IGNOU Solved Assignment - 2017-18, B.Com., AED - 01: EXPORT PROCEDURES AND DOCUMENTATION

                        Bachelor’s Degree Programme(BDP)
                                           ASSIGNMENT 2017-18
                                      Application Oriented Course
         AED- 01: EXPORT PROCEDURES AND DOCUMENTATION
         For July 2017 and January 2018 admission cycle
                                         School of Management Studies
                                   Indira Gandhi National Open University
                                       Maidan Garhi, New Delhi -110 068
                                                           AED- 01
 Also for:
B.Com (A &F)
B.Com (CA&A)
B.Com (F & CA)
Application Oriented Course
AED- 01: Export Procedures and Documentation
ASSIGNMENT- 2017-18
Dear Students,
As explained in the Programme Guide, you have to do one Tutor Marked Assignment in this
Course. Assignment is given 30% weightage in the final assessment. To be eligible to appear in the Termed examination, it is compulsory for you to submit the assignment as per the schedule. Before attempting the assignments, you should carefully read the instructions given in the Programme Guide. This assignment is valid for two admission cycles (July 2017 and January 2018.) The validity is given below:
1. Those who are enrolled in July 2017, it is valid up to June 2018.
2. Those who are enrolled in, January 2018 it is valid up to December 2018.
You have to submit the assignment of all the courses to The Coordinator of your Study Centre. For appearing in June Term-end Examination, you must submit assignment to the Coordinator of your study centre latest by 15th March Similarly for appearing in December Term-end Examination, you must submit assignments to the Coordinator of your study centre latest by 15^th September
                                                    

                                                     TUTOR MARKED ASSIGNMENT
                                                               Course Code : AED - 01
                                 Course Title : Export Procedures and Documentation
                                              Assignment Code : AED - 01/TMA/2017 - 18
                                                                Coverage : All Blocks
                                                                Maximum Marks: 100
Attempt all the questions.
1. Explain various steps involved in the processing of an export order with suitable examples.                                                                                                                     (20)

2. What are the basic principles of ECGC Operations? Explain the procedure for making a claim from ECGC. Also discuss the obligations of the policy holders.                      (7+7+6)

 

3. Distinguish between
    1. Spot rate and Forward rate
    2. Forward contracts and Currency options                                                          (10+10)
 

4. a) Discuss the Customs clearance procedures along with the documentation formalities.
    b) Explain the procedure of Duty Drawback Scheme along with the documentation formalities.                                                                                                                 (10+10)
 

5. Write short notes on of the following:
    i) International Contract Terms
   ii) Standardized Pre-shipment Export Documents
  iii) Letters of Credit
  iv) Government Policy Making and Consultations Institutions.                                                                                                                                          (5x4)

                                                          ANSWERS

1. Explain various steps involved in the processing of an export order with suitable examples.                                                                                                                         (20)

Ans: - In all actuality, a fare practice is finished up effectively simply after the exporter has possessed the capacity to convey the committal as per the fare contract and get installment for the products. This includes routine with regards to endorsed technique to be performed. The truth of the matter is that one needn’t bother with just to be exceptionally very much educated about his/her fare organization, his/her items, his/her providers, his/her fare chain, his/her market, the world market, yet one likewise has to know the fare guidelines and terms, the diverse societies that one targets and the last client’s needs. At that point comes satisfying these requirements by the most aggressive route and by increasing the value of one’s administrations. This is so since all offer similar items with minor changes, yet what has the effect is the strategy and the esteem added administrations one gives to a definitive buyers. Essentially, that influencing a fare to organization is a simple procedure, yet making the fruitful and durable fare organization is an exceptionally troublesome errand promotions:

          Thusly, it appears to be applicable now to influence us to take in the different advances’ engaged with the handling of a fare arrange. These are recorded as takes after:

1) Having an Export Order:  

            Preparing of a fare arrange begins with the receipt of a fare arrange. A fare arranges, essentially expressed, and implies that there ought to be an assertion as a record, between the exporter and the shipper before the exporter really begins delivering or obtaining merchandise for shipment. For the most part a fare request may appear as proforma receipt or buy request or letter of credit.

2) Examination and Conformation of Order:

            Having gotten a fare arrange, the exporter ought to analyse it with reference to the terms and states of the agreement. Truth be told, this is the most vital stage as every single resulting activity and responses rely upon the terms and states of the fare arrange. The examinations of a fare arrange, in this manner, incorporates things like item portrayal, terms of installment, terms of shipment, investigation and protection perquisite, archives acknowledging installment and the last date of transaction of records with the bank. Having being happy with these, the fare arrange is affirmed by the exporter.

