CHAPTER-1

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1.1 [INTRODUCTION
The term export means shipping the goods and services out of the port of a
country. The seller of such goods and services is referred to as an "exporter" who is based in
the country of export whereas the overseas based buyer is referred to as an "importer".
An export of a good occurs when there is a change of ownership from a
resident to a non-resident; this does not necessarily imply that the good in question physically
crosses the frontier. However, in specific cases national accounts impute changes of
ownership even though in legal terms no change of ownership takes place (e.g. cross border
financial leasing, cross border deliveries between affiliates of the same enterprise, goods
crossing the border for significant processing to order or repair). Also smuggled goods must
be included in the export measurement.
Export of services consist of all services rendered by residents to nonresidents. In national accounts any direct purchases by non-residents in the economic territory
of a country are recorded as exports of services; therefore all expenditure by foreign tourists
in the economic territory of a country is considered as part of the exports of services of that
country. Also international flows of illegal services must be included.
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
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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.
TYPES OF EXPORTERS:
Exporters can be basically classified into two groups

Manufacturer Exporter: As the exporter has the facility to manufacturer the product
he intends to export and hence he exports the products manufactured by him.

Merchant Exporter: An exporter who does not have the facility to manufacture an
item. But, he procures the same from other manufacturers or from the market and
exports the same.
An exporter can be both a manufacturer exporter as well as a merchant

exporter, he can export product manufactured by him or he can export items bought from the
market.
Once it is decided to export, it is mandatory on your part to follow certain
procedures, rules and regulations as prescribed by various regulatory authorities such as
DGFT.

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1.2 OBJECTIVE OF THE STUDY

To know the present scenario in Indian shipping line.

To know the relation between the CHA and exporter.

To know the documentation process done by the CHA.

To know the future of Indian shipping.

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1.3 SCOPE OF THE STUDY

The aim of this project is to unfold stepwise all complexities involved in the export business
right from receiving and export order to final realization of export proceeds. It gives detail
idea of how different departments in an apparel export house work in synchronization so that
export order is processed.
The project would be helpful to fulfil many loopholes of manufacturing processing and
analyzing the export order as well as documentation.

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1.4 RESEARCH METHODOLOGY

Research included gathering both primary and secondary data. Primary data is the
first hand data which are selected in fresh and thus happen to be original in character.
Primary data was crucial to know consumers view about the Riddhi Siddhi Logistics.
Primary data was collected through survey of consumers by questionnaire method and
by gathering information from the marketing manager of Riddhi Siddhi Logistics.
Secondary data are those which have been collected by someone else and which already have
been passed through statistical process.
Secondary data has been collected internet, text books, companys websites.
RESEARCH APPROACH
The research approach was done by survey method which is widely used method for
data collection and best suited for descriptive type of research. Research survey
includes research instruments like questionnaire which can be framed.
The research was carried in Mumbai. These were 10 respondents.
After the data has been collected, it was tabulated and findings of the project were presented
followed by analysis and interpretation to reach certain consumers.

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1.5 LIMITATIONS OF THE METHODOLOGY

1. Concern about the validity: the issue arises from the fact qualitative research does not
rely on tests for reliability or credibility that are external to data collection and analyses.
2. Labour intensive data collection: It can be extremely time consuming. Data collection is
this labour intensive process the researcher immerses himself or herself to build an
understanding of the organisation, through contract with the employees, exposure to the
norms and familiarity with their practise.
3.Conclusion and interpretation of qualitative research: They are primarily communicated
in a form of case study. The case study is written after an extensive process of data collection
through interviewing and participant observations.
4. Needs for training in qualitative research: There is a need of training in qualitative
research methodology. Person have low knowledge in this field dont go for such
methodology.

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1.6 SCOPE OF EXPORTS IN INDIA

India's trade has generally grown at a faster rate compared to the growth of GDP over the past
two decades. With the liberalization since 1991 in particular, the importance of international
trade in Indias economy has grown considerably. As a result the ratio of international trade to
GDP has gone up from 14 per cent in 1980 to nearly 20 per cent towards the end of the
decade of 1990s. Given the trends of globalization and liberalization, the openness of Indian
economy is expected to grow further in the coming two decades. The more exact magnitude
of India's trade in 2020 and its proportion to India's national income would be determined by
a variety of factors. Many of these factors are in the nature of external shocks and are beyond
the control of national policy making. One illustration is the recent surge in the crude oil
prices in the international market to unprecedented levels that have impacted the countrys
imports in a significant manner. In addition, the implementation of various WTO agreements
is likely to affect the India's trade. India's trade is also likely to be affected by various
bilateral/ regional preferential trade arrangements that have been concluded and those that
might take shape in the coming years.

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1.7 COMPANY PROFILE

Set up as an export unit in the year 2008 with a minimum investment of Rs.1 Cr.
Currently having a net worth of Rs.7 Cr

Purely an Export Oriented Unit [EOU]

It is a Partnership firm promoted by Mr.Raju Katira and Mr.Mayur Popat with an

equal share in the company.

Located near mulund railway station.

It employs about 120 people including contract labour.

Equipped with modern high-speed machines.

