INCOTERMS & OTHER TERMS: EXW : EX WORKS Title & Risk pass to buyer including transportation and insurance

e cost from the sellers door. FCA : FREE CARRIER Title & Risk pass to buyer including transportation and insurance when the seller delivers goods to the buyers collecting vehicle / carrier. FOB : FREE ON BOARD Title & Risk pass to buyer including transportatio n and insurance once seller delivers the goods to the ship. FAS : FREE ALONGSIDE SHIP

CFR : COST & FREIGHT Title, Risk & Insurance pass to buyer when goods delivered to the ship by seller who paid the transportation cost to the destinat ion port. CIF : COST, INSURANCE & FREIGHT Title & Risk pass to buyer when goods delivered to the ship by seller who paid the transportation cost to the destinat ion port. CIP : CARRIAGE & INSURANCE PAID TO - Title & Risk pass to buyer when g oods delivered to the carrier by seller who paid the transportation cost to the destination port. CPT : CARRIAGE PAID TO - Title, Risk & Insurance pass to buyer when go ods delivered to the carrier by seller who paid the transportation cost to the d estination port. DAF : DELIVERED AT FRONTIER

DDP : DELIVERED DUTY PAID Title, Risk & Responsibility pass to buyer w hen sellers delivers good to the names destination point cleared for import. DDU : DELIVERED DUTY UNPAID Title, Risk & Responsibility of import cle arance pass to buyer when sellers delivers good to the names destination point. DES : DELIVERED EX SHIP Title, risk and responsibility for vessel disc harge and import clearance pass to the buyer when seller delivers goods on board the ship to destination port. DEQ : DELIVERED EX QUAY (DUTY PAID) TEU FEU : : TWENTY EQUIVALENT UNITS FOURTY EQUIVALENT UNITS

INCOTERMS IN DETAIL C. & F. - Cost and Freight: Same as C.I.F., except that insurance is covered by the buyer. C.I.F. Cost, Insurance, and Freight Certificate of Free Sale A certificate, required by some foreign governments, stating that the goods for export, if products under the jurisdiction of the U.S. Federal Food and Drug Adm inistration, are acceptable for sale in the United States, i.e., that the produc ts are sold freely, without restriction. FDA will issue shippers a "letter of co mment" to satisfy foreign requests or regulations.

Certificate of Inspection A document in which certification is made as to the good condition of the mercha ndise immediately prior to shipment. The buyer usually designates the inspecting organization, usually an independent inspection firm or government body. Certificate of Manufacture A statement by a producer, sometimes notarized, which certifies that manufacture has been completed and that the goods are at the disposal of the buyer. Certificate of Origin A document in which certification is made as to the country of origin of the mer chandise. C.F.R. (Cost and Freight) and C.I.F. (Cost, Insurance, and Freight)indicate that the seller will deliver the goods onto a vessel and pay all the normal charges t o get the cargo to the named seaport. The buyer assumes all risks from the time the cargo is placed onto the vessel at the seaport of loading. C.I.F. also indic ates that the seller arranges for insurance as an automatic condition of the con tract. Clean Bill of Lading A bill of lading signed by the transportation company indicating that the shipme nt has been received in good condition with no irregularities in the packing or general condition of all or any part of the shipment. See "Foul Bill of Lading." Credit Risk Insurance A form of insurance which protects the seller against loss due to default on the part of the buyer. See "FCIA." Delivered Duty Paid While the term "Ex Works" signifies the seller s minimum obligation, the term "D elivered Duty Paid," when followed by words naming the buyer s premises denotes the other extreme-the seller s maximum obligation and may be used irrespective o f the mode of transport. Delivered Duty Unpaid The seller must deliver the goods to the named destination and is responsible fo r all costs involved in transportation, including exportation. The buyer handles the import formalities. D.E.Q. Delivered Ex Quayindicates that the seller must deliver the goods onto the quay (dock or wharf), having cleared the goods for import and paid all taxes, d uties, etc. applicable to that clearance. Demurrage Excess time taken for loading or unloading a vessel as a result of acts of a shi pper. Charges are assessed by the shipping company. Dock Receipt A receipt issued by an ocean carrier or its agent, acknowledging that a shipment has been delivered and received at the dock or warehouse of the carrier. Documentary Credit See "Letter of Credit (Commercial)." Documentary Draft A draft to which documents are attached. Documentation/Documents See "Shipping Documents." Documents Against Acceptance (D/A) A type of payment for goods in which the documents transferring title to the goo ds are not given to the buyer until he has accepted the draft issued against him

. Documents Against Payment (D/P) A type of payment for goods in which the documents transferring title to the goo ds are not given to the buyer until he has paid the value of a draft issued agai nst him. The same as a "bill of exchange." A written order for a certain sum of money, to be transferred on a certain date from the person who owes the money or agrees t o make the payment (the drawee) to the creditor to whom the money is owed (the d rawer of the draft). See "Date Draft," "Documentary Draft," "Sight Draft," "Time Draft." EMC Export Management Company. ETC Export Trading Company. Ex (Point of Origin) A pricing term under which the seller s only responsibility is to clear the good s for export and make them available to the buyer at an agreed upon location (fa ctory, warehouse, ship, etc.). The buyer then bears the full cost and risk invol ved in transporting the goods to his desired location. Other terms used are "Ex Works," Ex Ship," and "Ex Quay." Exchange Permit A governmental permit sometimes required of an importer to enable him to convert his own country s currency into a foreign currency with which to pay a seller i n another country. E.X.W. Ex Works Indicates that the buyer is responsible for cargo when it s available at the sel ler s factory. F.A.S. Free Along Side, as in "F.A.S. (Vessel)," a pricing term under which the seller must deliver the goods to a pier and place them within reach of the ship s loadi ng equipment. F.C.A.Free Carrier At indicates that the seller delivers the goods to the named place free of any tra nsportation cost, having cleared the cargo for export. The seller accepts transp ortation costs, risks, and responsibilities until the cargo is handed over at th e named place. FCIA Foreign Credit Insurance Association Free on Board, as in "F.O.B. (Vessel)," a pricing term under which the seller mu st deliver the goods on board the ship at the point named at his own expense. Si milar terms are "F.O.B. (Destination)" and F.O.B. (Named Point of Exportation)." FOR/FOT FOR and FOT mean "Free on Rail" and "Free on Truck." These terms are synonymous since the word "truck" relates to the railway wagons. They should only be used w hen the goods are to be carried by rail. Foreign Sales Representative A representative or agent residing in a foreign country who acts as a salesman f or a U.S. manufacturer, usually for a commission. Sometimes referred to as a "sa les agent" or "commission agent." See "Representative." Foreign Trade Zone An area where goods of foreign origin may be brought in for re-export or transhi pment without the payment of customs duty.

Foul Bill of Lading A receipt for goods issued by a carrier bearing a notation that the outward cont ainers or goods have been damaged. See "Clean Bill of Lading." Free Carrier (...named place) The seller must clear the goods for export, and deliver them to a carrier at a s pecific point determined by the buyer. The buyer then bears all costs and risks of transporting the goods to the desired destination. Also see "Named Point and "Specific Delivery Point." Free Port An area generally encompassing a port and its surrounding locality into which go ods may enter duty-free or subject only to minimal revenue tariffs. Free Sale See "Certificate of Free Sale." Freight Carriage (paid to) Like C&F "Freight Carriage paid to..." means that the seller pays the freight fo r the carriage of the goods to the named destination. However, the risk of loss of or damage to the goods, as well as the risk of any cost increases, is transfe rred from the seller to the buyer when the goods have been delivered into the cu stody of the first carrier and not at the ship s rail. Freight Carriage (and insurance paid to) Like "Freight or Carriage paid to..." but with the addition that the seller has to procure transport insurance against the risk of loss of or damage to the good s during the carriage. The seller contracts with the insurer and pays the insura nce premium. Freight Forwarder An agent who assists his exporter client in moving cargo to a foreign destinatio n. General Agreement on Tariffs and Trade (GATT) The General Agreements on Tariffs and Trade is a multilateral trade treaty among governments, embodying rights and obligations. The detailed rules set out in th e Agreement constitute a code which the parties to the Agreement have agreed upo n to govern their trading relationships. General License (Export) Government authorization to export without specific documentary approval. Gross Weight Total weight of goods, packing, and container, ready for shipment. Handling Charges The forwarder s fee to his shipper client. Inco Terms Indicate whether the buyer or the seller carries the risk, responsibility, liabi lity, or costs at specific points during a transaction. Inconvertibility The inability to exchange the currency of one country for the currency of anothe r. Inherent Vice Defects or characteristics of a product that could lead to deterioration without outside influence. An insurance term. See "All Risk Clause." Insurance Certificate A document issued by an insurance company, usually to order of shipper, under a marine policy and in cover of a particular shipment of merchandise.

Irrevocable Applied to letters of credit. An irrevocable letter of credit is one which canno t be altered or canceled once it has been negotiated between the buyer and his b ank. Licensing The grant of technical assistance and service and/or the use of proprietary righ ts, such as a trademark or patent, in return for royalty payments. MEA Manufacturer s Export Agent. See "Export Management Company." Manufacturer s Exp ort Agent (MEA): See "Export Management Company." Marine Insurance An insurance which will compensate the owner of goods transported overseas in th e event of loss which cannot be legally recovered from the carrier. Also covers air shipments. Marks A set of letters, numbers and/or geometric symbols, generally followed by the na me of the port of destination, placed on packages for export for identification purposes. Maturity Date The date upon which a draft or acceptance becomes due for payment. Most-FavoredNation Status: All countries having this designation receive equal treatment wit h respect to customs and tariffs. Named Point See "Specific Delivery Point." Net Weight Weight of the goods alone without any immediate wrappings; e.g., the weight of t he contents of a tin can without the weight of the can. See "Legal Weight." "On Board" Bill of Lading A bill of lading in which a carrier acknowledges that goods have been placed on board a certain vessel. Open Cargo Policy Synonymous with "Floating Policy." An insurance policy which binds the insurer a utomatically to protect with insurance all shipments made by the insured from th e moment the shipment leaves the initial shipping point until delivered at desti nation. The insuring conditions include clauses naming such risks insured agains t as "perils of the sea," fire, jettison, forcible theft, and barratry. See > Pe rils of the Sea," "Barratry," "All Risks Clause." "Order" Bill of Lading A bill of lading, negotiable, made out to the order of the shipper. Packing List A list which shows number and kinds of packages being shipped, totals of gross, legal, and net weights of the packages, and marks and numbers on the packages. T he list may be requested by an importer or may be required by an importing count ry to facilitate the clearance of goods through customs. Perils of the Sea A marine insurance term used to designate heavy weather, stranding, lightning, c ollision, and sea water damage. Piggybacking The assigning of export marketing and distribution functions by one manufacturer

to another. Port Marks See "Marks." Pro Forma Invoice An invoice forwarded by the seller of goods prior to shipment to advise the buye r of the weight and value of the goods. Quota The total quantity of a product or commodity which may be imported into a countr y without restriction or the penalty of additional duties or taxes. Quotation An offer to sell goods at a stated price and under stated terms. Rate of Exchange The basis upon which money of one country will be exchanged for that of another. Rates of exchange are established and quoted for foreign currencies on the basi s of the demand, supply, and stability of the individual currencies. See "Exchan ge." Revocable Applied to letters of credit. A revocable letter of credit is one which can be a ltered or canceled by the buyer after he has opened it through his bank. See "Ir revocable." Royalty Payment The share of the product or profit paid by a licensee to his licenser. See "Lice nsing." S/D See "Sight Draft." S.I.T.C. See "Standard International Trade Classification." Sales Agent See "Foreign Sales Representative." Sales Representative See "Foreign Sales Representative." Sanitary Certificate A certificate which attests to the purity or absence of disease or pests in the shipment of food products, plants, seeds, and live animals. Schedule B Refers to "Schedule B, Statistical Classification of Domestic and Foreign Commod ities Exported from the United States." A seven-digit Schedule B number must be entered on the shipper s U.S. Export Declaration for every commodity shipped. Shipper s Export Declaration A form required by the U.S. Treasury Department and completed by a shipper showi ng the value, weight, consignee, destination, etc., of export shipments as well as Schedule B identification number. Shipping Documents Commercial invoices, bills of lading, insurance certificates, consular invoices, and related documents. Ship s Manifest A true list in writing of the individual shipments comprising the cargo of a ves sel, signed by the captain. Sight Draft (S/D) A draft so drawn as to be payable upon presentation to the drawee or at a fixed or determinable date thereafter. See "Documents Against Acceptance," "Documents

Against Payment." Specific Delivery Point A point in sales quotations which designates specifically where and within what geographical locale the goods will be delivered at the expense and responsibilit y of the seller; e.g., F.A.S. named vessel at named port of export. Standard Industrial Classification (SIC) A numerical system developed by the U.S. Government for the classification of co mmercial services and industrial products. Also classifies establishments by typ e of activity. Standard International Trade Classification (SITC) A numerical system developed by the United Nations to classify commodities used in international trade as an aid to reporting trade statistics. Steamship Conference A group of vessel operators joined together for the purpose of establishing frei ght rates. A shipper may receive reduced rates if the shipper enters into a cont ract to ship on vessels of Conference members only. Stocking Distributor A distributor who maintains an inventory of goods of a manufacturer. Straight Bill of Lading A bill of lading, non-negotiable, in which the goods are consigned directly to a named consignee. Tare Weight The weight of packing and containers without the goods to be shipped. Tariff A schedule or system of duties imposed by a government on goods imported or expo rted; the rate of duty imposed in a tariff. Tenor The time fixed or allowed for payment, as in "the tenor of a draft." Time Draft A draft so drawn as to mature at a certain fixed time after presentation or acce ptance. U.S. Standard Master A single business form with combined stencil which includes space for informatio n required on many different export forms. Use of this form eliminates multiple typing. Validated License A government document authorizing the export of commodities within the limitatio ns set forth in the document.Visa: A signature of formal approval on a document. Obtained from Consulates. Wharfage Charge assessed by carrier for the handling of incoming or outgoing ocean cargo.

Prudent Credit Practices An experienced exporting firm extends credit cautiously. It evaluates new custom ers with care and continuously monitors older accounts. Such a firm may wisely d

ecide to decline a customer s request for open account credit if the risk is too great and propose instead payment on delivery terms through a documentary sight draft or irrevocable confirmed letter of credit or even payment in advance. On the other hand, for a fully creditworthy customer, the experienced exporter may decide to allow a month or two to pay, perhaps even on open account. Other good credit practices include being aware of any unfavorable changes in yo ur customers payment patterns, refraining from going beyond normal commercial t erms, and consulting with your international banker n how to cope with unusual c ircumstances or in difficult markets. It is always advisable to check a buyer s credit (even if safest payment methods are employed). A Department of Commerce I nternational Company Profile (ICP) (see Chapter 5) provides useful information f or credit checks. For a fee, an ICP may be requested on foreign companies in man y countries. It contains financial information on the company and a discussion r egarding its size, capitalization, years in business, and other information such as citing some U.S. companies that conduct business with the firm. The exporter can then contact the U.S. companies to find out about their payment experience with the foreign firm. ICPs are not available in every country, and in these instances, EACs can provid e a list of private credit reporting services. There are several U.S. companies that compile financial information on foreign firms (particularly larger firms) and make it available to their subscribers. Also, banks are sometimes able to pr ovide credit reports on foreign companies, either through their own foreign bran ches or through a correspondent bank. As being paid in full and on time is of the utmost concern to exporters, the lev el of risk in extending credit is a major consideration. There are several ways in which you can receive payment when selling your products abroad, depending on how trustworthy you consider the buyer to be. Typically with domestic sales, if the buyer has good credit, sales are made on open account; if not, cash in adva nce is required. For export sales, these ways are not the only common methods. L isted in order from most secure for the exporter to the least secure, the basic methods of payment are: 1. Cash in advance; 2. Documentary letter of credit; 3. Documentary collection or draft; 4. Open account; and 5. Other payment mechanisms, such as consignment sales. Cash in Advance Receiving payment by cash in advance of the shipment might seem ideal. In this s ituation, the exporter is relieved of collection problems and has immediate use of the money. A wire transfer is commonly used and has the advantage of being al most immediate. Payment by check, may result in a collection delay of up to six weeks. Therefore, this method may defeat the original intention of receiving pay ment before shipment. Many exporters accept credit cards in payment for exports of consumer and other products, generally of a low follar value, sold directly to the end user. Domest ic and international rules governing credit card transactions sometimes differ, so U.S. merchants should contact their credit card processor for more specific i nformation. International credit card transactions are typically done by telepho ne or fax. Due to the nature of these methods, exporters should be aware of frau d. Merchants should determine the validity of transactions and obtain the proper authorizations. For the buyer, however, advance payment tends to create cash flow problems, as w ell as increase risks. Furthermore, cash in advance is not as common in most of the world as it is in the United States. Buyers are often concerned that the goo ds may not be sent if payment is made in advance. Exporters that insist on this method of payment as their sole method of doing business may find themselves los ing out to competitors who offer more flexible payment terms. Documentary Letters of Credit and Documentary Drafts Documentary letters of credit or documentary drafts are often used to protect th

e interests of both buyer and seller. These two methods require that payment be made based on the presentation of documents conveying the title and that specifi c steps have been taken. Letters of credit and drafts can be paid immediately or at a later date. Drafts that are paid upon presentation are called sight drafts . Drafts that are to be paid at a later date, often after the buyer receives the goods, are called time drafts or date drafts. Since payment by these two methods is made on the basis of documents, all terms of payment should be clearly specified in order to avoid confusion and delay. Fo r example, "net 30 days" should be specified as "30 days from acceptance." Likew ise, the currency of payment should be specified as "US$30,000." International b ankers can offer other suggestions. Banks charge fees - based mainly on a percentage of the amount of payment - for handling letters of credit and smaller amounts for handling drafts. If fees char ged by both the foreign and U.S. banks are to be applied to the buyer s account, this should be explicitly stated in all quotations and in the letter of credit. The exporter usually expects the buyer to pay the charges for the letter of cred it, but some buyers may not agree to this added cost. In such cases, the exporte r must either absorb the costs of the letter of credit or risk losing that poten tial sale. Letters of credit for smaller amounts can be somewhat expensive since fees can be high relative to the sale. Letters of Credit A letter of credit adds a bank s promise to pay the exporter to that of the fore ign buyer provided that the exporter has complied with all the terms and conditi ons of the letter of credit. The foreign buyer applies for issuance of a letter of credit from the buyer s bank to the exporter s bank and therefore is called t he applicant; the exporter is called the beneficiary. Payment under a documentary letter of credit is based on documents, not on the t erms of sale or the physical condition of the goods. The letter of credit specif ies the documents that are required to be presented by the exporter, such as an ocean bill of lading (original and several copies), consular invoice, draft, and an insurance policy. The letter of credit also contains an expiration date. Bef ore payment, the bank responsible for making payment, verifies that all document conform to the letter of credit requirements. If not, the discrepancy must be r esolved before payment can be made and before the expiration date. A letter of credit issued by a foreign bank is sometimes confirmed by a U.S. ban k. This confirmation means that the U.S. bank (the confirming bank), adds its pr omise to pay to that of the foreign bank (the issuing bank). If a letters of cre dit is not confirmed, it is advised through a U.S. bank and thus called an advis ed letter of credit. U.S. exporters may wish to confirm letters of credit issued by foreign banks if they are unfamiliar with the foreign banks or concerned abo ut the political or economic risk associated with the country in which the bank is located. An Export Assistance Center or international banker can assist expor ters in evaluating the risks to determine what might be appropriate for specific export transactions. A letter of credit may either be irrevocable and thus, unable to be changed unle ss both parties agree; or revocable where either party may unilaterally make cha nges. A revocable letter of credit is inadvisable as it carries many risks for t he exporter. A change made to a letter of credit after it has been issued is called an amendm ent. Banks also charge fees for this service. It should be specified in the amen dment if the exporter or the buyer will pay these charges. Every effort should b e made to get the letter of credit right the first time since these changes can be time-consuming and expensive. To expedite the receipt of funds, wire transfers may be used. Exporters should c onsult with their international bankers about bank charges for such services. A Typical Letter of Credit Transaction Here are the typical steps of an irrevocable letter of credit that has been conf irmed by a U.S. bank:

1. After the exporter and buyer agree on the terms of a sale, the buyer arr anges for its bank to open a letter of credit that specifies the documents neede d for payment. The buyer determines which documents will be required. 2. The buyer s bank issues, or opens, its irrevocable letter of credit incl udes all instructions to the seller relating to the shipment. 3. The buyer s bank sends its irrevocable letter of credit to a U.S. bank a nd requests confirmation. The exporter may request that a particular U.S. bank b e the confirming bank, or the foreign bank may select a U.S. correspondent bank. 4. The U.S. bank prepares a letter of confirmation to forward to the export er along with the irrevocable letter of credit. 5. The exporter reviews carefully all conditions in the letter of credit. T he exporter s freight forwarder is contacted to make sure that the shipping date can be met. If the exporter cannot comply with one or more of the conditions, t he customer is alerted at once. 6. The exporter arranges with the freight forwarder to deliver the goods to the appropriate port or airport. 7. When the goods are loaded, the freight forwarder completes the necessary documentation. 8. The exporter (or the freight forwarder) presents the documents, evidenci ng full compliance with the letter of credit terms, to the U.S. bank. 9. The bank reviews the documents. If they are in order, the documents are sent to the buyer s bank for review and then transmitted to the buyer. 10. The buyer (or the buyer s agent) uses the documents to claim the goods. 11. A draft, which accompanies the letter of credit, is paid by the buyer s bank at the time specified or, if a time draft, may be discounted to the exporte r s bank at an earlier date. Example of a Confirmed Irrevocable Letter of Credit The example of a confirmed irrevocable letter of credit in figure 13 illustrates the various parts of a typical letter of credit. In this sample, the letter of credit was forwarded to the exporter, The Walton Building Supply Company (A), by the confirming bank, Megabank Corporation (B), as a result of c letter of credi t being issued by the Third Hong Kong Bank, Hong Kong (C), for the account of th e importer, HHB Hong Kong (D). The date of issue was March 8, 1997 (E), and the exporter must submit the proper documents (e.g., a commercial invoice in one ori ginal and three copies) (F) by June 23, 1997 (G) in order for a sight draft (H) to be honored. Tips on Using a Letter of Credit When preparing quotations for prospective customers, exporters should keep in mi nd that banks pay only the amount specified in the letter of credit - even if hi gher charges for shipping, insurance, or other factors are incurred and document ed. Upon receiving a letter of credit, the exporter should carefully compare the let ter s terms with the terms of the exporter s pro forma quotation. This step is e xtremely important, since the terms must be precisely met or the letter of credi t may be invalid and the exporter may not be paid. If meeting the terms of the l etter of credit is impossible or if any of the information is incorrect or even misspelled, the exporter should contact the customer immediately and ask for an amendment to the letter of credit. The exporter must provide documentation showing that the goods were shipped by t he date specified in the letter of credit or the exporter may not be paid. Expor ters should check with their freight forwarders to make sure that no unusual con ditions may arise that would delay shipment. Documents must be presented by the date specified for the letter of credit to be paid. Exporters should verify with their international bankers that there will be sufficient time to present the letter of credit for payment. Exporters may request that the letter of credit specify that partial shipments a nd transshipment will be allowed. Specifying what will be allowed can prevents u nforeseen last minute problems. Documentary Drafts

