480

International Business
INTRODUCTION
The main activity of international' marketing is the export-import procedure. This proced
involves the actual and operational procedure of export and import trade. It also inval
documentation, procedures, rules and regulations imposed by both the exporting and importi
countries. These procedures include excise clearance, foreign exchange, etc. porting
These procedures involve a number of documents and copies to be submitted to a number of
government departments. Thus, it is a cumbersome process. Hence, the Government of Indi
reduced the number of documents and the number of copies to be submitted by restructuring the
the
documents. We shall, first discuss the export procedures.

EXPORT PROCEDURES
Export procedures involve several activities. These activities are classified into five stages
viz.,
(i) Preliminaries
(ii) Offer and receipt of confirmed orders
(ii) Production and clearance of the products for exports
(iv) Shipment
(v) Negotiation of documents and realisation of export proceeds, and
(vi) Obtaining various export incentives.

PRELIMINARIEs
Importer-Exporter Code Number (IEC Number): Individuals and business firms intending
to export and/or import goods and/or services should
obtain an Importer-Exporter Number
from the regional licensing authorities, unless
exempted by DGFT. This number mentioned
is be shown in documents.
Membership in Certain Bodies: After obtaining the IEC number, the and
importers
may obtain membership in certain bodies like Export Promotion exportersCouncils, India Trade
Promotion Organisation, etc. Membership in these organisations,
regarding information and documentation.
help the exporter and importer
Registration: The exporter/importer have to register themselves with the Export Promotion
Councils (EPC), Sales tax authorities, etc.

ii) INQUIRY, OFFER AND RECEIPT OF CONFIRMED ORDER

Inquiry is the Inquiry is the request made by a prospective importer regarding his wish to import
request made by
goods. Offer is a proposal submitted by an exporter expressing his intention to certain
a prospective export-specifi
goods at a specific price with specific terms and conditions. Exporter usually makes an offer in
importer
regarding his the form of a 'Proforma Invoice'.
wish to import The invoice includes the
certain g0ods.
proforma following items:
Name of the Buyer: The complete name and address of the
buyer/importer.
Description of Goods: A brief description of
goods indicating technical, physical and chemica
features. If necessary, a detailed description is
provided.
Price: Unit wise and total price of the goods in internationally accepted currencies or mutual
agreed currencies. t should also coverthe quantity discounts and
cash discounts bon
unit-wise and total. The price indicated in the invoice should be
internationally accepted form. f.o.b., c&f, c.i.f. or in o
 481
areign Trade Procedures

Conditions of Sale:
Conditions of sale should be incorporated in detail.
them are: mporta
(i) Validity: The period for which the invoice is valid. The
ay C1Ore the validity period. Buyer can stipulate the validity period in case o
importer can acc
tenders
(ii) Escalation Clause: The prices of the products mav increase before the delivery perIO
due to increase in the cost of inputs and thus, the cost of production. Theretore,
exporter may include an escalation clause for escalation of price.
Gi) Delivery Schedule: A realistic delivery schedule should be indicated. Based on the pre
mode, the exporter has to indicate the delivery schedule. In case of c.i.f. quotationis, u
goods have to be delivered to the port of destination.
snould
(iv) Inspection: The authority who will conduct inspection of goods (if necessary)
also be indicated.
in case or
to deliver the goods
(v) Force Majeure Clause: The exporter may sometimes fail
etc. Therefore, the exporter
uncontrollable situations like war, riots, natural calamities,
clause in order to get rescue in such conditions.
indicates the force majeure included.
etc., should be
terms like letter of credit, bill of exchange,
Payment Terms: Payment
nature should also be included:
»Other Obligations: Other obligations of the following
by the exporter.
Post-sales service to be provided

.Providing spare parts. equipment/technology.

Warranty/guarantee for the the
order confirmed to the exporter by signing
sends the the confirmed
Order: The buyer the importer becomes
»Confirmed
The signed invoice by
of the invoice.
duplicate copy
from the authorities concerned,
order. the export license
has to obtain
The exporter
License: license.
Export require a
be exported finance to undertake the
if the items to does not
have the required

Procuring
Finance: If the exporter
finance
different s o u r c e s .
from
obtain
he/she should
exports,
GOODS
PRODUCTION/PROCUREMENT OF
produce the goods exactly
as
rder should
orde
a
confirmed
facilities, it has to The exporting
(i) after
obtaining
does not have production house after
house house
The exporting
If the
exporting
obtaining a
invoice.
specified in the others. for packing confirmed order
from the exporter should arrange should produce
the products a r e procured, Bureau of
procure goods various bodies. The
After the prescribed by the goods
s t a n d ards British
Marking: ard
the
king and
» Packi for certain items. Similarly, exactly as
i n t e r n a t i o n a l

the standards
detailed
as per in the USA provide
packing specified in the
and marking prescribed Encyclopaedia published
has instructions. The
Internationa invoice.
Standards
Exporters provide packing
Indian
Code and the also pro instructions.
prescribed packing
companies
Packing
Standard Shipping A . s s o c i a t i o n
has also
i n s t r u c t i o n s .

tion while packing

the goods.
packi Coordina
instructions ns The exporter has
these
to arrange for quality
The exporter has
Cargo-Handling

follow to arrange for

has to Inspection
as indicated in quality control
The expo
xporter P r e - s h i p m e n t

ensure the quality of products

and in and pre-shipment
Control
inspection
2uality inspection in
the quality control
body conducts
p r e - s h i p m e n t

and order to ensure

control appropriate
or
other
oth
under thee
the Compulsory Quality Control the quality of
the invoice. included under
included
C o u n c i l

I n s p e c t i o n exported
exported
are
a re
with the provisions
of the Export (Quality products as
to be rdance
a c c o r d a n c e

indicated in the
The Expo
port
goods in
ifthe
Scheme

nspection, Inspection
invoice.
1963.
P r e - s h i p m e n t

Act,
dnd and
Inspection)

Control
 -482

Excise Duty Rebates:

