian Railways for getting a priority in the allotment of wagons for movement of export consignments. and………….. Q4. Insurance policy/Certificate and bill of exchange. ii. the banking channel will ensure that the importer does not get the charge of goods unless he has either paid for the goods or has obligated himself to make the payment after the expiry of an agreed period. In addition. the document used for this purpose is called shipping bill. Bank Ql. In other words. Q6. The details required to be mentioned in these documents will depend upon the terms and conditions of the export contract/letter of credit. etc... contract are: Commercial invoice.. The application for getting the Export Inspection Certificate is the.standardized documentation’ Aligned Documentation System’ has been developed. Customs Invoice is prescribed by the………country. Several documents can be prepared from a Master document..Lets Sum Up Documentation in export business is complex but . 11... State whether the following Statements are True or False. When goods are exported by road or by rail. Bill of lading. Some of these documents are made or secured at the preshipment stage while others are made or secured after the shipment has been made. The need for export documents arises due to commer-cial. in particular. law stipulates that for anyone to be in the export business.. Main commercial documents in C.. Shipping Bill is prescribed by.. This is to be done by accepting and honouring of the Bill of Exchange by the importer. The legal regulatory documents fulfil the legal requirements of the concerned countries...1 136 . It is a document of contents and a bill. vi) Invoice and Ar4/AR5 Forms. iii. ii.F. iv. These documents are generally in the nature of certificates of . In India. iii. Fill in the Blanks i. Government of India has also developed Standardized Pre.. the exporter has to follow documentation and procedural formalities for any consignment that is shipped. Shipping Bill (customs clearance) and port Trust Copy of Shipping Bill Dock Challan/Export Application (Port Clearance).. The document prescribed for obtaining GSP facility is called. Bill of exchange protects the interests of the exporter by linking the payment for goods with the other documents. authority. form for all exports in physical form other than by post. Q2. registration with the licensing authorities (Importer. Export Inspection Certificate. Distinguish between certificate of Origin and Consular Invoice.. Q7. some of the main documents are Invoice and AR41 AR5 Forms (excise rebate). origin and quality. vi.. exporters from India have to declare exports on..Exporter code No.. iv.) is essential.....l. v.) to claim compensation from the insurance company for loss or damage to the goods caused by the perils insured against. Drawback Copy of Shipping Bill (Duty Drawback) Faced with the problem of the non. Post parcel receipt. In addition to docu-ments needed in exporting country the importing country may also specify documents to be obtained by the exporter. What are the different types of Bill of Lading? What is the significance of Certificate of Origin? What is the significance of Consular Invoice? Distinguish between Mate’s Receipt and Bill of Lading. GR Form is required to be filled in duplicate for all exports in physical form other than by post. Bill of lading and airway bill are transport documents and act mainly as receipt of cargo given by the carrier. Q3. Main documents for claiming rebate in central excise duty are ………. What is the significance of the Aligned Documentation System? What are the contents of Commercial Invoice? Explain the components of Mate’s Receipt. Q5. Ans:12 I) CNX From and GR form ii) Intimation for inspection iii) Customs iv) Importing v) GSP Certificate of Origin vi) Forwarding note.... Insurance policy/certificate will enable the assured (exporter/importer/bank.shipment Export Documents. . Incentive perspective helps in getting various incentives according to the prevailing policy of the government.. Regulatory perspective emphasises to follow the regulatory provisions of that particular country. v. legal and incentive perspectives. Q11.. RBI Code Number is required for the purpose of monitoring the flow of foreign exchange against export of goods by a firm. is also a document oftitle and for this reason it acquires the transferability. Q10. Documents are also needed for claiming export incentives. ………….. It gives information about the shipment and payment terms and also acts as a certificate of origin. Softex form is required to be prepared in duplicate for export of computer software in non-physical form. What do you mean by “Application for export . But if such exporter also wants to claim certain specified export incentives.11 (i) True (ii) false (iii) True (iv) True (v) False..

Packing credit is normally granted on secured basis. Eligibility: Packing credit is available to all exporters whether merchant exporter. Finance short or medium term.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 18: EXPORT FINANCE • • • • Objectives Introduction Institutional framework Pre-shipment finance • Packing Credit • • also be acquainted with the role of EXIM Bank in export finance.1 . It is a short-term credit against exportable goods. Advance against Incentives Pre-shipment Credit in Foreign Currency Negotiation of Export Documents Under Letters of Credit Purchase/ Discount of Foreign Bills Advance against Bills Sent on Collection Advance against Goods Sent on Consignment Advance against Export Incentives Advance against Undrawn Balances Advance against Retention Money Post-shipment Export Credit Guarantee and Export Finance Guarantee Post-shipment Credit in Foreign Currency • Post shipment finance • • • • • • • • • • • • • • Export under deffered payment Deferred credit facilities Role of export import bank of india. Institutional Framework Institutional framework for providing finance comprises Reserve Bank of lndia. Recent development in export financing Lets sum up • • Pre-shipment Finance Pre-shipment finance is provided to the exporters for the purchase of raw materials. process-ing them and converting them into finished goods for the purpose of export. describe the recent development in export finance. participates with commercial bank in extending medium term loans to exporters. lays down the policy frame work and pro-vides guidelines for implementation. 3. Packing Credit The basic purpose of packing credit is to enable the eligible exporters to procure.675. Provided by commercial banks. explain various types and procedure of post-shipment credit . processing. Export Credit & Guarantee Corporation (ECGC) also plays an important role through its various policies and guarantees providing cover for commercial and political risks involved in export trade. process. Export Import Bank of India and Export Credit and Guarantee Corporation. explain the role of Export Import Bank of India. for specified purposes against irrevocable 137 Answers to Check Your Progress Terminal Questions Objectives After studying this unit. Sometimes clear advance may also be granted. is provided exclusively by the Indian and foreign commercial banks which are members of the Foreign Exchange Dealer’s Association. You will 11. manufacturing or packing of goods as defamed by the Reserve Bank of India. Commercial banks provide finance at a concessional rate of interest and in turn are refinanced by the Reserve Bank! Export Import Bank of India at concessional rate. being the central bank of country. Commercia1 Banks. Credit is also extended after the shipment of goods to the date of realisation of export proceeds. In case they do not wish to avail refinance. Let us discuss various pre-shipment advances available to the exporters. you will learn various schemes of finance avail-able to exporters at pre-shipment and post-shipment stages. The-foreign buyer through the medium of a reputed bank gives the credit to eligible exporters. they are entitled for an interest rate subsidy. Once the goods are acquired and are in the custody of the exporter banks usually convert the clean advance into hypothecation! pledge. in certain cases. Reserve Bank of India. Export finance refers to the credit facilities ex-tended to the exporters at pre-shipment and post-shipment stages. Export/ Trading/ Star Trading/ Super Star Trading Houses and manufacturer exporter. It includes any loan to an exporter for financing the purchase. Export Import Bank of India. manufacturing or packing of goods meant for overseas markets. manufacture or store the goods meant for export. Let us first discuss the detail procedure of packing credit. you should be able to: 1. Export financing is another important area of export business. describe the procedure of pre-shipment credit 2. The Reserve Bank of India function as refinancing institutions for short and medium term loans respectively. Manufacturers of goods supplying to Export/ Trading/ ST/ SST Houses and Merchant exporters are eligible for packing credit. Introduction You have learnt various provisions of Exchange Regulations in Unit 6. processing. 4. Many advances are clean at their initial stage when goods are not yet acquired. Packing credit refers to any loan to an exporter for financing the purchase. In this unit.

the documents are drawn in permitted currencies and payment receivable as permitted method of payment.ed the need for Running Account facility has been established by the exporters to the’ satisfaction of the bank.The packing credit can be granted for a maximum period of 180 days from the date of disbursement. It is also available against a confirmed or firm export order/contract placed by the buyer for export of goods from India. the exporters may get packing credit advance more than the FOB value of the goods. The extent of cover and the premium are the. credit’ is given at the instance and responsibility of the foreign bank establishing the LlC. For Commodities under selective credit control. ii. J1rcwid. The Banks scrutinise the documents submitted for compliance of exchange control provisions like: i. The exporters can avail this finance under the following two options. The bank may extend this facility only to those exporters whose track record has been good. Packing credit may also be given under the Red Clause letter of credit. If the exporter fails to do so they would not be able to avail concessional rate of interest. L/C or firm order is produced within a reasonable period of time. iii. then. if the banks are satisfied about the need for longer duration of credit. the post-shipment credit either in rupees or in foreign currency denominated credit or discounting/ rediscounting of export bills. banks are governed by the guidelines issued by the RBI.1 . provided the credit is extinguished by lodging the export bills on remittances from abroad. the relevant GR/PP form duly certified by the customs is submitted and particulars as stated in the GR/PP form are 11. The exporter may choose the type of facility as per his requirement. in case of nonshipment of goods within 180 days. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. It includes any loan or advance granted to an exporter on consideration of or on the security of. The quantum of credit depends on export sales and receivables. the packing credit advance is made against a simple receipt and is unsecured. banks should insist on production of LlCs or firm orders within one month from the date of sanction. when the 138 Post-shipment Finance It may be defined as “any loan or advance granted or any other credit provided by a bank to an exporter of goods from India from the date of extending the credit after shipment of goods to the date of realisation ion of export proceeds. i. Period:. For example. The facility may be extended. Here.The loan amount is decided on the basis of export order and the credit rating of the exporter by the bank. Advance Against Incentives When the value of the materials to be procured for export is more than FOB value of the contract. The credit will be self-liquidating in nature and accordingly after the shipment of goods the bills will be eligible for discounting/ rediscount-ing or for post-shipment credit in foreign currency. exporters are expected to make a formal application to the bank giving details of credit requirements along with the required documents. any duty drawback or any cash receiv-ables by way of incentive from the government. This period can be extended for a further period of 90 days. The facility is available in any of the convertible currencies. The credit in foreign currency shall also be available on exports to Asian Clearing Union (ACU) Countries. the difference represents duty drawback entitlement. i. domestic price of goods exceeds the value of export orders. PCFC credit will also be available both to the supplier units of EPZ/ EOU and the receiver units of EPZ/ EOU. It can be to the extent of domestic value of the goods even though such value is higher than their FOB value provided the goods are entitled to duty draw back and also covered by the Export Production Finance Guarantee of the ECGC. iv. The exporters are required to obtain credit limits suitable to their needs.conditions . This credit is available to cover both the domestic and imported inputs of the goods exported from India. Running Account Facility: The RBI has permitted banks to grant packing credit advances even without lodgement of-L/ C or firm-order/ contract under the scheme of Running Ac-count Facility subject to.675. the rules of the Foreign Exchange Dealers Association of India (FEDAI). Post shipment finance is granted under various methods. Banks can grant ad-vances against duty drawback at pre-shipment stage subject to the condition that the loan is covered by Export Production Finance Guarantee of Export Credit Guarantee Corporation (ECGC). The banks are authorised by RBI to extend this period. Amount:. the Trade Control and Exchange Control Regulations and the International Conventions and Codes of the International Chambers of Commerce. In order to avail the packing credit. The Running Account facility will not be available under the scheme. same as for packing credit guarantee. Rate of Interest:-The interest payable on pre-shipment finance is usually lower than the normal rate. This guarantee enables banks to sanction advances at the pre-shipment stage to the full extent of cost of production. The extension can be done provided the banks are satisfied that the reasons for extension are due to circumstances beyond the control of the exporters. The concessive credit available ~in respect of individual pre-shipment credit should not go beyond 180 days. Generally the amount of packing credit will not exceed FOB value of the export goods or their domestic value whichever is less. ii. The exporters may avail pre-shipment credit in foreign currency and discounting/ rediscounting of the export bills in foreign currency.letter of credit. Pre-shipment Credit in Foreign Currency This is an additional window to rupee packing credit scheme. the fol1owing. Pre-shipment credit may be given for a longer period upto a maximum of270 days. While granting post-shipment finance. This will be extended only °!l the basis of confirmed! firm export orders or confirmed L/Cs. the exporters may avail pre-shipment credit in rupees and. The excess of cost of production over the FOB value of the contract represents incentives receivables. In this method.

the period of usance is in consonance with the time limit prescribed for realisation of export proceeds. 11. In this case the export proceeds must be realised within 90 days. ii. The amount advanced will be liquidated out of the export proceeds of the export bill and the balance paid to the exporter. Under the policy. It is granted only if all other types of export finance are extended to the exporter by the same bank. 4. If such advances extend beyond one year. iii. 1. The documents. 6. where it is customary practice in the particular line of trade and in the case of exports to countries where there are problems of externalisation. etc. A small part of the bills is left undrawn for payment after adjust-ments due to difference in weight quality. When documents are pre-sented to the bank for negotiation under L/C. Banks sometimes do obtain credit reports on foreign buyers before they purchase the export bills drawn on the foreign buyer. Let us now discuss various types of post-shipment finance. Advances are granted against such undrawn balances.consistent with the documents tendered as well as the sale contract! firm order etc. when the accommodation available under the foreign bills purchase limit is exhausted when some export bills drawn under L/ C have discrepancies. The most common practice is to obtain a power of attorney from the exporter executed in their favour by the banks. which is payable within one year from the date of shipment. Whereas in the case of Documents against Acceptance (D/A) bills. However. it is the trade practice that the bills are not drawn for the full invoice value of the goods. The advance is granted to an exporter in consideration of or on the security of any duty drawback incentives receivable from the Government. the financing bank is totally dependent upon the credit worthi-ness of the foreign buyer. Exporters may avail themselves on the forward exchange facility where they do not wish to be subjected to exchange risk on account of the new procedures for overdue export bills. 2. the major part of the advance is given at the postshipment stage. Goods are exported at the risk of exporter for sale. All the documents tendered should be strictly in accordance with the L/C terms. Advance against Export Incentives Advances against the export incentives are given at the preshipment stage as well as the post-shipment stage. the banks will negotiate the export bills provided it is drawn in conformity with the letter of credit. are released through foreign correspondent only when payment is received. ECGC fixes limits and payment terms for individual buyers and the financ-ing bank has to ensure that the limit is not exceeded so that the benefits of policy are avail-able. Even the slightest deviation from those specified in the L/C can give an excuse to the issuing bank of refusing the reimbursement of the payment that might have been already made by the negotiating bank. Advance against Undrawn Balances In some of the export business. 5. Advance against Goods Sent on Consignment Sometimes exports are effected on consignment basis. under the Documents against Payment (DIP) arrangements. the bank may send the bill on collection basis and finance the exporter to some extent out of the total bill amount. Since the financing banks are open to the risk of non-payment. 3.675. In such condition payment is receiv-able to sale of goods. It is sent to the concerned government department like the Director General of Foreign Trade. Purchase/Discount of Foreign Bills Purchase or discount facilities in respect of export bills drawn under confirmed export contracts are generally granted to exporters who enjoy bill purchase/discounting limits sanctioned by the bank. The advances are granted provided the undrawn balance is in conformity with the normal level of balances left undrawn subject to a maximum of 5% of the full export value. etc. they are treated as deferred payment advance which are also eligible for concessional rate of interest. iv. Banks also secure a guarantee from ECGC on the post-shipment finance extended by them either on a selective or whole turnover basis. documents are delivered to the overseas importers against acceptance of the draft to make payment on maturity. Advance against Bills Sent on Collection Post-shipment finance is granted against bills sent on collection basis in the following situations: i. It is to be noted that the L/C issuing bank undertakes to honour its commitment only if the beneficiary submits the stipulated documents. 7./ letter of credit. As the security offered by the issuing bank under letter of credit arrangement is not available. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Under the above situation. The overseas branch/ correspondent of the bank is instructed to deliver documents against Trust Receipt. Commissioner of Customs. they should be scrutinized carefully taking into account all the terms and conditions of the credit. The banks follow their own procedure in granting the advance. The advances are granted upto 90 days. The banks may finance against such transaction subject to the exporter enjoying specific limit for such purpose. These advances are not granted in isolation. the documents are submitted within the time limit stipulated and in case of delay suitable explanation is made. iii. The exporters are supposed to give an undertaking that they will surrender the balance proceeds within 6 months from the date of shipment.1 139 . Negotiation of Export Documents Under Letters of Credit Where the exports are under letter of credit arrangements. Advance against Retention Money Banks grant advances against retention money. ECGC policies issued in favour of exporters and assigned to banks are insisted upon.

iii. contracts for export of goods and services against payment to be secured partly or fully beyond 180 days are treated as deferred payment exports. project reports. iii. Export Finance Guarantee cover post-shipment advances granted by banks to exporters against export incentives receivable in the form of duty drawback. civil construction. The exporters are paid out of the buyer’s credit on a non-recourse basis on their complying with the terms of the export contracts to be financed under the scheme. civil construction and erection and ii. Construction projects: involve civil works. 9. Hence. steel structural works as well as associated supply of construction materials and equipment. commissioning of plant or factory alongwith supply of machinery. credit is granted by EXIM Bank jointly with an authorised dealer to foreign buyers in connection’ with export of capital goods and turnkey projects from India. If pre-shipment credit has been availed of in foreign currency. b. Project exports eligible for export finance are as follows: i. They can avail refinance from EXIM bank. negotiation or dis-count of export bills or advances against such bills qualifies for this guarantee. Exporters are expected to hold appropriate shipments or contracts policy of ECGC to cover the overseas credit risks. Post-shipment Export Credit Guarantee and Export Finance Guarantee Post-shipment finance given to exporters by banks through purchase. preparation of designs and advice to the project authority on specifications for plant and equipments. can provide in principle clearance for contracts valued upto Rs. economic viability of the overseas projects concerned of the importer and general economic conditions of his country~ iv. Deferred Credit Facilities Export of goods on deferred payment terms can be financed under suppliers credit or buyer’s credit. erection and commissioning of plants. credit worthiness of foreign borrower. Exporters are required to obtain permission from the Reserve Bank through authorised dealers in the event of nonrealisation of export proceeds within the prescribed period. commissioning or supervision of erection and commissioning. skills. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. iii. competence and capability of Indian exporters in complying with the proposed commercial terms of the contract. Technical and consultancy service contracts involve provision of personnel. The credit extended is termed as deferred payment term credit. ) 100 crores. furnishing of knowhow. While considering proposals under the scheme. 25 crores. erection. operation and maintenance services and management contracts. Deferred credit facility is normally allowed only for export of engineering goods. Reserve Bank has formulated special schemes permitting deferred credit arrangements. EXIM bank is empowered to give clearances for contracts of value of above Rs. For financing under deferred credit system a single point approval mechanism within a three tier system operates. Consultancy services contracts involve preparation of feasibility studies. ii. they should have detailed discussion with the bankers. Let us first understand what they are. This will enable realisation of export proceeds over a period exceeding six months. Discounting of bills beyond 180 days requires prior approval from RBI.8. 140 11. Post-shipment Credit in Foreign Currency The exporters have the option of availing of exports credit at the post-shipment stage either in rupee or in foreign currency. detailed engineering. Supplier’s Credit: The exporter extends credit directly to the overseas buyer and seeks refinance from commercial banks/ EXIM bank. The exporters have the option to avail of pre-shipment credit and post-shipment credit either in rupee or in foreign currency. Let us discuss buyer’s Credit in detail. However. Engineering services contracts involve supply of services such as design. Commercial banks who are authorised dealers in foreign exchange in India. justifiability of the contract on commercial considerations. Reserve bank’s permission is also required for the purpose of granting credit under the scheme since payment will have to be made to the exporter on behalf of non-resident buyer. The working group consists of representatives of all the above institutions to provide single window clearance. etc.1 . The authorised dealer in Form DPX 6 should make application to the Reserve Bank for the purpose. 25 crores and upto Rs. Exports under Deferred Payments You have learnt that all export proceeds must be surrendered to an authorised dealer within 180 days from the date of shipment. Buyer’s Credit: It is a loan extended by a financial institutions or a consortium of financial institutions to the overseas buyer for financing a particular contract. equipment and materials. Turnkey projects: These projects involve supply of equipment alongwith related services like design. The credit is granted under the Rediscounting of Export Bills Abroad Scheme ( EBR) at LIBOR linked interest rates. etc.675. The scheme covers export bills with usance period upto 180 days from the date of shipment. These services include: a. Before the exporter enters into any contract providing for credit terms to be financed under buyer’s credit scheme. This system includes: i. realising the special needs of exports of engineering goods and projects. Under this scheme. turnkey projects involving rendering of services like designing. 100 crores. This is done because the foreign currency pre-shipment credit has to be liquidated in foreign currency. the post-shipment credit necessarily to be under the EBR scheme. the following factors are taken into account by EXIM Bank: i. A working group considers proposals of contracts of value beyond Rs.

Manufacturing units with minimum export orientation of 25% of pro-duction or export turnover exceeding Rs. The maximum period of an advance under PCFC will not generally exceed 180 days. if applicable.Export Import Bank of India: Pre. It is the principal financial institution in the country for coordinating working of institutions engaged in financing exports and imports. Research & Analysis: Research & Analysis carried out on specific industry sub sectors with export potential. Export Vendor Finance Development Enables vendors of export-oriented units to acquire plant & machinery and other assets for increasing export capability Export Product Development Enables Indian firms undertake product Finance development. Enables Indian exporter to convert credit sale to cash sale on without recourse basis. The Bank finances export of Indian machinery. Confirmation of L/Cs covering import of capital goods Forfaiting Guarantee Facility L/C Confirmation 141 . and international trade related subjects are provided to exporters. b. Such funds are then made available by the EXIM Bank to the commercial banks in India who opt to avail of PCFC for on-lending to eligible exporter customers for import of eligible items. The applicable rate of interest on credit available to the exporter will be two per cent over and above the interest rate at which the funds are raised by the EXIM Bank. Enables Indian companies to provide requisite guarantees to facilitate execution of export contracts and import transactions Enables Indian companies to provide requisite guarantees to facilitates execution of export contracts and import transactions. Software Training Institutes Marketing Finance Enables setting up of institutes for software training. The major functions of EXIM bank are as follows. Table 7.675. Enables eligible export-oriented units to acquire equipment. export opportunities and competitiveness. Such credit is granted to pay for the import of inputs required for export production. Finance: The present focus of EXIM Bank is on export finance. allocate PCFC limits to their customers on the basis of their assessment of import requi. The specified categories of exporters are as follows: a. whichever is lower. This credit is granted on the basis of the firm export order or the letter of credit. Such exports could be made either directly or through Trading Houses.shipment export credit in foreign currency to only specified categories of the exporters unlike the PCFC offered by commercial banks to all categories of the exporters.1 Enables Indian exporters to raise finance from capital markets through public/ rights issues of equity shares/ debentures with the backing of EXIM Bank's underwriting commitment. fee. Exim Bank finance is also available at export production stages. of eligible Indian goods Enables companies to meet cash flow deficits of projects being executed overseas on cash payment terms EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Finance for Consultancy And Enables Indian exporters of consultancy and Technology Services technology services to extend term credit to overseas Importers Pre-shipment Credit Enables Indian exporters to buy raw material and other Inputs for export contracts involving cycle time exceeding six months. Services: EXIM Bank provides information. Production Equipment Financ e Services Underwriting Role of Export Import Bank of India Export-Import Bank of India was set up in 1982. EXIM Bank raises short-term foreign currency funds on a revolving basis from one or more Syndicates of overseas lenders.1 lending and service programmes of EXIM Bank Programme For Indian Entities Export (Supplier's) Credit Financing of Rupee Expenditure for projects Export Contracts Use Enables Indian exporters to extend term credit to Overseas importers. Enables exporters to implement market development Programmes and finances productive capabilities through loan financing. The advances granted under PCFC to the exporters is fully liquidated from the export proceeds of the relative export bill. Look at Table 7. commitment.shipment Export Credit in Foreign Currency In addition to the pre. etc. The repayment of the pre-shipment credit will be made out of sale pro-ceeds of export shipment in respect of which the exporter availed of the facility. 3. c.rement for export production. for the purpose of financing. facilitating and promoting foreign trade of India. Export House/Trading House with annual export turnover exceeding Rs 10. consultancy and technology services on deferred payment terms. in turn. 4.shipment credit in foreign currency granted by the commercial banks. advisory services to enable exporters to evaluate the international risks. the Export. The Export Import Bank of India provides this facilities to the exporters through commercial banks. Exporters may also have to pay management fee. 2. Overseas Investment Finance Enables Indian promoters to finance equity contribution in joi nt ventures/ WOS set up abroad. The exporter should have satisfactory.Import Bank of India (EXIM Bank) also offers the facility of pre. For this purpose only physical exports of commodities are taken into ac-count. 11. Enables Indian Companies to meet cash flow deficits of contracts secured in India and financed by multilateral funding agencies. Salient Features manufactured goods. 5 crores. Foreign Currency Pre-shipment Enables eligible exporters to access finance credit for import of raw materials and other inputs needed for export Production Finance for EOU's & Units in EPZs Enables Indian companies to acquire indigenous and imported machinery and other assets for export Production Foreign Currency Lines of Credit Enables eligible export-oriented units to for imports acquire imported machinery for export production.1 where details of various programmes offered by the EXIM Bank have been shown. Finance for Deemed Exports The salient features of this scheme are as follows: 1. The commercial banks will. R & D for exports.00 crores.