A draft, sometimes also called a bill of exchange, is analogous to a foreign buy er s check. Like checks used in domestic commerce, drafts carry the risk that th ey will be dishonored. However, in international commerce, title does not transf er to the buyer until he pays the draft, or at least engages a legal undertaking that the draft will be paid when due. Sight Drafts A sight draft is used when the exporter wishes to retain title to the shipment u ntil it reaches its destination and payment is made. Before the shipment can be released to the buyer, the original ocean bill of lading (the document that evid ences title) must be properly endorsed by the buyer and surrendered to the carri er. It is important to note that air waybills of lading, on the other hand, do n ot need to be presented in order for the buyer to claim the goods. Hence, risk i ncreases when a sight draft is being used with an air shipment. In actual practice, the ocean bill of lading is endorsed by the exporter and sen t via the exporter s bank to the buyer s bank. It is accompanied by the sight dr aft, invoices, and other supporting documents that are specified by either the b uyer or the buyer s country (e.g., packing lists, consular invoices, insurance c ertificates). The foreign bank notifies the buyer when it has received these doc uments. As soon as the draft is paid, the foreign bank turns over the bill of la ding thereby enabling the buyer to obtain the shipment. There is still some risk when a sight draft is used to control transferring the title of a shipment. The buyer s ability or willingness to pay might change from the time the goods are shipped until the time the drafts are presented for paym ent; there is no bank promise to pay standing behind the buyer s obligation. Add itionally, the policies of the importing country could also change. If the buyer cannot or will not pay for and claim the goods, returning or disposing of the p roducts becomes the problem of the exporter. Time Drafts and Date Drafts A time draft is used when the exporter extends credit to the buyer. The draft st ates that payment is due by a specific time after the buyer accepts the time dra ft and receives the goods (e.g., 30 days after acceptance). By signing and writi ng "accepted" on the draft, the buyer is formally obligated to pay within the st ated time. When this is done the time draft is then called a trade acceptance. I t can be kept by the exporter until maturity or sold to a bank at a discount for immediate payment. A date draft differs slightly from a time draft in that it specifies a date on w hich payment is due, rather than a time period after the draft is accepted. When either a sight draft or time draft is used, a buyer can delay payment by delayi ng acceptance of the draft. A date draft can prevent this delay in payment thoug h it still must be accepted. When a bank accepts a draft, it becomes an obligation of the bank and thus, a ne gotiable investment known as a banker s acceptance. A banker s acceptance can al so be sold to a bank at a discount for immediate payment. Open Account In a foreign transaction, an open account can be a convenient method of payment if the buyer is well established, has a long and favorable payment record, or ha s been thoroughly checked for creditworthiness. With an open account, the export er simply bills the customer, who is expected to pay under agreed terms at a fut ure date. Some of the largest firms abroad make purchases only on open account. However, there are risks to open account sales. The absence of documents and ban king channels might make it difficult to pursue the legal enforcement of claims. The exporter might also have to pursue collection abroad, which can be difficul t and costly. Another problem is that receivables may be harder to finance, sinc e drafts or other evidence of indebtedness are unavailable. There are several wa ys to reduce credit risk,through such means as export credit insurance and facto ring (see Chapter 13). Exporters contemplating a sale on open account terms should thoroughly examine t he political, economic, and commercial risks. They should also consult with thei r bankers if financing will be needed for the transaction before issuing a pro f orma invoice to a buyer.

Other Payment Mechanisms Consignment sales International consignment sales follow the same basic procedures as in the Unite d States. The goods are shipped to a foreign distributor who sells them on behal f of the exporter. The exporter retains title to the goods until they are sold, at which point payment is sent to the exporter. The exporter has the greatest ri sk and least control over the goods with this method. Additionally, receiving pa yment may take quite a while. It is wise to consider risk insurance with international consignment sales. The contract should clarify who is responsible for property risk insurance that will cover the merchandise until it is sold and payment is received. In addition, it may be necessary to conduct a credit check on the foreign distributor. Countertrade International countertrade is a trade practice whereby one party accepts goods, services, or other instruments of trade in partial or whole payment for its prod ucts. This type of trade fulfills financial, marketing, or public policy objecti ves of the trading parties. For example, a firm might trade by bartering because it or its trading partner lacks foreign exchange. Many U.S. exporters consider countertrade a necessary cost of doing business in markets where U.S. exports would otherwise not be sold. One consideration for sm aller firms is that this type of trade may cause cash flow problems. Therefore, many smaller exporters do not consider this an option as they wish to do busines s in U.S. dollars. There are several types of countertrade, including counterpurchase and barter. C ounterpurchase is quite common. In this situation, exporters agree to purchase a quantity of goods from a country in exchange for that country s purchase of the exporter s product. These goods are typically unrelated but have an equivalent value. Another form of this practice is contractually linked, parallel trade tra nsactions that each involve a separate financial settlement. For example, a coun tertrade contract may provide that the U.S. exporter will be paid in a convertib le currency as long as the U.S. exporter (or another entity designated by the ex porter) agrees to purchase a related quantity of goods from the importing countr y. Barter arrangements in international commerce are not as common, because the par ties needs for the goods of the other seldom coincide and because valuation of the goods may be problematic. This type of countertrade occurs without money exc hanging hands as merchandise is traded directly for other merchandise or service s. Barter might occur by swapping (one good for another) or by switching (using a chain of buyers and sellers in different markets to barter). U.S. exporters can take advantage of countertrade opportunities by trading throu gh an intermediary with countertrade expertise, such as an international broker, an international bank, or an export management company. One drawback to this ty pe of exporting is that there are often higher transaction costs and greater ris ks than with other kinds of export transactions. The Department of Commerce can advise and assist U.S. exporters on countertrade requirements. The Financial Services and Countertrade Division of ITA s Office o f Finance, monitors countertrade trends, disseminates information (including lis ts of potentially beneficial countertrade opportunities), and provides general a ssistance to enterprises seeking barter and countertrade opportunities. For more information, contact the Financial Services and Countertrade Division/Office of Finance, International Trade Administration, U.S. Department of Commerce, Washi ngton, D.C. 20230; telephone 202-482-4471. Foreign Currency A buyer and a seller who are in different countries rarely use the same currency . Payment is usually made in either the buyer s or the seller s currency or in a third mutually agreed-upon currency. One of the risks associated with foreign trade is the uncertainty of the future exchange rates. The relative value between the two currencies could change betwe en the time the deal is concluded and the time payment is received. If the expor ter is not properly protected, a devaluation or depreciation of the foreign curr

ency could cause the exporter to lose money. For example, if the buyer has agree d to pay 500,000 French francs for a shipment and the franc is valued at 20 cent s, the seller would expect to receive US$100,000. If the franc later decreased i n value to be worth 19 US cents, payment under the new rate would be only US$95, 000, a loss of US$5,000 for the seller. On the other hand, if the foreign curren cy increases in value the exporter would get a windfall in extra profits. Noneth eless, most exporters are not interested in speculating on foreign exchange fluc tuations and prefer to avoid risks. One of the simplest ways for a U.S. exporter to avoid this type of risk is to qu ote prices and require payment in U.S. dollars. Then the burden of exchanging cu rrencies and risk are placed on the buyer. Exporters should also be aware if the re are problems with currency convertibility. Not all currencies are freely or q uickly converted into U.S. dollars. Fortunately, the U.S. dollar is widely accep ted as an international trading currency, and American firms can often secure pa yment in dollars. If the buyer asks to make payment in a foreign currency, the exporter should con sult an international banker before negotiating the sales contract. Banks can of fer advice on the foreign exchange risks that exist with a particular currency. Some international banks can also help hedge against such a risk, by agreeing to purchase the foreign currency at a fixed price in dollars, regardless of the cu rrencies value at the time the customer pays. Banks will normally charge a fee o r discount the transaction for this service. If this mechanism is used, the bank s fee should be included in the price quotation. Payment Problems In international trade, problems involving bad debts are more easily avoided tha n rectified after they occur. Credit checks and the other methods that have been discussed in this chapter can limit the risks. Nonetheless, just as in a compan y s domestic business, exporters occasionally encounter problems with buyers who default on their payment. When these problems occur in international trade, obt aining payment can be both difficult and expensive. Even when the exporter has i nsurance to cover commercial credit risks, a default by a buyer still requires t he time, effort, and cost of the exporter to collect a payment. The exporter mus t exercise normal business prudence in exporting and exhaust all reasonable mean s of obtaining payment before an insurance claim is honored. Even then there is often a significant delay before the insurance payment is made. The simplest (and least costly) solution to a payment problem is to contact and negotiate with the customer. With patience, understanding, and flexibility, an e xporter can often resolve conflicts to the satisfaction of both sides. This point is especially true when a simple misunderstanding or technical proble m is to blame and there is no question of bad faith. Even though the exporter ma y be required to compromise on certain points - perhaps even on the price of the committed goods - the company may save a valuable customer and profit in the lo ng run. However, if negotiations fail and the sum involved is large enough to warrant th e effort, a company should obtain the assistance and advice of its bank, legal c ounsel, and other qualified experts. Since arbitration is often faster and less costly, this step is preferable to legal action if both parties can agree to tak e their dispute to an arbitration agency. The International Chamber of Commerce handles the majority of international arbitration and is usually acceptable to f oreign companies because it is not affiliated with any single country. For infor mation contact the vice president for arbitration, U.S. Council of the Internati onal Chamber of Commerce, telephone 212-354-4480. Glossary of Export Terms Acceptance - This term has several related meanings: (1) A time draft (or bill o f exchange) that the drawee has accepted and is unconditionally obligated to pay at maturity. The draft must be presented first for acceptance - the drawee beco mes the "acceptor" - then for payment. The word "accepted" and the date and plac e of payment must be written on the face of the draft. (2) The drawee s act in r eceiving a draft and thus entering into the obligation to pay its value at matur

ity. (3) Broadly speaking, any agreement to purchase goods under specified terms . An agreement to purchase goods at a stated price and under stated terms. Ad valorem - According to value. See Duty. Advance against documents - A loan made on the security of the documents coverin g the shipment. Advising bank - A bank, operating in the exporter s country, that handles letter s of credit for a foreign bank by notifying the export firm that the credit has been opened in its favor. The advising bank fully informs the exporter of the co nditions of the letter of credit without necessarily bearing responsibility for payment. Advisory capacity - A term indicating that a shipper s agent or representative i s not empowered to make definitive decisions or adjustments without approval of the group or individual represented. Compare Without reserve. Agent - See Foreign sales agent. Air waybill - A bill of lading that covers both domestic and international fligh ts transporting goods to a specified destination. This is a nonnegotiable instru ment of air transport that serves as a receipt for the shipper, indicating that the carrier has accepted the goods listed and obligates itself to carry the cons ignment to the airport of destination according to specified conditions. Compare Inland bill of lading, Ocean bill of lading, and Through bill of lading. Alongside - The side of a ship. Goods to be delivered "alongside" are to be plac ed on the dock or barge within reach of the transport ship s tackle so that they can be loaded aboard the ship. Antidiversion clause - See Destination control statement. Arbitrage - The process of buying foreign exchange, stocks, bonds, and other com modities in one market and immediately selling them in another market at higher prices. Asian dollars - U.S. dollars deposited in Asia and the Pacific Basin. Compare Eu rodollars. ATA Carnet - See Carnet. Balance of trade - The difference between a country s total imports and exports. If exports exceed imports, a favorable balance of trade exists; if not, a trade deficit is said to exist. Barter - Trade in which merchandise is exchanged directly for other merchandise without use of money. Barter is an important means of trade with countries using currency that is not readily convertible. Beneficiary - The person in whose favor a letter of credit is issued or a draft is drawn. Bill of exchange - See Draft. Bill of lading - A document that establishes the terms of a contract between a s hipper and a transportation company under which freight is to be moved between s pecified points for a specified charge. Usually prepared by the shipper on forms issued by the carrier, it serves as a document of title, a contract of carriage , and a receipt for goods. Also see Air waybill, Inland bill of lading, Ocean bi ll of lading, and Through bill of lading. Bonded warehouse - A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed. Booking - An arrangement with a steamship company for the acceptance and carriag e of freight. Buying agent - See Purchasing agent. Carnet - A customs document permitting the holder to carry or send merchandise t emporarily into certain foreign countries (for display, demonstration, or simila r purposes) without paying duties or posting bonds. Cash against documents (CAD) - Payment for goods in which a commission house or other intermediary transfers title documents to the buyer upon payment in cash. Cash in advance (CIA) - Payment for goods in which the price is paid in full bef ore shipment is made. This method is usually used only for small purchases or wh en the goods are built to order. Cash with order (CWO) - Payment for goods in which the buyer pays when ordering and in which the transaction is binding on both parties.

Certificate of inspection - A document certifying that merchandise (such as peri shable goods) was in good condition immediately prior to its shipment. Certificate of manufacture - A statement (often notarized) in which a producer o f goods certifies that manufacture has been completed and that the goods are now at the disposal of the buyer. Certificate of origin - A document, required by certain foreign countries for ta riff purposes, certifying the country of origin of specified goods. CFR - Cost and freight. A pricing term indicating that the cost of the goods and freight charges are included in the quoted price; the buyer arranges for and pa ys insurance. Charter party - A written contract, usually on a special form, between the owner of a vessel and a "charterer" who rents use of the vessel or a part of its frei ght space. The contract generally includes the freight rates and the ports invol ved in the transportation. CIF - Cost, insurance, freight. A pricing term indicating that the cost of the g oods, insurance, and freight are included in the quoted price. Clean bill of lading - A receipt for goods issued by a carrier that indicates th at the goods were received in "apparent good order and condition," without damag es or other irregularities. Compare Foul bill of lading. Clean draft - A draft to which no documents have been attached. Collection papers - All documents (commercial invoices, bills of lading, etc.) s ubmitted to a buyer for the purpose of receiving payment for a shipment. Commercial attache - The commerce expert on the diplomatic staff of his or her c ountry s embassy or large consulate. Commercial invoice - An itemized list of goods shipped, usually included among a n exporter s collection papers. Commission agent - See Purchasing agent. Common carrier - An individual, partnership, or corporation that transports pers ons or goods for compensation. Confirmed letter of credit - A letter of credit, issued by a foreign bank, the v alidity of which has been confirmed by a domestic bank. An exporter whose paymen t terms are a confirmed letter of credit is assured of payment by the domestic b ank even if the foreign buyer or the foreign bank defaults. See Letter of credit . Consignment - Delivery of merchandise from an exporter (the consignor) to an age nt (the consignee) under agreement that the agent sell the merchandise for the a ccount of the exporter. The consignor retains title to the goods until the consi gnee has sold them. The consignee sells the goods for commission and remits the net proceeds to the consignor. Consular declaration - A formal statement, made to the consul of a foreign count ry, describing goods to be shipped. Consular invoice - A document, required by some foreign countries, describing a shipment of goods and showing information such as the consignor, consignee, and value of the shipment. Certified by a consular official of the foreign country, it is used by the country s customs officials to verify the value, quantity, and nature of the shipment. Convertible currency - A currency that can be bought and sold for other currenci es at will. Correspondent bank - A bank that, in its own country, handles the business of a foreign bank. Countertrade - The sale of goods or services that are paid for in whole or in pa rt by the transfer of goods or services from a foreign country. Countervailing duty - A duty imposed to counter unfairly subsidized products. CPT (carriage paid to) and CIP (carriage and insurance paid to) - Pricing terms indicating that carriage, or carriage and insurance, are paid to the named place of destination. They apply in place of CFR and CIF, respectively, for shipment by modes other than water. Credit risk insurance - Insurance designed to cover risks of nonpayment for deli vered goods. Compare Marine insurance. Customhouse broker - An individual or firm licensed to enter and clear goods thr

ough customs. Customs - The authorities designated to collect duties levied by a country on im ports and exports. The term also applies to the procedures involved in such coll ection. Date draft - A draft that matures in a specified number of days after the date i t is issued, without regard to the date of acceptance. See Draft, Sight draft, a nd Time draft. Deferred payment credit - Type of letter of credit providing for payment some ti me after presentation of shipping documents by exporter. Demand draft - See Sight draft. Devaluation - The official lowering of the value of one country s currency in te rms of one or more foreign currencies. For example, if the U.S. dollar is devalu ed in relation to the French franc, one dollar will "buy" fewer francs than befo re. DISC - Domestic international sales corporation. Discrepancy - Letter of credit - When documents presented do not conform to the letter of credit it is referred to as a discrepancy. Dispatch - An amount paid by a vessel s operator to a charterer if loading or un loading is completed in less time than stipulated in the charter party. Distributor - A foreign agent who sells for a supplier directly and maintains an inventory of the supplier s products. Dock receipt - A receipt issued by an ocean carrier to acknowledge receipt of a shipment at the carrier s dock or warehouse facilities. Also see Warehouse recei pt. Documentary draft - A draft to which documents are attached. Documents against acceptance (D/A) - Instructions given by a shipper to a bank i ndicating that documents transferring title to goods should be delivered to the buyer (or drawee) only upon the buyer s acceptance of the attached draft. Draft (or Bill of exchange) - An unconditional order in writing from one person (the drawer) to another (the drawee), directing the drawee to pay a specified am ount to a named drawer at a fixed or determinable future date. See Date draft, S ight draft, Time draft. Drawback - Articles manufactured or produced in the United States with the use o f imported components or raw materials and later exported are entitled to a refu nd of up to 99 percent of the duty charged on the imported components. The refun d of duty is known as a drawback. Drawee - The individual or firm on whom a draft is drawn and who owes the stated amount. Compare Drawer. Also see Draft. Drawer - The individual or firm that issues or signs a draft and thus stands to receive payment of the stated amount from the drawee. Compare Drawee. Also see D raft. Dumping - Selling merchandise in another country at a price below the price at w hich the same merchandise is sold in the home market or selling such merchandise below the costs incurred in production and shipment. Duty - A tax imposed on imports by the customs authority of a country. Duties ar e generally based on the value of the goods (ad valorem duties), some other fact or such as weight or quantity (specific duties), or a combination of value and o ther factors (compound duties). EMC - See Export management company. ETC - See Export trading company. Eurodollars - U.S. dollars placed on deposit in banks outside the United States; usually refers to deposits in Europe. Ex - From. When used in pricing terms such as "ex factory" or "ex dock," it sign ifies that the price quoted applies only at the point of origin (in the two exam ples, at the seller s factory or a dock at the import point). In practice, this kind of quotation indicates that the seller agrees to place the goods at the dis posal of the buyer at the specified place within a fixed period of time. Exchange permit - A government permit sometimes required by the importer s gover nment to enable the import firm to convert its own country s currency into forei gn currency with which to pay a seller in another country.

