6 - Export Marketing (Paper II) (T.Y.B.com Sem - Vi)

6heth Publishers Private Limited
Our f oot lbiflts

Regd. Office & Unit No. 4, Ground Floor, lalwani IndustialFstate,
Shorry Room 14, G.D. Ambekar Marg, Wadala, Mumbai- 400 031.
@ (0221 6662 4553 I 66624554 FAx : 6662 4556
Email : support@shethpublishers.com
Goa 'PALLAV-KUNJ', Borda, Margao, Goa, @ (0832) 2733436
Pune 302, Mahalaxmi Chambers, 3d Floor, Appa Balwant Chowk,
23, Budhwar Peth, Pune-411 002. @ (020l, 24450773
Nagpur Shreeniwas Apt., Mukundraj Lane, Opp. Dharampeth Mahila Bank,
Walker Road, Mahal, Nagpur - m N2.
a (o7L2)2737Os2
Vadodara Joshi Brother's lkishna lftupa Miradatar's Tekro,
Navabazar, Vadodara - 390001 (Gujarat). @ 026r24789L71 2471287
Bharinagar Shah & Co. High Court Road, Bhavnagar (Gujarat). @ (027812516679
Hcc!(115/-oaly
ISBN - 97&93-87825-52-9
@ Authorr
Flrrt Edltlon Nooemberr 2OTS
The book is strictly wrinen according to the rcw syllabus available at the tin e of printing.
Every possible effort has been made to avoid errors and omissions in this publication by the Authors and the
Publishers. Inspite of this effort, some typographbal enors might hwe crept in. Any misakc, error or discrepancy
noted may be brought to our notice which slwll be nl<en care oJ in tlv forthcoming edition. It is hereby notified tlut
neither the Author nor the Publishers or seller will be liable fur any danage or loss to onyone, in any manner,
there from. It is suggested tlat to avoid arry doubt the reader should cross-chcck all the facts, law and contents oJ
the publication with original Goventment publication or notifications wherever applicable.
The text of this publication, or an! part thereof, nay not be repro&rced or tansmitted in any form or by any
means, electronic or mechanical, including photocopying, recording, storage in an information retrieval system, or
reproduced on ary disc, tape, perforated mcdia or other information s1otage device, etc., othentise, without the
prior written permission of thc publisher and autlar. No key to this book can be prepared without the prior written
permission of the Publishcrs. Any violation will invite prosecution legal action under thc htdian Copyriglu Act.
This book is sold subject to the condition that it shall not by way of tadc or otheruise, be lent, resold, hired
out or circulated,
For binding misakes, mispints or fur missing Wges, etc., the Wblishcrs' litbility is limited to replacement
wirhin one month of purchase by similar edition. Nl expenscs in tlds mtection are to bc borne by the purchaser.
All disputes are subject to jurisdiction of courts, tibunals and forums at Mumbai only.
Publlrhcd & : 6het^h Dublishers Drivate Ltd., Unit No. 4, Ground Floor,
Prlntcd by lalwani Industial Estate, 14, G.D. Ambekar Marg, Wadala, Mumbai -400 031.
a ffi2 4553 I 66612 4554 FN( :6662 4556.
TYLLABU'.,.
Electioe Courses (EC )
Ability Enhancement Courses 6EC)
Modules at a Glance
Sr Modules No. of
No. Lettures
1 Product Planning and Pricing Decisions for Export Marketing t2
2. Export Distribution and Promotion 11
3. Export Finance 11
4. Export Procedure and Documentation 11
Total 45
(iv)
DPE 1a
This book is an attempt to offer students material for study for the
T.Y.B.Com. exams of Mumbai University for the Semester - Vl, for the optional
subject of Export Marketing.
The authors have tried to make the matter simple lucid and easy for the
students, without compromising on the quality.
The authors would like to appreciate the encouragement and support given
by the Management, Ghanshyamdas Saraf College of Arts & Commerce, the
Management, L.S. Raheja College of Arts & Commerce and Dr. (Mrs.) Ancy Jose,
Principal, Nagindas Khandwala College, for this academic venture.
The authors are grateful for the support given to them by all commerce
teachers of various colleges. Their feedback and suggestions have helped us
improve the contents of the book.
Further suggestions for improvements in the contents from teachers and

students of the subject, will be welcome and incorporated in future editions, in
the quest for constant betterment of study material.
We appreciate the kind efforts put in by Shri. Deepak Sheth, Shri. Kirit Sheth
and Shri. Viren Pathak for the completion of and distribution of the book to,all
students in a time bound manner. We are also thankful to the publishers for the
fine print and their support in typing, formatting and fine tuning of the book.
Authors
ttr irsi:
'rrfr :r';urolz noilrr:,
(iii)
Sr. No. Modules / Units
1 Product Planning and Pricing Decisions for Export Marketing
a) Planning for Export Marketing with regards to Product Branding,
Packaging.
b) Need for Labelling and Marking in Exports, Factors determining Export
Price; Objectives of Export Pricing.
c) International Commercial (INCO) Terms; Export Pricing Quotations - Free
on Board (FOB) Cost Insurance and Freight (CIF) and Cost and Freight
(C&F); Problems on FOB quotation.
2. Export Distribution and Promotion

a) Factors influencing Distribution Channels; Direct and Indirect Exporting
Channels; Distinction between Direct and Indirect Exporting Channels.
b) Components of Logistics in Export marketing; Selection criteria of Modes of
Transporg Need for Insurance in Export Marketing.
c) Sales Promotion Techniques used in Export Marketing; Importance of Trade
Fairs and Exhibitions; Benefits of Personal Selling; Essentials of Advertising
in Export Marketing;
3 Export Finance
a) Methods of Payment In export marketing; Procedure to open Letter of
Credit, Types and Benefits of Countertrade.
b) Features of Pre-Shipment and Post-shipment finance; Procedure to obtain
Export Finance; Distinction between Pre-shipment Finance and Post
Shipment Finance.
c) Role of Commercial Banks, EXIM Bank, SIDBI in financing exporters; Role
ofECGC.
4. Export Procedure and Documentation

a) Registration with different authorities; Pre-shipment Procedure involved in
Exports; Procedure of Quality Control and Pre-shipment Inspection.
b) Shipping and Custom Stage Formalities; Role of Clearing & Forwarding
Agent; Post-shipment Procedure for Realisation of Export Proceeds;
Procedure of Export under Bond and Letter of Undertaking. (LUT)
c) Importance of - Commercial Invoice cum Packing list, Bill of Lading/
Airway Bill, Shipping Bill/Bill of Expor! Consular Invoice, Certificate of
Origin.
(v)
UE'NON PAPER PATTERN,,
Maxlmum Marks : 1@
Questtons to be set :6
Duragon r 05 Hrs.
All Questions are Compulsory C-arryng 15 Marks each.
Questlsn Partlcular Marks

No.
1 Objective Questions 2O Marks
A) Sub Questions to be asked 12 and to be answered any 1O
B) Sub Questions to be asked 12 and to be answered any 1O
(*Multiple choice / Tfue or False / Match the columns/Fill in
the blanks)
2. Full Length Question 15 Marks
OB
OR
OR
OR
6. A. Theory questions 1O Marks
B. Theory questions 10 Marks
ofi
6. Short Notes : 2O Marks
To be asked O6
To be answered O4
Note:
The.ory question of 75 marks may be dtvtded into hlo sub questioru of 7/8 or
7015l"Iarks.
(vi)
coNrENrr.,.
l. Product Plonning & Pricing Decisions for Export Morketing I -36
2. Export Diskibution ond Promotion 37-62
3. Export Finonce 63- 105
4. Export Procedure ond Documentotion 106 - 144
ii
(vii)
Product Planning and Pricing Decisions for Export Marketing Sfr' I
MODUTE
PRODUCT PLANNING
AND
PRICING DECISIONS FOR
EXPORT MARKETING
SYNOPStS
* Planning for Export Marketing with regards to Product, Branding, Packaging.

* Need for Labelling and Marking in Exports, Factors determining Export Price;
Objectives of Export Pricing.
* lnternational Commercial (INCO) Terms; Export Pricing Quotations - Free on
Board (FOB), Cost lnsurance and Freight (ClF) and Cost and Freight (C&F);
Problems on FOB quotation.
2 ft't' Export M arketi ng (7.Y. B.Com. ) ( Se m.-V I )
EXPORT MARKETING DECISIONS
Related to Product
The product decision is among the first decisions that a marketing manager
makes in order to develop a marketing mix. The product decision must be made on
the basis of careful analysis and review as the global market becomes competitive.
The exporter can't assume that the product which is doing well in lndia can do
equally well in foreign country.
According to Philip Kotle rand Keller, the world has dramatically shrunk in
recent years. Countries are increasingly multicultural and products and services
developed in one country are finding enthusiastic acceptance in others. A Cerman
businessman may wear ltalian suit to meet an English friend at a Japanese restaurant,
who later returns home to drink Russian vodka and watch U.S. movie on a
Korian T.V.
Thus export product planning involves determining which products to introduce
into which countries, what modifications to make in the products, what new
products to add, what brand names to use, what package designs to adopt, what
guarantees and warranties to give what after sales services to offer and finally when
to enter the market.
These decisions can be summarized as follows :
1. Product Design Strategy

The environmental and cultural differences among the nation are sometimes
great. The exporter thus may select following strategy :
a) Product standardization strategy

Some products cross borders without adaptation better than others and
consumer knowledge about the product is generally same everywhere. E.g. Coogle,
e-Bay, Twitter, Facebook.
b) Product adaptation strategy

Product adaptation is based on effective marketing research and research and
development to introduce innovative products. Even Coka-Cola is sweeter or less
carbonated in certain countries. Clobal brands have to think Global but act local.
McDonalds allows countries and regions to customise its basic layout and menu.
2. Product Mix/Product Line Decisions
Product line indicates the products which have similar technology, uses and
target same customer. Product mix involves a set of products which the exporter
offers to the overseas customers. The composition of the product line may need to be
periodically reviewed as changed as per environmental changes like customer
I
Product Planning and Pricing Decisions for Export Marketing ffn 3
preference, competitor's policy, legal requirements of the host country, and internal
environment like objectives. E.g. product line extension is provided by the Coca-cola
company. lt began marketing Coca-cola in Japan in 1958, and as the market
developed it introduced additional beverages like Fanta in 1968 and Sprite in 1970.
Products may be added to the line for two reasons :
i) To serve an unfulfilled customer need in a particular country/segment.

ii) To optmize the existing marketing capacity.
Products mix which is the larger entity, denotes the complete set of all products
offered for sale by a company. A product mix is composed of several product lines.
3. Product Packaging
Packaging is of special importance in export marketing as it protects the product
for long distances. lt enhances the sale appeal. lt also facilitates merchandising. The
role of package is silent salesman and projecting the right image of the product.
Smaller packaging is often critical when income is limited in developing markets.
Unilever's four cent saxhets of detergent and shampoo were big hit in rural lndia.
The packaging in export marketing is influenced by various factors like foreign buyer,
shipping company, customs, importer's country. llP (lndian lnstitute of Packaging)
provides guidance to lndian exporters for lnternational packaging. Environmental
Laws also influence packaging in international market.
4. Product Labelling
Labelling can be regarded as a part of packaging because packaging decision
making also involves the consideration of the labelling requirement. Many countries
have laid down labelling requirements in respect of a number of commodities.
According to regulations in many countries, labelling of food items should disclose
information about date of manufacturing. lt should also be done in these language of
importer's country.
5. Product Pricing
Export pricing indicates determining the price of goods and services in
international market. Price is influenced by internal factors like cost and pricing
objectives, whereas external factors like nature of competitions, demand, consumers,
government incentives also influence pricing decision. Many multi nationals are
suffered due to gray markets, which diverts branded products from authorised
channels. The exporter has to determine pricing strategies and methods of pricing
which may differ from country to country.
4 ff1fje Export Marketing (T.Y.B.Com.) (Sem.-Vl)
6. Product Positioning
Positioning is a platform for the brand. lt facilitates the brand to get through to
the target consumer. Positioning is an act of creating a distinct image in the minds of
target customers. ln positioning the export firm decides how and around what
parameters, the product offer has to be placed before the target customers.
The aim of product positioning is to create a perception for our brand in the
prospects mind so that it stands apart from competing brands. Different positioning
strategies include:
i) Positioning on competition
ii) Position on the consumer's expectations and desires.
iii) Position on the plank of quality.
iv) Positioning on the plank of service
v) Positioning on the product's conformity with societal demands
7. Product Promotion
The promotion is an important marketing mix which includes advertising,
publicity, sales promotion, public relation and personal selling. However, in export
marketing internet and trade fairs and exhibitions also promote products and services
internationally. lt can be innovative. Nokia sent marketing, sales and Engineering
staff from its entry level phone group to spend a week in people's home in rural
China, Thiland and KENYA to observe how they use phones.
8. Product Warranty and guarantees
When the export firm is engaged in export of consumer durables and industrial
goods, the assurance of performance (warranty) helps in successful marketing.
9. Branding Decisions
Brand is a name, term, symbol to identify the goods and services of one seller,
from the offer of other competition. A good brand can serve as a powerful
competitive advantage for a firm. ln fact strong brand is a major asset in export
market. Establishing brand is a costly affair in export marketing. Thus, the exporter
has to decide whether to use his own brand.
10. Product Distribution Decision

Logistics play an important role in modern marketing. Different distribution
channels can be selected by the exporter taken into consideration, the method of
exporting nature of product, competition, strategy etc. Eg. There is differences in
distribution channels across countries. To sell consumer products in Japan,
companies have to sell to a general wholesaler, who sells to a product wholesaler,
I
Product Planning and Pricing Decisions for Export Marketing tfn 5
who sells to the product speciality wholesaler who sells to the regional wholesaler
who sells to the local wholesaler who finally sells to the retailer.
11. After Sales Services
ln case of consumer durables and industrial goods like machinery, effective after
sale service affects market.
EXPORT MARKETING DECISIONS RETATED TO BRAND!NC
A brand is a name, sign, symbol or design or a combination of them, intended to

identify the goods and services of one seller or a group of sellers and to differentiate
them from those of others. When the brand is launched, marketers may need to
change certain brand elements. Numbers and colours can take on special meaning
in certain countries. Nokia does not release phone models with number four in Asia
as it is considered unlucky.
Export marketing may involve several decision related to branding :
1. To brand or not to brand

The first decision is to brand or not to brand. Branding provides many
advantages however it is costly and risky in export marketing.
2. Manufacturer's Brand or Private Brand

A manufacturer may use for his products his own brand or a private brand i.e.
the distributor's brand. lt is very difficult for small exporter to sell products abroad
under his own unknown brand name. ln several cases goods exported under lndian
brand names are repacked abroad and sold under foreign brand names.
3. Same Brands or Different Brands
lf the exporter is using his own brand, he has to decide whether to use the same
brands or different brands.
Branding Strategies / Approaches
1. Brand Name Communicating the Functions/Attributes of the Product
Most companies select brand names that communicate the functions or key
attributes of the product. E.g. Cood knight the mosquito repellen! offers good night
sleep, Aquaguard gives protected water and fair and lovely premises fair and lovely
skin.
2. Brand Names that Communicate the Speciality of the Product

E.g. Ford's IKON, CM's Opel. They are intended to communicate the speciality
of the respected brands. The name Taj given to the hotel chain of lndian hotels is an
attempt to recapture and reflect the marginal culture.
6 ffl Export Marketing (T.Y.B.Com.) (Sem.-Vl)
3. Use of Acronyms
Sometimes, brand names are acronyms. Amul originated from Anand Milk
Union Ltd. MRF is originated from Madras Rubber Factory.
4. Use of the Company Name
The temptation to use the company name as a brand name is also very strong.
E.g. Cadbury's, Samsung, Phillips and Sony company name is used in branding only
when the company is confident hat leading its name to its products gives a better
identity and image.
5. lndividual Brand Names
Each product of the company is given an independent brand name.
e.g. Hindustan Leaver gives separate brand names for most of its products e.g. Dove,
Lux, Pears, Lifebuoy, Liril and Hamam.
6. Family/UmbrellaBrand
ln this case, different products of the company are marketed under one brand
me. E.g. Amul, Codrej, Johnson and Johnson. A major benefit of giving a family
brand name is that advertising and promotion efforts can be combined for all the
products which cut down the budget.
7. Middlemen's/State brand/Private Label
Sometimes, some manufacturers leave their products for branding by the
distributors/retail chains as per latter's choice. E.g. Spencer's. There are many small
scale products like bulbs, soaps, fan, food products, garments who leave their
products for branding and marketing by distribution house.
8. Corporate-cum-lndividual Brand Names
!t combines both names e.g. Cadbury's Dairy Milk, Cadbury's fem, 5-star etc.
9. Different brand Names in lnternationat Markets

Depending on the cultural environment of the country, the brand name can
change from country to country.
10. Name of Founders
Founde.r member's names are reflected in the brand names : Colgate, Maggie,
Dabur.
11. Other Approaches
a) Using Numbers
b) Combination of names and Numbers
Product Planning and Pricing Decisions for Export Marketing tfff 7
Factors lnfl uencing Branding
ln export marketing branding can be affected by number of factors. They can be

summarized as follows :
1. Customs
Nature of consumer affect the branding decisions. The company can select a
trendy brand name if they target young people whereas for elite customers, the
names are associated with status, the language of the customers also affett the brand.
It should be meaningful for foreign buyers.
2. Corporate lmage
The export firm will use company's name as a brand only when it enjoys high
reputation and signifies high quality in international market.
3. Competition
ln case of number of substitutes are available in foreign market, the brand names
are essential to distinguish exporter's products from competitor's products.
4.' Company Resources
Establishing a brand at international level is very costly and risky. It requires high
promotional expenses. The branding decisions therefore largely depend on the
financial resources of the company.
5. Size and Area of a country
There are various countries with cultural differences. E.g. Europe, Asia, Africa,
America. The brand must be suitable and meaningful in the target market.
6. Market Size
Large market ensures/permits larger investment in branding. Umbrella branding
reduces expenditure on promotion of brands worldwide.
7. Nature of Product {}
Brand must be associated with the products sold in export market. lt helps the
customers to identify the products in the market.
8. Preference of Promoter
The promoters and management may influence the brand names. Colgate, Tata,
Nestle, Ford, L & T, Suzuki.
9. Popularity of Existing Brand
Brand extension is possible when the existing brand already enjoy high brand
equity in foreign market.
S 1l'3fjl" Export Marketing (T.Y.B.Com.) (Sem'-Vl)
10. Registration Formalities

Brand names should be such that tax can be easily registered under Trade marks
Act, 1999. lt should provide legal protection in the market.
11. Other Factors
i) Company's policies,
ii) lmporter's country,
iii) lnternational Laws.
EXPORT MARKETING DECISIONS RELATED TO PACKING
Packing and packaging are generally used in a brand sense and as synonymous,
they are distract in marketing relevance. Packing refers to the protective covering
used for shipment of the goods whereas,packaging refers to the package in which the
product reaches the consumer.
Poor packaging is a serious matter that hinder the export of developing country.
ln export marketing, packaging is a services problem as it varys due to physical
conditions and situations the cargo is exposed to and subjected to different tastes,
preferences and practices. There are atso certain regulations related to environment
protection.
Need / lmportance of Packaging.in Export Market
Functions of packaging themselves signify the importance of packaging,
specially in export market.
1. Protection to Export Product
Protection to the product is an important function of packaging. lt protects the
product in transportation, weather condition, warehousing and cargo handling.
2. Preservation
Cood packaging ensures the preservation of the quality of the products. lt

prevents the deterioration of quality to ultimate consumer. lt is very important in case
of perishable goods like seafood, meat, vegetables, food, medicines, flowers, fruits. lt
is important for fragile products ,like glass as well as products like spirit which a
subject to pilferage.
3. Presentation
Packaging is a silent salesmah. lt promotes the products. The need to make
packaging attractive, acceptable and presentable in export market is very important
particularly for retail products as it facilitates.
Product Planning and Pricing Decisions for Export Marketing 1fjflf g
a) Effective and convenient sales services by describing product's features,

enhancing, consumer confidence and making overall favourable impression.
b) Consumer Affluence : Consumers are witling to pay more for convenience,

appearance, dependability and prestige.
c) lntegrated marketing concept packaging most support and reinforce the
brand that the company is trying to build through promotion.
4. Confirmation to Export Standards
The packaging in export market is influenced by different factors. The standards
set up by exporters and importer country, customs, environmental laws must be
fulfilled to be successful in export marketing.
5. Effective Distribution
Adequate packaging ensures effective distribution of goods from the
manufacturer exporter to the ultimate consumers.
5. Preference by the Consumers
Branded and packaged goods have more demand especially, by urban
consumers and high-middle class consumer.
7. Re-use Value
Like domestic marketing packaging can provide re-use value in export

marketing. i ,
Thus, packaging plays an important role in export marketing. lnternational

packaging decision should take into account the requirement of four groups of
people i.e. customers, shippers, distributors and the importing country.
Essentials / Requisites of a Good Packaging
Export packaging is important in export marketing mix. Export firm should
ensure that following requirements are fulfilled for packaging in foreign market.
1. Customers Requirements
will vary from country to country based
Packaging requirements for the customer
on socio-economic and cultural factors. Customer characteristics should be
examined in order to make sound packaging decisions. The shape of the package,
the words, language and colour schemes must be appropriate.
2. lnternational Standards
llP helps lndian exporters to confirm to lnternational standards. lt educates
exports about new trends in export marketing.
2/T.Y.B.Com.-Export Marketing (Sem.-V!

tO !,1f1j, Export Marketing (T.Y.B.Com') (Sem'-Vl)
3. DistributionRequirements
The distribution channels for products designated to world markets require that
theft pilferage and damage of shipped goods be decided the rough proper packaging.
The package should not waste she if space should kindly easily and should easy and
efficient price marketing / labelling.
4. Requirements of Shopping
Regardless of the mode of transportation the main concern shoppers involved in
export is goods to their distraction without damage theft.
5. Re-use Value
Packaging also should have re-use value for customers. Its design should
encourage re-use.
5. Attractive
Packaging should attract attention of perspective buyers also it helps in window
display.
7. Climatic Condition
The package chosen should be sturdy enough to withstand extreme climate
conditions. For example, the food product packaging may have to be redesigned for
shipping to zones of high temperature such as Saudi Arabia.
8. Economical
A good packaging should involve minimum cottrr,, " *
9. Requirement of government
It may be regarding language statutory working etc.
10. Suitability to the Product ,
Packaging should be suitable to the nature of product e.g. perishable goods; and
heavy machinery electronic goods will have different packaging standards.
Hint for students - CID R RACERS
NEED FOR LABELTING IN EXPORTS
Labelling may be regarded a part of packaging because packaging decision

making also involves the consideration of the labelling requirements.
Many countries have framed rules and regulation regarding labelling.They cover
number of commodities e.g. According to regulations of some countries the labelling
of foods (Food, medicines) should contain information about :
Product Planning and Pricing Decisions for Export Marketing
$tfs lt
a) Date of manufacturing
b) Expiry date
c) Optimum storage period
d) Composition
e) Storage condition
0 Methods of use if any
g) Statutory warning if any
h) Language of the country
i) Name of brand
j) Name of the export firm
k) Name of country of origin
l) Batch no.
Need for Labelling in Export Marketing

1. Labels
Labels are those information disclosed on the product or the information carried
in a prices of material which is attached to the product. lt contains all information
given above.
2. ldentification of Brand-Labt*'
The label - I may display brand on larges which is cashier for the customer for
locating the desired product.
3. Consumer Preference
Brand name or manufacturer name which is labelled on the product helps the
consumer to find the genuine product which he/she wants.
4. Facilitate Sale by lmporter
Sometimes the importer may insist on attachment of a particular type of label.
Exporter can import such labels without import restriction against confirmed export
order.
5. Sales Promotion
ln export marketing labelling reveals all about that product preferably prices of
it.
12 fflo|' Export Marketing (T.Y.B.Com.) (Sem.-Vl)
6. Customers Clearance
Developed countries have strict rules and regulations. They insist on instructions
regarding pesticides insecticides used for horticulture products. Labelling is very
important when consumer goods are sold in big departmental stores. lt facilitates self
service and eases buying process.
7. Statutory Requirements
The label in international market provides statutory warnings in case products
which are injurious to health. lt also provides cohesion, storage instructions,
ingredients which help the consumer to select the product and educates the use.
Hint for students - LICISCS
NEED TOR MARKING IN EXPORTS
arN
Apblt6
/
s-,_ dN6.l
lbi,wtld.*f
0a#lo,rdll)
6hsd
hflitllt l€rbk
,@,,*,*,
(hs I dN6.l d89
d$IMB eoanr.td*ire ilitdlotw
/o\
(bxrnyOotO IIdrb) thsib$lht4itb
CLN
ng&d&6
t
Jgp.*.,.* cks6.2
h{diw sull@tw
laM
S**-,- k7
ll&odirlk
NUel)
lni4b
&**--,* chn 5.1

ol,d're,4W
kodrstie itabtub
t't l*Nll)
d,N23 tus 5.2

/bLrua64a o,VilbM
Product Planning and Pricing Decisions for Export Marketing
$rfrr 13
Marking goes hand-in-hand with packaging making is

made on packages. ln export marketing the ships or any
other mode carry a large number of consignments of various
exporters at the same time. Marking is important to identify a
particular consignment. The marking help the consignment
to be distinguished from other cargo and enables quick and
t
effectively delivery to ultimate buyer.
Marking can be :
a) lmpressions with black ink or coloured ink.
b) Stencil marks
c) lmpressions an metal sheets and quality pages.
d) lnscribed directly.
lnformation through marking includes :
1. Address / short name of exporter / importer

2. Quantity
3. Cross / net weight
4. Exporters' special mark
5. lmporter's special marks
6. Port of destination
7. Port of origin
B. Order not code ac.
9. Date of manufacturing
10. Steamer name
11. Bill of lading no.
12. Handling instruments if any e.B. glass material
The international Cargo Handling co-ordination Association has put certain
recommendations for the marking of goods carried by ship.
a) The appearance of the marks should be in certain order and in certain size.
b) Large package should have marking on minimum two sides.

c) Handling instructions should be placed in all four sides of the package.
d) Letters for marking should be in capital letters and size of marking should be
proportionate.
e) Use of fast dyes is required but they should not be harmful to the product.
0 Old marks should be removed before putting new marks.
g) English language is permitted.
14 ff3o Export Marketing (T.Y.B.Com.) (Sem.-Vl)
Thus, the significance of marking of goods is to identify easily and also to take
due care at the time of transportation and handling. Some goods are breakable, some
are to be kept away from heat, few are highly inflammable, some are to be stored in
refrigerator. So the exporter should instruct through the marking that during loading
and unloading, the workers at post identify the marks and send to the final
destination.
Pricing in Export Market
Price is one of the key variables in the export marketing mix, the mix that aims to
provide the right product in the right place, at the right time and at the right price.
Price can be rightly defined as the exchange value of goods and services in monetary
firms while export pricing is a technique of determining price in export market.
ln thepresent competitive situation, survival and groMh of an enterprise
depends on the sound and effective pricing policies and strategies. lt directly affect
revenue and thus profitability in export market.
FACTORS AFFECTING EXPORT PRIC!NG
Exporter should consider following factors while fixlng price for export goods
which can be classified as follows :
Factors Affecting Pricing
lnternal Factors Externa.l Factors
a) Pricing objectives a) Price destination

b) Cost b) Competition
c) Product life cycle c) Channel i ntermediaries
d) lnternational reputation d) The currency involved
e) Nature of the producVservices e) Economic and political
0 Promotion mix environment in foreign country
Credit policy 0 Nature of foreign buyer

8)
Covt. regulations
8)
h) Covernment incentives and
assistance
i) Market opportunities
j) Export product demand
Product Planning and Pricing Decisions for Export Marketing *lfi t 5
A. INTERNAI FACTORS
They are the factors within the organization which influences price. They are
controllable by management.
1. Pricing Objectives
Pricing objectives should be closely related to marketing objectives which are

related to overall company objectives. They can be :
a) Profit maximisation
b) Facing of competition effectively
c) lmage building
d) lmproving of the market share

