1. How to Export
2. Preliminaries for
4. Register with Export
5. Despatching Samples
6. Appointing Agents
7. Specimen Copy of
8. Acquire an Export
9. Acquire Export Credit
10. Arranging Finance
11. Rates of Interest
12. Understand Foreign
Exchange Rates & Protect Against Their Averse Forward Contracts
Goods for Export & Their Inspection by Government Authorities
14. Labelling, Packaging,
Packing & Marking Goods
15. New Excise Procedure
How To Export
Golden Rule: In order to be
successful in exporting one must fully research its markets. No one should ever
try to tackle every market at once. Many enthusiastic persons bitten by the
export bug, fail because they bite off more than they can chew. Overseas design
and product requirements must be carefully considered.
Always sell as close to the market as possible. The fewer intermediaries
one has the better, because every intermediary needs some percentage for his
share in his business, which means less profit for the exporter and higher
prices for the customer. All goods for export must be efficiently produced.
They must be produced with due regard to the needs of export markets. It is no
use trying to sell windows which open outwards in a country where,
traditionally, windows open inwards.
Sell Experience: If a person cannot easily export his goods, may be he can sell his
experience. Alternatively, he can concentrate on supplying goods and materials
to exporters' who already have established an export trade. He can concentrate
on making what are termed 'own brand' products, much demanded by buyers in
overseas markets which have the manufacturing know-how or facilities.
Selling in Export: In today's
competitive world, everyone has to be sold. The customer always has a choice of
suppliers. Selling is an honourable profession, and you have to be an expert
On-Time Deliveries: Late deliveries
are not always an exporters fault. Dock strikes, go-slows, etc. occur almost
everywhere in the world. If one enters into export for the first time, he must
ensure of fast and efficient delivery of the promised consignment.
internal and external must be comprehensive and immediate. Good communication
is vital in export. When you are in doubt, pick up the phone or email for
Testing Product: The risk of
failure in export markets can be minimized by intelligent use of research.
Before committing to a large-scale operation overseas, try out on a small
scale. Use the a sample test, and any mistakes can then be corrected without
much harm having been done. While the test campaign may appear to cost more
initially, remember that some of the cost will be repaid by sales, so that test
marketing often turns out to be cheaper.
Approach: If possible
some indication of the attitudes towards the product should be established,
like any sales operation. Even if the product is successful, to obtain
reactions from the customer.
Preliminaries for Starting Export Business
- Setting up an appropriate
- Choosing appropriate mode of
- Naming the Business
- Selecting the company
- Making effective business
- Selecting the markets
- Selecting prospective buyers
- Selecting channels of
- Negotiating with prospective
- Processing an export order
- Entering into export
- Export pricing and costing
- Understanding risks in
Setting up an appropriate business organization
The first and the foremost question you as a prospective exporter has to
decide is about the kind of business organisation needed for the purpose. You
have to take a crucial decision as to whether a business will be run as a sole
proprietary concern or a partnership firm or a company. The proper selection of
organisation will depend upon
- Your ability to raise
- Your capacity to bear the
- Your desire to exercise
control over the business
- Nature of regulatory
framework applicable to you
If the size of the business is small, it would be advantageous to form a
sole proprietary business organisation. It can be set up easily without much
expenses and legal formalities. It is subject to only a few governmental
regulations. However, the biggest disadvantage of #138;sole proprietary
business is limited liability to raise funds which restricts its growth. Besides,
the owner has unlimited personal liability. In order to avoid this
disadvantage, it is advisable to form a partnership firm. The partnership firm
can also be set up with ease and economy. Business can take benefit of the
varied experiences and expertise of the partners. The liability of the partner
though joint and several, is practically distributed amongst the various
partners, despite the fact that the personal liability of the partner is
unlimited. The major disadvantage of partnership form of business organisation
is that conflict amongst the partners is a potential threat to the business. It
will not be out of place to mention here that partnership firms are governed by
the Indian Partnership Act,1932 and, therefore they should be form within the
parameters laid down by the Act.
Exporters Manual and Documentation
Company is another form of business organisation,which has the advantage
of distinct legal identity and limited liability to the shareholders. It can be
a private limited company or a public limited company. A private limited
company can be formed by just two persons subscribing to its share capital.
However, the number of its shareholders cannot exceed fifty, public cannot be
invited to subscribe to its capital and the member's right to transfer shares
is restricted. On the other hand, a public limited company has a minimum of
seven members. There is no limit to maximum number of its members. It can
invite the public to subscribe to its capital and permit the transfer of
shares. A public limited company offers enormous potential for growth because
of access to substantial funds. The liquidity of investment is high because of
easiness of transfer of shares. However, its formation can be recommended only
when the size of the business is large. For small business, a sole proprietary
concern or a partnership firm will be the most suitable form of business
organisation.In case it is decided to incorporate a private limited company,
the same is to be registered with the Registrar of Companies.
For details as to be procedures for registration with the registrar of
Companies, kindly refer to Nabhi's FORMATION AND MANAGEMENT OF A PRIVATE
COMPANY ALONG WITH PRACTICAL PROCEDURES.
Choosing appropriate mode of operation
You can chose any of the following modes of operations:
Merchant Exporter i.e. buying the goods from the market or from a
manufacturer and then selling them to foreign buyers.
Manufacturer Exporter i.e. manufacturing the goods yourself for export
Sales Agent/Commission Agent/Indenting Agent i.e. acting on behalf of the
seller and charging commission Buying Agent i.e. acting on behalf of the buyer
and charging commission
Naming the Business
Whatever form of business organisation has been finally decided, naming
the business is an essential task for every exporter. The name and style should
be attractive, short and meaningful. Simple and attractive name indicating the
nature of business is ideal. The office should be located preferably in a
commercial complex, in clean and workable surroundings. The letter head should
be simple and superb providing information concerning H.O., branches, cable
address, telephone number, fax number, banker's name and address etc. Pick up a
beautiful trade name and logo which reinforces your organisation's name and
Open a current account in the name of the organisation in whose name you
intend to export. It is advisable to open the account with a bank which is
authorised to deal in Foreign Exchange.
Selecting the Company
Carefully select the product to be exported. For proper selection of
product, study the trends of export of different items from India. The selected
product must be in demand in the countries where it is to be exported. It
should be possible to procure or manufacture the selected product at most
economic cost so that it can be competitively priced. It should also be
available in sufficient quantity and it should be possible to supply it
repeatedly and regularly. Besides, while selecting the product, it has to be
ensured that you are conversant with government policy and regulations in
respect of product selected for export. You should also know import regulations
in respect of such commodities by the importing countries. It would be
preferable if you have previous knowledge and experience of commodities
selected by you for export. A non-technical person should avoid in dealing in
high tech products.
Making effective Business Correspondence
You should recognise the importance of business correspondence as it is
an introduction with the buyer in proxy which may clinch his response according
to the impression created by the correspondence. For creating a very favorable
and excellent impression, you must use a beautiful letter head on airmail paper
and a good envelope, nicely printed, giving fully particulars of your firm's
name, telephone, telex and fax number etc. Your language should be polite,
soft, brief and to the point, giving a very clear picture of the subject to be
put before the customer. Letters should be typed/ computer typed set, preferably
in the language of the importing country. Also make sure that the full and
correct address is written and the envelope is duly stamped. It should also be
borne in mind that the aim of your business correspondence is not only to
clinch the buyer's order but also to obtain the information on the following:
The specifications of the products already in use in the importing
country. Whether your product meets the above specifications. If not, Whether
your specifications offer any distinct advantages in terms of prices, quality,
after-sales service, etc. The import policy prevailing in the buyer's country
(e.g. whether there is any import licensing, any restrictions on remittances,
any pre-qualification for product/supplier, etc.)
The trade practices in the buyers' country with special reference to
your product, information like whether importers import and distribute the
product/high sea sales, whether agent is required to book orders from actual
users etc. In case your item requires after sales service, the manner in which
it can be offered. The prices at which your product sells in the
retail/wholesale market, the duty structure and any other cost element to
arrive at the landed cost. Information on the margins at which the product is
sold. This information will help you in evolving a pricing strategy.
Study of various market segments viz. Importers, Supermarkets,
Government Suppliers, Institutional Sales, Tenders, Suppliers, etc.
The various factors that rule the market viz. Quality, Price, Delivery,
Brand Name, Credit Terms, etc. Role of advertising and publicity and reference
to the product and the country.
A specimen export letter is given below :
Specimen of Introductory Letter to International Importers
Ref: TIL/NYK2001/ 14th Novl,2000
The Manager (Purchase)
M/s. TIL Ltd.
We are exporters of a wide variety of items including .......... for the
last ten years. Our major buyers are ......... in .......... We are one of the
registered export houses in India. We represent .......... the leading
manufacturers of these items in India. These items are produced in
collaboration with .........., the world famous company. We follow the ISI
specifications. We believe that your company imports the items we export. We
are enclosing herewith a copy of our brochure and price list for your perusal.
We shall be glad to send you detailed literature/ samples of items that may be
of interests to you.
For NYK Ltd.
Encl: As above.
The text can be suitably amended with reference to the manufacturing
activity or/items dealt in by the exporter.
Where the manufacturing is not in collaboration with a foreign company,
it need not be referred to.
Product literature (of the buyer's interest) and price list should
invariably be sent along with the letter.
The price list should categorically indicate whether the prices are
f.o.b., & C&f or c.i.f. etc. However, discount need not be indicated in
the price list.
The profile about your company should generally include the following
- Company's name and address
/Telex /Telephone /Cable /Fax/Email/ Date of establishment
- Export Executives
- Status: Partnership/ Company
(Pvt. Ltd./Pub.Ltd) Govt.(Semi-Govt.)
- Bank Reference
- Exporting Since
- Value of Assets
- No. of Employees/
Manufacturing/ Sales/ Administration
Offices/Representatives, if any
- Exporter/ Manufacturer/
- Main Line
- Technical Collaboration
- Major Buyers- In India;
Selecting the markets
Target markets should be selected after careful consideration of various
factors like political embargo, scope of exporter's selected product, demand
stability, preferential treatment to products from developing countries, market
penetration by competitive countries and products, distance of potential
market, transport problems, language problems, tariff and non-tariff barriers,
distribution infrastructure, size of demand in the market, expected life span
of market and product requirements, sales and distribution channels. For this
purpose you should collect adequate market information before selecting one or
more target markets. The information can be collected from various sources like
Export Promotion Council (EPCs)/Commodity Boards, Federation of Indian Export
Organisation, (FIEO), Indian Institute of Foreign Trade (IIFT), Indian Trade
Promotion Organisation (ITPO), Indian Embassies Abroad, Foreign Embassies in
India, Import Promotion Institutions Abroad, Overseas Chambers of Commerce and
Industries, Various Directories, Journals, Market Survey Reports.