Exchange rate - The price of one currency in terms of another, that is, the numb er of units of one currency that may be exchanged for one unit of another curren cy. Eximbank - Export-Import Bank of the United States. Export broker - An individual or firm that brings together buyers and sellers fo r a fee but does not take part in actual sales transactions. Export commission house - An organization which, for a commission, acts as a pur chasing agent for a foreign buyer. Export declaration - See Shipper s export declaration. Export license - A government document that permits the licensee to export desig nated goods to certain destinations. See General export license and Individually validated export license. Export management company - A private firm that serves as the export department for several producers of goods or services, either by taking title or by solicit ing and transacting export business on behalf of its clients in return for a com mission, salary, or retainer plus commission. Export trading company - A firm similar or identical to an export management com pany. FAS - Free alongside ship. A pricing term indicating that the quoted price inclu des the cost of delivering the goods alongside a designated vessel. FCA - "Free carrier" to named place. Replaces the former term "FOB named inland port" to designate the seller s responsibility for the cost of loading goods at the named shipping point. May be used for multimodal transport, container statio ns, and any mode of transport, including air. FCIA - Foreign Credit Insurance Association. FI - Free in. A pricing term indicating that the charterer of a vessel is respon sible for the cost of loading and unloading goods from the vessel. Floating policy - See Open policy. FO - Free out. A pricing term indicating that the charterer of a vessel is respo nsible for the cost of loading goods from the vessel. FOB - "Free on board" at named port of export. A pricing term indicating that th e quoted price covers all expenses up to and including delivery of goods upon an overseas vessel provided by or for the buyer. Force majeure - The title of a standard clause in marine contracts exempting the parties for nonfulfillment of their obligations as a result of conditions beyon d their control, such as earthquakes, floods, or war. Foreign exchange - The currency or credit instruments of a foreign country. Also , transactions involving purchase or sale of currencies. Foreign freight forwarder - See Freight forwarder. Foreign sales agent - An individual or firm that serves as the foreign represent ative of a domestic supplier and seeks sales abroad for the supplier. Foreign trade zone - See Free-trade zone. Foul bill of lading - A receipt for goods issued by a carrier with an indication that the goods were damaged when received. Compare Clean bill of lading. Free port - An area such as a port city into which merchandise may legally be mo ved without payment of duties. Free-trade zone - A port designated by the government of a country for duty-free entry of any nonprohibited goods. Merchandise may be stored, displayed, used fo r manufacturing, etc., within the zone and reexported without duties being paid. Duties are imposed on the merchandise (or items manufactured from the merchandi se) only when the goods pass from the zone into an area of the country subject t o the customs authority. Freight forwarder - An independent business that handles export shipments for co mpensation. (A freight forwarder is among the best sources of information and as sistance on export regulations and documentation, shipping methods, and foreign import regulations.) GATT - General Agreement on Tariffs and Trade. A multilateral treaty intended to help reduce trade barriers between signatory countries and to promote trade thr ough tariff concessions. General export license - Any of various export licenses covering export commodit

ies for which Individually validated export licenses are not required. No formal application or written authorization is needed to ship exports under a general export license. Gross weight - The full weight of a shipment, including goods and packaging. Com pare Tare weight. Import license - A document required and issued by some national governments aut horizing the importation of goods into their individual countries. Individually validated export license - A required document issued by the U.S. G overnment authorizing the export of specific commodities. This license is for a specific transaction or time period in which the exporting is to take place. Com pare General export license. Inland bill of lading - A bill of lading used in transporting goods overland to the exporter s international carrier. Although a through bill of lading can some times be used, it is usually necessary to prepare both an inland bill of lading and an ocean bill of lading for export shipments. Compare Air waybill, Ocean bil l of lading, and Through bill of lading. International freight forwarder - See Freight forwarder. Irrevocable letter of credit - A letter of credit in which the specified payment is guaranteed by the bank if all terms and conditions are met by the drawee. Co mpare Revocable letter of credit. Letter of credit (L/C) - A document, issued by a bank per instructions by a buye r of goods, authorizing the seller to draw a specified sum of money under specif ied terms, usually the receipt by the bank of certain documents within a given t ime. Licensing - A business arrangement in which the manufacturer of a product (or a firm with proprietary rights over certain technology, trademarks, etc.) grants p ermission to some other group or individual to manufacture that product (or make use of that proprietary material) in return for specified royalties or other pa yment. Manifest - See Ship s manifest. Marine insurance - Insurance that compensates the owners of goods transported ov erseas in the event of loss that cannot be legally recovered from the carrier. A lso covers air shipments. Compare Credit risk insurance. Marking (or marks) - Letters, numbers, and other symbols placed on cargo package s to facilitate identification. Ocean bill of lading - A bill of lading (B/L) indicating that the exporter consi gns a shipment to an international carrier for transportation to a specified for eign market. Unlike an inland B/L, the ocean B/L also serves as a collection doc ument. If it is a "straight" B/L, the foreign buyer can obtain the shipment from the carrier by simply showing proof of identity. If a "negotiable" B/L is used, the buyer must first pay for the goods, post a bond, or meet other conditions a greeable to the seller. Compare Air waybill, Inland bill of lading, and Through bill of lading. On board bill of lading - A bill of lading in which a carrier certifies that goo ds have been placed on board a certain vessel. Open account - A trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment. The obvious risk this method poses to the supplie r makes it essential that the buyer s integrity be unquestionable. Open insurance policy - A marine insurance policy that applies to all shipments made by an exporter over a period of time rather than to one shipment only. Order bill of lading - A negotiable bill of lading made out to the order of the shipper. Packing list - A list showing the number and kinds of items being shipped, as we ll as other information needed for transportation purposes. Parcel post receipt - The postal authorities signed acknowledgment of delivery to receiver of a shipment made by parcel post. PEFCO - Private Export Funding Corporation. A corporation that lends to foreign buyers to finance exports from the United States. Perils of the sea - A marine insurance term used to designate heavy weather, str anding, lightning, collision, and sea water damage.

Phytosanitary inspection certificate - A certificate, issued by the U.S. Departm ent of Agriculture to satisfy import regulations for foreign countries, indicati ng that a U.S. shipment has been inspected and is free from harmful pests and pl ant diseases. Political risk - In export financing, the risk of loss due to such causes as cur rency inconvertibility, government action preventing entry of goods, expropriati on or confiscation, and war. Pro forma invoice - An invoice provided by a supplier prior to the shipment of m erchandise, informing the buyer of the kinds and quantities of goods to be sent, their value, and important specifications (weight, size, etc.). Purchasing agent - An agent who purchases goods in his or her own country on beh alf of foreign importers such as government agencies and large private concerns. Quota - The quantity of goods of a specific kind that a country permits to be im ported without restriction or imposition of additional duties. Quotation - An offer to sell goods at a stated price and under specified conditi ons. Remitting bank - The bank that sends the draft to the overseas bank for collecti on. Representative - See Foreign sales agent. Revocable letter of credit - A letter of credit that can be canceled or altered by the drawee (buyer) after it has been issued by the drawee s bank. Compare Irr evocable letter of credit. Shipper s export declaration - A form required for all shipments by the U.S. Tre asury Department and prepared by a shipper, indicating the value, weight, destin ation, and other basic information about an export shipment. Ship s manifest - An instrument in writing, signed by the captain of a ship, tha t lists the individual shipments constituting the ship s cargo. Sight draft (S/D) - A draft that is payable upon presentation to the drawee. Com pare Date draft and Time draft. Spot exchange - The purchase or sale of foreign exchange for immediate delivery. Standard industrial classification (SIC) - A standard numerical code system used to classify products and services. Standard international trade classification (SITC) - A standard numerical code s ystem developed by the United Nations to classify commodities used in internatio nal trade. Steamship conference - A group of steamship operators that operate under mutuall y agreed-upon freight rates. Straight bill of lading - A nonnegotiable bill of lading in which the goods are consigned directly to a named consignee. Tare weight - The weight of a container and packing materials without the weight of the goods it contains. Compare Gross weight. Tenor (of a draft) - Designation of a payment as being due at sight, a given num ber of days after sight, or a given number of days after date. Through bill of lading - A single bill of lading converting both the domestic an d international carriage of an export shipment. An air waybill, for instance, is essentially a through bill of lading used for air shipments. Ocean shipments, o n the other hand, usually require two separate documents - an inland bill of lad ing for domestic carriage and an ocean bill of lading for international carriage . Through bills of lading are insufficient for ocean shipments. Compare Air wayb ill, Inland bill of lading, and Ocean bill of lading. Time draft - A draft that matures either a certain number of days after acceptan ce or a certain number of days after the date of the draft. Compare Date draft a nd Sight draft (see chapter 13). Tramp steamer - A ship not operating on regular routes or schedules. Transaction statement - A document that delineates the terms and conditions agre ed upon between the importer and exporter. Trust receipt - Release of merchandise by a bank to a buyer in which the bank re tains title to the merchandise. The buyer, who obtains the goods for manufacturi ng or sales purposes, is obligated to maintain the goods (or the proceeds from t heir sale) distinct from the remainder of his or her assets and to hold them rea

dy for repossession by the bank. Warehouse receipt - A receipt issued by a warehouse listing goods received for s torage. Wharfage - A charge assessed by a pier or dock owner for handling incoming or ou tgoing cargo. Without reserve - A term indicating that a shipper s agent or representative is empowered to make definitive decisions and adjustments abroad without approval o f the group or individual represented. Compare Advisory capacity.. CASH AND CREDIT TERMS Proceedings from most secure to least secure: 1 . Cash or Cash in Advance - Seller receives cash in full from Buyer prior to s hipment. Acceptable cash is U.S. dollars or marketable foreign exchange. For obv ious reasons, foreign currency which cannot be readily converted into dollars (f oreign exchange) would not be considered "cash" in this context. 2. Confirmed Irrevocable Letters of Credit (CILC) - Procedures arc same as (3) w ith the exception that a U.S. bank "confirms" the LC, or, in other words, substi tutes its own performance for that of the local foreign bank which issues the LC . Payments under a CILC are remitted immediately by the U.S. bank issuing its co nfirmations upon receipt of documents and LC. It should be noted that the Buyer pays all charges for opening the LC at its local foreign bank and the Seller pay s all charges for confirming the LC. The U.S. Bank which confirms the LC assumes all credit, political and exchange risks of the foreign bank and its country. 3. Unconfirmed Irrevocable Letters of Credit (UILC) - Local foreign bank opens i ts letter of credit (irrevocable promise to pay once terms are met) to Seller on behalf of Buyer. Seller presents documents and LC to U.S. bank for collection. U.S. bank forwards to issuing foreign bank and payments are remitted in accordan ce with LC (sight to 180 days). Caution is taken to: 1 .) make sure LC is irrevo cable, and 2.) the LC does not call for special terms or conditions which cannot be met. The U.S. bank can provide assistance in this regard. 4. Cash Against Documents (CAD) - Buyer deposits cash with its local (foreign) b ank. Seller presents documents to its U.S. bank for "collection". U.S. bank send s documents to foreign bank which remits payment back through U.S. bank and forw ards documents to buyer. 5. Sight Draft/Documents Against Payment (SD/DP) - Same procedure as CAD (item 4 ) with the exception that a Draft accompanies the documents. The Buyer has made arrangements with its bank to repay the amounts due under the Draft. Until such arrangements are made the bank holds the Draft and the documents. SD/DP means th e bank pays at "sight", i.e., upon presentation with the documents. 6. Sight Draft/Document Against Acceptance (SD/DA) - Also known as "Time Drafts" because a prescribed period of time elapses before payment; e.g., 30, 60, 90, 1 80 days SD/DA. The procedure is the same as SD/DP (item 5) except, in lieu of pa yment at sight, the bank returns the Draft stamped "Accepted" to the U.S. bank w hich presented it for collection on behalf of the Seller. When the prescribed ti me period ellipses, the U.S. bank presents the Draft for payment and the local f oreign bank honors its acceptance and remits payment. 7. Open Account (O/A) - This is the least secure means of foreign sales. In lieu of a bank being presented the documents, all of the documents are forwarded dir ectly to the Buyer and payment is remitted according to the terms of the invoice . Net 30 to 180 days are the range of O/A terms. The flow of documents is all im portant because the bearer of documents is the only party who can clear the impo rted merchandise through customs. In O/A sales, the Buyer not only has immediate

access to the merchandise, since it possesses the documents, but can control re payment at its discretion. For this reason, only the most creditworthy and longs tanding customers should be afforded O/A terms. 8. Promissory Notes - Generally used for medium term (one to five year) sales of capital equipment or quasi-capital goods. A Promissory Note is a signed valid a nd enforceable obligation to pay a certain amount ("principal") plus interest by the "Maker" (or Buyer) to the "Payee" (or Seller). Payments are made in one, or a series, of, installments until the entire principal is repaid. Promissory Not es may also be guaranteed by a third party ("Guarantor") who is affiliated with the Maker. A Guarantor can be an individual (e.g. owner), parent company or fina ncial institution. Rarely are promissory notes used for short term sales of noncapital goods. EX-Works One of the simplest and most basic shipment arrangements places the minimum resp onsibility on the seller with greater responsibility on the buyer. In an EX-Work s transaction, goods are basically made available for pickup at the shipper/sell er s factory or warehouse and "delivery" is accomplished when the merchandise is released to the consignee s freight forwarder. The buyer is responsible for mak ing arrangements with their forwarder for insurance, export clearance and handli ng all other paperwork. FOB (Free On Board) One of the most commonly used-and misused-terms, FOB means that the shipper/sell er uses his freight forwarder to move the merchandise to the port or designated point of origin. Though frequently used to describe inland movement of cargo, FO B specifically refers to ocean or inland waterway transportation of goods. "Deli very" is accomplished when the shipper/seller releases the goods to the buyer s forwarder. The buyer s responsibility for insurance and transportation begins at the same moment. FCA (Free Carrier) In this type of transaction, the seller is responsible for arranging transportat ion, but he is acting at the risk and the expense of the buyer. Where in FOB the freight forwarder or carrier is the choice of the buyer, in FCA the seller choo ses and works with the freight forwarder or the carrier. "Delivery" is accomplis hed at a predetermined port or destination point and the buyer is responsible fo r Insurance. FAS (Free Alongside Ship)* In these transactions, the buyer bears all the transportation costs and the risk of loss of goods. FAS requires the shipper/seller to clear goods for export, wh ich is a reversal from past practices. Companies selling on these terms will ord inarily use their freight forwarder to clear the goods for export. "Delivery" is accomplished when the goods are turned over to the Buyers Forwarder for insuran ce and transportation. CFR (Cost and Freight) This term formerly known as CNF (C&F) defines two distinct and separate responsi bilities-one is dealing with the actual cost of merchandise "C" and the other "F " refers to the freight charges to a predetermined destination point. It is the shipper/seller s responsibility to get goods from their door to the port of dest ination. "Delivery" is accomplished at this time. It is the buyer s responsibili ty to cover insurance from the port of origin or port of shipment to buyer s doo r. Given that the shipper is responsible for transportation, the shipper also ch ooses the forwarder. CIF (Cost, Insurance and Freight) This arrangement similar to CFR, but instead of the buyer insuring the goods for the maritime phase of the voyage, the shipper/seller will insure the merchandis e. In this arrangement, the seller usually chooses the forwarder. "Delivery" as above, is accomplished at the port of destination. CPT (Carriage Paid To) In CPT transactions the shipper/seller has the same obligations found with CIF,

with the addition that the seller has to buy cargo insurance, naming the buyer a s the insured while the goods are in transit. CIP (Carriage and Insurance Paid To) This term is primarily used for multimodal transport. Because it relies on the c arrier s insurance, the shipper/seller is only required to purchase minimum cove rage. When this particular agreement is in force, Freight Forwarders often act i n effect, as carriers. The buyer s insurance is effective when the goods are tur ned over to the Forwarder. DAF (Delivered At Frontier) Here the seller s responsibility is to hire a forwarder to take goods to a named frontier, which usually a border crossing point, and clear them for export. "De livery" occurs at this time. The buyer s responsibility is to arrange with their forwarder for the pick up of the goods after they are cleared for export, carry them across the border, clear them for importation and effect delivery. In most cases, the buyer s forwarder handles the task of accepting the goods at the bor der across the foreign soil. DES (Delivered Ex Ship) In this type of transaction, it is the seller s responsibility to get the goods to the port of destination or to engage the forwarder to the move cargo to the p ort of destination uncleared. "Delivery" occurs at this time. Any destination ch arges that occur after the ship is docked are the buyer s responsibility. DEQ (Delivered Ex Quay)* In this arrangement, the buyer/consignee is responsible for duties and charges a nd the seller is responsible for delivering the goods to the quay, wharf or port of destination. In a reversal of previous practice, the buyer must also arrange for customs clearance. DDP (Delivered Duty Paid) DDP terms tend to be used in intermodal or courier-type shipments. Whereby, the shipper/seller is responsible for dealing with all the tasks involved in moving goods from the manufacturing plant to the buyer/consignee s door. It is the ship per/seller s responsibility to insure the goods and absorb all costs and risks i ncluding the payment of duty and fees. DDU (Delivered Duty Unpaid) This arrangement is basically the same as with DDP, except for the fact that the buyer is responsible for the duty, fees and taxes. International Terms of Payment Method Usual Time of Payment Goods Available To Buyer Risk to Seller Risk to Buyer Comments CASH IN ADVANCE Before shipment After payment None Complete. Relies on sell er to ship exactly the goods expected, as quoted and ordered Seller s goods m ust be special in one way or another, or special circumstances prevail over norm al trade practices (e.g., goods manufactured to buyer-only specification). LETTER OF CREDIT (L/C) (See next two items.) Commerical Invoice must match the L/C ex actly. Dates must be carefully headed. "Stale" documents are unacceptable for co llection. Letters of Credit require total accuracy in conforming t o terms, conditions, and documentaion. Consult your United Shipping Associate me mber for determining feasibility of terms and conditions. CONFIRED IRREVOCABLE CREDIT After shipment is made, documents presented to t he bank. After payment Gives the seller a double assurance of payments. Depends on the terms of the letter of credit. Assures shipment is made but rel ies on exporter to ship goods as described in documents. Terms may be negotiated prior to L/C agreement, alleviating buyer s degree of risk. The inclusion of a second assurance of payment (usually a U.S. Bank) prevents surprises, and add s assurance that issuing bank has been deemed acceptable by confirming bank. Add s cost and an additional requirement to seller. UNCONFIRMED IRREVOCABLE CREDIT Same as above Same as above Seller has singl e bank assurance of payment and seller remains dependent on foreign bank. Seller should contact his banker to determine whether the issuing bank has sufficient

assests to cover the amount. Same as above Credit can be changed only by mu tual agreement, as stipulated in a sales agreement. Becomes open account with bu yer s bank as collection agent. Foreign bank may have problems making payment in sum or timeliness. DRAFTS (See next two items.) Remittance time from buyer s bank to seller s bank may s till take one week to one month. Drafts, by design, should contai n terms and conditions mutually agreed upon. A draft may be written w ith virtually any term or condition agreeable to both parties. When determining draft tenor (terms and conditions), consult with your banker and freight forward er to determine the most desirable means of doing business in a given country. SIGHT DRAFT (with documents against acceptance) On presentation of draft to buye r. After payment to buyer s bank. If draft not honored, goods must be retu rned or resold. Storage, handling, and return freight expenses may be incurred. Assures shipment but not content, unless inspection or check-in is allowed befor e payment. A draft can be a collection instrument used to exchange possessi on and title to goods for payment. Seller is essentially drawing a check against the bank account of the buyer. Buyer s bank must have pre-approval, or seek app roval of the buyer prior to honoring the check. Payble upon presentation of docu ments. TIME DRAFTS (with documents against acceptance) On maturity of the draft Before payment, after acceptance Relies on buyer to honor draft upon pres entation. Assures shipment but not content. Time of maturity allows for ad justments, if agreed to by seller. Payable based upon the acceptance of an obligation to pay the seller at a specified time. Although a time draft has more collection leverage than an invoice, it remains only a promissory note, with co nditions. OPEN ACCOUNT As agreed, usually by invoice Before payment Relies completel y on buyer to pay account as agreed None All terms of payment, including extra charges and terms should be mutually understood and agreed upon prior to o pen account initiation. Companies conducting ongoing business are candidates for open account terms of payment. Seller must measure not only buyer s credit reli ability but the country s as well. Terms Ranked from LEAST RISK to MOST RISK for the Seller LETTER OF CREDIT:It is a letter from a Bank guaranteeing that buyers payment to seller will be rec eived on time and for correct amount. It means if buyer does not perform his obl igation for payment, his bank pays. Need of Letter of Credit:1) Due to nature of dealings including factors such as distance and differi ng laws in each other countries. 2) When you have limited trading experience or credit history or difficulty in knowing each other personally. Types of Letter of Credit:1) Revocable Letter of Credit:- This type of LC can be revoked or canceled by issuing bank without the agreement of beneficiary. It is generally used to pr ovide guidelines for shipment. 2) Irrevocable Letter of Credit:- This type of LC cannot be revoked or canc elled or amended without all the parties agreement i.e. buyer, seller and the is suing bank. In absence of any indication, the Letter of Credit deemed to be irre vocable. There are 2 types of Irrevocable Letter of Credit:1) Confirmed Credit:- The strength of LC is related to the financial streng th of buyers bank or country of importer. In case it is in doubt the exporter may require another bank (confirming bank) preferably in exporters country to provid e its undertaking that credit will be honored. Remember only issuing bank may re

quest another bank to add its confirmation. 3) Stand by Letter of Credit:- Under this type of LC, seller can demand pay ment from Bank if buyer does not pays by forwarding the copy of invoice that was not paid along with supporting documents. 4) Revolving Letter of Credit:- This type of LC established when there are regular shipments of the same commodity between buyer and seller. It eliminates the need to issue an LC for eah individual transaction. Parties to Documentary Credit:1) Beneficiary :- It is the party in whose favour a Letter of Credit is op ened by Issuing Bank. It is usually the exporter or seller of goods. 2) Applicant:- It is the party who request issuing bank to open Letter of C redit in favour of beneficiary. 3) Issuing Bank OR Opening Bank :- It is the Bank who opens a Letter of Cre dit in favour of beneficiary on the request and as per instructions of applicant . It is usually located in applicants country. 4) Advising Bank OR Confirming Bank OR Nominated Bank OR Notifying Bank:- I t is the Bank who advises the Letter of Credit to the beneficiary. It acts as a correspondent to the issuing bank. The advising bank may OR may not offer to neg otiate document and may not be responsible for the payment of credit unless it i s confirming bank. But if it is a confirming bank then it guarantees for payment subject to condition that documents are presented as per Letter of Credit. 5) Correspondent Bank :- It refers to another bank in another country with which issuing bank maintains a Banking Service Agreement. It is usually from exp orters or sellers country. 6) Nominated Bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.