International Business
Government has exempted the goods meant f1or exports
imposition of excise
duty. Exporters from the
rebate of excise
can export the excisable goods either under
duty or in bond without of claim (ar
Central Excise Rules of 1944.payment duty.
The rebate is
12 of the provided under Rule
rebate after the excise Exporter has to submit the following
forms for
duty is paid.
.Gate Pass, GP-1,
AR-4 form.
The next
stage is the shipment stage. Now, we shall discuss the shipment
stage.
(iv) SHIPMENT
of the
Transporting the goods by ship is cheaper compared to that by air. In
products create hurdles for addition, physical size
transporting by air.
Regarding shipment, the exporter has to contact
the confirmed order. Sometimes shipping companies for
space, after getting
information of all shipping getting the space in ships is casy
through agents as they have
The shipping companies throughout the world.
The
company may shipping company may issue shipping advice or
issue shipping requirement of the exporter. In case of shipping order, depending upon the
advice or accept the cargo as the shipping advice shipping advice, the shipping company has no
is only providing information of obligation to
shipping order time of issue of the
acceptance. But in case of shipping order, the shipping availability of space at the
depending upon
the requirement
to accept the
cargo. company has the obligation
of the exporter. Customs Clearance: The
exporter has to get custom clearance of the
are loaded on the
ship. Customs authorities accord their formal goods before, they
complete set of
shipping documents, copies of shipping bill, after approval scrutinising
etc. These documents include:
.Proforma Invoice in original and
GR-I
duplicate
Form (in duplicate)
AR-4 Form (in original and
duplicate)
Export License (if required)
Letter of Credit covering the
export order, export contract or order in
.Certificate of inspection (where original
Form
necessary)
of Declaration (in duplicate)
Shipping Bill (five copies)
Quality Control Inspection Certificate
.Original Contract wherever available
(if required)
Packing List
Letter of Registration Certificate
(if applicable).
»GR-I Form: This form is an
India. The exporter has to
exchange control document required by the Reserve
realise the proceeds of the Bank of
the date of the
shipment from India. This form is not goods exported within 180 from days
and Bhutan. necessary in case of export to Nepal
Shipping Bill: This is an exchange document
permission for shipment. This bill contains the needed by the customs officials for granting
Name of the Exporter/shipper following information.
including his address and IEC number.
.Description and quantity of goods to be shipped
.Value of goods
.Number of packages and markings on them
Amount of drawback claimed
(drawback duty is allowed when the goods
in India) are produced
 4 8 3 -

Trade Procedures
Forelgn Tra

Port of destination
Names of the ship and its agent.
officials.
Five
copies of the shipping bill are to be provided to the custom
Export
license

of goods.
icense: Export license is necessary for certain
Export Li ategories
Trade (JDGFT).
obtained from the Joint Director General of Foreigt
be availabie,
shipping order is latter's

»Carting
Order: Once the goods are ready for export and the Port Trust
for the
o f the Port
has to approach the Superintendent of the concerned of
exporter The
Superintendent

to move the goods physically inside the port area. the shipping
mission
permis
after verifying order
es the order for moving the goods into
Trust issues po a r e a
into the port carting
rd EOoas ntendent is
called the
bill and shipping
This order
order. This given by the Superinte
moves the goods into tne
po *
After getting
the carting order, the exporter physically checking
authorities after
»Customs Examination of Cargo at Docks: The customs
The exporter
can arrange to
the products to be exported at the docks. for this Taciny
documents, check warehouse. Applications
the products in his factory or
the physical check of after checkg
to the Assistant Collector of Customs.
The Customs Appraiser
can be made are n o r a i y
Such packages
will seal the packages, after his satisfaction.
the consignment, are doubtrul.
unless the bonafides of the exporter
not checked again at the port,
satisfied with the
o n c e they are
customs authorities accord formal approval for export, authorities, the
The from the c u s t o m s
and documents. After obtaining the approval
products a ship.
for loading the cargo on
exporter can make the arrangements for
the exporter arranges
from the customs officials,
L e t Ship: After getting the approval forwarding agent
Before loading takes place, the exporter's
loading the products on the ship. of the customs department.
This
the permission from the Preventive Officer to
has to get order authorises the shipping company
Let ship order'. Let ship
permission is called the are to be loaded on the ship
in the presence
board the vessel. The goods
accept the cargo on order.
of customs officials after obtaining
let ship
loaded on the ship, the captain ship furnishes a
of the
Mate's Receipt: After the goods
are

This document is called "Mate's Receipt', which certifies

document to the Port Superintendent. the details of the products, condition of
provides
the loading of the cargo. This document
etc.
the products at the time of loading,
the "Mate's Receipt"., from the
Trust Authorities after receiving
Port Trust Dues: The Port to the exporter.
the "bill of lading'
captain of the ship, issues
Bill of Lading: The Exporter's forwarding agent collects the Mate's Receipt' and submits
the same to the authorities and in turn cOlleets tne Dill or lading from the port authorities.

The exporter's forwarding agent proviaes tne rollowing documents to the exporter at this

final stage. They are:

attested by the customs
A copy of the invoice duly
Drawback copy of the shipping bill
of the shipping bill
Export promotion copy
Full set of 'clean on board' bill or lading tOgetner with the non-negotiable copies