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CHAPTER-2

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2.1HOW TO SETUP AN BUSINESS 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 shareholders.
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 public
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

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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 authorized 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

Preparation of pre - shipment documents.

Coordinating with clearing agents on the progress of the shipment to be made.

Coordinating with the ware house\C. excise department regarding packing and
clearance of the goods for export.

Preparation of post shipment documents foe banks.

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Follow-up with the bank on dispatch of documents, receipt of payment,

availability of bank loans etc.

To look into the requirement of licenses, claiming of export benefits filing 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
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condition that they can export only with RBIs 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.

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 affected in the previous financial year, the same will be made
inoperative. However, this can be made operative by a formal request to the DGFT.
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
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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 ImporterExporter 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 31st 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.

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2.2HOW 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 (IEC 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:

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.

Being a member, you will have access to all the information relating to the
product that could be made available by the council

Many foreign buyers send their enquiries for the imports to the Export
Promotion Council. Hence you will have few customers interested in your
product.
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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 governments 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 known 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.

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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.

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2.3EXPORT 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 eithers 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 shall not be exported as a gift without a license/certificate/permission, except in the
case of edible items.

STANDARD CONTRACT FORMS:

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
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understanding of various trade terms, the commercial practices and the rights and the
obligations vis--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.
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, Labelling and Marking

Terms of Payment-- Amount/Mode & Currency

Discounts and Commissions

Licenses and Permits

Insurance

Documentary Requirements

Guarantee

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
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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).

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2.4TERMS 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.
The purpose of Inco terms 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 Inco terms 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. Inco
terms 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 buyers end, for example the trade terms DEO (Delivery Ex Quay)
and DDP (Delivered Duty Paid)
Quite often, the charges and expenses at the buyers 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 the sellers end.

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2.5PROCESSING 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

Labelling 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 etc. 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.

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2.6FINANCIAL 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. Detailed
procedures how an exporter can get him protected against the above risks are given in
separate chapters later.

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2.7EXPORT 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.

Commercial Documents. : - Commercial documents are required for effecting

physical transfer of goods and their title from the exporter to the importer and the
realization of export sale proceeds. Out of the 16 commercial documents in the export
documentation framework as many as 14 have been standardized 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,

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 prepared by the
exporter after the execution of export order giving details about the goods shipped.
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.

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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.

26 | P a g e

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 indicate 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.

27 | P a g e

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.

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.

Types of the Certificate of Origin

(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is
required in general by all countries for clearance of goods by the importer, on which no
preferential tariff is given. It is issued by:

The authorized Chamber of Commerce of the exporting country.

Trade Association. Of the exporting country.

(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin
required for availing of concessions under Generalized System of Preferences (GSP)
extended by certain, countries such as France, Germany, Italy, BENELUX countries,
UK, Australia; Japan, USA, etc.
(c)

Certificate for availing Concessions under Commonwealth Preferences (CWP):

Certificate of origin for the purpose of Commonwealth Preference is also known as
'Combined Certificate of Origin and Value'. It is required by two member countries, i.e.
Canada and New Zealand of the Commonwealth. For concession under Commonwealth
28 | P a g e

preferences, the certificates or origin have to be submitted in special forms obtainable,

from the High Commission of the country concerned.
(d) Certificate for availing Concessions under other Systems of Preference:- Certificate
of origin is also required for tariff concessions under the Global System of Trade
Preferences (GSTP), Bangkok Agreement(BA) and SAARC Preferential Trading
Arrangement (SAPTA) under which India grants and receives tariff concessions On
imports and exports. Export Inspection Council (EIC) is the sole authority to print blank
Certificates of Origin under BA, SAARC and SAPTA which can be issued by such
agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc...
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.

Significance of the Certificate of Origin

Certificate of origin is required for availing of concessions under Generalized System

of Preferences (GSP) as well as under Commonwealth Preferences (CWP).

It is to be submitted to the customs for the assessment of duty clearance of goods with
concessional duty.

It is required when the goods produced in a particular country are banned for import
in the foreign market.
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It helps the buyer in adhering to the import regulations of the country.

Sometimes, in order to ensure that goods bought from some other country have not
been reshipped by a seller, a certificate of origin IS required.
Bill of Lading: The bill of lading is a document issued by the shipping company or its

6.

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.

Significance of Bill of Lading for Exporters

It is a contract between the shipper and the shipping company for carriage of the
goods to the port of destination.

It is an acknowledgement indicating that the goods mentioned in the document have

been received on board for the Purpose of shipment.

A clean bill of lading certifies that the goods received on board the ship are in order
and good condition.

It is useful for claiming incentives offered by the government to exporters

Significance of Bill of Lading for Importers

It acts as a document of title to goods, which is transferable endorsement and delivery.

The exporter sends the bill of lading to the bank of the importer so as to enable him to
take the delivery of goods.

The exporter can give an advance intimation to the foreign buyer about the shipment
of goods by sending him a non-negotiable copy of bill of lading

Significance of Bill of Lading for Shipping Company

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It is useful to the shipping company for collection of transport charges from the
importer, if not collected from the exporter.

