INTRODUCTION TO EXPORT

MARKETING
. 1.0 Objectives 


. 1.1 Introduction 


. 1.2 Definitions of Export Marketing 


. 1.3 Features of Export Marketing 


. 1.4 Importance of Export Marketing 


. 1.5 Distinguish between Domestic Marketing and Export

Marketing. 


. 1.6 Motivations for Export Marketing 


. 1.7 PresentProblems/DifficultiesfacedbyIndianExporters.

. 1.8 7 schemes for boosting exports in india


1.9 EXPORT PROMOTION SCHEMES

HOW TO SET UP AN EXPORT ORGANISATION
HOW ONE BEGINS TO DO EXPORT
EXPORT SALES & CONTRACT TERMS & CONGITIONS
TERMS OF SHIPMENT – INCOTERMS.
PROCESSING AN EXPORT ORDER
FINANCIAL RISK INVOLVED IN FOREIGN TRADE
EXPORT DOCUMENTS
OCTROI
QUALITY CONTROL & PRE-SHIPMENT INSPECTION
SHIPPING ANG CUSTOMS FORMALITIES
SALES TAXES EXEMPTION PROCEDURE
 METHODS OF RECEIVING PAYMENTS AGAINST
EXPORTS
THE LETTER OF CREDIT
PREPARATION AND SUBMISSION OF DOCUMENTS
FOR BANK NEGOTIATIONOR PURCHASE
SHIPMENT THROUGH COURIERS
CUSTOM PROCEDURE FOR EXPORT UNDER EDI
SYSTEM
THE ECGC COVER.

.
. 1.0 OBJECTIVES
. The main purpose of this chapter is –
 To provide you with
an overview of export marketing.
 To understand the
meaning of export marketing
 To explain the features of
export marketing
 To know the importance of export
marketing at national level and firm level.
 To distinguish
between domestic marketing and export marketing.
 To
elaborate the motivations for export marketing.
 To find out
the present problems / Difficulties faced by Indian exporters.
. 1.1 INTRODUCTION
. Export marketing means exporting goods to other countries
of the world. It involves lengthy procedure and formalities. In
export marketing, goods are sent abroad as per the
procedures framed by the exporting country as well as by
the importing country. Export
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.

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. marketing is more complicated to domestic marketing due to
international restrictions, global competition, lengthy
procedures and formalities and so on. Moreover, when a
business crossed the borders of a nation, it becomes
infinitely more complex. Along with this, export marketing
offers ample opportunities for earning huge profits and
valuable foreign exchange.
. Export marketing has wider economic significance as it
offers various advantages to the national economy. It
promotes economic / business / industrial development, to
earn foreign exchange and ensures optimum utilization of
available resources. Every country takes various policy
initiatives for promoting exports and for meaningful
participation in global marketing. Global business is a reality
and every country has to participate in it for mutual benefits.
Every country has to open up its markets to other countries
and also try to enter in the markets of other countries in the
best possible manner. This is a normal rule which every
country has to follow under the present global marketing
environment. In the absence of such participation in global
marketing, the process of economic development of the
country comes in danger.
. 1.2 DEFINITIONS OF EXPORT MARKETING
. 1) According to B. S. Rathor
 “Export marketing includes the
management of marketing
. activities for products which cross the national boundaries of
a country”.
. 2) “Export marketing means marketing of goods and
services beyond the national boundaries”.
. 1.3 FEATURES OF EXPORT MARKETING
. The main important features of export marketing are as
follows.
. 1) Systematic Process –
. Export marketing is a systematic process of developing and
distributing goods and services in overseas markets. The
export marketing manager needs to undertake various
marketing activities, such as marketing research, product
design, branding, packaging, pricing, promotion etc. To
undertake the various marketing activities, the export
marketing manager should collect the right information from
the right source; analyze it properly and then take systematic
export marketing decisions.
.

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. 2) Large Scale Operations –
. Normally, export marketing is undertaken on a large scale.
Emphasis is placed on large orders in order to obtain
economies in large sole production and distribution of goods.
The economies of large scale help the exporter to quote
competitive prices in the overseas markets. Exporting goods
in small quantities is costly due to heavy transport cost and
other formalities.
. 3) Dominance of Multinational Corporations –
. Export marketing is dominated by MNCs, from USA, Europe
and Japan. They are in a position to develop world wide
contacts through their network and conduct business
operations efficiently and economically. They produce quality
goods at low cost and also on massive scale.
. 4) Customer Focus –
. The focus of export marketing is on the customer. The
exporter needs to identify customers‟ needs and wants and
accordingly design and develop products to generate and
enhance customer satisfaction. The focus on customer will
not only bring in higher sales in the overseas markets, but it
will also improve and enhance goodwill of the firm.
. 5) Trade barriers –
. Export marketing is not free like internal marketing. There
are various trade barriers because of the protective policies
of different countries. Tariff and non-tariff barriers are used
by countries for restricting import. The export marketing
manager must have a good knowledge of trade barriers
imposed by importing countries.
. 6) Trading Blocs –
. Export trade is also affected by trading blocs, certain nations
form trading bloc for their mutual benefit and economic
development. The non-members face problems in trading
with the members of a trading bloc due to common external
barriers. Indian exporters should have a good knowledge of
important trading blocs such as NAFTA, European Union
and ASEAN.
. 7) Three – faced competition –
. In export markets, exporters have to face three-faced
competition, i.e., competition from the three angles – from
the other suppliers of the exporter‟s country, from the local
producers of importing country and from the exporters of
competing nations.
. 8) Documentation –
. Export marketing is subject to various documentation
formalities. Exporters require various documents to submit
them to
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. various authorities such as customs, port trust etc. The
documents include – Shipping Bill, Consular Invoice,
Certificate of Origin etc.
. 9) Foreign exchange regulations –
. Export trade is subject to foreign exchange regulations
imposed by different countries. These regulations relate to
payments and collection of export proceeds. Such
restrictions affect free movement of goods among the
countries of the world.
. 10) Marketing – mix
. Export marketing requires the right marketing mix for the
target markets, i.e. exporting the right product, at the right
price, at the right place and with the right promotion. The
exporter can adopt different marketing – mixes for different
export markets, so as to maximize exports and earn higher
returns.
. 11) International marketing Research –
. Export marketing requires the support of marketing research
in the form of market survey, product survey, product
research and development as it is highly competitive.
Various challenges, identification of needs and wants of
foreign buyer in export marketing can be dealt with through
international marketing research.
. 12) Spreading of Risks –
. Export marketing helps to spread risks of business. Normally
export firms sell in a number of overseas markets. If they are
affected by risks (losses) in one market, they may be able to
spread business risks due to good return from some other
markets.
. 13) Reputation –
. Export marketing brings name and goodwill to the export
firm. Also, the country of its origin the gets reputation. The
reputation enables the export firm to command good sales in
the domestic market as well as export market.
. 1.4 IMPORTANCE OF EXPORT MARKETING
. Exports are important for all countries whether developed or
underdeveloped. The need / importance / advantages of
export marketing can be explained from the viewpoint of a
 country and that of business organization.
. 1.4.1 Need / Importance / Advantages of Export Marketing at the
National Level:
. 1) Earning foreign exchange –
. Exports bring valuable foreign exchange to the exporting
country, which is mainly required to pay for import of capital
goods,
.

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. raw materials, spares and components as well as importing
advance technical knowledge.
. 2) International Relations –
. Almost all countries of the world want to prosper in a
peaceful environment. One way to maintain political and
cultural ties with other countries is through international
trade.
. 3) Balance of payment –
. Large – scale exports solve balance of payments problem
and enable countries to have favourable balance of payment
position. The deficit in the balance of trade and balance of
payments can be removed through large-scale exports.
. 4) Reputation in the world –
. A country which is foremost in the field of exports,
commands a lot of respect, goodwill and reputation from
other countries. For example, Japan commands international
reputation due to its high quality products in the export
markets.
. 5) Employment Opportunities –
. Export trade calls for more production. More production
opens the doors for more employment. Opportunities, not
only in export sector but also in allied sector like banking,
insurance etc.
. 6) Promoting economic development –
. Exports are needed for promoting economic and industrial
 development. The business grows rapidly if it has access to
international markets. Large-sole exports bring rapid
economic development of a nation.
. 7) Optimum Utilization of Resources –
. There can be optimum use of resources. For example, the
supply of oil and petroleum products in Gulf countries is in
excess of home demand. So the excess production is
exported, thereby making optimum use of available
resources.
. 8) Spread Effect –
. Because of the export industry, other sectors also expand
such as banking, transport, insurance etc. and at the same
time number of ancillary industries comes into existence to
suppo0rt the export sector.
. 9) Higher standard of Living –
. Export trade calls for more productions, which in turn
increase employment opportunities. More employment
means more purchasing power, as a result of which people
can enjoy new and better goods, which in turn improves
standard of living of the people.
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. 1.4.2 Need / Importance / Advantages of export marketing at
Business / Firm / Enterprise Level
. 1) Reputation –
. An organization which undertakes exports can bring fame to
its name not only in the export markets, but also in the home
market. For example, firms like Phillips, HLL, Glaxo, Sony,
coca cola, Pepsi, enjoy international reputation.
. 2) Optimum Production –
. A company can export its excess production after meeting
domestic demand. Thus, the production can be carried on up
to the optimum production capacity. This will result in
economies of large scale production.
. 3) Spreading of Risk –
. A firm engaged in domestic as well as export marketing can
 spread its marketing risk in two parts. The loss is one part
(i.e. in one area of marketing) can be compensated by the
profit earned in the other part / area.
. 4) Export obligation –
. Some export organization are given certain concessions and
facilities only when they accept certain export obligations
Large- scale exports are needed to honour such export
obligations in India, units operating in the SEZs / FTZs are
expected to honour such export obligations against special
concessions offered to them.
. 5) Improvement in organizational efficiency
. Research, training and the experience in dealing with foreign
markets, enable the exporters to improve the overall
organizational efficiency.
. 6) Improvement in product standards
. An export firm has to maintain and improve standards in
quality in order to meet international standards. As a result,
the consumers in the home market as well as in the
international market can enjoy better quality of goods.
. 7) Liberal Imports
. Organizations exporting on a large-scale collect more foreign
exchange which can be utilized for liberal import of new
technology, machinery and components. This raises the
competitive capacity of export organizations.
. 8) Financial and non-Financial benefits
. In India, exporters can avail of a number of facilities from the
government. For example, exporters can get DBK, tax
exemption
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. etc. They also can get assistance from export promotion
organizations such as EPCs IIP, etc.
. 9) Higher profits –
. Exports enable a business enterprise to earn higher prices
for goods. If the exporters offer quality products, they can
charge higher prices than those charged in the home market
 and thereby raise the profit margin.
. Check your progress
. 1. Define Export Marketing.
. 2. “Export is important for all the countries whether
developed or underdeveloped.” Explain.
. 1.5 DIFFERENCE BETWEEN DOMESTIC
MARKETING AND EXPORT MARKETING.
.

Domestic / Home marketing Export / International mark

1) Meaning –
International marketing c
Domestic marketing is restricted to political marketing purpose. It inv
boundaries of a country. It involves buying and activities at the global lev
selling activities within one country only

2) Nature –
International marketing is
Domestic marketing is easy and simple due to due to reasons such as u
several reasons such as uniform currency system, trade restrictions long dis
limited trade restrictions, uniform trade practices uniform trade practices.
and short distances for transport of goods.

3) Trading Blocs –
Trading blocs and tariff a
Absence of trading blocs and tariff and non-tariff international marketing a
barriers provide ample scope for expansion in among the countries of t
domestic marketing activities.

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4) Licensing and
It involves licensing, permissions and lengthy pr
procedures
marketing operations complicated, time-consum
It is free from licensing and
lengthy procedures and
formalities. This brings
simple in trading operation

5) environmental changes
Changes in the economic,
political or social Changes in the economic, political or social env
environment create limited effects on international marketing scenario
effects on domestic
marketing

6) Risk in trade
The risk involves is limited
due to limited area of The risk involves is heavy due to vast area of op
operations, political nature of markets and political factors.
stability and uniform rules
and laws

7) Competition –
It is not highly competitive. It is highly competitive as different countries invo
The scope for competition of economic and industrial growth.
is restricted due to uniform
business environment

8) Government
Interference –
Least interference in the Maximum interference is observed in internation
domestic marketing
activities.

9) Division –
It has two broad divisions. Foreign marketing an
It has no division as it is
one integrated marketing
activity.

10) Quantities involved –

Domestic marketing International marketing activities are always in la
activities are conducted in potentials are also more.
small quantities with
limited profit potentials.

11) Incentives
In home marketing, special
concessions, facilities and In export marketing, special incentives, facilities
incentives are normally not to manufacturers of export oriented goods and e
offered to traders and
manufacturers.

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12) Agencies Involved –

Agencies involved in home Agencies in export marketing include manufac
marketing include exporters, export houses and trading houses.
wholesalers, retailers and
other trading organizations.

13) Method of payment –

In domestic marketing Payment in international marketing is through
payment is through cash or documentary bills of exchange.
cheque

14) Use of currency

It involves the use of multiple currencies partic
It involves the use of one
currency. For example
Rupee in India.