Risks to the Applicant Non-delivery of Goods Short Shipment Inferior Quality Early /Late Shipment Damaged in transit Foreign exchange Failure of Bank viz Issuing bank / Collecting Bank Risks to the Issuing Bank Insolvency of the Applicant Fraud Risk, Sovereign and Regulatory Risk and Legal Risks Risks to the Reimbursing Bank no obligation to reimburse the Claiming Bank unless it has issued a reimbursemen t undertaking. Risks to the Beneficiary Failure to Comply with Credit Conditions Failure of, or Delays in Payment from, the Issuing Bank Credit Issued by Party other than Bank Risks to the Advising Bank The Advising Banks only obligation if it accepts the Issuing Banks instructions to check the apparent authenticity of the Credit and advising it to the Benefic iary Risks to the Nominated Bank Nominated Bank has made a payment to the Beneficiary against documents that comp

ly with the terms and conditions of the Credit and is unable to obtain reimburse ment from the Issuing Bank Risks to the Confirming Bank If Confirming Banks main risk is that, once having paid the Beneficiary, it may n ot be able to obtain reimbursement from the Issuing Bank because of insolvency o f the Issuing Bank or refusal of the Issuing Bank to reimburse because of a disp ute as to whether or not payment should have been made under the Credit Step-by-step process: Buyer and seller agree to conduct business. The seller wants a letter of credit to guarantee payment. Buyer applies to his bank for a letter of credit in favor of the seller. Buyer s bank approves the credit risk of the buyer, issues and forwards the cred it to its correspondent bank (advising or confirming). The correspondent bank is usually located in the same geographical location as the seller (beneficiary). Advising bank will authenticate the credit and forward the original credit to th e seller (beneficiary). Seller (beneficiary) ships the goods, then verifies and develops the documentary requirements to support the letter of credit. Documentary requirements may vary greatly depending on the perceived risk involved in dealing with a particular c ompany. Seller presents the required documents to the advising or confirming bank to be processed for payment. Advising or confirming bank examines the documents for compliance with the terms and conditions of the letter of credit. If the documents are correct, the advising or confirming bank will claim the fun ds by: o Debiting the account of the issuing bank. o Waiting until the issuing bank remits, after receiving the documents. o Reimburse on another bank as required in the credit. Advising or confirming bank will forward the documents to the issuing bank. Issuing bank will examine the documents for compliance. If they are in order, th e issuing bank will debit the buyer s account. Issuing bank then forwards the documents to the buyer. Common Defects with Documentation under Letter of Credit: Letter of Credit has expired prior to presentation of draft. Bill of Lading evidences delivery prior to or after the date range stated in the credit. Stale dated documents. Changes included in the invoice not authorized in the credit. Inconsistent description of goods. Insurance document errors. Invoice amount not equal to draft amount due to exchange fluctuation or any othe r reason. Ports of loading and destination not as specified in the credit. Description of merchandise is not as stated in credit. A document required by the credit is not presented. Documents are inconsistent as to general information such as volume, quality, et c. Names of documents not exact as described in the credit. Beneficiary information must be exact. Invoice or statement is not signed as stipulated in the letter of credit. SWIFT TELEX FIELD 700/701 DEFINITIONS:UCPDC (Uniform Customs Practice for Documentary Credit ) 600 came into effect on 1st July 2007 with 39 articles whereas in UCPDC 500, there were 49 articles. NUMBER SWIFT FIELD EXPLANATION 700 Issue Of Doc Credit Type of transmission :20 Doc Credit Number Credit number assigned by the issuing bank :21 Receiver s Reference :23 Reference Top Pre-Advise

:26E Number Of Amendments Number of Amendments :27 Sequence Of Total Page number of total pages :30 Date Contact Agreed / Amended Date Amended :31C Issue Date The date the letter of credit is issued :31D Date And Place Of Expiry The date the letter of credit expires :31E Maturity Date :32B Currency / Amount The currency and value of the Credit :39A Percentage Credit Amount Tolerance :39B Maximum Credit Amount :39C Additional Amounts Covered Additional amounts covered :40A Form Of Doc Credit Irrevocable and/or transferable :41A Available With ...By :41D Available With / By Bank the Credit is available to be paid by :42C Drafts At Sight or days after sight for payment :42A Drawee Bank the draft is drawn on :42M Mixed Payment Details :42P Deferred Payment Details Deferred payment details :43P Partial Shipments Partial shipments allowed or not allowed :43T Transshipment Transshipments allowed or not allowed :44A Loading on Board / Dispatch / Taking in Charge at / From Commerci al port loading from :44B For Transport To Destination commercial port :44C Latest Shipment Date Last date shipment letter of credit is valid for :44D Shipment Period :45 Goods Goods to be delivered :45A Description Of Goods And/Or Services Goods description :46 Documents Required :46A Documents Required Documents required for payment :47 Additional Conditions :47A Additional Conditions Additional requirements of the letter of credit :47B Additional Conditions Additional conditions to be complied with :48 Period For Presentation Of Documents Number of days after shipment al lowed for document presentation :49 Confirmation Instructions Confirmation by the paying bank is allow ed or not allowed :50 Applicant The Applicant (usually the buyer) of the Letter of Credi t. :50 Ordering Customer Ordering customer :51A Applicant Bank :51D Sending Institution Sending Institution :53A Reimbursement Bank Paying bank to negotiating bank :53D Reimbursement Reimbursement instructions between the paying and issuin g bank :57A "Advise Through" Bank :57D Account With Bank Issuing banks account relationship bank :59 Beneficiary The Beneficiary (usually the seller) of the Letter of Cr edit. :71B Charges Applicant and Beneficiary responsibility for bank charges :72 Sender To Receiver Information Send and Receive information :78 Instructions To Pay / Accept / Negotiating Bank Instructions to paying, accepting, or negotiating bank :79 Narrative I/O Instead Of REMEMBER WHILE CHECKING LETTER OF CREDIT:1. The name and address are complete and spelled correctly. 59 2. 3. Applicability of UCP Rules. 40E The L/C is irrevocable. 40A

4. 5. 6. 7. 8. 9.

The L/C is transferable

40B

and confirmed by the Advising Bank. The description of goods is correct. 45A 32B & 39B

The currency and value to cover the consignment is correct.

The percentage of credit amount tolerance is sufficient i.e. 10/10. 39A The latest date of Shipment is correct and sufficient. 44C

10. The latest date for negotiation or the expiry date to present the docume nts is sufficient. 48 11. 12. 13. 14. 15. 16. 17. The port of shipment is correct. The port of destination is correct. The partial shipment is allowed. The transshipment is allowed. 43P 43T 44 A/E 44 B/F

The L/C is transferable or non-transferable. The documents required are obtainable. Additional Conditions. 47 & 47A & 47B 46 & 46A

OTHER TOPICS:1) ANTI DUMPING DUTY:- It is leviable under Section 9A of Customs Tariff Ac t, 1975 on import of specific goods from specific country with a view to protect domestic industry. It is leviable when goods are exported from any country to I ndia at less than its normal price. The investigations for the levy of anti dump ing duty are carried out by the Ministry of Commerce but the applicable notifica tions are issued by the Ministry of Finance. 2) SAFEGUARD DUTY:- It is leviable under Section 8B of Customs Tariff Act, 1975 on import of items into India which causes or threaten to cause serious inj ury to domestic industry. The investigations for the levy of safeguard duty are carried out by the Directorate of Inspection in Ministry of Finance and the appl icable notifications are issued by the Ministry of Finance.

EXPORT PROCEDURES AT CUSTOMS REGISTRATION:The exporters have to obtain PAN based Business Identification Number (BIN) from DGFT prior to filing of Shipping Bill for clearance of export goods. Under the EDI System, BIL is received by Customs from DGFT online. The exporter is also required to register authorized foreign exchange dealer code (through which export proceeds are expected to realized) and open a current acco unt in the designated bank for credit of any drawback incentive. The exporters intending to export under the export promotion scheme need to get their licences/DEEC book etc, registered at the Customs Station. In case of export by sea or air, the exporter must submit the Shipping Bill , a nd in case of export by road he must submit Bill of Export in the prescribed f orm containing the prescribed details such as the name of the exporter, consigne

e, invoice number, details of packing, description of goods, quantity, FOB value , etc. Along with the Shipping Bill, other documents such as copy of packing lis t, invoices, export contract, letter of credit, etc. are also to be submitted. There are 5 types of shipping bills :Shipping Bill for export of duty free goods. This shipping bill is white colored . Shipping bill for export of goods under claim for duty drawback. This shipping b ill is green colored. Shipping bill for export of duty free goods ex-bond i.e. from bonded warehouse. This shipping bill is pink colored. Shipping Bill for export of dutiable goods. This shipping bill is yellow colored . Shipping bill for export under DEPB scheme. This shipping bill is blue in colour . Copies of Shipping Bill:1 Customs copy For record of Custom 2 Exporters Copy For record of Exporters 3 EP.Copy For obtaining DEPB Licence from office of DGFT 4 DEPB (Duplicate Copy) For use in the import cell of this Customs Stati on for registration of licence 5 Exchange control copy For negotiating the export documents in bank 6 7 TR1 copy For transportation goods upto sea port TR2copy For obtaining proof of loading on board.

Processing of Shipping Bill Non EDI Under manual system, shipping bill is required to be filed in the format as pres cribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. Shippin g bill is required to be filed along with all original documents such as invoice , packing list, AR-4, etc. The assessing officer in the exports section checks t he value of goods. If he has any doubt regarding value or description of goods, he may call for samples of goods from the docs. He can also send sample for test and pass the shipping bill provisionally. Once the Shipping Bill is passed by the Export section, the exporter or his agen t present the goods to the Shed Appraiser/Superintendent for examination. The Sh ed appraiser may mark the document to a custom officer (examiner/inspector) for examining the goods. The examination is carried out under the supervision of She d appraiser/Superintendent. If the description and other particulars of goods fo und to be as cleared, the Shed appraiser/Superintendent gives let export order aft er which the exporter/his agent may contact the escort officer for supervising t he loading of goods on to the aircraft etc. Processing of Shipping Bill EDI Under the EDI system, declaration in prescribed format are to be filed through S ervice Centres of Customs. A checklist is generated for verification of data by exporter/CHA. After verification, the data is submitted to the system by service centre operator and system generates a shipping bill number which is endorsed o n the printed checklist and returned to the exporter/CHA After the receipt of checklist and goods in the shed, the exporter/CHA may conta ct the customs officer to check all the documents including checklist. After che cking and verifying the goods, the customs officer handover all documents to She d appraiser/Superintendent who may assigns customs officer (inspector) for the e xamination. The examination is carried out under the supervision of Shed apprais er/Superintendent. After examination and satisfying he put examination report in the system and mark all the documents to the Shed appraiser/Superintendent. If the description and other particulars of goods found to be as cleared, the Shed appraiser/Superintendent gives let export order after which the exporter/his agent may contact the escort officer for supervising the loading of goods on to the a ircraft etc. If there is any variation between declaration in shipping bill and physical docu

ments/examination report, the Appraiser may mark the Electronic Shipping Bill to the Assistant Commissioner/Deputy Commissioner of Customs. The following are the documents required for the processing of the Shipping Bill : 1. GR forms (in duplicate) for shipment to all the countries. 2. 4 copies of the packing list mentioning the contents, quantity, gross an d net weight of each package. 3. 4 copies of invoices which contains all relevant particulars like number of packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct & full de scription of goods etc. 4. Contract, L/C, Purchase Order of the overseas buyer. 5. AR4 (both original and duplicate) and invoice. 6. Inspection/ Examination Certificate. Registration of DEPB Licenses: The DEPB Licenses in respect of exporters made from this customs station will b required to be registered at the same station. Before registration, the concerne d officer will verify the shipping bill(s) in the license form the computer to e nsure that exports have been effected and value mentioned is as determined by Cu stoms at the time of export. In cases of shipping boils assessed provisionally, the verification will not be possible because shipping bill will not be in verif ication queue. The exporters are advised to obtain licenses for the items export ed under DEPB Scheme and not for Non-DEPB items. If the lower value for credit p urpose has been accepted at the time of export, the licenses shall be obtained o nly for such lower value and not for FOB value declared in shipping bill or as p er Bank Realization certificate. Similarly, in cases where market value of the g oods is less than twice credit availed, the license shall be obtained for 50% of the present market value of the goods. The computer at the time of registration of licensee will calculate admissible credit on the basis of the exchange rate on the date of realization of export proceeds (as per bank realization certifica te) for DEPB items only and at Customs approved value at the time of export. If the amount of licence is more than the amount of credit calculated by the system , it will not be possible to register a licence and reference will be made to DG FT for correction of amount of the credit as per DEPB licence, computer will gen erate print-out regarding verification of the exports given details like shippin g bill no., date, rate of credit, FOB value as approved by customs and amount of credit etc. DEPB licence will be registered on the basis of print-out of verifi cation report duly signed by AC./D.C.(export). If DEPB licence is having shippin g bills exported from other ports in the same city, the exporter can get the lic ence registered at any rate of the ports from where he intends to import the goo ds in the city after verification about exports from other ports from where expo rts were effected. GR stands for "Guaranteed Remittance" Form, which is prescribed by RBI in case o f export of goods and services under cause (a) of sub-section (3) of section 7, subsection (20 of section 47 of FEMA, 1999 GR waiver needs in following cases where no foreign exchange remittance is invol ved:1) In case of re-export of defective machinery/parts exceeding Rs.25000/-. 2) In case of parcel exceeding Rs.25000/-. BILL OF LADING A document issued by a carrier to a shipper, listing and acknowledging receipt o f goods for transport and specifying terms of delivery. A legal document between the shipper of a particular good and the carrier detailing the type, quantity a nd destination of the good being carried. The bill of lading also serves as a re ceipt of shipment when the good is delivered to the predetermined destination. T his document must accompany the shipped goods, no matter the form of transportat

ion, and must be signed by an authorized representative from the carrier, shippe r and receiver. The BL must contain the following information: Name of the shipping company; Fla g of nationality; Shipper s name ; Order and notify party; Description of Goods; Gross/net/tare weight; and Freight rate/Measurements and weighment of goods/Tot al freight Main types of bill Straight bill of lading This bill states that the goods are consigned to a specified person and it is no t negotiable free from existing equities, i.e. any endorsee acquires no better r ights than those held by the endorser. So, for example, if the carrier or anothe r holds a lien over the goods as security for unpaid debts, the endorsee is boun d by the lien. Although, if the endorser wrongfully failed to disclose the charg e, the endorsee will have a right to claim damages for failing to transfer an un encumbered title. Also known as a non-negotiable bill of lading; and from the banker s point of vi ew this type of bill of lading is not safe. Order bill of lading This bill uses express words to make the bill negotiable, e.g. it states that de livery is to be made to the further order of the consignee using words such as " delivery to A Ltd. or to order or assigns". Consequently, it can be endorsed by A Ltd. or the right to take delivery can be transferred by physical delivery of the bill accompanied by adequate evidence of A Ltd. s intention to transfer. Bearer bill of lading This bill states that delivery shall be made to whosoever holds the bill. Such b ill may be created explicitly or it is an order bill that fails to nominate the consignee whether in its original form or through an endorsement in blank. A bea rer bill can be negotiated by physical delivery. an so its that Surrender bill of lading Under a term import documentary credit the bank releases the documents on receip t from the negotiating bank but the importer does not pay the bank until the mat urity of the draft under the relative credit. This direct liability is called Su rrender Bill of Lading (SBL), i.e. when we hand over the bill of lading we surre nder title to the goods and our power of sale over the goods. ("Guide to Trade Terms" (PDF). p. 64. http://ww2.westpac.com.au/documents/pdf/wi bnz/guide-to-trade-terms-payables. Retrieved 2007-12-13.) A clean bill of lading is one which states that the cargo has been loaded on boa rd the ship in apparent good order and condition. Such a BL will not bear a clau se or notation which expressively declares a defective condition of goods and/or the packaging. Thus, a BL that reflects the fact that the carrier received the goods in good condition. The opposite term is a soiled bill of lading. It reflec ts that the goods were received by the carrier in anything but good condition. What is the difference between surrender bill of lading and express bill of ladi ng? Surrender Bill of Lading is where the Master BL or House BL is endorsed and retu rned to the Liner or Freight Forwarding (As the case may be). The carrier/FF sen d telex message to its agent at the destination to release the cargo without act ual presentation of the Original Bill of Lading. Under Express Bill Of Lading release the cargo without actual presentation of th e Original. As the Original Bill of lading is surrendered at the Origin after en dorsement. What is the diference between Master bill of lading and house bill of lading? Master Bill of Lading: Issued from Carrier. House Bill of Lading: Issued from Freight Forwarder. Can a master bill of lading be created after individual bills of lading have all been signed? Yes it can be issued on destination. But original must have to be surrended at l

oading port Charterer Party Bill of lading (B/L) Definition B/L issued by the hirer (charterer), and not by the owner, of the ship (vessel) transporting the shipment. Since the owners of the vessel often have the right t o lay claim to the cargo aboard the ship (in case of a dispute with the chartrer ) banks generally refuse to accept such B/Ls as collateral for loans, or for pay ment under a letter of credit. Risks of a charter party bill of lading Hi mehdik, Most of the risks associated with a charter party bill of lading are similar to those associated with a normal bill of lading (i.e. fraudulent docs, incorrect w eights or merchandise). The only additional risk that I am aware of (other lc specialists feel free to a dd to the list) is the risk of delayed delivery. Since a charter party bill of lading is subject to the charter party, there is really no set delivery schedule . I once heard about a delay of 60 days for a shipment where the charter party chose not to deliver the goods directly to the port of discharge, but chose to d eliver additional goods in another hold on the vessel to another port, delaying delivery of the original goods. Other Ocean/Sea Transport Documents Through Bill of Lading The through bill of lading---combined transport bill of lading---is used to cove r at least two different modes of transportation, known as multimodal transport, or different means of conveyance. The format of a through bill of lading is closely similar to the sample ocean bi ll of lading, except the words "Through Bill of Lading", "Combined Transport Bil l of Lading", or "Combined Transportation" or the like usually are printed on th e bill of lading. Freight Forwarder s Bill of Lading The freight forwarder s bill of lading---house bill of lading---is issued by the ocean freight consolidator or NVOCC (non-vessel operating common carrier) or NV O (non-vessel owner or non-vessel owning carrier). Unless otherwise authorized in the letter of credit (L/C), the freight forwarder s bill of lading is not acceptable in the L/C negotiation. Charter Party Bill of Lading The charter party bill of lading is issued by the carrier or its agent in the ch arter shipping. The documentary requirements in a charter party bill of lading a re similar to the ocean (marine) bill of lading. Unless otherwise authorized in the letter of credit (L/C), the charter party bil l of lading is not acceptable in the L/C negotiation. Non-Negotiable Sea Waybill The non-negotiable sea waybill---liner waybill---usually is marked with the word s "Sea Waybill" or the like on its face. Stale Bill of Lading and the Guarantee for Delivery of Goods In short-sea trades, for example within the Asian countries, it is not uncommon for the goods to arrive at the port of destination before the bill of lading (B/ L). Under this circumstance the B/L is known as a stale bill of lading or late b ill of lading. The shipper or its agent may receive the B/L from the carrier or its agent in ab out 2 days after the customs closing date. If the shipper is to arrange for mari ne insurance, 1 to 4 days may elapse before the shipper receives the insurance p olicy. The negotiating bank may dispatch the documents to the issuing bank in 1 to 7 banking days following the day of receipt of the documents. Furthermore, ta

king into account the mailing time needed for the documents to reach the issuing bank, the vessel may have arrived at the port of destination without the B/L. C onsequently, a delay in customs clearance of the goods and the payment of wareho using charges may occur, and the cargo may be exposed to the risk of loss or dam age at destination. The remedy to the problem of a stale bill of lading is for the importer to use t he Guarantee for Delivery of Goods (this or similar form is available at the iss uing bank) and the posting of a bond, both of which must be countersigned by the issuing bank, in order to clear the goods through customs in the absence of the B/L. However, the importer is obliged to surrender to the carrier the original B/L upon receipt, or to procure a replacement of the original B/L in case of los s. The bill of lading must be properly endorsed. IHC/THC COST (FOB) ICD MORADABAD FOR KHATIMA ICD MORADABAD FOR BAZPUR 20 FEET 40 FEET 20 FEET 40 FEET CUSTOMS CLEARANCE 1800 2400 CUSTOMS CLEARANCE 1800 2400 TRANSPORTATION 9900 12500 TRANSPORTATION 6630 8700 THC 2000 3600 THC 2000 3600 IHC UPTO 20 MT 21700 40050 IHC UPTO 20 MT 21700 40050 IHC ABOVE 20 MT 27400 40050 IHC ABOVE 20 MT 27400 40050 FOR MUMBAI 20 FEET 40 FEET FOB UPTO 20 MT 35400 58550 FOB ABOVE 20 MT 41100 58550 FOR MUMBAI 20 FEET 40 FEET FOB UPTO 20 MT 32130 54750 FOB ABOVE 20 MT 37830 54750

ICD DADRI FOR KHATIMA 20 FEET 40 FEET CUSTOMS CLEARANCE 2500 2500 TRANSPORTATION 17500 19500 THC 2100 3600 IHC UPTO 20 MT FOR MUMBAI I 20600 38450 IHC ABOVE 20 MT FOR MUMBAI AI 27400 38450 IHC UPTO 20 MT FOR MUNDRA A 18700 32550 IHC ABOVE 20 MT FOR MUNDRA RA 25900 32550 IHC UPTO 20 MT FOR PIPAVAV AV 19150 33400 IHC ABOVE 20 MT FOR PIPAVAV VAV 26250 33400 FOR MUMBAI 20 FEET 40 FEET FOB UPTO 20 MT 42700 64050 FOB ABOVE 20 MT 49500 64050 FOR MUNDRA 20 FEET 40 FEET FOB UPTO 20 MT 40800 58150 FOB ABOVE 20 MT 48000 58150 FOR PIPAVAV 20 FEET 40 FEET FOB UPTO 20 MT 41250 59000

ICD DADRI FOR BAZPUR 20 FEET 40 FEET 2500 CUSTOMS CLEARANCE THC 20600 27400 18700 25900 19150 26250

2500

TRANSPORTATION 16000 18500 2100 3600 38450 IHC UPTO 20 MT FOR MUMBA 38450 32550 32550 33400 33400 IHC ABOVE 20 MT FOR MUMB IHC UPTO 20 MT FOR MUNDR IHC ABOVE 20 MT FOR MUND IHC UPTO 20 MT FOR PIPAV IHC ABOVE 20 MT FOR PIPA

FOR MUMBAI 20 FEET 40 FEET FOB UPTO 20 MT 41200 63050 FOB ABOVE 20 MT 48000 63050 FOR MUNDRA 20 FEET 40 FEET FOB UPTO 20 MT 39300 57150 FOB ABOVE 20 MT 46500 57150 FOR PIPAVAV 20 FEET 40 FEET FOB UPTO 20 MT 39750 58000

FOB ABOVE 20 MT 48350

59000

FOB ABOVE 20 MT 46850

58000

ICD MORADABAD FROM KHATIMA TO MUMBAI BAI CONTAINER SIZE FOB EXCLUDING LINE THC NE THC 20 FT. UPTO 20 MT 35400 20 FT. 20 FT. ABOVE 20 MT 41100 20 FT. 40 FT. 58550 40 FT. 54750

ICD MORADABAD FROM BAZPUR TO MUM CONTAINER SIZE FOB EXCLUDING LI UPTO 20 MT ABOVE 20 MT 32130 37830

ICD DADRI FROM KHATIMA TO MUMBAI CONTAINER SIZE FOB EXCLUDING LINE THC NE THC 20 FT. UPTO 20 MT 42700 20 FT. 20 FT. ABOVE 20 MT 49500 20 FT. 40 FT. 64050 40 FT. 63050 ICD DADRI FROM KHATIMA TO MUNDRA CONTAINER SIZE FOB EXCLUDING LINE THC NE THC 20 FT. UPTO 20 MT 40800 20 FT. 20 FT. ABOVE 20 MT 48000 20 FT. 40 FT. 58150 40 FT. 57150 ICD DADRI FROM KHATIMA TO PIPAVAV CONTAINER SIZE FOB EXCLUDING LINE THC NE THC 20 FT. UPTO 20 MT 41250 20 FT. 20 FT. ABOVE 20 MT 48350 20 FT. 40 FT. 59000 40 FT. 58000 GSP (GENERALIZED SYSTEM OF PREFERENCE)