Selecting prospective Buyers
You can collect addresses of the prospective buyers of the commodity
from the following sources:
Enquiries from friends and relatives or other acquaintances residing in
Visiting/ participating in International Trade Fairs and Exhibitions in
India and abroad. Contact with the Export Promotion Councils, Commodity Boards
and other Government Agencies. List given in Appendix 4 of this book).
Consulting International Yellow Pages (A Publication from New York by
Dun & Bradstreet, USA or other Yellow Pages of different countries like
Collecting addresses from various Private Indian Publications
Directories available on cost at Jain Book Agency,C-9, Connaught Place, New
Delhi-1. (PH. 3355686, Fax.3731117).
Collecting information from International Trade Directories/
Journals/periodicals available in the libraries of Directorate General of
Commercial Intelligenceand Statistics, IIFT, EPCs, ITPO etc. A list of selected
trade directories published abroad is given in Appendix 5 of this book.
Making contacts with Trade Representatives of Overseas Govt. in India
and Indian Trade and Other Representatives/ International Trade Development
Authorities abroad. A list of international trade development authorities
abroad like Foreign Chambers of Commerce etc. is given in Nabhi's EXPORTERS
MANUAL AND DOCUMENTATION.
Reading biweekly, fortnightly, monthly bulletins such as Indian Trade
Journal, Export Service Bulletin, Bulletins and Magazines issued and published
by Federation of Exporters' Organisations, ITPO, EPCs, Commodity Boards and
other allied agencies. A list of Indian Trade Periodicals containing names and
addresses of importers is given in Appendix 6 of this book.
Visiting Embassies, Consulates etc. of other countries and taking note
of addresses of importers for products proposed to be exported.
Advertising in newspapers having overseas editions and other foreign
newspapers and magazines etc.
Contacting authorised dealers in foreign exchange with whom exporter is
maintaining bank account.
Overseas importers can be contacted or informed about the products by
the following methods:
By corresponding and sending brochures and product literature to
prospective overseas buyers.
By undertaking trips to foreign markets and establishing personal
rapport with overseas buyers. The number of trips will depend on your budget
and resources. But it is essential forlong-term success in international
marketing to establish personal rapport. Foreign trip will provide first-hand
information regarding the market, overseas customers, their requirement, taste,
preference and better out communication of the merits of exporters' products.
Participation in buyer-seller meets and meeting the members of foreign
delegation invited by Export Promotion Councils concerned.
Participation in international trade fairs, seminars.
Advertisement and publicity in overseas reputed newspapers and
magazines. Facilities of free publicity can be availed from Import Development
Selecting channels of distribution
The following channels of distribution are generally utilised while
exporting to overseas markets :
- Exports through Export
- Export through Canalising
- Export through Other
Established Merchant Exporters or Export Houses, or Trading Houses
- Direct Exports
- Export through Overseas
Negotiating with Prospective Buyers
Whatever the channel of distribution for exporting to the overseas
countries is proposed to be is utilized, it is essential that the exporters
should possess the necessary skill for negotiating with the overseas channels
of distribution. The ability to negatiate effectively is needed for discussion
with importers or trade agents. While conducting business negotiations, the
prospective exporter should avoid conflict, controversy and criticism vis-`-vis
the other party. During conversation the attitude should be to communicate
effectively. There should be coherence, creativity, compromise, concessions,
commonality, consensus, commitment and compensation in business negotiations.
The general problem you may face is about pricing. The buyer's contention is
that prices are too high. It should be noted that though the price is only one
of the many issues that are discussed during business negotiations, it
influences the entire negotiating process.
Since this is the most sensitive issue in business negotiations, it
should be tactfully postponed until all the issues have been discussed and
mutually agreed upon. As far as the price is concerned, you should try to
determine the buyer's real interest in the product from the outset, only then a
suitable counter proposal should be presented. It should also be remembered
that the buyer may request modifications in presentation of the product. You
should show the willingness to meet such request, if possible, provided that it
will result in profitable export business. Price being the most important sales
tool, it has to be properly developed and presented.
Therefore, in order to create a favorable impression, minimize costly
errors and generate repeated business. The following points should be kept in
mind while preparing the price list:
Submit a typewritten list, printed on the regular bond paper and laid
out simply and clearly (with at least an inch between columns and between
groupings) Prominently indicate the name of your company, its full address,
telephone and fax numbers, including the country and city codes. Fully describe
the items being quoted. Group the items logically( i.e. all the fabrics
together, all the made-up together etc.).
Specify whether shipped by sea or by air, f.o.b. or c.i.f. and to what
Quote exact amount and not rounded-off figures.
Mention the dates upto which the prices quoted will remain valid.
Where there is an internal reference number which must be quoted, to
keep it short (the buyer has no interest in this detail and the more complex it
is, the greater is the risk of error).
As regards the factors determining your price, please refer to 'EXPORT
PRICING AND COSTING'
One main point regarding export pricing is that while negotiating with
overseas buyer, you may not remember the cost of a product. It may also be
difficult for you to remember the profit margin built in various prices quoted
by you. A clear jotting of this information is not free from the risk of being
leaked out to the competitors or to the overseas buyers.
Some coding is, therefore, essential for the prices quoted by you so
that at any stage/point of time, you can always utilise the information,
enabling you to profitably negotiate with the overseas buyer. This can be done
by assigning codes to the cost price.
For assigning codes to the cost price, you may select an English
password consisting of 10 separate letters, each letter to represent a
numerical figure. For example: 'CRAZY MOUTH' is the password selected by you,
where C=1, R=2, A=3, Z=4, Y=5, M=6, O=7, U=8, T=9, H=0. This password can be
successfully used for recognising various items of exports and their
varieties.Thus, a brass candle stand which is being quoted at Rs. 100(sale
price) but whose cost price to you is Rs 25.50 will be coded as item number
'RYYH' and then assigned with a running serial number to make it more fascinating.
You can decode the word 'RYYH' to write as Rs 25.50 so as to get an idea of
difference between the Sale Price and the Cost Price, which will provide you
the range within which you can negotiate with overseas buyers.
Processing an Export order
You should not be happy merely on receiving an export order. You should
first acknowledge the export order, and then proceed to examine carefully in
respect of items, specification, preshipment inspection, payment conditions,
special packaging, labeling and marketing requirements, shipment and delivery
date, marine insurance, documentation etc. if you are satisfied on these
aspects, a formal confirmation should be sent to the buyer, otherwise
clarification should be sought from the buyer before confirming the order.
After confirmation of the export order immediate steps should be taken for
procurement/manufacture of the export goods. In the meanwhile, you should
proceed to enter into a formal export contract with the overseas buyer.
Entering into an Export contract
In order to avoid disputes, it is necessary to enter into an export
contract with the overseas buyer. For this purpose, export contract should be
carefully drafted incorporating comprehensive but in precise terms, all
relevant and important conditions of the trade deal.
There should not be any ambiguity regarding the exact specifications of
goods and terms of sale including export price, mode of payment, storage and
distribution methods, type of packaging, port of shipment, delivery schedule
etc. The different aspects of an export contract are enumerated as under :
- Product, Standards and
- Total Value of Contract
- Terms of Delivery
- Taxes, Duties and Charges
- Period of Delivery/Shipment
- Packing, Labeling and
- Terms of Payment--
Amount/Mode & Currency
- Discounts and Commissions
- Licenses and Permits
- Documentary Requirements
- Force Majeure of Excuse for
Non-performance of contract
- Arbitration It will not be
out of place to mention here the importance of arbitration clause in an
export contract Court proceedings do not offer a satisfactory method for
settlement of commercial disputes, as they involve inevitable delays,
costs and technicalities. On the other hand, arbitration provides an
economic, expeditious and informal remedy for settlement of commercial
disputes. Arbitration proceedings are conducted in privacy and the awards
are kept confidential. The Arbitrator is usually an expert in the subject
matter of the dispute. The dates for arbitration meetings are fixed with
the convenience of all concerned. Thus, arbitration is the most suitable
way for settlements of commercial disputes and it may invariably be used
by businessmen in their commercial dealings.
The Indian Council of Arbitration Federation House,
Tansen Marg, New Delhi. (Ph. 3319251 Fax:3320714) is a specialized arbitration
institution providing arbitration facilities for all types of domestic or
international commercial disputes. You should use their services as far a
BRIEF SPECIMEN CONTRACT FORM FOR SALE PURCHASE
EXPORTS AND IMPORTS
Name and address of the parties.......(state correct appellation and
complete address of the parties)
We, the above named parties have entered into this contract for the
sale/purchase, etc. ....... (state briefly the purpose of the contract) on this
........(date) at ........(place)..... subject to the following terms and
...............Quality................. (Describe the quantity, quality and the
other specifications of the goods precisely as per the agreement. An agency for
inspection/certification of quality and/or quantity may also be stipulated).
Mode of payment ...................(Quote the price, terms, i.e. ex-works/FOB(free
on board) CIF(Cost, Insurance & Freight) etc. in the currency agreed upon
and describe the mode of payment i.e. payment against L/C(letter of credit)/DA
(document against acceptance) /D/P(document against payment)etc. It is also
desirable to mention the exchange rate.)
date of delivery and the maximum period upto which delivery could be delayed
and for which reasons, port of shipment and delivery should be mentioned).
e. Packing and
marking...............(Requirements to be specified precisely)
.................(State the type of insurance cover required, i.e. FPA(free
from particular average)/WA (with average)/ All Risks, etc. State also the
party responsible for insurance)
........(if any payable may be mentioned)
h. Passing of the
property and of risk. The property or ownership of the goods and the risk shall
finally pass to the buyer at such stage as the parties may agree, i.e. when the
goods are delivered at the seller's place of work/pass the ship's rails/are
covered by insurance etc. as per agreed terms).