There are different objectives for skimming price (to skim the cream of the
market) whereas the objective for penetration pricing is to capture a large share of
the market.
2. Cost Factor
Fixed cost and variable costs are the important factor in export price
determination. The coslo{xproduction, marketing and delivery costs can be major
cost items in export marketing. There are also overhead costs like indirect costs.
Export marketing basically involves ex-factory cost, transportation, packaging
documentation, marine loading and unloading, freight and insurance. lt also includes
commission to foreign agents if any.
3. Product Life Cycle
Product life cycle in export market means different stages through which the
product goes in the market.
a) At introductory stage the price may be low.
b) At growth stage, the price may be high due to high demand.
c) At maturity stage, the prices are relatively stable.
d) At decline stage, the price cost is adopted to survive.
4. International Reputation
It relates to corporate image of the export firm in international market. Clobal
companies have high brand value and are able to attract high price.
5. Nature of the ProducUServices
The superior quality product attracts premium or high price in export market. For
FMCC products, the price is'relatively low as compared to consumer durables and
industrial product.
t
(!em'-Vl)
t6 !,fif, ExportMarketing(T'Y'B'Com')
6. Promotion Mix
The elements of promotion mix includes the exPenses on :
a) Advertising
b) Sales promotion
c) Publicity
d) Personal selling
e) Public relations
0 Trade fairs and exhibition
I Online trading
High cost of promotion increases the price of goods and services in export
market.
7. Credit Policy
Export goods can be sold at credit depending on the policy of export firm and
the relationship with the importer. The more the [diiodof credit, the price charged
may be high and vice-versa.
HINTS FOR. STUDENTS : PC PIN PC
B. EXTERNAL FACTOR,S
They are the factors outside the organization which influence the price.
7. The Price Destination
That means who is that will pay the price.
a) Final consumer
b) lndependent distributors
c) Wholly owned subsidiary
d) Joint venture organisation
2. Competition
The important feature of export marketing is actuate or three faced competition.
Thus, the price of competitor firms must be taken into consideration while
determining export pricing. The nature of competition in a particular foreign country
also affects prices of export commodities.
3. Channellntermediaries
There are various distribution channels under direct and indirect exporting. For
example merchant exporters, EH, TH, canalizing agency, foreign agents etc. The
presence of intermediaries increases the price of export goods.
Product Planning and Pricing Decisions {or Export Marketing ;f3f1P t7
4. Currency involves importerts country, exporterts country

The currency of the importer country exporter having country currency and
leading international currency also influences export price.
5. Economic and Political Environment in Foreign Country
This includes time of recession, economic prosperity, political stability and
consistent economic pol icies.
6. Nature of Foreign Buyer ,
Consumer behaviour is another important factor in export pricing. The nature of

consumers differ from country to country in terms of increase, consumption,
preferences, likes and dislikes, habits, fashions etc. For example the consumers in
developed country are ready to pay high price for high quality products.
7. Government Regulations
Government rules and regulations pertaining to pricing should be taken into
account in setting prices. Legal requirements of both the host and the importing
country's government must be satisfied.
8. Government Incentives and Assistance
Government incentives play a vital role in deciding export price. Financial
incentives that affect the export price include cash subsidies, tax holidays, duty
drawback, excise refund, VAT refund, octroi refund. The objective'of providing
incentives is to enable exporter.
9. MarketOpportunities
The price of export goods also depends on short term and long term
opportunities available in the market.
10. Export Product Demand
Consumer demand for a product is another key factor in pricing. Demand is
based on a variety of consideration e.g. ability of the customers to buy, their
willingness, the place of the product in the customer's life style, potential market of
the product. The relationship between price and demand is called elasticity of
demand or price sensitivity.
HINTS FOR STUDENTS: PC C TEN GAME
EXPORT PRICE QUOTATIONS
Export price is quoted to the importer in any of several ways. Every alternative
implies mutual commitment by exporter and importer and specifies the terms of
trade. A quotation refers to an offer made by an exporter after the enquiry is received
from the buyer.
a
IB fn'f Export M arketing (T.Y.B.Com. ) (Sem.-Vl )
Export price quotation contains firms and conditions such as :
i) The charges and expenses which must be paid by the exporter.

ii) The place of delivery of goods.
iii) The point in time when the goods and their transport risk are transferred
It also states the terms and conditions of export contract -
a) Currency in which quotation is to be made.
b) Type of quotation FOB/CTF/CIF
c) Methods of payment
d) Payment of freight
e) Payment of insurance
fl Delivery schedule
I Commission
tr) Any other details
oBf ECTTVE OF EXPORT PRTCTNG
Pr.ice is considered as a strategic tool to achieve certain objectives. The
exporter's pricing policy is guided by any one or more of the following objectives :
1. Market Penetration
It is an important objective particularly for new exporter. The exporter may
penetrate the market with low price. The objective is to penetrate the market easily
and capture a large share of market.
Advantages
1. The exporter can enter and capture the market easily and quickly.
2. Higher sales due to low price.
3. Economics of large scale in case of mass scale production to match higher sale.
4. Export from does not attract competitors due to low profit margin.
5. Export firm can increase the price gradually after becoming market leader.
6. The strategy help the exporter to develop a strong brand loyalty. Customers can
purchase repetitively due to low price.
7. The export firm can become a brand leader.
B. This strategy can be successful for a long run.

9. Quick sales will not block the funds for the export firm.
10. This strategy is suitable for consumer goods product.
\
Product Planning and Pricing Decisions for Expon Marketing tfrt 19
Disadvantages
1. Marketing and product development cost may not be recovered within a short
period due to low price.
2. There is a difficulty in raising prices at a later stage.
3. Consumers may equate low prices for low quality.
4. lt is not suitable to products with changes in fashion or technology.

5. The funds can be blocked if there are no quick sales.
6. lt is not suitable as a short term strategy.
Market Penetration strategy's suitable when -

1. Quality of the product sold is highly sensitive to prices.
2. Substantial economies can be achieved in unit cost by operating at large
volume.
3. Products may face threats of strong potential competitors.
4. Market demand is likely to increase after the introduction of the product in the
market.
2. Market Share
The price is manipulated to increase the market share.
3. Market Skimming
The objective of Market Skimming is to charge high price at the introduction
stage to skim the cream of the market. The price is subsequently reduced to achieve
greater market penetration.
Advantages
1. Product development expenses can be recovered within a short period due to
high price.
2. The exporter can undertake promotion efforts on a large scale due to high
income.
3. After charging high prices, it will be easier to reduce the prices gradually.
4. Consumer may equate high prices to high quality.
5. Higher prices fetch higher revenue and takes the cream of the market.
6. It helps to estimate the demand in the market and response of the consumers.
7. It is suitable for products with high technology, novelty and uniqueness. Fashion
products which may become outdated in future can also adopt the strategy.
8. This strategy is suitable for short-term.
L
20 fl|jr Export Marketing (T.Y.B.Com.) (!em.-Vl)
9. ln case of quick sales, exporter need not block his funds.

10. Benefit of selective markets.
Disadvantages
1. High prices may prevent quick sales. lt is difficult to enter the market or capture
a large share.
2. Due to high profit margin, competitors may be tempted to enter into the market.
3. This strategy is not suitable in the long run.
4. lt may create problem of brand loyalty preventing repeat purchases among
consumers.
5. No benefit of economies of large scale production.

6. The funds may be blocked in absence of quick sales.
7. Not suitable for consumer goods where technology is simple and common and
number of substitution are available in the market.
Suitability
1. When the product is completely new, unique and the initial demand is likely
to be substantial in foreign market.
2. When the initial cost of production is high and naturally high market price is
necessary.
3. lt is successful in case of distinct products having selected market.

4. lt is desirable when it is anticipated that new competitors would enter the
market rapidly.
5. The exporter has to incur huge expenditure in Research and development to
introduce the product.
4. FightingCompetition
A price reduction may be done by the competitor. The exporter in this case may
adapt price cuts.
5. Preventing new entry
The exporter may charge low price even when there is a scope for high price so
that the market does not look attractive to new export firms.
6. Shorten pay back period
!n export market there is high risk and uncertainty due to changing
environmental factors like swift technological changes, short product life cycle,
political reasons and treat of competition.
\
Product Planning and Pricing Decisions for Export Marketing l|l,1j. 2l
7. Early cash Recovery
The exporter with liquidity problem generally gives priority to generate better
cash flow. The objective of pricing is to encourage timety and prompt payment.
8. Meeting Export Obligations

There are incentives like EPCC where export obligations are compulsory and
failure may lead to penalty. The exporter may adopt a pricing policy in such a way to
discharge export obl igations.
9. Disposal of Surplus
ln case of surplus stock, the objective may be to dispose of the same. The
exporter may resort to dumping That is selling below the cost price.
10. Optimum Capacity Utilization
It leads to minimising the unit cast of production. ln such case, achieving the
required quantity of exports is a primary objective.
11. Return on lnvestment
ln case of number of export firms, the pricing objective is to get adequate return
on investment.
12. Profit Maximisation
Again in many cases, the primary objective of pricing policy is to maximise the
profits of the firm.
INCO TERMS
The lnternational Chamber of Commerce (lCC) has codified certain trade terms
used at international level under the title INCOTERMS. lnternational Commercial
Term known as lncoterms are a series of international sales term widely used and
accepted throughout the world. They divide transaction costs and responsibilities
between a buyer and seller.
lncoterms were first published in 1936 and revised in 2000 and 2010.
lncoterm were devised and published by the ICC and endorsed by the United
Nation Commission on lnternational trade law.
8-considerationllist of INCO TERMS is as follows :
1. EXCO (Ex-works) (Ex-factory or local price quotation)

' lncludes export packing marking crats with shipping marks. The term represents
the seller's minimum obligation. Since he only has to place the goods at the disposal
22 f.f1i Export Marketing (T'Y'B'Com') (Sem'-Vl)
of buyer, the buyer must carry out all the task of export and import clearance.
Carriage and insurance are arranged by buyer.
2. FCA (Free Carrier)
It is applicable to any mode of transport. i.e. air, rail and road. This term means
that the seller delivers the goods cleared for export to the carrier nominated by the
buyer at the named place. The seller pays for the carriage at the named place.
3. FAS (Free Alongside Ship)
The exporter gets goods alongside ship. This is used for shipping transport only.
This means the seller delivers when the goods are placed alongside vessel at the
named port of shipment. The seller is required to clear the goods for export. The
buyer has to bear all the cost and risk of loss or damage to the goods from the
moment.
4. FOB (Free on Board)
It includes expenses like due dues, loading goods on the board of the ship. The
buyer has to clear all costs and risks to the goods from that port. The seller must clear
all the goods for export. lt can be used only for ocean transport.
5. CFR / (Cost and Freight)
lncludes CTF. Sea freight for bringing the goods to the part of destination. The
term means the seller delivers when the goods pass the ship's rail in the port of
shipment. The seller must pay the cost and freight necessary to bring the goods to the
named port of destination. But the risks of loss or damage as well as the additional
cost due to the events occurring after the time of delivery are transferred from the
seller to the buyer. Seller must clear the goods for export. lt is applicable only for
ocean.
6. CIF (Cost, lnsurance and Freight)

It consists of marine insurance (port to port) and shipping transport. The seller
delivers when the goods pass the ship-rail in the port of shipment. The seller must
pay the cost and risk of loss and damage The seller also has to procure marine
insurance against buyer's risk of loss during the carriage.
7. DEQ (Delivered Ex-Quay)
ln addition to above, it includes landing charges at importer's port.
8. DDP (Delivered Duty Paid)
ln addition to above, it includes import duty.
ln the recent revision of 2010, the terms DAE, DES, DFQ and DDU are
eliminated. There are two new terms introduced :
Product Planning and Pricing Decisions for Export Marketing 1l0|f|f 23
1. DAT (Delivery at Terminal)

The seller delivers when the goods once loaded at the named terminal at the
named port or port of destination. Terminal means any place whether covered or not
like quay, warehouse carted at road, rail or air cargo terminal.
2. DAP (Delivered at Place)
The seller delivers when the goods are placed at the buyer's disposal on the
arriving means of transport ready for uploading at the named place of destination.
Although internationally accepted, the term are still sometimes interchanging
differently in different countries. lt applies to delivery of tangible goods and not
intangibles like services, computer software.
For our syllabus let us learn three quotations in detail. They are :
a) FOB price
b) CTF price
c) CIF price
1. FOB Price (Free on Board)
Under this term, the seller/exporter fulfills the obligation of delivery of goods on
the board of the ship. From that point onwards the buyer bears all costs and risks.
The exporter clears the goods for exports. ln other words, FOB price includes actual
placement of goods abroad the ship.
Cenerally U. S companies prefer quoting export prices as F.O.B. ln lndia,
incentives are calculated on the basis of FOB price.
FOB price is calculated with following formulae :
FOB price = Cost of goods + Expenses
OR
upto the Board of the ship + Profit - export incentive
FOB price = FOB revenue - Export lncentive
Obligation of the exporter under FOB prices.
a) He has to bear all expenses required to load goods on the board of the ship.
The costs incurred by the exporter under FOB price includes.
i) Ex-factory cost
ii) Transportation charges (lnland)

iii) Packing charges
iv) Customs and port charges

v) Documentationcharges
24 3|!,lP Export Marketing (T.Y.B.Com.) (Sem.-Vl)
vi) Marine loading

vii) Wharfage and porterage
vii) Other expenses

ix) Profit margin
It is very important to note that FOB price does not inctude freight paid to
shipping company and marine insurance.
b) The exporter will submit necessary documents after shipping the goods to the
buyer.
Documents include :
i) Bill of lading
ii) Commercial invoice
iii) Consular invoice
iv) Certificate of origin
c) The Exporter clears the goods for export i.e. customs formalities.
d) He intimates the importer about shipment of goods. E.g. Date of shipment,
name of the ship, number of packages etc.
Obligations of the Buyer Under FOB price

a) The buyer books the space in the ship and give notice to the exporter. Here it
is important to note that shipping company acts as an agent of the buyer
under FOB price.
b) The freight is paid by the importer to the shipping company which carries the
goods from the port of shipment to the port of destination.
c) Under FOB price, the buyer obtains marine insurance policy to cover loss of
due to damage of goods. So, he has to pay insurance premium.
d) The buyer has to bear all costs and,risks after the goods are loaded on the
ship.
e) He has to make necessary payment to the exporter as per the contract.
2. C & F Price (Cost and Freight)
ln C & F price, obligation of delivery of goods is fulfilled by exporter same as

under FOB price. The only addition is that the exporter also pays freight necessary to
bring the goods to the named port of destination. He clears the goods for export.
Product Planning and Pricing Decisions for Export Marketing f,1f'1f, 25
C & F price, in other words includes FOB price plus freight. Therefore it can be
calculated as follows :
C & F price = FOB price + Freight
Obligation of exporter under C & F price

a) Exporter has to bear all expenses required to load goods on the board of the
ship.
b) Exporter books the space on the ship and is liable to pay the freight to the
shipping company. ln other words, shipping company acts as an agent of the
exporter under C & F price.
c) The exporter clears the goods for export. He prepares necessary documents
and completes customs formal ities.
d) The export will submit necessary documents to the buyer after shipping the
goods.
e) He intimates the importer about the shipment of goods.
Obligations of the buyer under C & F price

a) Under C & T price, a buyer obtains a marine insurance policy and pays
insurance premium.
b) The buyer has to bear all the costs at his port like port charges and import
duty.
c) He has to make payment to their exporter as per contract.
3. CIF Price
Under CIF price, the exporter pays the cost and freight necessary to the named
port of destination. He contracts for insurance and pays the insurance premium. The
risk of loss of or damage to the goods and additional costs occurring after the time of
delivery are transferred from the seller to the buyer, the exporter obtains insurance
only for minimum cover.
Thus it includesFOB price, freight and insurance, the exporter has maximum
obligations under this quotation whereas importer has minimum quotation. So, CIF
price is preferred by importers.
The formulae is :
CIF price = FOB price + Freight + lnsurance

26 Export Marketing (T'Y'B'Com') (1em'-Vl)
f'affi
Exporter has following obligation under CIF price :
a) Exporter bears all expenses upto the board of the ship.

b) Exporter books the space on the ship and pays freight to the shipping
company which carries goods to the pot of destination.
c) The exporter obtains a marine insurance policy and pays insurance premium.
d) The exporter clears goods for export. He prepares necessary documents and
completes customs formal ities.
e) The exporter submits necessary documents to the buyer after shipping the
goods.
0 He intimates the importer about the shipment of goods.

Obligations of the buyer under CIF price
a) The buyer has to bear all the costs at his port like port charges and import
duV.
b) He has to make payment to the exporter as per contract.
Distinction Between FOB Price and CIF Price
FOB Price CIF Price
1. Meaning It includes all costs to load the It includes all costs upto the
goods on the board of the ship. board and also payment of
freight and insurance.
2. Preference FOB price is normally preferred CIF price is normally

by exporter. preferred by importer.
3. lnsurance Insurance premium is paid by lnsurance premium is paid

Premium the importer. by the exporter.
4. Shipping Shipping company is an agent Shipping company is a.n

Company of importer. So importer books agent of the exporter as
the shipping space. exporter books the shipping
space.
5. Transfer of cost The buyer has to bear the

The buyer has to bear the costs
and risk and the risk after goods are cost of port charges and
loaded on the ship. import duty.
6. Obligation lmporter has maximum Exporter has maximum

obligation under FOB price. obligation under CIF price.
Product Planning and Pricing Decisions for Export Marketing Sr/r' 27
7. Freight Freight charges are charges Freight charges are paid by

paid by the importer. the exporter.
B. lncentives ln lndia, government offers CIF price is converted into

incentives on FOB price. FOB price for the purpose of
calculate.
9. Formulae FOB price = FOB revenue - CIF price = FOB price +

incentives freight + insurance
10. Amount Amount of FOB price is less as Amount of CIF price is more
compared to CIF price than FOB price.
HINTS tOR STUDENTS: MP lS TO FIFA
PROBLEMS ON FOB PRICE

1. From the following ir") .rf.rlate the FOB price if the exchange rate is 1 $ =
< s0/-.
Ex-factorycost : (28,000
Packingcost : (500
Transportation : ( 700
Contribution towards Profit : { 3,800
Duty Drawback 107o on FOB price.
Solution:
FOB cost = Ex. Factory cost + All expenses upto the board of the ship
= 28,000 + 500 + 7OO

= 7 29,2OO
FOB Revenue = FOB cost + profit
= 29,2OO + 3,800
= { 33,000
Let the FOB price be {x
Duty drawback = 10"h of FOB Price
=0.1 x
FOB price = FOB revenue - lncentives
x = 33,000 - 0.1 x
28 fclt Export M arketi ng (T.Y. B.Com. ) (Sem.-V I )
1.1x = 30,000
x = 30,000
.'. FOB price = ( 30,000
FOB price in $ =W=600$
.'. FOB price = { 30,000 (600 $)
2. Calculate the minimum FOB price which can be quoted by an exporter from he
following details. Also calculate the amount of foreign exchange that can be
earned at ( 50 per dollar :
Ex-factorycost : {65,000
Packingcost : {20,000
Transportationcost : (15,000 /.1:.),
Profit earned : 1Oo/o of FOB cost
Duty Drawback : 'lOo/o on FOB price
Solution:
FOB cost = Ex-factory cost + All expenses upto the board of the ship
= 65,000 + 20,000 + 15,000

= ( 1,00,000
FOB Revenue = FOB cost + Profit
= 1,00,000 + 'loo/o of 1,00,000
= 1,00,000 + 10,000
= '1,10,000
Let FOB price be ( x
;.Duty Drawback = 'loo/oof x 0.1 x
=
FOB price = FOB Revenue - Incentives
x = 1,'10,000-0.1
1.1 x = '1,10,000
x = 1,00,000
.'. FOB price is < 1,00,000
FoBpriceing =q#A = $2,ooo
FOB price = ( 1,00,000 or g 2,000

Product Planning and Pricing Decisions for Export Marketing l,l,ff 29
3. From the following data, calculate the minimum FOB price to be quoted by an
exporter in US dollars, if 1 US $ = { +0.
cost
Material : t'1,40,000
Labourcost : (60,000
Local Transportation : (8,000
OtherExpenses : t2,000
Profit Contribution : 2Oo/o of FOB cost
Duty Drawback : 5o/o on FOB price
Solution:
= 1,40,000 + 60,000 + 8,000 + 2,000
= 2,10,000
FOB cost + Profit
FOB revenue = 2,10,000 + 20o/" of 2,10,000

= 2,10,000 + 42,OOO
= 2,52,000
Let FOB price be t x
.'. DuW Drawback = 5o/o of x
=0.05x'
FOB price = FOB Revenue - lncentives
x -- 2,52,000 - 0.05 x
1.05 x = 2,52,OOO
_ 2,52,OOO
x 105
x = 2,4O,OOO
.'. FOB price = ( 2,40,000

FoB price in $ ='# = $ 6,000
FOB price =7 2,4O,O00 or $ 6,000
4. From the following data calculate minimum FOB price and the amount of
foreign exchange that can be earned by an exporter in US dollars.
Cost of Materials : 7 2,25,OOO
30 frfiff Export Marketing (T.Y.B.Com.) (Sem.-Vl)
CostofLabour : <1,20,OOO
Local Transport Charges : < 18,000

PackingCharges : {12,000
ProfitContribution : <65,000
Duty Drawback : 1O"/" on FOB price
Conversion Rate 1 US Dollar = ( 45
Solution :
= 2,25,O00 + 1,20,000 + 1 8,000 + 12,000
= 3,75,OO0
FOB revenue = FOB cost + Profit
= 3,75,00O + 65,000
= 4,4O,OOO
Let FOB price be { x

.'. Duty Drawback = 'l0olo of x
=0.1 x
FOB price = FOB Revenue - Incentives
x = 4,4O,O0O - 0.1 x
1.1 x 4,4o,ooo '')oo'oo'|:
=
x = 4,00,000
2.40.OOO
FOB price in $ =T=$8'888'89
FOB pricd = t 4,00,000 or $ 8,888.89
5. From the following data, calculate minimum FOB price.
Cost of Material
: t 75,000
Cost of Labour : { 10,000
PackingCharges : {10,000
Transportation : ( 8,000
Profit : "lOo/o of FOB cost
DBK : 'l5o/o on FOB price
Conversion Rate 1 $ Dollar = { 40
Product Planning and Pricing Decisions for Export Marketing tfaP;;9 3t
Solution:
= 75,000 + 10,000 + 10,000 + 8,000

= 1,03,000
FOB revenue = FOB cost + profit
= 1,03,000 + lOoh of 1,03,000
= 1,03,000 + 10,300
= 1,13,300
.'. Duty Drawback = 15oh of x
= 0.15 x
X = 1,13,300 - 0.15 x
1.15 x = 1,13,300
x ,=(98,521.8
FOBprice =(98,521.8
FoB price in g =W# =$2,463
FOB price = { 4,00,000 or $ B,B8B.B9
FOB price = T 98,521.8 or $ 2,463
6. Calculate the FOB price to be quoted to an importer from the following details.
Ex-factorycost : t1,52,000
Packingcost : (28,000
Expenses upto loading : ( 20,000
Profit expected : 217" of FOB cost

Duty Drawback : lOo/o on FOB cost
Conversionrate : 1$={40
Solution:
FOB cost = Ex- factory cost + AII expenses upto the board of the ship
= 1,52,0OO + 28,000 + 20,000
= 2,00,000
\
32 !,1l|l, Export Marketing (T.Y.B-Com') (Sem'-Vl)
FOB revenue = FOB cost + Profit
= 2,00,000 + 2'1"/" of 2,00,000

= 2,00,000 + 42,OOO
= 2,142,O0O
.'. Duty Drawback = 107o of x

=0.1 x

x = 2,42,OOO - 0.1 x
1.1 x = 2,42,O0O
FOB price in $ ='#

x - 2,2O,O0O
FoBpriceing =ry=$5,500
.'. FOB price = 7 2,2O,000 or $ 5,500
PRICING PROBLEM FOR PRACTICE
1 From the following data, calculate minimum FOB price in EURO. 1 Euro =
< so.
cost
Material : {4,20,000
Labourcost : {1,80,000
Local Transportation : 724,OOO
OtherExpenses : t6,000
Profit Contributed : 2O/" of FOB cost
Duty Drawback : 5"/o on FOB Price
[Ans. ( 7,2O,OOO or 14,400 Euro]
2. From the following, calculate BEP. Also calculate the profit, if exporter sells
2,00,000 units per year.
Fixedcost : ? 3,00,000 per year
FOB price : t 40 per unit
FOB cost : ( 45 per unit
Product Planning and Pricing Decisions for Export Marketing Srfrf JJ
Duty Drawback : 25"/" on FOB Price
[Ans. BEP = 40,000 units, Profit = t 7,00,000]
3. Calculate the FOB price which an .exporter can quote on the basis of the
following information :
a) Ex-factory cost ( 1,00,000
b) Expenses upto loading on the board of the ship
Packing charges < 2,000
Transportation charges { 4,000

Duty Drawback assistance 25o/" of FOB price
c) Profit desired < 14,OOO
lAns. FOB Price = < 96,0001
4. The exporter approaches you with the following data. What minimum FOB price
would you advise him to quote?
Ex-factorycost : t15,00,000
Packingcost : (30,000
Transportationcost : {20,000
Contribution towards profit : 1Oo/"
Duty Drawback : 5o/o
lAns. FOB Price = < 16,2381
5. From the following information, calculate the minimum FOB price which the
exporter can quote if 1 $ = ( 50.
No.'ofUnits : {10,00,000
Ex-factory cost per unit : { 5,200
Packing cost per unit : { 300
Transport cost per unit : { 20,000
Expected contribution to profit per unit : { 1,000
Duty Drawback 157o FOB Price
lAns. FOB Price = t 6,000 p.u. or 120 $ p.u.l

Export Marketing (T.Y.B.Com.) (Sem.-Vl)
34 tt fftf
6 The following is the cost dates of Empire Expo Ltd.
Ex-workscost : {5,000
Special Packing charges : { 1,000
Transportation charges : <500
Marine loading charges : t 500
Contribution of Profit : 5"/" FOB cost
Duty Drawback : 5olo on FOB price
a) Calculate minimum FOB price if 1 $ = t 35
b) What will be C & F price if Marine freight is $ 20?
lAns. FOB Price = $ 200, C & F price - $ 220)
QUESTION BANK FOR SELF PRACTICE

1. What do you mean by Export pricing? Explain various factors affecting export
price.
2. Discuss various export pricing strategies.
3. What do you mean by skimming pricing strategy? Explain its merits and
demerits.
4. What do you mean by penetration pricing strategy? Discuss its merit and
demerits.
5. Distinguish between skimming pricing strategy and penetration pricing in export

market.
6. Elaborate different pricing methods that can be used by the export firm,
7. What do you mean by export price quotation? Explain various export price
quotations used by the exporter.
B. Write a note on 'tncoterm'.
9. What do you mean by INCO terms? Explain various quotation under INCO term.
10. Simple problems on FOB price.
11. Discuss the various export product decision.
12. Explain the decisions to be taken by the exporter in product planning.
13. Explain various approaches/strategies in selecting a brand name in export
marketing.
Product-Planning and Pricing Decisions for Export Marketing l,1lf 35
14. Discuss the factors affecting brand in export marketing :
a) Shopping marks like names, number of packages.

b) lnformation mark like country of origin weight.
c) Handling instruction for goods like glass.
15. Explain importance of packaging in export market.
16. Explain the advantages of labelling in foreign market.
17. What is labelling? Discuss its advantages with respect to export market.
18. What is marking? Discuss the requirements of marking in lnternational market.
19. Explain the essentials of good packaging in export market.
oBf ECTTVE QUESTTONS
A. State whether the following statements are true or false :
1. Environmental aspects must be considered in product packaging.