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.
Importance of Airway Bill: It is a contract between the airlines or his agent to carry
goods to the destination. It is the document of instructions for the airline handling staff. It acts
as a customs declaration form. Since, it contains details about freight it also represents freight
bill.
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.

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.
Contents of Proforma Invoice

Name and address of the exporter.

Name and address of the importer.

Mode of transportation, such as Sea or Air or Multimodal transport.

Name of the port of loading.

Name of the port of discharge and final destination.

Provisional 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.

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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.

Importance of Proforma Invoice

It forms the basis of all trade transactions.

It may be useful for the importer in obtaining import license or foreign

exchange.

Intimation for Inspection: Whenever the consignment requires the pre-shipment

inspection, necessary application is to be made to the concerned inspection agency for
conducting the inspection and issue of certificate thereof.

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.

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.

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
32 | P a g e

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.

Types of Mate's Receipts

Clean Mate's Receipt: - The Commanding Officer of the ship issues a clean
mate's receipt, if he is satisfied that the goods are packed properly and there is no
defect in the packing of the cargo or package.

Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualified
mate's receipt, when the goods are not packed properly and the shipping company
does not take any responsibility of damage to the goods during transit.

Significance of Mate's Receipt

It is an acknowledgement of goods received for export on board the ship.

It is a transferable document. It must be handed over to the shipping company in

order to get the bill of lading.

Bill of lading, which is the title of goods, is prepared on the basis of the mate's
receipt.

It enables the exporter to clear port trust dues to the Port Trust Authorities.

Obtaining Mate's Receipt

The goods are then loaded on board the ship for which the Mate or the Captain of
the ship issues Mate's Receipt to the Port Superintendent.

Shipping order: it is issued by the Shipping/Conference Line intimating the exporter

about the reservation of space for shipment of cargo which the exporter intends to
ship. Details of the vessel, poet of the shipment, and the date on which the goods are
to be shipped are mentioned. This order enables the exporter to make necessary
arrangements for customs clearance and loading of the goods.

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Shipping Instructions: at the pre-shipment stage, when the documents are to

send to the CHA for customs clearance, necessary instructions are to be given
with relevance to
The export promotion scheme under which goods are to be exported.
Name of the specific vessel on which the goods are to be loaded.
If goods are to be FCL or LCL.
If freight amount are to be paid / collected.
If shipment are covered under A.R.E.-1 procedure.
Instructions for obtaining Bill of Lading etc.

Bank letter for negotiation of documents: at the post shipment stage, the exporter
has to submit the documents to a bank for negotiation or discounting or collection for
forwarding the same to the customer and also for realization of export proceeds.
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, export trade control, customs, etc.
Out of 9 regulatory documents four have been standardized 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.

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.

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Types of Shipping Bill

Based on the incentives offered by the government, customs authorities have introduced three
types of shipping bills:

Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the
customs drawback against goods exported.

Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are
subject to export duty.

Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods on
which there is no export duty.

In order to facilitate easy recognition and quick processing, following colours have been
provided to different kinds of shipping bills:
Types of goods

By Sea

By Air

Drawback shipping bill

Green

Green

Dutiable shipping bill

Yellow

Pink

Duty-Free shipping bill

White

Pink

Contents of Shipping Bill

Name and address of the exporter.

Name and address of the importer.

Name of the vessel, master or agents and flag.

Name of the port at which goods are to be discharged.

Country of final destination.

Details about packages, description of goods, marks and numbers, quantity and details
of each case.

FOB price and real value of goods as defined in the Sea Customs Act.

Whether Indian or foreign merchandise to be re-exported

Total number of packages with total weight and value.

Significance of Shipping Bill

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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.

Duly endorsed shipping bill is also necessary for the collection of export
incentives offered by the government.

It is useful to the Customs Appraiser while determining the actual value of

goods exported.

A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central
Excise rules for export of goods. In case goods meant for export are cleared
directly from the premises of a manufacturer, the exporter can avail the facility of
exemption from payment of terminal excise duty. The goods may be cleared for
export either under claim for rebate of duty paid or under bond without payment
of duty. In both the events the goods are to be cleared under form A.R.E-1 which
will show the details of the goods being exported, the relevant duty involved and
if the duty is paid or goods being cleared under bond, details of goods being
sealed either by the exporter or Central Excise officials etc.

Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange

control regulations all exporters must declare the details of shipment for
monitoring by the Reserve Bank of India. For this purpose, RBI has prescribed
different forms for different types of shipments like GRI, PP forms etc. These
declaration forms must be presented to the customs officials at the time of passing
of export documentation. Under the EDI processing of shipping bill in the
customs, these forms have been dispensed with and a new form SDF has to be
submitted to the customs in the place of above forms.

Export Application: this is the application to be made to the customs officials

before shipment of goods. The prescribed form of the application is the Shipping
Bill/Bill of Export. Different types are required for shipment like ex-bond, duty
free goods, and dutiable goods and for export under different export promotion
schemes such as claims for duty drawback etc.

Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken
inside the port for loading, necessary permission has to be obtained for moving the
36 | P a g e

vehicle into the customs area. This permission is granted by the Port Trust
Authority. This document will contain the detail of the export cargo, name and
address of the shippers, lorry number, marks and number of the packages, drivers
license details etc.