3) Assembling or Procuring Goods:

            The Reserve Bank of India (RBI), under the fare credit (premium sponsorship) plot, stretches out pre-shipment credit to exporter to fund working capital requirements for buy of crude materials, handling them and changing over them into completed merchandise with the end goal of fares. The exporter approaches the depend on the premise of set down methods for the pre-shipment credit. Having gotten credit, the exporter begins to fabricate/get and pack the products for shipment abroad.

4) Freedom from Central Excise: 

              When merchandise have been made/secured, the procedure for getting freedom from focal extract obligation begins. The Central Excise and Sale Act of India and the related standards give the discount of extract obligation paid. There are two option plans whereby 100 for every penny discount on obligation is given to trade items on the accommodation of the verification of shipment. The principal conspire is to make installment of the extract obligation at the season of expelling the fare transfer from the processing plant and record a claim for refund of obligation after exportation of merchandise. The second plan is to expel merchandise from production line/distribution centre without installment yet under a suitable bond with the extract specialists. The exporter needs to apply on a frame known as AR4 or AR4A to the Central Excise Range Superintendent for acquiring extract freedom. Shape An is documented when merchandise are to be cleared after examination by the extract auditor. In every other case, shape AR4A is documented.

5) Pre-Shipment Inspection:

             There are number of merchandise whose fare requires quality affirmation according to the Government of India’s notice. Thusly, the Indian custom experts will require the accommodation of an examination testament issued by the able and assigned specialist before allowing the shipment of merchandise happens.

Assessment of fare merchandise might be directed under:

(I) Consignment – wise Inspection

(II) In – Process Quality Control, and

(III) Self – Certification

The Inspection Certificate is issued in triplicate. The first duplicate is for the traditions confirmation. The second duplicate of the declaration is sent to the shipper and the third duplicate stays with the exporter for his reference reason.

6) Arrangement of Clearing and Forwarding Agents:

                On fruition of the way toward getting the Inspection Certificate from the custom offices, the exporter names clearing and sending operators who play out various capacities in the interest of the exporter. The fundamental capacities performed by these operators incorporate pressing, stamping and marking of committal, plan for transport to the port course of action for shipment abroad, traditions freedom of load, acquisition of transport and different archives. Keeping in mind the end goal to encourage the exporter in releasing his obligations, the accompanying reports are submitted to the specialist:

(I) Commercial receipt in 8-10 duplicates

(II) Customs Declaration Form in triplicate

(III) Packing list

(IV) Letter of Credit (unique)

(V) Inspection Certificate (unique)

(VI) G.R. Shape (in unique and copy)

(VII) AR4/AR4A (in unique and copy)

(VIII) GP-1/GP-2 (unique)

(IX) Railway Receipt/Lorry Way Bill, by and large

7) Products to Port of Shipment:  

                After the extract leeway and pre-shipment examination customs are finished, the products to be sent out are pressed, stamped and marked. Appropriate stamping, naming and pressing help fast and safe transportation of merchandise. The fare division finds a way to save space on the ship through which products are to be sent to the merchant. The transportation space can be saved either through the clearing and sending operator or cargo intermediary who takes a shot at benefit of the delivery organization or specifically from the transportation organization. Once the space is held, the transport organization issues a report known as Shipping Order. This request fills in as a proof of room reservation. On the off chance that products are sent through a street transporter to the port, no particular convention is included. On the off chance that, the products are sent by rail to the port of shipment, designation of wagon should be gotten from the Railway Board. The accompanying archives are submitted to the booking rail road yard/station:

(I) Forwarding Note (A Railway Document)

(II) Shipping Order

(III) Wagon Registration Fee Receipt

When wagons have been assigned, merchandise are stacked, for which rail roads will issue Railway Receipt (RR). At that point, this receipt and different reports are sent to the clearing and sending operator at the port town. In the mean time, the generation/trade division takes protection arrangement in copy for hazard scope (inner and additionally abroad) for the merchandise to be sent out.

8) Port Formalities and Customs Clearance:

                  Having gotten the records from the fare division, the clearing and sending specialist takes conveyance of the payload from the rail road station or the street transport organization and stores it in the distribution center. He likewise acquires traditions leeway and consent from the port specialists to bring the freight into the shipment shed. The custom office stipends consent for trade at the workplace of the traditions and physical confirmation of merchandise in the shipment shed. The leeway for trade is given on the Shipping Bill. The clearing and sending specialist is required to present the accompanying reports with the Customs House for acquiring traditions freedom and consent:

(I) Shipping Bill

(II) Contract Form

(III) Letter of Credit, if appropriate

(IV) Commercial Invoice

(V) GR Form

(VI) Inspection Certificate

(VII) AR4/AR4A Form

(VIII) Packing List, if necessary

In the wake of getting reports from the fare office, the clearing and sending specialist exhibits the Port Trust Document to the Shed Superintendent of the port. He gets trucking request conveying the load to the travel shed for physical examination by the Dock Appraiser. The Dock Appraiser is exhibited the accompanying reports to encourage him in physical examination of fare products:

(I) Shipping Bill

(II) Commercial Invoice

(III) Packing List

(IV) AR4/AR4A Form and Gate Pass

(V) GR Form (copy)

(VI) Inspection Certificate (unique)

The Dock Appraiser, in the wake of making examination, makes ‘Let Export’ underwriting on the copy duplicate of the shipping Bill and hands over it to the Forwarding Agent. Every one of these reports are introduced to the Preventive Officer who puts a support ‘Let Ship’ on the copy duplicate of the Shipping Bill. The preventive officer oversees the stacking of load on board the vessel. After the merchandise are stacked on board the vessel, the skipper of the ship issues a receipt known as ‘Mate’s Receipt’ to the Shed Superintendent of the port concern. The sending, specialist in the wake of paying port charges, takes the conveyance of the ‘Mate Receipt’. He submits to Shipping Company and demands it to issue the Bill of Lading.

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

                  Subsequent to getting the Bill of Lading from the Shipping Company, the clearing and sending specialist dispatches every one of the archives to his/her exporter. These reports include:

(I) Commercial Invoice

(II) Export Promotion Copy

(III) Drawback Copy

(IV) Clean on Board Bill of Lading

(V) Letter of Credit

(VI) AR4/AR4A and Gate Pass

(VII) GR Form (in copy)

10) Declaration of Origin:

                    On receipt of above records from the sending operator, the exporter now applies to the Chamber of Commerce for a Certificate of Origin and gets it. In the event that the merchandise are traded to nations offering GSP concessions, the exporter needs to obtain the GSP Certificate of Origin from the concerned specialist like Export Inspection Agency

11) Dispatch of Shipment Advice to the Importer:

                    Finally, the exporter sends ‘Shipment Advice’ to the shipper implying the date of shipment of the dispatch by a named vessel and its normal time of landing in the goal port of the merchant.

The accompanying reports are likewise sent to the merchant to encourage him for taking conveyance of the committal:

(I) Bill of Lading

(II) Commercial Invoice

(III) Packing List

(IV) Customs Invoice

12) Accommodation of Documents to Bank:

                     Toward the finish of the procedure, the exporter shows the accompanying archives to his bank for acknowledgement of his sum because of the merchant:

(I) Commercial Invoice

(II) Certificate of Origin

(III) Packing List

(IV) Letter of Credit

(V) Marine Insurance Policy

(VI) GR Form

(VII) Bill of Lading

(VIII) Bill of Exchange

(IX) Bank Certification

(X) Commercial Invoice

13) Asserting Export Incentives:

                       On culmination of the handling of a fare arrange at the three levels of shipment i.e. pre-shipment, shipment and post-shipment, the exporter claims for send out impetuses permissible to him/her.

2. What are the basic principles of ECGC Operations? Explain the procedure for making a claim from    ECGC. Also discuss the obligations of the policyholder

                                                                                                                                    (7+7+6)

Ans: -    BASIC PRINCIPLES OF ECGC OPERATIONS

There are two basic principles on which ECGC (Export Credit Guarantee Corporation of India Limited) works:

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

(I) advance payment or
(II) irrevocable letter of credit confirmed by banks in India.

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

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

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

1. the exporter also takes necessary precaution in selecting the parties to which he may decide to export,
2. he may not overextend credit and
3. he may take all possible care to minimize the risk.

In addition to these two basic principles of ECGC operation, ECGC being in insurance business also follows three basic principles of insurance. They are:

1. ECGC contracts are contracts of good faith which mean that non-disclosure of a material fact will render the contract void. In other words, the exporter is bound to disclose every material fact within his knowledge to the ECGC which may adversely affect the ECGC. Again, any material alteration of the risk arising from the date of the proposal and the issue of the policy must be disclosed to the ECGC.
2. The insured is duty bound to minimize the loss. He should conduct his business with ordinary prudence and diligence and act as an uninsured. The action that needs to be taken depends upon the facts and circumstances of the case.
3. Under the principles of subrogation, ECGC steps into the shoes of the exporter. If recoveries are made after the payment of the claim by ECGC, they are shared with the ECGC in the same proportion in which the loss was borne.