In India. his rights to claim for payment on goods delivered to an importer. participates with commercial banks in extending medium and long-term credit to exporters. offer of attractive credit terms is a crucial factor in winning export contracts. the exporter enters into an export factoring agreement with exporter’s factor. Bombay have been 142 . Small scale industry Export Bills Enables bank to rediscount exports bills of Rediscounting their SSI customers with usance not exceeding 90 days. process. The bank issues appropriate certificates to enable Indian exporters to remit commitment fees and other charges.Project preparatory Overseas services Enables Indian Consultancy firms undertake project preparatory studies in developing countries by grant/loan financing. collection of export proceeds. manufacture or store the goods meant for export. It provides a new dimension to management of export receivables. RBI has allowed Authorised dealers to undertake forfaiting of medium term export receivables. All exports of capital goods and other goods made on medium to long term credit are eligible to be financed through forfaiting. International Export Factoring services on with recourse basis have been approved by the RBI. EXIM bank plays an intermediary role between the Indian exporter mid the overseas forfaiting agency. On receipt of payments from the importer on due date of invoice. RBI and EXIM banks offer refi-nance.675. It is a mechanism of financing exports that involves less risk and enhances international competi-tiveness. A big advantage to the exporter is that it is without recourse financing. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION For Overseas Entities Lines of Credit Buyer’s Credit Let Us Sum Up Export finance is provided at the pre-shipment and postshipment stages. maintenance of accounts receivables and advance of funds. It is extended on the strength of either the letter of credit or confirmed export contracts. Enables overseas financial institutions. In India. Enables overseas buyer to import eligible goods from India on deferred credit terms.(AMSCO) Amsterdam managed by AMSCO in different parts of sub-saharan Africa through grant financing. Forfaiting: Forfaiting refers to the non-recourse discounting of export receivables. The bank receives bills of exchange or promissory notes from the exporter and sends them to the forfaiter for discounting. In this system forfaiting agency discounts international trade receivables of the exporter.. Gener-ally the amount of packing credit does not exceed FOB value of the export goods or their domestic value whichever is less. The exporter surren-ders. Ltd. importer’s factor remits the fund to the exporter’s factor.1 Recent Developments in Export Financing As stated earlier. It converts a credit sale into cash sale for an exporter. The exporter approaches EXIM bank for forfaiting transaction. pre-shipment finance is offered in the form of(i) Packing credit (ii) Advance against incentives and (iii) PreShipment Credit in Foreign Currency (PCFC). Business advisory & Technical Enables Indian consultancy firms undertake Assistance Services overseas specific assignments in select countries through grant financing Cooperation Arrangement with Enables Indian consultants secure African Management services assignments in various projects that are Co. In this system. financial institutions are offering several innovative financial services to exporters. offers a variety of services. Africa Enterprise fund Enables Indian Consultancy firms to undertake specific assignments to assist small and medium entrepreneurs in Sub -Saharan Africa. The exporter’s factor pays to the exporter after deducting the amount of prepayments. In this system. Africa project development Enables Indian Consultancy firms undertake Facility. Exporter’s factor will make prepayment to the export against approved export receivables. EC Investment partners Facility Enables setting up of joint ventures in India between Indian companies and enterprises in the European Community For Commercial banks Enables bank to offer credi t to Indian exporters of eligible goods. Various types of postshipment credits are: (i) Negotiation of Export Documents 11. Copies of invoices and shipping documents are sent to the Importer’s factor. The pre-shipment finance is also made available in foreign currency. the export credit facilities are provided largely by commercial banks. factor bears the complete credit risk. depending upon the type of agreement. These services include coverage of credit risk. Protects the bank by not treating the advance as a non-performing asset for provisioning purpose. The credit provided by a exporter after the shipment of goods is referred to the post-ship-ment credit. The quantum of credit depends on export sales and receivables. Bulk Import Finance Enables banks to offer finance to importers for bulk import of consumable inputs. Who is a factor? A factor is a special type of agent who. The forfaiter pays the exporter in cash and undertakes the risk associated with the export deal. Subsequently. Guarantee cum Supplier’s Credit Refinance Enables banks to protect their own cash flow as also its Exporter client’s cash flow on account of default by overseas buyer. Relending facility Enables banks overseas to make available term finance to their clients for import of eligible Indian goods. The basic purpose of packing credit is to enable the eligible exporters to procure. foreign governments. Some of these services are discussed below: Factoring: It is an attractive way of providing export finance to exporters. the exporters may get the credit against the receivables export incentives. permitted to provide International Export Factoring. Packing credit facilities are provided to the exporters for making necessary arrangements for executing export contracts. EXIM bank. In India. Each invoice is made payable to a specific factor in the importer’s country. the bank arranges for the discounted proceeds to be remitted to the Indian exporter. specific assignments in Sub-Saharan Africa through grant financing. This means that the risk of non-payment by the importer is to be borne entirely by the factor. Refinance of Term Loans to Enables banks to offer credit to eligible EOUs export oriented units to acquire indigenous and imported machinery and other assets for export production. Purchase of receivables of its clients without recourse is the most important service of the factor. their agencies to onlend term loans to finance import of eligible goods from India. Hence. In India. When the value of the materials to be procured for export is more than FOB value of the contract. who extend term Refinance of Export credit credit over 180 days to importers overseas. in certain cases. without recourse to him. SBI Factors and Commercial Services Pvt. The exporters ship goods to approved foreign buyers.

6. v.under letter of credit (ii) Purchase/ discount of foreign bills (iii) Advance against bills sent on collection basis (iv) Advance against goods sent on consignment basis (v) Advance against export incen-tives (vi) Advance against undrawn balances (vii) Advance against retention money (viii) Post-shipment export credit guarantee and export finance guarantee and (ix) Post shipment credit in foreign clemency. What do you mean by pre-shipment finance? Enumerate the methods of pre--shipment finance. ii. Export Import Bank plays an important role in promoting exports from India through its various financing schemes. 11. Pre-shipment Credit in Foreign Currency Post-Shipment Credit in Foreign Currency Buyer’s Credit Factoring Forfaiting Generally the amount of packing credit will not exceed FOB value of the export goods or domestic value whichever is less. iii. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Terminal Questions 1. iii.1 143 . Advances against the export incentives are given at the pre-shipment stage as well as the post shipment stage. What is post . What is the purpose of extending packing credit to exporters? Explain the procedures of packing credit. gives loans to Indian companies for financing exports under deferred payment. turnkey projects and consultancy projects. Banks are authorized to extend packing credit for a further period of 180 days. 4. i. 7. State whether following statements are True or False. provides lines of credit and buyer’s credit to overseas entities. It refinances to commercial banks in respect of credit extended by them to exporter. Deferred credit facilities are offered for export of engineering goods. ii. 3. etc.675. The bank also advises Indian exporters on matters pertaining to terms of payment. Describe the procedure of pre-shipment credit in foreign currency. Explain the procedures of export under Deferred payments. Factoring and Forfaiting are the recent developments in export financing. iv. 5. v.shipment finance? Explain various methods of post-shipment finance. Answers (i) true (ii) false (iii) false (iv) false (v) true. iv. Describe the role of Export Import Bank of India. 2. Write short notes on: i. Whenever exporter wants he can avail the post shipment advance against bills sent on collection basis. Pre-shipment credit in foreign currency can not be granted on exports Asian Clearing union countries. export financing.

Introduction You have learnt the regulatory framework of foreign trade. this step is helpful in creating business goodwill for the exporter. Although an instrument of payment. shipment and post. Product description. Proforma Invoice accepted and signed by the importer ii. including specification. etc v.e either in the form of export sales contract. ii.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 19: PROCESSING OF AN EXPORT ORDER • • • • • • • • • • • • • • Objectives Introduction Nature and Format of Export Order Examination and Confirmation of Export Order Manufacturing or Procuring Goods Central Excise Clearance Pre.1 Nature and Format of Export Order Processing of an export order starts with the receipt of an export order. etc. etc. the exporter will duly accept it. confirmed. the importer returns a copy of this invoice to the exporter. telex. restricted. Marking and labelling requirements.shipment. the exporter must first acknowledge its receipt by intimating the importer through telephone. 144 . unconfirmed. Thus. etc. An export exercise is concluded successfully after the exporter has been able to deliver the consignment in accordance with the export contract and receive payment for the goods.3 and 4. Inspection requirement including type of inspection and inspecting agency. The exporter must carefully examine the contents of the order to see that there is no discrepancy between the export order and export contract (verbal or written). After accepting the terms and conditions given in it as given in a documented contract. preparation and processing of documents for pre-shipment andpost-shipment formalities explain specific points to be examined while confirming the receipt of the export order explain documentary requirements for obtaining excise and customs clearance of export cargo describe formalities for c1aiming major export incentives enumerate documents to be submitted to the Bank.term contract. A proforma Invoice is prepared and sent by the exporter to the importer. it means that there should be an agreement. place of delivery. irrevocable. Excise Rebate Duty Drawback • • Let Us Sum Up Terminal Questions Objectives After studying this unit. thus the conclusion of an export contract.Shipment Inspection Appointment of Clearing and Forwarding Agents Transportation of Goods to Port of Shipment Port Formalities and Customs Clearance Dispatch of Documents by Forwarding Agent to the Exporter Certificate of Origin and Shipment Advice Presentation of Documents to Bank Claiming Export Incentives • • Simply stated. between the exporter and the importer before the exporter can start making arrangements for production or procurement of goods and their shipment. fax. port of shipment. You will also learn various formalities of claiming export incentive. Letter of Credit opened by the importer in favour of the exporter. buyers purchase order or the letter of credit opened in favour of the exporter must be examined. iv. Purchase Order accepted and signed by the exporter iii. which is mostly reduced in a documentary form. mode of carriage. including currency. Terms of shipment including choice of carrier. which is concluded and incorporated in the form of a document or in the form of evidence or an instrument evidencing the conclusion of a contract. style. An export order may !. you should be able to: . nature of letter of credit (revocable. colour.). if any. In this unit you will learn various steps involved in the processing of an export order at per. unrestricted. • • • • • describe different stages.675. credit period. the exporter may be required to send proforma invoice for any intended ‘shipment. Alternatively. Transhipment. If the purchase order is in accordance with the terms and conditions of the contract. if any.shipment stages. if any. Terms of payment. Examination and Confirmation of Export Order As soon as an export order has been received. the accepted proforma invoice. Though not legally necessary. Opening of a letter of credit is also a common method of receiving the export order. Generally an export order may take the following forms: i. Items to be examined particularly are: i. the letter of credit states major terms and conditions of shipment and enables the exporter to start processing of the export order. the export contract may require a purchase order to be sent by the importer to the exporter. iii.2. In the case of long. date of shipment! delivery. Such a process helps in accepting the offer of the exporter by the importer and.import trade and Electronic Data Interchange System in Units 1. packing conditions. the export sales contract the range of documentation formalities in export. 11.

certificate of value. the exporter will approach the bank for the pre-shipment credit. delivery note/purchase order may give such details as: product specification. At this stage. Funds will be released by debiting to the packing credit account and credit to exporter’s account. Insurance requirements including risk being covered and insurable value. the Reserve Bank of India enables the commercial banks to extend pre-shipment and postshipment credit to exporters manufacturers. Pre.exporter. The marketing or export department should also instruct the production/ procurement department to retain one copy of the delivery note/ purchase order and confirm the delivery (i. transport document and document of title. quantity required.vi. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. v. A systematic approach to these activities could be to send a delivery note. There is no specific format of this confirmatory letter ‘and an ordinary letter would serve the purpose. The purchasing. The banks have evolved their own docu-mentation and procedural systems for granting the credit. processing manufacturing and packing of goods for exports are facilitated by the packing . The documents used are Invoice and AR4/ AR5 forms. signs the form and return it to the concerned persons. exporter submits 4 copies of 1):R4 /ARS form to the superintendent of Central Excise having Jurisdiction over the premise of the exporter within twenty-four hours of the removal of the consignment.. Manufacturing or Procuring Goods Every export firm has devised internal procedures to suit specific requirements for ensuring production or procurement of goods. It is commercially prudent to confirm the order by sending a documentary confirmation. in duplicate to the production department. insurance policy. etc. popularly known as rebate in excise duty. following disbursement procedure is followed: i.credit facility given by the commercial banks in India.e. marking and labelling requirement. hi such case. In certain contracts it may also be the legal requirement. Once the goods have been acquired they are to be hypothecated. the exporter may suffer a loss.1 145 . certificate of origin. Packing credit advances are normally granted on secured basis. Although some exporters have printed the letter with suitable blank spaces. it may be difficult to persuade the importer to change this condition. transportation to the port) on the duplicate copy. he may suffer a loss. which does not operate from India. generally be required to be sent through the approved transport agencies and forwarding agents. On the basis of the laid down procedures. Last date of negotiation of document with the bank. The bank will calculate the drawing power of the exporter on the basis of a number of factors.. including the value of export order/letter of credit. Banks also grant post. iii. processing them Central Excise Clearance The Central Excise and Salt Act of India and the related rules provide the refund of excise duty paid. excise clearance requirement. Generally. the importer must be immediately informed for its amendment. Documents for realising payment including the nature and number of invoices. certificate of inspection.shipment credit is given to an exporter to fiancé working capital needs for purchase of raw materials. Specific instructions are given on the above-mentioned document to the production/procurement department for undertaking production and transport activities. viii. A new exporter who is very keen to get into the business may tend to ignore certain aspects of the export order. In the case of a merchant. vii. as well as merchant exporters. the production depart-ment of export firm is to apply to the central excise authority for excise clearance of the goods. Goods will be suitably insured while in the warehouse and in transit.gap between. In the process. The rate of interest charged is concessional one. intimation to transport department if any. This also provides exemption from the payment of excise duty both on the final export production and inputs used in the manufacture of export products. The Superintendent examines the AR4/AR5 form and having being satisfied. It is not uncommon that he encounters difficulties while complying with the contracted obligations.shipment credit to bridge the time. the shipment of the goods and the realisation of sale proceeds. The exporters are now allowed to remove the goods for export on their own without getting the goods examined or after the examination by the Central Excise Officers.675. Under the export credit (interest subsidy) scheme. iv. For example. which will accept it and affix a rubber stamp on it reading ‘export finance granted’. This facility is accorded on the basis of either the letter of credit or the confirmed export order or any other evidence of the order. Such a problem will be discovered only after the goods have been manufactured. Goods will. the importer may specify inspection to be undertaken by an agency. the marketing department may send a: similar document known as purchase order. Consequently. This credit is granted to enable the reporter to manufacture/ procure and pack the goods for shipment overseas. which may mean collateral security through a third party guarantee or mortgage of immovable property. Besides mentioning the time period within which these activities are t9 be completed. and dispatching to the port for shipment. marking and labelling. Sometimes the exporter desires sealing of the goods by the Central Excise Officers so that the custom officers at the port of shipment may not examine the export goods. the exporter submits AR4/ AR5 forms in sixtuplicate to the 11. In case of without examination. The exporter hands over the export order letter of credit to the bank. The exporters prepare six copies of AR4/AR5 forms. It is only after the amended order has been received and confirmed by the exporter that he becomes liable to fulfil his contractual obligations. packing. If there are any discrepancies in the export order. packing. As soon as goods are ready for dispatch to the port for shipment. bill of exchange. and converting them into finished goods for the purpose of exports.

For performing the desired functions. the exporter is required to give detailed instructions to his agent. if needed. arrangement for shipment overseas. Crossed cheque of demand draft as inspection fee III. The production department is to apply to the. before permission to ship goods is granted. If there are specific instructions on packing in the export con-tract. Information to this effect is sent to the export department by signing the Delivery Note or by preparing a Dispatch Advice alongwith the following documents: a. along with other documents. Customs Declaration Form in Triplicate (This is a legal requirement whereby the exporter states that the declarations made to the customs authorities by the agent on his behalf are true) c. Original Letter of Credit/Contract e. Packing list. perform a number of functions on behalf of the exporter. After the inspector has completed inspection. AR4/AR5 form (Original and Duplicate) Invoice h. procurement of transport and other documents. Before the excise authorities seal packs.’ labelled. A copy of the commercial invoice II. shipping and delivery of goods upto the importer. Mark-ing serves the purpose of identification of goods. Railway Receipt/lorry Way Bill EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Pre-shipment Inspection Government of India notifies. Railway Receipt or Lorry Way Bill b. the production department despatches the consignment to the port of shipment by either road or rail. The third copy is for the exporter’s record. Consequently. a number of goods whose export is subject to compulsory quality control or pre. Inspection of export goods may be conducted under 1. Labels are either stencils or affixed on the packs which contain handling instructions. Alongwith this document. They provide specialised help in the exporter’s ware-house to the importer’s warehouse by undertaking the procedural and documentary formali-ties. However. the Indian customs authorities will require the submission of an inspection certificate issued by the designated. generally known as Shipping Instruction Sheet or simply the Shipping Instructions. In-process Quality Control and 3.675. The application is to be made on a prescribed form known as Notice of Inspection and submitted to the Agency with the following documents: I. and customs clearance of cargo. the export goods are packed. from time to time. he allows the clearance of cargo. satisfied. marking and labelling of consignment Arrangement for movement of goods either by road or by rail. lie helps in packing. Commercial Invoice (Generally 8-10 copies with at least one completed) b. After the production department has completed the excise clearance and pre-shipment inspection formalities. On completion of the process of clearance by the excise authorities as well as obtaining the Inspection Certificate. ship them and procure the relevant transport document (Bill of Lading or Airway Bill). the main function of the agent is to obtain customs clearance of goods. A copy of export contract IV. agency bef6repermitting the shipment to take place. who in turn will charge fee for these activities. This document contains full details of instructions of the exporter as well as details or the consignment to be shipped. The basis of inspection is usually the.superintendent of Central Excise having jurisdiction over the premises of the exporter. importer’s specification. the export department will appoint a clearing and forwarding agent by signing and sending a document. The superintendent may depute an inspector of Central Excise or may himself go for selling and examination of export cargo. the process of pre-shipment inspection must be completed. if needed d. Importer’s technical specifications and/or approved sample. Appointment of Clearing and Forwarding Agents Clearing and forwarding agents. After be is.1 . Self-Certification Let us discuss consignment-wise inspection. It also eliminates the possibility of the insurance company’s refusal to pay a claim in the event of a loss or damage to goods in transit. 146 An export-worthy packing helps in minimising freight and delivery costs. except in the case of export of goods involving safety or health hazards. GR Form. These labels are usually in the pictorial form for easy understanding of the instructions. Inspection Certificate (Original) f. Transpotation of Goods to Port of Shipment You have already learnt the documents relating to transportation of goods to the port of shipment. Transportation and movement of goods to the port for shipment involve following activities: • • Packing. Inspection Certificate (Original) On receipt of these documents. these must be followed. The original certificate is for the customs verification. where notified minimum standards are enforced. also known as freight forwarders. following documents will be sent to the agent: a. marking and labelling of consignment. Proper marking helps in quick and safe transportation of goods. The second copy may be sent to the buyer. At the same time. Consignment-wise Inspection 2. the packages are to be properly marked and labelled. the Export Inspection Agency will issue the Inspection Certificate in triplicate. marked and. After the goods are packed. A R4/ A R5 form ( Original and Duplicate) d. handling. Export Inspection Agency for nominating an inspector for conducting examina-tion of the export goods. Invoice c.Original and Duplicate (it is a foreign exchange declaration form) g. the export department takes steps to reserve space on the ship 11. arrangement for transport to the port. It is submitted to the customs authorities.shipment inspection.

the Customs Examiner/Appraiser makes an endorsement on the duplicate copy of the shipping Bill. GR Form (Duplicate) The Dock Appraiser after conducting physical examination records examination report and makes “Let Export” endorsement on the duplicate copy of the Shipping Bill. Commercial Invoice (one for each of the shipping Bill) e. the clearing and forwarding agent takes delivery of the cargo from the railway station or the road transport company and arranges its storage in the warehouse. if applicable d. He also gives directions to the Dock Appraiser about the extent of physical examination of the ‘cargo to be conducted at the Docks. The duplicate copy of the Shipping Bi\! is then handed over to the agent of the shipping company. the production export department makes an application to the insurance company for insurance cover (internal as well as overseas) and’ obtains insurance policy/certificate in duplicate with appropriate risk coverage. Forwarding Agent Presents the Port Trust Document to the Shed superintendent of the port. 1 2 3 Forwarding Note (A railway document) Shipping Order (as proof of reservation of shipping space) Wagon Registration Fee Receipt The clearing and forwarding agent is to file following documents with the Customs House: a.through which goods are to be sent. After the space has been reserved. physical examination of goods is made in the shipment shed to verify that the goods being exported are the same as have been declared on the documents submitted at the Customs House. Any other document needed by the customs The Customs Appraiser/Examiner examines these documents and appraises the value having regard to the following consideration: 1. After the goods are loaded on board the vessel. The document on which customs give clearance for export is the Shipping Bill. triplicate and export promotion copies of the shipping Bill Commercial Invoice 2. Secondly. Customs House). goods are loaded. alongwith other documents. the shipping company will issue a document known as Shipping Order. This document serves as a proof of space reservation.e. wagons are allotted on the priority basis for carrying export goods to the port town for sh1pinent. Information on space reservation is given to the production department for making transport arrangements to the port. This receipt. Packing List 3.1 147 . Packing list. Port Formalities and Customs Clearance On receipt of the documents sent by the export department. Shipping Bill (4-5 copies) b. for which railways will issue Railway Receipt (RR). to ensure that the goods go out of the country after compliance with different laws concerning export trade b. Where the consignment is sent through a road carrier. 11. He obtains carting order for bringing the export cargo to the transit shed for physical examination by the Dock Appraiser and for their shipment. All the Documents. According to this scheme. Inspection Certificate (Original) g. He also initiates action to obtain customs clearance and permission from the port authorities to bring cargo into the shipment shed. no specific formality is involved. the customs grant permission for export at two stages. After bringing the cargo into the shed he presents the following documents to the Dock Appraiser for conducting physical examination of the cargo. GR Form (Original and Duplicate) f. Inspection Certificate (Original) 5. where applicable (Original) d. After taking delivery of documents from the Export Department. This constitutes an authorisation by the customs to the shipping com-pany to accept the cargo on the vessel. except GR (original) Form. is sent to the clearing and forwarding agent at the port town. 1.shipment quality control inspection etc. To compile data on cargo movements. for sending cargo by rail. laid down procedure is to be followed for obtaining allotment of wagon on a priority basis under a scheme of the Railway Board. The production department engages a reliable carrier and books the consignment to the port (generally in the name of the clearing and forwarding agent).675. to ensure authenticity of value of export goods to check over/under invoicing c. AR 4 /AR 5 form (original and duplicate) and Invoice 4. to correctly assess and collect export duty. AR 4/ AR 5 Form (Original and Duplicate) h. However. pre. After examination of documents and appraisement of value. Shipping space can be reserved either through the clearing and forwarding agent or freight broker who work on behalf of the shipping company or directly from the shipping company. At this stage. Following documents are submitted to the booking railway yard/Station. The objectives of customs control are: a. That the value and the quantity declared in the shipping bill is the same as in the export order or letter of credit. alongwith other documents. For complying with these objectives. to the clearing and for-” warding agent at the port town for taking delivery of the cargo. documentary checks are made at the office of the customs (i. The preventive officer makes an endorsement “Let ship” on the duplicate copy of the Shipping Bill. Lorry! Truck receipt is issued which is sent. Letter of Credit. the captain of the ship issues a receipt known as ‘Mate’s Receipt’ to the Shed EXPOR T IMPORT PROCEDURE AND DOCUMENTATION After wagons have been allotted. have been duly completed. Firstly. He hands it over to the forwarding Agent alongwith all other documents to be presented to the preventive officer of the customs department who supervises the loading of cargo on board the vessel. if needed i. Duplicate. Contract! correspondence leading to the contract (Original) c. That the formalities regarding exchange control. the original Shipping Bill and a copy of the Commercial Invoice are returned to the Forwarding Agent to be presented to the Dock Appraiser.

the importer must be immediately informed for amendment of the order. the clearing and forwarding agent will file the following documents with the Maritime Central Excise Collector or Jurisdictional Assistant Collector of Central Excise for claiming the refund of excise duty or for obtaining release from bond. GR Form (Duplicate). The exporter should then confirm the order with the importer.Superintendent of the port. • Dispatch of Documents by Forwarding Agent to the Exporter After obtaining the Bill of Lading from the shipping company. AR4/ AR5 Form (Duplicate copy).negotiable copy of the Bill of Lading b. Drawback copy of Shipping Bill d. ‘Shipment Advice’ to the importer intimating the date of shipment of the consignment by a named vessel and its expected time of arrival (ETA) at the destina-tion port. He returns the Export promotion copy. if the exporter so desires.if a. Marine Insurance Policy/Certificate i. as the case may be. Packing List (requisite number of copies) d. Additional copies of the Commercial Invoice for Certification by the Bank 148 . Customs Invoice (Requisite number of copies) GR Form (Duplicate) c. Purchase Order or Letter of Credit. Full set of ‘Clean On Board Bill of Lading’ together with non. The forwarding agent then makes a payment of the port charges and takes delivery of the Mate’s Receipt. the GSP Certificate of Origin will have to be procured by the exporter from the concerned authority like Export Inspection Agency. The bank takes into account a 11. Original letter of credit! contract order Copies of Customs Invoice. Customs Invoice • Duty Drawback For claiming Duty Drawback. Bank Certificate in the prescribed form in duplicate h. Let us now discuss the process of claiming export incentives. Excise Rebate After completing the post-shipment formalities. if any f. generally in the form of either the proforma Invoice. original and duplicate copies of AR4/ AR5 form. Incase of export shipment to countries offering GSP concession. Drawback Claim proforma (prescribed application form in five copies) b. Export promotion copy of Shipping Bill c. this amount will be sent to the exporter’s bank for being credited to his account with intimation to the exporter. Packing List d. Non-negotiable copy of the Bill of Lading and lor shipping Bill certified by the customs preventive officer Additional documents to be submitted for claiming refund excise duty are: (a) Application for Refund in Form C and (B) Pre-receipt Certificate of Origin and Shipment Advice On receipt of the above documents. Non-negotiable copy of Bill of Lading d. The exporter then sends. Let Us Sum Up Processing of an export order starts with the receipt of an export order. which has been certified by the customs preventive officer b. alongwith the following documents. For production/procurement and transportation of goods to the port for shipment. the agent sends the following documents to the exporter. a copy of Drawback shipping Bill and presents the Mate’s Receipt to the shipping company and requests it to issue the Bill of Lading (2/3 negotiable and a few non-negotiable as required). He presents the Mate’s Receipt first to the preventive officer who records the certificate of shipment on all the copies of the shipping Bill. The following documents are also sent alongwith the shipping advice so that the impol1er may start making arrangements for taking delivery of the consignments. Original Letter of Credit/Export Contract g. Commercial Invoice c. One copy of the Commercial Invoice duly attested by the customs b. terms of shipment and payment and submission of documents to the bank. Bank or Customs Certified copy of Commercial Invoice c. the exporter’s agent will me the customs attested copy of the Drawback Shipping Bill. AR 4/ AR 5 (Duplicate) and Invoice g. with the Drawback Department of the Customs House. After finding the claim to be correct. A non.negotiable copies as required) e.1 Presentation of Documents to Bank The exporter presents the following documents to the bank for negotiation/ collection: a. On its receipt.675. the exporter must first acknowledge its receipt and then process to examine it. f. a. Full set of Clean-on-Board Bill of Lading (Negotiable plus Non. a number of activities are to be undertaken by the production/ procurement department of the export firm. the Drawback Department will dispatch the cheque of the claim amount to the exporter. the exporter makes an application to the chamber of commerce and obtains a ‘Certificate of Origin ‘ in duplicate. If any discrepancy is found. Any other specifically prescribed document. Alternatively.negotiable copies e. The first activity is to apply for pre-shipment credit (packing credit) to the Bank. a. Commercial invoice (Requisite number of copies) Certificate of Origin (two copies b. Bill of Exchange EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Claiming Export Incentives You have learnt the processing of an export order at preshipment. particularly product specifica-tions. The examination should be done with reference to terms and conditions of the contract. a. shipment and post shipment level.