Bank Certificate of Realization: this is the form prescribed under the Foreign
Trade Policy, wherein the negotiating bank declares the fob value of exports and
for the date of realization of the export proceeds. This certificate is required for
obtaining the benefit under various schemes and this value of fob is reckoned as
fob value of exports.

Pre-Shipment Documents:

Shipping bill.

Export order/Sales contract/Purchase order.

Letter of Credit

Commercial invoice.

Packing list.

Certificate of origin.

Guaranteed Remittance 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.
37 | P a g e

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.

These forms are available for sale in Reserve Bank of India

Export declaration forms have utmost importance and are binding on the exporters. It is,
therefore, necessary that enough care is taken while declaring exports on these forms, with
special reference on the following points.

Name and address of the authorized dealer through whom proceeds of

exports have been or will be realized should be specified in the relevant
column of the form.

Details of commission and discount due to foreign agent or buyer should

be correctly declared otherwise difficulties may arise at the time of
remittance of such commission.

It should be clearly indicated in the form whether the export is on outright

sale basis or on consignment basis and irrelevant clauses must be stuck
out

Under the term analysis of full export value a break up of full export
value of goods under F.O.B value, freight and insurance should be
furnished in all cases, irrespective of the terms of contract.

All documents relating to the export of goods from India must pass through
the medium of an authorized dealer in foreign exchange in India within 21
days of shipment.

The amount representing the full export value of goods must be realized
within six months from date of shipment.

Disposal of Copies of Export Documentation Form

GR forms covering export of goods other than jewellery should be

completed by the exporter in duplicate and both the copies should be
submitted to customs at the port of Shipment. Customs will give their
running serial number on both the copies of the GR forms after verifying
the particulars and admitting the corresponding shipping bill. The value
declared by the exporter will also be verified by the customs and they will
38 | P a g e

also record the assessed value. Duplicate copy will be returned to the
exporter and the original will be remained by the customs for onward
submission to the Reserve Bank. Duplicate form of the GR form will again
be presented to the customs at the time of actual shipment. After
examination of goods and certifying the quantity passed for shipment the
duplicate copy will again be returned to exporter for submission to an
authorized dealer. However, an exception to submission of GR forms to the
Customs authorities have been made in case of deep sea fishing.

(a) PP forms are to be first presented to an authorized dealer for

countersignature. The form will be countersigned by the authorized dealer
only if the post parcel is addressed to his branch or correspondent bank in
the country or import. The concerned overseas branch or correspondent is
to be instructed to deliver the post parcel against payment or acceptance of
relevant bill, as the case may be.

For post parcel addressed directly to the consignee, the authorized dealer
will countersign the form, provided
an irrevocable letter of credit for the full value of export has been
opened in favour of exporter and has been advised through
authorized dealer concerned; or
the full value of shipment has been received in advance by the
exporter through an authorized dealer; or
On receipt of full value of shipment declared on this form the
authorized dealer will forward to RBI the duplicate copy along
with the certified copy of shippers invoice.
The authorized is satisfied on the basis of standing and track record
of the exporter and arrangements made for realization of the export
proceed that he could do so. If the authorized dealer is not satisfied
about standing etc. of the exporter, the application is rejected. No
reference is entertained by the Reserve Bank in such cases.

The original PP form countersignature will be returned to the exporter

by the authorized dealer and the duplicate will be retained by him.
Original PP form should then be submitted to the post office along with
39 | P a g e

the parcel. The post office through the goods have been dispatched will
forward the original to RBI.
The export of computer software may be undertaken in physical form i.e. software prepared
on magnetic tape and paper media as well as in non-physical form by direct data transmission
through dedicated earth stations/satellite links. The export of computer software in physical
form is subject to normal declaration on GR/PP form and regulations applicable there to will
also be applicable to such exports. However, export of non-physical form should be declared
on SOFTEX Form. Besides computer software, export of video / T.V. Software and all other
types of software products / packages should also be declared on the SOFTEX forms. Since
export of software is fraught with many risks and special guidelines have been framed for
handling such exports.

2.8OCTROI

Octroi is the local tax levied by the civic body on goods entering into the
city.
40 | P a g e

There are three procedures for clearing goods which are meant for export.

Procedure 1, Export on payment of Octroi duty and refund thereof after export.
Pay the Octroi Duty and apply for refund of payment made.

At Octroi Naka form B is issued with cash receipt for the payment of
Octroi Duty.

Cargo is moved to the docks.

At Docks Octroi officer prepares formC & endorses Shipping Bill

Number & Steamers Name.

After shipment exporter prepares claim for refund by submitting following

documents:

Covering Letter for refund of Octroi Duty.

Original receipt of Octroi paid.

Original Form B.

Original Form C.

Invoice under which material was bought to the city.

Export invoice issued by the Exporter to the importer.

Export Promotion Copy of Shipping Bill Photo Copy.

Bill of Lading or Airway Bill Copy.

Procedure 2, Export without payment of Octroi Duty.

N Form Procedure.

Prepares form N in 3 copies.