PROCEDURE FOR MAKING A CLAIM FROM ECGC

A claim will arise when any of the risks insured under the policy materializes. If an overseas buyer goes insolvent, the exporter becomes eligible for a claim one month after his loss is admitted to rank against the insolvent's estate or after four months for the due date, whichever is earlier. In case of protracted default, claim is payable after four months from the due date. Claims in respect of additional handling, transport or insurance charges incurred by the exporter because of interruption or diversion of voyage outside India are payable after
proof of loss is furnished. In all other cases, claim is payable after four months from the date of the event causing loss. However, in case of-exports to countries where long transfer delays are experienced, ECGC may extend the waiting period and claims for such shipments are payable after the expiry of such extended period. Sometimes the buyer does not accept goods or pay for then1 because of differences over fulfillment of the terms of contract by the exporter, counter claims 01. Set-off. In such cases, ECGC considers claims after the dispute between the parties is resolved and the amount payable is established by obtaining a decree in a court of law in the country of buyer. This condition is waived in cases where the Corporation is satisfied that the exporter is not at fault and that no useful purpose would be served by proceeding against the buyer.
  Procedural Formalities
The ECGC has three types of claim forms: (i) Form No.501 for claims arising due to nonpayment for goods accepted by the buyer, ( ii ) Form No.502 for claims arising because of the non-acceptance of goods/ documents by the buyer, and (iii) Form No.503 for clines on account of delay in transfer of funds to India. Claims due to the above causes should be filed in the respective prescribed forms. Other types of claims can be filed by means of a letter, giving full particulars of the cause and extent of loss. The claims have to be submitted to the ECGC office that issued the policy. Again, the claim forms should be sent through the bank which handled the export bill concerned. No claim will be entertained by the ECGC if it is not filed within a period of 24 months frorn the due date of the concerned bills.
 Documents in Support of Claims
Every claim has to be supported by documentary evidence. Important documents that should accompany the claim forms are the following:
a) Certified copy of the export order
b) Certified copies of invoices
c) Certified copies of bills of lading
d) Copies of the correspondence with the buyer
e) In case of insolvency of the buyer, copy of the letter from the official receiver and liquidator admitting the  claim.
f) In case of protracted default, (i) protect note, (ii) original of unpaid bills, (iii) advice of nonpayment received from the bank, and (iv) copy of the plaintiff if a suit has been filed.
g) In case of transfer delays, certified copy of payment advice received from the collecting banker indicating the date on which payment was made by the buyer in local currency. This should also certify that all exchange control formalities necessary for transfer of funds to India have been complied with by the buyer. All claims are paid in Indian rupees through the Bank which handled the bills concerned.

OBLIGATIONS OF THE POLICY HOLDER

The Export Performance Guarantee is aimed at meeting a situation, where an export proposition may be frustrated, if the exporter's bank is unwilling to issue the required guarantee. The EPG is in the nature of a counter guarantee to the bank and is issued to protect the bank against losses that it may suffer on account of guarantees given by it on behalf of exporters. This protection is intended to encourage banks to give guarantees, on a liberal basis for export purposes, which are of the following types:

(1) Exporters are often called upon to execute bonds, duly guaranteed by an Indian bank , at various stages of export business. An exporter, who desired to quote for a foreign tender may have to furnish a bank guarantee for the bid-bond. If he wins the contract, he may have to furnish bank guarantees to foreign buyers to ensure due performance or against advance payment or in 1ieu of retention money or to a foreign bank, in case he has to raise overseas finance for his contract.

(2) Exporters may have to execute an undertaking to export goods of a specified value within a stipulated time, duly supported by bank guarantees - far obtaining import 1icences for raw materials or capital goods.

(3) Bank guarantees are also furnished by exporters to the Customs, Central Excise or Sales Tax authorities for the purpose of clearing goods, without payment of duty or for exemption from tax for goods procured for export.

(4) Exporters also furnish guarantees in support of their export obligations, to Export Promotion Councils, Commodity Boards, the State Trading Corporation of India, the Minerals and Metals Trading Corporation of India or recognized Export Houses. Normally, cover is extended up to 75 per cent of loss, but in the case of guarantees in connection with bid-bonds, performance bonds, advance payment and local finance guarantees and guarantees in lieu of retention money, the cover may be increased up to 90 per cent, subject to proportionate increase in premium; the normal rate of premium is 7.5 paise per Rs.100 per month.

As a measure of relief to exporters, engaged in international bidding, ECGC allows a rebate of 75 per cent in the premium paid, in all cases of unsuccessful bids.

3. Distinguish between
    1. Spot rate and Forward rate
    2. Forward contracts and Currency options                                                      (10+10)

                                                            

Ans: -   

1. Distinguish between Spot rate and Forward rate

1- In spot rate transaction the settlement of funds or delivery of currency takes place on the second working day from the day of contract while in case of forward rate transactions the settlement of funds or delivery of currency takes place on future date except spot date ( because that would be spot rate).

2- Example of calculation of spot rate date is suppose the date of spot deal is 14^th April 2014 then settlement date will be 16^th April while example of forward rate date is suppose the 3 month forward contract is executed on 14^th April then settlement date will be 14^th July 2014.

3- Forward rate is always either higher or lower than spot rate and it is never same as spot rate because of various factors like time value of money, demand and supply of currency, risk free interest rate, presence of speculators and arbitrageurs and so on.