physical examination of goods and permission from the Customs Preventive Officer. Export-What.number of factors and grants credit to the extent determined by the value of the confirmed export order.the formalities for claiming duty Drawback. Advice to the importer mainly in the form of nonnegotiable copy of Bill of Lading. Janardhan. The second formality is to obtain permission from the customs authority to export the goods. Q8. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Q5. At the port two formalities are to be completed. New Delhi. As soon as shipment is completed.1 149 . The proof of space reservation is the shipping order. Some Useful Books Export Import Policy. the concerned customs officer notes down instructions for physical examination of goods in the shipment shed on shipping Bill (Duplicate copy). A Nabhi Publication (Recent Edition). The Indian Railways accord priority in allotment 6fwagons needed for moving export consignments. for which the essential requirements is to first reserve space on the ship. Thereupon. the exporter’s agent brings goods in the shipment shed. Nabhi’s New Import Export Policy. The master of the carrier issues Mate’s Receipt. New Delhi. Q4. How (Recent Edition).documentary deara’1ces. Once the shipment process is over. Terminal Questions Q1. AR4/ AR5 Form and Invoice are to be completed. Export goods are sent to the port town either by road or by rail. Q2. After appraising the value of the goods. This certificate is issued when the inspector visits the factory/ warehouse and examines the goods. Describe the steps involved in the receipt. The credit amount is used for manufacturing! procuring and packing goods The clearance from the central Excise authorities is needed so that the exporter can get rebate in the central excise duty paid/ payable on the exported goods. Ram Paras. What documents are required to be submitted to the bank after goods have been delivered to the carrier? Describe . This receipt is then exchanged with the Bill of Lading issued by the shipping company. New Delhi.675. Indian Institute of Foreign Trade (Recent Edition). Clearance is completed when the certified AR 4/ AR 5 (Original and Duplicate) is given to the production department. documenta-tion formalities are undertaken for getting rebate in Excise Duty and Duty Drawback. The exporter’s agent obtains shipment certificate on different documents. 11. the Clearing and forwarding agent of the exporter files the necessary shipping bill (a customs document) and the supporting documents with the Customs House. A Nabhi Publication (Recent Edition). the customs officer first physically examines goods and then finally the Customs Preventive Officer gives permission to load. What are the documents needed for i) Central Excise Clearance and ii) Securing Inspection Certificate? Describe the process of preparing goods for exports and their transit to the port of shipment. New Delhi. Q3. examination and confirmation of an export order. The first is to obtain permission from the port authority to bring cargo inside the shipment shed. Anupam Publisher. Q6. Q7. Space reservation may be done either through the freight broker or the clearing and forwarding agent. Ministry of Commerce. But before shipment process can start. Electronic Commerce. At the same time the exporter submits shipping documents as per the export order to the bank for securing the sale amount. For these purposes. which will enable the exporter to claim various incentives. the exporter should send shipment. Nabhi’s Exporters Manual and Documentation. The customs permission is granted at three stages. Government of India (Recent Edition). For this purpose. N. Where. After obtaining permission from the port authority. What are the supporting documents to be submitted alongwith the shipping Bill for getting customs permission for exports? What are the three stages at which customs permission to export is obtained? Make a flow chart of processing of an export order upto the shipment stage. Delhi. The production department also applies to the Inspection Agency for obtaining inspection certificate. The original Inspection certificate will be required to be submitted to the customs authority for obtaining permission to ship goods.

chemicals. considered it as appropriate to lay emphasis on the need for export promotion so as to enable the country to meet the’ need of imports. Expansion of Production Base for Exports. the feasibility of financing almost entirely depends upon the growth in Indian export. In addition. marine and other sectors have reached a stage from where they were looking for an opening in international market. ii. Policies for increasing Investment and production in export sector. export. • Introduction The Export-Import policy 1992-97 brought about many fundamental changes -in India’s external trade policy. But many6f these incentives were’ withdrawn by the 1992-97 and subsequent policies. Indian markets were highly protected and the Indian government used to give many incentives to the Indian exporters. therefore. Export Houses Status for Export of Services Rendering Exports Price-Competitive i. for the first time India was made to depend significantly on her exports for acquiring foreign exchange to meet her needs of essential imports.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 20: EXPOR T ASSISTANCE IN INDIA • • • • • Objectives Introduction Importance of Export Assistance Export Promotion Measure in India. Over the last couple of decades export promotion has assumed critical importance in Indian economy. Electronic Hardware Technology Parks (EHlTP) and Software Technology Park Units (STP) Assured Supply of Raw-Material’ Imports Eligibility for Export/Trading/Star Trading/Super Star Trading Houses v. ii. exports have now emerged as the only viable source of meeting the foreign exchange needs of Indian economy. Special Economic Zones (SEZs). Moreover. Price-support measures for rendering exports more competitive. Easy and adequate availability of external assistance from World Bank and other international agencies as well as developed countries has provided India with more than adequate amount of foreign exchange for financing development as well as essential imports. iii. Relaxation in Industrial Licensing Policy/MRTP/ FERA/Foreign Collaborations Liberal Import of Capital Goods Export Processing Zones (EPZ). However after 1965-66.stated that the future eco-nomic growth in India is inseparably linked with growth in Indian exports. Until 1992. i.675. Moreover. Export promotion’ policy in India has three main segments. be . a number.industrial products. Export growth has become the main determinant of economic growth in India. They are as follows: a. Importance of Export Assistance Export promotion was accorded a very low priority during the initial progmmme of economic development in India. not at all considered as an essential element in India’s economic development process. the urgency of earning foreign exchange through expanding exports was not there. Similarly during the period of the First Three Five year plans over 1950-51 to 1965--66" Indian economy was in a formative stage. The process of globalization and liberalization has further enhanced the need of strengthening the support of export-import trade business of the country. vi. of industries especially in the engineering. on this account as well. Hence. Hence. It gradually laid the foundation of globalisation ‘of Indian economy by initiating liberalization and making Indian industries to face competition from foreign MNCs. promotion is being an overriding consideration in policy formulation. because of the large size of the domestic market in India. Government of India had therefore. India could not look at international markets especially because of her extremely limited capacity to offer supplies of. Fiscal Incentives Financial Incentives • • • • Strengthening Export Marketing Effort Let Us Sum Up Answers to Check Your Progress Terminal Questions Objectives After studying this unit. leather. Consequently. the aid flows to India were substantially reduced. Export Oriented Units (EOU). Fortunately.effort.1 . During the 1950s and almost up to mid 1960 export-promotion was 150 11. with the increasing burden of debt-servicing on the one hand and the situation of aidfatigue on the other. iv. • vii. b. Hence. Consequently India’s capacity to export manufactures or industrial products was extremely limited. It may. by the second-half of 1960s. it received an encouraging response from the industrial sector which was also looking for international markets. explain the fiscal and financial assistances provided to the exporters describe the measures taken by the Government of India to strengthen the export marketing . ‘import substitution’ rather than the’ export promotion’ was considered as a more useful strategy for India’s economic development process. you should be able to : • • explain the importance of export assistance in India describe various assistances provided for the expansion of production base for export . Hence.

The amount granted under MDA varies from 25% to 60% of the actual expenditure incurred. exportable goods are exempted from sales tax.The Duty Drawback Scheme is administered by the Directorate of Drawback. b. for import of raw materials. Supply of Raw Materials Customs duty paid on the import of raw materials. when they enter the municipal limits of a city or a town.-{i subsidiary of STC. intermediates. Marketing Assistance a. international trade fairs. ~ Export under rebate. ~ Export under bond: c. Duty Drawback (DBK) :. Duty Exemption Schemes a. Ministry of Finance. Fiscal Incentives a. components.c. Export Promotion Measure in India The assistance extended to the Indian exporters are asunder : Import Facilities for Exporters a. d. Export Promotion Capital Goods Scheme (EPCG) :EPCG scheme was introduced by the EXIM policy of 199297 in order to enable manufacturer exporter to import machinery and other capital goods for export production at concessional or no customs duties at all. 2002-03. b.e. a ten year tax holiday is provided to 100% EOUs and units in EPZs. for the A. spare parts. It is a kind of pre-shipment finance procured by the exporter for the processing of export order.by removing the actual user clause.675. components and consumables utilized in the manufacture of goods meant for export. Export goods are totally exempted from central excise duty. an exporter may apply for credit as a specified percentage of FOB value of exports. etc. Measures for strengthening marketing effort by the export sector. It is granted by the Ministry of Commerce for export market development and research abroad.1e value of capital goods imported. I~MAC has’ been further simplified.Sales tax is a tax imposed by the State government on goods sold in or outside India. Central excise duty paid on indigenous raw materials. buyers-sellers meet. 60% of the export income is exempted from tax.The facility of Back-to-Back Inland letter of credit was announced by the EXIM policy 1992-97 and came into effect from 1st April 1995. provided the exporter or his firm is registered with the Sales Tax Authorities.DFRC is issued to a merchant exporter or manufacturer exporter for the duty free import of inputs such as raw materials. setting up of common showrooms. For example.Under the DEPB scheme.Under this scheme. the Government of India has given tax exemption 11.In order to enable exporters to plough back their earnings and promote exports. Such licence is given subject of the Julfi1ment of time bound export obligation. b. an exporter is entitled to claim:• • to exporters on export earnings under section 80 HHC provision of the Income Tax Act. i. However.IRMAC is established by the government of India as. made in freely convertible currency. warehousing facility.. Market Access Initiative (MAI) :. These organisations are:• Indian Institute of Foreign Trade (11FT) to provide training facilities.. c.Y. i. before removal of goods from the factory premises. Excise Duty Refund :. 13ack. However. This duty is collected at source. Back to-Back Inland Letter of Credit :. Sales Tax Exemption :. etc.1 a. This facility is subject to export obligation. necessary clearance has to be obtained in one of the following ways. intermediates.Excise duty is a tax imposed by the central government on goods manufactured in India. Market Development Assistance (MDA) :. the exporter is required to guarantee exports of certain minimum value. seminars. Exemption from Income Tax :. Goods purchased from the local market from export purpose. consumables. parts.The government of India has set up a separate fund under the head Marketing Development Assistance (MDA) for developing marketing abilities of Indian exporters. At the same time. This exemption is given on the following categories of goods :• • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Goods exported. Institutional Measures :. Duty Entitlement Passbook Scheme (DEPB) :.. C industry and trade associations and other eligible entities on the basis of the competitive merits of proposals received in this regard for undertaking marketing studies.to-back L/C is one. which is in multiple of tl.e. Institutional Measures a. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade (DGFT) by way of public notice issued in this behalf. b. participation in sales promotion campaigns.The Government of India (GOI) has established a number of organisations to promote and expand export trade. including packing materials to be used for export production. However.Octroi is a duty paid on manufactured goods. components and consumables. Such centres import raw materials in bulk and supply them to the registered exporters against a valid import licence. Duty Free Replenishment Certificate (DFRC) :. components. 151 . Under this scheme. publicity campaigns. Industrial Raw Material Assistance Centres (IRMAC) Scheme :. packaging materials. Octroi Exemption :. financial assistance is available to the export promotion councils. which can be opened In favour of local suppliers of raw materials or goods so as to enable exporters to got raw materials or goods for export on credit basis. export goods are exempted from octroi. This enables exporters to get timely supply of raw materials at reasonable prices.

In. These units import all types of goods without payment of duty including capital goods for manufacture.are not prohibited items. Export-Oriented Units (EOU). capital goods may also be imported in accordance with the provisions of the policy: Supplies from DT A to these units will be regarded as deemed exports. an advance licence is issued to allow import of inputs which are physically incorporated in the export product. The Foreign Exchange Regulation Act has been liberalised and Foreign Exchange Management (FEMA) Act. EXIM Bank. Duty Remission Scheme consists of Duty Free Entitlement Certificate and Duty Entitlement Passbook Scheme. it calls for increasing flow of production and investment resources into the export sector. development of software.• • • • • Indian Institute of Packaging (lIP) to upgrade. horticulture. As a result. sericulture. etc. export claims. Such units may be engaged in manufacture.1 . It will have more to export only if more and more is produced for export. MRTP (Monopolies and Restrictive Trade practices Act) and Foreign Exchange Regulations. agency commission. This period is reckoned from the date of issuance of licence. The duty remmission scheme enables post export replenishment/remission of duty on inputs used in the export product. if a country wants to exports more. additional customs duty. The duty exemp-tion scheme enables import of inputs required for export production. moulds and spares upto 20% of the CIF value of the capital goods may be imported at 5% customs duty: This import is subject to an export obligation equivalent to 5 times CIF value of capital goods on FOB basis or 4 times the CIF value of capital goods on NFE basis to be filled over a period of 8 years. These units shall be exempted from payment of corporate income tax for 10 years. 100% foreign equity has been permitted to the units in EPZ/EOU/EHTP/ STP. Assured supply of raw material imports As regards making available the supplies of imported raw materials to the export sector. Export Promotion Capital Goods (EPCG) Scheme has been introduced for liberal import of capital goods. surcharge. Consequently. There is general liberalisation of remittance of foreign exchange for visits abroad. trading. floriculture. exporters of goods and services and those who are in receipt of remit-tances are able to sell their foreign exchange at market determined rates. other words. Foreign equity upto 100% is permissible to these units. it must have more to export. Exporters have also been allowed to maintain foreign currency accounts. aquaculture. Under this provision. Foreign collaboration and foreign capital investment is also liberally permitted for the export sector. there are a number of other organisations such as Federation of Indian Export Organisation (FlEa). pisciculture.-Corporation (ECGC) to protect exporters against payment rises. Advance licence is issued for duty free import of inputs as defined in the policy subject to actual user condition. In addition special provisions have been made for import of capital-goods at a concessional rate of import duty.intermediate supplies and (iii) deemed exports. animal husbandry. if any. Relaxation in Industrial Licensing Policy/MRTP/ FERA/Foreign Collaborations With a view to facilitate relatively easier creation/expansion of production capacities for increasing export potential of Indian economic. Liberal Import of Capital Goods Import policy of India has made specially liberal provisions for easy import of capital goods of all types. etc. Special Economic Zones (SEZs). imports of machinery and equipment are allowed without import licence. dies. The importers and foreign travellers are also able to buy foreign exchange at market determined rates. Indian Council of Arbitration (ICA) to settle and solve disputes between importers and exporters. Apart from the above institutions. Export Promotion Councils (EPCs) to undertake export promotion activities. Export Inspection Council (EIC) to upgrade quality standards. Electronic Hardware Technology Parks (EHTP) and Software Technology Park Units (STP) Units undertaking to export their production ‘of goods may be set up under Export Processing Zones (EPZ) scheme. etc. services. poultry. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Expansion of Production Base for Exports The first prerequisite of export promotion policy is to ensure larger exportable surpluses. Export Credit Guarantee . Second hand. Electronic Hardware Technology park (EHTP) scheme or Software Technology Park (STP) scheme. reduction in export value. fixtures. bio-technol-ogy. Export Promotion Capital Goods Scheme: New Capital goods including computer software systems may be imported under the Export Promotion Capital Goods (EPCG) scheme. consular fees.675. Advance licence can be issued for (i) physical exports (ii) . 152 11. 1999 has been operationalised. both in the large-scale as well as small-scale sectors. Under duty exemption scheme. Export Oriented Units (EOU) scheme. viticulture. the import policy provides the scheme of Duty exemption and Duty Remission. Import of capital goods shall be. antidumping duty and safeguard duty. Such licences are exempted from’ payment of basic customs duty. Hence. production or processing provided they . All these policy measures are envisaged to go long way in facilitating easy expansion as Well as technological up gradation of export base in India through attracting larger flows of investment and other resources. reimbursement of expenses incurred on dishonoured export bills. The rupee has been made fully convertible for all approved external transac-tions. Special Economic Zones (SEZs) scheme. necessary relaxations have been provided for in the policies for industrial licensing. Export Processing Zones (EPZ). Accordingly. packaging standards. agriculture including agro-processing. and granites may I export all products except prohibited items of exports. capital goods including jigs. creation of additions of production capacities for export is liberally allowed. subject to Actual User condition till the export obligation is completed.

o.675. Duty Drawback: In the manufacturing of many export products imported or indigenous raw materials and components are used on which customs or central excise duty has been paid. value of exports or net foreign exchange earnings. Fiscal incentives Fiscal incentives for export promotion include (i) duty drawback. This results in substantial reduction in the cost of material inputs for export-production. The scheme of Duty Drawback has been formulated by the Drawback Director under the Central Board of Revenue and Customs from the Ministry of Finance. 15 crores Rs. Indian economy. 1680 crores Export of services for recognition of export houses Category Average free foreign exchange earning during the preceding three licensing year in rupees. 560 crore Rs. in Rupees Rs. 937 crores Net Foreign Exchange Value of exports made during t e preceding h licensing years Rs. The objective of this scheme is to recognise them as the respective houses”with a view to building marketing infrastructure and expertise required for export promotion. Hence. has over the years emerged as a high economy with low productivity. Deemed exports are not counted for this purpose. they may be recognized as EH/TH/STH/SSTH. Hence. 375 crores Rs. First.1 . 1125 crores FOB value of eligible export during preceding Licensing year in Rupees Rs. iii) Foreign Currency. for success full and viable export effort there is the need for incentives to provide the price support for rendering India’s exports competitive and viable.Eligibility for export/trading/star trading/super star trading houses Export/Trading/Star Trading/Super Star Trading Houses have been accorded special status. When the finished products are exported in which duty paid inputs are used. i. price levels in international markets are invariably the lowest.O. Accounts iv) Foreign Exchange Facilities v) Golden Status Certificate vi) Other facilities as specified in the policy Export houses status for export of services Service providers sha1l be eligible for recognition as service Export House. on material inputs for export activity are allowed to be drawback by the exporters under the incentives policy for duty drawback. 75 crore Rs.b. various types of incentives have been provided for a price-support measures. International Service Export House. registered with FlEO or EPC are. eligible for this purpose. import duties and central excise duties. 450 crores Rs. 22 crores Rs. because of the high degree of competition therein.requisite of export promotion policy is to render the exports increasingly price competitive in international market. Under the export promotion policy of India. Secondly. When exporters achieve the specified level of exports over a period. International Star Service Export House. Look at Table for this criteria. The export performance criteria may be based on either f. 62 crores Rs. 112 crore Rs. 312 crores Rs. EH/TH/STH/SSTH are entitled to the following special benefits: i) Import Facilities ii) Marketing Development Assistance. Details regarding Drawback Scheme can 153 Export House Trading house Star trading House Super star trading houses ii) Net Foreign Exchange Earnings: Exporters have an option for obtaining the status of Export and other Houses based on the following Net Foreign Exchange Earnings. a part or whole of the amount of such duty is allowed -to be drawn back by the exporter or if is refunded to him. FOB Criteria Category of Houses Average FOB value of exports during the preceding three Licensing year. Exports made both in free foreign exchange and in Indian rupees shall be taken into account for recognition.B. who have achieved the following targets can be accorded the status of above mentioned Export Houses.support measures in the form of export incentives. In other words. These include (a) Fiscal Incentives and (b) Financial Incen-tives. 12 crores Rs. on export profits. Let us discuss them in detail. Look at Table for this criteria. The need for price. Net foreign exchange criteria Category of Houses Average Net Foreign Exchange Value of eligible exports during the preceding three licensing years Rs. International Super Star Service Export House on achieving the performance level as below: 11. A number of Price support measures in the form of fiscal as well as financial incentives have therefore been provided for the export sector in India. (ii) central excise rebate and (iii) income tax exemption. The exporters. Criteria: The manufacturing or merchandising units. arises on two accounts. i) F. export incentives also aim at encouraging trade and industry in India to increasingly undertake export effort on a sustained basis. On the other hand. In this case relaxation in above earnings has been permitted. 90 crores Rs. 18 crores Rs. Rendering export price competitive:The second pre. incentives exports also become necessary to neturalise the domestic market -pull on Indian exporters. Service Export 4 crore House International 20 crore Service export House International 100 crore star service export house International 300 crore super star service export house Free Foreign exchange earning during the preceding licensing year in rupees 6 crore 30 crore 150 crore 450 crore Average NFE earned made during the preceding licensing year in rupees 3 crore 15 crore 75 crore 225 crore NFE earned during the preceeding licensing year in rupees 5 crore 25 crore 125 crore 375 crore EXPOR T IMPORT PROCEDURE AND DOCUMENTATION The service status holders sha1l be entitled to all the facilities provided in the policy. 1350 crores Export house Trading House Star trading house Super star trading house Exporters have also an option to get recognition for one year.

pays special attention to the need for improving and strengthening export marketing effort. horticultural and meat products.requisite of export promotion is the marketing effort. Feasibility studies. 7. In other words. 6. TV news software. With this objective. It may be noted that ‘export’ is primarily a ‘sale’ transaction. The exporter need not pay sales tax either on the goods purchased from manufacturers or traders. f. consultancy and data base up gradation b. With this object in view. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 2. playa major role in rendering Indian exports. Financial Incentives The major scheme of financial incentives include interest subsidy. income tax exemption has been granted under Income Tax Act. This measure helps Indian exporters. Part of the profits derived from export of specified goods or merchandise is deducted for the computation of income tax. The profits from export or transfer of film VT software. the practice of incentives has almost become universal. Financial Assistance Scheme for Agricultural. to reduce the working capital cost of export operation. However. This exemption scheme is to be phased out over a five year period i. 11. Sales tax Exemption: There is no tax on sales made for export purpose. The major exemptions are as follows: 1. Under this scheme working capital required for pre. The benefit can also be claimed by a supporting software developer from 1-4-1999. Hence. i. are refunded to the exporter. The scheme is operated as per Central Excise Rules notified by the Central Excise department. 10 years tax holidays is granted to units in FTZIEPZ and 100% EOU ending with 2010-2011. a tour operator or a travel agent is deducted. covering both developed as well as developing countries. Central Excise Rebate: Under this scheme.shipment credit as well as post. g. every country in the world makes an allout effort to increase her exports. in view of the highly competitive nature of international market. an effort has been made to provide the necessary infra structure for servicing the export sector. In order to promote exports. The benefit Of duty drawback has been provided on the basis of (a) all industry rates or (b) brand rates separately fixed for individual manufacturers of the export products. There is a tax rebate on remuneration received on services rendered outside India and other rebate as specified in the policy. the Central Excise Duties on the inputs .. . as well as financial incentives. success on the export front is dependent upon the marketing effort.675. surveys. Specified amount of profits of companies engage in the business of hotel or of . Export promotion policy in India therefore. basis. 4. 50% of the profits from project exports is deducted in computing taxable income of the Indian company or resident tax payer. Development of infrastructure Export promotion and market development Packaging development Quality control Upgradation of meat plants Organisation building and Human Resource Development Air freight assistance for export of horticultural products export by air Generation of relevant research and development through research institutions. In other words ‘marketing effort’ provides the necessary link or channel’ between production and sales. which have simple manufactures to offer for exports which are very much influenced by the material cost. of agricultural. telecast rights are partially deducted. financial assistance scheme for agricultural. by 2004-2005 for all exporters other than EPZ/EOU/EHTP/STP units. Interest Subsidy: Export sector in India has also been given interest subsidy under which the working capital is made available by the banks to the export sector at a concessional or subsidised rates of interest. h. ii. Government of India have established a number of specialized institutions for providing necessary services and assistance to individual corporate units from the export sector. You will learn in detail about the Central Excise Rebate in next lesson iii. horticultural and meat exports. e.concessions or fiscal incentives.shipment credit is provided to the export sector at concessional rates of interest. Thus. Strengthening Export Marketing Effort The third pre. c. Horticultural and Meat Exports: In order to promote the exports. Production can be converted into ‘sale’ only through the marketing effort. for which various types of different fiscal and financial incentives are provided. 3. There is a partial tax relief on export of computer software and for import of system.1 5. i.be had from ‘Drawback Rules’ as notified by the office of Drawback Director.e. and final product or on the output proposed for export. The scheme also provides for a Bond System under which outright exemption from Central Excise Duties can be claimed by the exporter. the Government of India have established a very comprehensive network of institutions for servicing the export sector. agricultural and processed food products Export Development Authority (APEDA) Provides financial assistance for the following purposes: a. d. Income-Tax Exemption: . You will learn detail procedure of Duty Drawback in next lesson. Thus. export incentives in the form of tax. It helps in further reduction in the overall cost of production for exports. Refund of Duty Drawback is granted on post-export . competitive in the international market. particularly to improve the export marketing effort. iv. The incentive of duty drawback helps reduce significantly the material cost of export products. ii. 154 . It is very important for countries like India.