2. Labelling of export goods refers to put certain marks on the carton boxes.
3. Marking must be there at least on one visible side.
4. At the introductory stage of Product life cycle, a firm may charge higher price to
induce people to buy the product.
5. The longer the chain of intermediaries lower will be the price of the product.
6. ln standard export pricing strateg/, the exporter charges different prices in
different global markets.
7. Penetration pricing strategy ensures customer delight.
B. Ex-factory cost includes the cost for manufacturing a product in the factory and
insurance charges.
9. Exporter considers only various consumer factors while fixing prices.
10. Transfer pricing strategy is adopted by subsidiaries of multinational corporation.
[Ans. : True : 1,7, 10;

False : 2,3, 4,5, 6, B,9l
36 f.f.i Export M arketi ng (T.Y. B.Com. ) (Sem.-V I )
B. Match the following:
GROUP A GROUP B
1 Economic Boom a) Heavy Promotional Expenses
2 Rapid Skimming Pricing b) Higher Price
3 Economic Recession c) Two part pricing
4 SIow skimming pricing d) Limited Promotional expenses.
5 Service Firms e) No Profit. No Loss
6. Break Even Pricing fl Lower Price
lAns.:('l -b), (2-a), (3-0, @-d), (5-c), (6-e)l
igi
I
Export Distribution and Promotion
rfff 37
MODULE
EXPORT DISTRIBUTION
AND
PROMOTION
SYNOPSIS I
* Factors influencing distribution channels : Direct and lndirect exporting

channels; Distinction between Direct and lndirect exporting channels.
* Components of logistics in Export Marketing ; Selection criteria of modes of
Transport; Need for lnsurance in export marketing.
* Sales promotion techniques used in Export Marketing ; lmportance of Trade Fairs

and Exhibitions; Benefits of Personal Selling; Essential of Advertising in Export
Marketing.
38 f1f1l Export Marketing (T.Y.B.Com.) (Sem.-Vl)
DIRECT AND INDIRECT CHANNELS
!ntroduction
Once the exporter decides to export the company has to decide on how to enter
the foreign market. A number of options are available, each having its own strengths
and weaknesses. Some companies also adopt multiple strategies. The selection of the
channel will depend on the requirements of the exporter. Some channels may not
require direct investment in foreign countries and some will require direct
investment.
FACTORS INFTUENCING CHOICE OF DISTR!BUTION CHANNELS
Markets of different countries are heterogeneous in financial climate, consumer

behaviour, and government policies. On the other hand companies also have
different objectives of exporting. Before selecting the mode of entry into the foreign
market all these must be considered.
1. Product characteristics : Product characteristics like unit value, perishability,
bulk, degree of product standardisation
2. Market and customer characteristics : market size, location, the number and
dispersal of customers, frequency of purchase, typical size of purchase.
Customer buying habits and impact of selling methods on customers.
3. Middlemen characteristics : middlemen differ in their ability and willingness to
support promotion strategies of the exporter. The margin or commission for
middlemen, warehousing or transport facilities given by them. The types of
products that they deal in.
4. Company characteristics and objectives : company's size, financial strength,
product mix, past channel experience, marketing policies.
5. Competitor's characteristics : company may adopt similar strategy or a more
profitable design can be adopted.
6. Environmental characteristics : factors Iike political, economic, social and
technological situations influence choice. Covernment policies and regulations
also influence selection.
tVleaning
The two main modes of entry into foreign markets are :
o Direct exports
when the exporters directly sell their goods to foreign countries
o lndirect exports
When the exporters use varied channets to sell their goods to foreign countries
lfr'r' 39
Types of Direct Export
1. FDI (Foreign Direct lnvestment)

FDI is when a company invests in the foreign country. The methods range from
directly funding an overseas manufacturing unit in the foreign country to a joint
venture. While entering a foreign market directly, through direct investment, the
company must consider the risk involved in that country. A Foreign . Direct
lnvestment helps the exporting company to spread the risk into other countries and
diversify its investment. The economies of countries also benefit as the flow of capital
ensures increase in productive activity and establishment of sound and healthy
corporate norms, rules and legal practices.
FDI focuses on long term benefits for the company as this decision would be
almost irreversible. The company has to continue the business in the recipient
country as closing down physical manufacturing units or a registered existing
business is not easy. Direct investments are influenced by the image of a country as
an investor friendly or hostile, corrupt or non-corrupt, political stabile or unstable
country. Countries, which have friendly macroeconomic policies, are rich natural
resources, have locational advantage and have pro-democratic governments are
known to attract more investments. The long term sentiment in the international
forums about the host country also influences investment decision. Developed
countries are the largest recipients of FDI and the largest source of FDI for other
countries.
2. Exporting
Exporting is when a company exports a product from its home country, without
any marketing organisation overseas. Cenerally, the exported product is the same as
what is sold in the home country. Used more commonly by small firms which
export, it is a less risky proposition. First time exporters use this mode of entry first to
acquaint themselves with exporting before exporting on a permanent basis.
ln this mode the exporter tries to simplify his process of marketing activities and
avoid product modifications, so as to minimize risks and costs of selling overseas.
This strategy is not suitable if the home country currency is strong. USA faces
problems exporting their products and it also has tough competition from imports of
cheaper products. The stronger the currency the imports will become cheaper fciiflhe
consumer. ln the 197Os the Swiss franc was s9 strong that Swiss companies found it
difficult to export to USA. They had to invest abroad to reduce the impacti of the
strong franc. Research has shown that decision makers of SME exporters learnt about
foreign opportunities through their existing social ties - rather than formal scanning
and market research. This was consistent across different industrial settings (Paul Ellis
40 fIff Export Marketing (T.Y.B.Com.) (Sem.-Vl)
and Anthony Pecotich, "social Factors influencing Export initiation in Small and
Medium-sized Enterprises", Journal of Marketing Research, Feb 2001)
Types of lndirect Export
1. Licensing
Licensing is an agreement that permits a foreign company to use the property of
a company. The agreement specifies the property that can be used by the foreign
entity - patents, trademark, copyrights, technical know-how and skills, architectural
or engineering designs or a combination of any of these. The licensor company
allows the licensee company to manufacture and sell the company's product in the
Iicensee's home country in exchange of royalty/fees. This is a less risky compared to
FDI and less expensive than exporting.
Many companies prefer this method. Coca-cola, Starbucks are examples of

companies that prefer this mode. Most pharmaceutical and retail companies prefer
this mode of entry.
The advantage is that :
a research and development facilities can be spread to different countries;
o increased incomes are achieved with negligible expenses used when capital
resources are scarce;
o it is a good technique when a country is sensitive to foreign investment
o it useful when a country has stringent trade barriers to foreign companies
o where transport cost is high this is a beftr method
o if the country has a difficult or non-receptive consumer behaviour, then a
local seller is a better bet
The disadvantage of this method is that
o it is the least profitable of entry modes.
o the licensee may become a competitor in future with inside knowledge of
licensor company.
a licensee may perform poorly.
., ,.,) brand image in the hands of foreign entity which is not as committed as the
licensor.
o the licensee may ncit adhere to the product standards.
o different product qualities may be observed of same product in different
countries.
Export Distribution and Promotion ;tPfraP 4t
2. Franchising
The main characteristics of Franchising are similar to licensing, only that the
franchisor exercises more control and monitoring over the franchisee. McDonald,
KFC use this mode of entry. Since they are edible and perishable products they prefer
to have more monitoring of the products sold with their brand name. The advantages
and disadvantages are similar to licensing.
3. ManagementContracts
The company enters into a contract with a local company to manage its business
in the foreign country. This mode is generally used by hotel chains. lt reduces the
political risk factor in business. ln this mode the returns are less. lf the governments
are hostile and force companies to shut down or leave the country then companies
can adopt this strategy. The advantages and disadvantages are similar to licensing.
4. loint Venture
A joint venture is a partnership at the corporate level; it can be domestic or
international. As a mode of entry this used between or among companies of different
companies. lt is formed for a specific purpose. ln countries where there is high
financial or technological risk this is a suitable method. Where high level of skill is
required for the production this is useful as the different companies offer their area of
specialization. The advantages of joint venture are :
o Best skilts of countries can be utilised in one venture.
o When wholly owned are prohibited in a country this mode is possible.

o The partner companies can function with reduced contribution of personnel.
o The companies can put best use of Iimited money resources.
The disadvantages are :
o The partners may not be able to create synergies.

o As both are functioning as individual entities there could be conflicts of
interest.
o lf the decision-making process is not clear there could be clashes or conflicts
between partners.
o Decisions will be delayed as both parties from different countries will have to
agree on the same decision.
o Objectives and aims may start diverging after some time after the venture is
implemented.
o There will be two centres of power which impacts the business activities
adversely.
42 ffi Export Marketing (T.Y.B.Com.) (Sem'-Vl)
5. Assembly Operations
Assembly means the fitting or joining together of components to produce the
end product. tt can be done by welding, gluing, laminating, sewing, riveting. ln this
mode parts or components of the product which are manufactured in different
countries are put together in another country. Commonly used in consumer
electronic goods. The advantage in this method is :
o Labour intensive/ capital intensive components produced in respective

countries
a Price competitiveness as imports of cheap components is possible
o Easy to enter many countries
o Lesser tariffs will be applicable
o Some countries have rules that a percentage of the product be sourced
locally
a Components may not be upto the product standardization needs of the

company
o Host countries do not approve of companies which just assemble imported
parts
6. Turnkey Operations
A turnkey operation is an agreement by the seller to supply a buyer with a
facility fully and ready to be operated by the buyer's personnel, who will be trained
by the seller. Large scale manufacturing units requiring specialized and modern
technology not available in the local markets use this mode. Giant projects of
construction, steel manufacturing units, cement, fertilizer and chemical plants,
infrastructure use this mode and deal with governments. These projects are big and
so huge profits are a part of such exports. The advantages of this mode are:
o Modern technology will be available to the local business.
o Personnel are trained to use the technotogy.
o The long term benefits will accrue to the recipient company/ party.
a Financing is difficult as project involves hu$E'ihVestment.

o The exporter will gain only form the contract on a one-time basis.
a The local people have to trained for using the technology.
Export Distribution and Promotion f,.lP!. 43
o The exporter will have to provide intensive after-sales-service as the

technology is of the home country, not the host.
7. Acquisitions
Acquisition or a takeover is when a company purchases another company from
the foreign country. This is different form FDl. Covernments favour FDI as it creates
employment; however acquisitions change the business, displacing and replacing
local ownership. lt also requires shuffling employees sometimes retrenching some.
Acquisitions can be hostile or friendly. Mostly, in international business the
acquisitions are viewed more as a challenge than an opportunity by the employee,
society and government. The advantages of acquisitions are :
o lt is useful when exporter want a quick entry into foreign markets.
O The local company knows the local markets better.
o The network built by the local company yields quicker returns.
O The exporter retains maximum control of the business.
o The local employees will be unhappy with the change.

a The displacement would adversely affect the goodwill of the company.
o The local personnel may not be ready to accept the new management.
a The benefits of the acquisition depends on the value of currencies of the
countries.
o Language and cultural barriers will be a hurdle to smooth operations.
8. Strategic Alliances
There are many ways of entering into foreign markets. A new mode in the
international markets is the strategic alliance. There is no specific definition for this
form. lt is a form of corporate co-operation. This is gaining a lot of attention as
multinationals and large companies need some alliance to be entering foreign lands.
These may have manifested through mergers, acquisitions, licenses or joint ventures.
The common reason for entering into an alliance is cost reduction, resource
allocation, risk reduction, competitive advantage. Airline industry is a good example
of alliances of international nature. Almost all major airlines have joined one of the
three strategic groups: Op"qggfl{U,SkyTeam and Star. Most commonly agreed way of
alliance is seats shared in the partners flights. Passengers are given frequent-flier
benefits if they fly with alliance partners.
44 !,l.!. Export Marketing (T.Y.8.Com.) (Sem.-vt)
9. Wholly owned subsidiaries

The company can opt to invest in a manufacturing facility abroad. MNCs use
this mode as they want to increase their presence in the world. The advantages of
this mode of entry are :
o Lower production costs
o Low labour wages
o Lower costs for raw material
o lmport duties can be reduced as manufacturing is local.
o Host countries promote this as employment is created and resources used.
Disadvantages are :
o Skills available locally may not match MNC requirement.

o Training costs will be incurred.
o Product image will be influenced by the country of manufacture.
The above mentioned techniques can be adopted by the exporter to gain entry
into a foreign market. The exporter has multiple choices to enter into foreign
markets. Each mode has its own advantages and disadvantages. A single best method
cannot be recommended to exporters. Further, many international environmental
factors play a role in selection of the mode. One company may select a mix of
methods to enter into markets according to its own requirements, countries features,
consumer and product features. After due consideration the mode is decided. ln the
Far East countries joint ventures are preferred because of the legal restrictions. For
US, which has high market barriers, joint ventures are preferred. A strategy which is
suitable for tangible products may not be suitable for intangible services.
COMPARISON OF DIRECT AND TNDIRECT EXPORT
Sr Points Direct Exports lndirect export

No.
,|
First-hand Available to exporters Not available to exporters.
information
2 Meaning Exporter directly involved in Exporter has intermediaries in

the sale of goods foreign countries. Different
modes are available.
3 lnvestment Exporter has to investment lnvestment shared by the

more exporter and intermediary
parties.
ffffff 45
4 Suitability Suitable for specialty Suitable where mass

products or Small Medium production is required and
enterprises, where consumer tastes are different
e-commerce is possible. from home product.
5 Control Exporter has decision making Exporter relinquishes control

over control over the exports. to intermediaries.
exports
6. Reputation Exporter directly gets the The reputation is shared with

goodwill and brand intermediaries.
reputation improves.
7 Benefits of Exporter enjoys the Exporters may have to forgo

incentives incentives by the home some incentives as partners
government. from other countries will be
involved.
8. Overhead Higher expenses as the sale Lesser expenses as sales are

expenses will be managed centrally. management is distributed.
9 Risk Higher risk as all borne by Lower risk as shared by

involved exporter, and less knowledge exporter and intermediaries,
about foreign markets. and parties have better
knowledge of their home
markets.
10 Consumer Lesser price as intermediaries Higher price as intermediaries

price are less. are involved.
COMPONENTS OF LOGISTICS IN EXPORT MARKETING
Logistics management comprises of five major interdependent areas :
1. Fixed facilities location : The location of fixed facilities like warehousing and
production should be in such a way that it maximises the efficiency of the
logistics system. Factors like future potential of markets, plans of the
coinpany and competitor strategies, political stability play an important
considerations.
2. Transportation Modes of transport, frequency of shipping are determined
:
on consideration of factors such as cost, speed, safety, lead time, transit time,
type of product, natural environment etc.
\ \__
46 j|lf|f Export Marketing (T'Y'B'Com') (Sem'-Vl)
3. lnventory management: The main objective of inventory management is to

minimise the cost of inventory while ensuring smooth supplies.
Technological development in inventory management system, customer /
importer order processing have made this area a challenging one.
4. Order processing : Efficiency
of order processing by the client and the
company have to be improved and upgraded constantly. A rapid system
shortens the order cycle and allows for lower safety stocks for the client.
Exporters from lndia and developing countries face this challenge of creating
an efficient method.
5. Materials handling and warehousing : The technologies used for this may be
different in different countries. Natural climatic factors also change the way
in which products have to be stress.
The other components of logistics are :
Procu renrcnt ()utbou ntl

l\,lan ufactu ring Customer
and and
Process Service
Inbound Distribution
o Procurement (Raw material purchase)

The manufacturer purchases raw material from suppliers. The suppliers may
be from foreign countries. The job of logistics is to ensure that the material of
specific quality and quantity is procured and reaches the manufacturing plant
on time.
o Manufacturing Process
A producer may be producing goods by sourcing parts of the product from
different manufacturers. The completion of the production schedule is
dependent on the availability of these parts in a time bound manner. The
effort of the logistics is directed at making available the various parts, maybe
from different countries to the manufacturer. The logistics may involve Work
in progress and sub-assembly material. The logistics should provide the
service of track and trace, especially as many countries and distance
involved are more in exports.
o Distribution
From the manufacturer the goods are stored till orders are placed. The
logistics takes care of Warehousing. Facilities to store and Handling care of
the goods is comes under logistics. In exports the time lrg between
production and orders is also high, this is an important consideration for the
Export Distribution and Promotion *W 47
exporter. The storage time and cost should be minimized with an efficient
logistics management.
o Delivery to consurirtif" '
The last part of the process of export is the delivery to the end-consumer.
This is another component of logistics. The goods should be delivered on
time and in good condition to the consumer. ln the interaction with
consumers there is another component of logistics which is recycle logistics
when the product is reused or recycled. Maybe the product is resold to other
country consumers. The logistics has to also deal with the goods that
consumers return to the producer, with online commerce this is an important
component of logistics management.
a wide array of activities ranging from procurement to

Logistics covers
delivery. Many companies have third party contracts with companies
specializing in logistics. ln export marketing this is a sensible option as the
time and expertise involved is more.
SEI-ECTION CRITERIA OI MODES OI TRANSPORT
In import export business, it is important to know what type of transportation will

be efficient and cost effective for business. Mode of transport and distributions are
the key factors for international trade. There are four ways of importing and exporting
goods from one place to another place i.e. rail, road, air and sea. The choice of
mode of transport depends on the following :
o Lower logistics cost. The cost incurred in providing logistics should be less as
it adds as a major component of cost of product and affects profitability of
export.
o Timely delivery schedules. Time spent in delivery affects the turnover of sales
and the capacity of liquid funds with exporter.
o Proper inventory levels. Bottlenecks in flow of goods affects productivity of

the manufacturer.
o Higher customer services. Some product require special services to be given
to customer, especially in industrial goods, construction exports.
o Type of safety required. Some goods have to be transported with safety
equipment. The following goods are defined as dangerous :
o corrosive substances
o explosive substances and articles
o flammable liquids and solids
4B fr/Ir Export M arketi ng (T.Y. B.Com - ) ( Sem.-V I )
O gases
a oxidizing substances
o radioactive substances
o toxic substances
The five main modes of transport are :
1. ROAD TRANSPORT is more flexible than any other mode of transport. lt is easy
to track shipments, the consignments can be secure and private, schedule transport
and pay the relevant fees. lt includes the ability to deliver cargo from door to door
with high flexibilitv and without need for further trans-shipment. The way of motor
vehicles network and crossing national borders is quick and efficient.
There are also so many risks for road transport such as long distances cargo
delivery takes more time due to traffic delays and breakdowns. There is the risk of
goods beings damaged and toll charges are high in some countries.
2. RAIL TRANSPORT is a cost effective and efficient way to move the goods. lt
plays a major role in the regional trade of the country and commerce activities. lt can
carry relatively large quantities of goods from medium to long distances and other
advantages include low transport costs, environmental friendly and higher reliability
than road transport. Most of the cargo's transported by railways comprises bulk items
such as coal, iron ore, cement, fertilizers, raw material for steel plants, finished steel
products and petroleum. ln remote regions, routes and timings are inflexible. There
are some regions all over the globe have a proper rail system which is a huge setback
for remote regions.
3. SEA TRANSPORT is the oldest mode of transportation used in transporting
goods. There is a popular phrase - Old is Cold. lt is categorised by low cost and high
capacity. !t is suitable for the shipments of large volume of objects transported for
long distances when the delivery time is not important. lnternational transportation
could be delayed due to slow speed, environmental aspects, inflexible routes &
schedules.
However, the sea transport includes the limited network of routes and costs
higher for loading, unloading and trans-shipment of commodities. To reach the final
destination from sea ports further transportation is also needed and there may be
additional costs for land transportation.
4. AIR TRANSPORT is the least utilized mode of transport in international trade
and the newest among all modes of transport. lt is the best way for quick delivery
and distribution of goods. lt is the safest methods of transport and variety of goods
can be imported or exported through this mode.
Export Distribution and Promotion jl1al1g, 49
Air transport involves higher costs than modes and not suitable for all items and
also need to pay taxes at each airport. lt is highly expensive but still used by traders
on a targe scale. The other transportation is needed to reach the goods from the
airport to its destination.
5. PIPEIINE mode of transport is a line of pipe equipped with pumps and valves
and other control devices for moving liquids, gases, and slurries (fine particles
suspended in liquid). Pipeline sizes vary from the 2-inch- (S-centimetre-) diameter
lines used in oil-well gathering systems to lines 30 feet (9 metres) across in high-
volume water and sewage networks. Pipelines usually consist of sections of pipe
made of metal (e.g., steel, cast iron, and aluminum), though some are constructed of
concrete, clay products, and occasionally plastics. The sections are welded together
and, in most cases, laid underground.
Most countries have an extensive network of pipelines. Because they are usually
out of sight, their contribution to freight transport and their importance to the
economy are often unrecognized by the general public. Yet, virtually all the water
transported from treatment plants to individual households, all the natural gas from
wellheads to individual users, and practically all the long-distance transportation of
oil overland goes by pipeline.
Pipelines have been the preferred mode of transportation for liquid and gas over
competing modes such as truck and rail for several reasons: they are less damaging
to the environment, less susceptible to theft, and more economical, safe, convenient,
and reliable than other modes. Although transporting solids by pipeline is more
difficult and more costly than transporting liquid and gas by pipeline, in many
situations pipelines have been chosen to transport solids ranging from coal and other
minerals over long distances or to transport grain, rocks, cement, concrete, solid
wastes, pulp, machine parts, books, and hundreds of other products over short
distances. The list of solid cargoes transported by pipelines has been expanding
steadily.
NEED FOR INSURANCE IN EXPORT MARKETING
The maritime perils and commercial and political risks the exporters are exposed
to and the credit risk the exporters and export financers encounter are among the
serious problems affecting the export business. To protect the interest of exporters
and financers and to encourage and promote exports of the country such risks are to
be covered.
-Risks in export marketing include:

a) tommercial risk
b) Political risk
50 Export Marketing (T'Y'B'Com') (Sem'-Vl)
fflt
c) Marine risk
lnsurance is necessary in international trade because of inherent risks that are
present in any export transaction. A company can insure against commercial credit
risks, political risks and shipping risks.
A. Commercial Credit Risk

Commercial credit risk insurance covers losses due to non-payment by the
buyer. FCIA, a private insurance group that operates as EXIM bank's agent provides
such insurance. Private insurance companies are also operating but to a limited
extent.
Features
i) The exporter must apply for a FCIA policy through insurance broker, who is
specialized in international insurance.

ii) lnsurance can be directly obtained from regional offices of FCIA.
iii) FCIA insurance protects gO% (gTo/" in case of agriculture) of foreign
receivables against commercial loss and provides 100% protection for
political risk.
iv) Types of policies :
a) Umbrella policy.
b) New to export policy.
c) Short term/medium term single buyer policy.
B. Political and Country Risk
Even if importer is creditworthy and reputed, there is still political risk that an
exporter needs to take into consideration.
Political risk refers to :
a) War
b) Currency fluctuation
c) Expropriation by government
d) Political unrest
e) High interest rate, inflation and major trade deficit.
lf the export is insured with FCIA, a political risk is automatically covered.
Private insurance companies also provide country risk coverage only.
1." \
Export Distribution and Promotion gt.gl.tr 5l
C. Cargo Insurance
Exporter should be aware of the risks to their cargo (export goods) while it is in
transit. This risk include :
a) Fire
b) Storm
c) Pilferage
d) Explosion
e) Collision
It is important that the goods must be insured against lass/damage at each stage
of transport so that whatever made of transportation being used, neither by exporter
nor the buyer suffers any loss.
Depending on the export price quotation, either exporter of the buyer is liable
for loss/damage of goods.
E.g. ln an FOB contract, the importer takes responsibility.
In CIF contract, the exporter obtains the insurance.

Types :
a) FAP-(Free of particular ways)

b) WPA (With particular average)
c) All risks -insures against most risk except the risk of war. lt is a kind of
broader coverage.
Marine insurance is applicable to sea transportation. An exporter can request air
freight insurance from the carrier, the cost of which charged with air freight costs.
This covers all risks, excluding war, which carries an additional premium.
ln the context of undertaking foreign trade, producers who are exporting or who
are planning to export are subject to different types and ranges of risk than they
would experience in the domestic market. International trade is affected by, but not
limited to, a range of risks that need to be addressed and which include :
1. Country/political risk
2. Currency exchange risk
3. lnstability of the local currency market
4. Transfer risk
5. Credit risk relating to credit & financing
6. Non-performance risk
7. Transport risk
f1f1f
8. Legal risk
9. Risk of fraud
10. Risks related to social, and geographic issues
Promotion
Promotion of products and services in foreign countries is very complex because
of differences in the environment of different countries. The exporter is well aware
the environment in his/her country but not of the foreign country. When promoting a
product local tastes, preferences, customs, traditions and culture have to be
understood. Self-Reference-Criterion (SRC) which is defined as an unconscious
reference to one's own cultural values, experiences and knowledge as a basis for
decisions. That is to say that the exporter may fall into the trap that one's own culture
or company knows the best how to do things. SRC can lead to failure of the product.
ln 1996 McDonald's opened seven restaurants in lndia. 40% population of lndia
is vegetarian and they do not eat meat or animal proteins. ln order to be successful in
new market the McDonald's had make many changes to its prime products and
needed to use separate tools and kitchens to make burgers and other products
according to the needs of lndian markets. Due to this the company had to incur extra
costs.
When Unilever started its operations in Brazil and wanted to introduce

detergents, the biggest issue it faced was that people in Brazil don't have washing
machines. ln rural areas people used to wash their clothes at the river, people of
Brazil were poor and they were price conscious. So to avoid self-reference criterion
Unilever first developed a special soap. They made plastic packing for soaps to
conveniently use while washing clothes in rivers and small packing of detergents in
order to lower their prices to make them affordable for people with low incomes.
SALES PROMOTTON TECHNTQUES USED tN EXPORT MARKETTNG
Sales promotion is defined as short-term incentives to encourage purchase or

sale of a product or service. lt includes trade fairs, exhibitions, samples, gifts contests,
games and lotteries etc. regulations regarding sales promotions differ from country to
country. Trade fairs are an effective tool used in export marketing.
IMPORTANCE OF TRADE FAIRS AND EXHIBITIONS
A trade fair is target directed. lt is organised for the purpose of selling goods or
demonstrating new ideas and techniques. An exhibition is not just for the traders but
also for the public. There are two types of fairs :
t
frl s3
a) Ceneral fairs also known as horizontal fairs.

b) Specialised fairs, also known as vertical fairs or solo fairs.
The general fairs have different products displayed for different fields. lt attracts
visitors of all ages, tastes and type. lt is a good place to display consumer goods, new
products. National pavilions are built in such fairs so that the government can create
an image of the country in the public's mind. Covernment give the visitors a view of
their country's industry, agriculture, way of life, tourist spots, as well as products. lt is
very useful in building the image of the country.
A specialised fair concentrates on display of a specific product, industry or a
group of industries. Many exporters who sell technical product suitable for a
particular industry prefer this type of fair. lt is not open to the public and he people
who come for such fairs have knowledge about the product and come with
specifications about the product they wish to see. lt is more effective as the target
market comes for such fairs.
Trade fairs are beneficial in the following ways :
1. ln some countries media is not permitted freely, advertising is not easy in

such places trade fairs are a safe option.
2. lt conveniently brings together potential sellers and buyers from all over the
world.
3. Sellers get an opportunity to promote their products and direct
communication and feedback is possible.
4. Modern developments in the product can be understood by the exporter.
5. Participants are varied sellers, machinery supplier, manufacturer,
intermediaries, technology solutions, raw material suppliers, packaging
devices and material, government agencies, etc.
6. Participants can know of new business opportunities and countries which are
friendly to business.
7. lt facilitates collecting knowledge about competition in the industry and
countries.
8. The participants are serious about business and many deals are signed in
such fairs. Cenuine enquiries are entertained, buyers and sellers can address
their issues directly with the concerned parties.
54 nfli Export M arketing (T.Y. B.Com. ) ( Se m.-V I )
BENEFITS OF PERSONAL SELLING
Personal selling is the personal communication of information to persuade

prospective customer to buy something. This is not the same as mass communication
techniques used in advertising.
Ways of personal selling can be depicted as below :
Ways of Personal Selling in Export Marketing
Visiting customers Meeting customers Meeting customers who

in foreign markets at trade fairs visit the home country
- Domestic based - Intemational (eg. India)
salesmen fairs held - Forcigii customer
- Salesmen in India visiting at his initiative
attached to - Intemational - Foreign customer
foreign office fairs held visiting at invitaiotn of
- Temporaril in foriegn exporter
hired countries. - Buyer selller meets
salesmen organise by promotion
organisations
Benefits of Personal Selling

1. Suitable for new product.
2. Keeps existing products in strong market positions.
3. Is suitable for construction of manufacturing facilities.
4. Opens new business opportunities.
5. lt involves direct dialogue so immediate solutions to questions.
6. Direct feedback is received.
7. lt is useful in developing a marketing intelligence network.
8. Crievances of customers handled easily.
9. Suitable for mall firms which cannot afford high advertising cost.
10. !t complements advertising efforts.
11. It can be flexible and tailor made according to customer needs.
12. lt give a personal touch.
13. Face to face communication unlike impersonal nature of mass communication.
14. Product demonstrations an explanation of features is easier.

15. lt results in actual sales advertisilig creates interest but may not result in
purchase.
Export Distribution and Promotion lffff 55
Limitations of personal selting are :
1. lt involves high cost in developed countries.