.
. 1.6 MOTIVATIONS FOR EXPORT MARKETING
. Companies have to take several decisions to participate in
export marketing. There are same basic economic reasons
which influence a company decision regarding participation
in export business. Such reasons can be treated as
motivators for export marketing. These motivational factors
for export marketing are as follows.
. a) Rate of profit –
. The rate of profit in export business is normally higher as
compare to rate of profit in domestic marketing. The unit
value realization of export products normally increases. Such
progressive improvement in the unit value of realization is
one reason which acts as a motivator for exporting.
. b) Sales and production stability –
. Export marketing may enable a firm to maintain sales and
production stability. For example, in the case of seasonal
products, exporting may help to achieve sales stability,
because the seasons may be opposite in certain export
markets. For example woolen clothing.
. c) Inadequate domestic demand –
. The level of domestic demand may be insufficient for utilizing
the available production capacity fall, i.e. at the optimum
level. Here, the company enters in export marketing so that
the available production capacity will be utilized fully for
meeting domestic demand and demand from abroad. This is
one motivational factor for export marketing.
.
. d) Economic growth –
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. Growth is another major reason for internationalization. The
growth potential of many foreign markets is a very strong
 attraction for foreign companies. Several developing
countries, like China, and India, have been growing at a
much faster rate than the developed countries. Many
multinational companies are eager to establish their foothold
in such countries, considering future potential.
. e) Reducing business risks –
. Geographical diversification facilitates distribution of
business risks among different export markets. Even the
risks in internal marketing can be reduced by undertaking
export marketing. A diversified business spreads business
risks among different markets.
. f) Information and media Revolution –
. There has been tremendous growth in the field of
information and media. For example, internet facility has
given a big boost to a global trade. Now, business firms can
conduct global operations with much investment in setting up
elaborate offices. Business activities in other countries can
be conducted through information network.
. g) Strategic vision –
. Some firms have a strategic vision to enter in export
markets. The business strategy of such firms includes
systematic international growth. Therefore, the stimulus for
export marketing comes from desire to grow and expand,
need to become more competitive.
. h) Accepting social responsibility –
. Export promotion is a collective responsibility of all social
groups including business enterprises. Some large
enterprises accept this social obligation and participate in
export marketing. Here, social responsibility acts as a
motivation for export marketing.
. i) Government policies –
. Government policies and Regulations may also encourage
the companies for international marketing. Some companies
export and invest in foreign countries to avail economic
incentives, and benefits provided by the government. Also
 some companies internationalize due to government‟s
emphasis on import development and foreign investment. In
India, certain companies export in order to fulfill their export
obligation.
. j) W. T. O.
. Due to WTO, member nations have reduced a number of
restrictions on foreign investment, and trade in goods and
services. For example, the custom duties have been
reduced world wide.
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. This has motivated business firms to enter in the global
markets to a greater extent.
. k) Benefit of bulk selling –
. Export business is normally in bulk quantity. Export orders
are much larger as compared to orders in domestic
marketing. Export business is undertaken in order to take the
benefits of selling in bulk i.e. in large quantities. It helps to
earn foreign exchange in large.
. In brief, export marketing offers many benefits to exporting
organization. Such benefits encourage companies to
participate in export marketing. The benefits also act as
motivators for export marketing.
. 1.7 PRESENT PROBLEMS / DIFFICULTIES FACED
BY INDIAN EXPORTERS
. At present, Indian exporters face a number of problems /
difficulties. The problem demotivates the business firms to
enter into foreign markets. These problem / difficulties are as
follows.
. a) Recession in world market
. The world market, faced recession in 2008 and in the first
half of 2009. The recession was triggered due to sub-prime
crisis of USA in September 2007. Due to recession, the
demand for several Indian items such as Gems and
Jewellery, Textiles and Clothing and other items were badly
 hit. During recession, exporters get low orders from
overseas markets, and they have to quote lower prices.
Therefore, exporter gets law profits or suffers from losses.
. b) Technological differences
. The developed countries are equipped with sophisticated
technologies capable of transforming raw materials into
finished goods on a large scale. Less developed countries,
on the other hand, lack technical knowledge and latest
equipments. And therefore they have to use their old and
outdated technologies. It leads to the lopsided development
in the international market.
. c) Reduction in export Incentives –
. Over the years, the Govt. of India has reduced export
incentives such as reduction in DBK rates, withdrawal of
income tax benefits for majority of exporters, etc. The
reduction in export incentives demotivates exporters to
export in the overseas markets.
.

. d) Several competitions in global marketing –

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. Export marketing is highly competitive. This competition
relates to price, quality, production cost and sales promotion
techniques used. Indian exporters face three-faced
competition while exporting. This includes competition from
domestic exporters, local producers where the goods are
being exported and finally from producers of competing
countries at global level. Such competition is one special
problem to the exporters.
. e) Problem of product standards –
. Developed countries insist on high product standards from
developing countries like India. The products from
developing countries like India are subject to product tests in
the importing countries. At times, the importing countries do
not allow imports of certain items like fruits, textiles and other
 items on the grounds of excessive toxic content. Therefore
Indian exporters lose markets especially in developed
countries.
. f) Fluctuations in Exchange Rate –
. Every country has its own currency which is different from
international currencies. The dominant international
currencies are US dollar or Sterling Pound. From the point of
view of Indian exporters we are interested to realize the
payment in international currency. Foreign exchange earned
by the operators is converted into Indian rupees and paid to
the exporters in Indian currency; this exposes the exporters
to the dangers of fluctuation in foreign exchange rates.
. g) Problems of Sea Pirates Attacks –
. A major risk faced by international trade is attack by pirates
in the Gulf of Aden. More than half of India‟s merchandise
trade passes through the piracy infested Gulf of Aden. New
exporters and importers are facing problem, because of
increased pirate attacks as they find it difficult to get
insurance cover.
. h) Problem of subsidies by Developed countries –
. The developed countries like USA provide huge subsidies to
their exporters. For example, in case of agriculture
exporters, USA, UK and other provide huge subsidies to
their exporters. Therefore, the exporters of developing
countries like India find it difficult to face competition in the
world markets.
. i) Problem in preparing Documents –
. Export involves a large number of documents. The exporter
will have to arrange export documents required in his
country and also all the documents as mentioned in the
documentary letter of credit. In India, there are as many as
25 documents (16 commercial and a regulatory documents)
to be filled in.
. j) Government restrictions and foreign exchange regulations –
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 . The Government restrictions compel the exporters to follow
certain rules and regulations in the form of licenses, quotas,
and customs formalities. Due to such restrictions, new
problems develop before the exporters. Even trade
restrictions in foreign countries create problems before
exporters. Indian exporters face this difficulty of government
restrictions and foreign exchange regulations even when
trade policy is now made substantially liberal.
. k) High risk and Uncertainties –
. Export marketing is subject to high risks and uncertainties.
The risks may be both political and commercial. Political
risks involve government instability, war, civil disturbances,
etc. The commercial risks involve insolvency of the buyer,
protracted default on the part of the buyer dispute on quality
and so on.
. l) Competition from China
. India is facing stiff competition from China in the world
markets, especially in the OECD markets. As a result,
India‟s share of export of OECD markets has declined from
53% of total exports in 2000-01 to about 38% in 2007-08.
Some of the Indian exporters have lost their overseas
contracts due to cheap Chinese goods and supplies. This is
the major problem of exporters.

1. Market Development Assistance Scheme

Description: Entrepreneurs get funding for participating in trade fairs. It assists

exporters for export promotion activities.

Nature of assistance: The scheme offers funding up to 90 per cent in respect of

to and fro air fare for the participation by MSME entrepreneurs in overseas
fairs/trade delegations. The scheme also provides funding for producing
publicity material (up to 25 per cent of costs) sector specific studies (up to Rs 2
lakh) and for contesting anti-dumping cases (50 per cent up to Rs 1 lakh).
Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

2. Export Oriented Unit (EOU) Scheme

Description: EOU Scheme provides an internationally competitive duty-free

environment coupled with better infrastructural facilities for export production.

Nature of assistance: The units are allowed to import or procure locally

without the payment of duty all types of goods including capital goods, raw
materials, components, packing materials, consumables, spares and various
other specified categories of equipment.

Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

3. Market Access Initiative (MAI) Scheme

Description: MAI Scheme is an Export Promotion Scheme, envisaged to act as

a catalyst to promote India’s exports on a sustained basis.

Nature of assistance: The scheme is formulated on focus productfocus country

approach to evolve specific market and specific product. These activities are
eligible for financial assistance - marketing projects abroad, capacity building,
support for statutory compliances, studies, project development, etc.

Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council

4. Software Technology Park (STP) Scheme

Description: STP Scheme is a 100 per cent export-oriented scheme for

undertaking software development for export using.
Nature of assistance: The approvals are given under single window clearance
mechanism. All imports of hardware and software in STP units are completely
duty free, and import of second-hand capital goods and re-export of capital
goods are also permitted.

Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

5. Services Exports from India Scheme (SEIS)

Description: The SEIS has been introduced to increase exports of notified

services.

Nature of assistance: The rewards under SEIS shall be admissible for exports
made/services rendered on or after the date of notification of this policy. The
duty credit scrips shall be granted as rewards under SEIS. The duty credit scrips
and goods imported/domestically procured against them shall be freely
transferable.

Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

6. The Merchandise Exports from India Scheme (MEIS)

Description: The MEIS has been introduced for the export of specific goods to
specified markets.

Nature of assistance: Rewards for the export of notified goods to notified

markets under MEIS shall be payable as percentage of realised FOB value.

Who can apply: Exporters, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

7. Export Promotional Capital Goods (EPCG) Scheme

 Description: The objective of the EPCG Scheme is to facilitate import of
capital goods for producing quality goods and services to enhance India’s export
competitiveness.

Nature of assistance: EPCG Scheme allows import of capital goods for

preproduction, production and post-production at zero customs duty.

Who can apply: Importers, entrepreneurs, etc.

From where to apply: FIEO, Export Promotion Council and Ministry of

Commerce

(This article first appeared in the Indian edition of Entrepreneur magazine

(October, 2015 Issue).

1. EXPORT PROMOTION SCHEMES

Foreign Trade Policy 2015-20 and other schemes provide promotional measures to boost India’s exports
with the objective to offset infrastructural inefficiencies and associated costs involved to provide exporters
a level playing field. Brief of these measures are as under:

1.1 Exports from India Scheme

i. Merchandise Exports from India Scheme (MEIS)

Under this scheme, exports of notified goods/ products to notified markets as listed in Appendix 3B
of Handbook of Procedures, are granted freely transferable duty credit scrips on realized FOB value
of exports in free foreign exchange at specified rate. Such duty credit scrips can be used for
payment of basic custom duties for import of inputs or goods.

Exports of notified goods of FOB value upto Rs 5,00,000 per consignment, through courier or
foreign post office using e-commerce shall be entitled for MEIS benefit. List of eligible category
under MEIS if exported through using e-commerce platform is available in Appendix 3C.

ii. Service Exports from India Scheme (SEIS)

Service providers of notified services as per Appendix 3D are eligible for freely transferable
duty credit scrip @ 5% of net foreign exchange earned.

2. DUTY EXEMPTION & REMISSION SCHEMES

These schemes enable duty free import of inputs for export production with export obligation. These
scheme consists of:-

2.1 Advance Authorization Scheme

 Under this scheme, duty free import of inputs are allowed, that are physically incorporated
in the export product (after making normal allowance for wastage) with minimum 15% value
addition. Advance Authorization (AA) is issued for inputs in relation to resultant products as
per SION or on the basis of self declaration, as per procedures of FTP. AA normally have a
validity period of 12 months for the purpose of making imports and a period of 18 months
for fulfillment of Export Obligation (EO) from the date of issue. AA is issued either to a
manufacturer exporter or merchant exporter tied to a supporting manufacturer(s).

2.2 Advance Authorization for annual requirement

Exporters having past export performance (in at least preceding two financial years) shall be
entitled for Advance Authorization for Annual requirement. This shall only be issued for items
having SION.

2.3 Duty Free Import Authorization (DFIA) Scheme

DFIA is issued to allow duty free import of inputs, with a minimum value addition
requirement of 20%. DFIA shall be exempted only from the payment of basic customs duty.
DFIA shall be issued on post export basis for products for which SION has been notified.
Separate schemes exist for gems and jewellery sector for which FTP may be referred.

2.4 Duty Drawback of Customs/Central Excise Duties/Service Tax

The scheme is administered by Department of Revenue. Under this scheme products made
out of duty paid inputs are first exported and thereafter refund of duty is claimed in two ways:

i) All Industry Rates : As per Schedule

ii) Brand Rate : As per application on the basis of data/documents

2.4 Interest Equalisation Scheme (IES)

It provides interest equalization rate of 3% on Pre and Post Shipment Rupee Credit
tor all manufacturing exporters and Merchant exporters exporting identified 416 four
digit tariff lines and 5% on all merchandise products manufactured and exported by
MSMEs.

3. EPCG SCHEME

3.1 Zero duty EPCG scheme

Under this scheme import of capital goods at zero custom duty is allowed for producing
quality goods and services to enhance India’s export competitiveness. Import under EPCG
shall be subject to export obligation equivalent to six times of duty saved in six years.
Scheme also allows indigenous sourcing of capital goods with 25% less export obligation.

3.2 Post Export EPCG Duty Credit Scrip Scheme

 A Post Export EPCG Duty Credit Scrip Scheme shall be available for exporters who intend
to import capital goods on full payment of applicable duty in cash.

4. EOU/EHTP/STP & BTP SCHEMES

Units undertaking to export their entire production of goods and services may be set up under this scheme
for import/ procurement domestically without payment of duties. For details of the scheme and benefits
available therein FTP may be required.

5. OTHER SCHEMES

5.1 Towns of Export Excellence (TEE)

Selected towns producing goods of Rs. 750 crores or more are notified as TEE on potential
for growth in exports and provide financial assistance under MAI Scheme to recognized
Associations.