Arbitration clause recommended by the Indian
Council of Arbitration: "All disputes or differences whatsoever arising
between the parties out of relating to the construction, meaning and operation
or effect of this contract or the breach thereof shall be settled by
arbitration in accordance with the rules of the arbitration of the Indian
Council of Arbitration and the award made in pursuance thereof shall be binding
on the parties."(or any other arbitration clause that may be agreed upon
between the parties). 3.Any other special condition, prevalent in or relevant
to the particular line of trade or transaction, may also be specified.
Notes: The above specimen
contract form, drawn up in brief essentials, is meant for simple small scale
transactions and is intended to draw the attention of the parties to important
aspects of the trade deal in drafting the contract. The parties are free to add
to or modify the terms as per the peculiar nature of their trade transaction.
They may also consult with advantage, experienced commercial or arbitration
bodies for the purpose or study published literature on the subject. The use of
the arbitration clauses in commercial contracts is becoming increasingly
commom, particularly in export-import transactions, with a view to promoting
smooth and swift flow of business. The Indian Council of Arbitration (ICA)
which is partly founded by the Government of India, provides comprehensive
institutional arbitration service to all government departments and public
undertakings as well as private traders, exporters and importers in India for
amicable and quick settlement of all types of commercial disputes. It has been
suggested by the Ministry of Commerce that all commercial organisations should
make use of the arbitration clause of the Council in their commercial contracts
with Indian and foreign parties.
Export Pricing and Costing
Export pricing should be differentiated from export
costing. Price is what we offer to the customer.Cost is the price that we
pay/incur for the product. Price includes our profit margin, cost includes only
expenses we have incurred. Export pricing is the most important tool for
promoting sales and facing international competition. The price has to be
realistically worked out taking into consideration all export benefits and
expenses. However, there is no fixed formula for successful export pricing. It
will differ from exporter to exporter depending upon whether the exporter is a
merchant exporter or a manufacturer exporter or exporting through a canalising
agency. You should also assess the strength of your competitor and anticipate
the move of the competitor in the market. Pricing strategies will depend on various
circumstantial situations. You can still be competitive with higher prices but
with better delivery package or other advantages.
Your prices will be determined by the following
- Range of products offered
- Prompt deliveries and
continuity in supply
- After-sales service in
products like machine tools, consumer durables
- Product differentiation and
- Frequency of purchase
- Presumed relationship
between quality and price
- Specialty value goods and
- Credit offered
- Preference or prejudice for
products originating from a particular source
- Aggressive marketing and
- Prompt acceptance and
settlement of claims
- Unique value goods and gift
Export Costing is basically Cost Accountant's job.
It consists of fixed cost and variable cost comprising various elements. It is
advisable to prepare an export costing sheet for every export product. For the
format of the export costing sheet and other relevant details refer to Nabhi's
EXPORTERS MANUAL AND DOCUMENTATION.As regards quoting the prices to the
overseas buyer, the same are quoted in the following internationally accepted
means that your responsibility is to make goods available to the buyer at works
or factory. The full cost and risk involved in bringing the goods from this
place to the desired destination will be borne by the buyer. This term thus
represents the minimum obligation for you. It is mostly used for sale of
plantation commodities such as tea, coffee and cocoa.
Free on Rail(FOR): Free on Truck(FOT):These
terms are used when the goods are to be carried by rail, but they are also used
for road transport. Your obligations are fulfilled when the goods are delivered
to the carrier.
Free Alongside Ship (FAS): Once the goods
have been placed alongside the ship, your obligations are fulfilled and the
buyer notified. The buyer has to contract with the sea carrier for the carriage
of the goods to the destination and pay the freight. The buyer has to bear all
costs and risks of loss or damage to the goods hereafter.
Free on Board (FOB): Your
responsibility ends the moment the contracted goods are placed on board the
ship, free of cost to the buyer at a port of shipment named in the sales
contract. 'On board' means that a 'Received for Shipment' B/L (Bill of Lading)
is not sufficient. Such B/L if issued must be converted into 'Shipped on Board
B/L' by using the stamp 'Shipped on Board' and must bear signature of the
carrier or his authorised representative together with date on which the goods
Cost and Freight (C&F): You must on
your own risk and not as an agent of the buyer, contract for the carriage of
the goods to the port of destination named in the sale contract and pay the
freight. This being a shipment contract, the point of delivery is fixed to the
ship's rail and the risk of loss or of damage to the goods is transferred from
the seller to the buyer at that very point. As will be seen though you bear the
cost of carriage to the named destination, the risk is already transferred to the
buyer at the port of shipment itself.
Cost Insurance Freight (CIF): The term is
basically the same as C&F, but with the addition that you have to obtain
insurance at your cost against the risks of loss or damage to the goods during
Freight or Carriage Paid (DCP): While C&F
is used for goods which are to be carried by sea, the term "DCP" is
used for land transport only, including national and international transport by
road, rail and inland waterways. You have to contract for the carriage of the
goods to the agreed destination named in the contract of the sale and pay
freight. Your obligations are fulfilled when the goods are delivered to the
first carrier and not beyond. In case the buyer desires you to insure the goods
till the destination, he would add 'including insurance' before the word 'Paid
in Freight' or 'Carriage Paid to'.
EXS/EX-Ship: This is an
arrival contract and means that you make the goods available to the buyer in
the ship at the named port of destination as per sales contract. You have to
bear the full cost and risk involved in bringing the goods there. Your
obligation is fulfilled before the customs border of the foreign country and it
is for the buyer to obtain necessary import license at his own risk and
EXQ/Ex-Quay: Ex-Quay means
that you make the goods available to the buyer at a named quay. As in the term
'Ex-Ship' the points of division of costs and risks coincide, but they have now
been moved one step further -- from the ship into the quay or wharf i.e. after
crossing the customs border at destination. Therefore, in addition to arranging
for carriage and paying freight and insurance you have to bear the cost of
unloading the goods from the ship.
Delivered at Frontier (DAF): The term is
primarily intended to be used when the goods are to be carried by rail or road.
Your obligations are fulfilled when the goods have arrived at the frontier, but
before the 'Customs border' of the country named in the sales contract.
Delivery Duty Paid (DDP): This term may
be used irrespective of the type of transport involved and denotes your maximum
obligation as opposed to 'Ex-Works'. You have not fulfilled his obligation till
such time that the goods are made available at his risk and cost to the buyer
at his premises or any other named destination. In the latter case necessary
documents (e.g. transport document or Warehouse Warrant) will have to be made
available to the buyer to enable him to take delivery of goods. The term 'duty'
includes taxes, fees and charges.Therefore, the obligation to pay VAT (Value
Added Tax) levied upon importation will fall upon you. It is, therefore,
advisable to use 'exclusive of VAT' after the words 'duty paid'.
FAO/FOB Airport: 'FOB Airport'
is based on the same main principle as the ordinary FOB term. You fulfill your
obligation by delivering the goods to the air carrier at the airport of
departure. Without the buyer's approval delivery at a town terminal outside the
airport is not sufficient, your obligations with respect to costs and risks do
not extend to the arrival of the goods at the destination.
Free Carrier (Named Point) FRC: The term has
been designed particularly to meet the requirements of modern transport like
'multi-modal' transport as container or 'roll-on-roll-off' traffic by trailers
and ferries. The principles on which the term is based is same as applicable to
FOB except that the seller or the exporter fulfills his obligations when he
delivers the goods into the custody of the carrier at the named point.
Freight Carriage and Insurance Paid
(CIP): The term is similar to 'Freight or Carriage Paid to'. However, in
case of CIP you have additionally to procure transport insurance against the
risk of loss or damage to the goods during the carriage. You contract with the
insurer and pay the insurance premium.
Understanding risks in International
While selling abroad, you may undergo the following
These risks can be insured to a great extent by
taking appropriate steps. Credit risk against the buyer can be covered by
insisting upon an irrevocable letter of credit from the overseas buyer. An
appropriate policy from Export Credit and Guarantee Corporation of India Ltd.
can also be obtained for this purpose. Country risks are also covered by the
ECGC. As regards currency risk, i.e. possible loss due to adverse fluctuation
in exchange rate, You should obtain forward cover from your bank authorised to
deal in foreign exchange. Alternatively, you should obtain export order in
Indian rupee. Carriage risk, i.e. possible loss of cargo in transit can be
covered by taking a marine insurance policy from the general insurance
- Registration with Reserve
Bank Of India: No longer required. Prior to 1.1.1997 it was compulsory for
every exporter to obtain an exporters' code number from the Reserve Bank
of India before engaging in export. This has since been dispensed with and
registration with the licensing authorities is sufficient before
commencing export or import.
- Registration with Regional
Licensing: Authorities (obtaining IEC Code Number) The Customs Authorities
will not allow you to import or export goods into or from India unless you
hold a valid IEC number. For obtaining IEC number you should apply to
Regional Licensing Authority (list given in Appendix 2) in duplicate in
the prescribed form given in Appendix 1. Before applying for IEC number it
is necessary to open a bank account in the name of your company / firm
with any commercial bank authorised to deal in foreign exchange. The duly
signed application form should be supported by the following documents:
Bank Receipt (in duplicates)/Demand Draft for
payment of the fee of Rs. 1,000/-.
Certificate from the Banker of the applicant firm
as per Annexure 1 to the form given in Appendix 1 of this Book.
Two copies of Passport size photographs of the
applicant duly attested by the banker to the applicants.
A copy of Permanent Account Number issued by Income
Tax Authorities. If PAN has not been allotted, a copy of application of PAN
submitted to Income Tax Authorities.
In case the application is signed by an authorised
signatory, a copy of the letter of legal authority may be furnished.
If there is any non-resident interest in the firm
and NRI investment is to be made with repatriation benefits, a simple
declaration indicating whether it is held with the general/specific permission
of the RBI on the letter head of the firm should be furnished. In case of
specific approval, a copy may also be furnished.
Declaration by the applicant that the
proprietors/partners/directors of the applicant firm/company, as the case may
be, are not associated as proprietor/partners/directors with any other
firm/company which has been caution-listed by the RBI. Where the applicant is
so associated with a caution-listed firm/company the IEC No. is allotted with a
condition that he can export only with the prior approval of the RBI.
