TUTOR MARKED ASSIGNMENT

Course Code : AED - 01

Course Title : Export Procedures and Documentation
Assignment Code : AED - 01/TMA/2017 - 18
Coverage : All Blocks
Maximum Marks: 100
Attempt all the questions.

1. Explain various steps involved in the processing of an export order with suitable
examples.
(20)
Answer- In reality, an export exercise is concluded successfully only after the exporter has
been able to deliver the consignment in accordance with the export contract and receive
payment for the goods.

This involves practice of prescribed procedure to be performed (Branch 2000). The fact is that
one does not need only to be very well informed about his/her export company, his/her
products, his/her suppliers, his/her export chain, his/her market, the world market, but one also
needs to know the export rules and terms, the different cultures that one targets and the final
customers’ needs.

Then comes fulfilling these needs by the most competitive way and by adding value to one’s
services. This is so because all sell the same products with minor changes , but what makes the
difference is the method and the value added services one provides to the ultimate consumers.
Simply speaking, that making an export company is an easy process, but making d successful
and long lasting export company is a very difficult task.

Therefore, it seems pertinent now to make you learn the various steps’ involved in the
processing of an export order.

These are listed as follows:

1. Having an Export Order:

Processing of an export order starts with the receipt of an export order. An export order, simply
stated, means that there should be an agreement in the form of a document, between the
exporter and importer before the exporter actually starts producing or procuring goods for
shipment. Generally an export order may take the form of proforma invoice or purchase order or
letter of credit.

2. Examination and Confirmation of Order:

Having received an export order, the exporter should examine it with reference to the terms and
conditions of the contract. In fact, this is the most crucial stage as all subsequent actions and
reactions depend on the terms and conditions of the export order.

The examination of an export order, therefore, includes items like product description, terms of
payment, terms of shipment, inspection and insurance requirement, documents realising
payment and the last date of negotiation of documents with the bank. Having being satisfied
with these, the export order is confirmed by the exporter.

3. Manufacturing or Procuring Goods:

The Reserve Bank of India (RBI), under the export credit (interest subsidy) scheme, extends
pre-shipment credit to exporter to finance working capital needs for purchase of raw materials,
processing them and converting them into finished goods for the purpose of exports. The
exporter approaches the bank on the basis of laid down procedures for the pre-shipment credit.
Having received credit, the exporter starts to manufacture / procure and pack the goods for
shipment overseas.

4. Clearance from Central Excise:

As soon as goods have been manufactured/ procured, the process for obtaining clearance from
central excise duty starts. The Central Excise and Sale Act of India and the related rules provide
the refund of excise duty paid. There are two alternative schemes whereby 100 per cent rebate
on duty is given to export products on the submission of the proof of shipment.

The first scheme is to make payment of the excise duty at the time of removing the export
consignment from the factory and file a claim for rebate of duty after exportation of goods. The
second scheme is to remove goods from factory/warehouse without payment but under an
appropriate bond with the excise authorities. The exporter needs to apply on a form known as
AR4 or AR4A to the Central Excise Range Superintendent for obtaining excise clearance.

Form A is filed when goods are to be cleared after examination by the excise inspector. In all
other cases, form AR4A is filed.

5. Pre-Shipment Inspection:

There are number of-goods whose export requires quality certification as per the Government of
India’s notification. Consequently, the Indian custom authorities will require the submission of an
inspection certificate issued by the competent and designated authority before permitting the
shipment of goods takes place.

Inspection of export goods may be conducted under:

(i) Consignment-wise Inspection

(ii) In-process Quality Control, and

(iii) Self-Certification.

The Inspection Certificate is issued in triplicate. The original copy is for the customs verification.
The second copy of the certificate is sent to the importer and the third copy remains with the
exporter for his reference purpose.

6. Appointment of Clearing and Forwarding Agents:

On completion of the process of obtaining the Inspection Certificate from the custom agencies,
the exporter appoints clearing and forwarding agents who perform a number of functions on
behalf of the exporter.