4- If the forward rate is more than spot rate then currency is said to be at premium that is currency will be more expensive in future whereas if forward rate is less than spot rate then currency is said to be at discount that implies currency will be cheaper in future.

5- In spot rate there can be only one exchange rate whereas if forward there can be multiple exchange rates like 1 month rate or 2 month rate or 3 month rate and hence one has to be very careful while transacting in forward transaction in currency market.

Ans: -   

 2. Forward contracts and Currency options

1- A Currency Option is a derivative contract giving the holder (buyer) the right, without the obligation, to trade (buy or sell) a specific underlying asset at or by a preset expiration date. The underlying asset could be a commodity or share of stock, or a variable such as an interest rate or energy cost at a preset level (strike price) on or up to a pre specified date (expiration date). On the other hand, a forward contract (or simply, a forward) is a derivative contract which involves an agreement between two parties to the effect that the holder (buyer or long) agrees to buy an asset from the seller at a pre specified delivery date in the future for a preset delivery price.
2- A Currency Option differs from forward contract in many aspects including cost, payoff profile, risk profile, and contracting obligation. A currency option contract entails that the buyer pays the writer (seller) an upfront premium. In a forward contract, no upfront payment has to be made. Additionally, the holder of the forward is obligated to buy the underlying asset at a preset price and at a preset date in the future. The pre specified price of a forward contract is determined in such a way that the price of the forward is zero at contract date. Hence, the expected fair value of the asset at a given maturity date is often known as the forward value (of the underlying).
3- The payoff profile of a currency option limits losses to the holders to the price paid for the option (the premium). In forward contracts, losses to the seller may be unlimited depending on how far market prices would go beyond the strike price, while losses to the buyer are limited to the strike price (which would occur should the market price drop to zero). In terms of obligation, the buyer of a currency option has the right but not the obligation to enter into a contract. The currency option writer (seller) is obligated to transact if requested by the buyer to do so. In contrast, both parties to a forward contract are obligated to perform the contract.
4- The holder of a currency option may receive a payout at maturity which is larger than zero, while the maximum loss is equal to the premium paid for the option. For a forward contract, the maximum loss on one contract is equal to the strike price of the forward, which arises if the underlying price drops to zero. And as the contract is worth zero at contract date, the strike price of the forward, in this case, is equal to the forward value. In this sense, a forward contract is a zero sum game (one party gains at the expense of the other). The same applies to currency options but just depending on the state of market price with respect to the strike price, and with minor twists. For a call option, if the market price is above the strike price, the more the difference between the two prices the higher the gains of the buyer and also the higher the losses of the seller. If the market price is below or equal to the strike price, the seller gains, and the buyer loses, the premium (as exercising the option would be pointless in such a case).

4. a) Discuss the Customs clearance procedures along with the documentation formalities.
    b) Explain the procedure of Duty Drawback Scheme along with the documentation   formalities.                                                                                                                       (10+10)
Ans: -   
a) Discuss the Customs clearance procedures along with the documentation formalities.

  Import procedure –

        Bill of Entry

         (a)    Goods imported into the country attract Customs duty and are also required to confirm to relevant legal requirements. Thus, unless the imported goods are not meant for Customs clearance at the port/airport of arrival such as those intended for transit by the same vessel/aircraft or transshipment to another Customs station or to any place outside India, detailed Customs clearance formalities have to be followed by the importers. In contrast, in terms of Section 52 to 56 of the Customs Act, 1962 the goods mentioned in the IGM/Import Report for transit to any place outside India or meant for transshipment to another Customs station in India are allowed transit without payment of duty. In case of goods meant for transshipment to another Customs station, simple
transshipment procedure has to be followed by the carrier and the concerned agencies at the first port/airport of landing and the Customs clearance formalities have to be complied with by the importer after arrival of the goods at the other Customs station. There could also be cases of transshipment of the goods after unloading to a port outside India. Here also simple procedure for transshipment is prescribed, and no duty is required to be paid.

(b) For goods which are offloaded at a port/airport for clearance the importers have the option to clear the goods for home consumption after payment of duties leviable or to clear them for warehousing without immediate discharge of the duties leviable in terms of the warehousing provisions of the Customs Act, 1962. For this purpose every  - India's importer is required to file in terms of the Section 46, a Bill of Entry for home
consumption or warehousing, as the case may be, in the form prescribed by regulations. The Bill of Entry is to be submitted in sets, different copies meant for different purposes and also bearing different colours, and on the body of the Bill of Entry the purpose for which it will be used is mentioned.

(c) The importers have to obtain an Importer-Export Code (IEC) number from the Directorate General of Foreign Trade prior to filing of Bill of Entry for clearance of imported goods. The Customs EDI System receives the IEC number online from the DGFT.