The original letter of the credit

Customer's order or contract

AR-4 Form.
Duplicate copy of the
Shipping by Other Modes of Transport
through ship. Other modes of
All the goods are not transported transport like air and
also used for xporting the goods. land are
 484 -
International Business
w
ww
Shipping by Air: Mostly perishable goods, goods of less weight and goods which are
needed by the importer urgently are transported by air.
Shipping bysPost: Certain goods of less weight are exported by post. The emergence of
e-commerce' increased the export trade by post. Pos tal Notice No. 13 dated 3rd December
1973 regulates the export trade by post.
Shipping by Land: Export of the excisable goods to the nearby countries is similar to th
one laid down for export by sea. AR-4 Form is different for export by land. The excisable
goods are presented to the Frontier Customs Officer/Border Examiner along with Form 4A.
Ater the goods are exported, the exporter is interested in getting payment for the exports
made. We shall discuss the payment procedure.
(v) DOCUMENTS
The exporter submits the relevant documents to his banker for getting the payment for the
goods exported. Submission of relevant documents to the bank and the process of getting the
payment from the bank is called "Negotiating the Documents", through the bank. These documents
are called Negotiable Set of Documents. This set normally includes:
Bill of Lading
Commercial Invoice together with the packing slip and bill of exchange
Certificate of Origin
GR-I Form (in duplicate)
Marine Insurance Policy (in duplicate)
Letter of Credit (in original).
The letter of credit is opened by the importer through his bank authorities drawing a bill of
exchange. Payment will be made against this bill of exchange by the importer bank. The exporters
bank realises the export proceeds and pays to the exporter.
Aligned Documentation System: Government of India appointed a committee to recommend
on the documentation regarding export trade. Government of India accepted the
recommendations of the committee and introduced standardised documents with effect from
1 October, 1981, which is known as the Aligned Documentation System'. This system is
based on the UN layout key. Standardised documents for Indian exporters based on the
Aligned Documentation System include:
Invoice
.Exchange Control Declaration (GR) Form
.Shipping Bill (Dock Challan/Duty Drawback and Port Trust Copy)
Bill of Lading.
(vi) EXPORT INCENTIVES
Export incentives include,
Duty Drawback, and
.Excise Duty Refund.
Duty Drawback: Exporter is eligible to get back the excise duty and central excise paid on
all raw materials, components and consumables used in the production of goods exported
under this schemne.
Excise Duty Refund: Exporter is eligible for refund ofthe excise duty. He/she can recover
it after export, if he paid at the beginning. He/she also can execute a bond with the exCise
authorities without making the payment.
Having discussed the export procedure, we now discuss the import procedure.
 - 485
Forelgn Trade Procedures

IMPORT PROCEDURES
the
or sale
Importing reters toprocess
country. Import
Im
the purchase of
consists
foreign products for the consumption
home of five stages, viz.,
Determining the market demand and purchase motivation
Locating and negotiating with the sources of supply
Securing physical distribution ntries
am0ng
Preparing documentation and customs processing to facilitate movement
and organisations
Developing a plan for resale or consumption. erent
countries.
goods and services from
the foreign
Different kinds of institutions import
kinds of importers include:
Private industrialists
Government agencies
Facilitating Agencies, and

End-users.
Procedures
Stages in Import include:
procedure
Stages in import
(i) Preliminaries

and Placing
the Indent
i) Enquiring Exchange
the Foreign
(ii) Obtaining
for Payment the Delivery ofGoods.
(iv) Arranging Duties and taking
Customs detail.
(v)Payment of procedure in
of import
stages
we
discuss these
Now, Code
and Importer-exporter
has to
tain a license
obtai.
(I) PRELIMINARIES

individual
become an established importer
firm or an he firm can
Imports. The licenses are
The importing and
prescribed period.
The import
of Exports
Controller
during the
the
from intends to
import
Number
goods it
time.
the at a
oy importing of o n e year
period
issued for a THE
INDENT
usually PLACING
to with various exporte enquire
AND importer has
at this stage asks the
the
to import. Importer
license,
ENQUIRING
import would like
the he indent directly to Indent may be
the goods, invoice and send the
After obtaining accept the indent open or closed.
regarding may i n t e r m e d i a r i e s called
importers speclalised
countries
The Open indent does
exporting invoice. indent througn
the send the
send not specify the
exporter to send the v may
they
may
and other details of price and other
not specify the price
Otherwise,

the export
orter.
indent does
inde closed indent details of the
Open On the other hand, the
houses. closed.
of the exporter. indents goods. The closed
insurance, etc. The
or c
shipping mode,
d i s c r e t i o n

be o p e n
Indent may them to
the shipping in indent specifies
leaves
packing, indent'. Indent houses help
the importers the brand, price,
number,
the goods and
brand,
price,
is
called
firmatory
'Confi
maintain close
links with the foreign
firms. As such,
number, packing,
the either
as they the importers order for the goods
Specifies price
exact shipping mode,
the
erc houses. Thus,
Thi
incorporating discounts,
of
indent insurance, etc.
negotiating
for price, services

use
the
ome imponporters

OBTAINING
indent
FOREIGN ho EXCHANGE

through from
lirectly or
the required foreign exchange
has to procure
indent,
indent, India. He/she has to produce the import
sending
the
the
Re
R es
seerrv e
Bank of In
er,
after off the
ent o
The importer, D e p a r t m e n t

Control

the Exchange
ge
 International Business

needed to pay for the

which is
486 exchange
foreign
forms for securing
the prescribed availability
and application,
icense of the
import of goods. based on the strength
Bank releases the
foreign exchange government.
Reserve of the
and foreign exchange policy
of foreign exchange

FOR
PAYMENT
after obtaining
the foreign
ARRANGEMENT
for imports
TV) arrangements
for paying
The importer
has to make

exchange.
commercial
transactions.
Documents international
the centre for their bankers to
letter of credit is of goods, request
Letterof Credit: The delivery the goods
for imports before taking
Letter of credit
as long as
indicates that the Importers instead of paying will pay to the exporter
bank will pay the that indicates that
the baker
conditions. Thus,
importers banks
issue a letter of credit instructions and of
will pay the value
value of imports are shippedin accordance with specified that the bank
indicates
to the exporter. Letter of credit when they a r e
satisfied
iSSue letter of credit to the importers. credit to the importers
letter of
Banks issue or collateral security.
imports to the exporter.
issue letter of credit
against a deposit. a letter
with their
c r e d i t w o r t h i n e s s . Banks bank after issuing
the issue of letter of credit. Importer's that it has
for tells the exporter
Banks charge commission
bank. Then exporter's bank
of credit, it sends it to
the exporter's
the goods. Then the exporter
ships the goods.
credit and he or she can ship documents to
received a letter of with necessary
to the value of exports along
The exporter submits a draft equal bank along with the
bank forwards the same to the importer's
his/her bank. The exporter's honour the
and letter of credit. Then
the importer's bank will
documents submitted by exporter fulfilled. Exporter's bank
to the exporter's bank, if all the conditions are
draft and pay the money
the same to the exporter.
after receiving the money, pay
the documentary
he may request the exporter to forward
Documentary Bill: Alternatively, of the bill of
would be delivered to him either against acceptance
bill through his banker, which the importer either
Thus, the documents may be received by
exchange or against its payment.
of bill of exchange) or D/P (documents against
through D/A (documents against acceptance hands
bank after receiving the documents from the exporter bank,
payment). The importer's to the
over the documents to
the importer if it is D/A bill. The banker delivers the documents
the amount of the bill on maturity. Normally, indent houses
importer only when the latter pays
help the importer if he fails to pay the amount on maturity date of the bill..
Bill of Exchange/Draft: Bill of exchange or draft is an order written by an exporter
time.
instructing an importer or his/her agent to pay a specified amount. of money at a specified