2. Success depends heavily upon ability and sincerity of personnel
ESSENTIATS OF ADVERTISING IN EXPORT MARKETING

lnternational Advertising, generally speaking, is the promotion of goods,
services, companies and ideas, usually in more than one country performed by an
identified sponsor. lt can be viewed as a communication process that takes place in
multiple cultures that differ in terms of values, communication styles, and
consumption patterns.
lnternational advertising involves recognizing that people all over the world
have different needs. Companies like Gillette, Coca-Cola, BlC, and Cadbury
Schweppes have brands that are recognized across the globe. While many of the
products that these businesses sell are targeted at a global audience using a
consistent marketing mix, it is also necessary to understand the regional differences,
hence it is important to understand the importance of international marketing.
Organizations must accept that differences in values, customs, Ianguages and
currencies will mean that some products will only suit certain countries and that as
well as there being global markets e.g. for BIC and Cillette razors, and for Coca-Cola
drinks, there are important regional differences for example advertising in China and
lndia need to focus on local languages.
Barriers to lnternational Advertising
The international communication process involves using the entire promotional
mix to communicate with the final consumer. First, the appropriate message is
determined for the target audience by the advertiser. Next, the international sponsor
(sendefl, usually represented by an advertising agency, encodes a message into
words and images. The message is then translated into the language of target market
and transmitted through a channel of media channels to the audience who then
decodes and reacts to the message. Cultural barriers may hamper effective
transmission of the message at each stage in the process and result in
miscommunication.
1. Culture
Culture is a problematic issue for many advertisers since it is inherently difficult
to understand. One may violate the cultural.norms of another country without being
informed of this, and people from different cultures may feel uncomfortable in each
other's presence without knowing exactly why. Communication is more difficult
56 t*l Export Marketing (T.Y.B.Com.) (Sem.-Vl)
because cultural factors largely determine the way various phenomena are
perceived. lf the perceptual framework is different, perception of the message differs.
It is a well-known fact that the culture of a country influences the customer
preferences. Customers are quite sensitive about cultural aspects depicted in
advertisements. Advertising themes, incorporating social acceptance, mutual
dependence, respect for elders, harmony with nature, use of seasons, innovation and
novelty, distinctive use of celebrities.
2. Language
Translation from one language to another language is crucial in international

advertising. The literal translation may fail to convey the desired message across the
countries due to cultural factors. For instance the word yes means in low context in
USA and Europe and in Japan it means I am listening to what you are saying in
Thailand it means Ok. So there is a difference in the language of different countries.
Pepsi used the German translation of the slogan 'come alive with Pepsi' in its ad
campaign in West Cermany. However, the slogan when translated in Cerman
actually meant 'come out of the grave with Pepsi' and failed to generate any market
response from the customers. Ceneral Motors translated its slogan 'Body by Fisher' to
'Corps by Fishe/ in Belgium that offended many Belgium customers.
3. Education
The level of literacy plays an important rote in deciding what advertisement tool
and message should be used in international market. Market segments with lower
level of adult literacy need to be addressed by,audio visual content rather than a
written message. lt should be ensured that the visuals convey the desired message
rather than the text part of the advertisement.
4. Government regulations
The regulatory framework of a country influences the advertisement strategy in
international market. The government regulations in a country relate to following
issues :
o Advertisements in foreign language.

a Comparative advertising referring to the competing product from rival firms.
o Use of children as models.
o Advertisement related to alcohol and tobacco.
o Advertisement related to health and pharmaceuticals.
Exprt Distribution and Promotion
$lfr' 57
Some of the various regulations in various countries are :
a ln Malaysia the Ministry of lnformation advertising code states that women

should not be a principal object of an advertisement and should not be used
to attract sales unless the advertisement product is relevant to women.
o The Ministry of lpfrormation in Saudi Arabia prohibits any advertisement
depicting unveiled woman.
a Use of foreign words and expression when French equivalents can be used
are prohibited in France.
a Portuguese law prohibits gender discrimination or the subordination or
objectification of women in advertising.
o lndian government has regulations regarding promotion expenditure abroad.
5. Media limitation
Media may diminish the role of advertising in the promotional program and may
force the marketers to emphasis the other elements of promotional mix. A marketer's
creativity is certainly challenged when a television commercial is limited to 10
showings a year with no two exposures closer than 10 days.
6. Art Direction
Art direction is involved with visual presentation- the body language of print and
broadcast advertising. Some Vpes of visual presentation are universally understood.
Revlon, for example, has used a French producer to develop television commercials,
English and Spanish for use in the international markets. These commercials, which
are filmed in
Parisian seftings, communicate the universal appeals and specific
advantages of Revlon products. :
By producing its ads in France, Revlon obtains effective television commercials

at a much lower price than it would have to pay for similar -length commercials
produced in US. Pepsi Co has used four basic commercials to communicate its
advertising themes. The basic setting of young people having fun at a party or on a
beach has been adapted to reflect the general physical environment and racial
characteristics of North America, South America, Europe, Africa, and Asia,. The
music in these commercials has also been adapted to suite regional tastes, ranging
from rock and roll in North America to Bossa nova in Latin America to Africa.
The international advertiser must make sure that visual executions are not
inappropriately extended into markets. Benetton recently encountered a problem
with is "United Colors of Benefton" campaign. The campaign appeared in 77
countries, primarily in print and on billboards. The art direction focused on striking,
provocative interracial juxtapositions- a white hand a black hand handcuffed
5/T.Y.B.Com.-Export Marketing (Sem.-VI)
5B Export Marketing (T.Y.B.Com') (Sem'-Vl)
f1f1;f
together, for example another version of campaign, depicting a black woman nursing
a white baby, won adverting awards in France and ltaly. However, because the
image evoked the history of slavery in America, that particular creative execution
was not acceptable in the U.S.
.' , j
. ,
7. lnternational advertising helps in

,,,;,
a Remind customers and prospects about the benefitr'3t' yout product or service.
o Establish and maintain your distinct identity.
o Enhance your reputation.
o Encourage existing customers to buy more of what you sell.
o Attract new customers and replace lost ones.
o Slowly build sales to boost your bottom line.
a Promote business to customers, investors.
o Create awareness
o Communicate information about attributes and benefits.
o Develop or change an image or personality.
o Associate a brand with feelings and emotions.
lnternational advertising is defined as the non-personal communication by an

identified sponsor across international borders, using broadcast, print, and or
interactive media. lt requires dissemination of a commerciat message to target
audiences in more than one country. Target audiences vary from country to country
in terms of how they perceive or interpret symbols or stimuli; respond to humour or
emotionat appeals, as well as in levels of literacy and languages spoken. How the
advertising function is organized also varies. "zrirt'llLjcJ vrl6(
QUESTTON BANK FOR SErF PRACTTCE

1. Explain the factors to be considered while selecting Distribution channel.
2. Distinguish between Direct and tndirect distribution channels.
3. Discuss various direct exporting channels.
4. Describe different types of lndirect exporting channels.
5. State various components of logistics in Export Marketing.
6. Write note on Modes of Transport in Export Marketing.
7. Discuss various criteria based on which mode of Transport in Export Marketing
is selected.
Export Distribution and Promotion f1f1f 59
8. Elaborate the importance of lnsurance in Export Marketing.
9. Explain the Sales promotion techniques used in Export Marketing.
10. Write Note on : tmportance of Trade Fairs and Exhibitions.

11. .State the advantages of Personal Selling.
12 Explain the different Risks in Export Marketing.
13. Write note on lnternational Advertising.

14. "Cultural barriers have great impact on tnternational Advertising". Discuss.
A. Fill in the blanks by selecting appropriate option :

f. is a type of lndirect Exports.
a) Licensing
b) Exporting
c) FDI
d) Logistics
2. Turnkey Operations mode of exporting is suitable for type of projects.

a) Small
-
b) Medium
;'ioV
c) Large
d) Personal
3. is when Company purchases another company from the foreign company
a) Amalgamation
b) Joint venture
c) Acquisitions
d) Partnership
4. Cenerally price is charged in lndirect Exports.
a) Higher
b) Lesser
c) No
d) Marginal
60 jP;ftf Export Marketing (T-Y.B-Com-) (Sem'-Vl)
5. Order processing is the important component of management.
a) Quality -
b) Logistics
c) Human Resource
d) Finance
6. risk insurance covers loss due to non-payment by the Buyer.

a) Political
b) Marine
c) Commercial Credit
d) Ceneral
7. covers number of activities starting from procurement to delivery of goods.
a) Research
b) logistics
c) Transportation
d) rQM
8. is suitable for small firms which cannot afford high Advertising cost.
a) Trade Fairs
b) Personal selling
c) lnternational advertising
d) Television advertising
9. McDonald uses _ type of mode of Export.
a) Licensing
b) Franchising
c) Joint venture
d) Acquisition
10. _ is necessary in Export trade due to risks involved.
a) Advertising
b) Logistics
c) Personal selling
d) lnsurance
Export Distribution and Promotion 3ojog 6t
1 1. _ factors play crucial role in lnternational Advertising.

a) Political
b) Cultural
c) Personal
d) Environmental
12. lnternational advertising is a communication across lnternational borders.
a) Non-personal
-
b) Personal
c) Mechanical
d) Non-verbal
lAns. : (1 - a), (2 - c), (3 - c), (4 - a), (5 - b), (6 - c), (7 -b), (8 - b), (9 - b),
(10 - d), (1 1 - b), (12 - a)l
B. Match the Groups:
1 GROUP A GROUP B
a) Commercial Risk i) Face to face communication
b) Personal selling ii) Franchising
c) KFC iii) Non-payment by buyer
d) lnternational advertising iv) Licensing

v) Multiple cultures
lAns. : (a - iii), (b - i), (c - ii), (d - v)l
2 GROUP A GROUP B
a) FDI i) lndirect Export
b) Personal selling ii) Non personal communication
c) Joint venture iii) Direct Export
d) lnternational advertising iv) High cost
v) low cost
lAns. : (a - iii), (b - iv), (c - i), (d - ii)l

62 trff Export M arketing (T.Y.B.Com. ) ( Sem.-V I )
3 GROUP A GROUP B
a) Direct Exports i) MNC
b) lndirect Exports ii) High risks ag.r.$,lnvbstment
c) Materials Handling iii) Low risks and lnvestment
d) Wholly Owned subsidiaries iv) Domestic companies

v) Logistics
lAns. : (a - ii), (b - iii), (c - v), (d - i)l
C. State whether following statements are True or False :

1. Nature of product influences mode of entry into the foreign market.
2. FDI is a type of indirect exports.
3. Political unrest is a type of commercial risk in export marketing.
4. Purchases of raw materiats is one of the area of logistics management.
5. ln Direct exports less risks is involved
6. Turnkey Operations mode of entry is suitable for small projects.
7. Acquisitions and FDI are synonymous terms.
8. Marine insurance is applicable to road transport.
9. Trade Fairs are organised for the purpose of Personal Selling.
10. Personal Selling is a part of mass communication techniques used in advertising.
11. Success of Personal selling does not depend on the ability personnel.
12. lnternational advertising maintains the same communication style all over the
World.
13. Higher risks is involved in Domestic maiketing as compared to Export
14. FDI helps the exporting companies to spread the risk into other countries.
1 5. lnternational advertising involves personal communication.
16. Cultural factors need not be considered in lnternational advertising.
17. Specialised Trade fairs are for all types of advertising.
18. While selecting mode of Transport safety factors should also be considered.
19. Licensing is less risky as compared to FDl.
20. Arts Direction will remain same in lnternational advertising.
"1, 4,14,'18,'19;
[Ans. : True :
False : 2,3,5, 6,7,8,9,'lO,'11,12,'13,'lS, 16, ,17,20)
al?
Export Finance
frrir 63
ftIODUtE
EXPORT FINANCE
. ll.',t:i.' -
SYNOPSTS I
* Methods of payment in Export Marketing; procedure to open Letter of Credit,

types and benefits of Countertrade
* Features of Pre-Shipment and Post-Shipment Finance; procedure to obtain Export

Finance; distinction between Pre-Shipment and Post-Shipment Finance.
* Role of Commercial Banks, EXIM bank, SIDBI in financing exporters; role of

ECCC.
\
64 rfff Export M arketing (T.Y. B.Com. ) ( Sem.-V I )
METHODS OF PAYMENT IN EXPORT MARKETINC

lntroduction
Export payment realisation depends on various conditions lai-d down by RBl. The
methods of payment depends on permitted currencies by,,RBl, Rupee agreement
between countries (Bangladesh, lran, Pakistan) and perjgd of payment (generally
180 days, however more than 180 days allowed for deferred payment). Financing
methods are determined to a large extent by the degree of control that the exporter
desires to retain over the merchandise, as well as the time limit that has been placed
upon the extension of credit. Cenerally, the exporter woutd prefer the most secure
method while importer would prefer the least expensive. There are several basic
methods of receiving payments for products sold abroad. As with the domestic sales,
a major factor that determines the method of payment is the amount of trust in the
buyer's ability and willingness to pay. A sale contract should clearly specify when
payment would be made, where it will be made and how it will be made. As the
payment terms are determined on the basis of specific circumstances of the particular
buying seller, it would be difficult to make any generalisation about payment terms.
The following factors determine the payment terms :
1. Financial Status of Exporter

The ability of the exporter to give credit, availability of insurance and cost of
insurance should be considered. The likely impact on business of loss from the
venture is to be considered. The capital structure of the company should be studied.
2. Amount of the Contract
When the quantity ordered is more, the amount to be paid is high. ln such cases
exporters would prefer to use payment terms where the liquidity of the company is
not affected due to delay in payments.
3. Credit Terms of Competitors
The exporter faces competition from many fronts. Competitive advantage can be
achieved by having friendly payment terms as this will help in establishing long run
relations with the buyer so that repeat orders can be ensured.
4. Nature of Goods Exported
The nature or type of the product influences payment terms. Service exports are
increasing. This type of export will require faster inflows of money into business. The
rules that control the import of product should be considered. Does the product
require special design; will it be difficult to sell elsewhere if the buyer fails to pay?
Are the goods durable or perishable or capital goods?
Export Finance 1fflf 65
Creditworthiness of the Buyer

The buyers' creditworthiness is difficult to determine in exports as they are
located in foreign countries. Letter of credit and bank involvenrent is essential in
exports and imports. Banks credit rating agencies, export credit insurance
organisations can vouch for the credit worthiness.
lmport and Exchange Controls
The currency exchange rates and import regulations of the importing country. lt
the regulations are stringent. Most countries try to restrict the imports and so they
have rules that will limit imports. lmport controls can be tariff or non-tariff.
Economic Situation in the Country I
lf the buyer is from a country which has a sound economic policy and condition
then the seller is more assured of payment. Then the direct payment option can be
selected.
Relations between the Countries

The relations between countries influences payment terms. Countries can have
cordial or hostile relations. Cordial relations will ensure payments. Banks will be
linked and it will be easier for the seller to realise the export proceeds. A sale
contract should clearly specify when the payment will be made, where it will be
made and how it will be made. lnternational commercial payments can be broadly
grouped into:
a) Cash payments
b) Open accounts
c) Bill of exchange
d) Letter of credit
Methods of payments can be summarised as follows :
1. Cash Payment
Cash as a method of payment is rarely used in international marketing. lf

accounts are maintained in bank in various countries, cheques may be drawn and
paid in variety of currencies. The conversion foreign currency into lndian rupee is a
foreign exchange transaction taken care of by banks. However cash payment is not
attractive to the buyers, since they bear entire burden of financing the shipment.
Today cash payment will probably be used when exporter is financially weak, on
orders requiring special instruction.
66 ffif Export Marketing (T.Y.B.Com-) (Sem.-Vl)
2. Open Account
It is a form of clean payment method, all shipping documents, including title
documents are handled directly between the trading partners. The role of banks is
limited to clearing amounts as requiied. Clean payment method offers a relatively
cheap and uncomplicated method of payment for both importers and exporters. This
method is adopted when exporter is confident of importer's integrity to meet the
obligations, exporter is financially sound to wait for payment, there are no exchange
control regulations or there is intercompany relationship. There is no need to draw a
bill of exchange. The shipper forwards all the shipping documents to the importer.
Undertaking on open account the exporter ships the goods with no financial
'lndian exporters are
documents to his advantage except the commercial invoice.
allowed to abroad on open account basis only with the special permission of RBl.
Normalfy, this, permission is given only to foreign companies operating in lndia.
ln r:pen account method the importer is trusted to pay the exporter after receipt of
gc**rtJs. The main drawback of open account method is that exporter assumes all the
risks while the importer get the advantage over the delay use of company's cash
resources and is also not responsible for the risk associated with goods.
3. Cash against Documents (CAD) or Documents against Payment
This method is adopted when the exporter does not have any business relation
with the importer in the past. ln this method when goods are shipped, importer must
arrange with a bank or other agent to accept the documents When submitted and pay
the amount stated in the invoice. Documents required are bill of lading, commercial
invoice, marine insurance policy, consular invoice, certificate of origin etc.
a) Cash against documents at point of shipment or port of shipment i.e. goods
are not released for shipment until buyer pays for them.
b) Cash against Documents at Destination (Sight Draft). The goods are shipped
without repayment but the buyer must take up the draft and pay the face
amount of it on presentation.
c) Documents against paymer;rt (Time draft) - On arrival, the goods are placed
in a warehouse. Payment may be made at any.time with the period specified
in the draft, at which time buyer may take possession of his goods.
4. DocumentaryCollection
ln case of trustworthy customers, whose creditworthiness is established,
documents can be. delivered against such usance draft. They are accepted by the
buyer against which documents are delivered.
\
Export Finance *fi 6Z
5. Advance Method Payment

It is a form of clean payment method, all shipping documents, including title
documents are handled directly between the trading partners. The role of banks is
limited to clearing amounts as required. Clean payment method offers a relatively
cheap and uncomplicated method of payment for both importers and exporters. This
is the safest method of acquiring payment but not attractive for buyers. Under this
method, buyer or his agent makes an advance payment when an order is placed with
the exporter. The risk of non execution of order for which buyer has made advances
makes this method unpopular.
6. Banker's Transfers
ln case of banker's transfers, the remitter makes payment in home currency in
the local branch of exchange bank in favour of overseas supplier. The overseas
supplier in turn receives payment in home currency through the branch of exchange
bank or correspondent as the case may be. Banker's transfers can be effected in three
ways.
a) Telegraphic transfer : Order for payment of money is communicated by

cable, which is the quickest method
b) Mail transfer is as good as cheque, where payment is sent by a postal mail,
'ho*euer
it takes longer time to reach.
c) Banker's draft : ln this method of payment, the importer has to deposit the
amount payable to the exporter within his bank in exchange he gets the draft
drawn by his bank on its branch office where the payment intended to be
received by the exporter.
7. Bill of Exchange/Bill Finance
It is the most popular method of remittance in foreign trade transactions. ln this
system seller draws a bill on buyer or on a banker depending upon the terms of
agreement between the two. The bank in seller's country presents the bill to the
importer for payment through correspondent in the importer's country. The Payment
Collection of Bills also called "Uniform Rules for Collections" is published by
lnternational Chamber of Commerce (lCC) under the document number 522
(URC522) and is followed by more than 90% of the world's banks. ln this method of
payment in international trade the exporter entrusts the handling of commercial and
often financial documents to banks and gives the banks necessary instructions
concerning the release of these documents to the lmporter. lt is considered to be one
of the cost effective methods of evidencing a transaction for buyers, where
documents are manipulated via the banking system.
\
68 fifff Export Marketing (T.Y.B'Com') (Sem'-Vt)
The bill can be :
a) CIean Bilt : When it is not accompanied by the set of documents. lt is also

called as sight drafUTime draft.
b) Documentary Bill : lt accompanies the documents like bill of lading,
commercial invoice, consular invoice, marine insurance policy, certificate of
origin
c) D/P Bill / Sight Bill : The documents are not released unless the payment is
made by the importer or his bank.
d) D/A Bill/Time bill :
Here the shipping documents are released to the
importer on acceptance of bill.
e) Bill Drawn on Bank : Sometimes exporter is not willing to draw a bill directly
on importer. He wants importer to open an account in a bank in his
(exporter) country and authorize the bank to honour the bill drawn by him.
8. lnternational Money Order

The facility of payment in term of money order is provided by postal department
in advanced country. ln this method of remiftance, the importer pays in home
currency and the post office in exporter's country pays equivalent amount in foreign
currency to the supplier. However they are subject to exchange control laws and
suitable for small amounts.
9. Personal Cheques
When there is cordial economic and political relation, exchange control

legislation in both countries can provide mutual cheque clearance. They are freely
accepted and cleared by banks when debtor enjoys high credit standing.
10. Letter of Credit
ln modern times, it is most popular method of securing payment for exports. lt is
a letter addi'essed by a banker, at the request of an importer, to a named exporter,
authorizing up to a stated amount within a specified period of time & undertaking to
honour such bills on presentation.
11. Consignment Stock Payment
Certain goods like tea, raw cotton, wool and mica are sold on consignment
basis. Here the payment is required to be made on the basis of sales. Under this
system the goods remains as the property of exporter but he can settle it with
overseas buyer as to when and what price to pay. This method is probably used in
export trade possibly because export transactions are always wholesale transactions.
ln the end, payment is frequently made by means of clean draft. When this method is
used, demand for payment is usually made by means of a clear draft (no document
I
Export Finance *Tn 69
attached) drawn on the consignment importer by the exporter. Consignment business

in many countries can be dangerous for three reasons :
a) The laws are always not clear on the ownership of the consigned
merchandise.
b) lt is difficutt for the selter to keep a watchful eye on the consigned

merchandise when it is physically in foreign country.
c) Exchange control may preclude payment by the consignee. Thus the exporter
consigns goods to his agent or representative in foreign markets who arranges
the sale of goods and makes payment to the exporter.
The consignment sales involve a number of risks for exporter. There is no B/E.
He is not protected against default. There is a risk of exchange fluctuations and loss
that may arise if the consignee is inefficient or dishonest.
12. Countertrade
lnternational countertrade is a trade practice where a supplier/exporter agrees, as
a condition of sale, to undertake specified courses of action to accept payment in the
form other than monetary instrument.
E.g. Barter where the payments do not get settled through monetary terms but by
exchanging one commodity for other, counter purchase, compensation, buyback and
offset.
PROCEDURE TO OPEN LETTER OF CREDIT
Letter of Credit (L/C)

UC is most popular method of payment in the international trade.
Meaning
Letter of Credit also known as Documentary Credit is a written undertaking by
the importers bank known as the issuing bank on behalf of its customer, the importer
(applicant), promising to effect payment in favor of the exporter (beneficiary) up to a
stated sum of money, within a prescribed time limit and against stipulated
documents. lt is published by the lnternational Chamber of Commerce under the
provision of Uniform Custom and Practices (UCP) brochure number 500.A key
principle underlying letter of credit (UC) is that banks deal only in documents and
not in goods. The decision to pay under a Ietter of credit will be based entirely on
whether the documents presented to the bank appear on their face to be in
accordance with the terms and conditions of the letter of credit.
70 fffff Export Marketing (T.Y. B.Com. ) (Sem.-Vl )
Definitions
1. lt is an undertaking by importer's bank to the negotiating bank that if exporter
presents the relevant set of documents, make the payment.
2. lt is a document containing guarantee by the importer's bank to honour the bill

drawn on it by an exporter up to a certain amount.subject to fulfilment of certain
conditions by the exporter.
Parties to LIC
i) Opener/Applicant-lmporter
Applicant which is also referred to as account party is normally a buyer or
customer of the goods, who has to make payment to beneficiary. LC is initiated and
issued at his request and on the basis of his instructions.
ii) Opening/lssuing Bank-lmporter's Bank

The issuing bank is the one which create a letter of credit and takes the
responsibility to make the payments on receipt of the documents from the
beneficiary or through their banker. The payments have to be made to the
beneficiary within seven working days from the date of receipt of documents at their
end, provided the documents are in accordance with the terms and conditions of the
letter of credit. lf the documents are discrepant one, the rejection thereof to be
communicated within seven working days from the date of receipt of documents at
their end.
iii) Beneficiary - Exporter
Beneficiary is normally stands for a seller of the goods, who has to receive
payment from the applicant. A credit is issued in his favour to enable him or his
agent to obtain payment on surrender of stipulated document and comply with the
term and conditions of the UC.lf L/C is a transferable one and he transfers the credit
to another party, then he is referred to as the first or original beneficiary.
iv) Negotiating Bank
Exporter's bank to which exporter presents the documents for payment. The
Negotiating Bank is the bank who negotiates the documents submitted to them by
the beneficiary under the credit either advised through thern or restricted to them for
negotiation. On negotiation of the documents they will claim the reimbursement
under the credit and makes the payment to the beneficiary provided the documents
submitted are in accordance with the terms and conditions of the letters of credit.
v) Advising Bank
Opening bank's branch of correspondent (Notifying bank) bank in the country of
exporter. An Advising Bank provides advice to the beneficiary and takes the
Export Finance Sfff 7t
responsibility for sending the documents to the issuing bank and is normally located
in the country of the beneficiary.
vi) Confirming Bank
Bank in exporter's country which cqnfirms or guarantees the credit on request of
opening bank. Confirming bank adds its guarantee to the credit opened by another
bank, thereby undertaking the responsibility of payment/negotiation acceptance
under the credit, in additional to that of the issuing bank. Confirming bank play an
important role where the exporter is not satisfied with the undertaking of only the
issuing bank.
viii) Paying Bank

On which bill is drawn.
Procedure to operate an L/C
The operation of L/C involves the following steps :
i)' lmporter'sApplication/Request
lmporter applies to his bank to open a UC in favour of the exporter. The
information includes the terms of purchase, the date of shipment, the usance of draft,
the documents to be accompanied etc. He has to deposit the cash or show sufficient
balance in his current a/c.
ii) UC Contract
lf the bank is prepared to issue the UC, the importer will sign L/C contract
ensuring reimbursement, payment of commission etc.
iii) Issue of L/C
The operating bank issues the L/C and forwards it either directly to the
negotiating bank or to the advising bank.
iv) Confirmation of L/C
The issuing bank may request the advising bank to add its confirmation to the
L/C.
v) Notification
The confirming bank will notify the exporter that the UC has been opened and
the terms of LlC.
vi) Receipt of LlC
From negotiating bank.
vii) Submission of Documents after shipment of goods.
72 Export Marketing (T'Y'B'Com') (Sem'-VI)
!'!,jo
viii) Scrutiny of Documents
To ensure that they are as per requirements of importer.
ix) Sending Drafts and Documents
lf all the documents are found to be in order, the negotiating bank will send the
payment to the exporter. lt sends the documents to the issuing bank.
x) Documents to the lmporter
The issuing bank will hand over the documents to the importer. The importer is
&pected to make full payment to the bank when the draft matures.
Types of LlC
There are different types of L/C on the basis of terms and conditions of L/C.
i) Revocable L/C
It can be cancelled, modified or revoked by the issuing bank without seeking
prior permission of the exporter. lt is never confirmed by a confirming bank. A notice
must be given by the bank to the exporter/beneficiary so that he doesn't despatch the
goods. lt can be revoked.
o Before/after procuring the goods.
o Before/after dispatching the goods.
. When the goods are in transit.
. When the goods have reached the destination.
ii) lrrevocable LlC
It cannot be cancelled/modified/revoked by the opening bank without prior
consent of the exporter. lf the UC doesn't mention whether it is revocable or
irrevocable, it shall be deemed to be irrevocable. lt represents a firm commitment on
the part of the opening bank.
iii) Confirmed L/C
The opening bank may not be known in the country of exporter. The exporter
may ask opening bank to get UC confirmed by a local bank. lt is considered to be a
safest type of UC to realise payment because it carries guarantee for payment from
two banks. lf the UC is confirmed by a bank in the beneficiaries country, it becomes
a confirmed L/C. confirmation constitutes a definite and legal undertaking on the part
of the confirming bank that it will duly honour the payment or acceptance as the
case may be on presentation of stipulated documents.
Export Finance jf;f1f 73
iv) Unconfirmed L/C