The main functions performed by these agents include packing, marking and labeling of
consignment, arrangement for transport to the port arrangement for shipment overseas,
customs clearance of cargo, procurement of transport and other documents.

In order to facilitate the exporter in discharging his duties, the following documents are
submitted to the agent:

(i) Commercial invoice in 8-10 copies

(ii) Customs Declaration Form in triplicate

(iii) Packing list

(iv) Letter of Credit (original)

(v) Inspection Certificate (original)

(vi) G.R. Form (in original and duplicate)

(vii) AR4/ AR4A (in original and duplicate)

(viii) GP-l/GP-2 (original)

(ix) Railway Receipt/Lorry Way Bill, as the case may be

7. Goods to Port of Shipment:

After the excise clearance and pre-shipment inspection formalities are completed, the goods to
be exported are packed, marked and labeled. Proper marking, labeling and packing help quick
and safe transportation of goods. The export department takes steps to reserve space on the
ship through which goods are to be sent to the importer.

The shipping space can be reserved either through the clearing and forwarding agent or freight
broker who works on behalf of the shipping company or directly from the shipping company.
Once the space is reserved, the shipping company issues a document known as Shipping
Order. This order serves as a proof of space reservation.

If goods are sent through a road carrier to the port, no specific formality is involved. In case, the
goods are sent by rail to the port of shipment, allotment of wagon needs to be obtained from the
Railway Board.

The following documents are submitted to the booking railway yard/station:

(i) Forwarding Note (A Railway Document)

(ii) Shipping Order

(iii) Wagon Registration Fee Receipt

Once wagons have been allotted, goods are loaded, for which railways will issue Railway
Receipt (RR). Then, this receipt and other documents are sent to the clearing and forwarding
agent at the port town. At the same time, the production/export department takes insurance
policy in duplicate for risk coverage (internal as well as overseas) for the goods to be exported.

8. Port Formalities and Customs Clearance:

Having received the documents from the export department, the clearing and forwarding agent
takes delivery of the cargo from the railway station or the road transport company and stores it
in the warehouse. He also obtains customs clearance and permission from the port authorities
to bring the cargo into the shipment shed.

The custom department grants permission for export at the office of the customs and physical
verification of goods in the shipment shed. The clearance for export is given on the Shipping
Bill.

The clearing and forwarding agent is required to submit the following documents with the
Customs House for obtaining customs clearance and permission:

(i) Shipping Bill

(ii) Contract Form

(iii) Letter of Credit, if applicable

(iv) Commercial Invoice

(v) GR Form

(vi) Inspection Certificate

(vii) AR4/AR4A Form

(viii) Packing List, if needed

After receiving documents from the export department, the clearing and forwarding agent
presents the Port Trust Document to the Shed Superintendent of the port. He obtains carting
order bringing the cargo to the transit shed for physical examination by the Dock Appraiser.

The Dock Appraiser is presented the following documents to facilitate him in physical
examination of export goods:

(i) Shipping Bill

(ii) Commercial Invoice

(iii) Packing List

(iv) AR4/ AR4A Form and Gate Pass

(v) GR Form (duplicate)

(vi) Inspection Certificate (original)

The Dock Appraiser, after making examination, makes ‘Let Export’ endorsement on the
duplicate copy of the Shipping Bill and hands over it to the Forwarding Agent. All these
documents are presented to the Preventive Officer who puts an endorsement ‘Let Ship’ on the
duplicate copy of the Shipping Bill. The preventive officer supervises the loading of cargo on
board the vessel.

After the goods are loaded on board the vessel, the captain of the ship issues a receipt known
as ‘Mate’s Receipt’ to the Shed Superintendent of the port concern. The forwarding, agent after
paying port charges, takes the delivery of the ‘Mate Receipt’. He submits to Shipping Company
and requests it to issue the Bill of Lading.

9. Dispatch of Documents by Forwarding Agent to the Exporter:

After obtaining the Bill of Lading from the Shipping Company, the clearing and forwarding agent
dispatches all the documents to his / her exporter.