Exporter's Profile as per form attached to Appendix
1 of this book (See Appendix 1A of this Book). The Regional Licensing Authority
concerned will on merits grant an IEC number to the applicant. The number
should normally be given within 3 days provided the application is complete in
all respects and is accompanied by the prescribed documents. An IEC number
allotted to an applicant shall be valid for all its branches/divisions as
indicated on the IEC number.
Register With Export Promotion Council
In order to enable you to obtain
benefits/concession under the export-import policy, you are required to
register yourself with an appropriate export promotion agency by obtaining
registration-cum- membership certificate.
For this purpose you should apply in the prescribed form, given at
Appendix 3 of this Book to the Export Promotion Council relating to your main
line of business.
For list of Registering Agencies, please refer to Appendix 4 of this
Book. However, if the export is such that it is not covered by any EPC, RCMC in
respect thereof may be obtained from the Regional Licensing Authority
An application for registration should be accompanied by a self
certified copy of the Importer-Exporter code number issued by the Regional
Licensing Authority concerned and bank certificate in support of the
applicant's financial soundness. In case an exporter desires to get registration
as a manufacturer exporter, he should furnish evidence to that effect. In the
case of a manufacturer exporter the licensing authority may seek copy of
registration with SSI/any other sponsoring authority in addition to the
application in the prescribed form for the Import Export Code Number.
If the application for registration is granted, the EPC or FIEO shall
issue the RCMC indicating the status of the applicant as merchant exporter or
manufacturer exporter. The RCMC shall be valid for five years ending 31st March
of the licensing year. The certificate shall be deemed to be valid from 1st
April of the licensing year in which it was issued.
Registration With Sales Tax Authorities: Goods which are to be shipped
out of the country for export are eligible for exemption from both Sales Tax
and Central Sales Tax. For this purpose, you should get yourself registered
with the Sales Tax Authority of your state after following the procedure
prescribed under the Sales Tax Act applicable to your State.
As the overseas buyers generally insist
for the samples before placing confirmed orders, it is essential that the
samples are attractive, informative and have retention and reminder value.
Besides, the exporter should know the Government policy and procedures for
export of samples from India. He should also be aware about the cheapest modes
of sending samples.
In this connection, it is advised that the postal channel is
comparatively cheaper than sending samples by air. While sending samples
through postal channel due regard should be given to weight and dimension of
the post parcels as postal authorities have prescribed maximum weight and
dimension for the post parcels handled by them. Where it is not possible to
send the samples by post parcels, the same may be sent by air. So far as the
Government policy regarding export of samples is concerned, distinction has
been made between export of commercial samples and gift parcels. In terms of
Para 11.4 of the Import Export Policy as modified upto 31.3.1999, goods
including edible items of value not exceeding Rs.1,00,000 in a licensing year
may be exported as a gift. Items mentioned as restricted for exports in the ITC
(HS) Classifications of Export & Import Items shall not be exported as a
gift without a license except in the case of edible items. Export of bonafide
trade and technical samples having indelible marking as "sample not for
sale" is allowed freely without any limit. However, in such cases where
indelible marking is not available, the samples may be allowed for a value not
exceeding US $ 10,000, per consignment. In addition the exporter has the option
to avail the facility of free samples upto US $ 5,000 or 1% of the preceding
year's exports, whichever is higher. An application for export of gifts/samples
in excess of the limits specified above may be made to the DGFT.
Special provisions have been made for export of garment samples. Garment
samples are allowed to be exported only by exporters who are registered with
the Apparel Export Promotion Council (AEPC) or the Wool and Woolen Export
Promotion Council for woolen Knitwears. Export of samples to be sent by post
parcel or air freight are further divided into 3 categories, namely : 1.Samples
of value upto Rs.10,000, 2.Samples of value less than Rs. 25,000, 3.Samples of
value more than Rs. 25,000.Where the value of the articles is less than Rs.
10,000, the exporter should file a simple declaration that the sample does not
involve foreign exchange and its value is less than Rs. 10,000.Where the value
of samples is more than Rs. 10,000 but less than Rs. 25,000 you should obtain a
value certificate from the authorised dealer in foreign exchange (i.e. your
bank). For this purpose, you should submit a commercial invoice certifying
thereon that the parcel does not involve foreign exchange and the aggregate
value of the samples exported by you does not exceed Rs. 25,000 in the current
calendar year.If the value of samples exceeds Rs. 25,000 you should obtain
Gr/PP waiver from the Reserve Bank of India.
Export of trade samples is allowed by sea/air (as distinguished from
sea/airmail) without any value restriction, provided the customs authorities
are satisfied about the bona fide of the goods that they do not fall in the
export control restrictions. However, customs authorities may ask for suitable
documentary evidence in this regard viz. correspondence etc. with the overseas
buyer. Trade samples against which the foreign buyer agrees to make payment can
be exported in the same manner in which normal exports are effected. Samples
can also be carried personally by you while traveling abroad provided these are
otherwise permissible or cleared for export as explained earlier.
However, in case of precious jewelry/stone items, you should declare the
same to the customs authorities while leaving the country and obtain necessary
endorsement on export certificate issued by the Jewelry Appraiser of the
Selling through an overseas agent is an
effective strategy. These agents serve as a source of market intelligence.
Regularly sending the latest trends on the current fashion, taste and price in
the market. Being a man on the spot, the agent is in a position to render his
advice to exporter or new methods and strategy for pushing up sales of your products.
He also provides you support in the matter of transportation, reservation of
accommodation, appointment with the government as and when required by you. In
some countries it is compulsory under their law to sell through local agents
only. It is, therefore, essential that you should carefully select your
Consider the points listed below when appointing an Agent :
- Size of the agent's company
- Date of foundation of the
- Company's ownership and
- Company's capital, funds,
available and liabilities
- Name, age and experience of
the company's senior executives
- Number, age and experience
of the company's salesman
- Oher agencies that the
company holds, including those of competing products and turn-over of each
- Length of company's
association with other principal
- New agencies that the
company obtained or lost during the past year
- Company's total annual sales
and the trends in its sales in recent years
- Company's sales coverage,
overall and by area
- Number of sales calls per
month and per salesman by company staff
- Any major obstacles expected
in the company's sales growth
- Agent's capability to
provide sales promotion and advertising services
- Agent's transport facilities
and warehousing capacity
- Agent's rate of commission;
payment terms required
- References on the agents
from banks, trade associations and major buyers
Some source of information on agents are:
- Government Departments Trade
- Chambers of Commerce
- Independent Consultants
- Export Promotion Councils
- Advertisement Abroad.
Specimen Copy of Agreement
An agreement made this the ....... day
....... of between .......(name and address) hereinafter called the exporters
of the first part and ........ (name and address) hereinafter called the
importers of the second part, wherein the exporters grant to the importers the
importation and selling right in the territory of ..........(fill name of
country) for .........(names and brief description of product) subject to the
terms and conditions given below :
The exporter agrees that during the currency of the agreement he will
not correspond or in any way deal with any part in the territory specified
unless requested to do so by the importers.
The exporter agrees that any orders or enquiries relating to the
specified territory received by him during the currency of this agreement will
be passed on to the importers to deal with.
The exporter agrees that he will make shipment of all orders received
from the importers by earliest shipping opportunity unless prevented from so doing
by circumstances beyond the former's control.
The exporter agrees to charge the importers for all goods ordered during
the currency of this agreement the prices detailed in Price List No. .........
appended to this agreement unless any order is received at least one month
after notification of price changes by the exporter to the importer.
The exporter agrees to pay the importer commission on ......... (fill in
the dates of each year during the currency of this agreement) at the rate of
...... per cent of ....... the F.O.B. value of all orders satisfactorily
completed during the ...... months preceding the dates specified.
The exporter agrees that he will allow to the importers ........ per
cent ....... of the value of all business satisfactorily completed with the
importers during the currency of this agreement as contribution towards the
importer's costs in publicising the products covered by this agreement. This
allowance is to be settled by deduction from the manufacturer's invoices to the
The importers agree that during the currency of this agreement they will
not sell, recommend or in any other way deal with any competing or rivaling
lines in the territory specified.
The importers agree that they will use their best efforts and endeavors
at all times during the currency of this agreement to promote the sales of
products covered by this agreement.
The importers agree that they will make net and full payment for all
goods ordered through confirmed and irrevocable letter of credit established in
........... (name of manufacturer's town or city). OR The importers agree that
they will make net and full payment for all goods ordered against presentation
of draft and shipping documents in ......... (name of importer's town or city).
OR The importers agree that they will immediately upon presentation at
......... and retire such drafts net and in full upon maturity.
The importers agree that they will write to the manufacturer at least
once each calendar month and will send to the manufacturer a full market report
on the prospects for sale of the products covered by this agreement every six
The importer agrees that they will place regular and adequate order with
the manufacturer amounting in total to not less than ........ during the first
calendar year and not less than Rs. .......... in each and every subsequent
year during the currency of this agreement.
This agreement shall become valid with effect from the date of shipment
of the substantial order amounting in value of not less than Rs. ........ and
remain in force for a period of twelve calendar months there from subject to
either party being at liberty to terminate this agreement without notice in the
event of the other party being in breach of any of the terms and conditions
Notwithstanding anything herein aforesaid if during the first twelve
calendar months the importers have placed satisfactory orders with the
exporters amounting to not less than Rs. ....... this agreement shall be
automatically renewed year after year provided that in the twelve calendar
months immediately preceding the expiry date satisfactorily business amounting
in total to not less than Rs. ....... has been placed by the importers with the
Any disputes arising under this agreement shall be settled in accordance
with Indian Law in (.............)
Acquire Export License
Exports free unless regulated: The current Export Licensing Policy of the Government of India is
contained in the new Import Export Policy and Procedures, 1997-2002 as amended
upto 31.3.1999. The Policy and Procedures are amended from time to time and for
latest position kindly refer to. However, for the sake of information of the
prospective exporters, it may be stated that all goods may be exported without
any restriction except to the extent such exports are regulated by the ITC (HS)
Classifications of Export and Import items or any other provisions of this
policy or any other law for the time being in force. The Director General of
Foreign Trade may, however, specify through a Public Notice such terms and
conditions according to which any goods, not included in the ITC (HS)
Classifications of Export and Import items may be exported without a license.
Such terms and conditions may include Minimum Export Price (MEP), registration
with specified authorities, quantitative ceilings and compliance with other
laws, rules, regulations.