Here confirmation is not added by advising bank. The risk of non-payment is
high.
v) With Recourse L/C
ln this case negotiating bank can make the exporter/beneficiary liable to pay the
amount along with interest, if bill is not honoured by issuing bank.
vi) Without (Sans) Recourse UC
Here exporter's liability comes to an end as soon as bill is negotiated. The
negotiating bank can have recourse to issuing bank and issuing bank can recover the
amount from importer. The irrevocable, without recourse and confirmed [/C is the
most secured t/C.
vii) Transferabte / Assignable [/C
It contains an express provision that the benefits under it may be transferred,
whether fully or partly, to one or more parties. Exporter should inform issuing bank.
ln lndia, such UC can be transferred only once and that too within the country. The
first beneficiary may assign his rights to another beneficiary, either within a stated
period or before the expiry date of the credit, Unless it is specified the UC cannot be
treated as assi gnable/transferable.
viii) Non-transferable /Non assignable L/C
ln this case, the beneficiary cannot assign or transfer his right to another party.
ix) Fixed L/C
It is for a fixed amount. The validity of UC gets qver as soon as the bills up to
fixed amount have been paid by the issuing bank.
x) Revolving L/C
This is used when there is a regular and continuous flow of transactions between
exporter & importer. The credit is renewed automatically as soon as the bills up to
fixed amount have been paid by the bank. The importer reimburses the amount to
his bank and restores the balances. This is designed to remove the need to have a
new credit for each shipment when the transactions are continuous. ln this type
provisions may be made for making credit availabte as soon as the importer
reimburses the issuing bank with.the drafts already negotiated by the paying bank.
xi) Documentary LIC

ln this case, the bill must be accompanied by the full set of shipping documents
specified in UC.
6iT.Y.B.Com.-Export Markaing (Sem.-VD

74 !.l.f. Export Marketing (T.Y.B.Com.) (Sem.-Vl)
xii) Clean L/C

tt can benegotiated against a clean bill, without any shipping documents
attached to it. This L/C may be negotiated against a clean draft, i.e. a draft with no
documents attached to it.
xiii) Red Clause L/C
This UC authorizes the negotiating bank to approve "Packing Credit "to the
beneficiary/exporter to enable him to purchase raw materials. This is given before
shipment hence shipment documents need not be presented to the negotiating bank.
After shipment, the packing credit amount should be repaid to the negotiating bank
from the proceeds of the bills negotiated under UC. Red clause UC is printed/typed
in red ink. The risk of non-submission of documents or non-execution of order is
borne by opening bank and not by the negotiating bank. The red clause enables the
beneficiary to draw a predetermined value of the UC as soon as it is established. The
red clause" is an authority to the negotiating bank to make advances to the
beneficiary for the purpose of purchasing the relevant goods. The conditions on
which such advancements are made are mentioned in the UC.
xiv) Green Clause L/C
The term green clause is printed in green ink for the sake of differentiation. This
UC, not only allows packing credit advances but also provides payment for
warehousing charges at the port of shipment. ln lndia, it requires prior permission of
RBI.
xv) Back to Back L/C
It provides ancillary credit. The exporter requests the negotiating bank to open a
domestic UC on the basis of original UC in favour of local supplier. Back to Back
Letter of Credit is essentially a secondary credit, opened by a bank on behalf of the
beneficiary of an original credit in favour of a domestic supplier. The original credit
backs another credit and facilitates the purchase of goods from a tocal supplier .tt is
also known as ancillary letter of credit.
xvi) Cash Credit or Sight letter of Credit L/C
The exporter may draw a sight draft on the bank. The main advantage of this
draft is that the beneficiary will receive cash for his draft as soon as the goods are
ready for shipment and the relevant documents are presented to the bank. Sight
credit states that the payments would be made by the'issuing bank at sight, on
demand or on presentation.
Export Finance $jPff 75
xvii) Acceptance letter of Credit UC

The bank accepts the drafts drawn by the exporter. After it has been accepted by
the bank the draft becomes a bank acceptance which may be discounted or sold by
the exporter to the accepting bank, to other banks or to exchange dealers.
xviii) Travellers LlC for visit to foreign country.
Advantages of L/C
L/C is not compulsory document. However, exporter insists on opening of
opening UC due to following benefits.
Benefits to the Exporter
i) lt avoids the risk of non-payment / bad debts.
ii) lt facilitates provision of packing credit to the exporter. (Red clause/green
clause L/C)
iii) The exporter can receive payment immediately after shipment by negotiating
UC with his bank.
iv) ln case of without recourse (Sans recourse) L/C, the exporter's liability comes
to an end as soon as bill is negotiated.
v) A confirmed sans recourse and irrevocable L/C is the most secured credit, the
exporter can get.
.
vi) lssue of LIC is a guarantee that exchange control regulations in the importer's
country is complied with.
vii)The importer cannot refuse to take possession of goods and to clear the
payment as per terms and conditions of UC.
viii)No blocking of funds.
Benefits to the lmporter
i) Certainty of shipment of goods as exporter cannot get any benefit under L/C
without shipping goods and submitting required documents.
ii) The UC accompanies documents which enables importer to collect the
goods in time.
iii) When the importer falls short of payment, he can take possession of
documents against Overdraft Faci I ity.
iv) There is no need for importer to block his funds by making an advance
payment.
v) UC builds up better long term business associations as both the parties are
protected as per terms & conditions of L/C.
76 fftf Export Marketing (T.Y.B.Com.) (Sem.-Vl)
vi) Befter terms of trade.

Limitations of L/C
i) Short life : Every UC has validity period which comes short life. lt may not
give sufficient time to the exporter to ship the goods and submit the
documents.
ii) Problem of Weight units/measures which may differ in different countries.
iii) lnsurance problem : UC may indicate a broad coverage of marine risk
whereas underwriters may like to go for limited risk.
iv) Packing material consideration may create a dispute.
v) Lack of safety : Unconfirmed / with recourse or revocable UC has

considerable risk.
vi) Delayed payment : When the payment is delayed by the opening bank, the
exporter has to pay heavy interest on the advances.
vii)Prohlem of discrepancy : ln case of discrepancy in document, the importer
either can delay or withhold the payment.
viii)UC is the most complex method of payment as there are number of parties
involved and lot of formalities to be completed.
ix) lt lacks flexibility.
x) The importer's bank usually requires prior deposit from importer for opening
UC.
Besides the above limitations, it

is desirable to obtain UC, where exporter is
beneficiary. Thus, it is a popular method of payment in lnternational marketing.
Basic Letter of Cledit Transaction
1-lrlcfrt8t
H
|.
I 1> t
f -lhcat
a
fr
I t
r& !E
itIt
U
ta EI
I$l!
a
!a
tI U
!i t
t
Ca
o
!
a
E
I
.l
3- bafi! l!traroaotilt
k
; dooltEot 6ilh1, pqlIA rcfea

islr{bank aad:ing bank
Z-PrsHoilddrumllb
Export Financ" jl@1Pf 77
Modus Operandi of LlC

Suppose, a US based buyer wants to purchase goods from an lndian seller, the
lndian exporter instead of drawing directly from the US importer, requests him to
arrange an irrevocable confirmed L/C. The US importer the applies to his bank in
USA to issue L/C. ln his application of L/C to the bank, the importer will set forth the
terms of sale and will mention the documents which shall accompany the draft, the
usance, the final date of shipment etc. If the bank is prepared to issue the credit in
which he will have to agree to reimburse the bank for all outlays and give such
security as the bank demands.
The issuing bank has to notify its correspondent bank in lndia and will request
the latter to confirm the credit to exporter. The notifying bank now informs the
exporter that an irrevocable and confirmed UC has been arranged. lt describes the
terms under which the shipment must be made before the draft is honoured. This
makes the contract binding on both issuing bank and confirming bank.
The exporter, then ships the goods to US buyer, draws a time draft on issuing
bank and sends the draft with documents attached to his bank in lndia (Negotiating
bank) The bank will mail the draft and documents to its own correspondent bank in
the USA, which will present it to the drawee bank (issuing/importers bank) for
acceptance. The accepting bank delivers the documents to the importer against trust
receipt. The importer makes the full payment when draft is matured.
Sample ol LlC
Tr) Fflr,
$ffit
Gi'e
ATfS[TlOll: "',"r'::ii.i.;':'r"r':r
FORVAI.UENTCEffED
PAY O{ D T'AXDI& DEUTSCHB BAI{K I{AT8{ALINU$TMXFIIil, U$'

DOT LARS (USD 1-I tHE ilmUilTtr
THIS DnAF 06 !0rEXC8tOTHEAlrO{n{TAVAlr.ltt Elo lG m^wx aY IrlE
EGilEHCnAY UlrD8n fltB lArrln Or CnEDn
ItE ACXNOWITDGE rtrar, rrtoil touB t(nfinE rHE mAwMG lCnEfi

RSqrEs[lD, tIlS Arot,}fr OF tH3 LETEn C CmDlT AVAILlst E FOn
DRAWI{G SllAIr lEJturql^rrAr.LY DECnEAIED gY AX ilffirXTE$rAL rO
fiEDNAl,vIlE.
crnncE 10 A@Utrr Or tr!f,firil$
DRAWN UT{DE&,
PUilBrOSWilEDl&
AAA*SllDEr{tn.llr:-
EESm!6l Xr.
EENEFIOARY:
oRIGtr{ATr{G BAI{I( BrmrIlT$r (Ct nEIl)}

VEf,YTru'LYYOI'RS,
7B Export M arketi ng (T.Y. B.Com. ) ( Sem.-Vl )
'''r"f
AND BENEFITS OF COUNTERTRADE
TYPES
Countertrade is a reciproca! form of international trade in which Soods or

services are exchanged for other goods or serviles-rdtheifhan for currency. This type
of international trade is more common in lesser-developed countries with limited
foreign exchange or credit facilities. "!'
Types of Countertrade
There are several types of countertrade including :
A. Barter
B. Counter purchase
C. Compensation trade
D. Switch trading
E. Offsets
F. Clearing agreements
A. Barter
Barter, possibly the simplest of the many types of counter trade, is a onetime
direct and simultaneous exchange of products of equal value (i.e., one product for
another). By eliminating currency as a medium of exchange barter makes it possible
for cash-tight countries to buy and sell. Although price of goods is considered in any
counter trade, price is only implicit (understood, implied, not specific) in the case of
barter. For example, if Chinese coal was exchanged for the construction of a seaport
by Poland. ln this case the agreement deals with how many tons of coal was to be
given by China and Poland rather than the actual monetary value of the construction
project or concerts. lt is estimated that about half of the U.S. corporations engage in
some form of barter primarily within the local markets of the United States.
B. Counter purchase (Paraltel Barter)

Counter purchase occurs when there are two contracts or a set of parallel cash
sales agreements, each paid in cash. A counter purchase involves two separate
transactions-each with its own cash value. A supplier sells a facility or product at a
price and orders unrelated or non-resultant products. Thus, the buyer pays with hard
currency, whereas the supplier agrees to buy certain products within a specified
period from the buyer. Therefore money does not need to change hands. ln effect,
the practice allows the original buyer to earn back the currency. Brazil exports
vehicles, steel, and farm products to oil-producing countries from which it buys oil in
return.
Export Finance
$n'lt' 79
C. Compensation Trade (Buyback)

A compensation trade peqg!.rg,s a company to provide machinery, factories, or
technology and to buy products made from this machinery over an agreed period.
Unlike counter purchase, which involves two unrelated products, the two contracts
in a compensation trade are highly related. Under an agreement to the sale of plant
or equipment, a supplier agrees to buy part of the plant's output for a specific
number of years. For example, a Japanese company sold sewing machines to China
and received payment in the form of 300,000 pairs of pajamas.
D. Switch Trading
Switch trading involves a triangular rather than bilateral trade agreement. When
goods from the buying country are not easily usable or saleable; it may be necessary
to bring in a third party to dispose of the merchandise. The third party pays hard
currency for the unwanted merchandise at a considerable discount. A hypothetical
example could involve lndia having a credit of $a million for Austria's hams, which
lndia cannot use, A third-party company may decide to sell lndia some merchandise
worth $3 million for a claim on the Austrian hams. The company can then sell the
acquired hams to Switzerland for Swiss francs, which are freely convertible to
dollars.
E. Offset
ln an offse! a foreign supplier is required to manufacture/assemble the product
locally and/or purchase local components as an exchange for the right to sell its
products locally. Offsets are often found in purchases of aircraft and military
equipment. One study found that more than half of the companies counter.trading
with the Middle East were in the defence industry and that the most common type of
counter trade was offset.
F. Clearing Agreement
A clearing agreement is clearing account with no currency transaction required.
There is a line of credit established in central banks of two countries. The trade is
continuous, and the exchange of products between two governments is designed to
achieve an agreed-on value or volume of trade calculated in 'clearing account
units". For example, the former Soviet Union limited imports and payment of
copiers. Xerox decided to circumvent the problem by making copiers in lndia for
sale to the Soviet under the country's "clearing" agreement with lndia. Although
nonconvertible in theory, clearing units in practice can be sold at a discount to
trading specialists who use them to buy saleable products.
B0 *i* Export Marketing (T.Y.B.Com.) (Sem.-Vl)
Examples of Countertrade
. Coca-Cola Co. operates under a mutual advantage policy through Coca-Cola
Trading Co. ln most countries, Coca-Cola goes much further than simply selling
syrup and taking back local products; the company transfers food and beverage
technology and assists in developing foreign marketing programs.
Most of these programs are designed to help the countries penetrate the
American market. For example Coca-Cola assisted Yugoslavia and Romania in the
production of wine for the American market, advising them on American taste in
wines and appropriate package designs, as well as making agreements with
American wine distributors.
ln Turkey, Coca-Cola set up a joint venture to produce tomato paste for the
American market and other markets, providing management and technology for the
plant. Coca-Cola generally tries to set up a partnership with customer countries.
o State-run firms are eyeing global opportunities in coal mining, power
projects, refining infrastructure and equity stakes in hydrocarbon blocks. Bharat
Heavy Electricals Ltd. (BHEL) and Metals and Minerals Trading Corporation of lndia
(MMTC) are in talks with the Malaysian government for the deal. BHEL will negotiate
for a hydro project in Malaysia and MMTC will get palm oil from there. MMTC will
procure palm oil over seven-eight years. MMTC had a similar arrangement with
state-owned lndian Railway Construction Company Limited (IRCON) lnternational
Ltd a few years ago in Malaysia, under which IRCON set up a railway line in that
country and MMTC procured palm oil.
Advantages of countbrtrade :
1. Countertrade provides a trade financing alternative to those countries that have

international debt and liquidity problems.
2. Countertrade relationships may provide LDCs and MNCs with access to new
markets.
3. Countertrade fits well conceptually with the resurgence of bilateral trade

agreements between governments.
4. Market access is gained to different countries.

5. Countries save on foreign exchange payments.
6. Pricing of products can be reduced as cash payments are not involved.
7. lt helps in increasing movements of inventory for buyer and seller.
B. The seller can convert stock and inventory to money/account receivable.
9. The cash-tight buyer that lacks hard currency is able to use any cash received for
other operating purposes.
Export Finance fifrf BI
FEATURES OF PRE.SHIPMENT AND POST.SHIPMENT FINANCE

ln today's intensely competitive world, export finance mechanism and
institutional support are important for the promotion of exports. !n other words,
effective export finance techniques provide additional marketing advantage. Export
finance means the credit required by the exporter for financing their export
transactions from the time of getting an export order to the time of full realization of
the payment from importer. Exporter finance includes both pre-shipment finance and
post shipment finance available to lndian exporter.
Scope of Export Finance
Let us study the short term, medium term and long term financial needs of the
exporter. Exporter generally needs finance at :
a) Pre-shipment stage (Before the shipment of goods).

b) Post shipment stage (After the shipment of goods up to realization of export
proceeds).
Need for Pre-shipment finance or packing credit

i) To purchase raw material, other inputs, components for the manufacture of
export goods. (Manufacturer exporter).
ii) To procure (buy) goods fr.om market form the purpose of exporting (Merchant
Exporter).
iii) To pay expenses like packing, marking labeling.

iv) To pay for pre-shipment inspection charges/excise duty.
v) To pay for storage transport etc.
vi) To pay for documentation charges.
vii)To pay for cargo handling expenses/customs formalities.
viii) To pay for consultancy services, if any
ix) To raise working capital
x) To import capital goodVdesignVcomponents etc.
Need for Post shipment finance :
i) To raise working capital up to the realisation of export proceeds.
ii) To pay foreign agent /distributor (commission).
iii) To pay marketing overheads.
iv) To pay marine insurance, if any (Under CIF price).
v) To pay freight charges.
lr
Export Marketing (T.Y.B.Com') (Sem'-Vl)
B2 if1PjP
vi) To pay ECCC premium.
vii)To provide after sales services.
viii) To raise medium term/long term finance in case of deferred payment.
ix) To raise funds before realizing export incentives.
x) To extend easy payment terms to foreign buyer.
Pre-shipment Finance / Packing Credit
Meaning
Pre-shipment finance is popularly known as packing credit. ln simple words, it is
working capital finance provided by commercial banks to the exporter prior to
shipment bf goods.
The Reserve Bank of lndia defines packing credit as "any loan to an exporter for
financing purchase, processing, manufacturing or packing of goods." This form of
financing is particularly important for small and medium size exporters who may not
have sufficient internal financial resources to meet production expenditure. Usually,
in the form of bank advance, overdraft or loan against
pre-shipment finance is
confirmed order. The objective is to provide working capital through bank of
financial institution for helping the exporter to execute the export order smoothly.
Features
a) Eligibility
Pre-shipment credit is granted only to those exporters who actually export and
produce a confirmed export order and / or a letter of credit received in their own
names. lf there is an indirect export through EH/TH/STH, the pre-shipment credit
would be available if EH/TH/STH states that it does not wish to obtain packing credit
from the same. EH/TH/STH allots the portion of export order in their favour.
b) Purpose
Packing credit is granted for processing / purchasing / manufacturing processing

storing / packing and shipping of goods.
c) DocumentaryEvidence
The exporter has to submit and deposit an irrevocable L/C established through a
reputed bank or against confirmed order for export.
d) Security
The exporter is required to provide a personal bond from sureties/policy issued
by ECCC as a security.
i
Export Finance ffffif 03
e) Form of Finance
tt is either in the form of fund based assistance or non - fund based assistance.
0 Amount of Finance
It represents need based finance. ln other words there is no fixed limit for pre-
shipment finance. lt depends upon nature & amount of export order, nature of goods,
credit rating of the exporter and export incentives receivable like IPRS & DBK etc.
0 Period of Loan
It is a short term credit which is availabte for a period not exceeding 180 days.
However, with a prior approval of RBI, it can be extended by additional 90 days.
h) Rate of lnterest
It is governed by RBI from time to time. Packing credit is eligible for interest
subsidy. The rate of interest for the extended period goes up. lf for some reasons,
shipment is delayed beyond 360 days, then the bank is authorised to charge a rate of
interest as charged by them and there will be no concession.
Up to 180 days -1OY"

Up to 27O days-13o/"
Up to 360 days -15"/" (No concession)
i) Loan Agreement
The exporter has to sign a loan agreement with the bank in order to get packing
credit. The bank sanctions loans on the basis of viability of the project, IEC code
number, personal record, export license and quota requirements etc.
il Maintenance of Accounts
According to directions of RBl, the bank is required to maintain a separate
account in respect of each packing credit. However, running accounts are permitted
in case of certain products produced in F\Z/EPZ|OO%EOU. Grant of running
account facility depends on track record of the exporter, and submission of
justification and submission of confirmed order or an UC.
k) Sanction of Loan
Bank sanction loan at one time but amount is given in a'phased manner, as per
progress of work.
l) Monitoring the use of Loan

The bank monitors the use of packing credit to ensure that the amount is used for
export purpose only. ln case of misuse, penalty can be imposed.
B4 f.llf Export Marketing (T.Y.B-Com.) (Sem.-Vl)
m) Repayment of Loan
This loan is self-liquidating in nature. The exporter repays the amount of loan
out of proceeds of export bill.
Post Shipment CrediUFinance
Meaning
Exporters often need to finance transactions not only prior to shipment but also
after the shipment. Post - shipment finance can be arranged through various financial
institutions, including commercial banks, merchant banks, insurance companies and
other financial institution. An advance or loan provided to an lndian Exporter after
completing the process of shipment of goods is termed as Post-shipment Finance.
Definition
RBI defines post shipment finance as "Any loan or advance granted or any credit
provided by bank to an exporter of goods from lndia from the date of extending the
credit after shipment of goods to the date of realisation of export proceeds".
Features
1. Eligibility
Post-shipment credit is available to the exporters who have actually shipped the
goods or to an exporter in whose name the export documents are transferred.
2. Purpose
The purpose of this credit is to provide short term, medium term and long term
credit from the date of shipment to the date of realisation of export proceeds.
3. Doctmentaryevidence
The documents required are :
i) Documents indicating shipment of goods.

ii) Necessary evidence in case of deemed and project export.
4. Amount of Finance
The amount of pre-shipment finance can be sanctioned up to "lOOo/o of invoice
value of goods.
5. Period of Finance
i) Short term-For 90 days by commercia! banks.
ii) Medium term-Between 90 days and 5 years by commerciat banks together

with Exim bank.
Export Finance tfit A5
iii) Long term-Between 5 years to'12 years by Exim bank for export of capital
goods and turn -key projects.
6. Rate of Interest
lnterest rates are governed by the directives of RBl.
7. Loan Agreement
A formal loan agreement has to be entered into between the bank and exporter.
8. Maintenance of Accounts
As per RBI directive banks must maintain a separate account for each post
shipment advance. However, running accounts are permifted in case of certain
products produced in FTZEPZ1 00%EOU.
9. Disbursement of Loan Amount
The amount sanctioned by the bank is disbursed in a phased manner as per
exporter's requirements.
10. Monitoring the use of Advance
The bank providing post-shipment finance should monitor the use of amount to
ensure that it is used for export purpose only. Misuse, if any, is subject to penalty.
1 1. Repayment of Advance
It is self - liquidated in nature. The exporter repays the loan and the installments
out of export proceeds.
PROCEDURE TO OBTAIN EXPORT FINANCE
Procedure for obtaining Pre-shipment Finance

Following steps are involved when exporter applies for packing credit in lndia :
a) Submitting applications to Bank/lending Institution

The exporter should apply in a prescribed form giving all details. Following
documents should be submitted along with application form :
i) Confirmed exporter order/contracUletter of credit.
ii) An undertaking that the amount will be utilized for the purpose of export.
iii) An undertaking that the shipment will be effected within a fixed time limit.
iv) An appropriate ECGC policy.

v) A copy of RCMC certificate.
vi) ln case of sole trader/partnership firm income tax and wealth tax assessment
orders for past two/three years.
86 tfr Export Marketing (T.Y-B-Com.) (Sem.-Vl)
vii)Copy of board resolution, in case company to open a bank account.

viii) Letter of authority to operate the account.
ix) ln case of indirect export, undertaking from EHiTHISTC.
x) Any other document required by bank.
b) Processing of Application
The bank scrutinizes the application and if satisfied, establishes the packing
credit limit.
c) Sanctioning of Loan
The bank sanctions the loan equal to the FOB value of export order or UC or
market value of goods whichever is less. !t also takes into account the value of export
incentives to be received by the exporter.
d) Loan Agreement
The bank and exporters enter into a formal loan agreement with the exporter
before the actua! disbursement of loan.
e) Manner of Payment
The amount is not disbursed in a tump sum. lt is disbursed in a phased manner.
0 Maintenance of Accounts
As per RBI directive, bank must maintain a separate account of each
preshipment credit. However, running accounts are permitted in case of certain
products produced in FIZEPZ\ OOo/" EOU.
0 Monitoring of use of Loan

The lending bank has to monitor use of packing credit.
h) Repaymentofloan
The loan is repaid by the exporter together with interest out of export proceeds
to ensure that the amount is used for export purpose only. Misuse, in any, is subject
to the penalty.
PROCEDURE FOR OBTAINING POST.SHIPMENT FINANCE
Following steps are involved when exporter applies for post-shipment credit :
1. Application to the Bank

Along with the prescribed application to the lending bank, exporter should
submit following documents as :
a) Shipping documents.
Export Finance 1lofftf 87
b) Undertaking as required by bank.

c) Certificate of the Board of director's resolution, in case of a company.
d) Letter of authority to operate the account.
2. Processing to Operate Application
The application is forwarded to the bank. The bank determines the amount of
post-shipment finance considering the credit worthiness of the exporter and importer,
nature of contract etc.
3. Sanctioning of Amount
lf the documents and the application are found in order and submitted to the
bank within the time limit, bank sanctions the loan.
The bank must be satisfied with :
a) Period of advance
b) Time to realize export proceeds
c) CR/PP form are certified by the customs
d) Documents are in currencies and methods of payment approved by RBl.
4. Loan Agreement
The Formal loan agreement is entered into between lending bank and the
exporter.
5. Manner of payment
The amount of loan is released in phased manner as per requirement of the
exporter and not lump-sum amount.
6. Maintenance of Accounts
As per directives of RBl, bank must maintain a separate account for each post
shipment advance. However running accounts are permitted for certain products
produced in FTZEPZIOO"h EOU.
7. Monitoring use of loan
The lending bank should monitor the use of amount released to ensure that it is
used for export purpose only. Misuse, if any, is subject to penalty.
8. Repayment of Loan
It is self-liquidated in nature. The exporter repays the loan and interest out of
export proceeds and incentive realized.
BB lrlrc Export Marketing (T.Y.B.Com.) (Sem.-Vl )
DISTINCTION BETWEEN PRE-SHIPMENT AND POST.SHIPMENT FINANCE
POINTS PRE.SHIPMENT FINANCE POST-SHIPMENT

FINANCE
1. Meaning It refers to the finance (working It refers to the finance

capital) required by therequired after shipment of
exporter before the shipment of goods by the exporter.
goods.
2. Eligibility !t is available to the exporter It is available to the

who actually export and exporters, who have
produce a conffrmed export shipped the goods,
order / UC. lt is also available against, whose name the
to deemed export. export documents are
transferred and deemed
export.
3. Nature It is basically a short !t can be short term,

term/working capital. lt is medium term, as well as
offered in' the form of fund long term fir"tance. lt is
based and non-fund based fund based only.
assistance.
4. Purpose It is provided to the lndian It is provided to finance

lndian exporters between
exporters to purchase, procure,
process, pack and ship the period of shipment of
goods. goods and realization of
export proceeds.
5. Period of Finance The maximum period of -up to 90 days,

Short term
packing credit is 180 days, Medium term - between
which can be further extended 90 days and 5 years., Long
by 90 days with special term: between 5 years up
permission of RBl. to 12 years.
6. Documentary Letter of credit, confirmed Letter of credit, confirmed

Evidence order. order, Shipping
documents.
Export Finance
ffrf B9
7. lnterest Rate Governed by RBI up to 180 Coverned by RBI up to 90

days-117" extended 90 days- days-1 1% extended 90
13%. days-l3%.
8. Major Source of Commercial bank, Special Up to 90 days commercial

Finance packing credit schemes by bank, Medium term-
Exim bank, lDBl are available. commercial bank together
with Exim bank, Long
term-Exim bank.
9. Beneficiary !t is available to lndian It is available lndian as

exporters or his suppliers (Back well as oversees clients.
to back UC).
11. Amount of Loan No fixed limit depends on The amount depends in

value of export order and invoice value of goods and
credit rating of the exporter. nature of goods exported.
ROLE OF COMMERCIAL BANKS
Exporters need to finance their export sales until payment is received. The
exporter should first consider its local commercial bank as a source of financing. The
four basic factors for selecting a bank are the efficiency and experience of the bank's
international division, the exporter's relationship with the bank, the availability of the
bank's foreign branches and the export credit and financing policies of the bank.
They provide major part of export finance. According to RBl, it is obligatory that
payment of exports should be seftled to the medium of bank in lndia authorised to
deal in foreign exchange.
Assistance offered by commercial banks
Fund based assistance of financial services
a) Pre-shipment or packing credit
b) Post shipment credit
Non fund based assistance or Non-financial sewices

a) Bank guarantees
b) Advisory and other services

gO f1f1i Export Marketing (T'Y'B'Com') (Sem'-Vl)
A. Fund Based Assistance

1. Packing Credit
Commercial banks are major financer of packing credit given for the period of
180 days. This finance helps the exporter to purchase raw materials, packing
materials, and manufacturing, processing or buying of export goods
2. Post Shipment Credit
After shipment of goods commercial banks provide post shipment credit for the
period of 90 days on the basis of bills drawn under UC, bills sent for collection etc.
B. Non Fund based Assistance
1. Bank Guarantees
Commercial banks are authorised to issue bank guarantees and furnish bid
bonds in favour of overseas buyer. They include :
a) Bid bond to exporters to participate and quote prices in various global
tenders.
b) Performance guarantee : ln case of export of capital goods, turnkey projects

and construction contracts.
c) Advance payment guarantee : After getting a contract, while piying gdvance
payment, the importer may insist on bank guarantee. \
d) Guarantee for payment of Retention money : Bank issues guarantee for
money retained by importer until completion of contract.
e) Cuarantee for loan in foreign currency : Bank guarantees are furnished to
lending financial institution abroad to finance lndian export projects.
2. Other Services
a) Commercial bank collects important information about the credit worthiness
(credit rating) of importer and supplies the same to the exporter.
b) They provide valuable information about foreign exchange like rupee

convertibi I ity, forward premi um.
c) Dollar account up to 25o/o of receipts in foreign currency can be opened with
bank to meet payments in foreign exchange.
d) Banks provide necessary information on invoicing in foreign currency when
insisted by buyer.
e) Banks also take job of advising and confirming letter of credit opened by
importers.
Export Financ 1fif,ff 9t
0 Banks provide important service to the exporters by covering the risk of

exchange rate fluctuations by fixing forward exchange rates for future
transactions.
g) Bank provides foreign currencies for invoicing services as all currencies are
not available readily.
h) lssue of bank drafu for payment of freight etc.
i) Collection of export proceeds

j) Sending duplicate copies of CR form to RBl.
k) lssuance of bank certificates for claiming export incentives like XC or CB XL

(blanket permit)
l) Providing information about export procedure.
EXIM BANK
lntroduction
The Export-lmport Bank of lndia came into existence in 1982 by taking
international finance wing of !DBI. lt has its headquarters in Bombay and its
branches in important cities in lndia and abroad. lt is wholly owned public sector
bank established by an act of parliament.
Objectives
1. To promote lndia's international trade.
2. To act as a measure financer to lriternational trade.
3. To act as a principal financial institution for coordinating the working of

institution engaged in financing lndia's foreign trade.
Assistance offered by commercial banks.
Fund based
(Lending programmes)
a) Loan to the lndian exporters

b) Loans to overseas parties
c) Loans to commercial banks in lndia
d) Cuaranteeing of obligations
Non fund based
a) Financial guarantees
b) Advisory services
92 j.fffl'. Export Marketing (T.Y.B.Com.) (Sem'-Vl)
c) Other services
Fund Based Assistance
1. Loan to lndian Exporters
a) Special pre-shipment schemes in foreign currency.

b) Post-shipment credit in rupees / foreign currency (Medium and long term).
c) Consultancy and technology service finance.
d) Export supplier's credit on deferred payment fof joint ventures, civil
construction work, service contracts and export of capital goods.
e) Finance for EOU and FTZ to acquire imported materials and inputs in rupees
and foreign crrrrency.
0 Production equipment finance.

g) Export marketing finance for market development.
h) Export product development finance.
i) Overseas investment financing for equity participation.
j) Finance to 'Deemed Exports.
2. Assistance to Overseas Parties
a) Overseas buyer's credit offered directly to foreign importers for import of

lndian goods and services.
b) Linesof credits to foreign governments and foreign financial institutions
which provides long term finance for import of lndian capital goods and
services.
c) Relending facility to overseas banks to enabte them to provide tern finance to

importers.'
3. Assistance to Commercial Banks
a) Refinance facility for supplier's credit, loan to EOU and computer software
exports.
b) Bills Rediscounting facility for post shipment to banks and SSI exporters.
c) Guaranteeing Obligations.
4. Non Fund Assistance
A. Financial Guarantees with Commercial Banks
i) Bid bonds when exporter wants to bid or compete for various global tendeis.
ii) Cuarantee for advance payment : to overseas party who pays advance
payment from contract.
Export finance f1f13/. 93
iii) Guarantee for performance to foreign party to ensure competition of project

by lndian exporter.
iv) Cuarantee for loan in foreign currency: to financial institutions abroad for
granting the lndian exporters in connection with their projects abroad.
v) Cuarantee for payment for retention money to foreign party for releasing
retention money to lndian exporter.
B. Advisory Services
i) Designing financial packages for joint ventures abroad.
ii) lnforming global sources of finances.
iii) Advising on global exchange control practices.
iv) Designing financial package for export oriented industries in lndia.
v) lnformation regarding opportunities, markets, products, prices and
competition abroad.
vi) lntbrmation through seminars and training programmes-
vii)Helping exporters in upgrading quality and obtaining ISO certificates.