Checking of documents Shipping Bill, Carting order, Export Invoice by Octroi officer.

Under taking that the goods will be cleared for export within 7 days of clearance
through the Octroi post.

Octroi officer at Docks will endorse the Shipping Bill number & shipment details on
N form.

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Proof of export... N form with above endorsement to be submitted to the Head Office
along with copies of Shipping Bill, Bill of Lading, Export Invoice etc.

Procedure 3
E.P (Export Promotion) Form.

Registration form + IEC / RCMC + CA Certificate.

Number will be allotted.

Fees Rs. 500/-

Documents Checked

Factory Challan cum Invoice.

ARE 1.

EP forms 3 copies.

Export order.

Shipping Bill.

2.9QUALITY 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 PreShipment Inspection of over 1050 items of export under Export (Quality Control and PreShipment Inspection) Act 1963.
42 | P a g e

At present, the export items that are subjected to compulsory inspection includes food and
agricultural products, chemicals, engineering, coir, jute and footwear.
Compulsory Pre-shipment Inspection:

Foods and Agriculture & Fishery

Mineral & Ore

Organic & Inorganic Chemicals

Refectories & Rubber Products

Foot wear & Foot wear components

Ceramic Products & Pesticides

Light Eng. Products

Steel ;Products

Jute Products

Coir & Coir Products

Exemption from compulsory Pre-shipment Inspection:

Status Houses

Certification by Units IPQC approved by EIA

EUO/EPZ/SEZ

Firm Letter from the overseas buyer

Specified products such as Egg/Fishery average level of Rs.1.5 Cr. for the last three
years no compliant.

For monitoring pre-shipment inspection, Govt. of India has set up Export Inspection
Council (EIO) The EIC has set up 5 Export Inspection Agencies (EIA). The EIAs are
located one each at Mumbai, Calcutta, Cochin, Delhi and Chennai. The EIAs has a
network of nearly 60 offices throughout India. Each EIA is given certain jurisdiction for
inspection purpose. For instance, EIA of Mumbai has jurisdiction over Maharashtra,
Gujarat and Goa.
Systems of Quality Control:

43 | P a g e

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.

Consignment wise Inspection:

Under this system, each and every consignment is subject to compulsory inspection. The
exporter has to follow a certain procedure such as:

He has to make an application to Export Inspection Agency with certain documents.

The EIA deputes inspector to inspect the goods

After the inspection, the goods are repacked with EIA seal

The inspector then makes a report to Deputy Director of EIA

The Dy. Director of EIA then issues Inspection Certificate in triplicate if the
inspection report is favourable

44 | P a g e

If the inspection report is not favourable, a rejection note is issued.

It is to be noted that goods marked with ISI/AGMARK/BIS14000/ISO 9000

are not required to be inspected by any agency

Overseas buyer may depute his own inspection team to inspect the goods

Inspection of textile goods is conducted by Textile Committee in respect of

those exporters who are registered with the textile committee.

Norms:

Adequate Testing Facility

Raw Material Testing & Process Control

After Sales Services & Maintaining Product Quality

Control on bought out components

Meteorological Control & PKG.

Independent Quality Audit & Houses.

Fumigation: For ensuring that no insects or bacteria are carried with the export certain
types of export products are fumigated before shipment. The fumigation is carried out in
the port of shipment.

2.10 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
45 | P a g e

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:

ARE-1 (Original and duplicate)

Excise gate pass (Original and duplicate transporters copy

Proforma Invoice

Packing List

GRI form (Original and duplicate)

Customs Invoice (where required in the importing country)

Original letter of credit/contract

Declaration form in triplicate

Quality Certificate

Purchase memo

Labels

License (if any required) including advance license copy

Railway receipt/lorry way bill

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

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Original Copy of GR to be forwarded to RBI

Original copy of shipping bill

One copy of commercial invoice

Carting Order: The exporters 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 exporters 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 exporters 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 Mates Receipt. The Mates Receipt is sent to the Port Trust Office.
The C&F agent pays the port trust dues and collects the mates 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 Mates 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:

3 negotiable copies of Bill of Lading

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

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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 colour 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:

The inspector returns the original and duplicate copies to the exporter

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.
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The 4th copy will be retained by the excise inspector.

The 5th copy is also handed over to the exporter.

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.

2.11 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
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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

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 buyers 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:

B.

The goods are specifically designed for the customer, and

There is heavy demand for the goods (a sellers market situation).

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
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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 greater, 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.

2.12 THE LETTER OF CREIDT

Introduction
The cycle of a business transaction can be said to be complete prima facie when the buyer has
received the product he desires to buy and the seller gets his payment in due consideration of
the product supplied.
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While the seller is keen to receive the payment for his supplies, the buyer is equally keen that
he gets what he wants by the paying for the same.
Tough there are many merit and demerits in each of the different mode of payments we have
discussed earlier, in relation either to the buyer or to the seller, we shall now deal in detail
about the mode of payment under the Documentary Credit.
Generally, though exporters are complacent once they get the letter of Credit on hand feeling
that their payment is secured, let me say it is as much a dubious instrument as is a safe
instrument.
If one does not understand the implications of the terms and condition of a letter of credit, the
provisions under UCP 500, how co-operative are the exporters bank and how good are the
L/C opening bank and the reimbursement bank, he is sure to land in trouble at once stage or
another.
There are ample cases of frauds under the Letter of Credit. More and more ingenious methods
are adopted to circumvent the provisions of UPC 500 by fair or foul means. Hence, even the
safety and security under the Letters of Credit may prove to be no better than a mirage for a
man in the desert.
Hence, sufficient care is to be taken by the exporter to ensure that instrument is received in
order and the conditions of the L/C can be well complied with, and there are no clauses of
ambiguity.