Application for an Export License: An application for grant of
export license in respect of items mentioned in Schedule 2 of ITC (HS)
Classifications of Export and Import items may be made in the form given in
Appendix-18A or 18B or 18C, as the case may be, to the Director General of
Foreign Trade and shall be accompanied by the documents prescribed therein. The
Export Licensing Committee under the Chairmanship of Export Commissioner shall
consider such applications on merits for issue of export licenses special High
Powered Licensing Committee under the Chairmanship of Director General of
Foreign Trade shall consider applications for export of dual purpose chemicals
and for special materials, equipment and technologies, as specified in Schedule
2 Appendix 5 and Schedule 2 Appendix 6 respectively of the book p 7 3 titled
ITC(HS) Classifications of Export and Import items on the basis of guidelines
issued in this regard from time to time.
Export of Canalised Items: An application for export of
canalised items mentioned in ITC (HS) Classifications of Export and Import
items may be made to the Director General of Foreign Trade.
Trade Fairs/Exhibitions: Any Indian wishing to organise
any Trade Fair/Exhibition in India or abroad, would be required to obtain a
certificate from an officer of the rank not below that of an Under Secretary to
the Government of India, in the Ministry of Commerce, or an Officer of India
Trade Promotion Organisation, duly authorised by its chairman in this behalf,
to the effect that such exhibition, fair or as the case may be, similar show or
display, has been approved or sponsored by the Government of India in the
Ministry of Commerce or the India Trade Promotion Organisation and the same is
being held in public interest.
Gifts/Spares/Replacement Goods: For export of gifts,
indigenous/imported spares and replacement goods in excess of the prescribed
ceiling/period, an application may be made to the Director General of Foreign
Export through Courier Service: Import/Exports through a
registered courier service is permitted as per the Notification issued by the
Department of Revenue. However, importability/exportability of such items shall
be regulated in accordance with the policy.
Acquire Export Credit Insurance
Export credit insurance protects you
from the consequences of the payment risks, both political and commercial. It
enables you to expand your overseas business without fear of loss. Further, it
creates a favorable climate for you under which you can hope to get timely and
liberal credit facilities from the banks at home.
You can obtain Export Credit Insurance from the Export Credit and
Guarantee Corporation of India Limited. In order to provide you Export Credit
Insurance, the following covers are issued by the ECGC :
Standard policies to protect you against the risk of not p 7 3 receiving
payment while trading with overseas buyers on short-term credit.
Specific policies designed to protect you against the risk of not
receiving payment in respect of:
- exports on deferred payment
- services rendered to foreign
- construction work, including
turnkey projects undertaken abroad
The policies are either:
Whole Turnover Policies in the form of 'Open Cover' in respect of
shipments made during 24 months period. You have to obtain credit limit on each
one of your buyers to enable ECGC to approve a limit on the basis of credit
worthiness of the buyer. These policies are basically similar to whole turnover
policies but only apply to specific contracts.
Specific Policies for exports of capital goods on medium or long-term
credit, turnkey projects, civil construction works and technical services.These
policies are basically similar to whole turnover policies but only apply to
Financial guarantees issued to banks against risk involved in providing
credit or guarantee facilities to you, and
Special schemes viz. transfer guarantee issued to protect banks which
add confirmation to letters of credit, Insurance cover for Buyers' Credit,
Lines of Credit, Joint Ventures and Overseas Investment Insurance, and Exchange
Fluctuation Risk Insurance. The other guarantees which banks can offer to
youthrough ECGC schemes are :--- Bid Bonds,--- Advance Payments Guarantee,---
Bank guarantee for due performance of the contract by the exporter,---Bank
guarantee for payment of retention money,--- Bank guarantee for loans in
foreign currencies. Details of these schemes can be obtained from your own
banker or local office of the Export Credit and Guarantee Corporation of India
The Shipments (Comprehensive Risks) Policy is the one ideally suited to
cover risks in respect of goods exported on short-term credit. Shipments to
associates or to agents and those against letter of credit can be covered for
only political risks by suitable endorsements to the shipments (comprehensive
risks) Policy. Premium is charged on such shipments at lower rates.
For obtaining a policy you should apply to the nearest office of the
ECGC in the prescribed Form no.121 (obtainable from ECGC) along with the
following documents :
Bank Certificate about the financial position
Application form for fixing the credit limit
Name/address of foreign buyer fixing sub-limits
After examining the proposal, ECGC would send the exporter an offer
letter stating the terms of its cover and premium rates. The policy will be
issued after the exporter conveys his consent to the premium rate and pays a
non-refundable policy fee of Rs. 100 for policies with maximum liability limit
p 7 3 upto Rs. 5 lakhs; Rs. 200 between Rs. 5 lakhs and Rs. 20 lakhs and Rs.
100 for each additional Rs. 10 lakhs or part thereof subject to a ceiling of
Rs. 2500.As commercial risks are not covered in the absence of a credit limit,
you are advised to apply to ECGC for approval of credit limit on buyer in the
prescribed Form No:144 (obtainable from ECGC) before making shipment. Credit
limit is the limit upto which claim can be paid under the policy for losses on
account of commercial risks. If no application for credit limit on a buyer has
been made, ECGC accepts liability for commercial risks upto a maximum of Rs.
5,00,000 for D.P./C.A.D. transactions and Rs. 2,00,000 for D.A. transactions
provided that at least three shipments have been effected to the buyer during
the preceding two years on similar terms, at least one of them was not less
than the discretionary limit availed of by the exporter and the buyer had made
payment on the due dates.
Financial assistance to the exporters
are generally provided by Commercial Banks, before shipment as well as after
shipment of the said goods. The assistance provided before shipment of goods is
known as per-shipment finance and that provided after the shipment of goods is
known as post-shipment finance.Pre-shipment finance is given for working
capital for purchase of raw-material, processing, packing, transportation,
ware-housing etc. of the goods meant for export. Post-shipment finance is
provided for bridging the gap between the shipment of goods and realization of
export proceeds. The later is done by the Banks by purchasing or negotiating
the export documents or by extending advance against export bills accepted on
collection basis. While doing so, the Banks adjust the pre-shipment advance, if
any, already granted to the exporter.
An application for pre-shipment advance should be made by you to your
banker along with the following documents:
Confirmed export order/contract or L/C etc. in original. Where it is not
available, an undertaking to the effect that the same will be produced to the
bank within a reasonable time for verification and endorsement should be given.
An undertaking that the advance will be utilised for the specific purpose of
procuring/manufacturing/shipping etc., of the goods meant for export only, as
stated in the relative confirmed export order or the L/C. If you are a
sub-supplier and want to supply the goods to the Export/Trading/Star Trading
House or Merchant Exporter, an undertaking from the Merchant
Exporter or Export/Trading/Star Trading House stating that they have
not/will p 7 3 not avail themselves of packing credit facility against the same
transaction for the same purpose till the original packing credit is
liquidated. Copies of Income Tax/Wealth Tax assessment Order for the last 2-3
years in the case of sole proprietary and partnership firm. Copy of Exporter's
Code Number (CNX). Copy of a valid RCMC (Registration-cum-Membership
Certificate) held by you and/or the Export/Trading/StarTrading House
Certificate. Appropriate policy/guarantee of the ECGC.
Any other document required by the Bank. For encouraging exports, R.B.I.
has instructed the banks to grant preshipment advance at a concessional rate of
interest. The present rate of interest is 10% p.a. for preshipment advance upto
an initial period of 180 days. Preshipment advance for a further period of 90
days is given at the concessional rate of 13% p.a. Banks are free to determine
the interest rate for advances beyond 270 days and upto 360 days.
Following special schemes are also available in respect of pre-shipment
Exim Bank's scheme for grant of foreign currency pre-shipment credit to
exporters for financing cost of imported inputs for manufacture of export
Scheme of export packing credit to sub-suppliers from export order.
Packing credit for deemed exports.
Pre-shipment Credit in Foreign Currency (PCFC). For further details
refer to Nabhi's "How to Borrow from Financial and Banking
Post Shipment Finance
Post-shipment finance is the finance provided against shipping
documents. It is also provided against duty drawback claims. It is provided in
the following forms:
Purchase of Export Documents drawn under Export Order: Purchase or
discount facilities in respect of export bills drawn under confirmed export
order are generally granted to the customers who are enjoying Bill
Purchase/Discounting limits from the Bank. As in case of purchase or
discounting of export documents drawn under export order, the security offered
under L/C by way of substitution of credit-worthiness of the buyer by the
issuing bank is not available, the bank financing is totally dependent upon the
credit worthiness of the buyer, i.e. the importer, as well as that of the
exporter or the beneficiary. The documents dawn on DP basis are parted with
through foreign correspondent only when payment is received while in case of DA
bills documents (including that of title to the goods) are passed on to the
overseas importer against the acceptance of the draft to make payment on
maturity. DA bills are thus unsecured. The bank financing against export bills
is open to the risk of non-payment. Banks, in order to enhance security,
generally opt for ECGC policies and guarantees which are issued in favor of the
exporter/banks to protect their interest on percentage basis in case of
non-payment or delayed payment which is not on account of mischief, mistake or negligence
on the part of exporter. Within the total limit of policy issued to the
customer, drawee-wise limits are generally fixed for individual customers. At
the time of purchasing the bill bank has to ascertain that this drawee limit is
not exceeded so as to make the bank ineligible for claim in case of
Advances against Export Bills Sent on Collection: It may
sometimes be possible to avail advance against export bills sent on collection.
In such cases the export bills are sent by the bank on collection basis as
against their purchase/discounting by the bank. Advance against such bills is
granted by way of a 'separate loan' usually termed as 'post-shipment loan'.
This facility is, in fact, another form of post- shipment advance and is sanctioned
by the bank on the same terms and conditions as applicable to the facility of
Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is,
however, stipulated in such cases. The rates of interest etc., chargeable on
this facility are also governed by the same rules. This type of facility is,
however, not very popular and most of the advances against export bills are
made by the bank by way of negotiation/purchase/discount.
Advance against Goods Sent on Consignment Basis: When the goods
are exported on consignment basis at the risk of the exporter for sale and
eventual remittance of sale proceeds to him by the agent/consignee, bank may
finance against such transaction subject to the customer enjoying specific
limit to that effect. However, the bank should ensure while forwarding shipping
documents to its overseas branch/correspondent to instruct the latter to
deliver the document only against Trust Receipt/Undertaking to deliver the sale
proceeds by specified date, which should be within the prescribed date even if
according to the practice in certain trades a bill for part of the estimated
value is drawn in advance against the exports.