5.2 Market Access Initiative (MAI) Scheme

Under the Scheme, financial assistance is provided for export promotion activities on focus
country, focus product basis to EPCs, Industry & Trade Associations, etc. The activities are
like market studies/surveys, setting up showroom/warehouse, participation in international
trade fairs, publicity campaigns, brand promotion, reimbursement of registration charges for
pharmaceuticals, testing charges for engineering products abroad, etc. Details of the
Scheme is available at www.commerce.gov.in

5.3 Status Holder Scheme

Upon achieving prescribed export performance, status recognition as one star Export House,
two Star Export House, three star export house, four star export house and five star export
house is accorded to the eligible applicants as per their export performance. Such Status
Holders are eligible for various non-fiscal privileges as prescribed in the Foreign Trade
Policy.

In addition to the above schemes, facilities like 24X7 customs clearance, single window in
customs, self assessment of customs duty, prior filing facility of shipping bills etc are
available to facilitate exports.

EXPORT PROCEDURE & DOCUMENTATION

INTRODUCTION

India has a mission to capture 2% of the global share of trade by 20010, up from
the present level of less than 1%. Export is one of the lucrative business activities in India. The
government also provides various promotional schemes to the exporters for earning valuable
foreign exchange for the country and for meeting their requirements for importing modern
technology and essential inputs. Besides, the income from export business is also exempted to
the specified extent under the Income Tax Act, 1961, Refund of Central Excise and Custom Duty
on export is also made under the Duty Drawback Scheme of the Government. There is no Sales
Tax on products meant for exports.

Exports can be of goods which can be moved physically from one country to
another or can be of service rendered. Detailed list of services are given in the Foreign Trade
Policy covering more than 160 items e.g. Insurance, Hospital, Postal and Telecommunication etc.

TWO CLASSES OF EXPORTS:

Physical Exports: If the goods physically go out of the country or services are
rendered outside the country then it is called as physical export. Deemed Exports: Where the
goods do not go out of the country physically they can be termed as deemed exports. This will
be subject to certain conditions as prescribed by the DGFT. Under Deemed Exports, the goods
may be supplied to the manufacturer exporter who ultimately export a finished product of which
this supply forms a part and ultimately go out of the country. E.g. Supply of fabrics to the garment
exporter who exports the garments made out of the said fabric.

The government may announce from time to time the types of supplies that may
be considered as deemed export. The Foreign Trade Policy gives the list of supplies considered
under the Deemed Export Category. The policies and procedures are different for Physical
Exports and Deemed Exports as also the benefits available. In a nutshell, Deemed Exports do not
enjoy all the benefits that are available under Physical Export. The Foreign Trade defines exports
as taking out of India any goods by land, sea, air. Although the act does not term them as “Physical
Exports”, we have to put phrase to distinguish it from “Deemed Exports” which is sales in India
but considered as exports for limited purpose.

HOW TO SET UP AN EXPORT ORGANISATION

The proper selection of organization depends upon

 Ability to raise finance.

 Capacity to bear the risk.
 Desire to exercise control over the business.
  Nature of regulatory framework applicable to anyone

If the size of the business is small, it would be advantageous to form a sole

proprietary business organization. It can be set up easily without much expenses and legal
formalities. It is subjected to only few governmental regulations. However, the biggest
disadvantage of sole proprietorship business is limited ability to raise funds which restricts the
growth. Besides the owner has unlimited personal liabilities. In order to avoid this disadvantage,
it is advisable to form a partnership firm.

The partnership firm can also be set up with ease and economy. Business can take
benefit of the varied experiences and expertise of the partners. The liability of the partners
though joint and several, is practically distributed amongst the various partners, despite the fact
that the personal liability of the partner is unlimited. The major disadvantage of partnership firm
of business organization is that conflict amongst the partners is a potential threat to the business.
It will not be out of place to mention here that partnership firms are governed by the Indian
Partnership Act, 1932 and, therefore they should be formed within the parameters laid down by
the Act. Company is another form of business organization, which has the advantage of distinct
legal identity and limited liability to the share holders.

It can be a private limited company or a public limited company. A private limited

can be formed by just two persons subscribing to its share capital. However, the number of its
shareholders cannot exceed 50, public cannot be invited to subscribe to its capital and the
members right to transfer their share is restricted. On the other hand, a pubic limited company
has a minimum of seven members. There is no limit on the maximum number of its members. It
can invite the public to subscribe to its capital and permit the transfer of share. A public limited
company offers enormous potential for growth because of access to substantial funds. The
liquidity of investment is high because of easiness of transfer of shares. However its formation
can be recommended only when the size of the business is large. For small business, a sole
proprietary concern or a partnership firm will be the most suitable form of business organization.
In case it is decided to incorporate a private limited company, the same is to be registered with
the Registrar of Companies.

CHOOSING APPROPRIATE MODE OF OPERATIONS:

You can choose any of the following modes of operations

 Merchant Exporter i.e. buying the goods from the market or from the manufacturer and
then selling it to foreign buyers.
  Manufacturer Exporter i.e. manufacturing the goods yourself for export.

 Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller and
charging the Commission.

 Buying Agent i.e. acting on behalf of the buyer and charging Commission.

 Service provider i.e. providing service from India to another country.

NAMING THE BUSINESS

Whatever form of business organization has been finally decided, naming the
business is an essential task for every exporter. The name and style should be soft, attractive,
short and meaningful. Open a current account in the name of the organisation in whose name
you intend to export. It is advisable to open the account with a bank which is authorised to deal
in Foreign Exchange.

STRUCTURE OF AN EXPORT ORGANISATION

 marketing manager for generating sales

 Commercial manager for looking activities of the execution of the orders.
 staff personnel for carrying out the day-to-day activities namely
o Preparation of pre - shipment documents.
o Co-ordinating with clearing agents on the progress of the shipment to be made.
o Co-ordinating with the ware house\C. excise department regarding packing and
clearance of the goods for export.
o Preparation of post shipment documents foe banks.
o Follow-up with the bank on dispatch of documents, receipt of payment, availment
of bank loans etc.

 To look into the requirement of licenses, claiming of export benefits fiiling of documents
with the Government Authorities in Discharge of Export Obligations, if any, filing of
returns to the various Government Agencies which are mandatory, prepare and keep an
information bank of various transaction of the company, their domestic as well as
international competitors.
 An office boy for doing leg work.
  A clearing and forwarding agent to handle the documents and the goods in the customs
premises\ in the ports of lading.

Depending upon the size of the business the numbers of personnel under each
category may increase. For example if a company is transacting substantial volume of business in
more than one product. Then it is necessary to have marketing manager for each product so that
the person can concentrate on a particular trade to enhance the business.

REGISTRATION WITH REGIONAL LICENCING AUTHORITIES OBTAINING IMPORTER

EXPORTER CODE (IEC) NUMBER.

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

The following importer exporter is exempted from the requirement of IEC code number.

 Ministries \ Department of Central or State Government.

 Person importing or exporting goods for their personal use not connected with trade or
manufacture or agriculture.
 Persons importing\exporting goods from\to Nepal & Myanmar provided the CIF value of
single consignment does exceed Indian Rs. 25000\-.

APPLICATION FOR OBTAINING AN IEC NUMBER

For obtaining IEC number apply in the prescribe form along with the documents listed above to
Regional Licensing Authority (Office of the Regional DGFT). The registered office or the head
office may apply for allotment of IEC No.

Whenever, there is a change in the name, address or constitution of the holder of IEC No., such
change should be intimated within 30 days to the concern authorities.

IEC certificate will be issued in the form (copy enclosed). A copy of IEC No. is also endorsed to the
concerned banker.

VALIDITY :

The IEC No allotted to a firm/company will be valid for all its branches/divisions units/factories
as indicated in the IEC No. Import/Export of any commodity by that firm/company. There being
no date of expiry, the IEC once allotted is valid till it is revoked. But, if no import or export is
effected in the previous financial year, the same will be made inoperative. However, this can be
made operative by a formal request to the DGF

IDENTITY CARD (For conducting transactions with the office of DGFT):

As it is not always possible for the top man or directors, promoters of the company to visit DGFT
frequently. There is a provision of issuance of identity cards to the proprietors/partners/directors
and their authorized representatives. An application of Issuance of an identity card may be made
in the form (Appendix-5) The document/ License/Certificate/Permissions may be delivered to
the identity card holder and officials of the Licensing Authority(DGFT)shall not be responsible for
any loss etc. In case of loss of an identity card a duplicate card may be issued on the basis of an
FIR & affidavit. In addition to obtaining the IEC No. the exporter is also required to obtain Business
Identification No(BIN). For this exporter is required to contact DGFT online on web site. The
licensing authority issues BIN in coordination with customs authorities. This BIN is required to be
mentioned on the shipping bills at the time of customs clearance of the export cargo.

RCMC (Registration-Cum-Membership Certificate) – REGISTRATION WITH EXPORT

PROMOTION COUNCILS –

In order to enable the exporter to obtain benefits/concessions under the Foreign Trade Policy,
the exporter is required to register himself with an appropriate export promotion agency by
obtaining registration-cum-membership certificate. (RCMC). If the export product is that it is not
covered by any EPC, RCMC in respect thereof may be issued by FIEO. An application for
registration should be accompanied by a self certified copy of the Importer-Exporter Code
number issued by the regional licensing authority concerned and bank certificate in support of
the applicants financial soundness. The RCMC shall be valid for 5 years ending 31 st March of the
licensing year.

REGISTRATION WITH SALES TAX AUTHORITIES:

Goods that are to be shipped out of the country for export are eligible for exemptions from both
Sales Tax and Central Sales Tax. For this purpose, exporter should get himself registered with the
Sale Tax Authority of is state after following the procedures prescribed under the Sales Tax Act
applicable to his state.

HOW ONE BEGINS TO DO EXPORT

Before entering into the venture of exports, one must look for the product to be exported and
the market where he intends to export.

In case of a manufacturer, obviously he would like to export the product he manufactures as is

or with possible modification as may be required by the market. However, in case of a merchant
exporter or a trader, one has to identity the product to export. If the exporter is already in the
trade in the domestic market and is familiar with the product it would be an advantage to export
the said product of which he has reasonable knowledge.

Before selecting a product, one must simultaneously made a study and find out the prospective
market. For finding out the market for the selected product, the following methods will help.
 Get statistical information as to imports of the product by various countries and their
growth prospects in the respective countries
 Approach the chamber of commerce for their guidance to find out the market.
 Approach the Export Promotion Council dealing in the product of selection to get
more information.
The Preliminary
Once you are ready with the product you wish to export and have found the market for the same,
you are ready to proceed further. Following sequences can be followed:
 Any one, who wishes to export, must first of all get an Importer Exporter Code
Number (IE Code).This can be obtained by making a formal application to the office
of the Regional Directorate General of Foreign Trade (DGFT).
 Get yourself registered with the related Export Promotion Council and become a
member. Also arrange to obtain Registration-Cum-Membership Certificate (RCMC)
from the council. This has twin objectives:
o Under the Foreign Trade Policy, it is mandatory that an exporter gets him
registered with the Export Promotion Council to avail of various export facilities.
o Being a member, you will have access to all the information relating to the product
that could be made available by the council
o Many foreign buyers send their enquiries for the imports to the Export Promotion
Council. Hence you will have few customers interested in your product.
 If you are a manufacturer, find out the provisions under the EXIM Policy of getting the
raw materials duty free.
 Get familiar with the excise formalities as goods meant for export can be cleared without
payment of C. Excise duty on the finished product subject to compliance of certain
formalities.
 Understand the local government regulations in relations to the export of the product.
 Get information of the government’s regulations of the importing country as to
restrictions on the quantity, product specification, packing regulations, customs
regulations, requirement of specific documents/information etc.
 Availability of Vessels/Airlines, the transport charges, frequency of operation etc.,
 To look for a Custom House Agent (CHA) (also know as freight forwarders or clearing
agents) for handling the documents/cargo in the customs.
  If the product is covered under any quota regulation, find out the agency/council who
are handling the quota distribution for the product and the availability of quota for
exports.

FINDING A CUSTOMS

Once you have selected the market, the next step is to find a prospective customer. This you
can get
 From the directory of importers of the country
 By writing to the Embassy of India in that country for assistance
 By writing to the chamber of commerce of that country
 By means of participation in a Fair/Exhibition abroad either directly or through the Export
Promotion Council
 By participating in international fair if organized locally
 Through the personal contacts in that country. By these processes one can only have the
list of customers. One has to dialogue or correspond with these customers by sending
samples, getting feedback from the customers etc. to ultimately select the customer with
whom to deal with. It is necessary to know the financial standing of the company which
can be obtained through the bank channel or through the office of ECGC.

NEGOTIATING CONTRACT.
Once the prospective customer is found, the business deal has to be concluded. The following
aspects may be considered before entering into a final contract with the buyer.
 Credit Worthiness of the Customer.
 Availability of the Steamer/Airlines and the frequency
 The freight charges
 The full product specification
 The quantity, Price
 Terms of Payment
 Type of packing and markings on the packages
 Mode of shipment & Shipment schedule
 Tolerance of quantity to be shipped
 Documentation requirement for the customer
 Documentation requirement of the government of importing country
 Compliance of the local governmental rules and regulations
Before entering into contract one should take note of the above factors. While these are
indicative, the requirements will vary from country to country, product to product and buyer to
buyer.

EXPORT SALES & CONTRACT TERMS & CONDITIONS

Very often exporters do not enter into any formal contract and finalize the trade deal through
the exchange of letters, cable, telex etc. It is, however, expedient that the parties (exporters &
importers) incorporate all important terms & conditions of their trade deal in a separate
document or contract that will avoid disputes arising out of uncertainty or ambiguity. Export
contract may be sent in duplicate along with the Proforma Invoice to the overseas buyer.