Bill of Lading: Bill of lading is the third important instrument financing international trade
The shipping company or other common carrier company issues bill of lading to the exporter
indicating that the shipping/carrier company has received the goods as described in it. Bill of
document.
is receipt, contract and a
lading a a

As indicated in the letter of credit, the importer's bank receives all the documents from the
exporter's bank. Then the importer's bank provides the documents to the importer. After obtaining
the documents from the bank, the importer awaits the information of the ship carrying the
goods. He gets the information from the newspapers and the customs authorities. The importer
obtains the 'Endorsement for Delivery' on the back of 'Bill of Lading' from the shipping company
by paying for the freight, if the exporter does not pay it. Then the importer presents 'Port Trust
Dues Receipts' (two copies) and Bill of Entry to the Port Trust Office to obtain clearance
regarding dock dues.
Bill of entry certifies the fact that goods of specified quantity, value and description are
entering the country.
 4 8 7

Foreign Trade Procedures

ODS
PAYMENT OF CUSTOMS DUTIES AnD TAKING DELIVERY O be
The importer has to pay for the customs duties, if necessary.
based on the weight and size of the goods or based on the value of goods.
The customs duy
Thecu
ains
may also be paid under the 'PermanentDeposit System'. Under this system, thei t h
a running account with customs office and deposits money from time-to-tume w
to the duty
payable.
The importer then gets the delivery of goods.

FINANCING TECHNIQUES
Financing
S
with the basic techniques
Most of us know that domestic business agreements are concerned include:
like price, quantity and delivery date. But, international business agreements
are concernea wi Currency t o be
issues include:
trade. These
other issues, in addition to the issues involved in domestic used in t h e
international

»Currency to be used in the international business transactions. business

»Creditworthiness of the importer. transactions.

Acceptable methods of payment. Creditworthiness

of the importer.
Arranging Finance.
Acceptable
methods of
CURRENCY TO BE USED
transactions is an important payment.
Selecting currency for settling the international business
to be used . Arranging
to have his home currency or hard currency
issue in international finance. The exporter prefers country is Finance.
his home currency. If the currency of the importing
while the importer prefers to pay in UK pound, Japanese
in hard currencies like the US dollar,
weak, the exporter prefers the payment countries are invoiced in the US
of most of the developing
Yen and French Franc. The exports currencies.
to settle their transactions
in the US dollar or other hard
dollar. Some companies prefer transactions in
currencies are the choice
of the exporter for settling the
As such the hàrd countries struggle to earn hard
currencies in
the importers and
international business. Hence,
is interested to know the importer's
bills. Next, the exporter
order to meet their import
creditworthiness.
IMPORTER
CREDITwORTHINESS
OF THE
ot the goods and receives the money
first arranges for the shipment
The exporter normally ot risk involved in the payment of money by the
would be an amount
at a later stage. There business relations with the importer
either should have satisfactory
importer. Hence, the exporter an internationally reputed
send his creait rating done by
or the exporter may ask
the importer to
firm. India and such other organisations
the USA, Export-lmport Bank of
Export-Import Bank of
to the exporters y colecting a fee. The exporting firms which
provide credit rating information For example, one small US manufacturer
face serious problems.
do not demand for credit rating
new customer Africa and failed to get the
to a in
of USS 1,27,000
exported fan blades worth account to a collection agency.
over the
payment even by handing
creditworthinesS or ne mporter,
the exporter and importer should
After evaluating the the method of payment.
regarding
come to an understanding

METHODS OFPAYMENT
importer shouia agree
on a
particular type of payment, after
Both the exporter and The
of payment include:
methods
creditworthiness.
ne importer's
 488
International Business
Payment in advance .Open account
Documentary collection Letters of credit
.Credit cards .Counter-trade
Payment in Advance: Most of the exporters prefer the advance payment prior to shipmen
as it involves no risk. This method is most undesirable from the point of view of the importer
due to the involvement of heavy risk in getting the delivery of the goods as per the
order.
Open Account: Under open account, the importer first receives the goods and then arranges
for the payment. Hence, it is the safest form of payment from the point of view of the
importer. This form is undesirable and risky from the viewpoint of the exporter. This method
is more suitable when the
importer's creditworthiness is certified by an authorised agency or
when the exporter has well-established
long-term relation with the importer.
Documentary Collection: International financial institutions and banks have developed a
number of financial instruments due to the risks and
problems involved in advance payment
and open account. One of the important financial instruments is documentary collection.
Under this method, the commercial banks facilitate the
payment process. The exporter draws
up a document called a bill of exchange, in which payment is demanded from the importer at
a specified future date. There are two types of bills of exchange, viz.,
(a) Sight Bill of Exchange
(b) Time Bill of Exchange
(a) Sight Bill of Exchange requires payment immediately after the transfer of title of the
goods to the importer by the exporter. The importer's bank after receiving the bill of
lading and sight bill of exchange from the exporter's bank, asks the importer to
for the payment. The bank gives the bill of arrange
lading to the importer after the payment is
made by the importer. Figure 20.1
presents the transactions using a Sight Bill of
Exchange.