Govt. help and assistance to individual corporate units. settlement of disputes. These institutions provide necessary guidance. Hence. Explain the framework of export incentives in India and analyse as to how far it provides a total approach to export promotion. Special Authorities and Industry Associations. Government of India have established a number of specialised institutions for provid-ing necessary services and assistance to the exporters. Explain the facilities/concessions for increasing the production-base for exports from India. ii. For supplementing the export-effort by the private sector. and (iii) measures for strengthening marketing effort by the export sector. Export Processing Zones. Duty Tee licence schemes have been granted’ to the registered exporters for supplies of adequate quantities of material inputs required for export. Export promotion policy include (i) policies for increasing investment and production in export sector (ii) price support measures for rendering exports more competitive.Institutions established for strengthening export marketing effort include Export Promotion Council. External Marketing Assistance Scheme for Jute: The External Marketing Assistance Scheme provides grant of market assistance at the rate of 5% and 10% of FOB value realisation on export of specified diversified products. of India have also estab-lished a number of Corporations in the Government sector for directly undertaking export -import activity. These are the. inviting trade delegations within and outside the country. v.exporters and merchant exporters. package service and market information. i.1 155 . long. It is provided for sponsoring. Explain the rationale for price-support measures for export promotion in India. etc. Star Trading House and Super Star Trading House have been given special facilities to promote the export business. The benefit is available to both manufacturer. special efforts have been made for improving and strengthening export marketing effort. In addition. etc. In the beginning India followed a policy of import substitution. Export-Oriented Units have been given completely licence-Fee and duty. 4. The success on the export front is crucially dependent upon the marketing of the products.term credit. The primary ‘function of these institutions is to provide the exporter with export marketing guid-ance and advice as well as complete information and details covering almost all the critical elements involved in export marketing effort at the individual corporate unit level on a continuous basis. quality control. Export House. Export Houses/Consortia of Small Scale Industries. Import policy has made provision for easy import of capital goods of all types. 5. quality control. Commodity Boards. participation in fairs and’ exhibitions. publicity. 2. market studies. key institutions servicing export effort ~t individual corporate level product-wise. Export growth has become main determinant of economic growth. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Questions Bank State whether the following statements are true or False: Q1. Government of India have provided various incentives for export promotion. Lets Us Sum Up Of late export promotion has assumed critical importance in Indian economy. daily allowance. In order to make India’s export competitive. MDA is largely available to Approved Organisations. The assistance is given for air fare. 3. separate institutions have also been established for providing technical and specialized services to the export-sector in India. An advance licence is granted only to the manufacturer exporter. exports have now emerged as the only viable source of meeting the foreign ex-change needs. Apart from the provisions made for liberal import of capital goods. risk coverage. Discuss. Foreign equity upto 75% is permissible to EPZ and EOUs.free 11. setting up of warehouses/showrooms. iii. foreign exchange regulation. There has been relaxations in industrial licensing policy MRTP. The scheme of financial incentives include interest subsidy on working capital and financial assistance scheme for Agricultural.675. 6. Fiscal incentives include (i) duty drawback (ii) central excise rebate and (iii) income-tax exemption on export profits. Trading House. With the increasing requirements of imports. The assistance is disbursed by the FIEO and Ministry of Commerce. especially in the field of packag-ing. iv. price viable support incentives have been given to the exporters. Market Development Assistance: This assistance is provided for overall development of I overseas markets. import facilities for all production inputs. Individual exporters or other sponsored persons. trade fairs and exhibitions. Marketing Development fund provides necessary financial assistance for market promotion. research and development. Various state Governments have also established Export Corporations for promoting exports from different states respectively. there is completely licence free and duty free import facility for all production inputs for Export processing Zone and Export Oriented Units. “Export Incentives have become a universal practice”. Answers to Check Your Progress j) True ii) True iii) False iv) False v) False Terminal Questions 1. Analyse the different price support measures introduced in India for rendering India’s exports more competitive. Horticultural and Meat Exports. Why the role of marketing effort is crucial in export promotion? Describe the measures undertaken in India for strengthening export marketing effort. foreign collaboration to increase the flow of production and investment resources into the export sector.

M. a separate Ministry of Commerce has been entrusted with the responsibility of promoting India’s interest in international market. Indian Institute of Foreign Trade (11FT). Chamber of Commerce (COC). The Department of Commerce. The fifth tier consists of Government trading organisations specifically set up to handle export/ import of specified commodities and to supplement the efforts of the private enterprise in the field of export promotion and import management.675. negotiation of trade agreements. including India. It has created a 11. EPZs. market promotion and publicity. With this object in view. Exporters need guidance and assistance at different stages of the export effort. Policy Making and Consultations Indian Trade Promotion Organisation (ITPO). The main functions of the Ministry are the formulation of international commercial policy. It is only with the support and services rendered by specialised institutions. exporter is able to successfully convert his ‘production’ into ‘sales in international market. coverage. In view of the increasingly important and critical role of foreign trade in economic development. Objectives After studying this unit. engaged in the task of export promotion. For this purpose. For undertaking international marketing operations” an exporter needs special guidance and assistance in critical areas like packaging. Visvesvaraya Industrial Research & Development Center (MVIRDC). Export Processing Zones (EPZ). In view of the widely diversifying nature of the export markets in different parts of the world and an equally diverse and varied nature of products and services traded in international market.culture. there are deliberate and consultative organisations to ensure that export problems are comprehensively dealt with after mutual discussions between the Government and the Industry. formulation of country’s export-import policy and their implementation. . Question Bank. Government of India have established specialised institutions at production/ industry level for assisting exporters from different. you should be able to: • • • • • • explain the importance of the institutional infrastructure for export promotion in India describe the role of government policy making and consultative body in the export promotion explain the functions of export promotion councils and commodity boards describe the role of various service institutions engaged in export promotion explain the importance of government trading organisations engaged in the export of specified commodities. The fourth tier consists of service institutions which facilitate and assist the exporters to expand their operations and reach out more effectively to the world markets. risk 156 .. Marine Products Exports Development Authority (MPEDA). you will learn the role of these institutions in export promotion. has to establish specialised institutions for strengthening export-marketing effort for the country as a whole. market intelligence. the Government of India have set up several institutions whose main functions are to help the exporter in his work. Consequently. quality certification. Federation of Indian Export Organisation (FIEO). At the second tier. any country. sectors. At the third tier are the commodity specific organisations which deal with problems relating to individual commodities and/or groups of commodities. Government Policy Making and Consultations Appropriate government policies are important for successful export effort. At the top is the Department of Commerce of the Ministry of Commerce. Institutions engaged in export efforts fall in six distinct tiers. on the foundation of which the export marketing effort at the corporate level can be effectively launched on an intensive and sustained basis. Facilities for Units in EOUs. Indian Counsel of Arbitration (ICA). finance and credit support etc. This is the main organisation to formulate and guide India’s trade policy. in the Ministry of Commerce has been made responsible for the external trade of India and all matters connected with the same. Agencies for export promotion at the State level constitute the sixth tier. Indian Institute of Packaging (lIP).1 Importance of Institutional Infrastructure Export marketing effort is of vital importance for the success of apart-promotion programme in any country. Let us now discuss each of them in detail. This along will have the way for creating an export environment and export.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 21: EXPOR T PROMOTION ORGANISATIONS • • • • • • • • • • • • • • • • Objectives Introduction Importance of Institutional Infrastructure Govt.EHTPs & STPs. 100% Export Oriented Units (EOUs). In this unit. Government of India have established a number of specialised institutions in the country for providing the necessary services and assistance to individual corporate unit for a successful export effort. Introduction Export business requires special knowledge and business acumen.

Division. It provides guideline to State level export organisations. Development Commissioner. It has a separate Export Promotion. to organise export training programmes iii. .675. National Small Industries Corporation and State Corporations for the promotion or exports from small scale industries. They provide export. regulation and export promotion of textile sector including sericulture. Let us now discuss them in detail. It is an important national platform for a regular dialogue between the Government and the trade and industry. It also issues certificates of origin and other special certificates. on 1 st January 157 .import trade flows. Director General of Foreign Trade (DGFT): DGFT is an important office of the Ministry of Commerce. The Regional Licensing offices also act as Export facilitation centres. Monthly Brochure of Foreign Trade Statistics of India (Principal Commodities and Countries) iv. Empowered Committee of Secretaries: For speedier and quicker decision-making. Board of Trade: For ensuring a regular consultation. related to small scale industries Besides. promotion and finance. The major publications are as under: i.1 formulation. Indian Trade Journal Ministry of Textiles: Ministry of Textiles is another Ministry of Government of India which is responsible for policy 11. All India Handicrafts Board iii. and Commodity Boards. The deliberations in the Board of Trade provide guidelines to the Government for :appropriate policy measures for corrective action. Grievances Committees headed by Director General of Foreign Trade and head of concerned Regional Licensing Authority have been constituted in the respective licensing offices. iii. Export Promotion Councils. risk coverage. The important functions are: i. Handicrafts and Handlooms. All India Powerloom Board iv. There are Textile Commissioner and Jute Commissioner who advise on the matters relating to the growth of exports of these sectors. It brings out various publications relating to Foreign Trade of India. Government of India. monitoring and review of India’s foreign trade policies and operations. Its functions are to act as a nodal agency for interacting with state Government or Union Territories on matters concerning exp0l1 or import from the State or Union Territories. It also devises strategy for expanding markets in India and abroad. to help such units in developing their export markets v. Indian Trade Promotion Organisation (ITPO) Indian Trade Promotion Organisation was set up by the Ministry of Commerce. to take up the problems and other issues. an Empowered Committee of Secretaries has also been established to assist the Cabinet Commit-tee on Exports. Textile Committee has also been set up for ensuring of textile machine manufac-tured indigenously. to help the small scale industries to develop their export capacities EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. It is a cell meant for speedy redressal of genuine grievances. There is an Export Commissioner in the DGFT office who functions as a nodal point for all export promotion schemes. jute and handicrafts. promotion services almost at the doorsteps of the small scale industries and cottage unit. It assists them in the formation of export plans for each cases. Government of India have set up a Board of Trade with representatives from Commerce and other important Ministries. etc. Trade and Industry Associa-tions. Director General. offices. Indian Trade Classification based on Harmonised Commodity Description and Coding System v. It has set up an “Ex-porters Grievances Redressal Cell” to assist exporters in quick redressal of grievances. The four advisory boards are as under: i. The advisory boards have been constituted to advise the govern-ment in the formulation of the overall development programmes in the concerned sector. The Committee also include representatives of FIEO. Cabinet Committee on Export has also been set up. These offices are known as Regional Licensing Authorities. The grievances may be addressed to the Grievance Cell of the concerned Licensing Authority in the prescribed Performa. All India Handloom Board ii. quality control. advisory boards. to help the formulation of India’s Export-Import policy and implementation thereof. development corporations. concerned Export Promotion Council/Commodity Board and other departments and organisations. These cover important and crucial areas like packaging. States Cell: The cell has been created under Ministry of Commerce. Wool Development Board There are Development Commissioners. Cabinet Committee on Exports: With a view to ensure regular and effective monitoring of India’s foreign trade performance and related policies. there are Directorates of Industries. Commercial Intelligence & Statistics (DGCI& S): DGCI& S has been entrusted with the task of compilation and publication of data on India’s Foreign Trade. Technical and Specialised Services Assistance Export marketing effort at the individual corporate level also needs to be reinforced through a number of technical and specialised service inputs. to collect and disseminate information iv. especially for exports.network of commercial sections in Indian embassies and high commissions in various countries for export. Grievances Cell: Grievances Cell has been set up to entertain and monitor disposal of grievances and suggestions received. Small Scale Industries Organisation: The Directorate has the headquarter if! New Delhi and extension centres located in almost an States and Union Territories. and Export Service Organisations. development. Monthly Press Notes on Foreign Trade’. Monthly Statistics of Foreign Trade of India ii. who advises on matters relating to the development and exports of these sectors. It has set up regional offices in almost all States and Union Territories of India.

Helps in establishing Overseas Contacts :. It also assists Indian companies in product development and helps them to adapt to meet buyer’s requirements.The IIFT has been recognised as a centre of excellence for imparting training and education in international business. government departments and academic fields. Bangalore. Delhi and Chennai. a quarterly journal. b. Other Services:• • • • • Foreign Trade Review (FTR).Combining a unique ‘blend of research and consultancy. Management Development Programmes :. To organize seminars. To identify and nurture specific export products with long-range growth prospects.Mumbai and regional laboratories at Kolkata. Technology Exports. g. Research and Consultancy :.1 . conferences and workshops.market studies and surveys in the overseas markets. joint ventures. f. such as export pricing. It was set up with the prime objective of professionalising the country’s foreign trade management and increase exports by developing human resource. 158 11. d. Collects and Supplies Information :.(TFAI). Assists in Technological Upgradation and Product Development :. The exporters can use such information while making their export marketing decisions. To participate in overseas trade fairs and exhibitions. its intensive short duration programmes have received the most enthusiastic response. To encourage and involve small and medium scale units in export promotion efforts. Indian Institute Packaging (LIP) The Indian Institute of Packaging was set up as a national institute jointly by the Ministry of Commerce. status papers. At the same time. a bimonthly magazine. It also acts as a consulting house for solving the problems of the exporters and importers. It supplies this information to the exporters. marketing tie-ups and investment promotion. It has five regional offices at Mambai. and the Indian Packaging industry and allied interests in 1966. d. It also extends the use of Pragati Maidan for holding pf trade fairs and exhibitions by other fair organisers both from India and abroad. Trade Delegations :. it has built up a very strong and Indian Institute of Foreign Trade (11FT) Indian I Institute of Foreign Trade was set-up in 1963 by the Government of India a’s an autonomous body registered under the Societies Registration Act.It organises various trade fairs and exhibitions at its exhibition complex in Pragati Maidan and other centres in India. c. Kanpur and Chennai and four in Germany.infrastructure for holding trade’ fairs in state capitals or other suitable locations in India. in consultation with the State Governments concerned. monographs. Publications:. which transforms the’ bright young students into talented creative professionals. analysing and disseminating data and conducting research. with its head quarters and principal laboratories at . It also invites overseas buyers and organises their meetings with Indian suppliers. export promotion. Its specialisation in intentional business and a global outlook makes it unique among management schools in the country. for wider dissemination among the business community. As a premier trade promotion agency of the Government of India. quarterly newsletter. Exporters can take advantage of such workshops and seminars by taking active part them. Involves the State Governments :. Training :. It tries to find out demand for Indian products in overseas market.11FT sends delegates abroad to study overseas markets and also to interact with overseas importers.675. generating. It promotes establishment of facilities and . the ITPO provides a road spectrum of services to trade and industry so as to catalyse the growth of bilateral trade. It offers an inspiring learning environment. Government of India. Organises Trade Fairs and Exhibitions :. etc.11FT conducts . etc. The institute publishes :• • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Functions of Indian Trade Promotion Organisation a.1992 with its headquarters at New Delhi after the merger of Trade Development. e. It organises ‘buyer-seller meets with a view to bring buyers and sellers together.IIFT has so far brought out over 570 research studies and surveys. Over the years. b. It is a training cum research institute pertaining to packaging and testing. b.It helps in establishing a durable contacts between Indian suppliers and overseas buyers.It enlists the involvement and support of the State Governments for the promotion of India’s foreign trade.. it invites delegates from abroad. e. lIFT has been a pacesetter in addressing to the needs of business executives by continuously aligning the focus of its Management Development Programmes with the changing realities. who can study Indian market conditions and can also interact with Indian exporters. To conduct in-house and need-based research on trade and export promotion. Kolkata. particularly India’s exports and technological upgradation and modernization of different industry segments.11FT organises seminars and workshops in a number of export marketing areas. Authority (TDA) and Trade Fair Authority of India . Japan. Organises Seminars and Workshops :.It provides assistance to Indian companies’ in locating suitable foreign collaborators for transfer of technology. Focus WTO. As a result. A large part of the lIFT’s research work is published in the form of study reports. Functions of Indian Institute of Foreign Trade a. It analyses the international business environment and develops appropriate corporate strategies for the overseas markets. UAE and USA.

Bulgaria. Malaysia. d. International Recognition :. The main objective of the Council is to promote the use of commercial arbitration. b. Federation of Indian Export Organisation (FIEO) Federation of Indian Export Organisations (FIEO) is an apex body of various export promotion organisations. IIP is the only authorised body in India to give this certification.. Republic of Korea. d.It also undertakes testing of packaging materials and packages to ensure export quality. Training Programmes :. Societies Registration Act. Testing Facilities :.improving overall infrastructural facilities for achieving packaging improvement so as to prevent losses during transportation f. c.1 159 . It has excellent infrastructural facilities. e. including a quarterly Arbitration Journal. both with regard to the domestic distribution and export market requirements.. It advises the government of India for all export related packages. etc. South Africa and more. Yugoslavia. businessmen. particularly in the course of India’s export trade. As the apex body of all Indian export promotion organisations. Romania. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Functions of Indian Institute of Packaging a. Institute of Packaging (lOP) UK. Russia. from time to time in different parts of the country. FIEO works as a partner of the Government of India to promote Indian exports. It organises arbitration meetings. It keeps abreast of the latest developments. ICA is a member of the Federation of International Commercial Arbitral Institution and has’ mutual co-operation agreements with the International Court of Arbitration. g. h. in the field of international commercial arbitration and maintains cooperative links with national and international arbitration bodies throughout the world.com. specially testing facilities for packages to ensure high quality. Research and Development:. directing and thrust to India’s expanding international trade. i. Collection and Dissemination of Information :. e. b. the London Court of Arbitration and apex arbitration bodies in Thailand. It is registered with UNCTAD as a national nongovernment organisation. Egypt. arbitration laws and facilities and dispute settlement procedures in India and in other parts of the world. training programmes.The institute is international organisations. Switzerland. “http:/ / www. It also carries out graphic designing for international products. Philippines. International Membership :. Government of India. USA. f.All dangerous goods packages need a UN certification mark before they can be dispatched. etc. It is recognised by Industrial Development Organisation (UNIDO) and Centre (ITC) for consultancy and training. Environmental Cell :. It is not binding or compulsory for an organisation or company to be a member of lIP. on being a member one can avail the benefits of services provided by lIP. USA.The institute has an environment cell. UN Certification :..675. lawyers. It represents the Indian entrepreneurs’ spirit of enterprise in the global market. 1860.. Australia. It was set up in October 1965. Japan. for non-performance of contracts or noncompliance with arbitration awards. It has kept pace with the country’s evolving economic and trade policies and has provided the content. conferences. The council provides arbitration facilities for all types of domestic and international commercial disputes.capable expertise in various fields of packaging sciences and technologies.It organises a number of training programmes pertaining to packaging and also provides suggestions in regard to packaging. arbitrators. However. It was set up on 15th April 1965 as an autonomous non-profit organisation registered under the • It has forged strong links with counterpart organizations in several countries as well as international agencies to enable direct communications and interaction between India and world businessmen. Functions of Federation of Indian Export Organisation a. Other Functions :• • Functions of Indian council of arbitration a. Denmark. for company executives.iip-in. c. Sri Lanka. It uses its network of offices for conciliation of international trade complaints received from Indian and foreign parties. It provides information arid advice to interested parties regarding the drafting of trade contracts. Germany. Technical Association for Pulp and Paper Industry (TAPPI) and the World Packaging Organisation (WPO). International Linkage:• Indian Council of Arbitration (ICA) Indian Council of Arbitration (ICA) was set up in accordance to the recommendations of the Committee on Commercial Arbitration constituted by the Ministry of Commerce. the Institute of Packaging Professionals (IOPPA). which cater to the various needs of the package manufacturing and package user industries. the.It is a member of the Asian Packaging Federation (APF). Mauritius. which guides exporters as to what type of material can be used or incorporated in the packaging of their products so as to reduce environmental threats. It conducts research and publishes informative literature on different aspects of commercial arbitration. and has direct access to information and data originating from UN bodies and 11. An up-to-date information 01:1 packaging developments can be availed on its website.It undertakes research and development programmes for creating and . It collects information on various packing and packaging strategies and disseminate them to the exporter for their benefits.

e. quality control laboratory. participation in exhibitions and fairs abroad. through FIEO. which covers organisation. e. ESCAP. Inviting delegations. packaging. reimburses certain percentage of the expenditure incurred by the recognised exporters. in the international market. etc. one at Tokyo (Japan) and the other at New York (USA). h. improvement of peeling sheds. partners for deep sea fishing. Opening new FIEO offices abroad. j. To develop contacts with government agencies and officials to remove identified constraints. Liaisoning with the Government :• It sends representations on policy matters to Central and State (Regional) Governments. generator sets. Collecting data and maintenance of data bank. f. putting up fish landing platforms. marketing extension and training in various aspects of the industry.1 . coordination. on sales-cum-study tours. b. quality and inspection procedures. aquaculture projects. -’ Providing assistance for market development. c. 160 11. Market Research and Development Department :. regulation and growth of the export of marine products with special reference to the quality. • It helps in. b. advertisements in foreign media. Market Development Assistance (MDAJ) :. It publishes a fortnightly magazine. To implement development measures vital to the industry like distribution of insulated fish boxes. shipment.world agencies like the IMF.The Publicity department of FIEO performs the following functions :• Bringing out various special supplements in Indian and overseas dailies in order to project the selected finished products in India and abroad. Marine Products Exports Development Authority (MPEDA) Marine Products Export Development Authority (MPEDA) was constituted in 1972 under the Marine Products Export Development Authority Act 1972. Inviting overseas importers and experts for export promotion visits to India. such as all types of export houses. FAO. Organising buyer-seller meets in overseas markets. World Bank. joint venture and equity participation. It has published Directory of Foreign Buyers and Dictionary of Indian Exporters. Government of India. For example. modernisation. The role envisaged for the MPEDA under the statue is comprehensive. MPEDA organises seafood trade fair and exhibition every alternate year in India. c. Sponsoring of sales team and delegations abroad. To promote the image of Indian sea products in overseas markets through publicity campaigns. Participating in overseas trade fairs and exhibitions. of industry such as upgrading of plate freezers. Creating and telecasting episodes in NEPC channel to promote India’s prominent brands in various countries covered by the channel. ADB. Undertaking publicity through media and producing literature and films on trade promotion. Opening foreign offices and warehouses. processing and marketing value added products. Organising seminars for promotion of international trade. etc. packaging. This enables the products of EPZs to be competitive. b. Dissemination of Information :• It has bilateral arrangements for exchange of information as well as for liaisoning with several overseas chambers of commerce and trade and industry associations. such as :• • • • • • • • • Arranging meetings with diplomats. Kandla (Gujarat). “FIEO News”. • • • Export Processing Zones (EPZS) Export Processing Zones (EPZs) are industrial estates. The Authority operates two overseas trade promotion offices. Promotion of deep-sea fishing projects through test fishing. storage. which form enclaves from the Domestic Tariff Areas (DTA) and are usually situated near seaports or airports. of international trade concerning India. To promote brackish water aquaculture for production of prawn for export. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Functions of Marine Products Exports Development Authority a. They are intended to provide an internationally competitive duty free environment for export production at low cost. To undertake various market promotion programmes. both quality-wise and price-wise.The Market Research and Development department offers the following services to the exporters community :• • • • • • d. ice making machineries. Conducting overseas market survey. i. etc. To find suitable joint venture. with Indian exporters and overseas importers. Publicity Department :. There are seven EPZs in India at :a. incoming delegations and buying missions. to cover developments in the field.The Ministry of Commerce. f. establishing contacts between the government and commercial bodies both in India and overseas’. To promote seafood exports by liaisoning.675. Organising trade fairs and exhibitions in India as well as abroad. installation of machinery. UNIDO and others. processing. Organising trade fairs and exhibitions in India. transport. d. To create awareness on the capabilities of Indian processing. Santacruz (Mumbai). The headquarter of MPEDA is located at Kochi in Kerala.