NATURE OF INTERNATIONAL TRADE COUNTRACTS.

There are certain, peculiar characteristics of international trade contract which are not present
in those for sales of goods in the domestic market

Whereas the parties to a domestic trace contract normally needs only agree on the elements
which are necessary for their particular trade transactions like price, description, quality and
quantity of goods, delivery terms etc the situation will be quite different when the buyer and the
seller to sale/purchase contract belong to different countries. The parties to all international
trade contracts provide all their relative rights and obligations in several ways

For example, they may agree to adopt either the Law of the country of the buyer or that of the
seller. The traders are normally reluctant to leave the determination of the rights and obligations
by implications under the legal system of either’s country. They prefer to make explicit provisions
regarding the rights and obligations by including a set of detailed and precise terms and
conditions in their contract.

EXPORT OF SAMPLES\GIFTS.

Exports of bonafide trade and technical samples of freely exportable items shall be allowed
without any limit. Goods including edible items of value not exceeding Rs. 100000/- in a licensing
year, may be exported as a gift. However items mentioned as restricted for exports in ITC(HS)
shall not be exported as a gift without a licence/certificate/permission, except in the case of
edible items.

STANDARD CONTRACT FOMS:

Notwithstanding the efforts made by various national/international organizations like the United
Nations Commission on the International Trade Law, there is still no perfection or a device which
would give the parties an accurate and complete idea of each others understanding of various
trade terms, the commercial practices and the rights and the obligations vis-à-vis each other so
that the misunderstandings are practically eliminated.

Nevertheless, the Indian Council of Arbitration published in 1966 a booklet on “Standard Contract
Forms and Model Arbitration Clause for use in Foreign Trade Contracts”. It was revised and
reprinted in 1969 and 1977. It can be referred to by exporter for various clause to be incorporated
in the Export Contract.

ENTERING INTO AN EXPORT CONTRACT

In order to avoid disputes, it is necessary to enter into an export contract with the overseas buyer.
For this purpose, export contract should be carefully drafted incorporating comprehensive but in
precise terms, all relevant and important conditions of the trade deal.

There should not be any ambiguity regarding the exact specifications of goods and terms of sale
including export price, mode of payment, storage and distribution methods, type of packaging,
port of shipment, delivery schedule etc. The different aspects of an export contract are enumerated
as under:

 Product, Standards and Specifications

 Quantity
 Inspection
 Total Value of Contract
 Terms of Delivery
 Taxes, Duties and Charges
 Period of Delivery/Shipment
 Packing, Labeling and Marking
 Terms of Payment-- Amount/Mode & Currency
 Discounts and Commissions
 Licenses and Permits
 Insurance
 Documentary Requirements
 Guarantee
 Force Majeure of Excuse for Non-performance of contract
 Remedies
 Arbitration clause

It will not be out of place to mention here the importance of arbitration clause in an export
contract Court proceedings do not offer a satisfactory method for settlement of commercial
disputes, as they involve inevitable delays, costs and technicalities. On the other hand, arbitration
provides an economic, expeditious and informal remedy for settlement of commercial disputes.
Arbitration proceedings are conducted in privacy and the awards are kept confidential. The
Arbitrator is usually an expert in the subject matter of the dispute. The dates for arbitration
meetings are fixed with the convenience of all concerned. Thus, arbitration is the most suitable
way for settlements of commercial disputes and it may invariably be used by businessmen in
their commercial dealings.

ARBITRATION:
Arbitration clause recommended by the Indian Council of Arbitration:”All disputes or
differences whatsoever arising between the parties out of / relating to the meaning, construction
and operation or effect of this contract or the breach thereof shall be settled by arbitration in
accordance with the rules of Arbitration of the Indian Council of Arbitration and the award made
in pursuance thereof shall be binding on the parties” (or any other arbitration clause that may be
agreed upon between the parties).

TERMS OF SHIPMENTS – INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set of definition of

international trade terms, such as FOB, CFR & CIF, developed by the International Chamber of
Commerce(ICC) in Paris, France. It defines the trade contract responsibilities and liabilities
between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the importer
need not undergo a lengthy negotiation about the conditions of each transaction. Once they have
agreed on a commercial terms like FOB, they can sell and buy at FOB without discussing who will
be responsible for the freight, cargo insurance and other costs and risks.

The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised periodically
to keep with changes in the international trade needs. The complete definition of each term is
available from the current publication --- INCOTERMS 2000. Under INCOTERMS 2000, the
international commercial terms are grouped into E, F, C and D, designated by the first letter of
the term, relating to the final letter of the term. E.g. EXW—exworks comes under grouped ‘E’.

The purpose of Incoterms is to provide a set of international rules for the interpretation of the
most commonly used trade terms in foreign trade. Thus, the uncertainties of different
interpretations of such terms in different countries can be avoided or at least reduced to a
considerable degree. The scope of Incoterms is limited to matters relating to the rights and
obligations of the parties to the contract of sale with respect to the delivery of goods. Incoterms
deal with the number of identified obligations imposed on the parties and the distribution of risk
between the parties.

In international trade, it would be best for exporters to refrain, wherever possible, from dealing
in trade terms that would hold the seller responsible for the import customs clearance and/or
payment of import customs duties and taxes and/or other costs and risks at the buyer’s end, for
example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid)

Quite often, the charges and expenses at the buyer’s end may cost more to the seller than
anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the
importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which would hold the
buyer responsible for the export customs clearance, payment of export customs charges and
taxes, and other costs and risks at s

PROCESSING AN EXPORT ORDER

You should not be happy merely on receiving an export order. You should first acknowledge the
export order, and then proceed to examine carefully in respect of

 Items
 Specification
  Pre-shipment inspection
 Payment conditions
 Special packaging
 Labeling and marketing requirements
 Shipment and delivery date
 Marine insurance
 Documentation requirement etc.

If you are satisfied on these aspects, a formal confirmation should be sent to the buyer, otherwise
clarification should be sought from the buyer before confirming the order. After confirmation of
the export order immediate steps should be taken for procurement/manufacture of the export
goods. In the meanwhile, you should proceed to enter into a formal export contract with the
overseas buyer.

Before accepting any order necessary homework should have been done as to availability of the
production capacity, raw material e.t.c. It would be in the interest of the exporter to look into
entering into forward contract to safeguard against exchange rate fluctuations. Ensure that the
mode of payment is also agreed upon. In case of shipment against letter of credit, the buyer should
be advised to open the credit well in advance before effecting the shipment.

FINANCIAL RISKS INVOLVED IN FOREIGN TRADE

As an exporter while selling goods abroad, you encounter various types of risks. The major risks
which you have to undergo are as follows:

 Credit Risk
 Currency Risk
  Carriage Risk
 Country Risk

You can protect yourself against the above risks by initiating appropriate steps.

Credit Risks :

You can cover your credit risk against the foreign buyer by insisting upon opening a letter of credit
in your favour. Alternatively one can avail of the facility offered by various credit risk agencies. A
specific insurance cover can also be obtained from ECGC (Exports Credit & Guarantee
Corporation) to cover your country risk besides covering credit risk.

Currency Risks:

As regards covering the currency risk, due to the exchange rate fluctuations, you can request
your banker to book a forward contract.

Carriage Risk:

The carriage risk can be covered by taking an appropriate general insurance policy.

Country Risk:

ECGC provides cover to protect the exporter from country risks. A detailed procedure how an
exporter can get himself protected against the above risks are given in separate chapters later.

EXPORT DOCUMENTS

Any export shipment involved various documents required by various authorities such as
customs, excise, RBI, Inspection and according depending upon the requirements, there are
categorized into 2 categories, namely commercial documents and regulatory documents.
 A. Commercial Documents. : - Commercial documents are required for effecting physical
transfer of goods and their title from the exporter to the importer and the realisation of
export sale proceeds. Out of the 16 commercial documents in the export documentation
framework as many as 14 have been standardised and aligned to one another. These are
proforma invoice, commercial invoice, packing list, shipping instructions, intimation for
inspection, certificate, of inspection of quality control, insurance declaration, certificate'
of insurance, mate's receipt, bill of lading or combined transport document, application
for certificate origin, certificate of origin, shipment advice and letter to the bank for
collection or negotiation of documents. However, shipping order and bill of exchange
could not be brought within the fold of the Aligned Documentation System,

1. Commercial Invoice: Commercial invoice is an important and basic export

document. It is also known as a 'Document of Contents' as it contains all the information
required for the preparation of other documents. It is actually a seller's bill of merchandise.
It is prepared by the exporter after the execution of export order giving details about the
goods shipped. It is essential that the invoice is prepared in the name of the buyer or the
consignee mentioned in the letter of credit. It is a prima facie evidence of the contract of
sale or purchase and therefore, must be prepared strictly in accordance with the contract
of sale.

Contents of Commercial Invoice

 Name and address of the exporter.

 Name and address of the consignee.
 Name and the number of Vessel or Flight.
 Name of the port of loading.
 Name of the port of discharge and final destination.
 Invoice number and date.
 Exporter's reference number.
 Buyer's reference number and date.
 Name of the country of origin of goods.
 Name of the country of final destination.
 Terms of delivery and payment.
 Marks and container number.
 Number and packing description.
 Description of goods giving details of quantity, rate and total amount in terms of
internationally accepted price quotation.
 Signature of the exporter with date.
 Significance of Commercial Invoice

 It is the basic document useful in preparation of various other shipping documents.

 It is used in various export formalities such as quality and pre-Shipment inspection excise
and customs procedures etc.
 It is also useful in negotiation of documents for collection and claim of incentives.
 It is useful for accounting purposes to both exporters as well as importers.

2 Inspection Certificate: The certificate is issued by the inspection authority such as the
export inspection agency. This certificate states that the goods have been inspected before
shipment, and that they confirm to accepted quality standards.
3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to
fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to voyages
and in land transportation. Marine insurance policy is one of the most important document
used as collateral security because it protects the interest of all those who have insurable
interest at the time of loss. The exporter is bound to insure the goods in case of CIF
quotation, but he can also insure the goods in case of FOB contract, at the request of the
importer, but the premium payment will be made by the exporter. There are different types
of policies such as
 SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment.
For a regular exporter, this policy is not advisable as he will have to take a separate
policy every time a shipment is made, so this policy is taken when exports are in
frequent.
 Floating Policy: This is taken to cover all shipments for some months. There is no
time limit, but there is a limit on the value of goods and once this value is crossed
by several shipments, then it has to be renewed.
 Open Policy: This policy remains in force until cancelled by either party i.e.
insurance company or the exporter.
 Open Cover Policy: This policy is generally issued for 12 months period, for all
shipments to one or more destinations. The open cover may specify the maximum
value of consignment that may be sent per ship and if the value exceeded, the
insurance company must be informed by the exporter.
 Insurance Premium: Differs upon product to product and a number of such other
factors, such as, distance of voyage, type and condition of packing, etc. Premium
for air consignments are lowered as compared to consignments by sea.

4. Consular Invoice: Consular invoice is a document required mainly by the Latin American
countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia,
 Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the most important
document, which needs to be submitted for certification to the Embassy of the importing
country concerned. The main purpose of the consular invoice is to enable the authorities of
the importing country to collect accurate information about the volume, value, quality,
grade, source, etc., of the goods imported for the purpose of assessing import duties and
also for statistical purposes. In order to obtain consular invoice, the exporter is required to
submit three copies of invoice to the Consulate of the importing country concerned. The
Consulate of the importing country certifies them in return for fees. One copy of the invoice
is given to the exporter while the other two are dispatched to the customs office of the
importer's country for the calculation of the import duty. The exporter negotiates a copy of
the consular invoice to the importer along with other shipping documents.

Significance of Consular Invoice for the Exporter

 It facilitates quick clearance of goods from the customs in exporter's as well as

importer's country.
 Certification' of goods by the Consulate of the importing country indicarer that the
importer has fulfilled all procedural and licensing formalities for import of goods.
 It also assures the exporter of the payment from the importing country.

Significance of Consular Invoice for the Importer

 It facilitates quick clearance of goods from the customs at the port destination and
therefore, the importer gets quick delivery of goods.
 The importer is assured that the goods imported are not banned for imported in his
country.

Significance of Consular Invoice for the Customs Office

 It makes the task of the customs authorities easy.

 It facilitates quick calculation of duties as the value of goods as determine by the
Consulate is considered for the purpose.

5. Certificate of Origin: The importers in several countries require a certificate of origin

without which clearance to import is refused. The certificate of origin states that the goods
exported are originally manufactured in the country whose name is mentioned in the
certificate. Certificate of origin is required when:-
  The goods produced in a particular country are subject to’ preferential tariff rates in the
foreign market at the time importation.
 The goods produced in a particular country are banned for import in the foreign market.

Contents of Certificate of Origin

 Name and logo of chamber of commerce.

 Name and address of the exporter.
 Name and address of the consignee.
 Name and the number of Vessel of Flight
 Name of the port of loading.
 Name of the port of discharge and place of delivery.
 Marks and container number.
 Packing and container description.
 Total number of containers and packages.
 Description of goods in terms of quantity.
 Signature and initials of the concerned officer of the issuing authority.
 Seal of the issuing authority.

6. Bill of Lading: The bill of lading is a document issued by the shipping company or its
agent acknowledging the receipt of goods on board the vessel, and undertaking to deliver
the goods in the like order and condition as received, to the consignee or his order, provided
the freight and other charges as specified in the bill have been duly paid. It is also a
document of title to the goods and as such, is freely transferable by endorsement and
delivery.