FIGURE 20.1 2
Exporter ships goods Exporter submits 3
Transactions EXPORTER-IMPORTER draft (bill of exchange), Exporter's bank
Using a Sight (Title not transferred until step transfers documents
packing list, and
6) to importer's bank
Bill of bill of lading
Exchange
4 6
5
Importer's bank Importer's bank
notifies importer that the
Payment
releases bill of lading.
documents have been received trans ferring title of
goods to importer
7 8
Payment Payment

EXPORTER'S BANK IMPORTER'S BANK

Source: Ricky W. Griftin and Michael W. Pustay, op.cit., p. 658.

(b) Time Bill of Exchange requires the importer to
arrange for the payment after sometime
(60 days or 90 days) receiving the possession of goods. The
on the bill of offer after
exchange
importer writes, "Accepted
obtaining the bill of
lading (i.e., after obtaining tn
title of goods). This document is called "Trade
enforceable by
Acceptance'. Trade acceptance is legal
the law of most of the countries. This is a
negotiable debt instrument.
Foreign Trade Procedures
- 489
The importer may not
documentary
also. As suchcollection.
keep
promise and fail to payto the exporter, under the up his
the banks Thus, there is the pa
Letters Credit: This
of developed
u another
involvement
s the involvement
another method of T
method of
of
of risk in this method of paymen
payment, i.e., Letters or

of payment. instrument iscarried paym

carrio out to avoid the risk involved in other methods
A letter of credit is
an
to pay upon instrument issued by a bank erein the bank promises the exporte
receiVing the wherein tne oa
pecified in the document. proof
spe that the exporter completed
This guarantees the all
formalities
payment 1s free from risk. The exporter regarding pang
he

importer and also after obtaining importer's

a
tnc bank does this work by
cou
a fee from

using a letter of credit. a security Figure 20.2

to this
effect. Figure presents the transactions
20.2 prese

2 3
FIGURE 20.2
Sales contract specifies
Importer applies Importer's bank Transactions
payment using to a local bank for informs exporter's bank Using L e t t e r
letter of credit letter of credit when letter of credit
of Credit
has been issued.
4
6
Exporters bank Exporter sends
advises or confirms Exporter ships goods documents to his bank
letter of credit
9
8 Amount due is
Documents sent Bank sends documents
paid for (bank
for review to importer
may extend credit)
10
Importer's bank Exporter
transmits funds receives

due to exporter payment

EXPORTER IMPORTER
IMPORTER'S BANK
EXPORTER'S BANK

another instrument, i.e., credit

is costly for the importer. Hence,
However, this instrument
card is developed. international business transactions by the
are used for small
C r e d i t Cards:
Credit cards customers. Various credit cards include:
and also by the
intermediaries like retailers
market Master Card.
Visa and
American Express, counter-trade.
is
of payment and services
The next method arrangement
to pay tor import of goods
an is goods-for-goods deal.
is
Counter-trade counter-trade

cash. Thus,
Counter-trade:

something
other than include: barter, counter purchase,
ind
with of
Types
counter-trade

agreements.
clcaring
C o u n t e r - t r a d e :

o f t s e t s and
Types of
switch trading, nercial banks to finance for internatior
C o m p e n s a t i o n trade, made the
commer

letter of credit to the exporter bank

trust
of
the form of issuing
the
absence is.
Banks: Thus, finance in
credit.
bank provides letter of
trade. Imp
mporter
while
discussing
rcial banks, other financial institutions
earlier addition
In to
them include ECGC and EXIM Ban
4s explained I n s t i t u t i o n s :

among
Financial important
Other The
trade.
i n t e r n a t i o n a l

finance for
for
IMPORT PROCEDURES SIMPLIFIED

economy
simnli
simplified he import procedure. The
liberalising
the economy
the
after 1992-97 are:
policy
of India, the
import
Government
as per
procedures

libe
o e r a l i s e d
 490
International Business
Only one form is required against seven forms required for import of various items in
the negative list.
mportlicense is not required for most of the items. In other cases, powers are delegated
to the regional licensing authorities.
mport licenses and customs clearance permits are valid for 12 months. It is 24 months
in the case of capital
goods.
Import licenses are granted for the import of raw material, consumables, etc., in the
negative list.
Imports through courier service are allowed up to a value of 5,000.
.Dealers of books may be
granted licenses.
Import of motor vehicles including tourist coaches and air-condition units is permitted.
h e import entitlement of any one licensing year can be carried forward either in full or
in part.

CE EXPORT PROMOTION
Introduction
Export business basically earns foreign exchange for the country in addition to providing
direct and indirect
employment to the domestic people. Further it generates economic
of the country. Therefore, many governments in the world promote the exports development
in order to
maximise the export earnings. Promotion
of exports includes producing products that arein
demand in other countries and market them in
foreign countries. In this process exporters need
guidance and assistance at different stages of the export effort. Government of India in order to
promote exports has set up several institutions and agencies whose main functions are to
the exporters. help

Institutional Infrastructure
Institutions
gather/collect Marketing domestically is relatively easy compared to selling in foreign countries as several
information environmental factors affect marketing globally. In view of the significance of exporting and its
necessary to
analyze the
complexity, governments across the globe established various institutions to help the exporters.
These institutions gather/collect information necessary to
foreign markets, analyse the foreign markets, foreign
foreign customers and market intelligence and make them available to the
exporters. In addition, exporter
customers and needs assistance in the process of exporting the goods. These institutions
render such assistance
market needed by the exporters. Further, the exporters need financial
intelligence and assistance, quality certification for
his products, risk coverage, promotion, packaging and other
make them such services. The specialised
available to the institutions established by the government as well as private individuals assist the exporters in
exporters. this regard. Exporters can be successful in their efforts of
markets only with the help and assistance
exporting the goods to various foreign
of such specialised institutions. Thus, in orderto
promote exports, create export culture and environment a number of governments established
export promotion organisations. Government of India also established various export
institutions and agencies in this regard. Government of India established a promotion
variety of institutions
STC is the chief to provide different kinds of service, information and assistance to
the exporters.
canalising agent
for export and Levels of Export Promotion Institutions in India
import of
There are six levels of institutions established for export promotion by the Government or
agricultural
commodities, India. The first level includes Department of Commerce under the Ministry of Commerce, which
fertilisers, and formulates various policies including for export trade. The second level in the
hierarchy is to help
textiles the exporters in solving the problems in the process of exports. The institutions at this level
deliberate with the industry and develop the solutions to the current as well as future
problems.
Foreign ade Procedure;
491
The next level
ne