all its requirements of capital goods. water supply and drainage. DTA Sale :. existence of an industrial base and the need for a larger area of land for the project. hinterland facilities. They are exempted from most of the duties and levies such as state levies including sales tax. e. (For more details refer EOU/SEZ/EHTP/STP units) No licences are required for such import or domestic procurement. floriculture. e.They are exempted from industrial licensing for manufacture of items reserved for Small Scale Industry sector. sub-contract part of the production and production process in DTA. f. animal husbandry.675. repairing. 100% Export Oriented Units (100% EOUS) The Export Oriented Units (EOUs) Scheme.viticulture. Importability or Procurement of Goods from Domestic Tariff Areas :. Inter-Unit Transfer :-They can supply to other EOU/ SEZ/EHTP/STP units without payment of duty and such supplies are counted towards fulfilment of export obligation. h. Income Tax Concession :. Software units may undertake export using data communication links or in the form of physical exports including export of professional services.Units. may sell goods and services upto 50% of.-all existing EPZs have been asked to convert themselves into SEZs. flexibility of operations and incentives. Electronic Hardware Technology Park Units (EHTPs) & Software ‘Technology Park Units (STPs) Units undertaking to export their entire production of goods and services may be set up under :a. subject to fulfilment of minimum NFEP on payment of applicable duties./platinum/ jewellery and articles thereof. The Electronic Hardware Technology Park Scheme d. Surat and Kancheepuram. The Government has asked such units to move out to the Domestic Tariff Area (DTA). of gold / silver. No DTA sale is permitted in case of motor cars. d. remaking. The Export Processing Zone Scheme. availability of technological skills.b. consumables.Supplies form DTA to EOU/SEZ/ EHTP/STP units are regarded as ‘Deemed Exports’ and the DTA supplier is eligible for the deemed export benefits. 161 11. g. pisiculture.1 . Activities undertaken BV such units a. Exemption from Industrial Licensing :. Supplies from DTA :. No trading unit is permitted Facilities for Units Located under EOU/ EPZ/STP/EHTP Schemes a. The Software Technology-Park Scheme. b. power. (For more details refer to EOU/SEZ/EHTP/STP units) EOUs. packaging material. However. Government has also permitted’ development of EPZs by private. f. 1961. post office facilities and offices of clearing agents in the Service Centre located in each Zone. raw materials.An EOU/EPZ/EHTP/STP unit can import or procure from the domestic sources. Such units can utilise goods imported or domestically procured .c. roads. b. Each zone provides basic infrastructure such as developed land for construction of factory sheds. free of duty. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Difference between EPZS and SEZS The main difference between the SEZ and the EPZ is that the SEZ is an integrated township with fully. • • Facilities Aavailable to Units in EPZS a. c. Sub-contracting:. Agriculture including agro-processing. reconditioning.. re-engineering including making. e. with the permission of the Customs Authorities.They can. Falta (West Bengal). state or joint sector. The Export Oriented Unit Scheme. In fact. EPZs. b. c. developed infrastructure on international standards whereas EPZ is just an industrial part. some units are not interested in the conversion on account of the sale into DTA at concessional rate of duty is not available inSEZs. port. d. anti-dumping duties.They are also entitled for concessions in respect of payment of income tax under various sections of the Income Tax Act. d. Provision has also been made for locating banking. standard design factory buildings providing ready-built sheds. office equipments. Chennai (Tamilnadu). It adopts the same production regime but offers a wider option in location with reference to factors like source of raw materials. g. Visakhapatnam (Andhra Pradesh). Cochin (Kerala). other than gems and jewellery units. etc. introduced in early 1981. is complementary to the EPZ scheme. Noida (UP). Export of all products except goods mentioned as restricted and prohibited items of exports in ITC (HS) Classification of Export and Import items. f. -aquaculture. etc. Units for generation distribution of power can also be setup in EPZs. Customs clearance is arranged within the zones at no extra charge. sericulture and granites. Exemption from Duties . c. c. The Inter-Ministerial Committee on private EPZs has already cleared three proposals for setting up of private EPZs in Mumbai. alcoholic liquors. Manufacturing.over a period of 2 years. servicing.. bio-technology. poultry. horticulture. spares. tea (except intent tea) and books. EOUs have been established with a view to generating additional production capacity for exports by providing an appropriate policy framework. FOB value of exports.

b. Business Services :. Centre-II has been entirely leased out to the Industrial Development Bank of India. Mumbai. Other Services :. An exchange of views and formulation of specific remedial policies. New York. Trade Education Services’:. The Council of Management comprising of industrialists. k.Foreign Exchange Earning as a Percentage of exports (NFEP) cumulatively over a period of 5 years. An exchange of information and compilation of data. Visvesvaraya Industrial Research and Development Centre The World Trade Centre. Current Research and Development Briefs (Monthly). • To give advice on starting of import/export business and authorities to be approached for solving import/ export problems. the educational wing of WTC Mumbai. Research and Development :. Can repatriate their profits freely without any dividendbalancing requirement. set up in 1991. It also houses the prestigious Expo-Centre (exhibition hall). 11. shops and showrooms.They can achieve export performance and Net. It was the pioneer in introducing a six months Post Graduate Diploma in Foreign Trade (PGDFT) and Post Graduate Diploma in Foreign Exchange and Risk Management (PGDFERM). (IDBI) Functions of World Trade Centre a. • • e. etc. As a follow up to such studies the Centre has brought out research publications. locate markets. banks.1 . industrialists and traders in different regions as per their needs and requirements establish the Chamber of Commerce and Industry. Export Obligation :. representatives from Central and State governments and apex Trade Promotion Organisations. g. journals and related publications.WTC offers the IMPEX Data Bank facility.675. European Union Market. WTC also offers state of the art support facilities. It was established in 1970 as a non-profit company licensed under Sec. Virtually no penal action is taken for shortfalls during the first three years of operation. business and industry such as EXIM bank. To make recommendations to the government in regard to the EXIM Policy and procedure. It comprises of details on export and import transactions. Market reports on different products by ITC and cm are the main strengths of this library. Trade Information Services :.WTCA online is a unique internet based website. RBI. etc.The Centre has conducted research work on diverse topics like Multimodal Transport. Manufacturers processors who have acquired quality status with specified certification from identified agencies are eligible for double weightage for recognition as status holder. 100% Foreign Equity :. understand the market players. f. M. It has been certified as ‘Best Practice Institute’ by WTCA. Visvesvaraya. The arcade comprises of various state Emporia. Centre. WTCA Online :.100% Foreign Direct Investment (FDI) in the manufacturing sector is permissible to the EOU/SEZ/EHTP/STP units. MVIRDC became of a member of WTCA in 1971 after which it was known as WTC.I comprises of areas leased to various organisations connected with world trade.It is an exclusive source of business information. International Trade Library :. Current thrust of Centre’s research activity is on the implications of the WTO agreements on India’s foreign trade. video conferencing. Foreign Trade Facilitation Cell :. Visvesvaraya Industrial Research and Development Centre after the name of Dr. They arrange periodic meetings which help in :a. governs it. indicating the present state of the export activities in a particular trade or industry. h. translation capabilities. A minimum two weeks advance notice is required. EPCs. 25 of the Companies Act. It is India’s first ever computerised database on imports and exports. Can club their exports with exports of their parent company for purposes of Obtaining Trading or Export House status. Businessmen and students can easily access various sources of trade information through the large collection of trade directories. Temporary office space. etc. It consists of three centrally air-conditioned building. The membership of Chamber of Commerce is open to all. WTCA online offers quality products representing the best international trade information and services at discounted prices.World Trade Institution (WTI). evaluate competitive prices. For FDI in services and trading sector. which will be taken up with the Government. was. Mumbai has been named as the M. facility of WTC clubs (lounge and dining services for members and guests) different publications’ such as Trade Promotion Bulletin (monthly). It also houses WTC offices as well as meeting rooms. an engineer and a scientist. providing a one-stop source for global business 162 Chamber of Commerce (COC) Manufacturers. Agro-based Industries. Other Entitlements:• • • information through strategic alliances with leading information and service providers. the sectoral norms as notified by the Department of Industrial Policy and Promotion are applicable. It helps in identifying products in demand for export or import.i. j. M. b.Apart from the above services. d. the WTC also provides exhibition facilities. c. etc. etc.Specific business meetings can be “Organized for the visiting overseas businessmen for their products of interest. WTC Intercom (Quarterly).A Foreign Trade Facilitation Cell has been set up in order to :• EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Can procure duty-free inputs for supply of manufactured goods to advance licence holders. offices. They playa prominent role in the export promotion activities of trade and industry. Are exempted from State Trading regime except in limited cases. meeting rooms.

Membership of the Chambers and Associations is open to all members of trade and industry. The discussions therein are amongst professional people who have a thorough knowledge of a trade or an industry. This can be an excellent forum to project practical, viable and sound suggestions for removing impediments or changing policies in the national interest. Many of these Chambers or Associations have separate sections or cells dealing with the export trade, which are helpful in interpreting government policies to members, disseminating data on export markets and also making representations to the government.

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

Question Bank
Ql. Q2. Q3. Q4. Q5. Q6. Q7. Q8. Q9. What are the common functions of Export Promotion Council? What is the difference between EPCs and Commodity Boards? What are the functions of Commodity Boards? Why were Export Inspection Agencies constituted? What role does Indian Trade Promotion’ Organisation play in export promotion? Write note on Indian Institute of Foreign Trade. Explain the role of Indian Institute of Foreign Trade in promotion of exports. What role does Indian Council of Arbitration play in export promotion? Explain the role of Federation of Indian Export Organisation in export promotion? Q.10 What are Export Processing Zones? How do they help in promoting exports? What is 100% EOU? What are its benefits?

Qll.

Q12. Write a brief not on All India Handicrafts Board. Q13. Write a not on MPEDA.

11.675.1

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EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

LESSON 22: STATE TRADING IN INDIA
• • • • • • • • • •

Introduction Objectives of state trading Functions Advantages State trading in india Export development measures Weakness & future plans of stc Future of stc Chart on stc Question bank

preventing deterioration in the income of the agricultural producers. State trading, however, is more commonly practised in the developing economies. The reasons behind this are varied. First; such countries may not have adequately developed private sector trading bodies which can effectively participate in international commerce and also protect the national interest. Secondly, the private sector bodies, though possessing adequate trading expertise, will be solely motivated by profit consideration. However, it may be necessary from the national standpoint to promote new export items and cultivate new export markets ever. by sustaining short-terms losses. This can be done only by government bodies having act developmental role and which are backed by the government so that the financial losses do not hamper the pursuit of long-term objectives. Thirdly, the centrally-planned economies have emerged as important export markets for a large number of developing countries including India. Since the foreign trade of these countries is in-variably conducted through State trading organisations, it is found that government trading bodies are in a better position to negotiate with their counterparts in the centrally-planned economies. Canalisation of Imports State participation in imports in generally motivated by some other considerations. These are: (a) to reap the advantage of bulk buying, (b) to mop up any excess profit which the private sector firms might enjoy in import business, and (c) to ensure proper internal distribution of the imported items and to maintain stable domestic price level. Advantage of Bulk Buying There are essentially three elements which can be associated with the advantage of bulk purchase. First, a bulk purchaser may get better discount and trading terms. Secondly, since the bulk purchaser will be a monopolist, the possibility that prices of commodities, in short supply can be pushed up by competitive bidding by the Indian importers, is eliminated. Thirdly, since the international markets of many importable items are monopolistic, State trading will give rise to countervailing power which may mitigate to some extent the ill effects of the monopolistic market structure. Mopping up of Excess Profits In a situation where demand for imports exceeds the supply of imports, there is bound to be a premium on imported materials. If the import licence is issued to an importer, the premium will accrue to him. Further, ‘the extent of the premium will be determined by the market forces. The higher is the excess demand for imports, the higher will be the premium. If the premium is high it means not only a correspondingly larger windfall profit to the importer but also a rise in the cost

Introduction
There is no precise definition of State trading. There are various types of’ government participation in foreign trade, all of which can be defined as State trading. For example, in the centrallyplanned economies the entire foreign trade is nationalised and is, therefore, conducted directly by government departments or government-owned corporations. On the other hand, there are countries, which are essentially free enterprise economies, but export and import of specific commodities are entrusted to government trading organisations or departments. For example, import of raw and unmanufactured tobacco is a State monopoly in France. The Government Food Agency of Japan regulates the import, export and internal distribution of rice; wheat and barley. Similarly, Japan Monopoly Corporation which is a State body has the exclusive rights of tobacco importation. The Australian Wheat Board has the exclusive rights for exports of wheat. There are many such instances all over the world. , The third variety of State trading is found in mixed economics like India. In I India, State participation in foreign trade is mostly done through government-owned trading organisations or through government departments. The government-owned trading corporations are, h9wever, commercial entities registered under the Companies Act and have, the same rights and obligations as any private sector firm. Rationale of State Trading State hading is resorted to for a number of reasons. In the centrally. planned economies, foreign trade as a matter of State policy is nationalised. Foreign trade in those countries is to be conducted by State trading organisations because otherwise the central planning mechanism will not function properly. In the developed free enterprise economies, State trading sometimes is practised as a source of revenue. That is why it is found that trade in products like alcohol and tobacco is subject to State monopoly. Similarly, trade in drugs and arms and ammunition is managed through State bodies in the interest of health and national security of the country. State trading in a number of agricultural products is quite common because State intervention is necessary to avoid large fluctuations in the prices and

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of production of those items which use the imported material as input. Both these problems can be solyed through State. trading for two reasons: First, because the State trading organisations having the monopoly right to import are government organisations, the premium will accrue to the government. Secondly, the magnitude of the premium will also not be a problem because the government can decide on the prices at which the State trading organisations will release the imported materials in the domestic market. Maintenance of Internal Distribution If foreign exchange availability poses no problem and the import trade is completely free, internal distribution of imported items at fair and equitable prices will not create any problem. But since such conditions generally do not prevail in a developing country, sporadic scarcity of imported items will occur. ‘To avoid these problems, it may be necessary to hand over the import of essential items to government trading organisations which can plan the import operation in such a way that a steady in flow will be. maintained. This will avoid sudden scarcities and consequent spurt in domestic prices.

b. Indirect Trading :- In the case of indirect trading, the contracts for the sale or the purchase of commodities are negotiated by STC while the actual fulfilment of the contracts is entrusted to the private businessmen enrolled by the STC. c. Canalised Trade :- Canalised trade includes the import or export of certain items through the concerned agencies of STC. The canalised items of export include sugar, castor oil, molasses, groundnut extractions, etc. Canalised items of imports include edible’ oils, writing and printing paper, non-edible oils, etc. d. Export Promotion Measures:• • • •

EXPOR T IMPORT PROCEDURE AND DOCUMENTATION

It provides financial and raw material assistance. It participates in trade fairs and exhibitions. It undertakes product research. It undertakes market research.

e. Other Activities :- STC also performs servicing functions, thereby bringing buyers and sellers together and assisting them in fulfilling contracts.

Objectives of State Trading
A country may undertake state trading to achieve one or more of the following objectives: i. To achieve its political objectives, ii. To boost its export trade, iii. To enlarge domestic planning programmes by purchasing products required to fill a gap in the plans and by controlling outside economic forces that may affect these plans, iv. To improve the country’s balance of international payments; v. To control foreign exchange, vi. To maintain national security and defence by furthering military preparedness and by preventing potential enemies from receiving strategic materials, vii. To acquire specific products either because they can be obtained at lower cost or because they are scarce at home or abroad, viii. To advance domestic interests by improving bargaining power in trade or by protecting trade against foreign competition.

It helps the government departments and, industrial concerns in processing supplies of plant and machinery from abroad. In some cases, it settles trade disputes between the Indian and foreign parties.

The corporation is successful in introducing several new commodities for exports and in developing new markets for Indian goods. In recent years, the STC is also taking active interest in marketing research, advertising and sales promotion. ,However, it is a public sector organisation with usual difficulties and limitations of its own. Services Rendered by the State Trading Corporation a. To the Indian Industry :- STC helps thousands of Indian manufacturers to find markets abroad for their products’. It assists them in making the best use of raw materials and production infrastructure, guides and helps them in their marketing efforts. Some of the services offered by STC to the Indian manufacturers include :• • • • •

Provides financial assistance to the Indian exporters on easy terms. Imports machinery and raw materials for export production. Assists in the areas of marketing, technical know-how, quality control, packaging, documentation, etc. , Supply of imported goods in small quantities as per the requirements of buyers. Helps in exhibiting the products .of small scale manufacturers in the international trade fairs and exhibitions.

Function of the State Trading Corporation
At the outset, the main function of STC was to deal with bilateral trading practices, especially in the socialist countries. But today it has become a premier trading house having branches in almost all the trading countries of the world. It deals in nearly 300 commodities spread over 84 countries of the world. Trading Activities of the STC a. Direct Trading :- Direct trading includes those goods where STC has monopoly to deal with. Such goods are procured, packed and shipped by STC while import items are purchased from the foreign countries by STC offices located there.

Market intervention on behalf of the Government: b. To the Overseas Buyers :- STC acts as an expert guide for the overseas buyers interested in Indian goods. It helps them in finding the best Indian manufacturers, undertakes negotiations, fixes delivery schedules, overseas quality

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control, etc., and tries to provide a complete satisfaction to the overseas buyers. c. To the Indian Consumers :- Indian consumers are also benefited from STC’s expertise and infrastructure. STC imports essential commodities in order to cover shortfalls arising in the domestic market during the periods of scarcity. Generally, it imports the items of daily requirements such as sugar, wheat, pulses, etc., so as to stabilise their prices.

Advantages of State Trading
One of the important features in most countries in the postwar years has been the rapid extension of the function of the state in commercial fields. In most countries trade is closely regulted by the state, while in others it is partly or wholly conducted by state organs. In India, too, the trend towards state participation is becoming increasingly significant. The controls over international trade are, in some respect, the most dangerous of all, and they stem from state trading. Private enterprise economies have a considerable admixture of governmental trade. State trading may be assumed for purposes of governmental responsibilities for defence, the desire to protect important sources of taxation and control public morals. The limitation of foreign exchange and shipping, plus the need for saving manpower were responsible for state trading and bulk purchases during the war and in the war period of reconstruction. There was an element of monopoly selling and monopoly buying. The argument for the perpetuation of the system rested on economies of scale. If foreign producers, for example have assured markets in governmental bulk purchase contracts, they would cease to worry about marketing problems and would concentrate on efficient productions, passing on a part of the gains of efficiency to the consumer in the form of lower prices of goods. Few countries are willing however, to allow a foreign government to deal directly with private producers in important markets without intervention. Such foreign government may yield to the big buyers to squeeze down prices, and improve their terms of trade. This calls for an organisation on the selling side. With both the buyer and seller orgainsed, there should solution and which frequently results in a stalemate, and always leads to complaints

to take over import trade in East African cotton.1 Since then State trading in imports was discussed by various committees and by 1956 the Government had come to the conclusion that there should be government corporations which were to be entrusted with the function of import of specific items. Two factors persuaded the Government that canalisation of imports for some items . was necessary. The first factor was the gradually increasing trade with the’ socialist countries. Private traders in India had not the expertise in dealing with the Government trading organisations in these countries, and therefore, faced problems while negotiating export import contracts. Since under the rupee-payment arrangement exports and imports have to balance; the Government of India have the responsibility to see that the import plan is fulfilled. A State trading organisation, through which imports could be canalised, would be an effective instrument to achieve this result. The second factor was the artificial scarcity created by small importers who had been given import licences to make abnormal profits. The State Trading Corporation of India (STC) was set up by the Govern-ment of India in 1956 which was designated as the sole import agency of such items as the, Government may decide from time to time. STC, however, would import other items as well apart from the canalised items. The functions of the STC as given in the Memorandum of Association are as follows: i. To organise and undertake trade with the State trading countries as well as other countries in commodities entrusted to the company for such purpose by the Union Government from time to time and to undertake the purchase, sale and transport of such commodities in India or anywhere else in the world.

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ii. To undertake at the instance of the Union Government import and/or internal distribution of any commodities in short supply with a view to stabilising prices and rationalising distribution, and iii. To generally implement such special arrangement for imports, ex-ports; internal trade and/or distribution of particular commodities as the Union Government may specify in the public interest. Very high margin of profit earned by the importers of certain consumer commodities like cassia, betel nuts, cloves, etc., for which adequate foreign ex-change could not be allocated due to tight foreign exchange position, prompted the Government to take the decision of complete import canalisation of items where either the speculative profit or profit due to a wide disparity between the domestic demand-supply position was likely to be high. The success of the State canalising agency in arranging bulk import by items, initially canalised, such as raw silk, caustic soda, soda ash, etc. at favourable prices also gave the Government more confidence in enlarging the sphere of import canalisation. By canalising the import of speculative items, the Government managed to appropriate the. profit which otherwise would have gone to the quota holders. The profit made in these operations helped the Government to pursue another policy objective, viz., export promotion. The State Trading Corporation was directed

State Trading in India
State trading in India has a fairly long history. State trading in imports is first discussed followed by a discussion on State trading in exports.State Participation in Imports The advisability of taking over imports’ of certain specified item was first considered by the Government of India in 1948. The context was the abnormal increase in the price of East African cotton of which India was a bulk importer. The margin between the prices at which the import was negotiated by the Government and the domestic price thereof was so high that suggestion was made that the Government of India should directly import the East African cotton so that the margin between the domestic price and the c.i.f. price could accrue to the Government. The Government, however, took a decision not

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by the Government to push up export of items which are difficult to sell, and therefore may involve financial losses. “In order to offset the losses on export of difficult-to-sell items. import of certain scarce commodities, such as betelnuts, cloves, copra, etc., are canalized through the State Trading Corporation. When imports of these items……. Are canalised through the STC, the corporation mops up a portion of the large profit which is available on these commodities…….”! The maintenance of an equitable distribution of imported materials as well as to keep the interests of the unorganised sector of the industry in fact are also considerations which force the Government to use the instrument of import canalisation. Stabilisation of raw material prices is another objective which was sought to be achieved through the instrument of import canalisation. Import of mercury was canalised in 1961. The domestic sale price of mercury had shot up in 1960 to Rs. 3,500 per flask against a of. price of only Rs. 1,000 per flask. The reason of such an abnormal rise in price was speculation. The canalisation of import through the State Trading Corporation immediately produced the desired result. The State Trading Corporation fixed its sale price at Rs. 1,800 per flask and the domestic sale price stabilised at Rs. 2,200 per flask. However, for the manufacturers of caustic soda, who needed mercury as a basic raw material, the STC charged significantly lower price, viz., a 15 per cent markup on the of. price of Rs. 800-900 per flask. For others, the price was Rs. 1,800 as indicated above. Thus, canalisation in effect achieved two objectives: first, to ensure supply of imported raw material at reasonable prices to the domestic I manufacturers, and secondly, to mop up the excess profit which inevitably I would be there, when adequate foreign exchange could not be allocated for ‘ the importation of an item. The following items have been canalised for import (subject to changes from time to time): Newsprint, Wool, Palm oil (edible), Rayon grade woodpulp, Synthetic ~ rubber, Caprolactum, Alkaloid benzene, Endrine technical, Chlorine diphosphate, Palm oil (soap), Sunflower seed oil, Sisal/manila hemp, Paraxylene, Tallow, Carbaryl technical, Tetracycline HCL, Poly filament yarn, Ampicil trihyd, Art silk yarn, Chloram powder, Pot. Chloride, Soyabean oil, DMT, ME glycol, Cement, Sugar, White printing paper, Nonferrous metals, Asbestos fibre, Antimony metals, Mercury and AG fluorspar.

c.

self-generation of foreign exchange through special link arrangements,

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d. equitable distribution in India through’associations/ consortia”.2 However, views of the trade and industry in respect of import canalization were not always favourable. A major complaint of industry and trade has been regarding the pricing policy and the high service charges. It has been pointed out that in the case of some items, specially raw materials, t9i prices charged by the STC have been excessive. Another complaint has been the absence of close liaison between industry and trade and the State trading agencies. At present, trade and industry have no means of knowing how exactly are the State trading agencies- fixing their prices. Anlaysing the Indian situation, Mr. Boothaligam, Director General, NCAER, and a former Secretary to the Government of India, submitted before the Estimates Committee: “Canalisation could be justified and be beneficial only in areas where two tests can be met. The first is that the organisation must be equipped to work and actually work in such a manner that bulk purchases are made economically taking advantage of favourable changes in the world market. The second is that the final user must get his material at least as cheaply and as quickly as he might have if allowed to import himself.” To conclude, the observations made by the Estimates Committee may be noted: “The Committee agrees that canalisation is no doubt a question of policy which only the Government is competent to decide. They would, however, suggest that the canalisation of import of a commodity may be done if it serves public interest. They would also stress that before canalisation of import of commodities was decided upon, all the important factors, including the capacity of the Corporation, should be taken into consideration. They recommended that after canalisation is decided upon, the Government must exercise vigilance to see that it served the purpose for which it was undertaken”.

Canalisation of Exports
The basic objectives of State trading in exports are as fo11ows: a. It was observed in the case of certain products that there was secular decline in the total value of exports. It was thought that a govern-ment trading organisation would be able to reverse this trend by concerted action. b. In some cases the inter se competition among the Indian exporters was resulting in lower unit value realisation. Entry of State trading organisation in the international market through which exports were to be canalised could result in the improvement of unit value realisation. . c. There are certain products for which. there maybe a premium in Lie international market. By canalising export of such products, excess profits from export operation can be mopped up by the Govern-ment.

Impact of Canalisation
Analysing the impact of canalisation, the Ministry of Commerce submitted before the Estimates Committee: “The effect of canalisation of import through State agencies has resulted in savings in foreign exchange on imports on account of bulk purchases and also on account of bulk shipments and in supply of raw materials to consumers in the country at reasonable rates” Other Advantages are Stated to be a. import and distribution in a planned and phased manner, b. long-term supply arrangements,

d. Another objective of canalisation was to eliminate under invoicing. It was found that sometimes the Indian exporters were quoting lower prices in their invoices while the world prices for such products were considerably higher.