Bill of Lading serves three main purposes:

 As a document of title to the goods;

 As a receipt from the shipping company; and
 As a contract for the transportation of goods.

7. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued by an
airline for the carriage of goods. As each shipping company has its own bill of lading, so each
airline has its own airway bill. Airway Bill or Air Consignment Note is not treated as a document
of title and is not issued in negotiable form.

7. Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the
importer about the shipment of goods giving him details about the date of shipment, the
name of the vessel, the destination, etc. He should also send one copy of non-negotiable
bill of lading to the importer.
8. Packing List: The exporter prepares the packing list to facilitate the buyer to check the
shipment. It contains the detailed description of the goods packed in each case, their gross
and net weight, etc. The difference between a packing note and a packing list is that the
packing note contains the particulars of the contents of an individual pack, while the
packing list is a consolidated statement of the contents of a number of cases or packs.
9. Bill of Exchange: The instrument is used in receiving payment from the importer. The
importer may prefer Bill of Exchange to LC as it does not involve blocking of funds. A bill of
exchange is drawn by the exporter on the importer, to make payment on demand at sight
or after a certain period of time.

B Auxiliary Documents: These documents generally form the basic documents based on which
the commercial and or regulatory documents are prepared. These documents also do not have
any fixed formats and the number of such documents will wary according to individual
requirements.

1. Proforma Invoice: The starting point of the export contract is in the form of offer made
by the exporter to the foreign customer. The offer made by the exporter is in the form of
a proforma invoice. It is a quotation given as a reply to an inquiry. It normally forms the
basis of all trade transactions

2. Declaration of Insurance: Where the contract terms require that the insurance to be
covered by the exporter, the shipper has to give details of the shipment to the insurance
company for necessary insurance cover. The detailed declaration will cover:

 Name of the shipper \ exporter.

 Name & address of buyer.
 Details of goods such as packages, quantity, value in foreign currency as
well as in Indian Rs. Etc.
 Name of the Vessel \ Aircraft.
 Value for which insurance to be covered.
 3. Application of the Certificate Origin: In case the exporter has to obtain Certificate of
Origin from the concerned authorities, an application has to be made to the concerned
authority with required documents. While the simple invoice copy will do for getting C\O
from the chamber of commerce, in respect of obtained the same from the office of the
Textile Committee or Export Promotion Council, the documents requirement are
different.
4. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship
when the cargo is loaded on the ship. The mate's receipt is a prima facie evidence that
goods are loaded in the vessel. The mate's receipt is first handed over to the Port Trust
Authorities. After making payment of all port dues, the exporter or his agent collects the
mate's receipt from the Port Trust Authorities. The mate's receipt is freely transferable.
It must be handed over to the shipping company in order to get the bill of lading. Bill of
lading is prepared on the basis of the mate's receipt.

C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the

different government departments and bodies in order to comply with various rules and
regulations under the relevant laws governing export trade such as export inspection, foreign
exchange regulation, ex port trade control, customs, etc. Out of 9 regulatory documents four
have been standardised and aligned. These are shipping bill or bill of export, exchange control
declaration (GR from), export application dock challan or port trust copy of shipping bill and
receipt for payment of port charges.

1. Shipping Bill: Shipping bill is the main customs document, required by the customs
authorities for granting permission for the shipment of goods. The cargo is moved
inside the dock area only after the shipping bill is duly stamped, i.e. certified by the
customs. Shipping bill is normally prepared in five copies :-

 Customs copy.
 Drawback copy.
 Export promotion copy.
 Port trust copy.
 Exporter's copy.

D. Other Document:

 Black List Certificate: it certifies that the ship/aircraft carrying the cargo has
not touched the particular country on its journey or that the goods are not from
the particular country. This is required by certain nations who have strained
political and economical relations with the so called “Black Listed Countries”.
  Language Certificate: Importers in the European Community require a
language certificate along with the GSP certificate in respect of handloom
cotton fabrics classifiable under NAMEX code 55.09. Generally four copies of
language certificate are prepared by the concerned authority who issues GSP
certificate. Three copies are handed over to the exporter. A copy is sent along
with the other documents for realisation of export proceeds.
 Freight Payment Certificate: in most of the cases, the B/L or AWB will mention
the transportation and other related charges. However if the exporter does not
want these details to be disclosed to the buyer, the shipping company may
issue a separate certificate for payment of the freight charges instead of
declaring on the main transport documents. This document showing the freight
payment is called the freight certificate.

 Insurance Premium Certificate: this is the certificate issued by the Insurance

Company as acknowledgement of the amount of premium paid for the
insurance cover. This certificate is required by the bank for arriving at the fob
value of the goods to be declared in the bank certificate of realisation.

 Combined Certificate of Origin and Value: this certificate is required by the

Commonwealth Countries. This certificate is printed in a special way by the
Commonwealth Countries. This certificate should contain special details as to
the origin and value of goods, which are useful for determining import duty. All
other details are generally the same as that of Commercial Invoice, such as
name of the exporter and the importer, quality and quantity of the goods etc.

 Customs Invoice: this is required by the countries like Canada, USA for imposing
preferential tariff rates.

 Legalized Invoice: this is required by the certain Latin American Countries like
Mexico. It is just like consular invoice, which requires certification from
Consulate or authorised mission, stationed in the exporter’s country.

Pre-Shipment Documents:

 Shipping bill.
 Export order/Sales contract/Purchase order.
 Letter of Credit
 Commercial invoice.
 Packing list.
  Certificate of origin.
 Guaranteed Remittance (G.R/SDF/PP/SOFTEX),or SDF.
 Certificate of Inspection.
 Various declarations required as per custom procedure.

Exchange Control Declaration Form: all exports to which the requirement of declaration apply
must be declared on appropriate forms as indicated below unless the consignment is of samples
and of ‘No Commercial Value’

 GR FORM: to be completed in duplicate for exports otherwise than by post

including export of software in physical form i.e. magnetic tape/discs and paper
media.
 SDF FORM: to be completed in duplicate and appended to the Shipping Bill for
export declare to the customs offices notified by the Central Government
which have introduced EDI system for processing Shipping Bill.
 PP FORM: to be completed in duplicate for export by post.
 SOFTX: to be completed in triplicate for export of software otherwise than in
the physical form i.e. magnetic tapes/discs and paper media.

MARINE INSURANCE POLICY

Goods in transit are subject to risks of loss of goods arising due to fire on the ship, perils of sea,
thefts etc. Marine insurance protects losses incidental to voyages and in land transportation.

Marine Insurance Policy is one of the most important document used as collateral security
because it protects the interest of all those who have insurable interest at the time of loss. The
exporter is bound to insure the goods in case of CIF quotation, but he can also insure the goods
in case of FOB contract, at the request of the importer, but the premium payment will be made
by the exporter.

There are different types of policies such as

Specific Policy: This policy is taken to cover different risks for a single shipment. For a regular
exporter, this policy is not advisable as he will have to take a separate policy every time the
shipment is made, so this policy is taken when exports are infrequent.
Floating Policy: This policy is taken to cover all shipments for same months. There is no time
limit, but there is a limit on the value of goods and once this value is crossed by several shipments,
then it has to be renewed.

Open Policy: This policy remains in force until cancelled by either party, i.e. insurance company
or the exporter.

Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one
or all destinations. The open cover may specify the maximum value of consignment that may be
sent pre ship and if the value exceeded, the insurance company must be informed by the
exporter.

Insurance Premium: Differs upon from product to product and a number of other such factors,
such as, distance of voyage, type and condition of packing etc. Premium for air consignments are
lower as compared to consignments by sea.

The Insurance Policy Normally Contains:

 The name and address of the insurance company.

 The name of the assured & description of the risk covered.
 A description of the consignment.
 The sum insured & the date of issue.

QUALITY CONTROL AND PRE-SHIPMENT INSPECTION

Realizing the importance of the need for supplying quality goods as per international standards,
the Government of India has introduced Compulsory Quality Control and Pre-Shipment
Inspection of over 1050 items of export under Export (Quality Control and Pre-Shipment
Inspection) Act 1963.

At present, the export items that are subjected to compulsory inspection includes food and
agricultural products, chemicals, engineering, coir, jute and footwear.

Systems of Quality Control:

For the purpose of pre-shipment inspection, EIC has recognized three systems of inspection
namely:

 Self-Certification
  In-Process Quality Control
 Consignment Wise Inspection

Self-Certification:

Under this system, complete authority is given to the manufacturing units to certify their own
products and issue certificates for export. The manufacturing units which have been
recognized under this scheme have to pay a nominal yearly fee at the rate of 0.1% of FOB
price subject to minimum of Rs.2,500/- and maximum of Rs.1 lakh in a year to the concerned
EIA

In-Process Quality Control (IPQC):

In this system, companies/units adjusted as having adequate level of quality control right from
raw material stage to the finished product stage including packaging are eligible to get the
inspection certificate on a formal request by the exporter. Over 800 units all over India are
operating under this system.

Constant vigil and surveillance are kept on units approved under IPQC and self-certification
system. Units approved under the above two systems are often known as “Export worth Units”,
because of their consistent standards of quality.

SHIPPING AND CUSTOMS FORMALITIES

(As per the Prevailing Law i.e., ICA 62)

The shipment of export cargo has to be made with prior permission of, and under the close
supervision of the custom authorities. The goods cannot be loaded on board the ship unless a
formal permission is obtained from the custom authorities. The custom authorities grant this
permission only when it is being satisfied that the goods being exported are of the same type and
value as have been declared by the exporter or his C&F agent, and that the duty has been
properly determined and paid, if any.

The custom procedure can be briefly explained as follows:

 Submission of Documents: The exporter or his agent submits the necessary documents
along with the shipping bill to the Custom House. The documents include:

o ARE-1 (Original and duplicate)

o Excise gate pass (Original and duplicate transporters’ copy
o Proforma Invoice
o Packing List
o GRI form (Original and duplicate)
o Customs Invoice (where required in the importing country)
o Original letter of credit/contract
o Declaration form in triplicate
o Quality Certificate
o Purchase memo
o Labels
o Licence (if any required) including advance licence copy
o Railway receipt/lorry way bill
o Inspection Certificate by Export Inspection Agency

 Verification of Documents: The Customs Appraiser verifies the documents and appraises
the value of goods. He then makes an endorsement of “Examination Order” on the
duplicate copy of shipping bill regarding the extent of physical examination of the goods
at the docks. All documents are returned back to the agent or exporter, except

o Original Copy of GR to be forwarded to RBI

o Original copy of shipping bill
o One copy of commercial invoice

 Carting Order: The exporter’s agent has to obtain the carting order from the Port Trust
Authorities. Carting Order is the permission to bring the goods inside the docks. The
carting order is issued by the superintendent of Port Trust. Carting Order is issued only
after verifying the endorsement on the duplicate copy of shipping bill. The Carting Order
enables the exporter’s agent to cart goods inside the docks and store them in proper
sheds.
 Storing the Goods in the Sheds: After securing the carting order, the goods are moved
inside the docks. The goods are then stored in the sheds at the docks.

 Examination of Goods: The exporter’s agent then approaches the customs examiner to
examine the goods. The customs examiner examines the cargo and records his report on
the duplicate copy of the shipping bill. The customs examiner then sings the “Let Export
Order”

 Let Export Order: The Let Export Order is then shown to the Customs Preventive Officer,
along with other documents. The CPO is in charge of supervision of loading operations on
the vessel. If CPO finds everything in order, he endorses the duplicate copy of shipping
bill with the “Let Ship Order” This order helps the exporter/shipper to load the goods on
the ship.

 Loading Goods: The goods are then loaded on the ship. The CPO supervises the loading
operations. After loading is completed, the Chief Mate (Cargo Officer) of the ship issues
the “Mate’s Receipt”. The Mate’s Receipt is sent to the Port Trust Office. The C&F agent
pays the port trust dues and collects the mate’s receipt. The C&F agent then approaches
the CPO and gets the certification of shipment of goods on AR Forms and other
documents
 Obtaining Bill of Lading: The Mate’s Receipt is then handed over to the shipping company
(on whose vessel the goods are loaded). The shipping company issues bill of lading. The
Bill of Lading is issued in:

o 3 negotiable copies of Bill of Lading

o 10 to 12 Non-negotiable copies of Bill of Lading.

The negotiable copies have title to goods; whereas non-negotiable copies do not have title to
goods but are used for record purpose.

PROCEDURE OF EXCISE CLEARANCE:

The common procedure of excise clearance under “bond” and under “rebate” is discussed as
follows:

 Preparing of Invoice: The export goods have to be cleared from the factory under invoice.
The invoice contains details like name of the exporter, value of goods, excise duty
chargeable, etc. The invoice is to be prepared in triplicate. In case of export under Bond,
 the invoice should be marked as “For Export without payment of duty”. In addition to
the invoice, a prescribed for ARE 1 has to be filed in by exporter.

 Filling up of ARE-1 form (Annexure-20): The ARE-1 form needs to be filled in four copies.
A fifth (Optional) may be filled in by the exporter, which can be used at the time of
claiming other export incentives. The ARE-1 copies have distinct color for the purpose of
verification and processing.

