Unit – V

Export and Import Procedures and Documents

Export Trade:
Exports are explained as the goods and services manufactured in one country and acquired by
citizens of another country. The export of good or service can be anything. This trade can be
done through shipping, e-mail, transmitted in private luggage on a plane. Basically, if the
product is manufactured domestically and traded in a foreign country, it is known as an
export.
In International trade, exports are one of the components. The other component is imported
which means the goods and services purchased by a country’s citizens that are manufactured
in a foreign country. Both the export and import combined contribute to the country’s trade
balance. Whenever the country’s export is more than the import, it is called a trade surplus.
However, when the import is more than the export, it is known as a trade deficit.

The procedure of Export Trade

(1) Trade Enquiry and
Sending Quotations
 The international buyer who wishes to buy the goods from the other
country sends an inquiry relating to price, desired quality, terms, and
conditions for the export of goods which is known as Trade inquiry.
 The exporter sends a reply to the inquiry in the form of ‘Quotation’.
 The quotation is also known as ‘Proforma Invoice’ which contains
information about the selling price, quantity, quality, mode of
delivery, etc.

(2) Receipt of Order or  After the receipt of the ‘Quotation’, if the prospective buyer finds the
Indent information suitable to him, he places the ‘Order/Indent’ for the
import of goods.

(3) Assessing the
Creditworthiness
 Before proceeding further, the exporter wants to satisfy him
regarding the payment of goods.
 For this, he demands a Letter of Credit (L/C) from the importer.
 This L/C is issued by importer’s bank in favour of the exporter’s
bank.
 Through the (L/C), the bank gives assurance to the exporter of
accepting the bill of exchange of a certain amount.
 If required, the exporter can ask for advance payment also from the
importer

(4) Obtaining Export
Licence & Apply Pre-
shipment Finance and
 After satisfying himself about the payment, the exporter has to get an
export license.
 For receiving the export license, he has to apply to the office of the
controller of imports and exports.
 Along with the application, he has to deposit a certain fee also.
 The Controller of Imports and Exports checks the application
 thoroughly and after having satisfied himself, issues an export license
to the exporter.
 The exporter can apply for a Pre Shipment Finance on the basis of
Confirmed Indent, Letter of Credit and Export License.

(5) Procurement or  Exporting firm has to either procure ready-made goods from the
Production of Goods market or procure raw materials and start producing the goods
according to the specification of the importer.

(6) Obtain Inspection  An exporter must approach a Govt. Authorized Agency for Quality
Certificate and Excise Check and Inspection of Goods meant for Exports and obtains an
Clearance Inspection Certificate.
 After Inspection, The exporter has to apply to the Excise
Commissioner to obtain the excise clearance from the excise duty.
The exporter needs to check if he is covered under the duty drawback
scheme.

(7) Obtaining  This certificate certifies about the origin of the country in which the
Certificate of Origin goods are produced and exported.

(8) Packaging,  The products are correctly prepared and labelled with necessary
Forwarding, and details (Prepare PACKING List) such as:
Insurance
 Title and address of the importer
 Net and Gross weight
 Port of destination and cargo
 Country of origin
 Road / Railway Receipt
 The exporter must ensure the Goods meant for Exports and
obtain a valid Insurance Policy (in case of sea Transport –
Marine Insurance Policy is required)

(9) Custom Clearance  The goods can be loaded on the ship after the customs duty has been
paid.

(10) Obtaining Mate’s  Then the products are boarded on the ship. The captain or the mate of
Receipt the ship delivers the mate’s receipt to the port superintendent.

(11) Payment of  After the freight receipt, the freight company delivers a bill of lading.
Freight and Issuance of  Bill of lading is a document which works as proof that the sailing
Bill of Lading company has received the products for shipping to the assigned
destination.

(12) Preparation of  After shipping the goods, the exporter prepares a receipt of the
Invoice transmitted goods.
  The invoice is mentioned with the number of goods shipped and the
expense to be cleared by the importer.

(13) Securing Payment
 Once the shipment is done, the exporter notifies the importer about
the consignment.
 The importer requires different documents to declare the ownership
of goods on reaching the destination and making them customs
cleared, such as :

 Verified copy of the invoice

 Invoice of lading
 Packing list
 Insurance policy
 Certificate of origin
 Letter of credit

Import Procedure:
Import procedure means all the steps involved in purchase of goods from any foreign
country. The procedural steps involved in import trade differ from country to country in
respect of their import policy, statutory requirements. In majority of the countries import
trade is being controlled by the government. 
The objective of empowering the government in the import trade is to keep a strict restriction
policy in regards of foreign exchange, protection of Indigenous industries etc. For importing
goods, a specified and regulated procedure is to be followed. The procedure is summed into
quick steps as below: 

Import Process

1. Obtain IEC
Foremostly a business must first obtain an Import Export Code (IEC) number from the
DGFT. This is a pan-based registration of traders with a lifetime validity which is required
for clearing customs, the IEC registration takes about 10-15days. 
2. Ensure Legal Compliance with Different Trade Laws 
After IEC is allotted, a business entity may import goods in compliance with Section 11 of
the Customs Act 1962, Foreign Trade Act 1992, and Foreign Trade Policy.
3. Procure Import Licenses 
An import license can be either a general license or specific license. In case of general
license, the goods can be imported from any country while in case of specific license, goods
are to be imported from specific countries only.
4. File the Bill of Entry and All Other Documents
After acquiring the import license, the importers are required to furnish import declarations in
the Bill of entry with their PAN based BIN to complete customs clearing formalities.
5. Determine Import Duty Rate
Along with the goods-specific duties like safeguard duty, anti-dumping duty and social
welfare surcharge, India levies customs duty on imported goods as specified in the first
schedule of Customs Tariff Act 1975.
While processing the importing procedures, the owner of the company has to make sure
about the legalities and the compliances related to the import of goods and services from
foreign nations.