Advance against Undrawn Balance: In certain lines of export it is
the trade practice that bills are not to be drawn for the full invoice value of
the goods but to leave small part undrawn for payment after adjustment due to
difference in rates, weight, quality etc. to be ascertained after approval and
inspection of the goods. Banks do finance against the undrawn balance if
undrawn balance is in conformity with the normal level of balance left undrawn
in the particular line of export subject to a maximum of 10% of the value of
export and an undertaking is obtained from the exporter that he will, within 6
months from due date of payment or the date of shipment of the goods, whichever
is earlier surrender balance proceeds of the shipment. Against the specific
prior approval from Reserve Bank of India the percentage of undrawn balance can
be enhanced by the exporter and the finance can be made available accordingly
at higher rate. Since the actual amount to be realised out of the undrawn
balance, may be less than the undrawn balance, it is necessary to keep a margin
on such advance.
Advance against Retention Money: Banks also grant advances against
retention money, which is payable within one year from the date of shipment, at
a concessional rate of interest up to 90 days. If such advances extend beyond
one year, they are treated as deferred payment advances which are also eligible
for concessional rate of interest.
Advances against Claims of Duty Drawback: Duty Drawback
is permitted against exports of different categories of goods under the
'Customs and Central Excise Duty Drawback Rules, 1995'. Drawback in relation to
goods manufactured in India and exported means a rebate of duties chargeable on
any imported materials or excisable materials used in manufacture of such goods
in India or rebate on excise duty chargeable under Central Excises Act, 1944 on
certain specified goods. The Duty Drawback Scheme is administered by
Directorate of Duty Drawback in the Ministry of Finance. The claims of duty
drawback are settled by Custom House at the rates determined and notified by
the Directorate. As per the present procedure, no separate claim of duty
drawback is to be filed by the exporter. A copy of the shipping bill presented
by the exporter at the time of making shipment of goods serves the purpose of
claim of duty drawback as well. This claim is provisionally accepted by the customs
at the time of shipment and the shipping bill is duly verified. The claim is
settled by customs office later. As a further incentive to exporters, Customs
Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, Hyderabad have evolved
a simplified procedure under which claims of duty drawback are settled
immediately after shipment and no funds of exporter are blocked.
However, where settlement is not possible under the simplified procedure
exporters may obtain advances against claims of duty drawback as provisionally
certified by customs.
Negotiation of Export documents Drawn under L/C: This aspect has
been discussed in the chapter on Special Care for negotiation of Export
Documents under Letter of Credit.
Rates of Interest
The rate of interest depends on the
nature of the Bills, i.e., whether it is a demand bill or usance bill. Like
pre-shipment, post-shipment finance is also available at concessional rate of
interest. Present Rates of interest are as under:
Demand Bills for transit period Not exceeding ( as specified by FEDAI)
Usance Bills (for total period comprising usance period of ex-port
bills, transit period as specified by FEDAI and grace period, wherever
a. Upto 90 days 10% p.a.
b. Beyond 90 days and
upto six 12% p.a.months from the date of shipment.
c. Beyond six months
from the 20% date of Shipment (Minimum)
Against duty drawback etc., receive- Not exce-vable from Government
covered by adding 10%ECGC guarantees (upto 90 days) p.a. 4. Against undrawn
balance (upto 90 days) -- do -- 5.Against retention money (for suppl- -- do --
ies portion only) payable within one year from the date of shipment (upto90
Normal Transit Period: Foreign Exchange Dealers
Association of India (FEDAI) has fixed transit period for export bills drawn on
different countries in the world. The concept of this transit period is that an
export bill should normally be realised within that period. The transit period
so fixed by FEDAI is known as 'Normal Transit Period' and mainly depends on
geographical location of a particular country.
Direct and Indirect Bill: If the currency of the bill is
the same as the currency of the country on which it is drawn, it is termed as
direct bill, e.g. an export bill in US $ drawn on a place in U.S.A. However, if
the currency of the bill in which it is drawn is different than the currency of
the country on which it is drawn, it is termed as indirect bill, e.g. an export
bill in US $ drawn on a place in Japan. The normal transit period fixed for
indirect bill is on higher side as compared to transit period fixed for direct
Notional Due Date: To determine the due date of an export bill
we have to consider the following 3 components: (1) Normal transit period as
fixed by FEDAI (2) Usance period of the bill (3) Grace period if applicable in
the country on which the bill is drawn. Grace period is applicable only in the
case of usance bills. The notional due date of an export bill may thus be
calculated after adding all the above 3 components The concessional rate of
interest is chargeable upto the notional due date subject to a maximum of 90
FORFAITING FINANCE BY AUTHORISED DEALERS: Reserve Bank
has now permitted the authorised dealers (Banks) to arrange forfeiting of
medium term export receivables p 7 3 on the same lines as per the scheme of
EXIM Bank and many International forfeiting agencies have now become active in
Indian market. Forfeiting may be usefully employed as an additional window of
export finance particularly for exports to those countries for which normal exports
credit is not intended by the commercial banks.It must be noted that charges of
forfaiting are eventually to be passed on to the ultimate buyer and should,
therefore, be so declared on relative export declaration forms.
EXTERNAL COMMERCIAL BORROWINGS: Proposals for raising foreign
currency loans/credits viz., Buyer's Credits, Supplier's Credits or Lines of
Credits by firms/companies/lending institutions, banks, etc. for financing cost
of import of goods, technology or for any other purposes, other than short-term
loans/credits maturing within one year should first be submitted to government
of India, Ministry of Finance (Department Economic Affairs), ECB Division, New
Delhi for necessary clearance. The proposals are considered by the government
on merits of each case and in the light of prevailing Government policy. For
details refer to (1) NABHI'S FOREIGN EXCHANGE MANUAL & (2) NABHI'S MANUAL
OF SEBI GUIDELINES ON CAPITAL ISSUES, EURO ISSUES, MERCHANT BANKNG & MUTUAL
EXIM BANK FINANCE: Besides commercial banks,export finance is
also made available by the EXIM bank. The EXIM bank provides financial
assistance to promote Indian exports through direct financial assistance ,
overseas investment finance, term finance for export production and export development,
pre-shipment credit, lines of credit, re-lending facility, export bills
re-discounting, refinance to commercial banks, finance for computer software
exports, finance for export marketing and bulk import finance to commercial
banks. The EXIM Bank also extends non-funded facility to Indian exports in the
form of guarantees. The diversified lending programme of the EXIM Bank now
covers various stages of exports, i.e. from the development export markets to
expansion of production capacity for exports, production for export and post
shipment financing. The EXIM Bank's focus is on export of manufactured goods,
project exports, exports of technology, services and export of computer
Forfaiting Finance from EXIM Bank: A new financing option for the
Indian exporters is available under the forfaiting finance Scheme recently
introduced by the EXIM Bank. Forfaiting is a form of trade finance involving
discounting of medium-term export receivables with or without recourse to the
exporter. The arrangement envisages discounting by Indian exporters of bill of
exchange/promissory notes relating to export transactions which are
"avalised" or guaranteed by the buyer's bankers with overseas
forfaiting agencies on "without recourse" basis.Briefly, the
procedure involved in the scheme of for p 7 3 faiting finance by the Exim Bank
is as follows:
Exporter initiates negotiations with the prospective overseas buyer with
regard to the basic contract price, period of credit, rate of interest, etc.,
After successful negotiations, he furnishes the relevant particulars such as
name and country of overseas buyer, contract value, nature of goods, tenure of
credit, name and country of guaranteeing bankers to the Exim Bank and requests
for an indicative discounting quote. Exim Bank obtains the indicative quote of
forfaiting discount together with commitment fee and other charges, if any, to
be paid by the exporter, from an overseas forfaiting agency.
On receipt of the indicative quote from the Exim Bank, the exporter
finalises the terms of the contract, loading the discount and other charges in
the value and approaches Exim Bank for obtaining a firm quote. Exim Bank
arranges to get the same from an appropriate overseas forfaiting agency and
furnishes the same to the exporter. At this stage, exporter would be required
to confirm acceptance of the arrangement to Exim Bank within a specific period
as stipulated by that Bank.
The export contract clearly indicates that the overseas buyer shall
prepare a series of avalised Promissory Notes in favour of the exporter and
hand them over against the shipping documents to his banker. The Prommissory
Notes will be endorsed with the words without recourse by the exporter and
handed over to his banker in India for onward transmission to the Exim Bank.
Alternatively, the export contract may provide for exporter to draw a
series of Bills of exchange on the overseas buyer which will be sent with the
shipping documents through latter's banker for acceptance by the overseas
buyer. Overseas buyer's banker will handover the documents against acceptance
of Bills of Exchange by the buyer and signature of 'aval' or the guaranteeing
bank. Avalised and accepted bills of exchange will be returned to the exporter
through his banker. Exporter will endorse avalised Bills of Exchange with the
words 'without recourse' and return them to his banker for onward transmission
to the Exim Bank.
Exim Bank will forward the Bills of Exchange/Promissory Notes after
verification to the forfaiting agency for discounting by the latter.
Exim Bank will arrange to collect the discounted proceeds of Promissory
Notes/Bills of Exchange from the overseas forfaiting agency and effect payment
to the nostro account of the exporter's bank as per the latter's instruction.
Understand Foreign Exchange Rates & Protect Against their Adverse
Exchange Rates: Export contracts are concluded
either in Indian rupee or in foreign currency. Where the contracts are in
Indian rupee, the related documents are also prepared in Indian rupees and no
conversion is involved. However, where the bill is drawn in foreign currency,
like US $, , DM etc., you will get Indian rupees only after the conversion of
foreign currency at the appropriate exchange rate. Thus the exchange rates
become very important to determine the Indian rupees payable. A favorable
exchange rate will fetch you more rupees and vice-versa. It, therefore, becomes
essential for you to gain some basic knowledge about exchange rate, the working
out of its quotation by the banks, the factors determining the exchange rates
in the market and the precautions you should take so as to avoid possible
losses in future, due to adverse movement of the exchange rates. In the
following paragraphs we shall endeavor to explain these issues. The rates applied
by the banks for converting foreign currency into Indian rupees and vice versa
are known as exchange rates. In other words, exchange rate is the rate at which
one currency can be exchanged for another. There are two systems of quoting
exchange rates :
Direct Quotation: Where the price of foreign
currency is quoted in terms of home or local currency. In this system variable
units of home currency equivalent to a fixed unit of foreign currency is
quoted. For example : US $ 1 = Rs. 40.00
Indirect Quotation: Where exchange
rates are quoted in terms of variable units of foreign currency as equivalent
to a fixed number of units of home currency. For example : US $ 2,500 = Rs.