ICD DADRI FROM BAZPUR TO MUMBAI CONTAINER SIZE FOB EXCLUDING LI UPTO 20 MT ABOVE 20 MT 41200 48000

ICD DADRI FROM BAZPUR TO MUNDRA CONTAINER SIZE FOB EXCLUDING LI UPTO 20 MT ABOVE 20 MT 39300 46500

ICD DADRI FROM BAZPUR TO PIPAVAV CONTAINER SIZE FOB EXCLUDING LI UPTO 20 MT ABOVE 20 MT 39750 46850

Under GSP, a free or reduced duty is granted by developed countries to the impor ter of certain manufactured goods from least developed countries in order to boo st the exports and economic growth of least developed countries. The purpose of GSP is to help developing countries to reduce poverty by using ta riff preferences to help them obtain international trade revenue. GSP ACCEPTING COUNTRIES COUNTRIES OFFICIAL ATTESTATION REQUIRED OR NOT AUSTRALIA NOT REQUIRED U.S.A. NOT REQUIRED SWITZERLAND NOT REQUIRED BELARUS REQUIRED CANADA REQUIRED JAPAN REQUIRED NEW ZEALAND REQUIRED NORWAY REQUIRED RUSSIAN FEDERATION REQUIRED TURKEY REQUIRED EUROPEAN UNION LIKE AUSTRIA, BELGIUM BULGARIA, DENMARK, GERMANY, GREECE, LUXEMBU RG, MALTA, ITALY, FRANCE, HUNGARY, FINLAND, SPAIN, SWEDEN, POLAND, NETERLAND, GR EAT BRITAIN, PORTUGAL & LATVIA. REQUIRED

ATTESTATION AUTHORITY:EXPORT INSPECTION COUNCIL, GOVT OF INDIA, KAROL BAGH. WEIGHT LIMIT FOR CONTAINERS for OTHER COUNTRIES Container Size Container Dimension [L x W x H] Payload Weight Allowed 20 FEET STD. 20 x 8 x 8.6 21.5 MT 40 FEET STD. 40 x 8 x 8.6 26.5 MT 40 FEET HC 40 x 8 x 9.6 26.4 MT WEIGHT LIMIT FOR CONTAINERS for USA Container Size Container Dimension [L x W x H] Payload Weight Allowed 20 FEET STD. 20 x 8 x 8.6 17.24 MT 40 FEET STD. 40 x 8 x 8.6 19.96 MT 40 FEET HC 40 x 8 x 9.6 19.82 MT TARE WEIGHT OF Container Size 20 FEET STD. 40 FEET STD. 40 FEET HC IMPORTANT NOTES 1. PROVISIONAL ASSESSMENT Sometimes it is not possible to assess due to unavailability of relevant informa tion/documents or any reason withholding clearance of goods which may cause demu rrage/detention charges, disturbance in production schedule, financial losses or even cancellation of export orders. In such cases provisional assessment can be done. Conditions for allowing Provisional Assessment 1) Where exporter is unable to produce any document or any other informatio n required for assessment of duty. 2) Where Customs Officer deems it necessary to perform chemical or other te sts to check the goods. 3) Where all documents are produced by exporter but Customs officer deems n ecessary to make further enquiry for assessing the goods. In such cases customs officer assess the S/Bill provisionally and allow clearanc e of the goods by taking a bond with appropriate security. After assessment of p rovisional duty, the exporter has to execute appropriate bond and furnish requis ite security to the satisfaction of customs officer for payment of deficiency if any between the duty finally assessed and duty provisionally assessed. Final assessment needs to be done within 6 months from the date of provisional assessment. PROCESS OF PROVISIONAL ASSESSMENY 2. Whenever, an exporter finds that final assessment is not possible, he wi ll make a detailed request in writing to the DC / AC indicating :a. Specific reasons / grounds and the documents or information for want of which final assessment can not be made. b. Period for which provisional assessment is required. c. Undertakes to appear before AC / DC within 07 days or such date fixed by him and furnish all relevant information and documents within the time specifie d by AC / DC in his order, so as to enable the proper officer to finalize the pr ovisional assessment. 3. On receipt of the request, AC / DC will examine it to ascertain whether CONTAINERS TARE WEIGHT 2.75 MT 3.70 MT 3.93 MT

provisional assessment is necessary at all. If the reasons / grounds are not suf ficient, he may ask the exporter to appear before him on an appointed day and ti me and if he is satisfied that provisional assessment is not necessary, he may p ass a reasoned order rejecting the same. 4. Where AC / DC is satisfied with genuineness of the exporters request, he will obtain approval of JC / Addl. Commissioner and issue a specific order direc ting provisional assessment clearly stating :a. The grounds on which provisional assessment has been ordered. b. The rate and/or value as the case may be, at which duty has to be provis ionally paid. c. The amount of differencial duty, if any, for which bond is to be execute d. d. The amount of security or surety, if any, keeping in view the instructio ns issued by the Boards from time to time. 5. Assessing Officer and Shed staff while processing S/Bill / allowing expo rt for provisional assessment must insert suitable comments in EDI system, so th at benefit of export promotion scheme should not be allowed till the assessment is finalized. Shed Examining Officer, in case of DBK S/Bill, will make comments in DBK menu. 6. All the cases of provisional assessment must be monitored by AC / DC and JC / Addl. Commissioner incharge on monthly basis and a report in this regard m ust be submitted to Commissioner (Export). For proper monitoring of such cases a provisional assessment register must be opened. The provisional assessment regi ster will be submitted in the 1st week of the following to Jt. Commr. /Addi tional Commissioner for his perusal. 7. It is to be ensured that all such cases of provisional assessment are fi nalized expeditiously well within 3 months of the date of provisional assessment . If provisional assessment is pending for investigation, such investigation mus t be completed within 3 months, otherwise extension of 3 months must be sought f rom JC. Subsequent extension can only be granted by Commissioner. All the cases where provisional assessment can not be finalized within 6 months must be submit ted to Commissioner indicating the reasons for non-finalization. If the Commissi oner is satisfied with the reasons, he may extend the period or otherwise direct the method to be adopted for finalization of assessment. 8. Till the EDI system is upgraded, endorsement of finalization of provisio nal assessment should be made on hard copy of S/Bill. 2. ISF (IMPORTER SECURITY FILING)

Full enforcement of ISF commonly known as 10+2 begins on 26th January 2010. WHAT ARE COMMON PROBLEMS AND POTENTIAL PENALTIES I CAN RECEIVE AS IMPORTER? Under the ISF Rule, CBP could assess penalties up to $10,000 per ISF for one or more of the following violations: 1. LATE ISF: $5,000 penalty if the ISF is not filed at least 24 hours prior to l ading aboard a vessel destined to the USA. This includes untimely filing of an I SF update and/or flexible ISF filing. In 2009, nearly 50% of all ISF filings were filed late and are often caused by l ate ISF data/documentation from the Importer or their supplier. Therefore, if yo u use JJB as your ISF filing agent, it is important for you to submit ISF data a nd documentation to JJB well in advance of vessel departure to avoid delays to I SF filing. JJBs policy requires that the importer or their foreign supplier provide complete and accurate ISF data/documentation to us at least 72 business hours prior to l ading aboard a vessel destined to the USA. This allows ample time for JJB to val idate accuracy and completeness, research corrections, as well as to process and file the ISF. Please communicate this requirement to all overseas suppliers as necessary. If documentation and/or data are provided to JJB USA less than 72 business hours prior to lading, JJB cannot guarantee timely filing of ISF 24 hours prior to lo

ading at the foreign port. If ISF documentation/data are provided to JJB USA AFTER sailing date of the vess el, this is considered a Known Violation. If the Importer has no Customs bond on f ile, CBP will require the purchase of a Single Transaction Bond (STB) to cover I SF liabilities before the shipment will be released. In this case, the Surety Co mpany may not approve the STB for a Known Violation without the posting of colla teral by the Importer in the form of cash or letter of credit (L/C) equal to the maximum liquidated damages liability amount of $10,000 per ISF and it could be held until the statutory period (6 years) has expired. 2. INACCURATE ISF: $5,000 per inaccurate and/or incomplete ISF filing. This incl udes missing and/or incorrect AMS bill of lading number representing the lowest level (e.g., HB/L). Incomplete or inaccurate AMS bill of lading with SCAC code at the lowest bill le vel (AMS house bill) is a very common problem. Please ensure that the bill of la ding number provided by your Carrier or Freight Forwarder is the correct and com plete number that was transmitted to CBP in AMS to avoid a mismatch. Incorrect/incomplete names and/or addresses of the parties or other required dat a can also lead to penalties. 3. AMENDMENTS: $5,000 for inaccurate or late ISF updates including an incorrect update to a flexible ISF filing. Inaccurate or incomplete data requires the filing of an ISF amendment to CBP upo n discovery. Importers must promptly forward any change in data or documentation to JJB USA that requires an ISF amendment to be filed to correct the original I SF filing. Failure to amend an incorrect ISF filing is subject to penalty. Certain flexible data elements used due to unknown facts at the time of filing mus t be corrected and transmitted to CBP no later than 24 hours prior to arrival in the USA, or is subject to penalty. WHO IS RESPONSIBLE FOR PENALTIES? Under the ISF final rule, ultimate responsibility for ISF and correctness of the data rests with you as the importer of record to accurately and completely subm it ten (10) data elements electronically to CBP no later than 24 hours prior to lading (loading) at the foreign port of lading aboard a vessel destined to the U .S.A. As a business decision, an importer may designate an agent to file ISF on their behalf, but this does not relieve the importer of liability. An importer t hat designates JJB as their ISF filing agent agrees to JJBs terms and conditions of service. WHAT ARE MY ISF BONDING OBLIGATIONS? All ocean importers are required to obtain a bond to guarantee ISF compliance. T he importer is fully responsible for liquidated damages for an ISF as the bond p rincipal. If you currently possess a Continuous Import Bond, it will be sufficie nt at this time to cover both your ISF and Customs entry filings. If you do not currently possess a Continuous Import Bond, you will be required to purchase bot h a Single Transaction Bond to secure your ISF filings as well as a Single Entry Bond to secure your Customs entry filings after the enforcement date of Jan. 26 . 2010. Accordingly, you will be billed for two separate bond charges for each a pplicable import transaction. James J. Boyle & Co. Global Reach. Individual Care 3. In India CD is Customs Duty which levied on the goods being imported and CVD is Counter Vailing Duty (Excise Duty) which imposed on the value of goods + customs duty. The rate of duty varies from product to product. 4. Difference between Detention & Demurrage Demurrage relates to cargo Charges for container space used by shipping line , t hat is paid by shipping lines to the port authorities Detention relates to equipment The container rent charges that are collected by shipping line that is exceeding the free days granted by shipping line. Elaboration : Imports A container is discharged off a ship on the 2nd July Consi

gnee approaches the shipping line to take delivery of the cargo around 12th July .. Working off a standard 7 free days from date of discharge, the line free days (different to port free days) expires on the 8th July.. So, the line will charg e the consignee DEMURRAGE for 4 days from 9th to 12th July at the rate fixed by the line.. After the full container has been picked up by the client, for example if they t ake another 7 days to return the empty container, then it is known as DETENTION which again will be charged at the rate fixed by the line.. So basically before unpacking of the cargo Demurrage is charged and after the ca rgo is unpacked till the time the empty is returned to the lines nominated depot , Detention is charged.. Exports : In the case of exports, normally lines give about 5 free days within w hich the shipper has to pick up the empty, pack it and return it full to the por t.. In case of delays more than 5 days, the line charges Detention (generally sa me tariff as import detention) for the days that the empty is kept with the clie nt as empty or full. Once the container is packed and say for example the shipper is unable to ship t he same due to any reason, then the Demurrage will be charged at the rate fixed by the line till the full container is shipped out. CUSTOMS CLEARANCE PROCESS FIRST STEP Shipping Bill Process : Shipping Bill processed with Superintendent and A.C. The y check the DEPB details. SECOND STEP Container Inspection: Inspector verifies shipping seal intact and check other de claration like self sealing & ARE-1/2 declaration and Shipping bill. THIRD STEP Shipping bill along with container inspection report presents to Superintendent and D.C. thereon for export clarance. FOURTH STEP Forwarding note issues for railout which is to be handover to CONCOR. Container release process 1. Line surveyor on the basis of DO issues Job order for release of contain er. 2. Vehicle goes to line yard along with builty and job order. Release of co ntainer cannot be made without builty. 3. Container released by another surveyor at yard. DGFT SCHEMES Advance Authorisation - Inputs required to manufacture export products can be im ported without payment of customs duty under Advance Authorisation. Advance Auth orisation can be granted to merchant exporter or manufacturer exporter to import raw materials. Since the raw materials can be imported before exports of final products, the Authorisations issued for this purpose are called advance authorisa tions. Manufacture has the meaning assigned to it in para 9.30 of EXIM Policy. This defin ition is very wide. Hence, import for mere processing will also be permissible. Advance Authorisation is issued to allow duty free import of inputs with normal allowance for wastage. In addition, fuel, oil, energy, catalysts etc. required c an also be allowed. Duty free import of mandatory spares upto 10% of CIF Value o f Authorisation, which are required to be exported with resultant products may a lso be allowed. However, prohibited items of imports cannot be imported. Advance Authorisation issued on pre-export basis (i.e. where import takes place before fulfilment of export obligation), would contain description, value and qu antity of each material permitted against it and value of export obligation to b e fulfilled. Advance authorisation issued on post-exportation basis (i.e. where import takes place after fulfilment of export obligation), would, in addition, c ontain details of exports made against the authorisation. CBE&C circular No. 24/ 2002-Cus dated 6-5-2002.

Material can also be imported free of cost, which shall be re-exported after job work, after allowing for wastage. The advance Authorisation will be for Actual User only. It is not transferable. The material imported under advance authorisation is also not transferable even after completion of export obligation. There must be positive value addition. Advance Authorisation can be issued for (a) Physical Exports (b) Intermediate Su pplies (c) Deemed Exports. Advance Authorisation for physical exports can be issued to manufacturer-exporte r or merchant-exporter tied to supplementary manufacturer. Advance Authorisation after exports can be issued on basis of actual proof of ex ports. In such case, BG/LUT [Bank Guarantee/Letter of Undertaking] is not neces sary. Advance Authorisation is valid for 12 months for import and 18 months for export . - - Export obligation under Advance Authorisation should be fulfilled within 1 8 months. In case of projects, export obligation shall be fulfilled within durat ion of execution of project. Advance authorisation can be revalidated for 6 mont hs if export obligation was fulfilled, on payment of composition fee of 1%. Furt her extension of 6 months can be obtained on payment of 5% of unfulfilled FOB Va lue as composition fee. Goods exported under Advance authorisation/DFRC/DEPB may be re-imported in the s ame or substantially same form under Duty Neutralisation Scheme. The imports of raw materials is on the basis of standard input - output norms (S ION). The SION are finalised and quantity allowed to be imported will be based o n quantity exported. The price of inputs will be as declared by applicant. Howev er, there must be positive value addition. Application for authorisation shall be made in form given in Appendix 10B to lic ensing authority of DGFT. Advance Authorisation will indicate name and description and of items to be impo rted and exported/supplied, aggregate CIF value of imports, FOB/FOR value and qu antity of exports/supplies. If quantity cannot be indicated, value shall be indi cated. If the goods are cleared from warehouse, the licence should be valid on date of clearance from warehouse. However, licence issued after date of shipment but bef ore its clearance from customs or customs bonded warehouse is acceptable. - CC, Mumbai PN 19/99 dated 10-2-1999. Goods can be exported in anticipation of advance authorisation, after submission of application to licensing authority. Annual Advance Authorisation to status holders Annual Advance Authorisation woul d be issued to status holder (export houses / trading houses / star trading hous es / super star trading houses) to enable them to import their requirements of i nputs on annual basis. Annual Advance Authorisation will be granted upto 200% of FOB value of exports in preceding financial year. There should be positive valu e addition. The authorisation is valid for 12 months for import and 18 months fo r export. No extension will be granted. The authorisation is subject to actual u ser condition. They have to give LUT (Letter of Undertaking) only and not bank guarantee. MF(DR) circular No. 25/2003-Cus dated 1-4-2003 and Customs Notificati on No. 56/2003-Cus dated 1-4-2003 Duty Entitlement Pass Book Scheme (DEPB Scheme)- The scheme is easy to administe r and more transparent. The scheme is similar to Cenvat credit scheme. The expor ter gets credit when he exports the goods. The credit is on basis of rates presc ribed. This credit can be utilised for payment of customs duty on imported goods . Provisions are contained in notification No. 45/2002-Cus dated 22-4-2002. The objective of the scheme is to neutralise incidence of customs duty on the im port content of export product. The neutralisation shall be provided by way of g rant of duty credit against the export product. Exports under DEPB scheme are allowed only when DEPB rate for the concerned expo rt product is finalised. Under this scheme, exporters will be granted duty credit on the basis of notifie d entitlement rates. The entitlement rates will be notified by DGFT. The entitle

ment rates will be a % of FOB. The entitlement rate will be fixed on basis of S ION (Standard Input Output Norms) and deemed import content. Value addition achi eved in export product will also be taken into account. Supplies made to unit in SEZ are also entitled to DEPB. MF(DR) Circular No. 25/2 003-Cus dated 1-4-2003. DEPB is issued only on post-exportation basis. Excise duty paid in cash on input s will be eligible for brand rate of duty drawback. CBE&C circular No. 24/2002-C us dated 6-5-2002. Non-transferable DEPB can be issued before realisation of export proceeds, but i f export proceeds are not realised within 6 months, full customs duty along with SAD should be paid with 15% interest. CIF Value of Imports affected under DEPB shall not exceed FOB Value against whic h DEPB has been issued. Value of exports (i.e. export earnings) should be in freely convertible currency like dollars, Euro, British Pounds, Yen etc. Thus, the DEPB scheme is not avail able in case of exports to Nepal or Bhutan where we have Rupee trade or to Russi a etc., if the export is not in hard currency. The credit will be granted on bas is of actual amount of FOB value of export realised, as per Bank certificate. The credit of duty in pass book will entitle the exporter to import raw material s, components, packaging materials etc. duty free. Goods which are otherwise eli gible for imports can be imported under the credit. However, capital goods canno t be imported under DEPB. The scheme is available to both manufacturer exporters as well as merchant expor ters. DEPB has to be registered with customs house. The DEPB rates fixed are inclusive of SAD (Special Additional Duty) w.e.f. 1-4-2 002. Hence, goods imported under DEPB scheme are not free from special additiona l customs duty. [SAD]. If DEPB credit is insufficient, excess amount of duty can be paid in cash. Two s eparate entries in Bill of Entry should be made. The CVD (additional duty) paid in cash on inputs can be utilised for availing Ce nvat credit. Export under this scheme will be under a blue coloured shipping bill so that cus toms authorities can maintain separate record. Declaration in prescribed form sh ould be made on the shipping bill. The shipping bill should give details Serial number of export product in public notice issued by DGFT specifying the rate of entitlement and rate claimed. Exports under the scheme can be made from specifie d CFS (Container Freight Station) also. Samples will be drawn for test as per guidelines issued by department. LIMIT ON CREDIT BASED ON PMV - Where DEPB rate is 10% or more, amount of credit shall not exceed 50% of PMV (Present Market Value) of the product. Customs can c heck PMV (Present Market Value) of export goods, if over invoicing is suspected. It is clarified that PMV will be verified only if there is specific intelligenc e. There will be no verification of PMV where value cap exists. EPCG scheme - Under Export Promotion Capital Goods (EPCG) scheme, a licence hold er can import capital goods (i.e. plant, machinery, equipment, components and sp are parts of the machinery) at concessional rate of customs duty of 5% and witho ut CVD and special duty. Computer software systems are also eligible. Import of spares of capital goods is permitted, without any limit. Jigs, fixtures, dies, m oulds will be allowed to the extent of 100% of CIF value of licence. Spares for existing plant and machinery can also be imported. Second hand capital goods upt o 10 year old can also be imported under EPCG scheme. EPCG authorisation is issued with validity period of 24 months. Relevant exempti on notification is 55/2003-Cus dated 1-4-2003 (earlier No. 44/2002-Cus dated 194-2002). Merchant Exporters can also import capital goods under EPCG scheme, if the capit al goods are installed in the factory of their supporting manufacturer. The name and address of supporting manufacturer should be endorsed on EPCG licence and b ond with Bank guarantee has to be executed jointly and severally by merchant exp orter and his supporting manufacturer. The basic customs duty payable is 5%. Additional Customs Duty / CVD is exempt.

Importer has to fulfil export obligation equal to eight times duty saved on impo rted capital goods to be fulfilled over a period of 8 years. In respect of EPCG authorisations for Rs 100 crore or more, the export obligation shall be required to be fulfilled over a period of 12 years. Similarly, sick companies under BIF R and units in Agri Export Zones can fulfil export obligation in 12 years. Expor t obligation for every block of two/four years has been specified. In first two years, there is no export obligation. Extension for fulfilling export obligation upto two years can be obtained. MF(DR) circular No. 25/2003-Cus dated 1-4-2003. The export obligation shall be fulfilled by export of goods capable of being man ufactured or produced by the capital goods imported under the scheme. However, g oods can be manufactured in other unit of authorisation holder also. - - Export obligation can also be fulfilled by export of other goods and services by enhanc ing export obligation. If the goods are further processed, export obligation sha ll stand enhanced by 50%. The export obligation will be over and above the avera ge level of exports of previous three years. Export shall be physical exports, but certain specified deemed exports are also permissible. Year-wise slab rates for achieving export obligation have been specified. If the goods are not exported as per the obligation, differential customs duty plus 15 % interest is payable. The importer of capital goods has to execute Letter of Und ertaking (LOU) and execute a bond. Manufacturer-exporters having exports over Rs one crore and having clean track r ecord and status holders (star trading houses etc.) can execute bond without ban k guarantee. Others will have to execute bond with bank guarantee equal to 50% o f the differential duty. The authorisation holder can also procure such machinery from India. The Indian manufacturer will be able to import components for the machinery at concessional rate of 5%. However, the export obligation will be that of licence holder and n ot of Indian machinery manufacturer. If the goods are cleared from warehouse, the licence should be valid on date of clearance from warehouse. However, licence issued after date of shipment but bef ore its clearance from customs or customs bonded warehouse is acceptable. - CC, Mumbai PN 19/99 dated 10-2-1999. CPT-Carriage Paid to "Carriage paid to..." means that the seller pays the freight for the carriage of the goods to the named destination. The risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time the good s have been delivered to the carrier is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier. "Carrier" means any person who, in a contract of carriage, undertakes to perform or to procure the performance of carriage, by rail, road, sea, air, inland wate rway or by a combination of such modes. If subsequent carriers are used for the carriage to the agreed destination, the risk passes when the goods have been delivered to the first carrier. The CPT term requires the seller to clear the goods for export. This term may be used for any mode of transport including multimodal transport. A. The seller must A.1 Provision of goods in conformity with the contract Provide the goods and the commercial invoice, or its equivalent electronic messa ge, in conformity with the contract of sale and any other evidence of conformity which may be required by the contract.