Must-have Shipping Documents for Exports

1. Bill of Lading
The most important document in the shipping process for exporters. A bill of lading
(lading is the act of putting cargo on a ship) is a legal document that must be signed by
the exporter, the shipping line and the importer. For smooth transportation of goods from
origin to destination, the exporter must obtain a correct and complete bill of lading from
the shipping line/freight forwarder and send it to the importer. This bill includes details
such as:

 Description, quantity, weight of goods 

 Name and address of recipient
 Terms of sale

To know more about the bill of lading, read our detailed blog here. 

2. Commercial Invoice cum Packing List

A commercial invoice is a contract of sale issued by the exporter to the importer. It helps
customs determine the value of the goods to assess the duties and taxes due on them. A
commercial invoice carries details such as:

 Name, address of seller (exporter)

 Name, address of buyer (importer)
 Value, quantity of goods

A packing list is an itemised list with details of the goods. It helps facilitate their
examination and accurate tallying during clearance. It contains:

 Description of the goods

 Quantity and weight (gross and net) of the goods
 Number of packages
 Type of packaging (pallet, box, crate, drum, etc)
  Marks and numbers (symbols/numbers placed on each piece of cargo in a
shipment to identify them)
 Carrier’s (ship) name
 Date of export
 Export licence number
 Letter of credit number

Before the rules were changed, the commercial invoice and packing list were separate
documents with identical data fields.     

3. Shipping Bill/Bill of Export

A shipping bill or bill of export is a document submitted by the exporter in the form of
an application to obtain clearance from customs. It informs customs of whether the
exporter has availed of government incentives, such as:

 Exemptions/rebates/refunds on various taxes, duties 

 Benefits under various government export schemes

Read our detailed list of benefits under India’s export promotion schemes here 

If the goods are a re-export of previously imported goods, then these details must also be
included.

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Must-have Shipping Documents for Imports

1. Bill of Lading
This is the most important document not only for exporters but for importers too. The
exporter must share the bill of lading with the importer, who cannot receive the goods at
his end without it.

2. Commercial Invoice cum Packing List

Again, the importer needs this document just as much as the exporter. This is because the
commercial invoice cum packing list comes into play at the all-important time of
customs clearance.

3. Bill of Entry 
The third must-have document for importers is a bill of entry. It is a declaration by the
importer on the basis of which customs authorities at the port of entry inspect and clear
the goods. The information in this bill is tallied with the sales invoice or insurance
policy. The information includes:

 Type of cargo
  Value of the goods
 Quantity of the goods

That was a quick rundown of the three documents exporters and importers absolutely
need to ship their goods. That does not mean these are the only documents they require.
Shipping is all about paperwork. For their goods to get the go-ahead from customs,
importers and exporters might be required to submit additional supporting documents,
which are dependent on various factors and vary from case to case.

LETTER OF CREDIT CONCEPT:

A letter of credit is a bank undertaking of payment separate from the sales or other contracts
on which it is based. It is a way of reducing the payment risks associated with the movement
of goods.
Expressed more fully, it is a written undertaking by a bank (issuing bank) given to the seller
(beneficiary) at the request, and following the buyer’s (applicant) instructions to effect
payment — that is by making a payment, or by accepting or negotiating bills of exchange
(drafts) — up to a stated amount, against stipulated documents and within a prescribed time
limit.
Features of Letter of Credit

 Letter of credit is issued against collateral that may include buyer’s fixed deposit and
bank deposit, etc. as security
 Certain fees is charged by the bank depending on the type of letter of credit
 Guidelines are issued by International Chambers of Commerce (ICC) for any form of
Letter of Credit
 Correctness of Letter of Credit: As only documents are exchanged and no good and
services are involved in this process. Therefore, mentioned details in letter should be
correct that include name of seller, date, amount, product name and quantity, etc.
 Banks will deny the payment, if they find any slightest mistake in the buyer’s name,
product name, shipping date, etc.
 As all parties deals in documents only and not goods and services, so the payment will
not depend on the defects in goods and services, if any

Types of Letter of Credit in India

1. Credit on Sight

In this type of credit, entrepreneur can present a bill of exchange to lender with a sight letter
and can take the funds instantly on the basis of letter of sight. Sight letter of credit is
considered to be the most instant letter of credit that can be availed immediately.
2. Time Credit

Bill of exchange which is paid after agreed time period between the lender and the borrower
is known to be time credit. Certain time period is involved in this type of credit. Letter of
credit defining time credit allows borrower with some days to repay the amount, only after
receiving the goods.

3. Standby Letter of Credit (SBLC)

Standby Letter of Credit (SBLC) is a credit mechanism in which importer can get foreign
currency funds internationally by providing the issuance of SBLC from domestic bank that
guarannatees payment to the international bank, if the borrower fails to repay the amount
before on the due date.

4. Revocable Credit

Revocable credit is a type of letter of credit in which the terms and conditions of this type of
LC can be amended or cancelled by the issuing bank. It is not important for the issuing bank
to tell beneficiaries regarding any change in the letter of credit.

5. Irrevocable Credit

Irrevocable Credit is a type of LC in which the terms and conditions cannot be amended or
cancelled by the issuing bank. The bank has to obey the directions or commitments
mentioned in the letter of credit.

6. Transferable Credit

Transferable credit, as the name suggests is a type of LC in which the beneficiary can transfer
his/her rights to third parties. The terms and conditions may differ as per the trade and
industry.