What is a Documentary Credit?

To say in simple language, this is an Undertaking by a Bank associated with the buyer to
make the payment for the supply of goods by a seller subject to compliance of various
requirements that may be specified in the document of undertaking by the Bank. This
document is known as Documentary Credit. A Documentary Credit is also called a Letter of
Credit (L/C).
CONTENTS OF A LETTER OF CREDIT
A letter of credit is an important instrument in realizing the payment against exports. So,
needless to mention that the letter of credit when established by the importer must contain all
necessary details which should take care of the interest of Importer as well as Exporter. Let us

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see shat a letter of credit should contain in the interest of the exporter. This is only an
illustrative list.

name and address of the bank establishing the letter of credit

letter of credit number and date

The letter of credit is irrevocable

Date of expiry and place of expiry

Value of the credit

Product details to be shipped

Port of loading and discharge

Mode of transport

Final date of shipment

Details of goods to be exported like description of the product, quantity, unit rate,
terms of shipment like CIF, FOB etc.

Type of packing

Documents to be submitted to the bank upon shipment

Tolerance level for both quantity and value

If L/C is restricted for negotiation

Reimbursement clause

PROCEDURE INVOLVED IN THE LETTER OF CREDIT

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

Exporters Request: The exporter requests the importer to issue LC in his favour. LC
is the most secured form of payment in foreign trade.

Importers 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

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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 exporters 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 11-96. 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.

Types of Payments under a Documentary Credit.

Payment under a documentary credit can be of the following types:

Payment at Sight: In this mode, the payment is made by the L/C opening bank or its
nominated bank or by a confirming bank on presentation of the documents in full
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conformity with the L/C. The L/C may or may not call for draft at sight for the full
value of the documents.

Deferred Payment Scheme: In this case the payment is to be made at a future date as
stipulated in the L/C. Here, generally NO draft is required as the due date of payment
is defined in the L/C. In case of a confirmed L/C, the final payment is made by the
confirmed bank on due date and by the issuing bank or its nominated bank if the L/C
is not confirmed.

Acceptance Credit : This type of credit requires a usance draft to be drawn on a

nominated or accepting bank. The payment is made by the nominated/accepting bank
on the due date as per instructions of the negotiating bank. In case of a confirmed L/C
the payment on due date is made by the negotiating bank (confirming bank).

Negotiation Credit: Here the payment is made by the negotiating bank upon
negotiation of the documents if it prepares to take the risk and will recourse to the
beneficiary. If the credit is confirmed, then the negotiation bank is obliged to make the
payment upon submission of a clean document by the beneficiary.

Expect in the case of confirmed L/C there is always a time lag between the date of
negotiation of the document and the date of receipt of the payment. This is a grey area. If the
bank acts swiftly and without prejudice, one gets payment within a weeks time. If the
payment is delayed beyond this time, though an exporter has every right to ask for
compensation, in actual practice, no justice is done to the exporter for the delayed payment.
Very rarely, on persistent approach by the exporter/their banker, does a defaulting bank comes
forward to compensate for the delayed payment. Generally the exporter has to forego lot of
money in correspondence through the negotiating bank because every communication of the
bank is charged to the exporter. It is no surprise many exporter suffer this loss silently.

PARTIES TO LETTER OF CREDIT

Applicant: the buyer or importer of goods.

Issuing Bank: importers bank who issues the L/C.

Beneficiary: the party to whom the L/C is addressed. The seller or supplier of goods.
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Advising Bank: issuing banks branch or correspondent bank in the exporters country
to which the L/C is sent for onward transmission to the beneficiary.

Confirming Bank: the bank in beneficiarys country which guarantees the credit on
the request of the issuing bank. (Many a times the advising bank and confirming bank
are one and the same).

Negotiation Bank: the bank to whom the beneficiary present his documents for
Payment u Under L/C.

Reimbursing Bank: the bank which will reimburse the negotiating bank for the value
of the credit.

Where an L/C stipulates that the Negotiation is restricted to a specific bank which is not the
Advising Bank or Where the L/C is not restricted, and the seller desires to negotiate the
document which is not the advising bank, then we have a separate Negotiating Bank.
Where the opening bank prefers to advise the L/C through its own branch in the beneficiary
country or through another bank of its choice, then the L/C may be advised to the beneficiary
directly by this bank or if it instructed to advise the L/C through the buyers nominated bank
then it does so. Here, we have two advising bank.
As far as possible, one should restrict the involvement of the number of the banks to the
minimum. More the number of the banks, more the time in the transmission of the L/C, in
addition to multiplicity of bank charges.