40.00 Till 1.8.1993 banks were required to quote all the rates on indirect
basis as foreign currency equivalent to Rs. 100 except in case of sale/purchase
of foreign currency notes and traveller cheques where exchange rates on direct
quotation basis were quoted.
From 2.8.1993 banks are quoting rates on direct
basis only.There is distinction between inter-bank exchange rates and merchant
rates. Merchant rates are the exchange rates applied by the bankers for
transactions with their customers for various purposes, such as import, export,
travel, remittances etc. These rates are calculated by the banks as per the
guidelines issued by the Foreign Exchange Dealers Association of India (FEDAI).
On the other hand inter-bank rates are the rates for transactions amongst the
authorised dealers in foreign exchange. These rates depend on the market conditions.
It is not in out of place to mention here that exchange rates are volatile and,
therefore, you should make sincere efforts to choose appropriate time for
tendering your export documents to the bank for purchase/negotiation.
Therefore, plan your affairs in such a way that the documents are delivered to
the bank when exchange rates are favorable enabling you to get more Indian
rupees after conversion of foreign currency amount of the bill into Indian
rupees. A distinction is also made between spot rates and forward rates. Spot
rates are applicable on the day of transact p 7 3 tion , i.e, the same day,
whereas forward rates are the rates fixed in advance for a transaction which
will mature at a specified date or during a specified period in future. Quotations
for spot rates only are generally available and the customers have to enter
into specific contracts for forward rates. Foreign exchange rates are always
quoted as two way price i.e., a rate at which the bank is willing to buy
foreign currency (buying rate) and a rate at which the bank sells foreign
currency (selling rate). Banks do expect some profit in exchange operations and
there is always some difference in buying and selling rates. However, the
maximum spread available to banks is restricted in terms of ceiling imposed by
Reserve Bank of India. All exchange rates by authorised dealers are quoted in
terms of their capacity as buyer or seller. Different sets of exchange rates
are applied for various types of foreign exchange transactions as under :
TT Selling Rate: This rate is
applied for all clean remittances outside India i.e., for selling foreign
currency to its customer by the bank such as for issuance of bank drafts,
mail/telegraphic transfers etc. Bill Selling Rate: This rate is applied for all
foreign remittances outside India as proceeds of import bills payable in India.
This rate is a little worse than TT selling rate.
TT Buying Rate: This rate is
appled for purchase of foreign currency by banks where cover is already
obtained by banks in India. Thus all foreign inward remittances which are made
payable in India are converted by applying this rate. A mail transfer issued by
a bank in Dubai for US $ 10,000 drawn on (say) Oriental Bank of Commerce in New
Bills Rate: This rate is
applied for purchase of sight export bills which will result in foreign
remittance to India after realisation. This rate is worsen than TT buying rate
and, in addition, interest will also be recovered by the bank for the period
for which the bank is out of funds.
Elimination of exchange risk due to movement in the exchange rat can be avoided
by the following options:
- By invoicing in Indian
- By fixing the Foreign
First alternative is possible only when the buyer agrees to it. He may
have his own reasons for not agreeing to invoice in Indian rupees. The second
alternative is commonly resorted to. This alternative involves booking of
forward exchange contract with your bank.
This means that pending submission of documents to the bank for
purchase/negotiation, you have made firm commitment with the bank under which
you agree to sell to the bank foreign exchange at a future date/period and the
bank agrees to purchase at the firm rate the foreign exchange to be tendered by
you on that date / during the agreed period.
Thus you are in a position to know in advance the exchange rate you are
going to get on submission of your export documents. Thus, though you have to
pay some charge for booking a forward contract, you are certain about the rupee
amount of the bill on conversion of foreign currency at a future date. For
booking a forward contract, you should approach your bank with whom you are
enjoying a credit limit.
The bank will book a forward contract only against a firm export order
showing description and quantity of the goods to be supplied, aggregate price
and approximate date of shipment. The bank can accept telex, cable order/fax in
this regard, provided you give an undertaking to produce the original one.
Where shipment has already been completed, forward contract will be booked on
the basis of export bill tendered by you. It can also be booked against an
irrevocable Letter of Credit provided L/C is complete in all respects and you
give a declaration to the bank that you have not booked any forward contract
against the underlying sale contract covering shipments under the L/C.You must
ensure delivery of the related documents within the agreed period of the
contract. In case you fail to deliver the documents within the specified period,
the forward contract needs to be cancelled and fresh contract booked for which
your bank will levy cancellation charges as per the FEDAI Rules.
In case the documents are delivered before the stipulated period, it
will involve early delivery and bank will levy charges for the early delivery,
as per FEDAI Rules. Where the documents are not delivered at all, contract has
to be cancelled either at your request or by the bank itself under certain
circumstances, and this will entail cancellation charges as per the FEDAI
It, therefore becomes extremely important that the period of delivery of
the export documents is carefully chosen and strictly adhered to, so as to
avoid unnecessary charges on account of early delivery or cancellation of
forward contracts. However, facility for substitution of export order is
permitted by RBI on specific request if the unfulfilled export order and the
substituted order is for the same commodity.
Procuring/Manufacturing Goods for Export & their Inspection by
Procuring / Manufacturing Goods
Once you are ready with the infrastructure for
exporting goods and have obtained necessary finance, you should proceed to
procure the goods for export. Procuring the goods should be done with extreme
care and caution as to the quality and cost. However, procuring the raw
materials etc. and manufacturing the goods for export will need extra efforts
on your part. If you are an established exporter, you can have the facility of
procuring raw materials under the Duty Exemption Scheme.
Compulsory Quality Control & Preshipment
An important aspect about the goods to be exported
is compulsory quality control and pre-shipment inspection. Under the
Export(Quality Control and Inspection) Act, 1963, about 1000 commodities under
the major groups of Food and Agriculture, Fishery, Minerals, Organic and
Inorganic Chemicals, Rubber Products, Refractoriness, Ceramic Products,
Pesticides, Light Engineering, Steel Products, Jute Products, Coir and Coir
Products, Footwear and Footwear Products / Components are subject to compulsory
At times, foreign buyers lay down their own
standards / specifications which may or may not be in consonance with the
Indian standards. They may also insist upon inspection by their own nominated
agencies. These issues should be sorted out before confirmation of order.
Specific provisions have also been made for compulsory inspection of textile
Products having ISI Certification mark or Agmark
are not required to be inspected by any agency. These products do not fall
within the purview of the export inspection agencies network. The Customs
Authorities allow export of such goods even if not accompanied by any
pre-shipment inspection certificate, provided they are otherwise satisfied that
the goods carry ISI Certification or the Agmark.
Depending upon the nature of products, goods meant
for export are inspected for quality in the following manner: Consignment to
Consignment Inspection Each individual consignment is inspected by the Export
Inspection Agency, Commodity Board and certificate of inspection is issued. The
application for inspection for goods has to be submitted well in advance before
the expected date of shipment of the consignment. Inspection of the consignment
is generally carried out either at the premises of the exporter, provided
adequate facilities exist therein for inspection, or at the port of shipment.
The export inspection agency has a right to exercise supervision of inspected
consignment(s) at any place or time.
The application should be made in duplicate in the
new prescribed form 'Intimation for Inspection' as per standardised
pre-shipment export documents to the nearest office of the respective Export
Inspection Agency along with the following documents :
Particulars of the consignment intended to be
exported. A crossed cheque/draft for the amount of requisite inspection fees or
an Indian Postal Order.
o Copy of the
o Copy of letter of
o Details of packing
o Copy of the export
order/contract, indicating inter alia the buyer's requirement that goods are
strictly according to the prescribed specifications, or as per samples etc.
After satisfying itself that the consignment of
exportable goods meets the requirements stipulated in the export
contract/order, the inspection agency issues, generally within four days of
receipt of intimation for inspection, the necessary certificate of inspection
to the exporter in the prescribed proforma in five copies.
The certificate is issued in the standardised form
which is aligned pre-shipment export document. (Three copies for exporter,
original copy for customs use, the second copy for the use of the foreign buyer
and the third copy for the exporter's use, fourth copy for Data Bank, Export
Inspection Council, New Delhi and the fifth copy is retained with the agency
for their own office record).
In-Process Quality Control (IPQC)
Certain products like chemicals or engineering
goods are subject to this control. The inspection is done at various stages of
production. The exporter has to get his unit registered as "Export
Worthy" and keep record of processing and production. Inspection by the
officers of Export Inspection Agency is done from time to time. The
certification of inspection on the end-products is then given without in-depth
study at the shipment stage. Under this system, export is allowed on the basis
of adequacy of in-process quality control and inspection measures exercised by
the manufacturing units themselves. The certificates of inspection in favor of
the units approved under the scheme are issued by the Export Inspection
Agencies (EIAs) in the normal course. However, these units are kept under
surveillance by the EIAs and random spot checks of the consignments are carried
out by them. Units approved under this system of in-process quality control may
themselves issue the certificate of inspection, but only for the products for
which they have been granted IPQC facilities. However, these units have the
option either to get the certificate from the Export Inspection Agencies (EIAs)
or issue the same themselves. Consequently, the manufacturer exporters of
products approved under the IPQC have been recognised as an agency for
pre-shipment inspection for export of engineering products for which they have
been approved by the Export Inspection Agencies at Bombay, Calcutta, Cochin,
Delhi and Madras.