Other Services
i) Facilitates forfaiting - acts as an intermediary between lndian exporter and
foreign forfaiti ng agency.
ii) Provides technical and administrative services.
iii) To conduct survey in connection with the promotion and development in

lnternational trade.
iv) Learning centre at Bangalore 'Eximius Centre' 700 data base the world,
offices at Budapest and Rome for Trade and investment.
Thus, it is an apex institution for coordinating the export financenetwork in
lndia and promoting foreign trade .lt is also a major party for framing Exim policy of
the country.
SIDBI IN FINANCING EXPORTERS

lntroduction
Small lndustries Development Bank of lndia (SlDBl) was established in 1990
under the act of parliament. lt took over the activities of lDBl pertaining to small
scale sector. lt is wholly owns subsidiary of lDBl.
It is operating through its head office at Lucknow and a network of 5 regional

offices and 26 branch offices all over the states.
94 j'1j,ff Export Marketing (T'Y'B'Com') (Sem'-Vl)
Objectives
1. To serve as a principal financial institution for promotion, financing and
development of industry in small scale sector.

2. To co-ordinate the functions of institutions engaged in promoting, financing or
developing industry in small scale sector.
Assistance of SIDB!
A. RefinanceAssistance
B. Direct Financial Assistance
C. Bills Scheme
D. Developmental Activities
A. Refinance Assistance
1. Provision of term finance through primary lending institutions like SFC, SlDCs,
SllCs and banks for small scale industrial projects.
It also refinances for :
i) Expansion
ii) Modernisation
iii) Quality promotion
iv) Diversification
v) Rehabilitation
2. Tourism related finance scheme
It provided refinance for amusement park, cultural centres, restaurants etc.
through SFCS/SlDC.
3. Single Window Scheme
For new projects in SSI/tiny sector or new entrepreneurs.
4. Seed Capital Scheme
!t refinances SFCs/SlDCs to provide seed capital to promoters of SSI units. lt

enables the entrepreneurs to meet promoter's contribution towards equity capital
5. Equipment Refinance Scheme

For the purpose of expansion and modernisation of unit.
6. Other Refinance Schemes

For small road transport operators, hospitat, nursing homes, hotels, construction
of roads, common entrepreneurs etc.
.,1
Export Finance fftff 95
B. Direct Financial Assistance

1. Term Loan to SSI units for new projects, specialised marketing agencies,
modernisation, infrastructure development, leasing hire purchase companies etc.
2. Equity currency loans for importing equipment, entering in export market and
executing confirmed export order.
3. Equity Assistance to SSI
For new units manufacturing export oriented or high tech products, special
scheme for women entrepreneurs is known as Mahila Udyam Nidhi scheme.
4. Loans for obtaining ISO 9000

To prove quality with a view to strengthen their marketing and export
capabilities.
5. Loans for specialised marketing agencies
For the products of SSl, cottage and village industries.
C. Bill Schemes
1. Direct Discounting Scheme (DDS)
a) DDS (Equipment)-where bills are normally for 5 years and minimum
transaction value of { 1 lakh.
b) DDS (Components)-where unexpired period is not more than 90 days.
2. Bill Rediscounting Scheme (BRS)
a) BRS (Equipment) up to 5 years.

b) BRS (Short term) not more than 90 days.
D. Development and support activities
1. Technology up gradation
2. Quality promotion
3. Technology transfer
4. Skill up gradation
5. Entrepreneurship develoPment
6. Marketing support for export promotion
7. Environment Management
B. Project profiles
9. Rural industrialisation.
\
96 fsi Export Marketing (T.Y.B.Com. ) (Sem.-Vl )
ROIE OF EXPORT CREDIT AND GUARANTEE CORPORATION ECGC
lnternational market is sensitive in character due to high corhpletion and

complexities. To provide adequate cover of insurance to lndian export against such
risk, Govt. of lndia established Export Risks tnsurance Corporation (ERIC). tt was
replaced by ECCC with more comprehensive objectives in 1964. Their mofto is "You
focus on exports, we cover the risk."
Objectives
1. To issue suitable insurance policies against possible political and commercial
risk.
2. To provide financial guarantees to banks and exporters against deferred credit

terms.
3. To encourage and facilitate globalisation of lndia's trade.

4. To educate the customers by continuous publicity and effective marketing.
5. To facilitate availability of adequate bank finance to the lndian exporters by
providing surely insurance cover for bankers.
Commercial Risks Covered by ECGC
1. Buyer's failure to accept the goods
2. Buyer's default to pay the goods
3. lnsolvency of the buyer

Political Risks
1. War revolution or civil disturbances in exporter's country.
2. lmposition of new licence restrictions or cancellation of valid import license in
buyer's country.
3. Restriction imposed on remittances on licensing.
4. Cancellation of export licence/restriction on licensing.
5. Additional handling, transport, insurance charges due to interruption or
diversion of voyage which cannot be recovered from buyer.
6. Any restriction by government which may block or delay the payment of
exporter.
7. Any other loss not covered by commercial insurers.
Risks not Covered by ECGC
1. General or marine insurance risks for damage of goods.

2. Failure / Negligence on the part of exporter to fulfill the terms of export of
contract.
Export Finance lftff 97
3. Default/lnsolvency of exporter's agent or collecting bank.

4. Causes inherent in the nature of goods.
5. Buyer's failure to obtain import or exchange authorisation.
6. Fluctuation in the exchange rate of the currency of invoice.

7. Commercial disputes raised by buyer.
Assistance
Policies
1. Standard policies
2. Specific policies
3. Services policy
4. Construction work policy

5. Special policy
Financial Guarantees
1. Packing credit guarantee
2. Post-shipment credit guarantee
3. Export finance credit guarantee
4. Export performance guarantee
5. Export production guarantee
6. Transfer guarantee
7. Overseas lending guarantee
Special Schemes
1. Joint venture insurance
2. Overseas investment insurance
3. Product liability insurance
4. Revolving foreign exchange
Due to availability of insurance cover and guarantees of ECCC, the banks have
been able to grant export finance on liberal terms and higher scales. The ECCC fixes
the credit limit after taking into account financial position, credit worthiness and
business reputation of the buyer. Thus it plays a very significant role in the field of
export finance. lt has recently introduced a special scheme to cover exchange rate
fluctuations.
98 Export Marketing (T'Y'B'Com') (Sem'-Vt)
fiflr
ECGC Policies Covering Risks of Exports
ECGC covers various political risks and commercial risks involved in export
business. The details of policies are as follows :
1. Standard Policies
2. Specific Policies
3. Services Policy
4. Construction Work Policy

5. Special Policies
1. Standard Policies
They are issued to exporters to protect them against the payment risk involved in
export in short term credit. lt provided continuing insurance for the regular flow of
export contract forl80 days. The standard policies cover 9O"/" of loss on account of
commercial and political risks.
There are four policies which are issued under standard policies category.
i) Shipments (Comprehensive Risks) policy : It covers both political risk and

commercial risks from date of shipment.
ii) Shipments (Political Risks) policy : lt covers political risks only from the date
of shipment.
iii) Contracts (Comprehensive Risks) : Policy to cover both commercial and
political risks from the date of contract.
iv) Contracrc (Political Risk) policy : To cover only political risks from date of
contract.
2. Specific Policies
It is for the contracts for export of capital goods. Turnkey projects or construction
works are the projects which are not of a repetitive nature are required to be insured
by ECCC on case to case basis under specific policies.
The policies under category are :
i) Specific Shipment (Comprehensive risk) policy to cover both commercial and

political risks at post shipment stage.
ii) Specific Shipment (Political Risks) policy to cover political risk at post
shipment stage where buyer is foreign government or payments are
guaranteed by government or by banks.
iii) Specific Contracts (Comprehensive Risks) policy.
Export Finance frt gg
iv) Specific Contracts (Political Risks) policy.
v) Policy under which financial institution granting buyer's credit or line of

credit can get insured.
3. Services Policy
When an exporter renders technical, leasing professional service to overseas

buyer, there is a risk of payment which can be insured under following policies :
i) Specific Services Contract (Comprehensive Risk) policy.
ii) Specific Services Contract (Political Risk) policy.
Such policies are for private buyers and government respectively. They cover
90% loss suffered by the seller.
4. Construction Work Policy
i) Policy to cover turnkey projects for government as buyer "/" of loss 85%
(Political Risk)
ii) Policy to cover turnkey projects for private buyers. (Comprehensive risk-loss
7s%)
5. Special Policies
This scheme is drafted for small exporters whose total turnover for the period of
12 months ahead is not more than { 25 lacs. lt covers 95"/o of commercial risks and
1OO"/" of political risks. lt provides short term and medium as well as long term
policies. Short term policies include pre-shipment and post-shipment policies. There
are turnover based policies like small exporter's policy, specific shipment policy,
services policy, export turnover policy, export specific buyer policy, consignment
export policy etc. Exposure based policy includes Buyer's exposure policy; lT
enables service policy, small and medium entrepreneur's policy software project's
policy.
A part from above schemes, ECCC has joint venture insurance, overseas
investment insurance product liability insurance for covering risks, protecting
investments abroad and to encourage export marketing.
ECCC has several guarantee schemes to encourage banks to give liberal

advances to exporters. They cover risks of loss of banks due to insolvency and
protracted default of the exporter. So financial guarantees protect the banks from
losses on account of their export finance.
\
tOO Export Marketing (T.Y.B-Com') (Sem'-Vl)
f.fl.
The lmportant Guarantees are as follows :
1. Packing Credit Guarantee
It enables exporter to obtain pre-shipment finance from banks with or without
opening letter of credit. lt also extends to preliminary expenses in export market .Loss
covered is 66.66"/".
a) lndividual packing credit guarantee.
b) Packing credit guarantee for small exporters.
c) Whole turnover packing credit guarantee - The premium rate is 7.5 paise for
{ 100 per month.
2. Post Shipment Export Credit Guarantee
Post shipment credit against export bills are covered under this guarantee. Before
extending such guarantee, ECCC sees that the exporter has obtained 'Shipment or
Contract Risk Policy'. The loss coveredisT5o/" and 60% for non-policy holders. The
rate of premium is 5 paise for ( 100 per month.
3. Export Finance Guarantee

This guarantee is provided to cover pre-shipment and post-shipment finance
against customs and excise drawbacks. Advances are given up to max 507o of FOB
value. The premium rate is 7.5 paise for < 100 per month.
4. Export Performance Guarantee
The guarantee proteca the bank against loss, which it may have to suffer on
account of guarantee by it to overseas buyer on behalf of exporters. Such guarantee
may be ensuring performance of export contract or advance payment without
keeping deposit. The premium is 7.5 paise for ( 100 per month. The loss covered is
7.5%.
5. Transfer Guarantee
It has recently introduced this guarantee to confirming bank in lndia which may
suffer loss if overseas bank fails to reimburse him with the amount paid to the
exporter, which delays or prevents transfer of fund in lndia. They are :
i) Transfer guarantee (Comprehensive Risk)
ii) Transfer guarantee (Political Risk)
Premium rate is fixed after taking into account country in which UC is opened,
the length of period covered etc.
6. Export Production Finance Guarantee
This guarantee is available in case of both pre-shipment and post-shipment
advances given by banks and financial institutions to some specified products such
t
Export Finance fo1trl' t)t
as textiles, yarn, woolen carpet, garments, engineering goods, chemicals, iron and
steel which are eligible for duty draw back.
i) 50% of FOB value-maximum 1OO"/" of the domestic cost.

ii) 75o/o and above FOB value (lmport conditions).
iii) Domestic cost of export product loss-66.66oh.
7. Export Finance (Overseas l-ending) Guarantee Scheme

A bank granting foreign currency loan for overseas projects can be protected
under this scheme, against non-payment by the contractor. The guarantees provided
are regarded as useful collaterals by the financing banks.
QUESTTON BANK FOR SEIF PRACTTCE

1. Explain the different methods of payment in Export Marketing.
2. Discuss the procedure to open letter of Credit.
3. Explain different types of letter of credit.
4. Write Note on : Benefits of Counter trade.
5. Describe various types of counter trade.
6. Explain the features of Pre-shipment finance.
7. Describe the nature of post shipment finance.
B. Distinguish between Pre-shipment and Post-shipment Finance.
9. Discuss the procedure to obtain Export Finance.
10. State the role of commercial banks in export finance.
1 1. Discuss the functions of EXIM bank in export finance.
12. Explain the role of SIDBI in financing exports.
13. Explain the role of ECCC.
oBfECTTVE QUESTIONS
A. Fill in the blanks by choosing appropriate options :

f . is most popular method of payment in foreign trade transactions.
a) Open A/c.
b) Bill of exchange
C) CAD
d) Cash payment : i rEC ?018
* *
- 400
t02 lfi Export Marketing (T.Y.B.Com.) (Sem.-Vl)
2 lnternational Money Order is provided by

A) RBI
b) Commercial Bank
c) Postal Department
d) DGFT
3 SIDBI provides export finance to units.
a) Medium
-
b) Large
c) Small
d) Public Sector
4 ln . exporter agrees to accept payment in the form other than monetary
instrument.
a) lmport trade
b) Export trade
c) !nternational counter trade

d) Consignment Sales
5 Revocable letter of Credit can be by the issuing bank without prior
permission of exporter.
a) Transfer
b) modified
c) Confirmed
d) Assigned
6 Packing Credit is also known as _.
a) Post Shipment Finance
b) Pre Shipment Finance
c) Export Finance
d) Counter trade
7 Clean letter of Credit should be accompanied by _.
a) Full set of documents
b) No documents
c) Cash
d) lntergs!
Export Finance
fIff
rI
103
8. There are _ parties to letter of credit.
a) 2
b) 6
c) 4
d) 10
9 Pre-shipment Finance is available for a period not exceeding days
a) 270
-
b) eo
c) 180
d) 360
10. Post shipment Finance is only for _.
a) Short term
b) Medium term
c) Long term
d) all of the above

11 . covers credit risks of exporters.
-a) EXIM bank

b) ECCC
c) SIDBI
d) RBr
12. EXIM Bank is Sector Bank.
a) Public
b) Private
c) Covernment
d) Foreign
13. ECCC covers risks.
a) Only Political
-
b) Only commercial
c) Both Commercial and Political
d) Marine
tO4 ExportMarketing (T'Y'B'Com') (Sem'-Vl)
!f||rtf
14. Standard policies of ECGC covers % of loss on account of risks.
a) 1 00%
b) 9O"/"
c) 50o/o
d) No
15. Specific policies of ECGC is fot the contracts for export of goods.
a) Raw Material -
b) Capita!
c) Working Capital
d) All type
16. When exporter provides professional'service to overseas buyer then ECGC
Policy is applicable.
-
a) SPecific
b) Specia!
c) Standard
d) Service
17. Commercial banks provide asiistance to lndian exporters.
a) Fund based
b) Non-Fund based
c) Both fund and non"fund based
d) No finance
lAns.: (1 -b); (2 -c), (3 -c),(4 -c), (5 -b), (6 -b), (7 -b), (8- b), (9 -c),
(10-d), (11 - b), (12-a\, (13 -c), (14-b), (15 -b), (16-d), (17 -c)I
B. Match the Groups :
1 GROUP A GROUP B
a) lrrevocable letter of Credit i) Packing Credit

b) Unconfirmed letter of Credit ii) Small lndustrial units
c) Pre-shipmentFinance iii) High risk of non-payment
d) SIDBI iv) Forfaiting Scheme.
e) EXIM Bank v) No modification
vi) Modification
lAns. : (a - v), (b - iii), (c - i), (d - ii), (e - iv)I
Export Finance
Sfif l0s
2. GROUP A GROUP B
A) ECCC i) Pre-shipmentFinance
b) Counter trade ii) Specific policies
c) Red Clause UC iii) Working Capital Requirements

d) Creen Clause UC iv) Forfeiting Scheme
e) Posrshipmentfinance v) Packing Credit and Warehousing
charges
vi) Foreign exchange saving

lAns. : (a - ii), (b - vi), (c - i), (d - v), (e - iii)l
C. State whether the following statements are True or False :
1. ln sight bill documents are released to importer on acceptance of bill.
2. ln consignment stock payment clean bill is used for payment.
3. Pre-shipment finance plgyldgs fixed capital finance.
4. Revocable lefter of credit cannot be modified without prior permission of
exporter.
5. Letter of Credit is a popular method of payment for exports.
6. Commercia! banks provide only fund based assistance to exporters.

7. Confirm'ed lefter of credit is the safest type of letter of credit to raise payment.
8. EXIM bank does not provides financial guarantees to exporter.
9. Countertrade saves foreign exchange payments.
10. The standard policies of ECGC covers only political risks.
11. Post shipment finance is granted before shipment of goods.
12. Commercial banks have launched forfeiting scheme.

13. Post shipment finance is provided only for short term.
14. ECGC also covers marine insurance risks.
15. There are only two parties for letter of Credit.

16. ln time bill, shipping documents are released to importer on acceptance of bill.
17. Revolving lefter of Credit is useful for continuous transactions between exporter
and importer.
[Ans. : True : 2, 5, 7, 9,'16,'17;
False : 1,3, 4, 6,8,10, 11,'12, 13,14,151
iw
8/T.Y.B.Com.-Export Marketing (Sem.-VI)
106 Sfr' Export M arketing (T.Y. B.Com. ) ( Sem --V I )
TIODULE
4
EXPORT PRCCEDURE
AND
DCCUMENTATION
SYNOPSIS
* Registration with different authorities; Pre-shipment Procedure involved in

Exports; Procedure of Quality Control and Pfe.shipgrent lnspection.
* Shipping and Custom stage formalities; Role of Clearing and forwarding Agent;
Post-shipment Procedure for realisation of Export Proceeds; Procedure of Export
under Bond and Letter of Undertaking (LUT).
* lmportance of - Commercial lnvoice cum Packing list; Bill of Lading/ Airway
Bill, Shipping Bill/ Bill of Export, Consular lnvoice, Certificate of Origin.
Export Procedure and Documentation
$t''l' 107
REGISTRATION WITH DIFFERENT AUTHORITTES
The registration for exporters has to be done with authorities. As the authorities
and countries involved are more the formalities of registration are also more. Some of
the important ones are :
a) Registration with Reserve Bank of lndia (RBl)
Prior to 1997, it was necessary for every first time exporter to obtain IEC number
from Reserve Bank of lndia (RBl) before engaging in any kind of export operations.
But now this job is being done by DCFT.
b) Registration with Director Genera! of Foreign Trade (DCFT)
For every first time exporter, it is necessary to get registered with the Director
Ceneral of Foreign Trade (DCFT), Ministry of Commerce and Covernment of lndia.
DGFT provides exporter with a unique lmporter Exporter Code (lEC) Number. IEC
Number is a ten digit code required for the purpose of export as well as import. No
exporter is allowed to export his good abroad without IEC number.
However, if the goods are exported to Nepal, or to Myanmar through lndo-
Myanmar boarder or to eHffiH'thrdiifh Gunji, Namgaya, Shipkila or Nathula ports
then it is not necessary to obtain IEC number provided the CtF value of a single
consignment does not exceed INR 25,000 /-.
Application for IEC number can be submitted to the nearest regional authority of
DGFT.
Application form which is known as "Aayaat Niryaat Form - ANF2A" can also be
submitted online at the DCFT web-site: http://dgft.gov.in.
While submitting an application form for IEC number, an applicant is required to
submit his PAN account number. Only one IEC is issued against a single PAN
number. Apart from PAN number, an applicant is also required to submit his Current
Bank Account number and Bankers Certificate.
IEC is compulsoryfor import and / or exports. However, the following categories

of importers or exporters are exempted from obtaining lEC.
Sr. No. Categories Exempted from obtaining IEC
i) lmporters covered by clause 3 (1) [except sub-clauses (e) and (l)] and
exporters covered by clause 3 (2) [except sub-clauses (i) and (k)] of Foreign
'1993.
Trade (Exemption from application of Rules in certain cases) Order,
ii) Ministries / Departments of Central or State Government.

108 rfff Export M arketi ng (T.Y. B.Com. ) ( Sem.-Vl )
iii) Persons importing or exporting goods for personal use not connected with
trade or manufacture or agriculture.
iv) Persons importing exporting goods from / to Nepal, Myanmar through

/
lndo-Myanmar border areas and China (through Cunji, Namgaya Shipkila
and Nathula ports), provided CIF value of a single consignment does not
exceed lndian Rupees 25,000. ln case of Nathula port, the applicable
value ceiling will be < 1,00,000/-.
Further, exemption from obtaining IEC shall not be applicable for export of Special
Chemicals, Organisms, Materials, Equipments and Technologies (SCOMET)
The exporters have to obtain PAN based Business ldentification Number (BlN)
from the Directorate Ceneral of Foreign Trade (DCFT) prior to filing of shipping bill
for clearance of export goods.
c) Registration with Export Promotion Council
Registered under the lndian Company Act, Export Promotion Councils or EPC is
a non-profit organisation for the promotion of'v'arioua'goods exported from lndia in
international market. EPC works in close association with the Ministry of Commerce
and lndusti'y, Covernment of lndia and act as a platform for interaction between the
exporting community and the government.
So, it
becomes important for an exporter to obtain a Registration Cum
Membership Certificate (RCMC) from the EPC. An application for registration should
be accompanied by a self certified copy of the tEC number. Membership fee should
be paid in the form of cheque or draft after ascertaining the amount from the
concerned EPC.
The RCMC certificate is valid from 1st April of the licensing year in which it was
issued and shall be valid for five years ending 31st March of the licensing year,
unless otherwise specified.
d) Registration with Commodity Boards
Commodity Board is registered agency designated by the Ministry of Commerce,
Covernment of lndia for purposes of export-promotion and has offices in lndia and
abroad. At present, there are five statutory Commodity Boards under the Department
of Commerce. These Boards are responsible for production, development and export
of tea, coffeb, rubber, spices and tobacco.
Export Procedure and Documentation !|fi!. tlg
e) Registration with lncome Tax Authorities
Coods exported out of the country are eligible for exemption from both Value
Added Tax and Central Sales Tax. So, to get the benefit of tax exemption it is
important for an exporter to get registered with the Tax Authorities.
Other registrations and applications also have to be filed; some of the
applications are for grant of status recognition and so on some examples are :
o The exporters intending to export under the export promotion scheme need
to get their licences/DEEC book etc., registered at the Customs Station.
o The exporters are also required to register authorised foreign exchange dealer
code (through which export proceeds are expected to be realised) and open a
current account in the designated bank for credit of any drawback incentive.
o Whenever a new Airline, Shipping Line, Steamer Agent, port or airport comes
into operation, they are required to be registered into the Customs System.
For Vishesh Krishi and Cram Udyog Yojana (VKCUY)
To avail Focus Market Scheme (FMS)

To avail Focus Product Scheme (FPS)
For Duty Entitlement Passbook (DEPB) Scheme
Under Export e6q.ffiigg;$apital Coods (EPCC) Scheme

As an Export Oriented Units (EOUs), Electronics Hardware Technology
Parks (EHTPs), Software Technology Parks (STPs) Scheme and Bio-
Technology Parks (BTPs).
PRESHIPMENT PROCEDURE INVOTVED IN EXPORTS
Before the exporter ships the consignment he has to follow certain procedure.
The procedure is :
1. Examination of goods before export

2. Let Export Order by Customs Authorities
3. Processing under EDI system
4. Conveyance to leave on written order
n0 . 3Fl.!. Export Marketing (T.Y.B.Com.) (Sem.-Vl)
The following diagram depicts Preshipment procedure involved in exports :
o Pickup of eargo
Q Peckarins
off#;1,1"*o**
) )
Cargo pick up based on Determination Confirmation

new order of any inegularities with
consigrred cargo.
V
Q nxportfrmission
o Export dederetioa
@ Metagotabe[ine
{ {
"q{r
e Air cergo carry-in

o fiight
\r
)
flevt w,on
1. Examination of Goods before Export

After shipping bill is passed by export department, the goods are presented to
shed appraiser (exports) in dock for examination. Coods will be examined by
examiner. This inspection is necessary:
a) to ensure that prohibited goods are not exported.
b) goods tally with description and invoice.
c) duty drawback, where applicable, is correctly claimed.
2. Let Export Order by Customs Authorities
Customs Officer will verify the contents and after he is satisfied that goods are
not prohibited for exports and that export duty, if applicable is paid, will permit
clearance, by giving 'Let Ship' or 'Let Export' order. CR-l, ARE-I, Octroi papers,
Quota certification for export etc. are also signed. Exporter's copy of shipping Bill,
CR-'|, ARE-1 etc. duly certified are handed over to exporter or CHA. Drawback
claims papers are also processed.
cfs nt
3. Processing under EDI system
Under EDI system, declarations in prescribed form are to be filed through

'Service Centre' of customs. After verification, shipping bill number is generated by
the system, which is endorsed on printed checklist generated for verification of data.
Coods are inspected at docks on the basis of printed check list. All documents are
submitted to Customs Officer along with checklist. lf goods and documents are found
in order, 'Let Export' order is issued. Then two copies of Shipping Bill are generated -
one customs and other exporter's copy. Exporter's copy of Shipping Bill duly signed
is handed over to exporter or CHA.
4. Conveyance to leave on wriften order
The vessel or aircraft which has brought imported goods or which carry export
goods cannot leave that customs station unless a written order is given by Customs
Officer. Such order is given only after (a) export manifest is submitted (b) shipping
bills or bills of export etc. are submitted (c) duties are paid or payment of the same is
secured (d) no penalty is leviable (e) export duty, if applicable, is paid.
pRocEDURE Ot QUAUTY CONTROL AND PRE-SHTPMENT TNSPECTTON
lnternational markets are flooded with products these days. Producers of

developed countries have now diverted their focus on global markets. Availability of
all goods and services is now at its peak. 24 hour connectivity of producers and
consumers has removed barriers of space, geographical distance. Different time
zones that were a hindrance to linking producers and consumers earlier have been
eliminated.
With the easy availability of transnational expertise to each individual or firm
issue of quality has become very important. Exporters have to address quality control
to earn credibility in international market.
Quality Control is defined as "a deliberate and planned activity of determining

the quality of a product; with a view to accepting it to satisfy the stipulated
requirements or not to satisfy such requirements. ln case stipulated requirements are
not satisfied then necessary steps to correct the quality appropriately."
Objectives of quality control are :
1. Promoting the image of Indian goods sold in foreign land.