on the organisations render

speciic
produc/ specific assistance to the exporters or groups of exporters
service organisations and
product group 4SS1Stance
issues and exp
are those that handle they provide services
exports in order to
problems.
xporters.he.h
to the expo level organisations
The fifth level
supplen the exporters' activities. Theorganisa
ions are the state
organisatior
t o supplement
Trading Corporation Limitedlevel organisations.
sIxtn
ev
and Mineral and Metal Importan ong these organisations State are

state Trading
Corporation of India Limited Trading Corporation.
State Trading (STC)
Corporation
agent for export and import of of India Ltd. (STC) is public sector unit. a it
of bulk items such as agricultural commodities, fertilisers and
sugar, wheat, edible oil
analis
te
STC's urnover in the year 1999 core siness STC.
and newsprint had been the of
canalised and declined by 33 per cent. This drop
government account imports of was
many.
gold by banks, STC's turnover for gold also
urea and wheat. With lower
marg",
exports irom tne declined. However, despite
country, STC was able a
engineering and construction materials andto increaseandits exports of items like coftee, suga tea,
Ine corporduon,
drugs chemicals.
however, suspended exports of extractions during the year
lack of parity between Indian and 1999, auc
international prices. Extraction, which is mainiy os
extractions, has always been export item of STC. oil seed extractions in 1998 contributed 1.
billion toSTC export turnover. Total exports of STC during 1999 thus stood at 2.2 billion as
compared to 3.39 billion in 1998. STC plans to enter into retail distribution by setting up a
departmental store along the lines of Apna Bazar, etc.

TEA TRADING CORPORATION OF INDIA (TTCIL)

Tea Trading Corporation of India Limited (TTCIL) is a wholly-owned subsidiary of State
Trading Corporation of India Limited. It promotes the exports of tea. However, it continued to
face financial problems. TTCIL launched a voluntary retirement scheme (VRS) 1999 and out of
the 427 employees 279 have taken VRS. In 1999 STC purchased 1,50,000 equity shares of
amounting to 28.20 million making STCL a
Spices Trading Corporation of India (STCIL) a Cabinet decision.
this wasdone in pursuance of
wholly-owned subsidiary of STC,
of India Limited
Mineral and Metals Trading Corporation
in Asia (with special
focus on international trading particularly
As amajor trading company
MMTCI aims at achieving sustainable and viable growth rate hv
in the field of bulk handling), profits through total satis faction of
excellence in all its activities, generating optimum
achieving employees and society.
customers, suppliers,
Snareholders, in the competitive global
leading International rading iouse operating and adequate returns.on
Obiective: To be a
irn:
particularly specialising
in duik
nananng activities,
trading environment,

capital employed. MMICI in promoting exports include:

functions of
Functions: The most or its
traditional product-1ines s,
leader in
market
To strive to become Jewellery.
Gems and
Gold,
Fertilisers and Agro-products
etals,
a major
exporter of
lo aim at
becoming
service
categories of
all categories
ice to all
customers with
of custor professionalism and
of services to all our customers
high quality quality
and
of goods
To render
provide
high efficient system within the company for settlement of
efficiency and to
s t r e a m l i n e d
and effic
a
To put in place
sructural faciliti
facilities to facilitate trade related activities.
Commercial disputes. of
i n f r a s t r u c t u r a l

development

To promote
ote
 -492
International Business
Role of MMTCI in Exports: Role of MMTCI in the promotion of exports includes:

MMIC Limited, India's first Super Star Trading House, continues to be the country's leader
unera exports for four decades now. As recognition of the above achievements during the
year 2002-03, MMTC was awarded the
Highest Export Award for export of mincrals once again
for the Twelfth Time in
a row. Supply of Iron Ore
lumps and Fines to the Steel Plant in Orissa
(NINL) promoted by MMTC would
has also taken an
provide further fillip to value addition to minerals. The company
initiative to link import of capital equipments required for
activities in the modernising mining
country to promote export of minerals. The import of the earthmoving cquipments
was linked to export of Iron Ore under EPCG scheme
Government Policy Making and Consultations
Government of India created a separate
the
Ministry for Commerce and Trade in order to cater to
needs of the business both domestic and
foreign. The Department of Commerce under the
Ministry of Commerce and caters to the needs of the external trade of India and all matters
with the same. connected
Ministry of Commerce and Trade formulates international trade policy, negotiation of
trade agreements, formulation
of country's export-import policy and their implementation. The
commercial sections in the embassies and
of Commerce.
high commissions are established to assist the Department

Various Bodies and Committees

Government of India established Board of Trade with
other important Ministries, Trade and representatives from Commerce and

The purpose of this board is to have

Industry Associations, and Export Service Organisations.
a regular consultation, monitoring and review of India's
foreign trade policies and operations.
Cabinet Committee on Exports is set up to ensureregular and effective monitoring of India's
foreign trade performance and related policies. Empowered Committee of Secretaries is set up
for speedier and quicker
decision-making. A grievances Cell has been set up to redress grievances
and review the suggestions received. Director General
of Foreign Trade (DGFT) is an
office of the Ministry of Commerce, to important
help the formulation of India's
Export-Import policy and
implementation thereof.
Director General, Commercial Intelligence & Statistics
entrusted with the task of compilation and (DGCI&S): DGCl&S has been
publication of data on India's Foreign Trade.
Ministry of Textiles: Ministry of Textiles is created in order to formulate
and export promotion of textile sector policies, regulation
including sericulture, jute and handicrafts, etc., along with
its other activities.