These documents include:

(i) Commercial Invoice (attested by the customs)

(ii) Export Promotion Copy

(iii) Drawback Copy

(iv) Clean on Board Bill of Lading

(v) Letter of Credit

(vi) AR4/ AR4A and Gate Pass

(vii) GR Form (in duplicate)

10. Certificate of Origin:

On receipt of above documents from the forwarding agent, the exporter now applies to the
Chamber of Commerce for a Certificate of Origin and obtains it. If the goods are exported to
countries offering GSP concessions, the exporter needs to procure the GSP Certificate of Origin
from the concerned authority like Export Inspection Agency.

11. Dispatch of Shipment Advice to the Importer:

At last, the exporter sends ‘Shipment Advice’ to the importer intimating the date of shipment of
the consignment by a named vessel and its expected time of arrival at the destination port of the
importer.

The following documents are also sent to the importer to facilitate him for taking delivery of the’
consignment:

(i) Bill of Lading (non-negotiable copy)

(ii) Commercial Invoice

(iii) Packing List

(iv) Customs Invoice

12. Submission of Documents to Bank:

At the end of the process, the exporter presents the following documents to his bank for
realisation of his amount due to the importer:

(i) Commercial Invoice’

(ii) Certificate of Origin

(iii) Packing List

(iv) Letter of Credit

(v) Marine Insurance Policy

(vi) GR Form

(vii) Bill of Lading

(viii) Bill of Exchange

(ix) Bank Certification

(x) Commercial Invoice

13. Claiming Export Incentives:

On completion of the processing of an export order at the three levels of shipment i.e., pre-
shipment, shipment and post-shipment, the exporter claims for export incentives admissible to
him / her.

2. What are the basic principles of ECGC Operations? Explain the procedure for making a

claim from ECGC. Also discuss the obligations of the policy holders. (7+7+6)
Answer- There are two basic principles on which ECGC (Export Credit Guarantee Corporation
of India Limited) works:

a.The spread of Risk: An exporter is required to insure all the shipments that may be made by
him during the next two years. To avoid undue difficulty to the exporters, exceptions have been
made in respect of transactions made against

(i) advance payment or

(ii) irrevocable letters of credit confirmed by banks in India.

Shipments made to agents and associates may also be excluded. Where the exporter deals in
different types of goods, he may exclude those items which are not of an allied nature, The
basic idea is that the exporter is not allowed to pick and choose bad risks only for insurance.
This is also necessary to reduce Premia in general. It is open for the exporter to take political
cover for transactions under this para.

.
b.An exporter is a co-insurer: ECGC normally pays 90 percent of the losses on account of
political or commercial risks. In the event of loss due to a repudiation of contractual obligations
by the buyer, ECGC indemnifies the exporter up to 90 percent of the loss. In this situation, a
final and enforceable decree against the overseas buyer is obtained in a competent court of law
in the buyer’s country. The Corporation, at its discretion, may waive such legal action where it is
satisfied that such legal action is not worthwhile. In such cases, losses are indemnified up to 90
percent.

The insured will have to bear the rest of the loss. This is necessary to ensure that

the exporter also takes necessary precaution in selecting the parties to which he may decide to
export,
he may not overextend credit and
he may take all possible care to minimize the risk.
In addition to these two basic principles of ECGC operation, ECGC being in insurance business
also follows three basic principles of insurance. They are:

ECGC contracts are contracts of good faith which mean that non-disclosure of a material fact
will render the contract void. In other words, the exporter is bound to disclose every material fact
within his knowledge to the ECGC which may adversely affect the ECGC. Again, any material
alteration of the risk arising from the date of the proposal and the issue of the policy must be
disclosed to the ECGC.

The insured is duty bound to minimize the loss. He should conduct his business with ordinary
prudence and diligence and act as an uninsured. The action that needs to be taken depends
upon the facts and circumstances of the case.

Under the principles of subrogation, ECGC steps into the shoes of the exporter. If recoveries
are made after the payment of the claim by ECGC, they are shared with the ECGC in the same
proportion in which the loss was borne.