       Self-assessment of imported and export goods:

(1) Vide Finance Act, 2011, ‘Self-Assessment’ has been introduced under the Customs Act, 1962. Section 17 of the Customs Act, 1962 provides for self-assessment of duty on imported and export goods by the importer or exporter himself by filing a Bill of Entry or Shipping Bill, as the case may be, in the electronic form (new Section 46 or 50). Thus, under self-assessment, the importer or exporter who will ensure that he declares the correct classification, applicable rate of duty, value, and benefit of exemption notifications claimed, if any, in respect of the imported / export goods while presenting Bill of Entry or Shipping Bill.

(2)  Section 46 of the Customs Act, 1962 makes it mandatory for the importer to make entry for the imported goods by presenting a Bill of Entry electronically to the proper officer except for the cases where it is not feasible to make such entry electronically. While this is not a new requirement, it provides a legal basis for electronic filing. Where it is not feasible to file these documents in the System, the concerned Commissioner
can allow filing of Bill of Entry in manual mode by the importer. These Bills of Entry would continue to be regulated by Bill of Entry (Forms) Regulations, 1976. However, this facility should not be allowed in routine and Commissioner of Customs should ensure that manual filing of Bill of Entry is allowed only in genuine and deserving cases. Similarly, on export side also, Section 50 of the Customs Act, 1962 makes it obligatory
for exporters to make entry of export goods by presenting a Shipping Bill electronically to the proper officer except for the cases where it is not found feasible to make such entry electronically. The Commissioner concerned in these cases may allow manual filing of Shipping Bill. Again, this authority should be exercised cautiously and only in genuine cases.

(3) The declaration filed by the importer or exporter may be verified by the proper officer when so interdicted by the Risk Management Systems (RMS). In rare cases, such interdiction may also be made with the approval of the Commissioner of Customs or an officer duly authorized by him, not below the rank of Additional Commissioner of Customs, and this will necessarily be done after making a record in the EDI system. On account of interdictions, Bills of Entry may either be taken up for action of review of assessment or for examination of the imported goods or both. If the self-assessment is found incorrect, the duty may be reassessed. In cases where there is no interdiction, there will be no cause for the declaration filed by the importer to be taken up for verification, and such Bills of Entry will be straightaway facilitated for clearance without assessment and examination, on payment of duty, if any.

 Execution of bonds:

     Wherever necessary, for availing duty free assessment or concessional assessment under different schemes and notifications, execution of end use bonds with Bank Guarantee or other surety is required to be furnished. These have to be executed in prescribed forms before the assessing Appraiser. For instance, when the import of
goods are made under Export Promotion schemes, the importer is required to execute bonds with the Customs authorities for fulfillment of conditions of respective notifications. If the importer fails to fulfill the conditions, he has to pay the duty leviable on those goods. The amount of bond of bond and bank guarantee is in terms of the instructions issued by the Board from time to time as well the conditions of the relevant Notification
etc.
 Payment of duty:

(1) The duty can be paid in the designated banks through TR-6 challans. It is necessary to check the name of the bank and the branch before depositing the duty. Bank endorses the payment particulars in challan which is submitted to the Customs. Facility of e-payment of duty through more than one authorized bank is also available since 2007 at all major Customs locations.

(2) In order to reduce the transaction costs and expedite Customs clearance the Board has decided to make e-payment of duty mandatory from a date to be notified for the importers paying an amount of Rs. 1 lakh or more per transaction. Likewise, e-payment of duty regardless of amount shall be made mandatory for ACP importers from a date to be notified.

 Amendment of Bill of Entry:

   Whenever mistakes are noticed after submission of documents, amendments to the Bill of Entry is carried out with the approval of Deputy/Assistant Commissioner. The request for amendment may be submitted with the supporting documents. For example, if the amendment of container number is required, a letter from shipping agent is required. On sufficient proof being shown to the Deputy/Assistant Commissioner amendment in Bill of Entry may be permitted after the goods have been given out of charge i.e. goods have been cleared.

 Prior Entry for Bill of Entry:

(1) For faster clearance of the goods, Section 46 of the Customs Act, 1962 allows filing of Bill of Entry prior to arrival of goods. This Bill of Entry is valid if vessel/aircraft carrying the goods arrives within 30 days from the date of presentation of Bill of Entry. This Bill of Entry has 5 copies, the fifth copy being called Advance Noting copy. The importer must declare that the vessel/aircraft is due within 30 days and present the Bill of Entry
for final noting as soon as the IGM is filed. Advance noting is not available for Into Bond Bill of Entry and also during certain special periods.