Indian Trade Promotion Organisation (1TPO)

IIPO organises
Trade Fairs and Indian Trade Promotion Organisation was set up
by merging Trade Development Authority
Exhibitions.) (TDA) and Trade Fair Authority of India by the Government. This
involves the Fairs and Exhibitions, (b) Involves the State Governments in organisation Organises Trade
State the activities
India's foreign trade, (c) Assists in of the promotion ot
Governments i Technological Upgradation and Product Development.
the activities of (d) Helps in establishing
the promotion of
Overseas promotion and provides other services like
India's foreign
with long-range growth identifying specific export products
trade, and assists prospects, conducting in-house and need-based research on trade and
in Technological export promotion, and participating in overseas trade fairs and exhibitions.
Upgradation and
Product Indian Institute of Foreign Trade (1IFT)
Development. Government of India established Indian Institute
in order to provide training, conduct research and
of Foreign Trade as an autonomous body
disseminate data, information and researcn
findings and publish the reports, monographs and status papers, organise seminars and workshops,
organise trade delegations, provide consultancy Services and conduct
management developmen
programmes.
Foreign Trade Procedures
Tndian - 493
Institute
The Indi
ndian Packaging
Institute of (1IP)
packaging, rovide testing, Packaging was set to
can be used or provide UN up conduct Training Programmes pertainin; to
threats and to
to incorporated in the Certificatior
undertake
guide exporters as to what type oj material

of information. research packaging

kaging
and
of their products so as to reduce environmental
development proggrammes for collection and dissemination
[ndian Council of
Arbitration (ICA)
Indian Council of
of d i
e c and Arbitration CA)
international (ICA) was set up to provide arbitration facilities for all types
international commercial provide arbitratio
grannes,
aspects of commercial
etc., disputes,
conduct research and organise arbitration e on different
arbitration, publishes informative
and advice to interested including a quarterly Arbitration Journal,literaug
the latest developments, in parties regarding the drafting of prOv e
the field of trade contracts ana 0
international commercial arbitration.
Federation of Indian Export
Federation of Indian Organisation (FIEO)
1965. Its functions include: Export Organisations (FIEO) as an apex body was set October
creation and maintenance of Up
IMF, TBRD, ADB, ESCAP, International Linkages witn
FA0, UNIDO and IFC, dissemination
lies
Government, providing market of information, liaison
wItm u
dissemination of research results. development assistance, market researcn and
conducting
Agricultural and Processed Food
Products Export Development Authority (APEDA)
Agricultural and processed Food Products Export
Development Authority is an autonomous
organisation under the Ministry of Commerce of the Government of India.
APEDA perform the following functions:
Builds links between Indian producers and the
global markets.
Undertakes the briefing of potential sources on government policy and
producers.
Provides referred services and suggests suitable partners for joint ventures.
Apparel Export Promotion Council
The Apparel Export Promotion Council (AEPC) is a nodal agency sponsored by the Ministry
of Textiles, Government of India.
It performs the following functions:
Monitors garment exports quotas and promotion of exports of ready-made garments
from India.
Continuously involves in the task of promoting exports by organising buyer-seller meets.
markets globally
Leads trade delegations to potential
international fairs
Participates in specialised
the India International
Garment Fair biannually
Organises
.Organises seminars on fashion and workSnops on technical aspects of the industry.
try.
Promotion Council
Building Material and Technology
Technology Promotion ouncil performs the following functions
Building Material and technologies with emphasis on stilieandia
on of
.Undertakes identification of potential
agricultural and
industrial wastes
conventional materials like bricks, tiles etc.
manufacturers
of
Assists
-effective, energy efficient technologies for
Introduces modern, cost-ef
improving
of products
and Teuucing energy consumption
productivity, quality
- 494

International Businese
www.AS
Carpet Export Promotion Council
The Government of India set up the Carpet Export Promotion Council of India (CEPC)
n
1982. It performs the following functions:
Promotes the exports of hand knitted carpets and other floor coverings.
Advises the government on export promotion measures
Helps the exporters community in bringing their problems and requirements to the notiçe
of the government.
t provides expertise in many spheres both for the Indian exporterS and foreign buyers,

Cashew Export Promotion Council of India (CEPC)

Government of India established the Cashew Export Promotion Council of India (CEPC)in
the year 1955. Its functions include:
Rendering cooperation to the cashew industry
Promoting exports of cashew kernels and cashew nut shell liquid from India.
Providing the necessary institutional framework promoting exports of cashew kernels
and cashew nut shell
liquid.
Basic Chemicals, Pharmaceuticals and Cosmeties Export Promotion Council
Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council was established
in 1963. This council is popularly known as CHEMEXCIL. Its functions include:

Making concerted efforts to promote exports of Basic Organic and Organic Chemicals,
Pharmaceuticals, Dyes, Pesticides, Soaps, Detergents, Cosmetics, Toiletries.
omoting the exports of other products like Agarbatis, Essential Oils, Medicinal Herbs
Crude Drugs, Value added Herbal Products, and Castor oil.
Chemical Allled Products Export Promotlon Council
Chemical Allied Products Export Promotion Council (CAPEXIL), is a non-profit
Ministry of Commerce, Government of India established it in 1958.
organisation.
Its main function is to promote export of Chemical and Alied Products from India.

Coffee Board
Ministry of Commerce and Industry, Government of India established Coffee Board in
1942 under an Act of Parliament.
The functions of the Board include:
Serving as a guide to the coffee industry in India.
Focusing on research, development, extension and quality upgradation
Providing market information to the coffee exporters
Promotion of Indian coffee in various countries.
Cotton Textiles Export Promotion Council
Cotton Textiles Export Promotion Council (TEXPROCIL) is an autonomous, non-profit expot
promotion body.
Its activities include:
Acting as an international face of Indian Cotton Textiles exports.
Collection and dissemination of information
Fielding of trade enquiries, administering quotas
 - 495-
Foreign Trade Procedures
nar
acintating an interface between domestic manufacturers and the global
Settling of disputes.
Council for Leather
Exports
ouncil for Leather Exports was in July 1984 as a non-profit company registerc
set up
Government
under the Indian Companies Act, 1956, lt is under the Ministry of Commerce,
India.
Its functions include:
Promotes the Indian leather industry's products in foreign countries.
Attracts Foreign Direct Investments for the development of Indian leather industry.