A.2. Licences, authorisations and formalities Obtain at his own risk and expense any export licence or other official authoris ation and carry out all customs formalities necessary for the exportation of the goods. A.3. Contract of carriage and insurance a) Contract of carriage Contract on usual terms at his own expense for the carriage of the goods to the agreed point at the named place of destination by a usual route and in a customa ry manner. If a point is not agreed or is not determined by practice, the seller may select the point at the named place of destination which best suits his pur pose. CFR-Cost and Freight "Cost and Freight" means that the seller must pay the costs and freight necessar y to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any additional costs due to events occurring af ter the time the goods have been delivered on board the vessel is transferred fr om the seller to the buyer when the goods pass the ship s rail in the port of sh ipment. The CFR term requires the seller to clear the goods for export. This term can only be used for sea and inland waterway transport. When the ship s rail serves no practical purpose, such as in the case of roll-on/roll-off or c ontainer traffic, the CPT term is more appropriate to use. CIF-Cost, Insurance and Freight "Cost, Insurance and Freight" means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer s risk of loss of or damage to the goods during the carriage. The sell er contracts for insurance and pays the insurance premium.

The buyer should note that under the CIF term the seller is only required to obt ain insurance on minimum coverage. The CIF term requires the seller to clear the goods for export. This term can only be used for sea and inland waterway transport. When the ship s rail serves no practical purposes such as in the case of roll-on/roll-off or c ontainer traffic, the CIP term is more appropriate to use. DDP-Delivered Duty Paid "Delivered duty paid" means that the seller fulfils his obligation to deliver wh en the goods have been made available at the named place in the country of impor tation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation. Whilst t he EXW term represents the minimum obligation for the seller, DDP represents the maximum obligation. This term should not be used if the seller is unable directly or indirectly lo o btain the import licence. If the parties wish the buyer to clear the goods for importation and to pay the duty, the term DDU should be used. If the parties wish to exclude from the seller s obligations some of the costs p ayable upon importation of the goods (such as value added tax(VAT)), this should be made clear by adding words to this effect: "Delivered duty paid, VAT unpaid ... (named place of destination)". DDU-Delivered Duty Unpaid

"Delivered duty unpaid" means that the seller fulfils his obligation to deliver when the goods have been made available at the named place in the country of imp ortation. The seller has to bear the costs and risks involved in bringing the go ods thereto (excluding duties, taxes and other official charges payable upon imp ortation) as well as the costs and risks of carrying out customs formalities. Th e buyer has to pay any additional costs and to bear any risks caused by his fail ure to clear the goods for import in time. If the parties wish the seller to carry out customs formalities and bear the cos ts and risks resulting therefrom, this has to be made clear by adding words to t his effect. If the parties wish to include in the seller s obligations some of the costs pay able upon importation of the goods (such as value added tax(VAT)), this should b e made clear by adding words to this effect: "Delivered duty unpaid, VAT paid, . .. (named place of destination)". DEQ-Delivered Ex Quay (duty paid) "Delivered Ex Quay (duty paid)" means that the seller fulfils his obligation to deliver when he has made the goods available to the buyer on the quay(wharf) at the named port of destination, cleared for importation. The seller has to bear a ll risks and costs including duties, taxes and other charges of delivering the g oods thereto. This term should not be used if the seller is unable directly or indirectly to o btain the import licence. If the parties wish the buyer to clear the goods for importation and pay the dut y the word duty unpaid should be used instead of "duty paid". If the parties wish to exclude from the seller s obligations some of the costs p ayable upon importation of the goods (such as value added tax(VAT)), this should be made clear by adding words to this effect; "Delivered ex quay, VAT unpaid .. .(named port of destination)". EXW-Ex Works "Ex works" means that the seller fulfils his obligation to deliver when he has m ade the goods available at his premises (i.e. works, factory, warehouse, etc) to the buyer. In particular, he is not responsible for loading the goods on the ve hicle provided by the buyer or for clearing the goods for export, unless otherwi se agreed. The buyer bears all costs and risks involved in taking the goods from the seller s premises to the desired destination. This term thus represents the minimum obligation for the seller. This term should not be used when the buyer cannot carry out directly or indirec tly the export formalities. In such circumstances, the FCA term should be used. FAS-Free Alongside Ship-(named port of shipment) "Free Alongside Ship" means that the seller fulfils his obligation to deliver wh en the goods have been placed alongside the vessel on the quay or in lighters at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the buyer to clear the goods for export. It should not be used when the buyer cannot carry out directly or indirectly the export formaliti es. This term can only be used for sea or inland waterway transport. FCA-Free Carrier-(named place) "Free Carrier" means that the seller fulfils his obligation to deliver when he h as handed over the goods, cleared for export, into the charge of the carrier nam ed by the buyer at the named place or point. If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the

carrier shall take the goods into his charge. When, according to commercial pra ctice, the seller s assistance is required in making the contract with the carri er (such as in rail or air transport) the seller may act at the buyer s risk and expense. This term may be used for any mode of transport, including multimodal transport. "Carrier" means any person who, in a contract of carriage, undertakes to perfor m or to procure the performance of carriage by rail, road, sea, air, inland wate rway or by a combination of such modes. If the buyer instructs the seller to del iver the cargo to a person, e.g. a freight forwarder who is not a carrier , the seller is deemed to have fulfiled his obligation to deliver the goods when they are in the custody of that person. "Transport terminal" means a railway terminal, a freight station, a container te rminal or yard, a multipurpose cargo terminal or any similar receiving point. "Container" includes any equipment used to unitise cargo, e.g. all types of cont ainers and/or flats, whether lSO accepted or not, trailers, swap bodies, ro-ro e quipment, igloos, and applies to all modes of transport. FOB-Free on Board-(named port of shipment) "Free on Board" means that the seller fulfils his obligation to deliver when the goods have passed over the ship s rail at the named port of shipment. This mean s that the buyer has to bear all costs and risks of loss of or damage to the goo ds from that point. The FOB term requires the seller to clear the goods for export. This term can only be used for sea or inland waterway transport. When the ship s rail serves no-practical purpose. such as in the case of roll-on/roll off or co ntainer traffic the FCA term is more appropriate to use.

EXPORT PROCEDURES IN CENTRAL EXCISE In relation to Central Excise and customs, following are the concessions/incenti ves for exports: (1) Exemption from duty on final products (or refund of duty paid). (2) Exemption/Refund of excise and customs duties paid on inputs. INPUTS FREE OF DUTY - Exporting units need raw materials without payment of cust oms/excise duty, to enable them to compete with world market. Government has dev ised following schemes for this purpose: (a) Special Economic Zones at various p laces where inputs are allowed to be imported without payment of duty and finish ed goods are exported. (b) Export Oriented Undertakings (c) Permission to avail Cenvat on inputs for other similar products (d) Refund of duty on inputs if Cenv at credit cannot be used (e) Duty Drawback Scheme. Elaborate procedures have bee n prescribed for the above, to ensure that the benefits are not misused. EXPORTS FREE OF DUTY ON FINISHED PRODUCT - Exports of almost all excise goods ex cept hides, skin and leather and salt and exports to all countries except to Nep al and Bhutan are exempt from Central Excise Duties. Exports to Nepal and Bhutan do not qualify for export incentives as payment is received in Indian rupees. H owever, export rebate can be obtained if export to Nepal is made (a) on payment of free convertible foreign exchange or (b) for specified capital goods to Gover

nment of Nepal against global tender, even if payment is received in Indian curr ency. EVEN INPUTS RECEIVED BY THE FACTORY CAN BE EXPORTED AS SUCH WITHOUT PAYMENT OF E XCISE DUTY. IF MANUFACTURER HAD AVAILED CENVAT CREDIT OF DUTY ON SUCH INPUTS, IT NEED NOT BE REVERSED [THE CENVAT CREDIT CAN BE UTILISED FOR PAYMENT OF DUTY ON PRODUCTS CLEARED FOR HOME CONSUMPTION]. EXPORT CAN BE MADE WITHOUT PAYMENT OF ALL TYPES OF DUTIES LIKE BASIC, SPECIAL, A DE(GSI) AND ADE (TTA) - CHAPTER 7 PART I PARA 1.1 OF CBE&CS CE MANUAL, 2001. EXPORT PROCEDURES FOR EXCISE - There are basically two procedures for dispatchin g the goods out of India. (a) In the first procedure, duties are paid and subseq uently rebate (refund) is claimed after exportation of such goods. Alternatively , rebate is granted of duty paid on inputs used in the exported final product. ( Rule 18 of Central Excise Rules). (b) Another procedure is to export goods under bond without payment of excise duty. On actual exportation of goods and on pres entation of necessary proofs regarding exports, the bond is released. Regular Ex porters can have a running bond for this purpose. (Rule 19 of Central Excise Rul es). CBE&C has clarified that exports under claim of rebate and export under bond are at parity, since intention of both the procedures is to make duty incidence Nil . - CBE&C circular No. 283/117/96-CX dated 31-12-1996. General procedures for exports Export can be under bond without payment of duty or after payment of duty and then claiming rebate. Some procedures are common. T hese are discussed first. DOCUMENTS FOR EXPORT - THE GOODS HAVE TO BE CLEARED FROM FACTORY UNDER INVOICE. IN ADDITION TO THE INVOICE, A PRESCRIBED FORM ARE-1 HAS TO BE FILLED IN BY EXPOR TER. [EARLIER AR-4]. INVOICE FOR EXPORT Invoice for export can be from same series from which goods f or home consumption are cleared or a separate series of invoice can be maintaine d for export. General permission has been given to maintain separate series of I nvoice for export purposes. The Invoice should be prominently marked as FOR EXPOR T WITHOUT PAYMENT OF DUTY. COPIES AND COLOUR OF ARE-1 FORM - The copies of ARE-1 form should have following colour : (i) Original : White. (ii) Duplicate: Buff (iii) Triplicate: Pink (IV) Quadruplicate: Green. Assessee can optionally have quintuplicate form which can be used for claiming other export incentives. - - It is sufficient if copies of ARE-1 (that time AR-4) contain a colour band on the top or right hand corner as per the aforesaid colour scheme. Thus, it is possible to take out copies on pla in/computer stationery and affix colour band. The Assessable Value as per section 4 of CEA should be mentioned on ARE-1 and the Invoice. In view of new section 4, Transaction Value is Assessable Value. Hence, strictly legally, the value can be equal to, less or more than FOB Value. [ Practically, FOB Value is usually accepted as value]. The running bond account sho uld be debited by value as shown in the Invoice and ARE-1. HANDLING OF ARE-1 FORMS - If export consignment is cleared under supervision of Excise Superintendent or Inspector, the excise officer will make endorsement on all copies of ARE-1. He will return original and duplicate copies to the exporte r-assessee. He will send triplicate copy of ARE-1 directly to officer to whom bo nd was executed or letter of undertaking was given. This copy can also be handed over to the exporter in a tamper proof sealed cover to be submitted to the auth ority. Quadruplicate copy will be retained by excise officer. Exporter can have optionally quintuplicate copy which will be dealt with in same manner as the ori ginal copy. At the time of export, original, duplicate and quintuplicate (optional) will be submitted to customs officer, along with the goods. These will be examined and t hen export will be allowed. He will make endorsement of export on all copies of ARE-1. He will cite shipping bill number and date and other particulars of expor t on ARE-1. Original and quintuplicate (optional) will be returned to exporter. The duplicate copy will be sent directly by customs officer to the officer with whom bond was executed or to whom letter of undertaking was given. The duplicate copy can be sent either by post or by handing over to the exporter in tamper pr

oof sealed cover. Thus, the officer where bond is executed will get two copies one from Superinten dent of Central Excise when goods are cleared from factory and other from custom s officer after export. This will enable him to keep track to ensure that all go ods cleared from factory or warehouse without payment of duty are actually expor ted. If the goods are sent under self sealing and self certification, the export good s along with original, duplicate and quintuplicate (optional) copies of ARE-1 wi ll be sent after self sealing and self certification to the port for export. [Th ere will be no endorsement of excise officer on these copies]. Triplicate and qu adruplicate copies will be submitted to Superintendent or Inspector of Central E xcise within 24 hours after clearance from the factory. The excise officer will make endorsement on both the copies and then hand over triplicate copy to export er in sealed envelope for submitting the same to authority to whom bond or lette r of undertaking was given. Further procedure at the port will be same as above. In case of export after payment of duty, under claim of rebate, the basic proced ure is same as above, except that the triplicate copy (by excise officer) and du plicate copy (by customs officer) will be sent to the officer to whom rebate cla im is filed. If claim of rebate is by electronic submission, these copies will b e sent to excise rebate audit section at the place of export. SIGNING OF ARE-1 FORM The ARE-1 form is required to be signed by manufacturer. I f the export is under bond executed by Merchant Exporter, the form should be sig ned by both manufacturer as well as Merchant Exporter. Sealing of goods for export - Goods can be cleared from factory duly sealed. Goo ds can be cleared for export without sealing also. Self sealing and self certifi cation is also permissible. CLEARANCE WITH SEAL OF CENTRAL EXCISE - In this method, export goods are examine d before despatch by Central Excise Officers. In such case, the goods are not ex amined by Customs Officers at the port or airport of shipment, unless seals are found to be tampered or if there is specific information. The CE officer will verify the goods, DSA and documents. If these are in order, he will seal the consignment. Sealing can be done of each package or container. Individual packages may be sealed by using wire and lead seals. An all side cont ainer may be sealed by using one time lock / bottled seals. The officer will the n make necessary endorsement on ARE-1. FACTORY STUFFING OF CONTAINERS - Now most of the exports are through containers. Goods can be stuffed in containers at inland container depots (ICDs) situated i n various places. Stuffing of containers inside the factory, under supervision o f central excise officers is also permissible. Pre-shipment quality inspection, where required, should be carried out before stuffing. After the inspection by C entral Excise Inspector and Superintendent, samples will be taken out as per gui delines. Then, the container is sealed. The Superintendent of Central Excise shall send an examination report of factory sealed packages/containers in form Annexure C1 as given in CBE&C circular No. 6 /2002-Cus dated 23-1-2002. It has been reiterated that the examination report mu st accompany the export goods to port/airport of export. CBE&C circular No. 630/ 21/2002-CX dated 27-3-2002. After such sealing, the containers are not normally opened at the port, unless t he seal is found to be tampered with or there is specific intelligence, in which case, permission of AC/DC is required before checking. CONSOLIDATION OF CARGO OF DIFFERENT EXPORTERS Often export goods of more than on e manufacturers is required to be consolidated. For this, export goods of one fa ctory have to be taken to another factory. This is permissible if done under sup ervision of excise authorities. - Chapter 7 Part V Para 4.1 and chapter 8 part I V para 3 of CBE&Cs CE Manual, 2001. CLEARANCE WITH SELF-SEALING -. Any exporter who is a manufacturer or owner of wa rehouse can clear export consignment with self sealing and self certification. S uch sealing should be done under supervision of owner, working partner, managing director or Company Secretary or a person duly authorised by such owner, workin g partner or Board of Directors of the company.

He should certify on all copies of ARE-1 that goods have been sealed in his pres ence. If such certification is not done, the packages may be opened at port for detailed customs examination. CCE, Rajkot TN 91/2001 dated 25.10.2001. At the gateway port, examination will be carried out as per norms. It is clarif ied that self-certification and self-sealing is permissible, but these will be e xamined at the port of export on the basis of examination norms prescribed under circular No. 6/2002-cus dated 23-1-2002. MF(DR) circular No. 31/2002-Cus dated 7-6-2002. - - The permission for factory stuffing will be given on permanent bas is and need not be renewed every 6 months. CBE&C circular No. 60/2001-Cus dated 1.11.2001. SELF SEALING EVEN IF EXPORT THROUGH MERCHANT EXPORTER Self sealing is permitted even when goods are exported through merchant exporter. The sealing will be done by manufacturer following the same procedure as above. Removal under bond without payment of duty The basic procedures for removal of g oods without payment of duty under rule 19 are (a) Execute a bond (in case of me rchant exporter) or issue letter of undertaking (in case of manufacturer exporte r) (b) Clear goods from factory under bond without payment of duty (c) Export th e goods and obtain certificate of export on ARE-1 from customs authorities. Subm it the proof of export and get self-credit in Running Bond Account. - - The proc edures are prescribed in Notification No. 42/2001-CE(NT) dated 26.6.2001. ALL DUTIES EXEMPT INCLUDING NCCD CBE&C has clarified that National Calamity Cont ingent Duty (NCCD) is also exempt when goods are exported under bond. It is poli cy of Government to grant relief from domestic taxes on goods which are exported . CBEC circular No. 641/32/2002-CX dated 26-6-2002. BOND BY MERCHANT EXPORTER Merchant exporter is required to execute a bond. The bond can be executed by merchant-exporter in form B-1. Merchant exporter registe red with recognised Export Promotion Council and Status Holders (Export House, T rading Hose etc.) do not have to furnish any security/surety while executing bon d, unless they have come to adverse notice of department. CBE&C circular No. 613 /4/2001-CX dated 31-1-2002, confirmed in CBE&C circular No. 711/27/2003-CX dated 30-4-2003. - - - If bond is executed by merchant exporter, he will obtain cert ificates in form CT-1 from Superintendent of Central Excise. The exporter shall ensure that debit in bond does not exceed the credit availabl e in the bond any time. Goods can be cleared by manufacturer on the strength of this certificate, without payment of duty. Forms of bond, letter of undertaking and CT-1 certificate have been given in Notification No. 42/2001-CE(NT). If expo rt is through merchant exporter, ARE-1 form should be signed both by manufacture r as well as merchant exporter. TYPES OF BOND FOR EXPORT - The exporter has to execute B-1 bond. The bond can be with surety or security or only guarantee. The bond should be at least equal to the duty chargeable on the goods, with such surety or security as the excise of ficer may approve. [For instructions about security / surety etc. see under Bonds] WHERE BOND CAN BE EXECUTED The bond can be executed with any one of the followin g (a) Maritime Commissioners (b) Asstt. / Dy Commissioner under whose jurisdicti on the factory is situated. (c) Assistant / Deputy Commissioner (Export) as offi cer authorised by Board. The ARE-1 should clearly indicate the full postal address of authority before wh om the bond is executed, so that documents are submitted / transmitted to him fo r proof of export. PROCEDURE OF CT-1 CERTIFICATE The merchant exporter can obtain CT-1 forms in lot of 25. Part I of the form is certified by Superintendent of CE regarding bond e xecuted. It is not necessary to obtain CT-1 for each consignment separately. CT1 forms in lot of 25 should be issued to merchant exporter covering period of on e to three months, depending on his track record. The merchant exporter shall se nd CT-1 form to the manufacturer from whom goods are to be procured for export. Before sending CT-1, the merchant exporter should debit estimated amount of duty liability. This amount is required to be specified in part II form CT-1. On the basis of this CT-1, the manufacturer can clear goods for export without payment of duty by making suitable entries in part II of CT-1. This provisional debit w ill be converted into actual debit after the goods are cleared from the place of m

anufacturer. - Chapter 7 Part II Para 6.2 and 6.2-1 of CBE&Cs CE Manual, 2001. LETTER OF UNDERTAKING - The manufacturer exporter can furnish a letter of undert aking (LUT) in form UT-1 as given in Annexure II of Notification No. 42/2001-CE( NT). The manufacturer exporter need not execute a bond. The LUT once given is va lid for 12 calendar months. It is not necessary to submit LUT for each consignme nt. Though manufacturer exporter is not executing bond, submission of proof of e xport is required. If the manufacturer exporter repeatedly fails to comply with conditions of LUT, he can be asked to furnish B-1 bond with security / surety. T he LUT will not be discharged unless proof of export is submitted or duty is pai d upon deficiency with interest. - Chapter 7 Part II Paras 3.3 and 3.5 of CBE&Cs CE Manual, 2001. PROCEDURE AT THE TIME OF EXPORT - THE EXPORTER OR HIS AGENT WILL SUBMIT COPIES O F ARE-1 FORM TO CUSTOMS OFFICER AT THE TIME OF EXPORT. THESE WILL BE ENDORSED BY HIM CERTIFYING EXPORT OF GOODS. THIS WILL SERVICE AS PROOF OF EXPORT. RUNNING BOND ACCOUNT The merchant exporter will maintain a Running Bond Account (R BA). Once bond is executed, the RBA will be credited by the bond amount i.e. the amount for which bond is executed. A manufacturer exporter does not execute a bond and hence need not maintain Runn ing Bond Account. However, he should maintain similar record and submit proof of export following same procedure. EXPORT WITHIN 6 MONTHS - Goods must be exported within 6 months from date of rem oval from the factory, unless extension is granted. Extension can be granted by AC / DC / Maritime commissioner. - Chapter 7 Part II Para 2.2(i) of CBE&Cs CE Man ual, 2001. PROOF OF EXPORT The exporter will get copy of ARE-1 with certificate from custom s authorities certifying export of goods. The duplicate copy of ARE-1 will be ob tained in sealed envelope to be submitted to the authority with whom the bond is executed. The exporter is required to submit a statement at least once a month to the authority with whom bond is executed. If bond was executed with jurisdict ional AC / DC, the statement should be submitted to him through range office. Th e statement will be in form as given in Annexure 19 of CBE&Cs CE Manual, 2001. As sessee should submit duly certified copy of ARE-1, self attested copy of Bill of Lading and self attested copy of Shipping Bill (export promotion copy). This st atement will be immediately acknowledged by office of bond accepting authority. On submission of the statement, the assessee can take credit in his running bond account. It is not necessary to wait for their approval or permission. The exci se office will verify the correctness of statement and match ARE-1 sullied by ra nge office with triplicate copy which is already with them. If goods are not exp orted within 6 months or extended period permitted, action for recovery should b e initiated. - Chapter 7 Part II Paras 13.1 to 13.6 of CBE&Cs CE Manual, 2001. CONTROL OF BOND - Control over bond is exercised by the authority before whom th e bond is executed and all proofs of export have to be submitted to that authori ty. Any demand for duty in case goods are not exported will have to be raised by authority before whom the bond is executed. Bombay Dyeing and Mfg Co In re 2001 (134) ELT 591 = 45 RLT 860 (GOI) quoted and followed in Supreme Industries Ltd. In re 2002(144) ELT 729 (GOI). CHANGE OF DESTINATION OR BUYER If exporter intends to change destination or buye r or port / place of export after goods were cleared for export, he can do so. H e should submit details to authority with whom bond was executed and make necess ary changes in ARE-1 and Invoices. Alternatively, he can cancel previous invoice and ARE-1 and prepare fresh invoice and ARE-1 with permission and authenticatio n by bond / LUT accepting authorities. The serial number and date of initial doc uments are endorsed on the fresh documents. - Chapter 7 Part V Para 1.2 of CBE&Cs CE Manual, 2001. EXPORT UNDER CLAIM OF REBATE - THE REBATE OF EXCISE DUTY PAID ON EXPORTED GOODS IS GRANTED UNDER RULE 18. THE PROCEDURE HAS BEEN PRESCRIBED IN NOTIFICATION NO 4 0/2001-CE(NT) DATED 26.6.2001, SUPPLEMENTED IN CHAPTER 8 PART I OF CBE&CS CE MANU AL, 2001. The rebate is available on all exports except exports to Nepal and Bhutan. In ca se of Nepal, the rebate is granted to Government of Nepal. In case of export to