2.13 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, bankers cheques, personal cheques foreign currency notes,
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foreign currency travellers cheques, etc. Without any monetary limit provided the exporters
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

Bill of Exchange

Full set of Bill of Lading

Commercial Invoice Copies

Certificate of Origin

Insurance Policy

Inspection Certificate

Packing List

GR (duplicate copy to forward it to RBI)

Bank Certificate

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
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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

Whether the required documents are in order.

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

Credit Expired

Late shipment

Presented after permitted time from date of issue of shipping documents

Short Shipment

Credit Amount Exceeded

Underinsured

Description of goods on invoice differ from that of credit

Mark and numbers differ between documents

Bill of lading, Insurance documents, Bill of Exchange not endorsed

correctly

Absence of Documents called for under credit.

Insurance certificate submitted instead of policy.

Weight in different document differs.

Class of Bill of lading no acceptable-charter party or House B/L.

Insurance cover expressed in currency other than that of credit.

Absence of signature, where required on documents.

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Bill of exchange not drawn as per tenor stated in credit.

Bill of exchange drawn on wrong party.

Insurance risks covered not being those specified in credit.

Absence of freight paid statement on B/L in CFR of CIF shipment.

Bill of lading doses not carry shipped on broad stamp.

Amount shown on invoice and bill of exchange differ.

Shipment not make to port specified.

Transhipment/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 buyers 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 importers bank, and the
importers bank hands it over to the importer.

2.14 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.

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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.

2.15 CUSTOM PROCEDURE FOR EXPORT UNDER EDI

SYSTEM
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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:

DATA ENTRY FOR SHIPPING BILLS

Exporters/CHAs are required to register their IE codes, CHAs License Nos,

and the Bank A/C No. (For credit of Drawback amount) in the Customs
Computer Systems before an EDI Shipping Bill is filed.

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

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
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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.

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/-

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.

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.

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.

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.
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PROCEDURE FOR GR-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.

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.

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.

In the case of S/Bs processed manually, the existing arrangement of filing GR1 forms would continue.

2.16 THE ECGC COVER

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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 exporters
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
64 | P a g e

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 the 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.
WHAT ECGC OFFERS FOR PROTECTION OF EXPORTERS INTEREST?
ECGC offers various types of insurance cover to protect the exporters interest. For each type
of cover an exporter has to take Policy specific to the respective requirements. The Policy
that is most commonly taken by the exporters is the Standard Policy or otherwise called the
Shipments (Comprehensive Risks) Policy.
SHIPMENTS (COMPREHENSIVE RISKS) POLICY also called STANDARD
POLICY
For exporters with an annual export turnover in excess of Rs.50 lakhs, the Shipments
(Comprehensive Risks) Policy is the one intended for covering shipments on cash basis or on
short-term credit basis. (Credits not exceeding 180 days).The risks covered this Policy is as
follows effective from the date of shipment.

Commercial Risks

Insolvency of the buyer

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Failure of the buyer to make payment within

a specified period.

Buyers failure to accept the goods subject to

certain conditions.

Political Risks

Imposition of restrictions by the Govt. of the buyers country or any government

action which may block or delay the transfer of payment made by the buyer.

War, civil war, revolution or civil disturbances in the buyers country

New import restrictions or cancellation of a valid import license

Interruption or diversion of voyage outside India resulting in payment of

additional freight or insurance charges which cannot be recovered from the buyer.

Any other cause of loss neither occurring outside India nor normally insured by
general insurers and beyond the control of both the e porters and the buyer.

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CHAPTER-3

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INTERVIEW AT RIDDHI SIDDHI LOGISTICS

1. How did you setup this export organisation?
A. Worked for 20years in a company named MATHURADAS ANRAYANDAS AND
SONS and then started his own RIDDHI SIDDHI LOGISTICS. Mr. Raju Katira owns
this business from last 7 years.
2. What are the basic requirements of exporting?
A. IEC number, bank account, pan card number, export order from buyer, registration
with concerned authority as per item.
3. What are the various stages in the process of exporting?
A. 1) To take the order from the buyer.
2) Preparation of documents and filling with customs.
3) Consignment of goods.
4) Submitting goods to custom for examination.
5) Approval from customs.
6) Load cargo on vessel.
4. What are the various methods of making and receiving the payment?
A. Letter of credit, advance payment, documents against payment, telegraphic transfer.
5. What is the financial risk involved?
A. If payment received in advance or payment through LOC no risk involved.
Other method of payment carries risk.
6. What are the custom facilities?
A. Customs gives incentive for exporting the goods under duty drawback scheme and
appoint their staff for examinations and clearing of goods.
7. What financial support you get from your bankers?
A. Loans provided by the bank on competitive rate.
8. Are there any insurance policies which help you in export business?
A. Yes, there are various insurance policies which helps in export business.
9. What are the norms of government?
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A. No prohibited goods should be exported. Restricted goods should be exported with

proper documents and licence is required.
10. In how many countries do you export? List them.
A. Jabeliali (Dubai) , UK , Cape town (South Africa) , lagos (South Africa), Terna (South
Africa), Cotonou (South Africa), Egypt.etc.