 Application to Assistant Commissioner of Central Excise (ACCE): The exporter has to

make an application to ACCE regarding the removal of goods from the factory/warehouse
for export purpose.
 Information to Range Superintendent of Central Excise (RSCE): The ACCE will inform the
RSCE under whose jurisdiction the goods are intended to be cleared for export
 Deputation of Inspector: The RSCE will then depute an inspector to clear the goods, either
at the factory or warehouse, and in certain cases at the port.
 Processing of ARE-1 Form: The Excise Officer/Inspector will make endorsement on all
copies of ARE-1. The handling of ARE-1 Form is done as follows:
o The inspector returns the original and duplicate copies to the exporter
o The triplicate copy is sent to officer (ACCE or Maritime Commissioner
(MCCE) to whom bond was executed or letter of undertaking (LUT) was
given. This copy can also be handed over to the exporter in a tamper proof
sealed cover to be submitted to ACCE/MCCE.
o The 4th copy will be retained by the excise inspector.
o The 5th copy is also handed over to the exporter.
o At the time of export, original, duplicate and the 5th copy (optional) will be
submitted to customs officer. The customs officer will examine these
copies and then export will be allowed.

 Refund or Release of Bond: The exporter should make an application to the excise officer
for refund or release of bond. The application must be supported by original copy of ARE-
1 form. The excise officer crosschecks the original copy of ARE-1 form and the duplicate
and triplicate copies of ARE-1 form, which he had received earlier. If the copies match,
then refund is given or the bond is released.

FACTORY STUFFING OF CARGO

 Clearance of goods to docks: If the goods meant for export is of a small quantity which may
not be sufficient to make one full container, the cargo is said to be less than container load
(LCL) cargo. Such cargo has to be taken to the docks where the goods will be consolidated
(combining the cargo of other exporters to make up quantity for a full container) by the agent
and loaded into a container. Here the examination of the cargo is done at the docks.(There
are also inland container depots approved by the customs where the goods can be
consolidated and stuffed into the container by the agent under the supervision of the
customs officer)

If the goods meant for export is of sufficient quantity to make up a full container, the exporter
has the option to take the goods to the docks and get them examined and stuffed into a
separate container. An exporter gets the benefit on the freight amount for a full container.
(Generally called box rate)

Alternatively, he can have a container allotted to him and get the same to his Mills Premises.
The goods meant for exports can be stuffed into the container under the supervision of the
regional Central Excise Authority. Here the exporter has to

 Obtain permission from the Customs for getting the container to his mills premises
for stuffing (House Stuffing)
 Inform the C.Excise Authorities at least 24 hours before bringing the container for
loading.

The C.Excise Authority will supervise the loading, seal the container and certify the invoice as
directed in the permission given by the custom authorities. A special Lock is used to lock the
doors of the container. Samples from the goods will be drawn, if necessary, as required under
the customs permission. Such samples will be sealed and forwarded along with the container.
The examiner in the docks may arrange to send the sample for testing. Then the container is
moved to the dock for loading. Generally, such containerized goods are not subject to further
examination in the customs. They will be directly taken for loading.

SALES TAX EXEMPTION PROCEDURE

Export good are exempted from the payment of sales tax. The exporter can claim exemption from
sales tax (on purchases or sales for export purpose), provide the exporter is registered with the
Sales-Tax Department. If the exporter is not registered with the sales tax department, he cannot
utilize the facility of sales tax exemption. Therefore, it is necessary for the exporter to get his
organization registered with sales tax department.
I Registration Procedure

 Application: The exporter must apply to the Sales Tax Officer (STO) under whose
jurisdiction the head/ registered office of the exporter is located.
 Deputation of Inspector: The STO may depute an inspector to visit the office of the
exporter and inspect:

o Relevant books showing sales/ purchases.

o Partnership Deed or Memorandum and Articles of Association along with
Incorporation Certificate.
o Other Relevant documents.

 Inspection: The inspector visits the office of the exporter and inspects the necessary
books and other documents.

 Report by Inspector: The Sales Tax Inspector makes a report to the STO for registration
or otherwise. The STO verifies the inspector report. The STO, before granting the ST Reg.
Number may cal the exporter for necessary clarifications, if required.

 Security Bond: The STO normally requires the exporter to provide a security bond from
another firm which is registered with the Sales Tax Department.

 Granting of Sales Tax Reg. Number: After completing necessary formalities, the STO
grants Sales Tax Reg. Number to the exporter.

II. Exemption Procedure

 Obtaining Form ‘H’: the registered exporters need to apply to the concerned STO for
obtaining Form ’H’. the exporter should submit:
o A copy of Letter of Credit
o A copy of Letter of Credit /Export Order.
o Copy of the Invoice , where goods are already purchased for export purchase.
o A copy of shipping bill duty certified by customs.

The exporter has to affix the prescribed court fee stamp on each of the Form ‘H’ issued. The STO
then affixes the exporter’s company stamp on the Form ’H’.

 Filling the details in Form ‘H’: After export of goods, the exporter fills the relevant details
in ‘Form H’. The Form ‘H’ needs to be prepared in triplicate.
The exporter retains one copy, and other two copies are sent to the seller from whom the
exporter purchased the goods for export purpose. The seller than sends on copy of Form ‘H’ to
STO along with the Return of Sales Tax. The other copy is retained by seller. The STO may issue
refund order to the exporter.

METHODS OF RECEIVING PAYMENT AGAINST EXPORTS

Before we proceed to understand the concept of Letter of Credit, let us understand the various
types of payment methods available against export.

METHODS OF PAYMENT
There are three methods of payment depending upon the terms of payment, and each method
of payment involves varying degrees of risks for the exporter. The methods are:

 Payment in advance
 Documentary Bills
 Letter of Credit
 Open Account
 Counter Trade

A. PAYMENT IN ADVANCE

This method does not involve any risk of bad debts, provided entire amount has been received
in advance. At times, a certain per cent is paid in advance, say 50% and the rest on delivery. This
method of payment is desirable when:

 The financial position of the buyer is weak or credit worthiness of the buyer is not
known.
 The economic/ political conditions in the buyer’s country are unstable.
 The seller is not willing to assume credit risk, as un the case of open account method.

However, this is the most unpopular methods as a foreign buyer would not be willing to pay
advance of shipment unless:

 The goods are specifically designed for the customer, and

 There is heavy demand for the goods (a seller’s market situation).

B. DOCUMENTARY BILLS:

Under this method, the exporter agrees to submit the documents to his bank along with the bill
of exchange. The minimum documents required are

 full set of bill of lading

 commercial Invoice
 Marine Insurance policy and other document, if required.

There are two main types of documentary bills:

 Documents against Payment,

 Documents against Acceptance.
Documents against payment (D/P): The documents are released to the importer against
payment. This method indicates that the payment is made against Sight Draft. Necessary
arrangements will have to be made to store the goods, if a delay in payment occurs.

The risk involved that the importer may refuse to accept the documents and to pay against them.
The reason for non-acceptance may be political or commercial ones. In India, ECGC covers losses
arising out of such risks. Under this system, as compared to D/A, the exporter has certain
advantages:

 The document remain in the hands of the bank and the exporter does not lose
possession or the ownership of goods till payment is made,
 Other reason may include that the exporter may not be able to allow credit and wait
for payment.

Documents Against acceptance (D/A): The document are released against acceptance of the
Time Draft i.e. credit allowed for a certain period, say 90 days. However, the exporter need not
wait for payment till bill is met on due date, as he can discount the bill with the negotiating bank
and can avail of funds immediately after shipment of goods.

In case of D/A as compared to D/P bills, the risk involved is much grater, as the importer has
already taken possession of goods which may or may not be in his custody on the maturity date
of the bill. If the importer fails to pay on due date, the exporter, will have to start civil proceedings
to receive his payment, if all other alternatives fails. The risk involved can be insured with ECGC.

C. LETTER OF CREDIT (L/C):

This method of payment has become the most popular form in recent times, it is more secured
as company to other methods of payment (other than advance payment).

A letter of credit can be defined as “ an undertaking by importer’s bank stating that payment will
be made to the exporter if the required documents are presented to the bank within the variety
of the L/C”.

PROCEDURE INVOLVED IN THE LETTER OF CREDIT

The following are the step in the process of opening a letter of credit:

 Exporter’s Request: The exporter requests the importer to issue LC in his favor. LC is the
most secured form of payment in foreign trade.
  Importer’s Request to his Bank: The importer requests his bank to open a L/C. He May
either pay the amount of credit in his current account with the bank.
 Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank with
also request to inform the beneficiary that the L/C has been opened. The issuing bank
may also request the advising bank to add its confirmation to the L/C, if so required by
the beneficiary.
 Receipt of LC: the exporter takes in his possession the L/C. He should see it that the L/C is
confirmed.
 Shipment of Goods: Then exporter supplies the goods and presents the full set of
documents along with the draft to the negotiating bank.
 Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if they
are in order makes the payment to the exporter.
 Negotiation: The exporter’s bank negotiates the document against the letter of credit and
forwards the export documents to the L/C opening bank or as per their instructions.
 Realization of payment: The issuing bank will reimburse the amount (which is paid to the
exporter) to the negotiating bank.
 Document to Importer: the issuing in turn presents the documents to the importer and
debits his account for the corresponding amount.

In order to have uniformity and to avoid disputes, the ICC Paris has evolved uniform customs and
practices of documentary credit (UCPDC), in short known as UCP 500 effective from 1-1-96. These
are rules have been adopted by more than 150 countries. They provide the comprehensive and
practical working aid to banker, lawyer, importers, exporters, Exporters, transporters, executives
involved in international trade.

Note: as soon as an L/C is received ensure that the same is authenticated. Meaning that the
genuineness of the L/C is certified by the Advising Bank by an endorsement with the marking
‘AUTHENTICATED’ OR ELSE THE L/C IS OF NO USE.

PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK

NEGOTTIATION /PURCHASE
Document against exports should normally be realized through an authorized dealer foreign
exchange. However payment of export can be received directly from the overseas buyer in the
form of bank draft, pay order, banker’s cheque, personal cheque foreign currency notes, foreign
currency traveler’s cheque, etc. Without any monetary limit provided the exporter’s track record
is good, he is a customer of the authorized dealers through whom documents are to be
negotiated and prima facie the instrument of payment represents export proceeds realization.
Take care to submit various documents in a proper manner and within the prescribed time
schedule. Apply to the Reserve Bank for extension of time in case you feel there is likely to be a
delay in realizing export proceeds.

The following are the steps in realizing export proceeds:

 Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter
should approach his bank (authorized dealer) with a formal request to realize sale
proceeds from the foreign buyer. It is obligatory to submit the shipping documents to an
authorized dealer within 21 days of the date of shipment (subject to certain exceptions).
In India, the exporters have to realize the full value of exports within 180 days from the
date of shipment, (unless the payment terms offered are “deferred payment terms”).
Where it is not possible to realize the sale proceeds within the prescribed period, the
exporter should apply for extension in prescribed form ETX (in duplicate) to RBI.

 Submission of Documents to the Bank: The exporter should submit the following
documents
o Bill of Exchange
o Full set of Bill of Lading
o Commercial Invoice Copies
o Certificate of Origin
o Insurance Policy
o Inspection Certificate
o Packing List
o GR (duplicate copy to forward it to RBI)
o Bank Certificate
o Other relevant documents.

The above documents need to be submitted in two complete sets, because it is customary
to dispatch two sets of documents, one after the other. This is because, if one set is
misplaced or delayed in transit, the importer can get at least the other set and clear the
goods.
 Verification of Documents: The bank will verify the documents to find

o Whether the required documents are in order.

o Whether the required documents are attested by customs and other
authorities.

 Letter of Indemnity: If the exporter wants immediate payment from his bankers, then his
bankers may provide advance payment only when the exporter signs an indemnity letter.
The implications of an indemnity letter is that in the event of refusal of payment by the
issuing bank in respect of LC, then the negotiating bank can ask the exporter to pay back
the money advanced along with necessary charges.

Common Document Discrepancies

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

SHIPMENT THROUGH COURIERS

In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under the
courier imports or exporters (clearance) Regulation Act, 1998.

These regulations shall apply for clearance of goods carried by authorized courier on outgoing
flights on behalf of exports. Consigner for a commercial consideration.

Export Terms & conditions:

Export of any item can be affected by courier, except the following.

 Goods which are subject to cess.

 Goods proposed to be exported with claim of duly drawback.
 Goods proposed to be exported under DEPB, EPCG, AL (Advance License)
 Where the value of goods is more than Rs. 25,0000/-
 Goods where weight of individual packet is more than 32 kg.
CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM

It is brought to the notice of all exporters, importers, CHAs, Trade and General Public that the
computerized processing of Shipping Bills under the Indian Customs EDI (Electronic Data
Interchange) System – (Exports), will commence w.e.f.1`5-09-2004. The computerized processing
of shipping bills would be in respect of the following categories:

 Duty Free white shipping bills

 Dutiable shipping bills (Cess)
 DEEC Shipping Bills
 EPCG Shipping Bills
 DEPB Shipping Bills
 DFRC Shipping Bills
 100% EOU Shipping Bills
 Re export, Jobbing Shipping Bills
 Drawback Shipping Bills
 Other NFEI Shipping Bills

The procedure to be followed in respect of filing of shipping bills under the Indian customs
EDI System-Exports at CFS-Mulund shall be as follows:

2. DATA ENTRY FOR SHIPPING BILLS

2.1 Exporters/CHAs are required to register their IE codes, CHAs Licence Nos, and the
Bank A/C No.(for credit of Drawback amount) in the Customs Computer Systems
before an EDI Shipping Bill is filed.