Nepal, Invoice in prescribed form has to be prepared and prescribed procedure ha s to be followed. CLEARANCE WITHOUT BOND, BUT UNDER FORM ARE-1 - Export under claim for rebate sho uld be made under ARE-1 form. Since the goods are being cleared after full payme nt of duty, execution of any bond is not necessary. Copies of ARE-1 form and its distribution is same as that for export under bond. Export can be under seal of Central Excise or without seal. Procedure for export and distribution of copies of ARE-1 after export is also identical. REBATE CLAIM - The rebate claim can be filed with Maritime Commissioner (if ther e is one for the port/airport/post). As per section 11B of CEA, claim must be fi led within one year from date of export. Rebate claim can also be lodged with ju risdictional Assistant / Deputy Commissioner of Central Excise. Authorities are expected to point out deficiencies in application within 15 days. Rebate claim b elow Rs 500 is not acceptable. No form has been prescribed for submitting applic ation for rebate. Application on letter head is sufficient. - - Supplementary Re bate Claim can also be filed, but that claim also must be within time limit. - C hapter 8 Part IV of CBE&Cs CE Manual, 2001. DUTY CAN BE PAID BY CASH OR CENVAT CREDIT - It is not necessary that rebate can be obtained only if duty is paid by cash. Duty on final products can be paid eit her through cash or PLA or Cenvat credit ( that time RG23A part II or RG23C part II) - CBE&C Circular No 262/96/96-CX 6 dated 6.11.1996. RESTRICTIONS ON GRANT OF REBATE - The rebate will not be granted if (i) The mark et price of goods exported is less than the amount of rebate. (ii) The amount of rebate of duty is less than Rs. 500. WHEN REBATE PROCEDURE MAY BE USEFUL - It is naturally advisable not to pay duty, than to pay it and then wait for refund from Government. However, in following situations, it may be beneficial to pay duty and claim rebate If assessee has balance of duty in Capital Goods Cenvat Credit Account, it will be advisable to pay duty and claim refund, as balance in Capital goods C envat Credit Account is never refundable. This may happen when duty paid on capi tal goods is heavy and assessee may not be able to utilise the credit. An SSI unit may pay 60% duty and claim rebate, as getting refund of Cenv at credit of inputs is not an easy procedure. Moreover, he is not entitled to ge t refund of duty paid on capital goods. When duty paid goods are proposed to be exported. DUTIES ELIGIBLE FOR REBATE Following duties are eligible for rebate (a) Basic Dut y paid under Central Excise Act (b) Special excise duty (c) ADE (GSI) and (d) AD E (TTA). Explanation I to Notification No. 40/2001-CE(NT). Rebate of duty on inputs used in manufacture of export goods - Some times, final goods may be exempt from duty. In such case, the exporter can claim rebate of d uty paid on excisable materials used in manufacture of export goods, except in c ase of export to Nepal and Bhutan. Provision for granting such rebate is made in rule 18 of CE Rules. Input output ratio has to be informed to AC/DC. Goods can be procured at concess ional rate of duty by following procedure prescribed under Central Excise (Remov al of Goods at concessional rate of duty for manufacture of excisable goods), Ru les. Inputs can be sent outside for job work and return. Export is required to b e made under form ARE-2. After export, rebate claim should be filed. Procedure a nd form has been specified in Notification No. 41/2001-CE(NT) dated 26.6.2001. Inputs free of Central Excise duty - A manufacturer of export goods can get his inputs without payment of Central Excise Duty. Input output ratio should be info rmed to Assistant / Deputy Commissioner. Goods can be procured without payment o f duty by following procedure prescribed under Central Excise (Removal of Goods at concessional rate of duty for manufacture of excisable goods), Rules. Inputs received can be sent outside for job work and return. Final product has to be ex ported. Clearance for export is required to be made under form ARE-2. See Notifi cation No. 43/2001-CE(NT) and Chapter 7 Part VI of CBE&Cs CE Manual, 2001 for det ailed procedure. Exports to Nepal/Bhutan - India has Rupee trade with Nepal and Bhutan and hence export incentives are not available if goods are exported to Nepal/Bhutan. The c

learance should be on normal Invoice on payment of duty. Invoice should mention F or Exports to Nepal/Bhutan (as the case may be) and make declaration in prescribe d form. Extra copy of Invoice should be made, which is to be used at India-Nepal border. After the goods are exported to Nepal, rebate is given to Government of Nepal (and not to the exporter). There is no rebate system for export to Bhutan . Detailed procedure has been prescribed in para 4 of Notification No. 40/2001-CENT dated 26.6.2001 supplemented in Chapter 8 Part II of CBE&Cs CE Manual, 2001. Invoice in prescribed form has to be prepared in quadruplicate. This will be end orsed by excise officer. Its copies should be submitted at land customs station at Nepal border. Then, the goods along with Invoice will be handed over to Nepal ese customs officer. The Nepalese customs Officer will have to endorse details o f effective rate of duty if goods are imported from country other than India and the amount of import duty assessed. After his endorsement on the Invoice, the d uplicate copy will be sent to Indian customs office who will then forward it to Director General of Inspection, Customs & Central Excise (Nepal Refund Wing), Ne w Delhi. After verification, the rebate will be paid to His Majestys Government o f Nepal (and not to the exporter). Exports to Nepal / Bhutan without payment of duty - Export to Nepal/Bhutan are a llowed under bond without payment of duty if (a) payment is to be received in co nvertible foreign exchange or (b) Export of specified capital goods exported to Nepal against global tender issued by Government of Nepal or export against some specified projects. The procedure and conditions are given in Notification No. 45/2001-CE(NT) dated 26.6.2001. It is further elaborated in Chapter 7 Part IV o f CBE&Cs CE Manual, 2001. EXPORT INCENTIVES THROUGH CENVAT - CENVAT CREDIT AVAILED ON INPUTS USED FOR EXPO RTED GOODS CAN BE USED FOR PAYMENT OF DUTY ON OTHER SIMILAR PRODUCTS CLEARED FOR HOME CONSUMPTION (I.E. WITHIN INDIA). IF IT CANNOT BE USED, REFUND CAN BE OBTAI NED. THIS ASPECT HAS BEEN DISCUSSED UNDER CENVAT. CERTIFICATE REGARDING NON-AVAILMENT OF CENVAT ON INPUTS IF DUTY DRAWBACK TO BE C LAIMED (A) IF THE MANUFACTURER-EXPORTER OR SUPPORTING MANUFACTURER OF MERCHANT E XPORTER IS REGISTERED WITH CENTRAL EXCISE, FACT OF NON-AVAILMENT OF CENVAT CREDI T CAN BE VERIFIED FROM ARE-1 FORM FURNISHED (B) IF THE MANUFACTURER-EXPORTER OR SUPPORTING MANUFACTURER OF MERCHANT EXPORTER IS NOT REGISTERED WITH CENTRAL EXCI SE, THEY HAVE TO SUBMIT SELF-DECLARATION ABOUT NON-AVAILMENT OF CENVAT. MF(DR) C IRCULAR NO. 8/2003-CUS DATED 17-2-2003. The drawback rate consists of two components - customs portion (consisting of ba sic customs duty, surcharge and SAD) and excise portion (consisting of basic exc ise duty, special excise duty and CVD). The Cenvat credit is only in respect of central excise. Hence, it has been clarified that even if Cenvat credit has been availed, duty drawback in respect of customs portion will be available. Export procedures by exempt SSI units and manufacturers of readymade garments Small Scale Industries and manufacturers of readymade garments which are exempte d from Central Excise Duty on account of their turnover below prescribe limit, d o not have to follow ARE-1 and bond procedure. However, they have to follow simpl ified procedure as specified in Chapter 7 Part III Paras 1 to 4 of CBE&Cs CE Manua l, 2001. [The simplified procedure is really quite complicated]. The simplified procedure is applicable to exporters of readymade garments, i.e. they can clear under their own documents and ARE-1 procedure is not required. CB E&C circular No. 705/21/2003-CX dated 8-4-2003. (a) Clearance should be under own invoice of the SSI unit. The SSI unit need not have separate series of Invoice for export (b) The Invoice should be machine se rial numbered (or by franking machine) starting from 1 from 1st April every year (c) Invoice should be pre-authenticated by the SSI unit himself (d) Invoice sho uld indicate name and address of buyer, destination, description, value, progres sive total of total value of excisable goods cleared for home consumption since beginning of financial year, transport vehicle number, date and time of removal of goods from his factory. (e) If the export is direct, the SSI unit should ment ion "FOR EXPORT" on top and his own Export-Import Code Number, if any. If export is through merchant exporter, manufacturer should mention at top of Invoice -

EXPORT THROUGH MERCHANT EXPORTER . Export Import code No. of such merchant expor ter should be mentioned in such case. The SSI unit should maintain a simple record of production and clearance. Entrie s in production record should be made at close of the day or beginning of next d ay. No entry is necessary on the days when there is no production. The SSI unit should file a quarterly statement to jurisdictional Range Superintendent in pres cribed form given in Annexure 20 of CE Manual, 2001. Bringing goods for repairs, re-making etc. It is often necessary to bring the final products for various purposes like refi ning, repairs, re-making, reconditioning, testing etc. Rule 16 of Central Excise Rules make provisions in this regard. Procedure for receipt and clearance - As per the provisions, if the goods are br ought for being re-made, refined, re-conditioned or for any other reason, assess ee should take Cenvat credit of duty paid as if such goods are received as input s under Cenvat Credit Rules. Goods can be brought for any other reason. Thus, if goods are returned to assessee by buyer as they were in excess or if buyer refuses to accept the goods, the go ods can be brought back. There is no time limit for bringing goods for repairs a nd goods can be brought any time. GOODS MANUFACTURED BY OTHERS CAN ALSO BE BROUGHT FOR REPAIRS ETC. - Rule 16 use s the words, brought to the factory. Thus, the goods brought for repairs/reconditi oning /refining need not have been manufactured by assessee. Goods manufactured by any other person can be brought in the factory for repairs etc. However, if s uch goods brought are not accompanied by duty paying document, permission from C ommissioner under rule 16(3) will be required. DOCUMENT FOR AVAILING CENVAT CREDIT - If the person sending the goods sends good s under his invoice after payment of duty, Cenvat credit can be taken on the bas is of that invoice. However, such credit can be taken even on the basis of own I nvoice which was raised when the goods were originally cleared. In Gujarat Conta iners Ltd. v. CCE 2000(125) ELT 495 (CEGAT), it has been held that assessee can take Cenvat credit on basis of his own invoice on returned goods. In the opinion of author, Cenvat credit can be availed even on the basis of trip licate copy of invoice which is in record of assessee. The reason for the view i s that triplicate copy is also an invoice issued under Central Excise Rules. [Howeve r, a Xerox copy is not an invoice issued under Central Excise Rules]. REMOVAL AFTER REPAIRS / RE-MAKING ETC. - At the time of clearance, duty should b e paid under Invoice as follows - (a) If the process carried out on the goods br ought amounts to manufacture, assessee should pay duty at the rate applicable on date of removal. Value shall be determined under section 3(2), 4 or 4A as appli cable. (b) If the process does not amount to manufacture, an amount equal to Cenva t credit taken at the time of receipt of final product is payable. The buyer can avail Cenvat credit of this amount. [rule 16(2)]. - - The Cenvat credit available with assessee can be utilised for payment of duty payable under rule 16(1) or amou nt payable under rule 16(2). [Cenvat Credit Rule 3(3)(d)]. GOODS CAN BE SENT TO ANYONE AFTER REPAIRS - Note that after repairs, recondition ing etc., goods can be sent to any one. There is no requirement that goods must be sent only to the person from whom these were received. GOODS BROUGHT THEMSELVES MUST BE REPROCESSED Note that the goods brought must th emselves be reprocessed and then sent. If the goods brought are scrapped and fre sh goods are sent, it is new manufacture. Fresh duty is payable and Cenvat credi t of goods returned cannot be availed. CENVAT CREDIT OF AMOUNT The buyer can avail Cenvat credit of amount paid under rule 16(2) Explanation to Rule 16(2). If above procedure cannot be followed - At times, it may not be possible to foll ow aforesaid procedure. e.g. (a) the Invoice on which original goods were cleare d may not be available, or (b) the invoice may be for full machine, out of which only some components might have been brought back for repairs / reconditioning. There might be any other reason too. If there is any difficulty in following the procedure, permission has to be obtained from Commissioner for bringing the goo

ds for repairs, reconditioning etc. PROCEDURE PRESCRIBED The assessee should obtain prior permission in obtaining su ch goods. If obtaining prior permission is not possible, intimation about receip t of goods should be given to Range Superintendent within 24 hours and then appl y for permission through Range Superintendent in triplicate, indicating reasons for not applying in advance. Proper records should be maintained. The goods shou ld be re-cleared within six months or the extended period as may be permitted by Commissioner. - CCE Pune-I TN 66/2001 dated 5.10.2001 * CCE, Ahmedabad II TN 20 /2003 dated 6-2-2003 [152 ELT T46] Bonds under Central Excise The word bond is used quite often in excise and customs e.g. manufacture under bon d, clearance under bond, export under bond etc. Bond means an undertaking given by the assessee to Government for due fulfilment of certain obligation e.g. export under bond means a bond that goods cleared without payment of duty from factory f or export will be exported and if not, appropriate duty will be paid. Bond is an instrument by which the obligation to pay money is created expressly. It is also a legal agreement whereby a person undertakes to do or not to do any thing subject to conditions stipulated in the agreement. Primary purpose of the bond is to secure due compliance with the rules and procedures laid down under C E Law. A bond is a collateral security, which the department is securing to ensu re payment of appropriate duty, in addition to the statutory provisions availabl e. - Chapter 14 Para 1.1 of CBE&Cs CE Manual, 2001. NATURE OF BOND - Bond is an agreement where a person executing a bond undertakes to fulfil certain conditions as per agreement. Bond does not need registration unless it relates to immovable property. Primary purpose of bond under excise is to secure due compliance with rules and procedures as per Act and Rules and to provide for payments to be made if the conditions are not complied with. Bond is a supplementary security which the Central Excise department can take in additi on to provisions of duty payment. Thus, duty can be recovered under law even if bond is not executed or bond amount is not adequate. Execution of Bonds - Assessee has to execute bond under various provisions of Ac t. Form of bond has been standardised by excise department and numbers have been given for identification. Bonds should be executed on a non-judicial stamp pape r. If adhesive stamps are affixed to any instrument chargeable to duty, the stam ps shall be cancelled so that it cannot be used again. Such cancellation may be done by drawing two lines across or by signing on the stamp or in any other effe ctual manner [If not cancelled, the instrument is treated as unstamped].- - Amount of stamp depends on the State in which it is executed. Indian Stamp Act authori ses each State to prescribe stamp duty chargeable on various documents and hence it varies from State to State. Bond should be executed in favour of and in name of President of India. SIGNING OF BOND - If the assessee is a Company, bond can be signed by a person a uthorised by the Board of Directors by a resolution. In case of registered partn ership firm, any partner can sign on behalf of the firm. ACCEPTANCE OF BOND As per earlier instructions, bond should be executed before S uperintendent of Central Excise or officer above that rank or Notary public or M agistrate. Bond should be accepted by Assistant/Deputy Commissioner of CE. [Pres umably, the instructions are still valid]. RELEASE OF BOND Bond will be preserved by excise officers till all the obligatio ns are not discharged. After discharge of obligation, the bond can be got releas ed if the terms of bond are fulfilled. Securities offered can be released and th en encashed by guarantor. He can also get interest accrued on such securities. Forms of Bonds - Bonds are of different nature and for various purposes. Forms o f bond etc. have been standardised. The main bonds are as follows : B-1 GENERAL BOND - The bond is for due dispatch of excisable goods removed for e xport without payment of duty. The bond can be with surety or security. New form of B-1 bond has been given in Annexure-I of Notification No. 42/2001-CE(NT) dat ed 26.6.2001. An exporter-manufacturer can execute simple Letter of Undertaking (LOU) in form UT -1 without executing any bond. The UT-1 form is given in Annexure-II of Notifica

tion No. 42/2001-CE(NT) dated 26.6.2001. It is clarified that if export is throu gh merchant exporter, execution of bond is necessary. Export on basis of LUT of the manufacturer is not permissible in such case. - Chapter 7 Part II Para 5.4 o f CBE&Cs CE Manual, 2001. B-2 BOND - This is a General Bond for provisional assessment. It can be with sec urity or surety. B-4 BOND - The bond is for provisional release of seized goods. It can be only s ecurity bond. Bond should be for whole value of seized goods. Amount of security will be as determined by adjudicating authority taking into consideration of gr avity of offence (normally 25% ). [Earlier B-11 bond]. [The name B-4 has been me ntioned in Chapter 14 para 2.2 of CE Manual, 2001, but actually, no form has bee n prescribed. Chapter 17 para 3.2 states that old form under previous rules may be used. This para mentioned B-8 bond. Later it is clarified that it should be r ead as B-11 CBE&C circular No. 686/2/2003-CX dated 2-1-2003.]. B-8 BOND - This bond is for obtaining goods at Nil or concessional rate of duty under Central Excise (Removal of Goods at Concessional Rate of Duty for Manufact ure of Excisable Goods) Rules. A bond is required to be executed under these rul es. Since no form of bond has been prescribed, earlier form B-8, which was pres cribed under earlier Chapter X procedure may be used after making necessary chan ges. B-11 BOND This is not prescribed under new rules. However, it has been clarified that the old B-11 form should be used to clear seized goods on provisional basi s. CBE&C circular No. 686/2/2003-CX dated 2-1-2003. [Then what is B-4 bond which i s mentioned but not printed anywhere ?] or departmental instructions, read under B-4. B-17 BOND - This is a general surety / security bond to be executed by EOU, EHTP / STP units. It is for provisional assessment of goods for export of goods to f oreign countries without payment of duty and for accountal / disposal of excisab le goods procured without payment of duty. Types of Bond - Bonds are either surety or security type. Surety bonds are cover ed under provisions of Contract Act. Under Surety Bond, another person stands as surety to guarantee the performance on the part of obligor. Surety should be fo r full value of bond and the person standing as surety should be solvent to the extent of bond amount. Under the Contract Act, the liability of surety is co-ext ensive with that of the principal debtor and hence the department is at liberty to enforce the recovery of dues either from the obligor or from the surety. - Ch apter 14 Paras 2.1 of CBE&Cs CE Manual, 2001. Security Bond - Security Bonds are executed where security is offered instead of guarantee. Security can be in nature of Post Office saving deposit, National Sa ving Certificate or similar realisable Government papers of Central or State Gov ernment. Bank deposit receipt of large scheduled banks is also acceptable. Inter est on such securities will accrue to person making such deposit. Security can a lso be furnished by cash deposit, but no interest will be receivable on such cas h deposit (and hence it is advisable to provide security by way of NSC, Bank FD etc.). Cash should be deposited by way of TR-6 challan mentioning proper account head and other details. - Chapter 14 Para 7.1 of CBE&Cs CE Manual, 2001. Bank Guarantee as surety/security - Form of bank guarantee has been prescribed, both for scheduled and un-scheduled banks. Bank guarantee form when Court orders release of goods against bank guarantee has also been prescribed. LEGAL POSITION OF BANK GUARANTEE - The bank guarantee is given is respect of som e contract. Such contract is called underlying contract , e.g. in case of excis e bond, the bond executed by assessee is the underlying contract . Supreme Cour t has consistently held that bank guarantee is independent of the underlying con tract. The bank must honour the bank guarantee except in case of fraud or irretr ievable injustice. The fraud should be of beneficiary and not of some one else. If Banks do not honour their guarantees, trust in commerce would be irreparably damaged. Further, even if bank guarantee specifies a limited period for enforcement of ba nk guarantee (e.g. one year etc.). The bank guarantee can be enforced any time d uring the period of limitation, which is usually three years in most of the case