Promotes Joint Ventures in the Indian leather industry.

e
and buyers all over
ne CLE serves as a bridge between Indian leather exporters
world.

Directorate General of Foreign Trade

of Commerce,
Directorate General of Foreign Trade is set up under the Department
Government of India.
Its functions include:
of lIndia.
Providing export-import policies, procedures to the Government
downloadable application forms and
Providing public notices, notifications, circulars,
export-import data bank to the Government of India.
Electronic and Computer Software Export Promotion Council
established as an autonomous
Electronic and Computer Software Export Promotion Council is
Government of India.
organisation under the Ministry of Information Technology,
Its function include:
Trade promotion in the areas of electronics, computer software and internet development

Engineering Export Promotion Council

Promotion Council is a nodal agency.
Engineering Export
Its main functions include:

Promoting the exports of engineering products

and technical consultancy services of
Promoting the exports of projects, management
India.
Government of India set up the Engineering Export Promotion Council
Ministry of Commerce,
(EEPC) in 1955 as a non-profit body.
international trade in engineering goods and projects.
Its main activity is promotion of

Export Inspection
Council (EIC
Section 3 of the Control and Inspection) Act,
Export (Quality
Government of India under
set up the Export Inspection Council (EIC).
The function of this council
1963 (22 of 1963)
include:
trade of India through Quality Control and Inspection.
Ensuring the growth of export
Export Promotion Council
Gem and Jewellery
the Gem and Jewellery Export Promotion Council as a non-
Government of India set up
It is an all India apex body representing more than 7,000 jewellers from
profit organisation.
India.
- 496 o International Business

The council's functions include:

PTomoting export of Diamonds, Coloured Gemstones.
Promoting the exports of precious Metal Jewellery, Cut and Polished Synthetic Stones,
Jewellery and more.
Processed and Polished Pearls, Fashion and Costume

Handloom Export Promotion Council

The Ministry of Textiles, Government of India set up Handloom Export Promotion Council
(HEPC) as a statutory body.
ts function is to promote the exports of all handloom products like fabrics, home furnishings,
carpets and floor coverings, etc.

Indian Silk Export Promotion Council

Indian Silk Export Promotion Council is the nodal agency for promotion of silk exports
from India. Consists of more than 1,200 silk exporters as members.
Its functions include:
Providing information and intermediation services for right contacts in silk business
within the country and abroad
Organising buyer-seller meets for silk products, product ranges available in India
Participation in international textile fairs, latest trends for fashions, colours and designs,
product improvement in silk, etc.
Arrange for the foreign collaborations for silk.

Marine Products Export Development Authority

The Marine Products Export Development Authority (MPEDA) was constituted in 1972
under the Marine Products Export Development Authority Act, 1972 (No. 13 of 1972).
The activities of the Authority include:
Promoting exports of fisheries of all kinds,
Specifying standards, processing, marketing, extension
Providing training in various aspects of the industry.
Shellac Export Promotion Council
Ministry of Commerce, Government of India set up Shellac Export Promotion Council.
Its activities are:
Handling export of Lac in various forms like Shellac, both Hand Made and Machine
Made, Dewaxed Shellac, Seedlac, Aleuritic Acid, Bleached Lac and Shellac Wax.

Spices Board India

The Spices Board India is established in 1987 as the apex body for the export promotion of
Indian Spices.
The functions of the Board include:
Acting as the catalyst of these dramatic transitions.
Playing a far-reaching and influential role as a developmental, regulatory and promotional
agency for Indian spices.

Sports Goods Export Promotion Council

The Sports Goods Export Promotion council established in July 1958.
The functions of the Council include:
 asa

exports
treat
to
Foreign Trade ProcedureS Community
Sporting
Indian O
among exports
« Snse
of urgency of production
and
8 constraints
special responsibility. the
resolve
to
guidance and assisting
TOVIaing

sports goods. syntneC

Promotion Counci by the
Indian

Textiles Export backed

Synthetic and Rayon organisation
sponsored
Government of India
SRTEPC is a exporters.
3,000-member
over
and rayon
textile industry relationship
business
SRTEPC's functions are: profitable
enduring
and
an
overseas buyers form textiles.
many and rayon
eiping of synthetic
with Indian exporters textiles.
and rayon
of synthetic
Promoting exports
Promotion
Council
1966. It
operates under the
Export up in a l l - I n d i a apex boay
Jewellery set
The Gem and Council was

India. It is
Promotion an

The Gem and

Jewellery Export Government
of
non-profit
organisation

of the Ministry
of Commerce;
India. The Council
is a
Supervision from
than 7,000 jewellers
more
representing
nation.
service to the
involved with
under the
Tobacco Industry
Tobacco Board development
of the
the
established in 1976 for
Tobacco Board important
Government. Tobacco is an
countries.
control of the Central to various annual production
tobacco exports with a n
is to promote hectares
function about 4 lakh
Its main a r e a of of Tobacco.
raised o n a n non-FCV type
c o m m e r c i a l crop
in India. It is and different
FCV
million kgs of
ranging from 500 to 550
00008000088 888

POINTS TO BE REMEMBERED
clearance of products
include: preliminaries,
receipt of orders,
procedure and obtaining export
Stages of export realisation of export proceeds
of documents,
for export, negotiation
incentives. and placing indent, obtaining foreign
include: Preliminaries, enquiry
of import procedures custom duties and taking delivery of goods.
Stages
for payment, payment of
exchange, arrangement

KEY
WORDS
Export License
Inequity Offer
Let Ship Confirmed Order
Shipment
.Bill of Lading
.Customs Clearance
Export Incentives
.Shipping Bill
Payment Terms Excise Duty
Duty Drawback
Indent