Self Certification Scheme
Large manufacturers/exporters, export
houses/tradingp 7 3 houses are allowed the facility of Self-Certification on
the theory that the exporter himself is the best judge of the quality of his
products and will not allow his reputation to be spoiled in the international
market by compromising on quality. The industrial units having proven
reputation and adequate testing facilities have to apply to the Director
(Inspection and Quality Control), Export Inspection Council of India, 11th
Floor, Pragati Tower, 26 Rajendra Place, New Delhi-110008. They are granted a
certificate valid for a period of one year, allowing them self-certification
facility. The facility is available to manufacturers of engineering products,
chemical and allied products and marine products. During this period the
exporter can issue a certificate signed by himself or by a person authorised by
him. The certificate has to indicate the number and date of EIA's reference for
registration under Self-Certification Scheme. It has to be issued in the
aligned format as per new standardised pre-shipment documents. The approval of
an industrial unit under this scheme is notified in the Gazette of India and
the exporter has to pay a lump sum fee to the export inspection agencies
depending upon his export turnover.
Minimum Quality Norms prescribed by the Export
Inspection Council should be maintained and achieved for the grant of facility
under Self-Certification Scheme.
The discussion on quality control and preshipment
inspection will be incomplete without saying a few words about ISO 9000.The
ISO-9000 Series of Standards evolved by the International Standards
Organisation has been accepted worldwide as the norm assuring high quality of
goods. The ISO-9000 is also the hallmark of a good quality- oriented system for
suppliers and manufacturers. It identifies the basic principles underlying
quality, and specifies the procedures and criteria to be followed to ensure
that what leaves the manufacturer / supplier's premises fully meets the
customers requirements. The ISO-9000 series of standards are basically quality
assurance standards and not product standards.ISO-9000 spells out how a company
can establish, document and maintain an effective and economic quality control
system which will demonstrate to the customer that the company is committed to
quality. The series of Standards aims the following:
o Increased customer
confidence in the company
o Shift from a system
of inspection, to one of quality management
o Removing the need for
multiple assessments of suppliers
o Gaining management
o Linking quality to
o Giving customers what
The implementation of ISO-9000 Standards involves:
o Management education
o Writing quality
o Nominating a quality
o Identifying business
o Writing a quality
o Writing procedures
o Writing work instructions
It is thus clear that the ISO-9000 series of
standards constitute of concept of Total Quality Management (TQM).
Labeling, Packaging, Packing and Marking Goods
An important stage after manufacturing of goods or their procurement is their
preparation for shipment. This involves labeling, packaging, packing and
marking of export consignments. Labeling requirements differ from country to
country and the same should be ascertained well in advance from the buyer. The
label should indicate quality, quantity, method of use etc. Special
international care labels have been specified for the textile items by GINITEX,
and the same should be scrupulously adhered to. Packaging fulfills a vital role
in helping to get your export products to the market in top condition, as well
as in presenting your goods to the overseas buyer in an attractive way. While
packaging, quality should not be compromised merely to cut down costs,
packaging should also be in conformity with the instructions issued by the
importer. Packing refers to the external containers used for transportation .
The shape of packing cases play a very important role in packing the cargo, and
the nature of packing material to be used will depend upon the items exported
As regard specification for the size, weight and strength care must be taken to
ensure that the weight of standard case does not exceed 50 Kg. for easy
handling of the cargo. Before packing and sealing the goods, it should be
ensured that all the contents are properly placed in the case and the list of
contents of packing notes should be prepared so that the buyer, the Customs
authorities and the Insurance authorities can easily check the contents of each
and every case.
The consolidated statement of contents for a number of case is called
the Packing List, which should be prepared in the prescribed standardised
Marking means to mark the address, number of packages etc. on the
packets. It is essential for identification purpose and should provide
information on exporters' mark, port of destination, place of destination,
order number and date, gross, net and tare weight and handling instructions. It
should also be ensured that while putting marks, the law of buyer's country is
duly compiled with.
All shipping cases should be marked a number with special symbols
selected by the exporters or the importers, so that the competitors cannot find
out the details of the customers and the country of destination or supplier's
country of despatch. Care should also be taken to ensure that the marking conforms
to those written in the invoice, insurance certificate, bill of lading and
other documents. The International Cargo Handling Co-ordination, Association
has set out for the use of exporters a number of recommendations for the
marking of goods carried by ocean-going vessels. They are equally useful for
sending goods by other modes of transportation.
The marks should appear in certain order. Essential data should be
placed in oblong frames with lines 1.5 centimeters thick, and subsidiary information
should be placed in another type of frame.
Declaration on large packages should be placed on two continuous sides,
and for consignments bound together on a pallet, also on the top.
Handling instructions should be placed on all four sides. Similar packages,
such as goods in sacks, should be marked on two opposite sides.
Lettering should be at least 7.5 centimeters high for essential data,
and at least 3.5 centimeters for subsidiary data. If the package is too small
for such letter, other sizes may be used, but in the same ratio. The sizes of
the symbols should also be in proportion to the size of the package and of the
Only fast dyes should be used for lettering. Essential data should be in
black and subsidiary data in a less conspicuous colour; red and orange
lettering should be reversed for dangerous goods only. For food packed in
sacks, only harmless dyes should be employed, and the dye should not come
through the packing in such a way as to affect the goods.
Stick-on labels should only be used on individual package or parcel and
all old labels should be removed. Marking should be made by stencil or by
branding or by pencil or brush without a stencil. If stencils are used, care
should be taken that the letters and figures are perfectly legible to prevent
confusion. This is especially true of the letters and figures --- B.R.P, O,
G-G-D-C, H.N; 3-8 : 6-9 and 1-7.
The surface to be marked should be smooth and clean. If packages are to
be bonded, they can be marked before this is done; the hoops should not
however, cover the markings.
The figure should indicate the total number of packages making up the
consignment and the consecutive number of the individual package. For example
:1520/15/1 identifies the first package of a total number of 15 packets and
1520/15/15 the last one.
The name of the ship and the bill of lading number should be shown when
this is possible. Handling instructions must appear in the language of the
exporter and importer, and also, if possible, in the language of the countries
where goods are to be handled en route or trans shipped.
New Excise Procedure
All excisable goods exported out of India are exempt from payment of Central
Excise Duties, for which two different procedures have been approved
Rebate of Duty on Goods Export Procedure
Under the first procedure, known as 'Rebate of duty on Goods Export. The
manufacturer has first to pay the excise duty on goods meant for export and
then claim refund of the same after exportation of such goods to countries
except Nepal and Bhutan. This is done under Rule 12 of Central Excise Rules.
Under this rule, rebate of duty is granted for the finished stage as well as
input stage. Rebate of duty in respect of the excisable materials used in the
manufacture of the exported goods shall not be allowed if the exporter avails
of the drawback allowed under the Customs and Central Excise Duties Drawback
Rules, 1995 or Modvat. The following procedure should be followed while
exporting under the rebate of duty. Removal of goods under claim of rebate from
a factory or warehouse without examination by the Central Excise Officers. The
exporters are allowed to remove the goods for export on their own without
getting the goods examined by the Central Excise Officers. Form AR4 in such
cases should be prepared in sixtuplicate, giving all particulars and
declarations. The exporter shall deliver triplicate, and quadruplicate,
quintuplicateand sixtuplicate copies of AR4 to the Superintendent of Central
Excise having jurisdiction over the factory or the warehouse, within 24 hours
of the removal of the consignment and would retain the original and duplicate
copies for presenting along with the consignment to the Customs Officer at the
point of export. The jurisdictional superintendent of Central Excise examines
the information contained in AR4 and verifies the facts of payment of duty and
other certificates/declarations made by the exporter. After he is satisfied
that the information contained in the AR4 is true, he signs at appropriate
places in the four copies of AR4 submitted to him and plus his stamp with his
name and designation below his signature. He would then dispose of the
triplicate, quadruplicate, quintuplicate and sixtuplicate copies of AR4 as
Triplicate: To there bate sanctioning authority
viz. Maritime Commissioner of Central Excise or the assistant commissioner of
Central Excise declared by the exporter on the AR4. This copy on the request of
exporter may be sealed and handed over to the exporter / his authorized agent
for presenting to the rebate sanctioning authority.
Quadruplicate: To the Chief Accounts Officer in
the Commissionerate Headquarters.
Quintuplicate: Office copy to be retained by the
Central Excise Officer.
Sixtuplicate: To be given to the exporter.
Procedure for exports under Central Excise Seal Where the exporter
desires the sealing of the goods by the Central Excise Officers so that the
export goods may not be examined by the Customs Officers at the Port/Airport of
shipment, he should present an AR4 application in sixtuplicate to the
Superintendent of Central Excise having jurisdiction over the factory/warehouse
at least 24 hours before the intended removal of the export goods from the
factory/warehouse. The Superintendent of Central Excise may depute an Inspector
of Central Excise or may himself go for sealing and examination of the export
consignment. Where the AR4 indicates that the export is in discharge of an
export obligation under a Quantity-based advance License or a Value-based
Advance License issued under the Duty Exemption Scheme, in such cases the
consignment is invariably examined and sealed by the Superintendent of Central
Excise himself. The Central Excise Officer examining the consignment would draw
samples wherever necessary in triplicate. He would hand over two sets of
samples, duly sealed, to the exporter or his authorized agent, for delivering
to the Customs Officers at the point of export. He would retain the third set
for his records. The export consignment is carefully examined vis-`-vis the
description of goods, their value and other particulars/declarations on the
AR4. The Central Excise Officer verifies the facts of payment of duty and other
certificates/declarations made by the exporter. After he is satisfied that the
information contained in the AR4 is true he would allow the clearances and also
sign all the six copies of the AR4 at appropriate places and put his stamp with
his name and designation below his signature. The copies of AR4 are disposed of
Original and Duplicate: To the exporter for presenting to
Customs Officer at the point of export along with the export consignment.
Triplicate: To the rebate sanctioning authority i.e. Maritime Commissioner of
Central Excise or the jurisdictional Assistant Commissioner of Central Excise,
as declared by the exporter on the AR4. The Central Excise officer may handover
this copy under the sealed cover on exporter's request.
Quadruplicate: To the Chief Accounts Officer at his Commissionerate Headquarters.
Quintuplicate: To be retained for records.
Export under Bond Procedure
Under the second procedure known as
"Exports Under Bond" goods can be exported out of India except to
Nepal or Bhutan without prior payment of duty subject to the execution of the
Bond with security / security for a sum equivalent to the duty chargeable on
the goods to be exported. This is done under Rule 13 of Central Excise Rules
which deals with export of goods in Bond as well as utilisation of raw
materials etc. without payment of duty for manufacture and export of excisable
goods. The following procedure has been prescribed in this regard.