s. One sided conditions in Bond - Many of the conditions in the standard form of bo nd are totally one sided, i.e. favouring revenue. Some times, the conditions are even against the provisions of law. The assessee has to sign the bond as per st andard format as he has no option. These are dotted line contracts or contracts of adhesion. Normally, standard forms of contract are binding on the person even if the person has not read them. However, if the contracting parties do not hav e equal bargaining power, these are often one sided. Such contracts are Adhesion Contracts. These are standardised form of contract form offered on essentially tak e it or leave it basis without affording consumer realistic opportunity to bargai n. Court can grant relief if clauses in such contract are unreasonable and uncon scionable. The aggrieved person can approach Courts for relief in case of such o ne sided contracts [see discussions and case law under General Principles of Law]. Receipt of Goods at concessional rate of duty Some users of excisable goods can obtain goods at nil or lower rate of duty, sub ject to certain conditions. If they are entitled to obtain excisable goods at ni l or concessional rate of duty, they are required to follow prescribed procedure . The provisions are contained in Central Excise (Removal of Goods at Concession al Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. PROCEDURE PRESCRIBED IN SOME EXEMPTION NOTIFICATIONS - Some exemption notificati ons prescribe that procedure as contained in Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules shall be fo llowed. In such cases, the exemption will be available only if the required proc edure is followed. PROCEDURE FOR AVAILING THE BENEFIT - THE MANUFACTURER INTENDING TO AVAIL THE BEN EFIT OF EXEMPTION NOTIFICATION ISSUED U/S 5A SHALL APPLY TO ASSISTANT / DEPUTY C OMMISSIONER IN QUADRUPLICATE IN FORM SPECIFIED AT ANNEXURE I TO CENTRAL EXCISE ( REMOVAL OF GOODS AT CONCESSIONAL RATE OF DUTY FOR MANUFACTURE OF EXCISABLE GOODS ) RULES. SEPARATE APPLICATION SHALL BE FILED FOR EACH SUPPLIER. BOND TO BE EXECUTED - A bond in prescribed form should be executed with surety o r security. Bond amount will be prescribed by Assistant / Deputy Commissioner, c onsidering duty liability estimated to be involved at any given time. Form of ne w bond has not been prescribed. Hence, earlier B-8 bond form may be used with su itable modifications. [See under Bonds for instructions about B-8 bond]. CERTIFICATE BY AC/DC - The AC / DC will countersign the application submitted, c ertifying that necessary bond has been executed. SUBSEQUENT PROCEDURE - Copy of this application duly signed by AC/DC will be sen t to supplier-manufacturer. [The earlier procedure of CT-2 certificate has been discontinued]. The supplier can clear goods on receipt of the certificate duly countersigned by AC / DC. The removal details will be recorded on the applicatio n by the supplier-manufacturer. ACCOUNTS AFTER RECEIPT OF GOODS - Goods obtained by the manufacture at concessio nal rate of duty should be properly accounted for and should be used only for th e purpose for which they are brought. Simple account indicating quantity and val ue of subject goods, quantity consumed for intended purpose and quantity remaini ng in stock shall be maintained invoice wise. CLEARANCE TO ANOTHER UNIT Goods received without payment of duty can be sent to another eligible unit/manufacturer under the same procedure. However, the anothe r unit/manufacturer should be registered under rule 3 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules , 2001. [CBE&C circular No. 617/8/2002-CX dated 6-2-2002]. RETURN OF GOODS TO SUPPLIER It may happen that goods received under the rules wi thout payment of duty, may be found to be defective, damaged, unsuitable or surp lus to the needs of manufacturer. In such case, the manufacturer can return the goods to supplier, i.e. original manufacturer. The original manufacturer will ad d this to his non-duty paid stock (in Daily Stock Account) and then deal with it . [Proviso to rule 6 of Removal of Goods at Concessional Rate of Duty Rules]. MONTHLY RETURN - A monthly return in prescribed form should be submitted by 10th of following month. Form of monthly return has been prescribed in Annexure II t o Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture

of Excisable Goods) Rules. Goods received at concessional rate not used for intended purpose - If the mater ial received at concessional rate of duty is not used for intended purpose, manu facturer is liable to pay differential duty along with interest. DUTY PAYABLE IF GOODS LOST OR DESTROYED DURING TRANSPORT - It has been clarified that if the goods are lost or destroyed by natural causes or by unavoidable acc ident during transport from place of procurement to the manufacturers premises or from place of manufacturer to the place of procurer (if goods are returned), du ring handling or storage in the manufacturers premises, it will not be treated as used for intended purpose. In other words, in such case, differential duty and in terest will become payable. - Explanation to rule 6. INTENTION TO USE IS NOT ENOUGH - ACTUAL USE NECESSARY - Goods should be used fo r intended purpose. Mere intention to use is not sufficient. If the goods are no t used for intended purpose, duty is payable by the consignee along with interes t. Provisions of sections 11A and 11AB shall apply. Thus, demand has to be raise d within period prescribed u/s 11A. LIABILITY IS OF CONSIGNEE - The bond is executed by consignee. He has to give un dertaking to pay differential duty. Thus, the duty liability is of the consignee . No Cenvat to buyer in respect of goods received under the procedure - Since good s are cleared by supplier-manufacturer without payment of duty, the buyer will n ot be entitled to any Cenvat credit. - [Board Circular No. 33/33/94-CX-8 dated 4 -5-1994 in respect of earlier Chapter X]. Moreover, supplier will have to pay 8% amount of goods are removed at Nil rate of du ty. This amount cannot be utilised for Cenvat purposes. Thus, the procedure of sending material at concessional rate of duty is not of u se if buyer wants to avail Cenvat on inputs. Reversal of Cenvat on inputs or payment of 8% amount - If the final product is c leared under Chapter X procedure, Cenvat credit taken on inputs will have to be reversed or amount of 8% of price will have to be paid as per Cenvat provisions. T he buyer cannot avail Cenvat credit of this amount as Cenvat credit can be taken o nly of duty. Hence, in the opinion of author, if buyer is in a position to avail C envat credit, it is advisable to pay full duty instead of availing the concessio n. Rewarehousing certificate not required - In some cases, range superintendent hav ing jurisdiction over manufacturer s factory insist on rewarehousing certificate from the user (to whom goods were despatched at concessional rate of duty). Rul es do not provide for any such requirement. WAREHOUSING Normally, goods are removed from factory on payment of duty. However, in respect of certain goods, provision has been made to store the goods in warehouses with out payment of duty. - - The provisions are also available for goods cleared for export on payment of duty under claim for rebate of duty under rule 18 of CE Ru les. As per Rule 20 of Central Excise Rules, facility of warehousing can be extended for removal of excisable goods from factory of production to a warehouse or from one warehouse to another warehouse without payment of duty. CBE&C can prescribe conditions, limitations and safeguards. The rule clarifies that responsibility for payment of duty on the goods removed from factory or warehouse to another wa rehouse is that of consignee. However, if goods do not reach the destination war ehouse, the duty liability is that of consignee. At present, these provisions are applicable to following (i) Petroleum products (ii) benzene, toluene and xylene (iii) Goods tran sferred to customs bonded warehouse as Stores. [These goods are cigarettes, aerate d waters, prepared and preserved foods, Aluminium foil covers, stainless steel c utlery, butter and cheese]. These stores are issued to foreign going vessels witho ut payment of duty - Notification No. 47/2001-CE(NT) dated 26-6-2001. Goods removed by export houses or star trading houses for subsequent exp orts under rule 18 or rule 19 of Central Excise Rules - Notification No. 46/2001 -CE(NT) dated 26-6-2001.

The warehouses can be public or private. Permission for such warehouses has to b e obtained from Commissioner. The goods are in custody of officer-in-charge of t he warehouse. Goods can be removed from warehouse on payment of duty plus penalt y, godown rent etc. Transfer from one warehouse to another without payment of du ty is also permissible. Goods can be stored for maximum period of 3 years. [It m ay be noted that provisions of customs bonded warehouse also exist in respect of imported goods. That facility is available for all imported goods.] PROCEDURES TO BE FOLLOWED - Procedure, as prescribed in CBE&C circular No. 579/1 6/2001-CX dated 26-6-2001 supplemented in Chapter 10 Part I of CBE&Cs CE Manual, 2001, is briefly as follows 1. Warehouse should be registered by Excise Commissioner. 2. Consignor is required to prepare application in quadruplicate in form a ttached to aforesaid notification. [Earlier AR-3]. He is also required to prepar e invoice as required. Three copies of application and duplicate of invoice shou ld be sent along with goods to consignee. 3. On arrival at destination, rewarehousing certificate will be sent duly c ountersigned by Range superintendent to his counterpart at the end of consignee. 4. If rewarehousing certificate is not received within 90 days, consignor s hall pay the duty. 5. Proper accounts shall be maintained at the warehouse. He will be respons ible for payment of duty, penalty etc. 6. Registered person can keep only goods belonging to him and not to someon e else. He can keep others goods only with permission of Commissioner. 7. Owner of warehouse can sort, pack or repack the goods in warehouse and m ake such alterations as may be necessary for preservation, sale or disposal ther eof PLEASE READ ALSO PUBLIC NOTIFICATION NO.85 /2001 DTD.13.07.2001 PUBLIC NOTICE NO.85/2001 Date: 13.07.2001 Norms for granting permission for factory/warehouse stuffing of export goods and procedure- reg. Attention of the Exporters, CHAs and all concerned is invited to this Custom Hou se Notices Nos. 112/89 dated 8.9.89, 168/95 dated 11.10.95 and 138/99 dated 23.1 2.99 prescribing norms for granting permission for factory/warehouse stuffing of export goods and procedure therefore. 2. Representations have since been received from various exporters and trade to review the procedure for obtaining permission for factory/warehouse stuffing and examination of the export goods under the DBK, Free, DEPB, DEEC and DFRC scheme s. It has been represented that currently exporter/CHA apply for factory stuffin g permission separately for various export promotion schemes to different sectio ns of Export deptt., which causes inconvenience to them. Therefore, in order to streamline the procedure and with a view to further facilitate exports it has be en decided that the exporters/CHAs may apply to AC/DC (Gr.7 Exports) for a singl e permission for factory stuffing under DEEC, DEPB, DFRC schemes. Similarly for factory stuffing permission for DBK and Free exports, single application may be made to DC (Export). 3. AC/DC of Customs (Export/Gr.7)/ (Export) will grant such permission for a per iod of three (3) months at a time for examination and stuffing of export consign ments under supervision of Central Excise Officers or Customs Officers, as the c ase may be, on M.O.T. basis. In each such case a model examination order would b e issued to the jurisdictional AC/DC of Central Excise in case of stuffing under C. Ex supervision or to the AC/DC (Docks) for stuffing under Customs supervisio n, as the case may be. The permission letter will be sent in a sealed cover to t he concerned officers to examine the cargo to be stuffed.

4. The category of goods which will be so allowed to be stuffed at such places a re as follows:(a) All goods in the factory of production whether or not such goods are excisab le; (b) Perishable frozen sea food/fish/meat/similar item and agricultural horticult ure and similar goods; (c) Articles of foods and pharmaceutical goods which require specialized packing in order to be protected from contamination, deterioration etc; (d) Glassware and similar articles of fragile nature and (e) Goods to be exported under duty free shipping bills. 5. In case of exporters having their factories in Mumbai, either they can obtain such permission for 3 months or obtain permission for individual shipments, as the case may be, for stuffing/examination. These exporters will have the option to stuff and examine their export cargo either under Central Excise/Customs supe rvision. Customs staff for the supervision/examination of export cargo will be a vailable on overtime only on holidays or after normal office hours. 6. In cases of export other than under claim for drawback, DEFC, DEPB or DFRC Sc hemes and where the manufacturer exporter is a Central Excise Licencee, such exp ort cargo may not be subjected or re-examination in the Docks if it has been exa mined and sealed under Central Excise supervision. In respect of such free shipp ing bills, (wherein no claim for Drawback or DEPB or part of export obligation o f DEEC or DFRC scheme is envisaged) exporters can avail of the Central Excise su pervision facility for examination/stuffing of the containers subject to the con dition that such examination is supervised by an officer not less than the rank of Supdt. of Central Excise. This facility would be applicable to all export pro ducts which are manufactured in factories under Central Excise Control and which follow the procedure for clearance of goods under Central Excise invoice and th e exports are required to be done under AR4 procedure. Small scale units registe red with Central Excise can also avail of the above procedure. 7. In respect of goods which are manufactured in factories which are not under C entral Excise control, the facility of factory stuffing under Central Excise sup ervision can be availed by such factories which are situated outside the jurisdi ction of Greater Mumbai on M.O.T. basis. In respect of units situated in Greater Mumbai, the examination/stuffing of export cargo have to be normally done only under the supervision of the Customs officers. For this purpose, the services of Customs officers will be available only after office hours and on holidays. How ever, if such exporters have to execute export orders on urgent basis and during working hours from Monday to Friday (excluding public holidays) they can avail the service of Central Excise Officers for examination/stuffing of the goods at such factory premises on MOT basis. 8. Documents, information to be submitted at the time of making application for the grant of requisite permission by the manufacturer exporter/merchant exporter are as follows:(A) IN CASE OF FACTORY STUFFING BY MANUFACTURER EXPORTER: (i) A request letter for factory stuffing in original mentioning the details rea sons for such factory stuffing. (ii) A copy of Central Excise registration certificate, duly attested by the con cerned Central Excise authority in case of units registered with Central Excise,

or an attested copy of Small Scale industries Certificate, duly attested, in ca se of SSI units not registered with Central Excise; (iii) In case of not-excisable goods or SSI units not registered with Central Ex cise, original copy of NOC from AC/DC Central Excise mentioning therein their wi llingness for deputing the Central Excise officers to supervise the examination and stuffing operations in such factory. (iv) Items to be stuffed with address of factory for every such request or renew al of permission along with their respective DEPB heading No/SION entry Nos. etc . (v) Export performance in format Annexure A, duly signed by the exporter. (B) IN CASE OF FACTORY STUFFING BY MERCHAND EXPORTERS: (i) Request letter for factory stuffing mentioned therein the detailed reasons f or such factory stuffing; (ii) NOC from supporting manufacturer with every such application; (iii) A copy of Central excise registration certificate, duly attested by the co ncerned Central Excise authority in case of units registered with Central Excise or attested copy of SSI registration certificate in case of S.S.I. units, not r egistered with Central Excise; (iv) Original copy of NOC duly signed by the AC/DC of Central Excise, in case of non-excisable goods or S.S.I. units not registered with Central Excise, mention ing their willingness for deputing Central Excise Officers to supervise the exam ination and stuffing operations, in such factory; (v) Items to be stuffed with address of factory for every such request or renewa l of permission along with their respective DEPB heading No./SION entry Nos. etc . (vi) Export performance in format Annexure A duly signed by the Exporter. (C) IN CASE OF WAREHOUSE STUFFING OF GOODS UNDER FREE, DUTIABLE OR EX-BOND S/BIL L: (i) Request letter for warehouse stuffing permission mentioning therein detailed reasons for such warehouse stuffing; (ii) Original copy of the NOC from the or warehouse owner with every such reques t or renewal of permission; (iii) Original copy of NOC duly signed by AC/DC, Central Excise mentioning there in willingness of deputing the Central Excise officers to supervise the operatio n; (iv) Items to be stuffed alongwith address of the warehouse and the exporter for every such request or renewal of permission; (v) Export performance of the exporter in the format Annexure A duly signed by the exporter; D. IN CASE OF WAREHOUSE STUFFING FOR OTHERS :(i) Request letter mentioning therein the detailed reason for factory/warehousin g stuffing;

(ii) NOC from Warehouse owner; (iii) Original letter from jurisdictional AC/DC of Central Excise mentioning the rein their No Objection and willingness for deputing Central Excise officers to supervise the stuffing operation at the place of such stuffing. (iv) Items to be stuffed along with address of the warehouse and the exporter fo r every such request or renewal of permission along with their respective DEPB h eading No/SION entry No., etc. (v) Export performance of the exporter in the format at Annexure A duly signed by the exporter. 9. While applying for such permission the exporter should specify the descriptio n of the product to be exported and the details of the inputs claimed under the respective scheme. This one time permission shall be valid for a period of three months and for a particular exporter and the place of stuffing provided that:(a) There is no change in the description of the commodity and its particulars/s pecification; (b) There is no change in the DEPB/DBK rates and the conditions laid down therei n; (c) There is no change in the EXIM policy or other relevant and allied Acts. 10. Exporters shall present the goods along with relevant invoices (in quadrupli cate for export under DBK claims and triplicate for other exports.) packing list , GR form etc. with a written request for prior examination to the jurisdictiona l Supdt. of Central Excise. The goods will be examined and sealed by the inspect or of Central Excise under supervision of Supdt. Central Excise. In case of cont ainers, after examination, the Supdt. Central Excise will supervise stuffing and sealing of the container (after verifying it to be empty) with Customs Bottle S eal only. In case of consignments of value exceeding Rs.25 lacs and all consignm ents of sensitive commodities established to be prone to malpractices, examinati on, stuffing and sealing of the containers will be carried out under supervision of AC/DC, Central Excise and necessary orders to this effect will be given on t he Model Examination Order. The details of examination carried out (including ve rification of particulars for duty drawback) and sealing of packages/containers, the container No, and seal No., will be recorded on the invoice/packing list an d countersigned by the supervising officer. The Supdt. of Central Excise as well as the inspector of Central Excise will examine the Export cargo as per the mod el examination orders given by the Custom House. In all cases, unless specifical ly waived, sealed samples are required to be forwarded to the Custom House. The representative samples should be drawn by the Supdt. of Central Excise and shoul d be sealed with Central Excise seals and should bear indication of shipping bil l No., wherever filed in advance or the invoice No., and accompanying documents. (11) In case the goods under export are subject to compulsory pre-shipment quali ty inspection, the same can be carried out simultaneously with the Central excis e examination and this fact of inspection and sealing of goods by export inspect ion agency/Agmark official may also be incorporated in the report of Central Exc ise Inspector. (12) Whenever export cargo is moved from places under AR4, an extra copy of AR4 should invariably be attached to the S/Bills. The examination report by Central Excise Officers should also be endorsed on the reverse of S/Bills (duplicate and DBK/DEFC etc. copies) where S/Bill is presented to Excise officer after obtaini ng examination order from Custom House and in other cases on reverse of Invoice.

(13) Thereafter, the exporters are required to file the shipping bill in the Exp ort Deptt of the Custom House along with Central Excise certified copies of invo ices, packing lists, G.R. forms etc. Ordinarily there will be no further examina tion at the docks provided the Central Excise seals and export inspection agency /Agmark seals, if any, are found intact. 14. Exporters are advised to correctly follow the procedure prescribed to avoid re-examination of cargo at the Port. In cases where it comes to notice that the examination by Central Excise Officer has not been carried out in accordance wit h the prescribed procedures as required under the scheme or where Customs office r has doubts, such cargo shall be subjected to re-examination by Customs in the Docks. 15. In the case of export cargo examined outside the Port by the Customs officer s, the Customs seal will be verified by the P. Os in charge of the Division unde r whose supervision the shipment is to be effected. 16. In other cases not covered by the above, Commissioner (EP) may grant special sanction in individual cases depending on the merits of such cases. 17. This Public Notice supercedes all other Public Notices issued earlier on thi s subject. Sd/- 11.07.2001 (M. DWIVEDI) COMMISSIONER OF CUSTOMS (EP)

Copy to: All concerned ATTESTED (U.H. JADHAV) DY. COMMISSIONER OF CUSTOMS GROUP VII A N N E X U R E A FORMAT TO BE ENCLOSED WITH APPLICATION FOR FACTORY/WAREHOUSE STUFFING PERMISSION 1. NAME OF EXPORTER 2. FULL ADDRESS 3. NAME AND ADDRESS OF SUPPORTING MANUFACTURER 4. DESCRIPTION OF EXPORT GOODS 5. DEPB HEADING 6. SION ENTRY NO. 7. DEEC LICENSE NO./ APPLICATION NO. 8. PLACE OF STUFFING

9. PERIOD FOR WHICH PERMSSION IS SOUGHT 10. WAS ANY PERMISSION FOR W/H OR FACTORY STUFFING GRANTED EARLIER 11. EXPORT HOUSE STATUS 12. EXPORT PERFORMANCE DURING LAST THREE YEARS 1. 2006-07 2. 2007-08 3. 2008-09 4. 2009-TILL DATE 13. FREQUENCY OF EXPORT 14. DESTINATION OF EXPORT 15. CENTRAL EXCISE REGISTRAION; CERTIFICATE NO. 16. REASONS FOR FACTORY STUFFING (SIGNATURE OF EXPORTER) F.NO. S/16-MISC-536/01-GR.VII Role & liability of customs house agent:Section 146 of the Customs Act 1962 is the enabling provision, which allows agen ts of importers and exporters to act on behalf of importers and exporters. This is necessitated by the highly involved and technical nature of the work to be do ne in connection with clearance of imports into and exports out of country. The importers and exporters themselves may have neither time nor the requisite knowl edge on their own. Therefore, agents are allowed to act on their behalf. The wor k of the agents is governed by the Customs House Agents Licensing Regulations, 1 984 framed under this section read with Section 157. There are certain liabilities fastened on the agent of the importer or exporter under Section 147. Some of these liabilities are in the nature of extension of a nd exceptions to the liability of an agent under the Indian Contracts Act, 1872. Sub-section (1) empowers the agent to do everything that an importer or an expo rter can do. Filing a bill of entry, shipping bill, submitting supporting docume nts therewith, helping in examination of goods, payment of duty on behalf of the principal, warehousing of goods, removal from warehouse and the like. The commo n law principle that an agents actions bind the principal is given the status of a legal presumption. The consequences of all actions of a CHA will bind the impo rters and exporters on whose behalf they act. An agent who is authorized to act on behalf of the importer or exporter is treated as the owner of imported or exp orts goods. In respect of that particular transaction, a notice could be given t o that agent. This does not normally extend to recovery of duty not paid or shor t paid by the owner, importer or exporter of goods. As an exception, this is per missible when the Deputy/Assistant Commissioner is of the opinion that such reco very from the owner, importer or exporter of goods is not possible. Clearances only against authorization A CHA is required to clear goods for import or export only against specific auth orization from the principal and must produce it whenever required by the Deputy /Assistant Commissioner. Method of transacting business The CHA has to either personally clear the goods or clear it through an employee who is approved by the Deputy/Assistant Commissioner who is designated for this purpose by the Commissioner. All the documents prepared by him should p rominently bear the CHAs name at the top of the document. The CHA should not att empt to influence the conduct of Customs officers in matters pending before him or his subordinates. There should be no threats, false accusations or duress aga

inst such officers. No promise of advantage or benefit or gift should be made or bestowed on such officers. Duty of CHA should be discharged with utmost speed a nd avoid delays. He cannot charge for his services in excess of rates approved b y the Commissioner. Personal interests of CHA If the CHA is a former officer of the department, he cannot represent an y matter before a Customs officer, which he had personally considered as such of ficer. He cannot also use facts which came to his knowledge when he was an offic er. Duty to tender correct advice The CHA is duty-bound to advise the client to comply with the provisions of the Act and the regulations. If there is non-compliance of provisions by any client, he is required to bring it to the knowledge of the Deputy/Assistant Com missioner. This regulation requires the CHAs to act as source of information to the department. The CHA has to exercise diligence and ensure that he passes on correct i nformation to the client, ensure that all information relevant for clearance or cargo or baggage is passed on to the client if it is relevant for clearance of c argo or baggage. Accounting for money received The CHA has a duty to promptly pay to Government all money received from client for payment of duties and taxes. Similarly, any money received by him fr om the client or from the Government should be promptly and fully accounted to t he client. Liability as to information CHA should not attempt to gather information from Government records if it is not granted by the proper officer. Access to record maintained by him shou ld not be denied, nor removed or concealed when sought by the Commissioner. Ther e is a duty to maintain records and accounts as directed by the Deputy/Assistant Commissioner and produce them before that officer for inspection. All documents have to be prepared strictly in accordance with the rules and orders.