2.2 Exporters/CHAs would be required to submit at the SERVICE CENTRE the following
documents.

 A declaration in the specified format

 SDF declaration
 Quota/Inspection Certificate
 Drawback/DEEC/DFRC/DEPB Declarations etc., as applicable

2.3 The formats should be duly completed in all respects and should be signed by the
exporter or his authorized CHA . Forms, which are incomplete or unsigned will not
be accepted for data entry
2.4 Initially, data entry for Shipping Bills will be allowed to be made only at the Service
centre. After the exporters/CHAs become conversant with the EDI procedures, the
option of Remote EDI System would also be made available. In the Remote EDI
system (RES) Exporters/CHAs can electronically file their shipping bills from their
offices.
2.5 The schedule of charges to be levied for data entry at the Service Centre is as
follows:

Charges for S/Bills having up to five items ... Rs.60/-

Charges for additional block of five items ... Rs.10/-

Amendment fees (for a block of five items) ... Rs.10/-

Printing of a S/Bill for Remote EDI System ... Rs.20/-

2.6 The Service Centre operators shall carefully enter the data on the basis of
declarations made by the CHAs/Exporters. After completion of data entry, the
checklist will be printed by the Data Entry Operator and shall be handed over to
the Exporters/CHAs for confirmation of the correctness. Thereafter, the
CHA/Exporters will make corrections, if any, in the checklist and return the same
to the operator duly signed. The operator shall make the corresponding
corrections in the date and shall submit the shipping bill. The operator shall not
make any amendment after generation of the checklist and before submission in
the system unless the corrections made by the CHAs/Exporters are clearly
indicated on the checklist against the respective fields and duly authenticated by
CHA/Exporters signature.
2.7 The system automatically generates the S/Bill Number. The operator shall endorse
the same on the checklist in clear and bold figures. It should be noted that no copy
of the S/Bill would be available at this stage.
2.8 The declarations would be accepted at the service centre from 10.00 hrs to 16.30
hrs. Declarations received up to 16.30 hrs will be entered in the computer system
on the same day.
2.9 The validity of the S/Bill in EDI System is fifteen days only. After expiry of fifteen
days from the date of filing of shipping bill, the exporter has to file the declaration
afresh.
3 PROCEDURE FOR GR-1
3.1 Under the revised EDI procedure there would be no GR-1 Procedure.
Exporters(including CHAs) would be required to file a declaration in the form SDF.
It would be filed at the stage of “goods arrival” One copy of the declaration would
be attached to the original copy of the S/Bill generated by the system and retained
by the customs.The second copy would be attached to the duplicate S/B (the
exchange control copy) and surrendered by the exporter to the authorized dealer
for collection/negotiations.
3.2 The exporters are required to obtain a certificate from the bank through which
they would be realizing the export proceeds. If the exporter wishes to operate
through different banks for the purpose, a certificate would have to be obtained
from each of the banks. The certificates would be submitted to customs and
registered in the system. These would have to be submitted once a year for
confirmation or whenever the bank is changed.
3.3 In the declaration form to be filled by the exporters for the electronic processing
of export documents, the exporters would need to mention the name of the bank
and the branch code as mentioned in the certificate from the bank. The customs
will verify the details in the declaration with the information captured in the
system through the certificates registered earlier.
3.4 In the case of S/Bs processed manually, the existing arrangement of filing GR-1
forms would continue.

 OCTROI PROCEDURES, QUOTA ALLOCATION AND OTHER CERTIFICATION.

1.1 The processing of S/Bs involving allocation of ready-made garments quota by the
Apparel Export Promotion Council (AEPC) will change with the introduction of the
system. The quota allocation label will be pasted on the export invoice instead of
S/B. Allocation number of AEPC would be entered in the system at the time of S/B
data entry. The quota certification on export invoice should be submitted to
Customs along with other original documents at the time of examination of export
cargo.
1.2 As a transitional measure, AEPC certification even on S/B form would be accepted.
However, in these cases, S/B number should be indicated on the invoice when
goods are presented for examination. This transitional facilitation measure will be
available for a period of two months i.e., upto 30th November 2004.
 1.3 For determining the validity date of the quota, the relevant date would be the
date on which the full consignment is presented for examination and the date to
recorded in the system.
1.4 The certificate of other agencies, such as, the Cotton Textiles Export Promotion
Council; the Wildlife Inspection Agency under CITES; the Engineering Export
Promotion Council; the Agricultural Produce Export Development Agency
(APEDA), the Central Silk Board and the All India Handicraft Board should also be
obtained on the invoice. Similarly, the no objection of the Asst. Drug Controller
and of the Archaeological of Survey India would be obtained on the Invoice.

The transitional arrangements would be the same as in the case of AEPC certification.

1.5 The exporters would have to make use of export invoice or such other documents
as required by the Octroi Authorities for the purpose of octroi exemption.

2. ARRIVAL OF GOODS AT EXPORT EXAMINATION SHEDS IN CFS

2.1 The existing procedure of permitting entry of goods, brought for the purpose of
examination (and subsequent: “Let export” Order) in the CFS on the strength of
S/B shall be discontinued. The CONCOR will permit entry of the goods on the
strength of the checklist, the date entry form and the declaration. The CONCOR
would endorse the quantity of goods entering the CFS on the reverse of the
checklist
2.2 The goods should be brought for examination within 15 days of filing of
declaration in the Centre. In case of delay, a fresh declaration would need to be
filed
2.3 If at any stage subsequent to the entry of goods in CFS it is noticed that the
declaration has not been registered in the system, the exporters and CHAs will be
responsible for the delay in shipment of goods and any damage, deterioration or
pilferage, without prejudice to any other action that may be taken.

3. PROCESSING OF SHIPPING BILLS

 3.1 The S/B shall be processed by the system on the basis of declaration made by the
exporter. However, the following S/B shall require clearance of the Assistant
Commissioner/Dy. Commissioner (AC/DC Exports):

 Duty free S/B for FOB value above Rs.10 lakh

 Free Trade Sample S/B for FOB value above Rs.25,000
 Drawback S/B where the drawback exceeds Rs. One lakh

3.2 Subject to the provisions of para 20.3 of this PN the following categories of S/Bills
shall be processed buy the Appraiser (Export Assessment) first and then by the
Asstt/Dy. Commissioner:

 DEEC
 DEPB
 DFRC
 EOU
 EPCG

3.3 Apart from verifying the value and other particulars for assessment, the AO / AC /
DC may call for the sample s for confirming the declared value or the checking
classification under the drawback schedule / DEEC / DEPB / DFRC / EOU etc., He
may also give special instruction for examination of goods.
3.4 If the S/B falls in the categories indicted in para 6.1 above, the exporter should
check up with the query counter at the Centre, whether the S/B has been cleared
by Asstt. Commissioner /Dy. commissioner, before the goods are taken for
examination. In case AC / DC raises any query, it should be replied through the
Service Centre or, in case of EDI connectivity, through terminals of the Exporter /
CHA. After all the queries have been satisfactorily replied to, AC / DC will pass the
S/B

4. CUSTOMS EXAMINATION OF EXPORT CARGO

4.1 On receipt of the goods in the Export Shed in the CFS, the exporter will contact
the system examining officer (SEO)and present the checklist with the
endorsement of CONCOR on the declaration, along with all original documents
such as Invoice, Packing List, ARE-1(AR-4)etc. He will also present additional
particulars in the prescribed form.
 4.2 SEO will verify the quantity of the goods actually received against that entered in
the system. He will enter the particulars in the system. The system would identify
the Examining Officer (if more than one are available)who would be carrying out
physical examination of goods. The system would also indicate the packages(the
quantity and the serial numbers) to be subjected to examination. SEO would write
this information on the checklist and hand it over to the exporter. He would hand
over the original documents to the Examining Officer. No examination order shall
be given unless the goods have been physically received in the Export Shed. It may,
however, be clarified that Customs may examine all the packages/goods in case
of any discrepancy.
4.3 The Examining Officer may inspect and/or examine the shipment, as per
instructions contained in the checklist and enter the examination report in the
system. There will be no written examination report. He will then mark the
Electronic S/B and forward the checklist along with the original documents to the
Appraiser/Supdt. in Charge. If the Appraiser/Supdt. is satisfied that the particulars
entered in the system conform to the description given in the original documents
(including AEPC quota and other certifications) and the ;physical examination, he
will proceed to give “:Let Export” order for the shipment and inform the exporter.
The Appraiser/Supdt. would retain the checklist, the declaration and all original
documents with him.
4.4 In case of any variation between the declaration in S/B and the documents or
physical examination report, the Appraiser/Supdt. will mark the electronic S/B to
AC/DC Exports. He will also forward the documents to AC/DC and advise the
exporters to meet the AC/DC for further action regarding settlement of dispute.
In case the Exporter agrees with the views of the Department, the S/B would be
processed finally. Where the exporter disputes the views of the Department, the
case would be adjudicated following the principles of natural justice.

5. GENERATION OF SHIPPING BILLS

5.1 As soon as the Shed Appraiser/Supdt.gives “Let Export” order, the system would
print 6 copies of the S/B in case of Free and scheme S/B. In case of DEPB there are
7 S/B. If the S/B (DEPB) is assessed provisionally, then EP copy will be generated
only after AC/DC finalises the assessment. On the examination report the
Appraiser/Shed Supt.will sign. On all the copies, the Appraiser/Shed Supdt.,
Examination Offer as well as exporter’s representative/CHA will sign. Name and
 ID Card number of the Exporters representative/CHA should be clearly mentioned
below his signature.
5.2 The distribution of S/Bills is as follows:

DEPB Scheme S/Bills Other Scheme S/Bills

 1. Exporter’s copy 1. Exporters copy

 2. Custom’s Copy 2. Customs copy
 3. Exchange Control Copy 3. ExchangeControl Copy
 4. Scheme Bill Copy 4. E.P.Copy
 5. E.P.Copy 5. TR-1. TR-2 Copies
 6. TR-1, TR-2 Copies

5.3 The original AEPC quota and other certificates will be retained with the S/Bills and
recorded in the Export Shed.

6. PAYMENT OF MERCHANT OVERTIME (MOT)

6.1 For the time being the present manual system for payment of Merchant Overtime
(MOT) charges will continue.
6.2 MOT charges will be required to be paid by exporter when the goods are examined
by Customs for allowing “Let Export” beyond the normal office hours. No charges
would be required to be paid on normal working days when the examination itself
is being done for “Let Export” upto 05.oo PM. In addition, no charges would be
required to be paid if the exporter wants the goods to be entered in CONCOR (CFS)
only for meeting the quota deadlines.

7. DRAWAL OF SAMPLES

7.1 Where the Appraiser of Customs orders for samples to be drawn and tested, the
Examining Officers will proceed to draw two samples from the consignment and
enter the particulars thereof along with name of the testing agency in the system.
No registers will be maintained for recording dates of samples drawn. Three
 copies of the test memo will be sprepared and signed by the Examining Officer,
the Appraiser and Exporter. The disposal of the three copies would be as follows:

 Original to be sent along with the sample to the testing agency

 Duplicate copy to be retained with the second sample
 Triplicate to be handed over to the exporter.

7.2 AC/DC may, if he deems necessary, order for sample to be drawn for purposes
other than testing such as visual inspection and verification of description, market
value enquiry etc.

11 AMENDMENTS:
11.1 Corrections/amendments in the checklist can be made at the service centre
provided the system has not generated the S/B number. Where corrections are
required to be made after the generation of the S/B No. or, after the goods have
been brought in the docks/CFS, amendments will be carried out in the following
manner.

 If the goods have not yet been allowed “Let Export”, Assistant Commissioner/Dy.
Commissioner may allow the amendment.
 Where the “Let Export” order has been given, the Addl./Joint Commissioner (Exports)
would allow the amendments

11.2 In both the cases, after the permission for amendments has been granted, the
Asstt./Dy. Commissioner(Exports) will approve the amendments on the system.
Where the print out of the S/B has already been granted, the exporter will surrender
all copies of the S/Bill to the Appraiser for cancellation before amendment is approved
in the system.

13. SHORT SHIPMENTS, SHUT OUT, CANCELLATION AND BACK TO TOWN

PERMISSIONS.
13.1 AC/DE (Export) will give permission for issue of short shipment certificate, shut
out or cancellation of S/B, on the basis of an application made by the exporter.
The S/B particulars would need to be cancelled /modified in the system before
granting such permission. AC/DC should check the status of the goods, before
granting permission.
 14. AMENDMENT OF FREIGHT AMOUNT

14.1 If the freight/insurance amount undergoes a change before “Let Exports” is given,
corresponding changes would also need to be made in the S/B with the approval
of AC/DC Exports. But if the change has taken place after the “Let Exports” Order,
approval of Additional/Jt.Commissioner would be required. Non-intimation of
such changes would amount to mis-declaration and may attract penal action
under Customs Act 1962.

15. RECONSTRUCTION OF LOST DOCUMENTS:

15.1 Duplicate print out of EDI S/B cannot be allowed to be generated if it is lost, since
extra copies of S/B are liable to be misused. However, a certificate can be issued
by the Customs stating that “Let Exports” order has been passed in the system to
enable the goods to be accepted by the Shipping Line, for export. Drawback will
be sanctioned on the basis of the “Let Export” order already recorded on the
system.

16 RE-PRINT OF SHIPPING BILL:

16.1 Similarly, reprints can be allowed where there is a system failure, as a result of which
the print out(after the “Let Export” order) has not been generated or there is a
misprint. Permission of AC/DC (exports) would be necessary for the purpose. The
misprint copy shall be cancelled before such permission is granted

17 EXPORT OF GOODS UNDER CESS

17.1 For export items, which are subject to export cess the corresponding serial
number of the Cess Schedule should be clearly mentioned. A printed challan
generated by the system would be handed over to the exporter. The cess amount
indicated should be paid in the Bank of India, Extension Branch of CFS, under a
receipt.