(2) Often goods coming by container ships are transferred at intermediate ports (like Colombo) from mother vessel to smaller vessels called feeder vessels. At the time of filing of advance Bill of Entry, the importer does not know which vessel will finally bring the goods to Indian port. In such cases, the name of mother vessel may be filled in on the basis of the Bill of Lading. On arrival of the feeder vessel, the Bill of Entry may be amended to mention names of both mother vessel and feeder vessel.

 Bill of Entry for bond/warehousing:

    A separate form of Bill of Entry is used for clearance of goods for warehousing. All documents, as are required to be attached with a Bill of Entry for home consumption are also required with the Bill of Entry for warehousing which is assessed in the same manner and duty payable is determined. However, since duty is not required to be paid at the time of warehousing, the purpose of assessing the duty at this stage is only to secure the duty in case the goods do not reach the warehouse. The duty is paid at the time of ex-bond clearance of goods for which an Ex-Bond Bill of Entry is filed. The rate of duty applicable to imported goods cleared from a warehouse is the rate in force on the date of filing of Ex-Bond Bill of Entry.
 Risk Management System:

  ‘Risk Management System’ (RMS) has been introduced in Customs locations where the EDI System (ICES) is operational. This is one of the most significant steps in the ongoing Business Process Re-engineering of the Customs Department. RMS is based on the realization that ever increasing volumes and complexity of international trade and the deteriorating global security scenario present formidable challenges to Customs and the traditional approach of scrutinizing every document and examining every consignment will simply not work. Also, there is a need to reduce the dwell-time of cargo at ports/airports and also transaction costs in order to enhance the competitiveness of Indian businesses, by expediting release of cargo where compliance is high. Thus, an effective RMS would strike an optimal balance between facilitation and enforcement and promote a culture of compliance. RMS is also expected to improve the management of the Department’s resources by enhancing efficiency and effectiveness in meeting stakeholder expectations and bringing the Customs processes at par with best international practices.

 Risk Management Division:

       With a view to streamline the operations of the RMS, a Risk Management Division (RMD) has been created under the Directorate General of Systems with the following charter of functions:

(i) The RMD has the overall responsibility for designing, implementing and managing RMS using various risk parameters and risk management tools to address risks facing Customs, i.e., the potential for non-compliance with Customs and allied laws and security regulations, including risks associated with the potential failure
to facilitate international trade.

(ii) The RMD will suggest assessment and examination in respect of consignments perceived to be risky and facilitate the remaining ones.

(iii) The RMD is responsible for collecting and collating information and developing an intelligence database to effectively implement the RMS and also carry out effective risk assessment, risk evaluation and risk mitigation techniques. It will update and maintain risk parameters in relation to the trade, commodities and all stakeholders associated or involved with the supply chain logistics.

 National Risk Management Committee:

     A National Risk Management (NRM) Committee headed by DG (Systems) reviews the functioning of the RMS, supervise implementation and provide feedback for improving its effectiveness.

 Local Risk Management (LRM) Committee:

       A Local Risk Management (LRM) Committee headed by Commissioner of Customs
has been constituted in each Custom House / Air Cargo Complex / ICD, where RMS
is operationalised. The LRM Committee comprises the Additional / Joint Commissioner
in charge of Special Investigation and Intelligence Branch (SIIB), who is designated as
the Local Risk Manager and includes the Additional / Joint Commissioner in charge of
Audit and a nominee, not below the rank of a Deputy Director from the regional / zonal
unit of the DRI, and a nominee, not below the rank of Deputy Director from the
Directorate of Valuation, if any.

    Accredited Clients Programme:

     The Accredited Clients Programme (ACP) has been introduced with the objective of granting assured facilitation to importers who have demonstrated capacity and willingness to comply with the laws administered by the Customs. This programme replaces all existing schemes for facilitation in the Customs stations where EDI and RMS is implemented. Importers registered as “Accredited Clients” form a separate category to which assured facilitation is provided. Except for a small percentage of consignments selected on random by the RMS, or cases where specific intelligence is available or where a specifically observed pattern of non-compliance is required to be addressed, Accredited Clients are allowed clearance on the basis of self assessment without examination of goods as a matter of course.

  Export procedure –

         Shipping Bill:

(1) For clearance of export goods, the exporter or his agent has to obtain an Importer Export Code (IEC) number from the Directorate General of Foreign Trade prior to filing of Shipping Bill. Under the EDI System, IEC number is received by the Customs System from the DGFT online. The exporter is also required to register authorized foreign exchange dealer code (through which export proceeds are expected to be realized) and open a current account in the designated bank for credit of any Drawback incentive.

(2) All the exporters intending to export under the export promotion scheme need to get their licenses/DEEC book etc. registered at the Customs Station. For such registration, original documents are required.

  Octroi exemption for export goods:

     Since the Shipping Bill is generated only after the ‘Let Export’ order is given by Customs, the exporter may make use of export invoice or such other document as required by the Octroi authorities for the purpose of Octroi exemption.