Procedure and obligations - As explained previously, ECGC covers risk of buyer’s default of
payment against How to claim Insurance under ECGC exported goods. You have obtained a
policy from ECGC. Make sure, the procedures and formalities followed as per ECGC’s
requirements. You need to maintain a proper record of shipments as per serial order and
premium to be paid regularly as per their guidelines. Also need to submit the data of exports to
them as per their requirements. If you do not follow the terms and conditions of ECGC, you may
struggle to get your claim from them like any other general insurance companies. Better clarify
with them ‘how does ECGC work’ including the procedures for claim, so as to enable you to
have a clear idea to follow ECGC’s requirements to avoid further inconvenience, if any claim
arises.

i. ECGC normally pays 90 percent of the losses on account of political or commercial risks. The
recoveries made, after the payment of claim, are shared with the ECGC in the same proportion
in which the loss was borne. ECGC expects a fair spread of risks involved. Therefore, an
exporter is required
to insure all the shipments that may be made by him, during the next 2 to 4 years, except those
made against advance payment or irrevocable letters of credit - confirmed by banks in India.
Exclusions are, however, possible where items are not of an allied nature.

ii)ECGC issues the policy after the exporter conveys his consent to the premium rates and pays
a non-refundable policy fee as per schedule fixed according to maximum liability limits.

(iii) Maximum liability is the limit upto which ECGC would accept liability for shipments made in
each of the policy
years. Exporters should estimate the maximum outstanding payments due from overseas
buyers, at any time, during the policy period. Maximum liability fixed under the policy can
be enhanced, if necessary.

(iv) The premium rates are closely related to the risks involved and vary according to countries
to which goods are exported and the payment terms. An exporter is required to send a
declaration of shipments, within 15 days of the close of the month for shipments policy;a
declaration of all outstanding contracts immediately for Contracts Policy; and thereafter, such
declarations every month.

(v) As regards consignment exports, political risks are covered from the date of shipment till the
date of receipt of
payment in India; whereas commercial risks are covered after the Agent/Stockholder submits
the "Accounts Sales" to the exporter. The risk of the Agent/Stockholder not returning
the unsold goods is not covered.

(vi) On the basis of credit information and its own experience, ECGC fixes suitable credit limits
on overseas
buyers. Since commercial risks are not covered in the absence of a credit limit, exporters should
apply to ECGC for
approval of credit limit on buyer, before making shipment. If no application for Credit Limit on a
buyer has been made,
ECGC accepts liability for Commercial Risks, upto a maximum of R s . 60000 for D.P./C.A.D
transactions and Rs. 30000 for D.A. transactions, provided certain specified conditions are
fulfilled. The banks are now allowed to extend ad-hoc facilities to exporters, who already have
their limits sanctioned by the ECGC, to the extent of 10 per cent, over the limits without
obtaining ECGC's prior approval, under its pre-shipment and post-shipment guarantees.
(vii) When payment risks become too high in a country, ECGC provides cover for shipments to
such countries, on a
restricted basis. Policyholders intending to export to such countries are required to obtain
specific approval of ECGC
for each shipment/contract or series of shipments/contracts.

(viii) In the event of non-payment of any bill , policyholders are required to take prompt and
effective steps to prevent or minimise loss . A monthly declaration of all bills, which remain
unpaid for more than 30 days, should be submitted to ECGC, in the prescribed form,indicating
action taken in each case.

(ix) A claim will arise when any of the risks insured under the policy materialises. Generally, a
claim is payable after four months from the date of the event causing loss. In some
cases, claims will be paid on an ex-gratia basis to the extent of 60 percent of the loss, where
some requirement is required to be waived.

(x) In case proceeds of shipments are held up due to foreign exchange shortage in the buyer's
country, ECGC considers claims after the waiting period, as applicable for the country
concerned. Exchange Transfer Delay claims should be made, with documentary proof to the
effect.

3. Distinguish between
1. Spot rate and Forward rate
Answer- The forward rate and spot rate are different prices, or quotes, for different contracts.
The forward rate is the settlement price of a forward contract, while the spot rate is the
settlement price of a spot contract.