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CHAPTER-4

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CUSTOMER SURVEY

1. Are you aware of Riddhi Siddhi Logistics?

A)
B)

Yes
No

10
0

Chart Title

1
2
100%

COMMENT: As the survey is conducted for the customers of Riddhi Siddhi Logistics,100%
result is obtained as they are well aware of the Riddhi Siddhi Logistics.

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2. Have you used services of Riddhi Siddhi Logistics?

A)
B)

Yes
No

10
0

Chart Title

1
2
100%

COMMENT: s the survey was conducted for the customers of Riddhi Siddhi
Logistics, the result obtained 100% as all the customers have used the services.

3. How many times have you deal with Riddhi Siddhi Logistics?
A)
B)
C)
D)

2-5
5-10
10-15
More than 15

3
3
3
1

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Chart Title
10%
30%

1
2

30%

3
30%

COMMENT: As the survey is conducted, mostly people have deal with Riddhi Siddhi
Logistics and very rare people have deal with Riddhi Siddhi Logistics more than 15
times.

4. How do you rate the services provided by Riddhi Siddhi Logistics?

A)
B)
C)
D)

Average
Good
Satisfactory
Excellent

1
1
6
2

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Chart Title
20%

10%
10%

1
2
3
4

60%

COMMENT: The rates of serivces provided by Riddhi Siddhi Logistics are satisfactory.
Customers deal with Riddhi Siddhi Logistics because of its affordable prices. 60% of
customers find the serivces of Riddhi Siddhi Logistics satisfatory.

5. According to you are prices charged by Riddhi Siddhi Logistics for clearing the
documents affordable?
A)
B)
C)
D)

Average
Good
Satisfactory
Excellent

3
4
3
0

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Chart Title

30%

30%

1
2
3
4

40%

COMMENT: The prices charged by the Riddhi Siddhi Logistics are convenient for all its
customers. 30% of the customers find the prices satisfactory, 40% find the prices good and
30% rate the prices as average.

6. Which mode of transportation do you prefer the most?

A)
B)
C)
D)

Roadways
Airways
Waterways
Railways

1
4
4
1

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Chart Title
10%

10%

1
2

40%

40%

3
4

COMMENT: Airways is the speediest mode of transporting goods. Waterways rank second
after airways for transportation. Customers have rated airways and waterways equally i.e
40% rating is being given.

7. Which mode of payment do you prefer?

A)
B)
C)
D)

LOC
Telegraphic Correspondence
Contract copy
Others

6
1
2
1

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Chart Title
10%

20%
10%

2
60%

3
4

COMMENT: The most preferred way of payment by customers is Letter Of Credit (LOC) as
it is the safe and easiest way for transferring money. 60% of the customers prefer payment
through Letter of Credit.

8. Which types of goods do you prefer to export more hasty?

A)
B)
C)
D)

Perishable
Durable
Liquid
Petroleum subjective

1
3
2
4

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Chart Title
10%
40%

1
30%

2
3
4

20%

COMMENT: Perishable goods are exported very less because the durability is also less and
the risk involved is very high. Only 10% of the customers prefer perishable goods, 30%
prefer durable goods, 20% prefer liquids products and 40% prefer petroleum subjective
products.

9. How is your experience in terms of claiming insurance with any other logistics
company?
A)
B)
C)
D)

Average
Good
Satisfactory
Excellent

0
5
5
0

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Chart Title
1
50%

50%

2
3
4

COMMENT: The services provided by insurance company are good. Different insurance
policy are provided by different insurance companies covering various business ricks.

10. From which media did u come in awareness of Riddhi Siddhi Logistics?
A)
B)

Interns
Newspaper

2
3
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C)
D)

PR Personnel
Internet

2
3

Chart Title

30%

20%

1
2
3

20%

30%

COMMENT: Customers came to know about Riddhi Siddhi Logistics through interns,
newspaper, PR personnel, and internet. Newspaper and internet is equally popular among the
customers.

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CHAPTER 5

CONCLUSION

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The study was conducted to know the process involved in an apparel firm and to study about
the various departmental functions which coordinates to complete the export cycle. The
export procedure of the firm has been clearly and other related aspects have been known.
From the analysis it is found that the performance of the company is satisfactory, but the
company is facing problem regarding excess of documents which causes delay in
transportation. Therefore necessary steps should be taken to limit the number of documents
so that the company can make distribution at right for the company and it helps the company
to have a competitive advantage over its competitors.
There are good signs of good future for RIDDHI SIDDHI LOGISTICS, because of growing
demand for exportation.

BIBLIOGRAPHY
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Export & Import Procedure & Documentation Himalaya Publication

WEBLIOGRAPHY

http://www.howtoexportimport.com/How-to-set-up-an-export-import-firm-in-IndiaPart--398.aspx

http://www.foreign-trade.com/reference/impexp.htm#work

http://www.eximguru.com/exim/guides/how-to-export/default.aspx

http://business.gov.in/taxation/export_procedure.php

http://en.wikipedia.org/wiki/Export

http://www.eximbankindia.in/

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