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negotiating. STC is negotiating with Hong Kong for export of building materials and textiles for export to the USA and African countries. Shellac/lac. Hungary and GDR for fashion garments. 3. Canalisation was also thought of as an instrument to improve the bargaining power of Indian exporters.. viz. To provide support to traditional items. readymade garments. STC serves the national objective by arranging timely imports at most competitive prices. Spain for footballs and Uganda for bicycle and bicycle parts. coir. is declining over the years. Chrome ore. quality control and import of machinery and raw materials for export production. billets. Silimanite and Processed mica. 421 Crore (U8$ 92 million) EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Exports from India STC exports a diverse range of items to a number of destinations throughout the world.. 1040 Crore (US$ 228 million) Rs. Salt. Molasses. etc. STC makes use of its world-wide connections. Besides. Performance of the State Trading Corporation Performance Indicators Annual Turnover (2000-2001) Equity Profit after tax (2000-2001) Net Worth (as on 31. 4. To introduce products in international markets particular-ly those manufactured by the small-scale and cottage sector such as sandalwood. To function as catalytic agency for promoting new items of export. Rice basmati. financing. up-to-day information about the market trends and long term perspective on various commodities to ensure competitive prices. viz. To identify new export markets. green tea to Algeria and stereo music equipment to Hungary. right quality and adherence to delivery schedules to the buyers abroad. In the process. etc 6. vast infrastructure and above all an experience of over four decades in fulfilling the needs of the industry. of manufacturers specialising in different’ lines . For example. plywood. Rice & 8ugar Spices & Cashew Tea & Coffee Tobacco and Rubber Opium Groundnuts Castor oil & Seeds Jute Goods Manufactured goods Chemicals. Algeria and Libya have been identified as potential markets for a number of agricultural commodities. 5. To form consortia. jute. 168 11. Especially for products which originate in the small-scale sector. To introduce product adaptation and development keeping in line with the changes in the international markets. The following items have been canalized for export (subject to changes from time to time): Sugar.6 million) Rs. coffee. Exports by STC vary from traditional agricultural commodities to sophisticated manufactured products. the basic objectives of the State trading corporations are: 1.2001) Rs. Semi-processed leather. For example. like railway wagons. explore new markets and undertake wide ranging ancillary functions such as product development. Castor oil. STC has explored South Korea and Hong Kong for export of Indian goods to third countries. dried mush. Barytes.3. etc. Lemongrass oil. contracting and shipping. Principal Items of Exports Agricultural Commodities Wheat. a coordinating agency like the STC would be helpful in promoting export of such products. 3 Crore (U8$ 0. Groundnut extractions. Footwear leather. As regards non-canalised items.7 million) Rs. 2. processed mica.room. Cement and clinker. Canvas/ Plastic footwear. Drugs & Medical Disposables Engineering & Construction Materials Consumer Products Textiles Garments Leatherware Processed Foods Imports into India STC imports a number of essential commodities to cover the domestic shortfalls and hold the price line. e. silver jewellery. the Corporation makes best use of its strength in handling bulk imports. 30 Crore (U8$ 6. STC developed several new markets during 1981-82 including Saudi Arabia and Malaysia for mango pulp. The State trading organisations have also a promotional role so far as exports are concerned. Opium crude. STC seeks to introduce new products. the UK for golf shoe uppers. It was found that the principal buyers in Western Europe and the United States were large corpora-tions and to negotiate contracts with them would require the exist-ence of an equally large counterpart in India which would be able to supply exportable products in bulk quantities. kuth oil. Principal Items of Imports Agricultural Commodities Edible Oils Sugar Wheat Fatty Acids Pulses Manufactured goods Hydrocarbons Gold & Silver Urea Scientific Instruments Instruments for Police & Hospitals Export Development Measures The export development measures undertaking by STC during 1989-90 included the following.This led to the suspicion that the country had been losing foreign exchange because of the malprac-tices adopted by certain exporters. Mica Trading Corporation is trying to export fabricated mica as the demand for the traditional product.1 . in 1981-82 several new items were introduced in international markets by the STC including rayon viscose fabrics to the USA.675. textile fabrics and threads to Vietnam. abundant experience.

During the Year. were: i. • ii. exhibitions and buyer/seller meet in India and abroad including IITF ‘ 89. STC undertook the task of purchasing soyabeans in the mandis. thermoplastic wovens. peacock feathers and clutch and security bags.• STC provided financial and raw material assistance for the export of ibuprofen. in processing’ indents and tenders and in transportation and distribution. cooperative organizations and others in selected and identified sector. Also not much expertise is developed in procuring imports from sources of supply abroad. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION • II. 5. sports shoe uppers. I. Though the objectives with which STC was established are known and clear. Establishment of 100 per cent export-oriented production units the product ranges identified so far are leather products. 3.g sports goods. prcessing and selling the oil domestically and exporting soyabean meal. • • • 731. b. procurement or marketing. 2. In recent years.06 7. STC management has rarely taken any major entrepreneurial decision on its own. Maruti vehicles. Setting up of testing laboratories to ensure consistent quality export. Much of the expertise is in operating as an agent. It would lay emphasis on value added products like computer software. Testing facilities for leather items were also provided in STC laboratories to help the small scale industry in quality control.14 cores from Rs 4 crores in 1988-89. STC financed export oriented projects and converted financially weak companies into exporting.25 Imports (CIF Value) Interest Other expenses STC set a target of Rs 580 crores for exports for the year 199091 During the year emphasis was laid on direct buying and selling. The STC has also decided to enter into joint ventures to develop captive supply sources for exports. For the first time. New Delhi in which STC’s stall was awarded Gold Medal for best display. bulk purchasing locally and warehousing. An attractive package of services offered to the associates such as: 11. Trying to spearhead the national effort to identify new markets for Indian commodities and manufactured goods and establish itself in these markets on a long-term basis. Developing a reliable supply base for production of quality goods in association with the State undertakings. Improvement in quality. STC has taken some major steps to improve its working. pipes. Salient features of the export strategy adopted by STC for 199091 are given below: 1. RD. Foreign Exchange Earnings/Outgo The Total exchange earnings and outgo during the year are given below. iv. not In-merchan-dising. Participation in fairs/exhibitions in India and abroad. Not much expertise has been developed to locate and develop sources of supply of exportable products. • Offshore Trade The Corporation’s offshore trade during 1989-90 increased to Rs. f. compressors. etc. grading packaging. STC continued to make efforts to strengthen supply base for selected commodities to be identified as thrust areas. • • Foreign exchange earnings by way of exports (FOB Value) Foreign exchange outgo.1 d. iii. cocoa beans. buyback arrangements. Financial assistance for expansion of capacity. These will be mainly set up with foreign technical and equity participation and 100 per cent. STC shah undertake investments for development of such production base. v. consumer electronics and packaged tea. Items added were tea and castor oil. If necessary. c. 4.82 610. Ahemdabad. There seem to be no guidelines or criteria for choice by STC management of new product/markets. III. 169 . Indonesian Condensed milk to Maldives and Chemicals and pharmaceuticals to Poland from Germany. STC took action to underwrited part or whole of production of identified units for export of manufactured products. scooters and mopeds. Diversifying the product range-:it has continued to add new items to its export basket like moccasins. STC’s Design and Development Cells based in New Delhi and Agra developed a number of new samples of footwear and shoe uppers for display in various international fairs and exhibitions and for negotiations of export orders on behalf of the small scale industry.51 50. . Development of infrastructural services for the associates by way of import. STC took up development of Brand Marketing in select areas e. sports goods and engineering goods. phosphorour compounds and mercury salts. The setback in the exports of non-canalised items can be attributed to the STC’s failure to develop and appropriate supply base and take adequate promotional steps among importers. Oxalic acid / diethyl oxalate. They are: a. • Weaknesses and Future Plans of STC Some of the major weaknesses of the STC pointed out by a study con-ducted by the Indian Institute of Management. orthopedic shoes. e. Iranian cement to Nepal. A number of machines were installed in design-cumDevelopment Cell at Jalandhar for testing the quality of goods and other material being used for manufacture of sports items.675. STC participated in 23 fairs. The main items and markets for which trading were undertaken were. That rice to Dubai and Yemen.

the origin of wheat being the USA The STC has supplied sugar to Commonwealth of Independent States after getting the commodity from the European Community and South America. These include. petroleum products. on the other hand. oilseeds and cereals. it is now evident that canalisation. Rubber. to Sri Lanka. apart from direct exports of a number of items like leather products including shoes. the non-canalised turnover increased by 5 per cent from Rs. One offshore deal struck by it relates to supply of wheat. this increased to 59 per cent in 1995-96. & Construction Material Cement Cashew Joint Ventures Counter Trade rmy Software Textiles & Garments and Jute Sports Goods Grants By Govt of India Imports Edible Oils Fatty Acids Pulses Newsprint General Import Domestic Trade Bearn/Seed Processing & Oil Sale Pulses Recent Policy Stance on State Trading Government of India’s policy on State trading has undergone a sea change “from 1985 onwards. STC has made rapid strides in offshore trading. It is also engaged Personnel & Codification Industrial Relations General Administratio n Protocol & Travel Public Relations & Advtg. both export and import. 8 products are canalised. the number of canalised items. although is total turnover during 1995-96 amounted to Rs. It earned Rs:65 crores in 1994-95. to a large extent. With a view to developing captive sources of supply for exports. including investment in joint ventures to improve the turnover. With its long experience of exporting a wide range of products/com-modities to over a hundred developing and developed countries and a sound infrastructure. Undertaking infrastructure development. the STC has entered into a number of joint ventures. such as crude petroleum or in those cases where economies of bulk procurement are clearly evident. Organisational restructuring. Entering into joint ventures.685 crores as compared to Rs. Since the canalised business has virtually come to’ a standstill due to decanalisation. Exective Director Finance Executive Director Personal Executive Director Executive Director Markekting Executive Director marketing Finance & Accounnt Insurance legal Future of State Trading in India With the Government’s new economic policy taking shape. The MMTC has also decided to set up joint ventures in various fields of its activities.. Similarly in the case of exports. For example. However. has been obtained from Sri Lanka and sold to Iran. sugar and rubber. except of very few sensitive commodities. Since the Government wants the STC and MMTC to function as internation-al trading houses in competition with the private sector. therefore. 847 crores in 1994-95 to Rs.675. while canalised exports constituted per cent of MMTC’s total exports in 1991-92. Strengthening overseas marketing network. These organisations will. As a result. Undertaking OGL imports. Building Cell Hindi Cell housing Colony Library Securlty Forest Products Rubber Chemicals Imported Cars Import of OGL Items In Chemical Drugs & Plastics Timber Exp . STC should ~ot merely act as canalising agency but should organise itself as an effective trading house on the lines of Japanese trading houses.Drugs & Chemicals Sugar orts Alcohol Molasses Leatherware Shellac Agricultural Products Soyabean Meal/ Other Extractions Coffee Tea Castrol Oil Tobacco Consumer products Fresh & Processed Foods Meat 7 Marlne Products Engg. 892 crores in 1995-96. It should provide new dimensions and leadership as the biggest export house in the country. On the import side. Organisation Chart of STC Chairman & Managing Director Vigilance Internal Audit Mangement Services Trade & Export Development Practice Management Board Secretariat and Parliament cell EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Increased emphasis on direct buying and selling. (STC).000 crores by the year 19992000. 60 crores. among others. Principal among these products are petroleum products. it is strongly felt by these organisations that the Government should give them autonomy in their business operations. Both MMTC and STC have initiated measures in this direction but these have not become very successful.1 170 . imports should not be canalised.g. edible oils. onions and niger seeds. Evolution of a scheme to supply raw materials at international prices for export production. Exploring new lines of business. 1. In other cases. This.861 crores during the previous year. The major strategies to be followed in this regard include: • • • • • • • • • in the import of industrial raw materials for supply to actual users in the country mainly for export production. Abid Hussain Committee (whose recommendations were discussed earlier in the chapter on India’s Trade Policy) recommended that State trading in imports should be restricted to only very sensitive items. Expanding domestic trade. and other consumer goods. It has also set up warehouses overseas for developing exports on a sustained basis. 1. only 6 export products are canalised. has been progressively reduced. canalisation should be used only when very specific social objectives are to be achieved. 11. the STC has been finding avenues to generate profits from sources like offshore trading. The State Trading Corporation of India Ltd. will not be there in the country’s export-import policy. The major State trading organizations in India are: 1. In the latest Export-Import Policy (1997-2002). valued at Rs. Strengthing of information base. has already eroded the base and profitability of the State Trading enterprises-a trend which will get strengthened in the coming years. in the case of STC. The trading covered items like wheat. have to redefine their role and create capacity to emerge as global traders without the support of any monopoly business on the Government account. Corporate Plan The STC has drawn up a corporate plan with the main objective of achieving a turnover of Rs 5. a new area of growth identified by it.

3 items of con-struction material. leather. quality and packaging needs. 19 items of textiles and garments. coffee. but in imports. The import items include edible oil (6 items). Imports declined as canalisation policy changed. 15 items of army software. MMTC Ltd. preparation of new product development strategy and assistance in carrying out negotiations for import and export. 6 major and a number of miscellaneous engineering items. The major items of export in 1994-95 were cereals. the percentage of canalised items has gone down in exports. They reached the maximum of Rs. The major items of imports were edible oils and sugar. One important point to be noted is that in imports. rubber. 10 items of fresh and processed foods. move-ment and distribution of imported items. The Projects and Equipment Corporation of India Ltd. 5. explosives. the percentage of canalised items is far higher than the percentage of non-canalised items. 3. 8 consumer products. textiles and garments. an all time high export turnover of Rs 806 crores was achieved in 1994-95. engineering and construction material.2. drugs and chemicals. 7 items of leather. STC-The Merchant of India.1 171 . standard and glazed newsprint and white printing paper. Spices Trading Corporation Ltd. 3 items of meat and marine products. cashew kernels. The foreign branches provide valuable support in identification of new products and markets. assessment of market potential. Thus over the years the turnover of the STC has increased manifold. On the other hand. But in recent years. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11. canalised items still predominate. 796 crores in 198384 after which there has been a decline. the products handled by STC have also shown an increase. The Tea Trading Corporation ofIndia (TICI). (PEC). sugar. cement. there was almost a continuous increase in imports till 1984-85. This is because the STC’s efforts are mostly guided by the policies of the Government of India from time to time and it is left with limited scope for showing its initiative in there areas. The increase in exports has been significant after 1971-72. STC’s Indian branches playa vital role in port clearance. refers to 17 agricultural commodities. storage. molasses and castor oil. The percentage of canalised items varied between 74 and 94 in exports and between 72 and 97 in imports during the period 1972-73 to 1976-77. natural . an STC publication. sugar. Products Over a period. in addition to procurement and ship-ment operations for export items. The STC has developed a sound infrastructure for development of exports in the form of 17 branches in India and 17 overseas offices and a large force of trained marketing personnel. 4. As a result of efforts made by STC to promote non-canalised trade.675. alcohol.

the percentage of canalised items is far higher than the percentage of non-canalised items. The STC has developed a sound infrastructure for development of exports in the form of 17 branches in India and 17 overseas offices and a large force of trained marketing personnel. The major items of imports were edible oils and sugar. On the import side. (4) Mica Trading Corporation Of India Ltd. an all time high export turnover of Rs 806 crores was achieved in 1994-95. engineering and construction material.675. Principal among these products are petroleum products. (PEC). sugar. In the latest Export-Import Policy (1997-2002). As a result. among others. petroleum products. Chairman-cum-Managing Director • • • • HHEC PEC MMTC CCI Introduction Government of India’s policy on State trading has undergone a sea change “from 1985 onwards. The import items include edible oil (6 items). This is because the STC’s efforts are mostly guided by the policies of the Government of India from time to time and it is left with limited scope for showing its initiative in there areas. storage. cement. 8 products are canalised. 6 major and a number of miscellaneous engineering items. leather. STC’s Indian branches playa vital role in port clearance.1 . Thus over the years the turnover of the STC has increased manifold. sugar. the number of canalised items. 10 items of fresh and processed foods. the percentage of canalised items has gone down in exports. (2) The Projects and Equipment Corporation of India Ltd. both export and import. Similarly in the case of exports. canalisation should be used only when very specific social objectives are to be achieved. onions and niger seeds. only 6 export products are canalised. Imports declined as canalisation policy changed.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 23: STATE TRADING ORGANISATION IN INDIA Introduction Short notes recent years. such as crude petroleum or in those cases where economies of bulk procurement are clearly evident. and natural. cashew kernels. As a result of efforts made by STC to promote non-canalised trade. in addition to procurement and ship-ment operations for export items. oilseeds and cereals. The increase in exports has been significant after 1971-72. 796 crores in 198384 after which there has been a decline. edible oils. (HHEC). but in imports. move-ment and distribution of imported items. an STC publication. They reached the maximum of Rs. STC-The Merchant of India. canalised items still predominate. Rubber. drugs and chemicals. standard and glazed newsprint and white printing paper The major items of export in 1994-95 were cereals. (3) MMTC Ltd. In other cases. 3 items of meat and marine products. On the other hand. has been progressively reduced. (5) Spices Trading Corporation Ltd. (MITCO). One important point to be noted is that in imports. The percentage of canalised items varied between 74 and 94 in exports and between 72 and 97 in imports during the period 1972-73 to 1976-77. The 11. These include. there was almost a continuous increase in imports till 1984-85. alcohol. molasses and castor oil. explosives. textiles and garments. But in 172 Organization Chart Products Over a period. The major State trading organizations in India are: (1) Handicraft and handloom Exports Corporation of India Ltd. imports should not be canalised. 7 items of leather. 3 items of con-struction material. Abid Hussain Committee (whose recommendations were discussed earlier in the chapter on India’s Trade Policy) recommended that State trading in imports should be restricted to only very sensitive items. refers to 17 agricultural commodities. 8 consumer products. coffee. 19 items of textiles and garments. the products handled by STC have also shown an increase. 15 items of army software.

The magnetic appeal of Indian culture resides in its exclusivity. (HHEC) The Handicraft and Handloom Exports Corporation of India Ltd. HEPC was constituted in the year of 1965 with 65 members and its present membership is around 2000 spread all over the country. HEPC has its head office at Chennai and regional offices at New Delhi and Mumbai. Export Promotion and Trade development of Handicrafts and Handlooms products (including hand-knotted woolen carpets and ready made garments) and also to undertake export of gold and silver jewellery/articles and import of bullion. 5. The Chairman and Vice Chairman hold office for a period of two years. The HHEC is a wholly owned subsidiary of the STC. The Committee is headed by Chairman. II. It undertakes the export of handicrafts (including woolen carpets). Sending trade missions to the foreign countries. Providing guidance. v. A Central Public Sector Undertaking under the administrative control of the Ministry of Textiles. local authorities and public bodies on the policies adopted by them in relation to their effect on industry or commerce and other measure including direct and indirect taxations in so far as such policies or 173 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION ii. Khadi & Products of Village Industries from India. Facilitate the upgrading. Handlooms Products. towels. importers and exporters directories etc. dignity. preparation of new product development strategy and assistance in carrying out negotiations for import and export. Boston. Government of India to promote the exports of all handloom products like 11. 11. (HHEC) was set up in 1962. Undertaking market studies in individual foreign countries. table linen. Government of India established with the twin objectives of: I. India has a rich history of handicrafts that has evolved over the centuries. representatives or correspondence in foreign markets for continuously and regularly reporting the price. fabrics. 9. assessment of market potential. Handicraft & Handloom Exports Corporation of India Ltd. The Handloom industry mainly exports fabrics. 6. Administration HEPC is incorporated as a non profit making company under section 25 of the Companies Act. Approving agents. It acts as a supplementary agency to provide private sector agencies participating in the exports of handicrafts and handloom products. quality and packaging needs. exhibitions and buyer-seller meets in India and Abroad. It participates in the trade fairs and exhibitions abroad and also arranges visits of foreign trade delegations. Collect. market preferences and reception accorded to Indian Handloom products. its mystical tone that leaves people amazed at their sight. toilet and kitchen linen. exofficio members and nominated Government officials.675. carpets and floor coverings. collate and disseminate trade data and commercial intelligence to exporters. 2. About HEPC . Bringing out useful publications like colour catalogue.1 . handloom products (inducting ready-to-wear garments) and gold jewellery. 4. 1956 and governed by the Memorandum and Articles of Association framed by the Council. diversification and innovations. It is doing good business in the USA and West European markets as regards handicrafts and handloom goods. tapestries and upholstery’s. assists the Council to run the administration. Undertaking or assisting in research on schemes of technological nature designed to improve the efficiency of the handloom sector. To advise the Government. The basic objective of HEPC is to provide all support and guidance to the Indian Handloom exporters and International buyers for trade promotion and International marketing. standards and specifications. form and style. The legacy of Indian culture promises everything. etc. home furnishings. curtains. Main Functions of Handicraft & handlooms Exports Corporation of India. Our Objectives 1. consultancy and support to handloom exporters to promote handloom exports. bed linen. 10. carpets and floor coverings. Conducting propaganda regularly and popularise Indian Handloom products abroad though various means of publicity. 3. Organizing participation in trade fairs. Paris and Tokyo. quality and design improvement. colour trends catalogue. etc.A Gateway to Handloom Exporters Handloom Export Promotion Council (HEPC) is a statutory body constituted under The Ministry of Textiles. To undertake export of Handicrafts. cushions and pads. 7. The HHEC studies consumer preferences abroad and introduces new products with special attention to quality. 8. etc. It is administered by an Executive Committee consisting of elected representatives from the export trade.foreign branches provide valuable support in identification of new products and markets. The secretary (Executive Director) of the Council. It provides information and financial facilities in the form of loans to those engaged in the manufacturing of handicrafts and handloom products for exports. product development. Its “Sonar” retail outlets offer to public a variety of handicrafts not usually available in the market. an IAS cadre officer appointed by the Government. timber and other raw Material. iv. 12. In 1976 the HHEC has started its wholly owned subsidiary called the Central Cottage Industries Corporation of India (CCIC).:i. Laying down standards of quality and packaging in respect of Indian Handlooms for export. It has also established showrooms at New York.beauty. popularisation and adoption of technology. The entire wealth of timeless Indian handicrafts have survived through ages. iii. HHEC has been involved for the past 4 decades in development and exports of handicrafts utilising the crafts skills from all over India to create visually appealing and economically suitable products for the world markets.

Promote product innovation. over the years the Corporation has been discharging the service responsibility efficiently by imbibing confidence in the customer community. f.00 crores during the year of establishment of the Co Management The Council is run and managed by team of professionals headed by Executive Director. public utilities and industrial plants. design trends. metals and fertilizers. responding to the imperative need for generating foreign exchange to bridge the lwidening trade gap. The Council has created necessary infrastructure as well as marketing and information facilities. diversification and improvement in the selected handloom clusters under Development of Exportable Products and Marketing scheme (DEPM) for promoting the production of exportable products. trade magazines. Conducting workshops. conducting exclusive hand woven shows. 387. Provide financial grants to the exporters with market development assistance for under taking sale-cum. through publications and news letters. layout information and computer aided colour matching etc. which are availed both by the member exporters and importers. diversifications and improvement. Project and Equipment Corporation of India Ltd. The Committee of Administration consist of eminent exporters Export Promotion Council for Handicrafts has a rarest distinction of being considered as MODEL COUNCIL which is self sustaining and where all the promotional activities are self financed. b. officials. business missions. To promote the export of non-traditional and new products Minerals and Metals Trading Corporation of India (MMTC) MMTC is an independent corporation. To boost the export of engineering and railway equipment in established markets. Arrange for the participation of member exporters in the important trade fairs. 8343 crores in 2002-2003. reliable supplier of high quality of handicraft goods & services and ensured various measures keeping in view of observance of international standards and specifications. i. EPCH Council The Council is run and managed by team of professionals headed by Executive Director. publicity etc. the corporation started channelising its organizational and marketing acumen for development of k. professionals and senior Govt. Generating and dissemination of trade enquiries for facilitating International buyers to source the handloom products from Indian Handloom exporters. post loom practices to improve quality and productivity. Inquiries into the complaints made against exporters and take up the exporter’s problems related to the buyers with respective embassies. government of India for promotion of handicraft from country and projected India’s image abroad as a 174 11. The Committee of Administration consist of eminent exporters. advertisements in commercial portals.uncil i. j. Serve as a link between trade and Government to formulate appropriate policies to promote handloom export growth. To boost the exports of turnkey projects in the field of railway systems.A Gateway to Handicrafts Exporters Export Promotion Council for Handicrafts (EPCH) has been established under the Exim Policy of Govt. 1986-87 rose to level of Rs. Government policies.study tours. About EPCH . responding to the customer community. MMTC was set up by the Government as a conalising agency for export and import of minerals. product innovations. To penetrate new markets d. industry and government sponsored by ministry of Textile. Popularise Indian Handloom products abroad through website publicity. It took over the Railway Equipment and Engineering Division of the STC. c. standards and specifications. fabric simulation colour printouts. circulars etc. packaging methods and so on to improve the competitiveness of Indian Handloom products.e.1 . Providing design support to develop new designs. e. Main Objectives of Project & Equipment of India Ltd a. participation in international fairs. Simultaneously with this. loom. to the exporters. b. EPCH is an apex organization of trade. export trends. (PEC) EXPOR T IMPORT PROCEDURE AND DOCUMENTATION d. organising buyer-seller meet (BSM). better merchandising practices. h. and through Council publications. The Export Promotion Council for Handicrafts has a rarest distinction of being considered as MODEL COUNCIL which is self sustaining and all the promotional activities are self financed.measure having a bearing directly or otherwise on export of Indian Handloom products Inquiring and investigating into complaints received from foreign buyers or Indian exporters and act as arbitrators if asked for it. set up in October 1963 in the public sector by transferring to it all activities of STC relating to trade in minerals and metals. c. Simultaneously with this responding to the imperative need for generating foreign exchange to this. Our Strategies a. quality compliance. take efforts to improve forward and backward linkages in handloom sector. colour trends. Liaison with Government for strengthening infrastructure facilities in handloom export production centres. peg plan graph outputs.675. popularising modern dyeing practices. seminars on upgrading technology in pre-loom. The Projects and Equipment Corporation of India (PEC) was formed in April 1971 as a wholly owned subsidiary of the STC. of India in 1986-87 and is a non-profit earning organization. Dissemination of trade information like market studies. Export of Handicraft:-A rising trend of the export of handicrafts (other than hand knotted carpets) was merely Rs. g.