The two main differences between a spot rate and a forward rate are the timing of delivery of a
commodity, security or currency and the timing of payment for that commodity, security or
currency.

A spot rate is the agreed-upon settlement price in a spot contract, which facilitates buying and
selling a commodity, security or currency on the spot date, which is normally two business days
after the trade date. A forward rate, on the other hand, is the settlement price in a forward
contract, which facilitates buying and selling a commodity, security or currency when terms are
agreed upon now but delivery and payment will occur at some future date.

A spot rate is used by buyers and sellers looking to make an immediate purchase or sale. A
forward rate is considered to be the market's expectations for future prices. It can serve as an
economic indicator of how the market expects the future to perform, while spot rates are not
indicators of market expectations, and are instead the starting point to any financial transaction.
Therefore, it is normal for forward rates to be used by investors, who may believe that they have
knowledge or information on how the prices of specific items will move over time. If a potential
investor believes that real future rates will be higher or lower than the stated forward rates at the
present date, it could signal an investment opportunity.

It's also possible to use an item's spot rate to calculate its forward rate. The forward rate is
equal to the spot rate plus any expected earnings and finance charges from the time of the spot
rate to the time of the forward rate.

A spot contract is a contract that involves the purchase or sale of a commodity, security, or
currency for immediate delivery and payment on the spot date, which is normally two business
days after the trade date. The spot rate, or spot price, is the current price of the asset quoted for
the immediate settlement of the spot contract. For example, say it's the month of August and a
wholesale company wanted immediate delivery of orange juice, it will pay the spot price to the
seller and have orange juice delivered within 2 days. However, if the company needs orange
juice to be available at its stores in late December, but believes the commodity will be more
expensive during this winter period due to a higher demand than supply, it cannot make a spot
purchase for this commodity since the risk of spoilage is high. Since the commodity wouldn't be
needed until December, a forward contract is a better fit for the investment.

Unlike a spot contract, a forward contract is a contract that involves an agreement of contract
terms on the current date with the delivery and payment at a specified future date. Contrary to a
spot rate, a forward rate is used to quote a financial transaction that takes place on a future
date and is the settlement price of a forward contract. However, depending on the security being
traded, the forward rate can be calculated using the spot rate.

For example, say a Chinese electronic manufacturer has a large order to be shipped to
America in one year. The Chinese manufacturer engages in a currency forward and sells $20
million in exchange for Chinese yuan at a forward rate of $0.80 per Chinese yuan. Therefore,
the Chinese electronic manufacturer is obligated to deliver 20 million dollars at the specified rate
on the specified date, six months from the current date, regardless of fluctuating currency spot
rates.

2. Forward contracts and Currency options (10+10)

Answer- Forward contracts- A forward contract is a customized contract between two parties
to buy or sell an asset at a specified price on a future date. A forward contract can be used for
hedging or speculation, although its non-standardized nature makes it particularly apt for
hedging. Unlike standard futures contracts, a forward contract can be customized to any
commodity, amount and delivery date. A forward contract settlement can occur on a cash or
delivery basis. Forward contracts do not trade on a centralized exchange and are therefore
regarded as over-the-counter (OTC) instruments. While their OTC nature makes it easier to
customize terms, the lack of a centralized clearinghouse also gives rise to a higher degree of
default risk. As a result, forward contracts are not as easily available to the retail investor as
futures contracts.

Currency Options - A currency option is a contract that grants the buyer the right, but not the
obligation, to buy or sell a specified currency at a specified exchange rate on or before a
specified date. For this right, a premium is paid to the seller, the amount of which varies
depending on the number of contracts if the option is bought on an exchange, or on the nominal
amount of the option if it is done on the over-the-counter market. Currency options are one of
the most common ways for corporations, individuals or financial institutions to hedge against
adverse movements in exchange rates.

An option contract in which the underlying asset is a foreign currency. The option gives the
holder the right but not the obligation to buy (for a call) or sell (for a put) a set amount of the
currency at a certain exchange rate on or before the expiration date. They are largely used
when international corporations wish to hedge against the possibility of adverse movements in
foreign exchange rates.