2. dssuring that goods with good quality only are allowed to be exported.
3. Sustaining the existing markets of Indian goods and developing new markets
by meeting quality requirements of these markets.
4. tnspiring confidence in quality by acquiring third party certification.
112 l,tfn Export Marketing (T-Y-B.Com.) (Sem.-Vl)
5. Adhering strictly to technological demands of developed markets.

6. Ensuring conformance of rules of importing countries.
7. Eliminating causes of complaints from importing countries. !n the process
improving the overall quality of goods to meet demands of all countries.
8. Developing standardization to achieve higher productivity and economies.
Standard specifications are prerequisiteto maintaining quality. Some products
are given standards by the importer or the importer country. The Bureau of lndian
Standards, lnternational Standards organization and lnternational Electrochemica!
Commission are some bodies which define standards for products and services.
Under the Export Quality Control & lnspection Act, 1963, the Council, which is
constituted by the Central Covernmen! is the apex body, and has powers to
constitute specialist committees to assist it in discharge of its functions. Accordingly,
the Council has constituted.
A. Administrative Committee to advise it on Administrative mafters.
B. Technical Committee to advise it on technical matters.
C. Standing Committees in specific technical areas.
ElC, either directly or through the Export lnspection Agencies, its field
organizations, renders services in the areas of :
1. The Council advises the Central Coveihni"iii'-i"garding measures for the
enforcement of quality control and inspection in relation to commodities
intended for export and to draw up programrnes, to make it possible, with the
concurrence of the Central Government, for providing grants-in-aid to the
agencies established or recognised for schemes for export promotion. To
perform such other functions as may be assigned to it under this Act.
2. For the purpose of performing its functions, the Council may co-opt as
members persons it thinks fit, who have special knowledge and practical
experience in matters relating to any commodity or trade. This person shall
have the right to take part in the discussions of the Council pertaining only to
their specialised areas.
3. The Council may also constitute specialist committees for conducting
investigations on special probtems connected with its functions.
4. ln the performance of its functions under this Act, the Council shalt be bound
by such directions as the Central Covernment may give to it in writing from
time to time.
Export Procedure and Documentation f1!,1i t 13
The EIC is an advisory body to the Central Covernment, which is empowered

under the Act. EIC is Empowered to :
o Notify commodities which will be subject to quatiry- control and/ or
inspection prior to export,
o Establish standards of quality for such notified commodities, and
a Specify the type of quality control and / or inspection to be applied to such
commodities.
Besides its advisory role, the Export lnspection Council, also exercises technical
and administrative control over the five Export lnspection Agencies (ElAs), one each
at Chennai, Delhi, Kochi, Kolkata and Mumbai established by the Ministry o{
Commerce, Government of lndia, for the purpose of implementing the various
measures and policies formulated by the Export lnspection Council of lndia.
Functions of the Council

The Export lnspection Council, either directly or through Export lnspection
Agencies, its field organisation renders services in the areas of :
r' Certification of quality of export commodities through installation of quality

assurance systems (ln-process Quality Control and Self Certification).
/ Certification of quality of food items for export through installation of Food
safety Management System in the food processing units.
/ lssue of Certificates of origin to exporters under various preferential tariff
schemes for export products
{ Laboratory testing services.
r' Training and technical assistance to the industry in installation of Quality and
Safety Management Systems based on principles of Hazard Analysis Critical
Control Point (HACCP), ISO-9001 : 2000, ISO : 17025 and other related
i nternational standards, !aboratory testi ng etc.
/ Recognition of lnspection Agencies as per ISO 17O2O and Laboratories as per
ISO 17025 and utilizing them for export inspection and testing.
{ ln rendering the above services, ElCs are backed by qualified technical
manpower, having experience of quality control and inspection of notified
commodities including their testing as per international standards/importing
countries' standards or the foieign buyers' specifications.
t fIf3P
Objectives of EIC
The EIC is set up with some aims and objectives. Some of the objectives are :
1. Certify - to create a systematic framework for certifying quality of export

goods.
2. Authenticate - to validate the quality specifications met by exporters.

3. Standardise - to define a standard for different products a step towards
quality assurance.
4. Brand image - to initiate activities that will enhance the image of lndia and
lndian goods in foreign markets.
5. Advice - to advice the government and exporters on quality specifications of
different countries.
6. Link between exporter and government - it bridges the gap between the
policy makers and the beneficiaries of policies.
7. Technical assistance - to assist exporters in quality related issues.
B. Conformance - to advice exporters so that number of complaints and return
of goods is minimized.
SHIPPINC AND CUSTOM STAGE FORMALITIES
Shipping Formalities
Exports are vital for our economy. Any stoppage in export consignment means
loss of export orders to the exporter and loss of foreign exchange to the country.
Hence, the government policies are directed at movement of export consignment
without any interruption and authorities ensure that no export consignment shall be
withheld without any valid reason. However, the exporter has to follow certain
procedure and formalities. Coping with the increasing imports/exports and rising to
the need of the hour, the lndian Customs authorities have decided to computerize
the manual process of assessment of Bills of entry, clearing of shipping bills for
export. This gave birth to the EDI (Electronic Data lnter-change System) wherein all
the documents relating to exports and imports are being processed on-line. The
Public Notice dated '19.2.98 was issued to inform the public, importers, Custom
House Agents about introduction of EDI for exports and the procedure to be followed
by them.
Export goods can be loaded only after Shipping Bill or Bill of Export, duly passed
by Customs Officer is handed over by Exporter to the person-in-charge of
ftrff fi5
conveyance. ln case of baggage and mail bags, shipping bill is not necessary, but
permission of Customs Officer is required (section 40).
The diagram below depicts the shipping formalities :
Load Export cargo in

transport and prepare
Shippers Gate Pass
D Pass the Export
cargo in the
Docks
+ Pay Port
Trust
Obtaining Agents
and Shed Supdts.
carting order
€
Examine and
shipment of cargo F Surrender Shipping
Bill to collect Mate
Receipts
After the pre-shipment procedure is over the shipment of the goods starts. The
procedure for this is as follows :
1. Shipping Bill
2. Carting Order
3. Cate Procedure
4. Receipt in Shed
5. Shipment
6. Mate's receipt
1. Shipping Bil!
A Shipping Bill or Bill of Export, duly passed by Customs Officer is handed over
by Exporter to the person-in-charge of conveyance. The Shipping Bil! is primary
document for shipment of goods. The Shipping Bills are Benqrated from Custom's
EDI System. For Export cargo, only 3 copies of Shipping Bill are required, i.e.
Customs Original and duplicate and Port Trust copy.
2. Carting Order
After the Deputy Manager of the Docks concerned nominates a berth for an
export vessel, he issues wriften orders to the Shed Superintendent directing him to
receive export goods for the vessel in the shed. The Shipper then approaches the
Shed Superintendent with the Port Trust copy of the Shipping Bill duly noted in the
Customs House, for obtaining carting order. Considering the availability of space in
the shed taking into account previous carting orders given, the Shed Superintendent
after confirming that the Agents have given Carting Orders allows full or part carting
by stamping "Please Pass" under his signature on the reverse of the Port Trust copy of
the Shipping Bill.
116 rf,rf$ Export Marketi ng (T.Y. B.Com. ) (Sem.-V I )
3 Cate Procedure
The export goods are brought by the shipper from the Godown to the Dock gate
concerned. The Check list/Port Trust copy of the Shipping Bill,and Cart chit are given
to the gate keeper. The number of packages are verified at the Cate with reference to
the Cart Chit and is passed on inside. Thereafter the gate Register is prepared by the
gate keeper, gate inspector, vessel-wise. Cargo brought in by lorries thereof are
recorded in the gate register. The original of Cate Register is sent next day morning
to the shed concerned and duplicate to the labour office. Once the quantity under a
shipping bill is completely carted in, the party collects Port Trust copy of Shipping
Bill from the gate. Carting orders issued on any day should be held valid only for 3
days.
4. Receipt in Shed
When the lorry with export cargo arrives at the shed, the Asstt. Shed
Superintendent (Export) verifies the Cart Chit and takes charge of the cargo. The
receiving particulars are then entered in the register. Lifts have to be given by the
shipper at the hook point. lndividual packages which cannot be handled by mazdoor
on hand carts are treated as heavy lifts.
5. Shipment
Once the cargo is received in the shed, Shipping Bill is produced by the shipper
to the Customs and after examination and obtaining the "Let Export" order from the
Customs Officer, the Shipping Bill is handed over to the Agents in the shed for
shipment. The Shed Superintendent should ensure before shipment is effected that
the Customs "Let Export" order has been obtained by the shipper.
6. Maters receipt
This is a document originally issued by the first mate of the ship. He is the officer
responsible for cargo. The document would be issued by him after the cargo was
tallied into the ship by tally clerks. ln modern days, the document known as the
Mate's receipt is not often signed by the mate of the ship but by some person in the
shore office of the shipping company or its agents, although the name of the
document remains the same. The Mate's Receipt No. and date are entered in the
Export Cargo Register. A vessel shall not be allowed to leave the Docks unless Mate's
Receipts are received by the Shed Superintendent for all the goods shipped.
$#!f lt7
CUSTOMS STAGE FORMATITIES
The diagram below depicts the Custom Stage formalities :
' {- ilr.
*
t{ II
c>
ARRIVES AT CAR@ TERMINAL SUAMM DOCUMEI{TS PAYMENT
s
AwqtEc, AUTSOR|TY LETTER
CUSTOMSCHECKINC
{s &
{I $
PROCTED TOC]OI.ISICNEE GATEPASS OSIAINSD AAI CHARGES ATIOCATTON
Once the Export Declaration data has been entered into the Customs, it will be
subjected to automatic processing, for example data validation, data matching,
release status, etc. and the cargo is released. Cenerally, the export customs clearance
processes include four stages :
1. Submission of a Declarafion
The export procedures start when an exporter/broker submits an Export

Declaration to the Customs system.
2. Verification of a Declaration
The second stage is verification (may be automated) of the Declaration. ln cases
where the validated data contains no error, the Goods Declaration number is
generated in conjunction with the Payment system (if export taxes and duties are
applicable.). ln addition, the selectivity profile system will validate the transmitted
data and classify the Goods Declaration into two categories: Creen Line and Red
Line.
3. Payment of Duties and Taxes

The third stage is payment of applicable duties and taxes and/or guarantee.
There are currently three means for payment of export duties and taxes: payment at
the Customs Department, payment via e-Payment system, and payment at banks.
4. lnspection and Release of Caqgo
The last stage is to inspect and finally release cargo from Customs custody. At
this stage, a freight forwarder loads cargo into containers. The cargo control report
number is generated by the system and sent to the freight forwarder and the
ll| lff ExportMarketing(T.Y.B.Com') 6em'-Vl)
exporter/broker. The freight forwarder then prints out the cargo control report with its
number and removes the cargo to the port of exit. At this stage, the Customs officer at
a sub-gate checks whether the declaration is a Red Line or a Green Line.
1. ln case of the green line, the Declaration is cleared within a few minutes.
After the cargo is exported, a shipping company/agent is required to submit,
the manifest information to the Customs. The system then automatically loads
the Goods Declaration and transmits the message back to the
exporter/broker.
2. ln case of the red line, the cargo is removed for physical inspection.
Other Customs Procedures
Besides the aforesaid procedures, various other procedures have been
prescribed. These are mainly to be followed by the person in charge of conveyance.
1. Boat Notes
!f the vessel has to unload only a small cargo, it may not spend time in having
berth in the port. lf the small cargo is to be sent to shore, it may be loaded in a small
boat and sent to shore. Small boat must be accompanied by a 'Boat Note' in a
prescribed form. Boat Note is also required for transhipment of cargo, i.e. transfer
from one ship to another or for re-shipment.
2. Transit Goods
Coods imported will be allowed to remain on the conveyance and to be
transited without payment of customs duty, to any place out of India or any customs
station. However, all these goods must be mentioned in import manifest or import
report submitted by person in charge of conveyance. Such goods should not be
'prohibited goods'. [The conveyance may be vehicle, ship or aircraft].
3. Transhipment of Goods
Coods,imported in any customs station can be transhipped without payment of
duty, as per Customs Act. Transhipment means transfer from one conveyance to
another. [The conveyance may be vehicle, ship or aircraft]. Such transhipment may
be to any major port or airport in lndia. The goods can be transhipped to any other
customs station in lndia if customs officer is satisfied that the goods are bonafide
intended for transhipment to any customs station.
ln case of goods being transhipped under an international treaty or bilateral
agreement between Covernment of lndia and Covernment of a foreign country, a
Declaration of Transhipment shall be submitted instead of Bill of Transhipment.
llndia has such bilateral agreement with Nepall. Such goods should not be
'prohibited goods' under section '11 of Customs Act.
Export Procedure and Documentation $ff$ t lg
TRANSIT AND TRANSHIP : Distinction between transit and transhipment is that

in 'transit' goods continue to be on same vessel, while in transhipment, goods are
transferred to another vessel / vehicle. Hence, procedures are also different.
4. Coastal goods
Coastal goods means goods transported from one port in lndia to another port in
lndia, but do not include imported goods. Thus, coastal goods mean goods taken by
ship from one lndian port to another. No export or import is involved, but control is
necessary to ensure that coastal goods are not diverted illegally for export.
ROLE OF CLEARING AND FORWARDING AGENT

The clearance of goods on lmport or Export, involves quite a lot of procedural
formalities under Section 46, 47, 50, 51 etc. of the Customs Act. These formalities
have to be observed by lmporter / Exporter, as the case may be. But in most cases the
Customs station would be far away and it may not be possible for the Importer /
Exporter to attend to such work promptly.
Clearing and forwarding agents are called Customs House Agents (CHA) in
lndia.
The Customs formalities cannot be attended to leisurely, as clearance is allowed
only after the completion of formalities and payment of duty, where due. To meet
this situation, a provision for licensing Custom House Agents, to represent the
lmporter / Exporter for the clearance work, has been made in the Customs Act 1962.
Even prior to 1962, agents such as.Muccadams, Dalals, Baggage Agents, Clearance
Agents etc., were performing these duties.
ln terms of Section 146, the Board (Central Board of Excise and Customs) has
issued certain Regulations known as Custom House Agents Licensing Regulation
1984 laying down the conditions and procedures to be followed. The regulation has
rules for different activities.
o A person, who desires to become a Custom House Agent, has to make an
application, in the prescribed form, when such applications are invited by
the Commissioner of Customs (Rule 5).
o lnitially only a temporary licence, valid for two years is issued (Rule 8).
o To be eligible to make this application, the person should have experience in
the line for at least one year and should have assets to the extent of Rs.1 lakh
(Rule 6).
120 ffi Export Marketing (T.Y.B.Com.) (Sem.-Vl)
o He has also to execute a bond with security for < 25,OOO/-. The temporary
licence can be made a regular licence on his passing a qualifying
examination (Rule 9) within a period of tvvo years.
. The regular licence (Rule 10) is issued for five years, and can be renewed
thereafter on payment of a fee of { 3,000/- for further period of three years.
. The most important part of the Customs House Agents Regulations is Rule 14,
which lays down the obligations of Customs House Agents, as under.
,/ obtain an authorisation from each of the companies, firms or individuals
by whom he is, for the time being, employed as Customs House Agent
and produce such authorisation whenever required by an Assistant
Comm issioner of Customs;
/ transact business in the Customs Station either personally or through an
employee duly approved by the Assistant Commissioner of Customs,
designated by the Commissioner;
,/ does not represent a client before an officer of Customs ih any mafter to
which he, as an officer of the Department of Customs gave personal
consideration, while in Government service;
/ advise his client to comply with the provisions of the Act and in case of
non compliance, shall bring the mafter to the notice of the Assistant
Commissioner of Customs;
/ to ascertain the correctness of any information
exercise due diligence
which he imparts to a client with reference to any work related to
clearance of cargo or baggage;
'/ not withhold information relating to clearance of cargo or baggage issued
by the Commissioner of Customs from a client who is entitled to such
information;
,/ promptly pay over to the Government, when due, sums received for
payment of any duty, tax or other debt or obligations owed to the
Covernment and promptly account to his client for funds received for him
from the Covernment or received from him in excess of Covernment
charges payable in respect of the clearance of cargo clr baggage;
/ does not procure or attempt to procure directly or indirectly, information
from the Government records or other Covernment sources of any kind to
which access is not granted by proper officer;
'/ not attempt to influence the conduct of any official of the Customs Station
in any matter pending before such an official or his subordinates by the
Export Procedure and Documentation A}|,.!. t 2l
use of threat, false accusation, duress or the offer of any special
inducement or promise of advantage or by the bestowing of any gift or
favour or other thing of value;
r' not refuse access to, conceal, remove or destroy the whole or any part of
any book, paper or other record, relating to his transactions as a Customs
House Agent which is sought or may be sought by the Commissioner;
r' maintain records and accounts in such a form and manner as may be
directed from time to time by an Asst. Commissioner of Customs and
submit them for inspection to the said Asst. Commissioner of Customs or
an officer authorised by him whenever required;
r' ensure that all documents prepared or presented by him or on his behalf
are strictly in accordance with orders relating to the documents;
r' ensure that all documents, such as Bills of Entry and Shipping Bills
delivered in the Customs Station by him show the name of the lmporter or
Exporter, as the case may be, and the name of the Customs House Agent,
prominently, at the top of such documents;
/ in the event of the licence granted to him being lost, immediately report
the fact to the Commissioner;
/ ensure that he discharges his duties as Customs Hose Agent with utmost
speed and efficiency and without avoidable delay;
r' not charge for his s6rvices as Customs House Agent in excess of the
ratesapproved by the Commissioner from time to time under
Regulation 25.
Itshould be noticed that the above 'obligations' cover not only certain
procedural aspects, but also a Customs House Agents conduct and character. Any
lapse on the part of Custom House / Agent or viotation of any rule can invite action
which might result in suspension or revocation of licence.
A Clearing House Agent has to be not only well informed of the Customs laws
and procedures and documentation, but has to be alert all the time, closely following
the instructions or change in the public notices, issued from time to time.
The Clearing house has a typical position that, though he is employed by the
lmporters/Exporters, he is licensed by the department. Hence he can satisfy the
importer/exporter only to the extent that law permits and within the procedures laid
down for Customs House. He has, accordingl/, to function under two masters, the
tax payer and tax collector. Both the parties have to be served simultaneously and to
the satisfaction of each.
9/T.Y.B.Com.-Export Marketing (Sem.-M)
122 fff. Export Marketing (T.Y'B'Com') (Sem'-Vl)
A Clearing House Agent can attend to the Custom work himself or employ
persons to assist him, but after obtaining necessary permission from the Asst.
Commissioner of Customs for doing so. Such assistants appointed by Clearing House
Agents will have to pass an examination conducted by the Asst. Commissioner of
Customs within six months from the date of such appointment.
The charges levied by Clearing House Agents from the Client should be at such
rates as notified by the Commissioner from time to time which is done under Rule
25. Clearing House Agents should enrol as members of the registered Custom House
Agents Association of the Port.
POST-SHIPMENT PROCEDURE FOR REALISATION OF EXPORT PROCEEDS
All export contracts andinvoices shall be denominated in freely convertible

currency and export proceeds shall be realised in freely convertible currency.
Contracts for which payments are received through the Asian Clearing Union (ACU)
shall be denominated in ACU Dollar. The Central Covernment may relax the
provisions of this paragraph in appropriate cases. Export contracts and Invoices can
be denominated in lndian rupees against EXIM Bank/ Government of lndia line of
credit.
lf an exporter fails to realise the export proceeds within the time specified by the
Reserve Bank of lndia, he shall, be liable to action in accordance with the provisions
of the Act, the Rules and Orders made under the provisions of the export Policy. The
provisions for foreign currency dealings and export proceed handl[ng are clearly
mentioned in the policy. Some of the provisions are discussed below :
1. Realization and Repartition of Export Proceeds
It is obligatory on the part of the exporter to realize (receive the payment from
importer) and repatriate (bring back to lndia) full value of goods or software to lndia
within a stipulated period as under :
Category of Exporter Time Frame
Units in Special Economic Zones (SEZ) No specific time frame fixed
Status Holder Exporter. Within 12 months from date of export.

Cent percent EOUs set up under Within 12 months from date of export.
Electronic Hardware Technology Parks
(EHTPs) and Biotechnology Par[s (BTPs)
Schemes.
Coods exported to Warehouse As soon as it is realized and in any case

establ ished outside lndia. within '15 months from the date of
shipment of goods.
All other cases of export. 12 months from the date of export.
rfcs 123
2. Foreign Currency Account

Participants in international exhibition/trade fail have been permitted to open
temporary foreign currency accounts abroad for credit of foreign exchange obtained
by sale of goods at the fair and operate the account during their stay outside lndia.
The balance in the account is required to be repatriated to lndia within one month
from the date of closure of the exhibition/trade fair. An lndian entity can also open,
hold and maintain a foreign currency account with a bank outside lndia for the
normal business operations of its overseas office/ branch. A unit located in a Special
Economic Zone (SEZ) may open, hold and maintain a Foreign Currency Account
with bank in lndia subject to certain conditions.
3. Diamond Dollar Account
Firms/companies engaged in purchase and sale of rough or cut and polished
diamonds/precious metal jewellery, etc. and having an average annual turnover of '
3 crore or above during the preceding three licensing years (April to March) are
permitted to open/transact their business through Diamond Dollar Account. The
number of such accounts is restricted to not more than 5 accounts to a single entity.
4. Exchange Earners Foreign Currency (EEFC) Account
An lndian resident is permitted to open with bank Exchange Earners Foreign

Currency (EEFC) Account for credit of his foreign exchange earnings to the extent of
l}Oo/o. EEFC is allowed in the form of non-interest bearing current account. No credit
facilities (fund or non-fund) are permitted against the security held in the account.
Banks may permit their exporter constituents to extend trade related loans/ advances
to overseas importers out of their without any ceiling. Banks may
EEFC balances
permit exporters to repay packing credit advances from balances in their EEFC
account to the extent of exports that have actually taken place.
5. Advance Payments Against Exports
For advance payment against exports received, the exporter is supposed to effect
the shipment of goods within one year from the date of receipt of the advance. ln
case of the exporter's inability to make the shipment within one year from the date of
receipt of advance payment, no remittance towards refund of advance payment shall
be made, without the prior approval of the RBI. ln case the export order provides for
shipment of goods extending beyond one year from the date of receipt of the
advance payment, prior approval of the RB! is required to be obtained by the
exporter.
124 tf.ff. , E\Pon Marketing (T.Y.B.Com') (Sem'-Vl)
6. GR approval for Export of Goods for Re-imports
Banks can grant Cuaranteed Remittance CR approval for goods being exported
for re-import after repairs / maintenance / testing / calibration, etc. it will be subject
to the condition that the exporter shall produce relative Bill of Entry within one
month of re-import of the exported item from lndia.
7. Opening / Hiring of Ware Houses Abroad
Banks may grant permission to exporters for opening / hiring warehbuses abroad
subject to the compliance of certain conditions. On condition that the applicant's
export outstanding does not exceed 5o/" o( exports made during the previous year.
The permission may be granted initially for a period of one year and the same may
be extended subject to compliance of the conditions.
8. Counter-Trade Arrangement
Counter trade involves adjustment of value of goods imported into lndia against
value of goods exported from lndia. The parties, the lndian party and the overseas
party, have a voluntarily arrangement through an Escrow Account opened in lndia in
USD, provided:
a) All imports and exports under the arrangement should be at international
prices in conformity with the FTP and FEMA and the Rules and Regulations.
b) No interest will be payable on balances standing to the credit of the Escrow
Account. The funds temporarily rendered surplus may be held in a short term
deposit.
c) Application for permission for opening an Escrow Account may be made by
the overseas exporter through his bank to the Regional Office concerned of
the Reserve Bank.
9. Export of Goods on Lease, Hire, etc.
Prior approval of RB! is required for export of machinery, equipment, etc., on
lease, hire basis under agreement with the overseas lessee against collection of lease
rentals/ hire charges and ultimate re-import.
10. Export of goods by Special Economic Zones (SEZs)
Units in SEZs are permitted to undertake job abroad subject to the conditions
that processing / manufacturing charges are suitably loaded in the export price and
are borne by the ultimate buyer and the exporter has made satisfactory arrangements
for realization of full export proceeds.
Export Procedure and Documentation *ii ..25
11. Export of Currency

Export of Indian currency of value exceeding < 7,5OO/-, except to the extent
permitted under any general permission granted under the Regulations, will require
prior permission of RBl.
12. Forfaiting
EXIM Bank and banks have been permitted to undertake forfaiting for financing
of export receivables.
13. Operationat Guidelines for Banks
According to RBI circulars there are guidelines to be followed by banks in cases
of exports. Detailed procedure for disposal of export declaration forms viz.
CR Forms, SDF, PP Forms, & SOFTEX forms along with check list for scrutiny of the
forms are given. Presentation of export documents by the exporters after the
prescribed period of 21 days from the date of export.
o RBI has permitted the banks to extend the period of realization of export
proceeds beyond 12 months from the date of export up to six months, subject
to compliance of certain conditions.
o Banks may allow payment of commission, either by remittance or by
deduction from invoice value, on application submitted by the exporter
subject to compliance of certain conditions.
a Banks, through whom the export proceeds were originally realized may
consider reques8 for refund of export proceeds of goods being
re-imported into lndia on account of poor quality based upon the track
record of the exporter and the bona fide nature of the transaction.
PROCEDURE OF EXPORT UNDER BOND AND TETTER OF UNDERTAKING (LUT)
Allregistered tax payers who export the goods or services will now have to
furnish Letter of Undertaking (LUT) in CST RFD-I1 form on the common portal of
GSTN in order to make exports without payment of IGST.
Letter of undertaking has to be filed /submitted online before exporting the
goods/services.
Prior to this, exporters had to manually submit the filled and signed RFD-I1 on
Business letterhead in duplicate:
. One to the Jurisdictional Deputy / Assistant Commissioner having jurisdiction

over their principal pl+f,".qf business where the verification with the Export
documents happens thiough ICECATE medium.
126ffs:ffExportMarketing(T.Y.B.Com.)6em..Vl)
. Another along with the Export documents to the Customs clearing authority.
Just like the earlier excise regime, this led to exporters losing considerable
time
and operating expense on this compliance.
Eventually, this process has now been rationalised and made simple & quick,
giving transparency in the entire process of exports by an exporter to all the
stakeholders i nvolved.
Note that the Furnishing of Bond has to be on a non-judicial stamp paper and so
needs a manual submission.
Letter of Undertaking (LUT)