18. EXPORT OF GOODS UNDER CLAIM FOR DRAWBACK

18.1 The scheme of computerized processing of drawback claims under the Indian
Customs EDI system-Exports will be applicable for all exports through CFS.
18.2 In respect of goods to be exported under claim for drawback, the exporters will
file declaration in the form. The declaration in the form would also be required to
be filed when the export goods are presented at the Export Shed for examination
& “Let Export”
18.3 The exporters who intend to export the goods through CFS under claim for
drawback are advised to open their account with the Bank of India branch situated
at CFS-Mulund. This is required to be done to enable direct credit of the drawback
amount to the exporters account, obviating the need for issue of separate cheque
by post. The exporters are required to indicate their account number opened with
the Bank of India branch at CFS-Mulund. It would not be possible to accept any
shipment for export under claim for drawback in case the account number of the
exporter in the bank is not indicated in the declaration form.
18.4 The exporters are also required to give their account number along with the
details of the bank through which the export proceeds are to be realized.
18.5 Export declarations involving a drawback amount of more than rupees one lakh
will be processed on screen by the AC/DC before the goods can be brought for
examination and for allowing “Let Export”:
18.6 The drawback claims are sanctioned subject to the provisions of the Customs Act
1962, the Customs and Central Excise duties drawback rules 1995 and conditions
prescribed under different sub-headings of the All Industry rates as per
notification number 26/2003-Cus(NT) dated 1.4.2003 as amended by notification
number 12/2004-Cus(NT) dated 29-01-04.

19. EXPORT OF GOODS UNDER DEPB

19.1 While filing information as per the format, exporters are required to ensure that
correct Group Code No. of the goods being exported and the item No. of relevant
Group is clearly mentioned (item-wise details). The exporters/CHAs are advised to
fill Item No, in the same manner as given in the Public Notices issued by DGFT.
19.2 DEPB Credit in respect of items like formulations, injections etc. of group code
No.62 (Chemicals) are at a specific percentage of credit rate for the relevant bulk
drug. For proper calculations of DEPB rate, exporters/CHAs are advised to claim
export under the specific Sl.No. if they are exporting injections and thereafter
mention Sl.No. of Group Code 62 of the bulk drug of which such injections have
been made. The system will calculate the said specific percentage of the DEPB rate
of such bulk drugs, formulations of which are being exported.
19.3 If the group code No., Item No. and FOB value declared is accepted by the
Appraiser/Supdt (DEPB Cell) or Asstt./Dy. Commissioner(Export), goods may be
brought and entered in the system. The examining officer will feed the
 examination report and “Let Export” order will be given by Appraiser/Supdt. in the
EDI system. Seven copies of S/Bill will be printed for the purposes mentioned
against each as under :

Customs Copy For record of Customs

Exporter’s copy For record of Exporters
E.P.Copy For office of DGFT
DPB copy For use in the import cell of ICD Bangalore for registration
of licence.
Exchange Control Copy For negotiating the export documents in bank
TR-1TR-2 copies

19.4 There is a provision for changing the Group Code No./Item No./Value for DEPB
credit purposes and such changes will be reflected in the print out of the S/Bill.
Such charges may be done by Appraiser/Supdt. (DEPB Cell) AC/DC(Export) as well
as by Appraiser/Supdt.(Exam.) The credit will be allowed by the DGFT at the
rate/value (for credit purposes only) as approved by Customs. The EP copy of the
shipping bill shall be used by the Exporters to obtain DEPB licence from DGFT.
19.5 In case, for credit purposes, the exporter accepts the lower value as determined
by customs, such lower value will be entered by Appraiser (DEPB Cell) AC/DC
(Export) or by Appraiser (Exam) for each item(s) Printout of S/Bill at item level will
indicate for FOB value as well value for DEPB credit purposes. Exporters are
required to apply for the DEPB Licence at the B value accepted by Customs and
not the value declared by them. However, as DEPB is issued on the basis of
exchange rate applicable on the date of Let Export, exporters are advised to apply
for DEPB Licence at the value accepted by Customs at the time of export multiplied
by exchange rate on the date of Let Export(LEO) (As per para 4.43 of EXIM Policy
2003 edition)
20. EXPORT OF GOODS UNDER 100% EOU SCHEME

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

21. EXPORT OF GOODS UNDER EPCG SCHEME

21.1 All the exporters intending to file shipping bills under the EPCG scheme should first get
their EPCG licence registered with the Export section. For registration of EPCG licence, the
exporter/CHA shall produce the Xerox copy of EPCG licence to the service centre for data entry.
A printout of the relevant particulars entered will be given to the exporter/CHA for his
confirmation. After verifying the correctness of the particulars entered, the said printout will be
signed by the exporter. Thereafter, the original EPCG licence along with the attested copy of the
licence and the signed printout of the particulars shall be presented to the Appraiser/Supt (EPCG
Cell)The Appraiser/Supdt. (EPCG Cell) would verify the particulars entered in the computer with
original licence and register the same in EDI system. The registration number of the EPCG Licence
would be furnished to the exporters/CHA, who shall note the same carefully for future reference.
The said registration number would need to be mentioned against respective item on the
declaration form filed for data entry of the s/bill, at the time of export of goods. All the EPCG
S/Bill would be processed on screen by the Appraiser/Supdt.(EPCG Cell) and the AC/DC (Export).
After processing of the EPCG S/Bill by the Appraiser EPCG Cell and AC/DC Export, the goods can
be presented at the Customs warehouse for registration, examination and “Let Export” as in the
case of other export goods. After train summary is submitted to CONCOR, the S/Bill will be put
to Appraiser queue for logging/printing of ledger. After logging/printing of ledger, the EPCG bill
will be moved to history tables.

22 EXPORT OF GOODS UNDER THE DEEC SCHEME

22.1 Only shipping bills pertaining to DEEC books issued on or after 1.4.95 will be processed
on the EDI system.

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

22.3 Each book will be allotted a Registration No. should be indicated on the shipping bills in
the relevant columns.
22.4 Exporters/CHAs that will be filling S/Bills for export of goods under the DEEC Scheme
would be required to file additional declarations regarding availment/non-availment of
MODVAT or regarding observance/non-observance of specified procedures prescribed in
the Central Excise 1944 in the form. The declaration should be supported by necessary
certificates (ARE-1 or for non-availment of MODVAT) issued by the jurisdiction Central
Excise authorities. “Let Export” would be allowed only after verification of all these
certificates at the time of examination of goods. The fact that the prescribed DEEC
declaration is being made should be clearly stated at the appropriate place in the
declaration being filled in the service centre or through RES-Mode.
22.5 All the export declarations for DEEC would be processed on screen by the
Appraiser/Supdt., Export Department and the AC/DC Exports. The said processing would
be akin to the processing of Bill of Entry on the EDI System with provisions for query/reply.
After the declarations have been so processed and accepted, the goods can be presented
at the Export Shed along with DEEC Books registered in the4 EDI System so that the export
declarations are processed expeditiously.
22.6 Further, exporters availing of DEEC benefits in terms of various notifications should file
the relevant declarations.

23. EXPORT OF GOODS UNDER DFRC SCHEME:

The details pertaining to export products i.e. input materials utilized as per SION should be clearly
mentioned in the declaration mentioned at Annexure A at the time of filing.
 THE ECGC COVER

The abbreviated form for Export Credit and Guarantee Corporation is ECGC. As the name
indicates this is a sort of guarantee or a sort of cover for the exporter. Let us now see what this
is all about.

Needless to say that an exporter before entering into a contract with the overseas buyer for
making any supply, takes care to ensure that the customer with whom he is dealing have some
credit worthiness. This he may be able to do either through the local agent who is in a better
position to know about the customer or through a bank or through any of the exporter’s
associates if happens to be in the area of the customer etc., But, in a business things may change.
The financial status of a customer may take drastic turn and an established customer may go
bankrupt within a short period of time.

Moreover, the buyer may be willing to make the payment, but there are other environment
which prevents him from effecting the transfer of funds through the bank. For e.g., there could
be break out of war, the balance of payment position of the country may become unfavourable,
there may be some coup of the government etc., and all transactions could be sealed.

These are the risk factors for the exporters. What is the guarantee that he will get paid for the
supplies he has made?

With a view to provide support to Indian exporters, the Govt. of India set up the Export Risk
Insurance Corporation (ERIC) in 1957. This was transformed into Export Credit & Guarantee
Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus the name was again
changed to Export Credit & Guarantee Corporation of India Ltd., in 1983. This is a company wholly
owned by the Govt. of India and functions under the administrative control of the Ministry of
Commerce and managed by the Board of Directors representing Government, Banking,
Insurance, Trade, Industry etc.

Though one may insist for a Letter of Credit, still there could be some elements of risk which we
will study later here. Except getting an advance payment for the full value of the supplies, any
other mode of payment will have some risk.

Take the case of an exporter who has made supplies and before the payment is received the
buyer goes bankrupt or there comes some new provision or policy of Government of the
importing country preventing repatriation of the funds to other countries what recourse the
exporter has to recover his dues. The litigation procedure might be time consuming and the
exporter can never be sure of getting his full payment. An ECGC cover a safeguard his interest to
a great extent.

An exporter can either agree for sight payment or can made shipment on credit terms for say 60
days, 90 days etc., In project exports the period of payment may extend to some years. Longer
the period of cre3dit given to the customer, more will be the risk factor for the exporter.

In respect of sight bill, there is almost no risk because the customer has to make payment first
before he retires the documents. Therefore, before the title of the goods is passed on to the
customer, the importer makes the3 payment. However, in respect of usance bill (credit bills) the
buyer retires the documents by accepting the usance draft and takes delivery of the goods. In
case the customer goes bankrupt or become insolvent, before the due date of payment, the
exporter is totally at a loss. While big units may be able to absorb the one time loss, small
exporters will get broke even with one such transaction. Here the ECGC comes into picture. It
takes up the responsibility of paying the funds to the exporter and makes all efforts including
legal proceedings to recover the dues from the customer, provided the exporter has taken an
ECGC cover.

Shipments on Consignment basis:

Shipments on consignment basis can be covered only against political risks.

Shipments by Air

Since the buyer is able to take delivery of the goods even without retiring the bank documents,
shipments by air are not covered under the policy. However, the exporter may cover such
shipments for payments under open terms. The exporter can have cover for such shipments, if
he has obtained Credit Limit on such buyers on open delivery terms and also pays the premium
at rates applicable to open delivery terms.

Step 1. Open Policy:

Step 2. - Credit Limit on Individual Buyer

Step 3 – Payment of Premium and filing of monthly returns

FILING OF MONTHLY RETURNS:

The exporter has to send a monthly return in the prescribed form to ECGC declaring the list of
various shipments made and the amount of premium payable as per the premium table. The
exporter has to work out the total premium applicable on the shipment effected and make
payment to the ECGC

The exporter is also expected to file a Monthly Return in a separate form listing all the Bills which
are not paid on due date, if any, so that ECGC is periodically aware of the defaulters.

In case of any eventuality when the buyer goes bankrupt, he may prefer a claim with ECGC for
payment.

The policy that is issued for shipment not covered under L/C is called Comprehensive Policy
meaning that the policy will cover both the commercial and political risks. While commercial risk
is that of the buyer going bankrupt, the political risk relates to the country’s policies which may
prevent the repatriation of funds or there could be outbreak of war preventing financial
transactions etc.

All the above relates to shipments not covered under L/C. However, an exporter can have a
separate ECGC Policy for shipments under L/C. Here the exporter will have the policy covering
only the political risk since under L/C, the bank stands as a guarantor and there is no commercial
risk.

An exporter must cover all his exports under ECGC, including bills on sight basis, and are NOT
under L/C. He cannot be selective to certain countries or certain buyer. The cover is on whole
turnover basis.

For all shipments under L/C, the buyer may take a separate policy to cover the political risks. The
premium for L/C shipments will be relatively less than that on comprehensive policy.

Note: ECGC cover is not for non-payment on account of dispute on quality, damages to the goods,
theft, pilferage etc.
The cover is only when the party goes insolvent or there are some political risk due to which the
exporter is not in a position to get the payment immediately or on due date. This cover must be
distinguished from the general insurance.

VARIOUS POLICIES OFFERED BY ECGC:

1. STANDARD POLICY

2. SMALL EXPORTERS POLICY

3. SPECIFIC SHIPMENT POLICIES – SHORT TERM (SSP-ST)

4. EXPORTS (SPECIFIC BUYERS) POLICY

8. CONSIGNMENT EXPORTS POLICY (STOCKHOLDING AGENT)

9 CONSIGNMENT EXPORTS POLICY (GLOBAL ENTITY)

10. SERVICES POLICIES

9. MATURITY FACTORING

The Maturity Factoring scheme, as designed by ECGC has unique features and does not exactly
fit into the conventional mould of maturity factoring. The changes devised are intended to give
the clients the benefits of full factoring services through the maturity factoring scheme, thus
effectively addressing the needs of exporters to avail of pre- finance (advance) on the receivable,
for their working capital requirements. One important feature is the very role and special benefits
envisaged for banks under the scheme.

Benefits:

 100% credit guarantee protection against had debts

 Sales register maintenance in respects of factored transaction
 Regular monitoring of outstanding credits, facilitating collection of receivable on due
date, recovery, at its own cost, of all recoverable had debts

Setting up Charges and Factoring Charges

 The factoring application fee payable initially is Rs.10,000/- For setting up permitted limits
on each of the overseas customers, the exporter will have to pay a processing fee equal
to 0.05% of the permitted limit sought subject to minimum of Rs.2000/- after of this, the
factoring charges payable as and when an exports bill is to be factored depends on the
country to which the exports is made and the credit period.

Exporters Obligations:

 Registration and obtaining permitted limit on the buyer

 Payment of factoring charges with statement of exports made
 Inform developments