4. a) Discuss the Customs clearance procedures along with the documentation

formalities.
Answer- Export customs clearance formalities are so simplified now days. Export clearance
procedures are as simple as local sales procedures. After the member of GATT – General
Agreement on Tariff and Trade, India has liberalized its import and export procedures and
formalities very much. Before globalization till 1992, all procedures and formalities on export and
import procedures are too complicated. Introduction of software system to file documents
electronically made simple to handle export and import procedures for both government and
traders in export import. The fast grown electronic and telecommunication industry worldwide
contributed in large way in all sectors to boost simplification of procedures and formalities in
export import trade also.

Here, let us discuss present export customs clearance procedures and formalities in India.
Shipping bill is the legal document to be filed mandatory for moving goods outside India by an
exporter.

Once after preparing invoice and packing list, based on purchase order or Letter of credit, you
need to arrange export customs clearance procedures, well in advance of time of shipment
mentioned in export order. You can appoint a Customs broker or you your self can complete
export customs clearance formalities. Normally, a customs house agent is appointed for smooth
and fast clearance procedures under export. Invoice, Packing list, SDF declaration and other
specific required documents are sent to customs house agents for completion of necessary
export customs formalities.

After receiving documents from exporter, Customs broker files shipping bill through customs
online software system electronically. This can be done at home, office or private EDI
(electronic data information) centers appointed by government, as the filing software can be
downloaded from ICEGATE electronically. The generation of shipping bill number is as per
serial order all over the country, as the said software is a centralized one. ICE GATE is the
software service provider for Customs department of Government of India for import and export
customs clearance procedures and formalities. ICE GATE opens their software system 24 hours
a day to support export import trade for smooth clearance procedures in India. So the shipping
bill number – the serial number of export shipping bill - generated by software is obtained by
customs broker or exporter who files online on a queue basis.

The goods read for export is moved to airport, sea port or container freight station and unloads
in to the respective yard of shipping carrier. The location yard is decided by carrier who places
the vessel/aircraft at the allocated place where in loading of goods makes easier. Export
customs procedures and formalities for inspection of goods are completed with customs officials
and enter the details of examination of goods in to Export Procedures on Import and Export in
Indiasoftware system online for the approval of higher officials of customs. The assessment of
value of goods and other information are verified by the customs officials with necessary
documentary supports if required. Customs department is also alert on the export benefits
schemes filed by you (exporter) for claim by verifying with necessary supporting documents if
required.

Once after preparing invoice and packing list, based on purchase order or Letter of credit, you
need to arrange export customs clearance procedures, well in advance of time of shipment
mentioned in export order. You can appoint a Customs broker or you your self can complete
export customs clearance formalities. Normally, a customs house agent is appointed for smooth
and fast clearance procedures under export. Invoice, Packing list, SDF declaration and other
specific required documents are sent to customs house agents for completion of necessary
export customs formalities.

After receiving documents from exporter, Customs broker files shipping bill through customs
online software system electronically. This can be done at home, office or private EDI
(electronic data information) centers appointed by government, as the filing software can be
downloaded from ICEGATE electronically. The generation of shipping bill number is as per
serial order all over the country, as the said software is a centralized one. ICE GATE is the
software service provider for Customs department of Government of India for import and export
customs clearance procedures and formalities. ICE GATE opens their software system 24 hours
a day to support export import trade for smooth clearance procedures in India. So the shipping
bill number – the serial number of export shipping bill - generated by software is obtained by
customs broker or exporter who files online on a queue basis.

The goods read for export is moved to airport, sea port or container freight station and unloads
in to the respective yard of shipping carrier. The location yard is decided by carrier who places
the vessel/aircraft at the allocated place where in loading of goods makes easier. Export
customs procedures and formalities for inspection of goods are completed with customs officials
and enter the details of examination of goods in to Export Procedures on Import and Export in
Indiasoftware system online for the approval of higher officials of customs. The assessment of
value of goods and other information are verified by the customs officials with necessary
documentary supports if required. Customs department is also alert on the export benefits
schemes filed by you (exporter) for claim by verifying with necessary supporting documents if
required.

b) Explain the procedure of Duty Drawback Scheme along with the documentation
formalities. (10+10)
Answer- How to claim Draw back of exports in India?