It is a type of bank guarantee, under which a bank allows its customer to raise
money from another lndian bank's foreign branch as a short-term credit.
The purpose of such undertakings is to ensure that owner of the ship or aircraft
would:
. employ security on the vehicle;
o enter an appearance acknowledge ownership;
o pay any final decree entered against the vehicle whether it is lost or not.
Bonds
It is a financial instrument in which the issuer of bond owes the holders a debt
and is obliged to pay them interest or to repay the principal at a later date. lt is a
highly secured and highly liquid financial instrument which is mostly negotiable.
This means that the ownership of the bond can be transferred. The most common
types of bonds are municipal bonds and corporate bonds.
ln case of furnishing bonds for exports, the general parlance is B-1 Surety /
Security (General Bond) is furnished. These kinds of bonds have a surety (another
person) who guarantees the performance on the part of the obligor (person furnishing
the bond).
Eligibility for using LUT
Any registered taxpayer exporting goods can make use of LUTs. However, any
person who has been prosecuted for tax evasion for an amount of ( 2.5 Crores or
above under the act is not eligible to furnish LUTs.
The validity of such LUT's is for a period of one year (till the end of financial
year). An exporter furnishing LUT's are required to furnish fresh LUT for each
financial year. lf the conditions mentioned in LUT are not satisfied within the time-
limit, the privileges are revoked and the exporter will have to furnish bonds.
Export Procedure and Documentation $lilal l2Z
For all the other assesses (along with the ones who have been prosecuted for tax
evasion of ( 2.5 Crores or above under the CST laws), bonds should be furnished if
the export is being made without payment of ICST.
The Letter of undertakings can be furnished and submitted online through the
CST portal (refer 7.O for steps to furnish LUT's). At the same time, the bonds are
required to be furnished manually as the hardcopy of the same has to be remitted to
the department.
Example of transactions for which LUT/Bonds can be used :
. Zero-rated supply to SEZ without payment of IGST.

o Export of goods to a country outside lndia without payment of ICST.
o Providing services to a client in a country outside lndia without payment of

IGST.
lf goods and services are not exported then as per the specifications laid in Rule
96A of the CGST Rules.
The exporter shall be liable to pay taxes, with interest if :
o Coods are not exported outside lndia within 3 months of issuing the export
invoice tax should be paid within 15 days from the end of such three months
period);
o On a failure to render services or if the payment for goods is not received in

convertible foreign exchange within one year then within 15 days from the
expiry of such one year.
. Form CSTR-I with details of invoices of export shall be filed with a
confirmation of goods have been exported out of lndia

o lf the goods are not exported and the assessee does not makes the
payment accordingly, the amount shall be recovered as described in the
act (Section 79) and the export is withdrawn.
o As soon as the payment is made, the exports are restored. Also in cases
where the exports take place after three months, the benefit is restored.
The steps to file and furnish Bonds in the case where the exports are made
without payment of taxes :
Step 1 : Check the furnishing requirements (Whether LUT is to be filed or Bond) and
jurisdiction. lf a Bond is required to be filed then additional documents relating to
bank guarantee is also required to be prepared.
;I tlV6d ilr , ,
128 fff ExportMarketing (T.Y.B.Com.) (Sem--Vl)
Step 2 : Prepare necessary documents for Bonds. Following documents are to be

filed for bonds :
For Bonds:
o Form RFD-I1 on letterhead
o Bond on stamp paper
o Bank guarantee
o Authority letter (For example, if the bond is signed by the MD of a company then
a copy of Board Resolution authorising him to act on behalf of the company is
required to be furnished).
o Other supporting documents.
The exporter need not furnish a separate bond for each consignment. lnstead, he
can furnish a Running Bond. When using a
Running bond, the exporter carries
forward the same terms and conditions in the bond for the next consignment. Say if
an exporter furnishes a Running bond of ( 2 Crores, then he can export goods worth
of taxes to the tune of (
2 Crores in multiple transactions. On fulfilling the conditions
in the bond, the amount is freed up and can be used for next transactions for export.
Step 3 : Along with an office copy, a duplicate copy of the above shall be prepared.
Step 4 : Submit the documents to the department and get the same verified from the
relevant officer to avoid any rejections and resubmissions.
Step 5 : Within 2 to 3 days of filing the documents, a signed letter shal! be issued by
the officer acknowledging the same.
Format of tUT and Bonds in RFD-I1
The Form RFD-11 is filed in the format below :
. Registered Name
o Address
o CST No.
o Date of furnishing
o Signature, date and place
o Details of witnesses (Name, address and occupation)

Export Procedu re and Docu mentation frff 129
FORM GST RFD - 11

lSee rule 96 AI
Furnishing of bond or Letter of Undertaking for export of goods or services
1. CSTIN
2. Name
3. lndicate the type of document Bond : Letter of Undertaking

furnished
4. Details of bond furnished
Sr. Reference no. of the bank Date Amount Name of bank

No. guarantee and branch
1 2 3 4 5
Note : Hard copy of the bank guarantee and bond shall be furnished to the
j urisdicational officer.
5. Declaration
i) The above mentioned bank guarantee is submitted to secure the integrated tax
-
payable on export of goods or services.
ii) I undertake to renew the bank guarantee well before its expiry. ln case lA/Ve fail
to do so the department will be at liberty to get the payment from the bank
against the bank guarantee.
iii) The department will be at liberty to invoke the bank guarantee provided by us to
cover the amount of integrated tax payable in respect of export of goods or
services.
Signature of Authorized Signatory
Name
Designation / Status
Date
130 l,,r'r" Export M arketi ng (T.Y. B.Com. ) ( Sem.-V I )
Bond for Export of Goods or Services without Payment of lntegrated Tax

(See rule 96 A)
I / We of hereinafter called "obligor(s)", am/are held and firmly bound to

the President of lndia (hereinafter called "the President") in the sum of rupees to
-,
be paid to the President for which payment will and truly to be made.
lAl/e jointly -
and severally bind myself / ourselves and my / our respective heirs /
executors / administrators / legal representatives / successors and assigns by these
oresents : Dated this dav of
WHEREAS the above bounden obligor has been permitted from time to supply goods or
services for export out of lndia without payment of integrated tax;
and whereas the obligor desires to export goods or services in accordance with the
provisions of clause (a) of sub-section (3) of section 16;
AND WHEREAS the commissioner has required the obligor to furnish bank guarantee
for an amount of rupees endorsed in favour of the President and whereas the
obligor has furnished such guarantee by depositing with the Commissioner the bank
-
guarantee as afore mentioned;
The condition of this bond is that the obligor and his representative observe all the
provisions of the Act in respect of export of goods or services, and rules made
thereunder;
AND if the relevant and specific goods or services are duly exported;
AND if all dues of lntegrated tax and all other lawful charges, are duly paid to the
Covernment along with interest, if any, within fifteen days of the date of demand
thereof being made in writing by the said officer, this obligation shall be void;
OTHERWISE and on breach or failure in the performance of any part of this condition,
the same shall be in full force and virtue :
AND the President shall, at his option, be competent to make good all the loss and
damages, from the amount of bank guarantee or by endorsing his rights under the above
written bond or both;
lAlVe further declare that this bond is given under the orders of the Covernment for the
performance of an act in which the public are interested :
lN THE WITNESS THEREOF these presents have been signed the day hereinbefore
written by the obligo(s).
Signature(s) of obligo(s)
Date:
Place :
Witnesses
1. Name and Address Occupation
2. Name and Address Occupation
Accepted by me this _ day of (month) (year)

of _ (Designation)
for and on behalf of the President of lndia,,.
flt'lr t3t
Form for Bonds :
o Registered Name
o Address
o Amount of bond furnished

. Date of furnishing
o Amount of bank guarantee furnished
o Signature, date and place
a Details of witnesses (Name, address and occupation)
IMPORTANCE OF DOCUMENTS
Any export shipment requires number of documents which are mainly required
by customs/port trust authorities. Apart from this, following authorities require export
documents:
o Reserve Bank of lndia
o Commercial/Exporter - lmporter's Bank
o Export Licensing Authority (DCFT)
o Export lnspection Agency
o Excise Authorities
o lncome tax - Sales Tax Authorities
o lmporter
o lmporter's Bank
o The Registering Authorities
o The Registering Authorities such as EPC, FIEO, ICC etc.
Some of the export procedures often involve a good deal of documentation. !t is

one of the major differences between trading in the home country and trading with
the foreign country. For even export shipment a number of export documents must
accompany. The entire set of documentation must be correct. This is not a simple job
because documents may vary from country to country. tf the documentation work is
not proper/ correct, the importer cannot obtain the goods from his port or airport. He
may have to pay heavy penalty; therefore exporter has to be very particular while
preparing export documents; if not in future, he may lose export contracts.
With the help of clearing and forwarding agents exporter should collect basic
information about the purpose behind preparing these documents.
132 ffffc Export Marketing (T.Y.B.Com.) (Sem.-Vl )
Purpose
o To provide specific and complete description of goods under export contract.
o On the basis of correct documents, assessment of import duty can be done
easily.
a Some of the export documents play an important role in :
Transport Arrangements
Credit procedures
Cargo insurance and claims
o Some of the export documents will prove an evidence of shipment and title to
goods.
o Proper Export Documents makes the export realization procedure (payment)
easier.
o Declaration of exports as per Exchange control Regulations of the country.
Before starting export documentation; it is essential to note that from
1't Sept. 1991, The Covt. of lndia has made it mandatory lor every exporter to use
standardized pre-shipment export documents as it is popularly known as Aligned
, Documentation System (ADS)which is based on United Nations Layout Key.
Export Documentation can be broadly divided into 2 categories :
a) CommercialDocuments
o Bill of exchange
o Commercial lnvoice
o Consular tnvoice
o Certificate of Origin
o Shipping Bill Mate's receipt
o Bill of Lading
b) RegulatoryDocuments
o Shipping Bill
o Exchange Control Declaration form (CR form)
The documents which are discussed in detail below are :
1. Commercial lnvoice cum Packing list :
2. Bill of Lading/ Airway Bill

3. Shipping Bill/ Bill of Export
4. Consular lnvoice
5. Certificate of Origin
Expo rt P roced u re an d Doc u m e ntation ffrf 133
COMMER,CIAL INVOICE CUM PACKING LIST
It is one of the most important documents issued by the !t is also

""ptn"r.
known as Horoscope of the export transaction. lt has a standard format. tt is usually
made out for the full realizable amount of goods as per contracts.
lf the export documents are drawn under Lefter of Credit, Commercial lnvoice
should be prepared out in the name of the applicant for the credit and detailed
description of the goods in the commercial invoice must correspond with the
description in the credit, if any discrepancy occurs; banks have every right to refuse
commercial invoice issued for the amount in excess of the amount permifted by the
credit. lt is also to be noted that commercial invoice should be prepared strictly as
per contract of sale and signed by the exporter.
Features of Commercial lnvoice :
1. lt is a basic document.
2. lt should be prepared in standard format only.
3. Sometimes special commercial invoice is required in some countries due to
import control and customs requirement.
Importance of Commercial lnvoice
To the Exporter To the lmporter
'1. lt is useful for the collection of 1. lt is useful for payment of Customs

payment from the importer. Duty.
2. lt is complementary to complete 2. lt indicates exact amount payable to

other export documents. the exporter.
3. lt proves an important document to 3. lf any tariff concessions are

settle payment disputes. available; it helps to collect the
same.
4. lt is useful to collect the export 4. tt serves the purpose of accounting

incentives and acts as an base for and filing.
preparing Shipping Bill.
5. lt serves the record purPose. 5. Against the import of goods, it is

used to obtain loan from commercial
banks.
t34 fcf Export M arketing (T.Y. B.Com. ) (Sem.-Vl )
BILI OF TADING / AIRWAY BILL

Meaning
Bill of Lading is a document of title to the goods. lt is issued by shipping
company upon the shipment of goods. It is a contract between exporter and
shipping company for the carriage of the goods to the port of destination.
This certificate is required by the importer to clear the goods at importer's
customs department. The shipping company undertakes to deliver the goods at port
of destination on payment of freight charges.
Contents
1. Name and address of the shipper/exporter/consignee and the name of the
shipping company.
2. Name of the ship, voyage number and date of loading of goods on board the
ship.
3. Quantity, quality and marks (if any) and description of goods.
4. Number of originals issued.
5. Port of shipment and port of destination along with date of loading.
6. The number of packages.

7. Freight paid or payable should be mentioned clearly.
8. Number of packages.
9. Signature of issuing authority.
l0.Other details as per requirement.
Functions / Features of Bill of tading (B/L)

I. Acknowledgement or Receipt for Goods
This is main function of bill of lading which is issued by shipping company
which states that goods have been received by the exporter for transportation.
2. lt is a Proof of Contract of Carriage
Exporter requires reserving the shipping space in advance. B/L serves the
purpose on the basis of mate's receipt.
3. Semi-Negotiable lnstrument
It is a document of title to goods which gives the right to the goods covered by
the same. B/L is transferable by endorsement and delivery.
Export Procedure and Documentation fff|t' 135
Types
1. Clean B/L
The bill, without any adverse remarks about condition of goods.
2. Claused B/L
When goods are not packed in proper condition and shows the signs of damage;
the shipping company puts adverse remark "goods damaged", it is called Claused
bill of Iading.
3. Freight Paid B/t
When freight charges are paid by the exporter it is known as freight paid Bill of
Lading.
4. Freight Collect B/L

When the export contract is on the basis of F.O.B. terms and freight charges are
not paid by the exporter it is known as freight collect Bill of Lading.
5. Direct B/L
When the same ship carries goods directly from port of shipment to the port of
destination Shipping Company issues direct B/1.
6. Through B/L
When, goods are trans-shipped on its route then shipping company issues
through B/1.
7. Stale B/L
After many days from the date of issue of B/L, it is presented fro negotiation to
the bank; it is called stale B/1. lt is to be noted that at a right time if the B/L is
presented to the bank there won't be any difficulty or problem to exporter and
importer.
8. Straight B/[
ln this type of B/L importer is named in B/1.
9. To Order B/L
ln this; B/L is issued to the order of a particular person.
10. On Board and Received B/L
The B/L can be either :
o Shipped
. Board or received for shipment

Depending upon whether the goods are loaded on board the ship or shipping to
receive the goods for storing.
136 ExportMarkeilng(T.Y.B.Com.) (Sem'-Vl)
fil
11. Container B/t
B/L is issued by the container shipping lines when the cargo is transported from
an inland place of the shipper to the final destination of its arrival.
Importance
1. To the Exporter
a) Being a legal document, it is very important in the event of dispute and can
be presented before court.
b) tt acts as an valid proof of transperfation.
c) lt is an acknowledgement as it acts as a proof of receipt of goods on board

the ship.
d) lt enable exporter to send a Siprrent advice to the importer.
e) !f goods are damaged in transit ron the basis of B/L exporter can file for claim
of compensation.
0 While submitting C/F quotation; it helps to the exporter for calculation of

exact freight amount.
g) lt is useful for exporter while:claiming duty drawback.
2. To the lmporter
a) lt is a document of title to goods.
b) lt is semi negotiable document as it can be transferred by endorsement and
delivery.
c) !t helps the importer to pay exact amount of freight under F.O.B. quotation.
3. To the Shipping Cornpany
a) !t enables the shipplng company to issue clear or Claused B/L.
b) lt helps the shipping to collect freight changes either from exporter or
importer.
c) lt acts as a valid proof in case of Iitigations.
SHIPPINC BILt/ BILL OF EXPORT
Meaning
The bill which is required by the customs authorities for granting permission
for shipment of goods is called'Stripping Bill, Wtrren Shipping Bill is duly stamped by
custom authorities, and then only the cargo is allowed to be carted in docks.
Generally Shipping Bill is prepared in five copies, whose description is as under :
t/Irf 137
1. Custom Copy
2. Drawback Copy
3. Export Promotion Copy
4. Port Trust Copy
5. Exporter's Copy
lmportant Particulars from Shipping Bill
1 . Name and Address of the Exporter
2. Name of the Vessel
3. Number and description of packages
4. Name of the agent, if any
5. Port of destination
6. Duty drawback claimed
7. Quantity, weight and value of goods
8. Other details if required.
Types '
Nature of Goods I rxported by Sea Air

1. Drawback goods Creen Creen
2. Shipment Ex-bond goods Yellow Pale Yellow
3. Dutiable goods Yellow Bright Pink

4. free White Pale Pink
Explanation
1. Drawback Shipping Bill
Useful for claiming the duty drawback paid to custom authorities the claim is to
be paid to the bank then yellow colour shipping bill is used for both sea and air.
2. Shipment Ex-bond
It is useful for goods lying in bonded warehouse and goods meant for re-export.
3. Dutiable Shipping Bill
tt is useful for goods on which export duty is payable as per the fixed rate.
4. Duty Free Goods

tt is used for those goods on which export duty is not charged.
I 0/T.Y.B.Com.-Export Marketing (Sem.-V!

t3B ffff Export Marketing (T.Y.B.Com.) (Sem'-Vl)
Utility/lmportance of Shipping Bill

o lt is useful for obtaining 'Carting Order' from the port trust authorities to
bring the goods inside the dock.
o lt is useful for clearance of goods by custom authorities as they endorse the
shipping bill with 'Let Export Order' and Let Ship Order'.
o lt is useful for exporter for claiming duty drawback and excise refund as and
when it is duty endorsed by customs.
o lt is useful for determining the value of exportable goods.
o lt is useful for loading of cargo on the ship.
CONSULAR INVOICE
Meaning
It is a certificate issued by the Trade Consulate of importer's country stationed
in exporter's country stating that goods of a particular value are being imported
from a particular country by a particular importer. Certain countries like
Philippines, Australia, New Zealand etc. requires the valuation certificate about the
goods imported by an importer; so export",rr,lffpl, paying necessary fees can
obtained this certificate which facilitates prompt clearance of goods from the
customs authorities in the importing country.
Utility/Benefits
a) To the Exporter/Seller
i) lt facilitates quick clearance of goods from the customs.
ii) lt assures the exporter that goods exported will enter in importer's country
without any problem.
iii) Exporter can realize foreign exchange against shipment without any
problem so exporter's interest is well protected.
b) To the lmporter/Buyer
i) He gets quick delivery of goods from his customs.
ii) lt facilitates quick calculation of duty as it is certified by his country's Trade
Consulate.
iii) The importer is rest assured that banned goods are not exported by the
exporters.
Export Procedure and Documentation fff1f l3g
c) To the Customs Office

i) Custom Authorities can square up the job easily and quickly so it facilitates
quick clearance of goods.
ii) On the basis of certified value; quick calculation of duty is possible as it
does not requires physical verification.
iii) Time will not be wasted to open the cargo because of the value
certification.
iv) Loss of time in re-packing of the goods is avoided.
v) lt is easy to calculate Ad-valorem duty.
CERTIIICATE OF ORIGIN
Meaning
It is the certificate which declares that goods which are being exported are
produced in that particular country. lt states the origin of the goods.
b) utility
o Certificate of origin is sent by seller, i.e. exporter to the buyer,
i.e. importer and it is important while claiming special concession on the
import duty charged.
o lt is essential to be produced before Custom Authorities for the assessment
of duty and clearance of goods with concessional duty.
o Among member countries from certain trading blocs, imports are treated in
the favorable manner of levy of import duties. Such countries custom
authorities ask for genuine profig so it acts as a declaration which tests the
origin of the product.
o !t is useful for enioying an advantage of a preferential duty; if it is granted.
o lt ensures that goods are not re-shipped so it is not suitable for enterpot
trade.
tn lndia certificate of origin is issued by :
a) Chambers of Commerce
b) Export Promotion Councils
c) Trade Association
d) Some commodity boards like Central Silk Board, Coir Board, Textile
committee etc.
l,1l,1l,
Types
There are 3 types of Certificate of Origin :
a) Certificate for Clearance : ln general from all countries, importing for

clearance of goods this certificate is required by importer.
b) Certificate which avails the concess:ons under GSP : From countries like
USA, Japan, Germany, New Zealand,ltaly and BENELUX etc. this certificate
is required for availing concessions under Ceneralized System of Preferences
(CSP) under UNCTAD agreement. Such certificates are to be prepared in
triplicates.
c) Certificate which avails the concessions under Commonwealth Preferences
(CWP) : Such certificate is issued by the office of High Commissioner of the
importing country.
lmportance of Certificate of Origin
To the Exporter To the lmporter
1 It certifies that the goods are of 1 Bbcarise of this certificate, it enables

lndian origin when lndian exporters the importer to get quick delivery of
export the goods. goods from customs.
2. lt enables to the lndian exporter to 2. Regarding payment of tariff; importer

have quick clearance of goods from can claim the same for special
his Customs Department. concessions.
3. lt strengthens the goodwill or 3. lt strengthens the necessary and

reputation about standard and sufficient proof about the origin of
quality as it states the origin of goods.
goods.
4. lt assures better relations with 4. The importer is convinced that those

importing countries about goods are not reshipped.
manufacturing status.
Export Procedure and Documentation f;njo l4t
Distinguish Between Certificate of Origin and Consular tnvoice
Certificate of Origin Consular lnvoice
1. Meaning
i) lt states that the goods which are i) lt is issued by trade consulate of the
being exported have its origin in a importer's country stationed in
specific country. exporter's country.
2. Purpose
ii) lt is essential for picking up ii) lt is required only for prompt

advantages of preferential tariff or clearance and it avoids repackaging
to ensure that the goods are for determining value.
produced in the particular country
and are not banned from import.
3. Authority
iii) lt is prepared by exporter on his iii) After payment of requisite fees,

letterhead and not requirqd to consulate of importing country issues
obtain the same from any authority. the same.
4. No. of Copies
iv) Depending upon the requirement of iv) lt is prepared in triplicate lst copy is
the exporter it can be prepared. for customs at the importer's end.
llnd copy is for consulate and
lllrd copy is for exporter's reference.
5. Legal Status
v) For this certificate legal status is not v) lt has to be legalized by presenting

required. the same to the consulate of
importer's country.
6. Benefit
vi) For availing GSP and CWP vi) For quick clearance from importer's
preferences from his country, it is custom this is essential for importer
essential for importer. and the same time it is essential for
calculating Ad-valorem duty.
142 t'sf Export M arketi ng (T.Y. B.Com. ) ( Sem.-Vl )
QUESTTON BANK FOR SEIF PRACTTCE

1. Explain the registration to be done by the exporter with different authorities.
2. Discuss the pre-shipment procedure involved in Exports.
3. Write a note on : Quality Control procedure in Exports.

4. Explain the functions of Export lnspection Council.
5. Elaborate the Shipping and Custom stage formalities.
6. Describe the role of clearing and forwarding agent in export transactions.

7. Write a note on : Realisation of export proceeds.
8. Discuss the procedure of Export under bond and Letter of Undertaking.
9. Distinguish between Certificate of origin and Consular lnvoice.

10. Explain the importance of following Export documents :-
i) Bill of lading
ii) Commercial Invoice
iii) Shipping bill
iv) Consular lnvoice
v) Certificate of origin.
A. Fil! in the blanks with appropriate option :

1. Shipping bill is prepared in _ copies.
a) Five
b) Three
c) Four
2. document states the Origin of the export goods.
a) Mates receipt
b) Certificate of Origin
c) Bill of Lading
3. Consular lnvoice is issued by of the importer's country
a) Trade Consulate
-
b) Covernment
c) Commodity Board
Export Procedure and Documentation f$if 143
4. arrangement involves adjustment of value of goods imported against value

of goods exported.
a) Clobal Trade
b) Counter Trade
c) lmport Trade
5. is a basic document for export trade and should be prepared in standard
format.
a) Consular lnvoice
b) Certificate of Origin
c) Commercial lnvoice
lAns.: (1 - a), (2 -b), (3 - a), (4 -b), (5 - c)l
B. Match the Groups :
1 Group A Group B
a) Shipping Bill i) Cargo Officer
b) Carting Order ii) Document of Title of goods.
c) Mater Receipt iii) Document to settle payment

disputes.
d) Bill of Lading iv) Docks Authorities.
e) Commercial lnvoice v) Document for shipment of goods.
lAns. : (a - v), (b - iv), (c - i), (d - ii), (e - iii)l
2 Group A Croup B
a) Commercial Document i) Without Adverse Remarks
b) Regulatory Document ii) With Adverse Remarks
c) Clean bill of Lading iii) Shipping Bill
d) Claused bill of Lading iv) Export Promotion Council
e) RCMC v) Bill of Exchange
lAns. : (a - v), (b - iii), (c - i), (d - ii), (e - iv)l

144 lfftr ExprtMarketing(T.Y.B.Com.) (Sem.-Vl)
C. State whether the following statements are True or False :
1. EPC act as a link between exporters and Covernment.

2. RCMC certificate is issued by the Covernment.
3. Tea and Coffee exporters must register with commodity board.
4. DCFT issues carting order.

5. lt is compulsory to obtain IEC number.
6. EIC is established to issue shipping bill.
7. Transit and Tranship are synonymous terms.
8. IEC number issued by RBl.
9. Quality related issues are certified, advised and assisted by EIC to the exporters.
10. PAN account number is not required to get !EC number.
1 1. Letter of Undertaking is a type of bank guarantee.
12. Bill of lading is a legal and non-transferable document.
13. The validity of LUT's is only for one financial year.
14. Let ship order is a permission to load cargo into the ship. ;
15. Dutiable shipping bill is used for the goods on which export duty is not chargeo.
[Ans. : True : 1, 3, 5, 9,'l'1,'13, 14
False : 2, 4, 6,7, 8,'lO,'12, 151
ffn

6 - Export Marketing (Paper II) (T.Y.B.com Sem - Vi)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

6 - Export Marketing (Paper II) (T.Y.B.com Sem - Vi)

Uploaded by

Copyright:

Available Formats

6heth Publishers Private Limited

Our f oot lbiflts

Flrrt Edltlon Nooemberr 2OTS

1 Product Planning and Pricing Decisions for Export Marketing t2

2. Export Distribution and Promotion 11

4. Export Procedure and Documentation 11

Further suggestions for improvements in the contents from teachers and

'rrfr :r';urolz noilrr:,

2. Export Distribution and Promotion

4. Export Procedure and Documentation

All Questions are Compulsory C-arryng 15 Marks each.

Questlsn Partlcular Marks

2. Export Diskibution ond Promotion 37-62

3. Export Finonce 63- 105

4. Export Procedure ond Documentotion 106 - 144

* Planning for Export Marketing with regards to Product, Branding, Packaging.

EXPORT MARKETING DECISIONS

1. Product Design Strategy

a) Product standardization strategy

b) Product adaptation strategy

i) To serve an unfulfilled customer need in a particular country/segment.

10. Product Distribution Decision

EXPORT MARKETING DECISIONS RETATED TO BRAND!NC

A brand is a name, sign, symbol or design or a combination of them, intended to

Export marketing may involve several decision related to branding :

1. To brand or not to brand

2. Manufacturer's Brand or Private Brand

2. Brand Names that Communicate the Speciality of the Product

9. Different brand Names in lnternationat Markets

Factors lnfl uencing Branding

ln export marketing branding can be affected by number of factors. They can be

10. Registration Formalities

EXPORT MARKETING DECISIONS RELATED TO PACKING

Cood packaging ensures the preservation of the quality of the products. lt

a) Effective and convenient sales services by describing product's features,

b) Consumer Affluence : Consumers are witling to pay more for convenience,

Like domestic marketing packaging can provide re-use value in export

Thus, packaging plays an important role in export marketing. lnternational

2/T.Y.B.Com.-Export Marketing (Sem.-V!

NEED FOR LABELTING IN EXPORTS

Labelling may be regarded a part of packaging because packaging decision

Need for Labelling in Export Marketing

Hint for students - LICISCS

NEED TOR MARKING IN EXPORTS

&**--,* chn 5.1

d,N23 tus 5.2

Marking goes hand-in-hand with packaging making is

1. Address / short name of exporter / importer

b) Large package should have marking on minimum two sides.

FACTORS AFFECTING EXPORT PRIC!NG

Factors Affecting Pricing

lnternal Factors Externa.l Factors

a) Pricing objectives a) Price destination

Credit policy 0 Nature of foreign buyer

Pricing objectives should be closely related to marketing objectives which are

d) lmproving of the market share

4. Currency involves importerts country, exporterts country

Consumer behaviour is another important factor in export pricing. The nature of

EXPORT PRICE QUOTATIONS

Export price quotation contains firms and conditions such as :

i) The charges and expenses which must be paid by the exporter.

B. This strategy can be successful for a long run.

4. lt is not suitable to products with changes in fashion or technology.