Export Trade Group: light engineering products. b. Exports of primary and manufactured products.6 84. The inflow of foreign exchange was Rs. imports have risen to Rs. 350.0 57. Domestic trade services. ii.88 1988 . With the bonus issue the original capital of Rs. In the circumstances.89 1989 . This fusion of powerful conglomerates will add another chapter to India’s drive for achieving international recognition as an important sourcing centre.000 million. more powerful role for itself. ii. iv.90 Percentage increase (+)/ decrease (-) for last 2 years 86. The performance on the export front has also been spectacular.788 million compared to Rs. These cover international marketing. Trading Groups i. 50. Activity Profile of MMTC Going Place:. 50. 8. iii.483 in 1989 – 90.000 million rupee mark. distribution. Main Functions of the MMTC a. 11. It organises and undertakes trade in metals and minerals and other allied commodities as may be entrusted to it from time to time by the Government of India.7 76. 11. Investments in joint ventures. Trade and counter trade. the only meaningful solution available to MMTC is to meet the challenge of balance of payments crisis and to plan for major thrust in exports. MMTC’s socialized exports which were a meager Rs.MMTC is a state owned enterprise discharging an important responsibility that of finding markets for India’s exports and meeting India’s requirements of essential Goods. From a level of Rs. A fair proportion of imports are directly related to exports and another significant proportion pertains to capital goods imports.5 (-) 26. iii. From a level of Rs. 851million is the highest ever achieved by the Corporation in its 30-year’s history – an increase of 23% over the previous highest level of Rs. trade finance. generating optimum profits through total satisfaction of shareholders. iv. 691 million reached in the year 1988 – 89. The intensity of exports has also been steadily rising. Between these activities MMTC has been able to harness India’s rich potential in international trading. handicrafts. It explores new markets for metals.3 103. infrastructure development and new joint collaborations with other important manufacturing companies to set up projects in India and abroad. Review of Operations The year 1989 – 90 can truly be described as one of the most eventful year for the MMTC. Profit before tax at Rs.642 million in 1988 – 89. MMTC’s imports have been steadily rising.973 million.000 million in 1985 – 86. There is however.675. Fertilisers Group: fertiliser raw material. Corporation’s total exports have crossed the 10. After over 30 years as India’s leading trading house MMTC is creating a new. It is the first international trading company of India to be given the coveted status ‘Super Star Trading House’ and it is the first Public Sector Enterprise to be accorded the status of ‘Gold Super Star Trading House’ for long standing contribution to export.000 million in 1989 – 90. 30 million contributed by the government have now grown to Rs. 23. intermediates and finished fertilisers. agro products and counter trade.000 million recording an increase of 31% over the previous year. 7.828 million. It’s now joining hands with others to set up joint ventures in India and abroad. 5250million in 1989-90. MMTC aims at achieving sustainable and viable growth rate by achieving excellence in its activities. employees and society. Corporate Mission of the MMTC As a-major trading company in Asia.941 million to Rs. It has been a year of record achievements. minerals and allied commodities in overseas markets with a view to diversifying and expanding Indian exports. 500 million and net worth to Rs. 2. gems and jewellery. v.021 million as against Rs. 40 million in 1983-84 registered accelerated growth and increased more than 125 folds to Rs. 1987 . Foreign Exchange Earnings and Outgo During the year the outgo of foreign exchange on trading activities was Rs. 50. Towards this end MMTC has a wide spectrum of activities. During the last two years the turnover has gone up from Rs. This is indeed an outstanding achievement for the corporation. Import of Industrial commodities. Metals Group: ferrous and non-ferrous metals and metalbased products. Activities and Services i.371 million during the previous year.7 (-) 26.exports in noncanalised areas. Agents and representatives for domestic produces.284 million in 1987 – 88 the exports have jumped to Rs. 11. vi.1 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Exports Canalised Non – canalised Total Exports Imports Canalised Non – canalised Total Imports Domestic Total Turnover 20697 490 21187 470 28941 29303 410 29714 361 38800 38149 997 344 344 50973 3334 3950 7284 4778 3947 8725 6231 5252 11483 Profitability Another record achievement is significant improvement in the profitability of the Corporation during the year. customer suppliers. a broad measure of agreement that imports do not offer any substantial scope for pruning even in the face of severe balance of payments pressure.9 33. Most of MMTC’s imports are essential imports required for agriculture or industrial growth. Minerals Group: mineral based products. considering that the turnover during 1988 – 89 itself had registered an increase of 34% over the previous year.1 175 . The Corporation’s turnover crossed the magical figure of Rs. 27. 210. 32. The results have been highly impressive. MMTC’s total turnover during the magical mark of Rs.

but rather on the basis of its ability and success in fulfilling the objectives of maximisation of exports and diversification of trade. it should show greater determination and drive in pushing the nation’s exports.1 . view to stabilising their prices. Efforts are being made to overcome these problems through change in marketing strategy. the STC offices abroad have not been in a position to create an impact.90 million – highest ever – registering an increase of about 28% over the previous year export of Rs. Businessmen with practical knowledge must replace government officials. 125. STC has been arranging imports of edible oils. Organization chart of MMTC BOARD CMD BOARD SECTT VIGILANCE GM EXPORT PRODUCTS .8 million during 1989 – 90.3 million in 1988 – 89 to Rs. It handles a sizable value of India’s total foreign trade. The STC should not be judged on profit – and – loss account alone. Export to General Currency Area increased by 36% from Rs.13 million in 1989 – 90.50 million during 1988 – 89 to Rs.) GM (STEEL) GM (FERT) Mica Trading Corporation of India Ltd. not only in this country but in the markets of the world as well. This awareness is perhaps the greatest contribution of the STC to the success of India’s foreign trade. There is. chemicals. care should be taken to ensure that existing channels do not abruptly dry up and adversely affect the country’s foreign trade.85 million. 7. Conclusions The STC’s efficiency has varied directly with the quality of the persons in actual charge of its operations. For the RPA countries the growth rate was about 19% with exports increasing from Rs. the STC has met with severe hostility from private traders and trading interest. 141. 7. etc. Second phase of the Insulating Material Project is expected to be completed by the end of 1990. The sales turnover of mica products during 1989 – 90. on a wide scale. (d) It purchases or takes on lease any mines or mining rights. Though the STC has not done any harm to foreign trade interests. The name could have been India’s Commodity Exchange or India’s International Trade Centre. without explicitly thrusting forward the concept of the much argued and rather suspected State Trading. The interlocking of the activities of the Government of India and the STC makes possible the concealment of inefficiency under intricate official procedures. Report of mica paper increased marginally from Rs. There is an urgent need for coordinating the trade conducted by private traders and the STC. MITCO achieved record turnover of Rs. Project and Equipment Corporation. Moreover. change their attitude. From the beginning. Cost disadvantage vis – a – vis the long established competitors in the developed countries was the major obstacle in boosting export of this product.10 million. however. All the traders have been unanimous in objecting to what they consider as an unwarranted intrusion of the state in the trade. stagnated around the previous year level of Rs. 15 million due to continued teething problems in marketing of mica paper. The government have merged MITCO with its holding company MMTC Ltd. at the instance of the Union Government.675. 118. 322. Tea Trading Corporation of India Ltd and Central Cottage Industries Corporation of India Ltd.llow land in the country or elsewhere and any interest therein.(c) It undertakes to procure and distribute. fatty acid. a need for creating a better image of India’s foreign trade. However.1 CGM CPPM – 1 GM DIRECTOR (FINANCE) DIRECTOR micanite sheets for which there is good demand.82 million in 1989 – 90. the state would step in to set matters right. ores and concentrated metals with a. 245. Complaints regarding wagon allotments in movement of goods have been voiced. The proposed R & D Centre by MITCO has been registered as an approved centre by the Department of Science & Technology and further steps are being taken for its implementation. 170.) GM (A/CS) GM (AUDIT) GM (EXPORT GR. The traders obviously view export and import from their point of view: they should. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION DIRECTOR (MINERALS) (PERSONNEL) IRON ORE DIRECTOR (METALS) DIRECTOR (FERTILISERS) NFM FINISHED FERTILISER RAW MATERIALS AND INTERMIDIATE (FERT) ALL OVERSEAS AUDIT PROJECTS LINKED WITH FERTILISERS F&A PERSONNEL & ADMIN OTHER ORES IRM PR & OL SHIPPING & TRANSPORTATION JOINT VENTURES IN MINERAL RELATED AREAS INFRASTRUCTURE PROJECTS RELATING TO IRON ORE & OTHER MINRALS CGM STEEL LAW AGRO MARINE & MINERALS MSD & COMPUTER INSURANCE MITCOMICA CGM CGM CGM CGM (F&A) (LAW) (MICA) CGM CGM (PERS (ARGO & MARINE ADMIN & MINOR MIN) GM IRON ORE PURCHASE GM GM GM GM (OTHER (NFM) (STEEL (FERT RAW MINERALS) & IRM) MAT.92 million during 1988 – 89 to Rs. Handicrafts and Handloom Export Corporation. 312. rubber. newsprint. It has created an awareness among private traders that if they do not maintain a certain minimum code of conduct. Samples of heater micanite sheets have been sent to the prospective buyers for evaluation. To achieve its stated objectives. therefore. There are certain inherent weaknesses in the STC because it is largely manned by bureaucrats who lack business experience and initiative. Its total exports of mica was Rs. The choice of the name STC seems a bit tactless. in fact. With the commissioning of the first phase of the Insulating Materials Project it has become possible to convert mica paper into heater 176 11. (MITCO) During 1989 – 90. it established as its subsidiaries Cashew Corporation of India. f8. minerals..

After persuasion from the Government.Write a note on MMTC and HHEM. Q5. the. the role and activities of STC have widened. MMTC has a five-year agreement with South Korea to sell 2. valued at more than $30 million. has struck a deal with Itochu of Japan for supplies to Posco. the bank 11. Korea Intact through Novel Tieups MMTC Ltd. When MMTC approached Export Credit Guarantee Corporation (ECGC) for insurance cover. touch would pay the exporter once the shipments are cleared. affecting Posco. MMTC worked out a credit arrangement with an international bank based in the US. The first shipment under the revolving line of credit extended by lOB was cleared on April 1. Another shipment is expected to leave on April 20. Payments from the South Korean company will be collected after 90 days or ltochu would buy steel against the credit. The payment would be made only after a period of nine months. MMTC was advised to support it at the time of difficulty.86 per cent premium and the insurance payable would be only 60 per cent of the value of shipment.What services are rendered by the state trading Corporation to different entities. Q4. and public sector units. Following the Asian currency crisis. Explain any one of them. Q6. the current arrangement would be to ensure that MMTC gets paid on delivery of iron ore shipments while the Japanese trading company squares off the deal with Posco later through cash payment or steel supplies. The Hindustan Times. the Steel Ministry has not cleared the proposal since domestic producers like Steel Authority of India (SAIL) are already facing poor off take. banks. Now it has to seen that in years to come what contribution STC could make in the export drive of India.What are the functions of State Trading Corporation? Q2. Since the ECGC option was not considered viable.675. 1998. a Goa-based exporter. the financing arrangements would also ensure that MMTC’s exports to South Korea.re made. Since lOB has provided a revolving credit facility valid for 90 days. While helping Posco. South Korean major had expressed its inability to pay on time for iron ore and sought supplies from MMTC without an L/C (Letter of Credit). Q3. valued at around $6 million. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Article MMTC Keeps Exports To S. The subsidiaries of the STC have helped in importing some essential materials in time.With the new Exim policy liberalising the imports of certain items for government departments. The public sector trading company sold iron ore worth $32 million to South Korea in 1997-98 despite the currency crisis which led to steep devaluation of the Won. the plea was turned down. ECGC agreed to provide cover to shipments destined for South Korea whose rating has gone down after devaluation of the Won. the second largest steel producer in the world.3 million tonnes of iron ore per annum. It needs to take some more steps to diversify its operations. In the new policy the role of STC has been reduced to a mere export house. After the shipments w!>.80 lakh tonnes. The two shipments together account for 2. Trade sources said S. A similar facility from an international bank has also been worked out while MMTC is negotiating a credit arrangement from a Japanese trading company in a bid to assist Pasco. Posco could buy iron ore worth at least $18 million from MMTC if three cycles are completed within a year. which is the sole buyer from that country. has managed to salvage its iron ore exports to currency crisis-hit South Korea through a $ 6 million revolving line of credit from Indian Overseas Bank (lOB) in favour of Pohang Iron & Steel Company (Posco). However. ECGC is seeking a 3. Since Posco is a strong company.Analyses the achievements of STC in the field of imports and export. According to this arrangement. is not hit. In other cases.Name the major STC organizations in India. What are its objectives? Q7. MMTC is having talks with a Japanese trading major for a different sort of arrangement following a successful pact clinched by a private exporter. the premium is lower while the payment works out to 90 per cent of the shipment value and ECGC pays the amount after three to four months.What are the objectives of STC? To what extent it is successful in achieving them? 177 . The new policy has decanalised a number of items. Therefore. handloom items. engineering goods and turnkey projects is praiseworthy. Salgoankar. 1998. made payments to MMTC and recovered it from Posco after 90 days. which is all set to overtake global leader Nippon in a few years.Write a note on canalization of trade. Their role in the promotion of export of handicraft. It is understood that MMTC is having talks with another Japanese trading company and had even considered the option of buying steel from Posco through this arrangement. Now. However.1 Questions Bank Q1. April 17.

Despite the quantitative importance of the function and the critical need for imported goods. Import Procedure :• • Pre-import Procedure. The discussion should aid you in conceptualizing the import process and should provide a somewhat different perspective on Indian commercial policy. Essentially the import process comprises the following five stages: i. Moreover. Importing refers to the purchase of foreign products for use or sale in the home market. have been substantially liberalised.1 • Question Bank. Because of its close relationship to customs arrangements. This flow of goods and services from abroad provides a wide verity of critical materials. Developing plan for resale or use.Importers can have a distinct advantage over foreigners in the home market. The potential for such materials and parts is determined by the expected sales of the manufacturers who use them. The importing firm has the responsibility to determine whether the foreign product or service meet the needs of the home market. quantitative restrictions and other regulatory and discretionary controls both on exports and imports. the Government of India has liberalised the import regime from time to time.’ Besides. all controls ‘on imports have been lifted. iii. to describe major importing institutions. The Import Process Importing has been considered in several place in this text.. The procedure for imports has been considerably simplified and the bureaucratic controls have been reduced to the bare minimum. Locating and negotiating with sources of supply. They are familiar with information sources and institutions. it requires planning for acceptance of the product and delivery of the promised benefits. iv. A careful analysis of trade report and business conditions will and importers in determining the market potential for both final products and components. Securing physical distribution. because often they know or can more easily learn the requirements and nuances of the market. Additionally the flow provides a basis for foreigners to pay for Indian exports and provides Indian consumers with a wide selection of goods from which to purchase. Preparing documentation and customs processing to facilitate movement among countries and organization. ii. v. Determining Market Demand And Purchase Motivation:. To elucidate major facts of the custom law and procedure and v. except when imports directly compete with domestically produced products. They are closer to the market. iv. It has substantially eliminated licensing. increasing necessity of imports for export production and globalisation of Indian economy. Legal Dimensions of Import Procedure. to organize the various aspects of importing by presentation of the import process. Special Schemes for Importers. practically. Introduction In 1992 import of goods and services into India were valued at Rs. Thus successful importing depends on more than good buying. This knowledge can however be a disadvantage when familiarity leads to carelessness and individuals assume a level of knowledge that does not really exist. to portray probation confronting Indian importers. government and businesses alike. Merchandise imports exceeded exports. arranging financing negotiating the import documentation and customs procedure and developing plans for use or resale of the item or service. determining market demand and purchase motivation. time being in force. Regulations regarding personal imports such as consumer goods. The import function however often receives little attention because of the emphasis on the expansion of exports. Manufacturers may not 11. Home country manufacturers in fabricating their own final products import raw material and component parts for use.675. The present chapter serves: i. availability of foreign exchange for imports has also been eased. 1. Liberalisation of Imports Consequent upon a comfortable balance of payments position of the country. Enthusiastic exclamations of family and friends over souvenirs from aboard are no substitute for careful market analysis. 50. At present. iii. parts and products not otherwise available.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 24: IMPORT TRADE PROCEDURES • • • • • Introduction of Import Liberalisation of Imports.2002. the Government has initiated a comprehensive’ package intended to make international trade a vital part of development strategy. baggage etc. may live there and may be native to the market. the customs duties on imports have been considerably reduced and rationalised during the last few years.000 crores. It involves searching foreign markets for acceptable products and sources of supply providing for transfer of the product to home market. Under the new EXIM Policy 2002-07 announced on March 31. the import function remains little understood by many in universities. Types of Importers. ‘ All goods may be imported freely in India without any restriction except to the extent such imports are regulated by the provisions of the EXIM Policy 2002-07 or any other law for the 178 . ii.

Developing a Plan for Restate or Reuse :-Importers need to have a plan for resale or use of the goods they buy Otherwise. Imports of this group often constitute the major source of imports for our country. It also has another dimension Foreign products may be perceived differently than local ones. its revenues protected. sources should be operating in an environment that is conducive to satisfactory future performance if the relationship is expected to continue. The distances between trading partners and the sovereign rights of nations require more elaborate systems than those in domestic trade. 2. including delivery dates. usually being subject to an extensive budgeting process detailed procedures for bidding and bidding and ordering and attempted close co- 179 . who buy for their own use. 3. then. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Types of Importers Four basic types of importing institutions are found in the most countries: private industrialists end users. 4. They purchase raw materials. resident buyer. Failure to 11. Even among parent companies and their subsidiaries negotiation may be needed to establish policy transfer pricing. Risk management policies will vary with the negotiated results.Private industrialists who buy and sell for their own account. thereby permitting domestic manufacturers to be more competitive when they incorporate materials and parts in their final product. Locating and Negotiating with sources of supply:Importer must develop dependable supply sources in order to assure customers and themselves of their ability to deliver promised goods at the negotiated time and place and in the correct quantity and quality. transportation modes. Traditionally Indian industrial buyers purchased from abroad only the domestic suppliers could not service their requirements. government agencies and facilititating agencies. and its sovereignty maintained its laws are upheld. machinery and equipment to facilitate their own operations and gear level of their importing to their expected level of operations. and promotional aids are among other factors for negotiation. its revenues protected. Often goods are available at lower prices than from domestic sources. supplies.1 carry out documentation procedures can be costly and result in no delivery. the product involved. hospitals. Physical Distribution:-The logistics of supply. These considerations affect the ability of a exporter to deliver goods to customers or the assembly line on time and they the final cost. It is advantageous. 3.only buy crude materials from abroad but operate mines and processing plants abroad from which they import to meet their requirements. 1. The importer and the importer’s customers are interested in supply sources that are capable of producing the quantities and the quality levels possible. and deliveries. but importers should at least.675. Japanese. they may find themselves stuck with a product that doesn’t appeal to the local people or does not necessary fit the production and use systems of specific business or institution.Documentation is important in international trade.utilities. Some foreign products from some countries may be seen as being of higher quality than local products 9 (e. for the importer to have a plan for convincing others of the merits of a product or service. be aware of the potential differences perceived by their customers. university etc.End users are manufacturers public. Documentation:. These are augmented by many agents of foreign suppliers. Each business person desires to protects a personal interest and each nation wishes to be certain its laws are upheld. Exporters who require irrevocable confirmed letters of credit will not ship merchandise on revocable unconfirmed letters. Product quality is partly a technical matter of specifications or conformance to samples or description. and its sovereignty maintained Previous chapters have indicated some of the documents needed to support these systems. The quality perception can change over time. colleges. 2. may be the responsibility of either the buyer or seller or both-and may be subject to negotiation.governmental agencies constitute a separate class of importers because of their operating characteristics. End Users:. Private Industrialists:. for industrial raw material importation licensing has been liberalised by the government of India. cars) while other foreign products may find it difficult to overcome an image of poor quality. or middlemen to the worshiped control of supplying firms. priorities. Customs procedures are especially relevant. The individual importer has little choice but to conform at least in the short-run. terms of trade. Governmental agencies :. and others have expanded their research and development. The importation of goods from abroad has enabled many end users to gain the advantages of technological developments abroad as the Europens. Various negotiated time and place and in the correct quantity from a constant scouring of the foreign market by the importer. Price financial arrangements. There are numerous private industrialists may carry on a significant portion of the import business while in India. inventory policy and claims servicing. the activities of industrialists are hampered by government attempts to achieve economic development goals. product line. The individual importer has little choice but to conform at least in the short-run Failure to carry out the documents needed to support these systems. The choice among the various options is dependent on supply market characteristics. Restrictions such as the following are not unusual: Private industrialists are precluded from importing any item on the controlled list and they are often unable to get government approval to import on deferred payment terms . And the importer’s ability to finance and manage the operation.g. Recently however the growth of multinational companies improved transportation and communication supply shortages and increased exposure to foreign firms have led to increased use of foreign sources. 5.

. Duty Free Replenishment Certificate (DFRC) :”. catalysts. the exporter is required to guarantee exports of certain minimum value. Not only must brokers have knoeledge of documents. 2.675. for import’ “ of raw materials. Facilitating Agencies:a. Duty Entitlement Passbook Scheme (DEPB) . Selecting the Overseas Supplier :. b. The credit shall be available against such export products and at such rates as may be specified by the Director General of Foreign Trade. sees to the payment of duties and collects freight charges and arranges for the shipment of goods from ports to importers. Customs Bonded Warehouses:. Duty free import of mandatory spares up to 10% of the C. consulate generals. Export Promotion Capital Goods Scheme (EPCG) . This is true of all developing countries where the emphasis is on developmental plans and conservation of foreign exchange. 3. there shall be no ban on the import of items form Iraq in case where the prior approval of the concerned sanction committee of the UN Security Council has been obtained.. These intermediaries are export in the complicated paperwork connected with customs procedures. 4.Importers may not always want to take immediate possession of imported merchandise. consumables. which is in multiple of the value of capital goods imported. . i. Prohibited goods cannot be imported at all. 180 11. clearing agents: For the routine associated with clearing merchandise through customs as well as resolving controversies that may ensue an importer may engage the services of a customhouse broker. packaging materials. Advance Licence can be issued for :-• Physical Exports. international trade fairs and exhibitions and chamber of commerce.(DGFT) by way of public notice issued in this behalf. The exact role of governmental agencies varies among countries.e.Successful completion of an import transaction mainly depends upon the capability of the overseas supplier to fulfil his contract. DFRC is issued to a merchant exporter or manufacturer exporter for the duty free in:1port of inputs such as raw materials. The information regarding overseas suppliers can be obtained from various trade directories. Selecting the Commodity :. Deemed exports. intermediates.ordination with governmental development and social plans. ‘an . for consumption for transportation and exportation or for transportation and warehousing at the another port. exporter may apply for credit as a specified percentage of FOB value of exports. including packing materials to be used for. Such certificate is subject to the fulf1lment of time bound export obligation..Imports can be made from any country of the world except Iraq. import of goods is permissible under the following ‘special schemes. made in freely convertible currency.I. Advance Licence :.F. classifications and duty rates but they must also be familiar with countervailing duties. This facility is subject to export obligation. etc. They can postpone the payment of duty by storing dutiable import in customs bonded warehouses where they may clean sort repack and make certain changes in the condition of merchandise. oil.An importer should select the commodity for import after considering various commercial factors as well as legal considerations including the regulations contained in the EXIM Policy. Import of restricted items is permitted through licensing only while canalised items can be canalised through specified State Trading Enterprises (STEs). fuel.. value of the licence which are required to be exported or ‘supplied with the resultant product may also be allowed. c. Pre-import Procedure a. The value of their services is indicated by the fact that over 90% of all imports are processed customhouse brokers. arid is issued in respect of products covered under the Standard Input Output Norms (SIONs). Customs bonded warehouses are in the charge of a customs officer who jointly with the proprietor has custody of all stored merchandise subject to detailed customs regulations. b. The clearing agent verifies the documents on shipments into India. which. Capability and Creditworthiness of Overseas Supplier :..1 . Imports may be made freely except to the extent they are regulated by the provisions of the EXIM Policy. Spare paJ1:S. components. In India purchases by government agencies and government owned corporations account for a large percentage of all imports. In addition.EPCG scheme was introduced by the EXIM policy of 199297 in order to enable manufacturer exporter to import machinery and other capital goods for export production at concessional or no customs duties at all. c. Therefore. it is advisable to verify the creditworthiness of the overseas supplier and his capacity to fulfil the contract through confidential ‘reports about him from the banks and Indian embassies abroad. Special Schemes for Importers As per the latest EXIM Policy 2002-07. energy. parts. export production. However. intermediates. b.Under the DEPB scheme. designed for encouraging exports :a. etc d. products manufactured for export. components. • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Intermediate Supplies.An advance licence is issued for duty free import of components which are physically incorporated in the. It is. are consumed in the course of production process may also -be allowed. They often combine functions and serve also as forwarding agents. Imported merchandise may be withdrawn from the warehouse: 1. advisable to finalise contract through indenting agents of overseas suppliers situated in India.