Procedure for claiming Duty Drawback

If shipping bill was filed at a customs location where in no EDI facility is available, triplicate copy
of shipping bill with certain documents to support the application for draw back need to be filed.
The details of such documents have been mentioned in drawback rules 1995 of Customs
department. You can approach respective customs department and collect details of
documents under the product which you intend to claim drawback. If such requisite
information/documents are not filed, such application for drawback will be returned to exporter
advising to reapply with required documents. However, the shipment will not be stopped due to
this reason.

If export documents are filed by electronically, the exporter or his authorized customs broker
files necessary information about draw back with required documents at the time of filing
documents for export procedures and formalities. In such cases, the amount of drawback is
directly credited with exporter’s bank by customs authorities.

If the amount of drawback is not credited with exporter’s bank within a stipulated period of time
after export, he can contact customs department.

5. Write short notes on of the following:

i) International Contract Terms - International contracts refers to a legally binding agreement
between parties, based in different countries, in which they are obligated to do or not do certain
things. International contracts may be written in a formal way. Most businesses create contracts
in writing to make the terms of agreement clear, often seeking legal counsel when drawing
important contracts. Contracts can cover all aspects of international trade, although the most
commonly used are:

International sale contract.

International distribution contract.
International agency Contract.
International sales representative contract.
International supply contract.
International manufacturing contact.
International services contract.
International strategic alliance contract.
International joint contract.
International franchise contract.
In international trade, the UNIDROIT.

Principles establishes general rules applicable to commercial contracts. They shall applied
when the parties have agreed that their contract be governed by them. They also may be
applied when the Parties have not chosen any law to govern their contract. In other cases they
may be used to interpret or supplement domestic law.

ii) Standardized Pre-shipment Export Documents

Answer- unlike the domestic business, the commercial practices and legal systems are different
in the two countries the exporter and importer are operating from.

Therefore, in order to protect the respective interests of the exporter and the importer involved
in export business, certain documentary formalities become essential. Such documentation
facilitates the smooth flow of goods and payments thereof across national frontiers.

Export documents based on the functions performed by them are broadly classified into four
types:
1. Commercial Documents - The exporter needs this document for other purposes also such as:

(i) Obtaining export inspection certificate

(ii) Getting excise clearance

(iii) Getting customs clearance and

(iv) Securing such incentives as cash compensatory support (CCS) and import license.

This document is prepared at both the pre-shipment and post-shipment stages.

Besides commercial invoice, there is a proforma invoice also. It is a temporary commercial

invoice which is sent by the exporter to the importer. It covers contemplated shipment which
may or may not be made in future.

2. Regulatory Documents - Bill of lading serves three distinct functions:

(i) It is an evidence of the contract of affreightment (transport).

(ii) It is a receipt given by the shipping company for cargo received by it.

(iii) It is a document of title to the goods shipped.

3. Export Assistance Documents

4. Documents required by Importing Countries.

iii) Letters of Credit

Answer- A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller
will be received on time and for the correct amount. In the event that the buyer is unable to
make payment on the purchase, the bank will be required to cover the full or remaining amount
of the purchase. Due to the nature of international dealings, including factors such as distance,
differing laws in each country, and difficulty in knowing each party personally, the use of letters
of credit has become a very important aspect of international trade.

Example of a Letter of Credit

Citibank offers letters of credit for buyers in Latin America, Africa, Eastern Europe, Asia and the
Middle East who may have difficulty obtaining international credit on their own. Citibank’s letters
of credit help exporters minimize the importer’s country risk and the issuing bank’s commercial
credit risk. Citibank can provide letters of credit typically within two business days, guaranteeing
payment by the confirming Citibank branch. This benefit is especially valuable when a client is
located in a potentially unstable economic environment.