The indent houses maintain close touch with the well known foreign firms who send the samples of their products to them. (D/A=Documents against Acceptance: D/P = Documents against payment) The bank’s branch in the importing country.1 . The details of the order taken down by the salesmen in their note books are entered in the indent form. This may be done through an L/C where it is intended to enable the shipper to obtain payment for the goods immediately on surrendering a documentary bill to a bank in his own country. he may place an order directly with the exporter. In such a case the indent incorporating the price finally settled is called a confirmatory indent. Generally. he has to make arrangements for paying for the goods ordered. The attached documents are handed over to him immediately thereafter if it is a D/A bill in case of a D/P bill. the importer cannot comply with the requirements regarding acceptance or payment the indent house does so on his behalf. This paves the way for the importer to go ached with the other formalities in connection with an import transaction. the bank delivers the documents only after the importer pays the amount of the bill on maturity. Import of samples of goods is exempted from import duties under ‘Geneva’ Convention of 7th November 1952. Various documents like master document. indent house is mentioned as the ‘Referee in case of need’ on the bill. receipt of payment. Placing the Indent:. However an importer is able to get the foreign exchange only from an exchange bank approved and recognized by the Reserve Bank of India for dealings in foreign exchange..d. 2. documentation formalities. one should call for the samples or catalogue and other relevant literature and the specifications of the items to be imported. On the strength of the application and the licence and the exchange policy of the government of India in force at the time of application the Reserve Bank of India sanction the release of a certain amount of the desired foreign currency.The importer places order for the goods he requires and for which he holds an import licence. It must be noted that while licence is issued by the Government for all imports during the period of its validity exchange made available only for a specific transaction for which an order has been placed. arranges for the bill to be presented to the drawee (importer). Role of Overseas Suppliers’ Agents in India :. when the shipper (exporter) has shipped the goods and the an advice note to the importer stating the date of shipment the goods and the probable date when the ship is expected to reach its destination. Two copies of the indent form are sent to the importer for his acceptance.After the importer has succeeded in securing the requisite amount of foreign exchange from the Reserve Bank of India. Inquiry. After satisfying. Offer and Counter-offer :. The importer returns one of the copies duly accepted and signed to the indent house which then sends a copy of the indent to its agent in the foreign country concerned.himself with the samples and the creditworthiness of the overseas supplier. These agents procure orders from the Indian parties and arrange for the supply of goods from their principal abroad. the banker through which it is sent may be instructed to deliver the document against the acceptance of the bill by the importer or against the payment by him. In such cases. Their salesmen take these samples to the intending importers and book orders from them. the exchange Control Department of the Reserve Bank of India deals with applications for the release of foreign currency. Obtaining Foreign Exchange:. Another method will be to request the exporter to forward the documentary bill through his banker to the importer for being delivered to him either against acceptance of the bill of exchange or against its payment.It is advisable that before finalising the terms of import order. In case.Some reputed overseas suppliers have their indenting agents stationed in India. The word indent is used for import of goods according to which two or three copies of the order are prepared and indented is one which does not specify the price and other details of the goods ordered but leaves them but leaves them to the discretion of the buyer in the exporting country. Arrangement for Payment :. The order is called indent and may be placed either directly or through specialized intermediaries called indent house. Though one order goods directly generally importers prefer to make use of the services of indent houses for this purpose. bill of lading and certificate of origin are attached to this bill. insurance policy. in India many of the big indent houses have their offices in port towns like Bombay. Stages in an Import Transaction The following stages mark the various steps involved in importing goods into India under an import licence and quota: 1. Calcutta. 181 EXPOR T IMPORT PROCEDURE AND DOCUMENTATION 11.The foreign exchange reserves of any country are controlled by the Government and are released through the central bank. 3. the importer should proceed to fmalise the terms of the contract to be entered into. or its agent thee. That is way it is called the ‘Documentary Bill’ A Documentary Bill may either be D/A or D/P i. A If an indent specifies the price at which goods are sought to be imported it may give rise to negotiations between the parties. If an importer does not act through an indent house.675. At the same time he draws a bill of exchange on the importer (also called indentor) for the full invoice value of the goods. The indent firms serves as middlemen between the exporters and importers and charge a certain %age of commission from the importer . etc. It is advisable to import through such agents as they can be readily contacted in case there is any dispute regarding quality or quantity of goods imported. e. The exchange back through which the payment is proposed to be routed puts its endorsement on the application form.e. In India. The importer has to produce the import licence along with the prescribed form for securing foreign exchange required to pay for the goods ordered from another country.

coffee. When the ship carrying the goods touches at a port. and (iii) bonded goods. It may be advalorem.If the goods are free. an importer may maintain a running account with the Customs Office and make deposits from time to time. However. A special licensing committee headed by the Chief controller of Imports and Exports may consider applications for advice on the grant of licence for import of restricted items. Most of the imports are now free from licensing. Similarly. The importer then presents two copies of the Port Trust Dues Receipt and three copies of the Bill of Entry to the Port Trust Office to obtain clearance regarding dock dues. one copy of the first form and two copies of the second are presented to the Customs office. cinnamon and cassia to be granted to the extent of 10 per cent of best year’s imports in value in any of the preceding 5 licensing years. • Against seven application forms required for import of various items in the negative list only one form will now be required. To save themselves from the botheration of going through all the above mentioned formalities. Payment of Customs Duties:. Other highlights of import procedure are: grant of licences for certain items of raw materials. Bill of Entry. Clearing the Goods:. However. The Bill of Entry. Separate forms of the Bill of Entry are used used for each one of the three classes of good: (i) free goods which are exempted from customs duty. Goods imported without restrictions may be transferred to other. attests the fact that goods of specified quantity. 5000 at a time can be made in accordance with the policy. the importer or his agent will pay the import duty which may be specified. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION • • • • • • • • • • • • • Import Procedure Simplified As per the new Import Policy 1992-1997 Import procedure has been simplified: 182 11. In case the importer is not in a position to pay the customs duty on the whole of imported goods. In such a case. import licences/customs clearance permits will have validity of 12 months. aircraft après can also be imported without a licence on the basis of the manual of the aircraft or on the recommendations of the department of civil aviation. Import licences issued under various provisions of the policy will indicate the value both in rupees and in foreign currency at the exchange rate prevailing on the date of the issue of licence. The import entitlement of any one licensing year can be carried forward either in full or in part and added to the entitlement of the two succeeding licensing years.10000 for tractors for each imported vehicle can be made without a licence. tobacco and certain spices.1 . capital goods licences and customs clearance permits will be valid for 24 months. The duty payable on a particular consignment of goods received at the customs is charged to the account and the importer is informed of this. Licences for import of cloves. it is notified in the newspapers and the importer has to secure the release of cargo from the custody of the customs authorities. Thereafter. these agents will take it upon themselves to deliver the goods at the exporter’s warehouse. 5. However. The shipping campus of the such endorsement only if it is satisfied that the freight has been paid it freight has not already been paid by the shipper or exporter. On dutiable goods. Dealers of books may be granted licences on the basis of 20 per cent of the purchase turnover for import of fiction and other books. subject to fulfillment of export obligation. Import of spares for imported motor vehicles and tractors upto a maximum value per year of Rs. no import duty is to be paid at the Customs Office. drown in triplicates. Clearing agents charge commission for their services. the importer will have to make the payment on this score before he can be given a given a green signal by the shipping company. Import of motor vehicles including tourist coaches and airconditioning units will be permitted within the entitlement of the licences given to hotels travel agent and tour operators. he may apply to the customs authorities to get when placed in the ‘Bonded Warehouse’.e according to the tariff or the market value of the commodity or its invoice value.e. (ii) goods for home consumption. Items qualifying for exports include tea. in the case of goods imported with actual used conditions can be transferred only with the prior permission of the licensing authority. 20000 (for motor vehicles ) and Rs.675. etc. i. value and description are entering the bounds of the country. No enhancement of rupee value will be necessary if the imports are covered by the amount of foreign currency indicated in the licence. Components and consumables in the negative list of imports decentralized application for second hand capital good upto a CIF value of Rs 50 lakh to be considered by the regional licensing authorities. The first thing for him to do is to obtain the ‘Endorsement for Delivery’ delivery or order on the back of the bill of Lading which is the document of title of goods.4.Assuming that the importer has taken possession of the various documents relating to the goods shipped. Imports through courier service up to a value of Rs. Under the new procedure. he will have to comply with the formalities prescribed for clearing the goods. the importers may entrust the hob to clearing and forwarding agents. i. He can then pay the duty on each installment of goods that he withdraws from time to time. Revalidation may be granted on merits. based on weight measurements etc. where licensing is required-cases like duty-fee imports for export production-considerable delegation of powers has been made to the regional licensing authorities. Payment of customs duty can also be made under the system called the “Permanent Deposit System” Under this system.

• Authorized dealers of foreign exchange will indicate the value in foreign currency as well as in rupees determined on the basis of the market and official exchange rate in the letters of credit opened for import of freely importable items or the items proposed to be imported against a licence. sanctions necessary foreign exchange for the import transaction. precise terms as well as all relevant conditions of the trade deal. .. Payment under Letter of Credit.If the item to be imported falls in the . every importer is required to make an application to the Reserve Bank of India (RBI) for getting. demurrage charges. The Exchange Control Department scrutinises the application and if satisfied. Similarly. if it is subject to the canalisation through State Trading Enterprises (STEs). Arranging Finance for Import :.1 183 . mode of payment.The import contract should be carefully and comprehensively drafted incorporating therein. Finalisation of the Terms of Contract :.In India. Such units are allowed to export all prod-ucts except banned items. sericulture and granites. development of software. etc. g. all foreign exchange transactions are regulated by the Exchange Control Department of the Reserve Bank of India (RBI). Therefore. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Legal Dimensions of Import Procedure a. floriculture. Obtaining lEC Number :. There should not be any ambiguity regarding the exact specifications of the goods and terms of the purchase including import price.In India. demand for the commodity in the international market. the export processing zones the Government also established specialised processing zones to promote the export of elec-tronics hardware. bio-technology. c. The entire scheme was reviewed in 1980 when it was decided by the Government to introduce the scheme of export oriented units and provide them with all facilities in order to achieve faster rate of growth in exports. Dispatching Letter of Credit :. aqua-culture. pisciculture. type of packaging.There are mainly three modes of settling international transactions depending upon the creditworthiness of the importer or exporter. etc b. The units established as export oriented units or units in the export processing zones may be engaged in the manufacture.If the’ term of payment agreed between the importer and the overseas supplier is a letter of credit then the importer should obtain the letter of credit from his bank and forward it to the overseas supplier well within the time agreed for the same. delivery schedule. 1000 and two copies of passport size photographs of the applicant duly attested by the banker of the applicant and other relevant documents. licence and permits. inter-alia. d. the importer should. Paris. Advance Payment. The 100% EOUs located in export processing zones were known as EPZ units. These terms have almost universal acceptance. Mode of Pricing and INCO TERMS :. the overseas supplier should quote the terms prevailing in international trade. poultry.675. However. it is obligatory for every importer and exporter to register themselves with the Director General of Foreign Trade (DGFT) and obtain Import-Export Code (lEe) Number. trading. arbitration. The application form’ -for obtaining IEC number should be accompanied by a fee of Rs. h. if it falls in restricted list then the necessary clearance must be obtained from appropriate licensing authority. This requires advance financial planning so as to retire import bills under L/C on time. port of shipment. making overseas payments. prohibited list. e. they enable industrial units and others to have access to imported inputs and machinery by establishing letters of credit in favour of the overseas suppliers. f. Banks normally do not extend any fund based assistance to importers. Obtaining Foreign Exchange :. horticulture.Import L/C limits are sanctioned by the banks on submission of complete loan proposal as in the case of other types of credit facilities. Any delay in retirement of bills not only strains the relations is of the importer with his bank but also results in additional costs by way of extra commission. Obtaining Import L/C Limit:.While finalising terms of import contract. ware technology parks and software technology parks were established. sanction for 11. viticulture. As regards mode of pricing. has given detailed definition of a few standard terms popularly known as ‘INCO TERMS’. then such item cannot be imported at all. services. Payment or Acceptance against Documentary Collections. be fully conversant with the mode of pricing and the manner of payment for the imports. agroprocessing. The export oriented units could be established in the export processing zones or outside the zones. discount and commission. Besides. and computer software. The importer must see to it that the letter of credit has been prepared in the strict conformity of the import contract entered between them. i. exchange control regulations prevailing in the importer or exporter countries and other relevant factors :• • • Import by Export Oriented Units/Export Processing Zones Units The Government of India decided to establish export processing zones in 1965 in order to provide all facilities to the exporters to promote exports from India. insurance.It is advisable that the financial planning for imports should be done in advance in order to avoid huge demurrages on the imported goods lying uncleared for want of payment. Obtaining Import Licence :. Mode of Settlement of Payment :. then the necessary formalities are to be completed pertaining to the same. The basic requirement of the units to be established under these zones or for the export oriented units outside the zones is that these units shall undertake to export their entire production of goods and services. International Chamber of Commerce (ICC). penal interest. animal husbandry. agriculture. For this purpose electronics hard. However.

moulds. i.with latest amendment on 6. anti-static carpet. The obligations of these units are at two different levels as explained below: samples may be paid for or imported free of any charge. Raw materials.675. 60. consumables. v. The exemptions from import duty are different in both the cases. What are the legal dimensions of import procedure? Import of Commercial Samples The import of commercial samples is exempt from the levy of import duty as provided vide General Exemption No. Material handling equipment. charts.000 or 15 units in number. bonafide commercial samples and prototypes by post or by air or by courier service upto a value limit of Rs. 86/99-Cus). 5. Quality assurance equipment. instruments and acces-sories. teleconference equipment. The only condition is that the items of import should not be banned under the Export Import Policy 1997--2002. The 184 11. captive power plants. without payment of import duty. The list of items permitted for export is as follows: Capital goods. fixtures. The goods are clearly marked as samples. limit of Rs. The importer produces Importer-Exporter Code (1EC) 2. 1.The units are allowed to import even second hand capital goods or import goods on lease basis. storage systems. including P ABX. Q2. Drawings. vii. Name the different categories of importers. Commercial Samples (Paid for) A bonafide commercial traveller or businessman may import commer-cial samples without payment of import duty upto a value. air-con-ditioners. jigs. computer furniture. Un-interrupted Power Supply System (UPS). transformers and accessories. The EOU /EPZ/EHTP /STP units can procure the goods from bonded warehouses in the domestic tariff area without payment of import duty . The importer. 42 (Notification No.07. servo control system. spares and packing materials. gauges. The units in the STP /EHTP /EPZ are also allowed to import duty free all types of goods for creating a central facility for use by software development units in STP /EHTP / EPZ. ii. intermediates. dyes. Office equipment.1994 . modular furniture. blue prints. components. The postal charges or the air freight is not taken into account for determining the value of commercial samples and prototypes. Spares and consumables for the above items. The facility of duty free import available to the EOO / EPZ/ STP /EHTP is subject to fulfilment of export obligation by these units. Number at the time of importation. Explain the special schemes of import liberalisation in India. The EOU /EPZ/EHTP /STP units are allowed to import without payment of import duty all other goods besides capital goods required by them for their activities. Pollution control equipment. viii. video projection system. iii. 4. as defined in the Policy including the following and their spares. EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Question Banks Q1. at the time of importation: Commercial Samples and Prototypes (Free of Charge) A bonafide business firm may import. 154/94-Cus dated 13. Such units are also allowed to import goods including capital goods required by them free of cost or on loan from their clients in foreign countries. fax machines. Q4. iii. panel for electrical Security Systems. like fork lifts and overhead cranes. microfilms and technical data. development or evaluation.000 provided the said goods have been supplied free of charge.Tools. ix. Explain the main steps in pre-import procedure.Duty Free Imports The most significant feature of the units in these zones or export oriented units is that these units are allowed to make duty free import of all types of goods including capital goods required by the units for the manufacture of goods or trading of goods or supply of services.1999 vide notification no.07. within a period of twelve months subject to the fol-lowing conditions: The samples are imported as a part of personal baggage or by post or by air. Special racks for storage. 3. Q3. iv. DG sees.1 . Prototypes and technical samples for product diversification.

After the assessment of goods for the lievy of the import duty is com. The importer intending to import la certain item should first of all. Import of restricted items Any business firm intending to import restricted items shall be required to apply for import licence under the Negative List. parts. Warehousing of Imported Goods An importer may not like to clear or may have certain problems in clear-ing the goods imported immediately on payment of duty for home consump-tion. the only requirement make import in terms of procedure would be to pay for the import duty leviable that item and seek the customs clearance of the import consignment. 11. Many a time. It is a privilege extended by the Government to the importer. justification for the import has to be provided because import licence cannot be claimed as a matter of right. components other inputs and the capital goods to facilitate production of goods for the purpose of promotion of exports. The object of warehousing is to allow the facility of deferring payment of duty on im-ported goods pending actual clearance for Home Consumption on payment of duty or their re-export without payment of duty to any foreign port. sold or otherwise disposed off within a period of 2 years from the date of import without the prior permission of the Director General Foreign Trade.Exporter Code Number are allowed to import the goods which do not attract any kind of restriction under the Export-/import Policy: 2002-07. The Bond after scrutiny is accepted by Intoduction The Export-Import policy offers facilities for the import of raw materials. The facility of import is allowed under the ‘following categories: 1. 2. relevant chapter as given in Schedule 1 ( Import Policy) should referred to find out the policy regarding import against the item at the desired TC(HS) number. Import of capital goods The present chapter deals with these facilities and explains the pro-cedure involved in customs clearance of the import consignments.675.EXPOR T IMPORT PROCEDURE AND DOCUMENTATION LESSON 25: IMPOR T TRADE DOCUMENTATION • • • • • • • • Introduction Capital goods Custom Clearance Procedure for Imported goods Import Documents Retirement of Import Documents Classification of Goods for Import Policy & Assessment of Duty. 1. Import of unrestricted Items The business firms having Importer. 1962. The W R Bill of Entry is thereafter audited by the Internal Audit Depart-ment and then sent to Import Bond Department where the importers file the requisite warehousing Bond u/s 59 of Customs Act. There is no permission . registration and its pre-audit are also gone through as in the case of a Borne Consumption. If the licensing authority is not satisfied then it may not grant the import licence Capital Goods Import of Capital Goods The policy regarding the import of capital goods is very liberal. Bill of Entry.) The details of these restricted items can be obtained by making a reference to Schedule l(lmport Policy) as given in the ITC(HS) Classification of Import and Export Items. The importers are required to file a set of yellow coloured bill of entry commonly known as warehousing or Into bond Bill of Entry (B/E) if they want the facility of warehousing of the imported goods. he can. However. Thereafter. subject to certain conditions being sat-isfied. an export firm is required to make import of the various inputs and machines for the purpose of export production. In such an eventuality. pelted. such goods shall not be transferred. deposit the goods in a Public or Private Bonded Warehouse. A Note on Forward Contract The importer has to give reasons as to why he needs to import the restricted items. Import of unrestricted items 2. If the item is unrestricted for import. The warehousing BIE is almost the same as Home Consumption Bill of Entry and the procedures for its processing are also the same except that the payment of the duty is de-ferred. In other words. Import of restricted items 3. ascertain the ITC(HS) classification number ‘of the item by referring to the ITC(HS) Classifications of Import and Export Items. There are no restrictions for the import of New Capital Goods. as amended from time to time. The only require-ment is to arrange for the customs clearance of the import consignment against the payment of the applicable import tariff. the scrutinizing appraiser debits the import licence{s} where necessary. their import is allowed freely provided the second hand capital good is not more than 10 years old.1 185 . licence.or approval required to import such items. ( Negative List refers to the list of restricted items. B/E. The formalities of calculation of duty. Import of Second Hand Capital Goods As far as second hand capital goods are concerned. and the set of warehousing Bill of Entry {WR B/E} undergoes usual counter checks by the Assistant Collector of Customs.

etc for machinery imported. If Chemicals and allied products are importedLiterature showing chemical consumption.) b. if necessary. the following documents are also required to be submitted wherever necessary:• • • • • If the spare part are imported-exporters invoice showing unit price and extended total of leach item. Import Manifest :. The Customs administration vests with the Central Board for Excise and Customs. The original copy it kept in the Bond Department.C. c. All goods imported in India have to pass through the customs clearance after they cross the Indian border. Wealth Tax etc. Two copies of Packing List. an import manifest to the customs. the importers or their agents have to make an entry 186 In addition to the above. The goods so imported are examined. the Bill of Entry is completed by the Assistant Collector and sent to the Licence Section with an order to the Dock Staff for examination of goods before clearance. Central Board of Excise and Customs. If the steel is imported-Manufacturer’s Analysis Certificate. Manufacturers test certificate. evaluated and then allowed to be taken out of customs charge for use by the importer. Concerned group A. Certificate of Origin. Customs declaration Catalogue/drawing. printed on green paper in the Imported Bond Department. the Bonder is required to present an ex-bond bill of entry. which is in force on t1}e date of presentation. b. If the textiles items are imported. assessed. which shapes the policy and decides the functions of the customs formalities in the country. d. {Bond} and registered in the Bond Department and WR number is impressed on all copies of B. agent. Freight and insurance amount certificate if the import is on FOB terms A declaration from importer that he has not paid nay commission to agents in India. in a prescribed form in the’ Import Department of Customs House. by filing a Bill of Entry. The goods are thereafter examined by the Dock Appraising staff on the basis of orders of the scrutinising Appraiser on Duplicate copy. the persons in charge of a conveyance carrying imported goods should hand over. The import manifest is a complete list of all items the conveyance carries on board..C..Textile Commissioners endorsement or certificate.As per the section 30 of the Customs Act. Clearance of Warehoused of Goods for Home Consumption Under Ex-Bonds B/E In order to clear the dutiable imported goods from warehouse. Warehousing the Goods. A copy of Letter of Credit. in terms of the provisions of the Customs Act 1962.A.675. Original Bill of Lading and its non-negotiable copy. ‘ ‘Weight spe9ifications. It is not obligatory for the importer to take clearance of the entire consignment which was warehoused under a particular Into Bond BIE while filing an Ex-bond Bill of Entry. appraised. Clearance of Goods . there independent Boards of Revenue :a.1 . on the basis of declared and accepted particulars. date of presentation of Bill of Entry is an important date as the rate of duty applicable to the imported goods will be the rate. including those to be transshipped and those to be carried to the subsequent ports of call. Presentation of Bill of Entry for Appraisal :. If the second hand machinery is imported-chartered Engineer’s Certificate. the same should be presented to the Appraising Counters along with the following necessary documents :• • • • • • • • • • • • • EXPOR T IMPORT PROCEDURE AND DOCUMENTATION Import licence. for verification of the particulars furnished on the BIE (made on the basis of Into Bond B/E). Central Board of Direct Taxes (for Income Tax.After the Bill of Entry is noted in the import department.. If the above documents furnished by the importer are found to be adequate for acceptance of the declared value and determination of classification and acceptance of ITC Licence. and calculation of import duty thereafter hand over the assessed BIE to the importers clearing agents for payment of duty and taking delivery of the goods after the usual counter check. The importer after getting the Ex-Bond BIE registered in the Import Bond Department submits it to Appraising Department alongwith Triplicate copy of related Into Bond BIE and invoice/ packing list. Delivery order issued by Shipping company or its. The procedure for customs clearance in general for goods imported .jf necessary. clearance of goods is allowed by the appraiser. the same are allowed to be physically warehoused by the Dock Appraiser under the escort of a Preventive Officer.The imported goods can be warehoused at the port of shipment without the payment 11. and if found in order.After payment of duty (the original copy of Bill of Entry is retained in the Customs House) the importer should obtain the duplicate copy of Bill of Entry on which order for examination of the goods is given by Customs and get the goods examined. Entry in the Import Department of Customs House :. Custom Clearance Procedure for Imported Goods Under the Ministry of Finance (Department of Revenue). On receipt of information regarding the arrival of the goods. The. while the others are handed over to importers I clearing agent. If the description of goods. 1962.E. The concerned Group Appraiser classifies and reassesses. within 24 hours of the arrival of the conveyance. e. Exporter invoice. is found to be correct.in India is as follows : a. Even Exbond Bills of Entry for part clearance can be submitted.

e. a. The set normally contains bill of exchange. he has to present an Ex-bond bill of entry which is green in colour. iii. It is of two types :• • Documents against Payment (Sight Drafts) :. yellow in colour): Where an importer wants to shift goods to a warehouse and thereafter gets his goods cleared in small lots. triplicate is owner’s copy and the fourth copy is for the purpose of foreign exchange to be submitted to bank. etc. For the retirement of documents. Appointment of C & F Agent :. it is advisable to hire the services of C&F agents who are well versed with such formalities.1 .the relevant documents to the importer only against payment. the procedure for clearance of imported goods is very lengthy. the overseas. 2. The shipment advice contains invoice number. The Bill of Entry form has been standardised by the Central Board of Excise and Customs. c.In India.In case of usance draft. which may be extended upto a period one year. Let us now discuss the import documents.Once an importer is allowed to remit foreign exchange out of the country he has an obligation to import the permitted goods of equivalent value in the country. Import Follow-up . d. packing list. drums etc.After receipt of import documents from the exporter’s bank. g.675. Acceptance of the Bill of Exchange :. of reasonable value ship’s stores in small quantities for personal use b. Therefore. empty bottles. airways bill number and date. if applicable. the drawer instructs the bank to hand over . Four copies of bill of entry are submitted. Original and duplicate for customer departments. d. the port of export.Bill of Exchange accompanied by the above documents is known as the Documentary Bill of Exchange. the importer is required to present what is known as ‘Exbond Bill of Entry’. The warehoused goods can be cleared in one or more installments. Retirement of Import Documents :. Initially the facility is granted for 3 months. bill of lading.of duty by presenting a “Bill of Entry for Warehousing” to the Bonds Department along with a bond for twice the amount of duty payable. name of the vessel with date. time consuming and involves lots of legal formalities. e. cargo by sailing vessels from customs ports when landed at open bundles only EXPOR T IMPORT PROCEDURE AND DOCUMENTATION For imports through the medium of post there is no bill of entry. A letter authorising his bank to debit the equivalent Indian rupees to the value of documents including bank charges. commercial invoice. If no goods or goods for lesser values are imported. 1. kennels of cargos containing live animals or birds unserviceable stores. e. the importer is required to submit the following documents to his bank :a. marine insurance policy. Loading of Goods and Receipt of Shipment Advice :On loading of goods the overseas supplier dispatches the shipment advice to the importer informing him about the shipment of goods..’ b. The importer should also scrutinise the documents and ensure that there are no discrepancies. it would lead to leakage of foreign exchange. bill of lading. he has to present the Bill of entry for home consumption. 40' supplier prepares the necessary documents as per the terms of contract’ and letter of credit and hands them over to his bank for their onward negotiation< to importer in the manner as specified in the L/C. All goods discharged from a vessel. Bill of Entry is not required in the following cases: passengers baggage favour parcels mail box and post parcels boxes. b.In case of sight draft. The IEC Number is obtained from the Regional Licensing Authority. dunnage wood. Importer Exporter Code (IEC) Number: No person can import goods without obtaining an Importer-Exporter Code (lEC) Number unless he has been specifically exempted. You have already learnt the procedure of obtaining IEC Number in Unit . the drawer instructs the bank to hand over the relevant documents to the importer against his ‘acceptance’ of the bill of exchange. Bill of entry for warehousing (into bond. Reason may be that he is unable to pay duty leviable on all goods at one instance or may be because of storage problem. Inste