Types of Letters of Credit-

A commercial letter of credit is a direct payment method in which the issuing bank makes the
payments to the beneficiary. In contrast, a standby letter of credit is a secondary payment
method in which the bank pays the beneficiary only when the holder cannot.

A revolving letter of credit lets the customer make any number of draws within a certain limit
during a specific time period. A traveler’s letter of credit guarantees the issuing banks will honor
drafts made at certain foreign banks.

A confirmed letter of credit involves a bank other than the issuing bank guaranteeing the letter of
credit. The second bank is the confirming bank, typically the seller’s bank. The confirming bank
ensures payment under the letter of credit if the holder and the issuing bank default. The issuing
bank in international transactions typically requests this arrangement.

iv) Government Policy Making and Consultations Institutions - Public policy refers to the
actions taken by government — its decisions that are intended to solve problems and improve
the quality of life for its citizens. At the federal level, public policies are enacted to regulate
industry and business, to protect citizens at home and abroad, to aid state and city governments
and people such as the poor through funding programs, and to encourage social goals.

A policy established and carried out by the government goes through several stages from
inception to conclusion. These are agenda building, formulation, adoption, implementation,
evaluation, and termination.

Agenda building-

Before a policy can be created, a problem must exist that is called to the attention of the
government. Illegal immigration, for example, has been going on for many years, but it was not
until the 1990s that enough people considered it such a serious problem that it required
increased government action. Another example is crime. American society tolerates a certain
level of crime; however, when crime rises dramatically or is perceived to be rising dramatically, it
becomes an issue for policy makers to address. Specific events can place a problem on the
agenda. The flooding of a town near a river raises the question of whether homes should be
allowed to be built in a floodplain. New legislation on combating terrorism (the USA Patriot Act,
for example) was a response to the attacks of September 11, 2001.

Formulation and adoption-

Policy formulation means coming up with an approach to solving a problem. Congress, the
executive branch, the courts, and interest groups may be involved. Contradictory proposals are
often made. The president may have one approach to immigration reform, and the opposition-
party members of Congress may have another. Policy formulation has a tangible outcome: A bill
goes before Congress or a regulatory agency drafts proposed rules. The process continues with
adoption. A policy is adopted when Congress passes legislation, the regulations become final,
or the Supreme Court renders a decision in a case.

Implementation-

The implementation or carrying out of policy is most often accomplished by institutions other
than those that formulated and adopted it. A statute usually provides just a broad outline of a
policy. For example, Congress may mandate improved water quality standards, but the
Environmental Protection Agency (EPA) provides the details on those standards and the
procedures for measuring compliance through regulations. As noted earlier, the Supreme Court
has no mechanism to enforce its decisions; other branches of government must implement its
determinations. Successful implementation depends on the complexity of the policy,
coordination between those putting the policy into effect, and compliance. The Supreme Court's
decision in Brown v. Board of Education is a good example. The justices realized that
desegregation was a complex issue; however, they did not provide any guidance on how to
implement it "with all deliberate speed." Here, implementation depended upon the close scrutiny
of circuit and appeals court judges, as well as local and state school board members who were
often reluctant to push social change.

Evaluation and termination-

Evaluation means determining how well a policy is working, and it is not an easy task. People
inside and outside of government typically use cost-benefit analysis to try to find the answer. In
other words, if the government is spending x billions of dollars on this policy, are the benefits
derived from it worth the expenditure? Cost-benefit analysis is based on hard-to-come-by data
that are subject to different, and sometimes contradictory, interpretations.

History has shown that once implemented, policies are difficult to terminate. When they are
terminated, it is usually because the policy became obsolete, clearly did not work, or lost its
support among the interest groups and elected officials that placed it on the agenda in the first
place. In 1974, for example, Congress enacted a national speed limit of 55 miles per hour. It
was effective in reducing highway fatalities and gasoline consumption. On the other hand, the
law increased costs for the trucking industry and was widely viewed as an unwarranted federal
intrusion into an area that belonged to the states to regulate. The law was repealed in 1987.