 Waiver of GR form:

     Generally the processing of Shipping Bills requires the production of a GR form that is used to monitor the foreign exchange remittance in respect of the export goods. However, there are few exceptions when the GR form is not required. An example is export of goods valued not more than US $25,000/- and another is export of gifts valued up to Rs.5, 00,000/-.

 Arrival of export goods at docks:

    The goods brought for the purpose of export are allowed entry to the Dock on the strength of the check list and other declarations filed by the exporter in the Service Center. The custodian has to endorse the quantity of goods actually received on the reverse of the check list.

  Customs examination of export goods:

      After the receipt of the goods in the Docks, the exporter/CHA may contact the Customs Officer designated for the purpose, and present the check list with the endorsement of custodian and other declarations along with all original documents such as, Invoice and Packing list, AR-4, etc. The Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping
Bill and also hand over all original documents to the Dock Appraiser who assigns a Customs Officer for examination and indicate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter/CHA.

 Factory stuffing permission:

      The grant of a single factory stuffing permission valid for all the Customs stations instead of Customs station-wise permission is permitted. This facility is subject to the following safeguards:

(i) The exporter is required to furnish to Customs a list of Customs stations from where he intends to export his goods.
(ii) The Custom House granting the factory stuffing permission should maintain a proper register to keep a track-record of such permissions, and also create a unique serial number for each of such permissions.
(iii) The Custom House should circulate the factory stuffing permission to all Custom Houses concerned clearly indicating the name and contact details of the Preventive Officer/Inspector and Superintendent concerned of the Custom House granting the permission as well as those of the Central Excise Range concerned to facilitate
real time verifications, if required.
(iv) In case something adverse is noticed against the exporter, the Customs station concerned shall promptly intimate the Custom House granting the permission, which will, in turn, withdraw the permission, and inform all Custom Houses concerned.

   Variation between declaration and physical examination:

                                                                                 
      The check list and the declaration along with all original documents submitted with the Shipping Bill are retained by the Appraiser concerned. In case of any variation between the declaration in the Shipping Bill and physical documents/examination report, the Appraiser may mark the Electronic Shipping Bill to the Assistant Commissioner/Deputy Commissioner of Customs (Exports) along with sending the physical documents and
instruct the exporter or his agent to meet the Assistant Commissioner/Deputy Commissioner of Customs (Exports) for settlement of dispute. In case the exporter agrees with the views of the Department, the Shipping Bill needs to be processed accordingly. Where, however, the exporter disputes the view of the Department the
issue will be finalized in accordance with the principles of natural justice.

   Drawl of samples:

1- Where the Appraiser Dock (Export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/EDI system. There is no separate register for recording dates of samples drawn. Three copies of the test memo shall be prepared by the Customs Officer and signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposals of the three copies of the test memo are as follows:

(i) Original – to be sent along with the sample to the test agency.
(ii) Duplicate – Customs copy to be retained with the 2nd sample.
(iii) Triplicate – Exporter’s copy.

2- If he considers it necessary, the Assistant Commissioner/Deputy Commissioner may also order sample to be drawn for purposes other than testing such as for visual inspection and verification of description, market value inquiry, etc.

  Stuffing / loading of goods in containers:

      (1) The exporter or his agent should hand over the Exporter’s copy of the Shipping Bill duly signed by the Appraiser permitting “Let Export” to the steamer agent who would then approach the proper officer (Preventive Officer) for allowing the shipment. In case of container cargo the stuffing of container at Dock is done under Preventive Supervision. Further, loading of both containerized and bulk cargo is to be done under Preventive Supervision. The Customs Preventive Superintendent (Docks) may enter the particulars of packages actually stuffed into the container, the bottle seal number, details of loading of cargo container on board into the EDI system and endorse these details on the Exporter’s copy of the Shipping Bill. If there is a difference in the quantity/ number of packages stuffed in the containers/goods loaded on vessel the Superintendent (Docks) may put a remark on the Shipping Bill in the EDI system and that it requires amendment or change in quantity. Such Shipping Bill may not be taken up for the purpose of sanction of Drawback/DEEC logging, till it is suitably amended. The Customs Preventive Officer supervising the loading of container and general cargo into the vessel may give “Shipped on Board” endorsement on the Exporters copy of the Shipping Bill.

      (2) Palletisation of cargo is done after grant of Let Export Order (LEO). Thus, there is no
need for a separate permission for palletisation from Customs. However, the
permission for loading in the aircraft/vessel would continue to be obtained.

  

Ans: -   

 b) Explain the procedure of Duty Drawback Scheme along with the documentation   

         formalities.

     The term drawback is applied to a certain amount of duties of Customs and Central Excise, sometimes the whole, sometimes only a part remitted or paid by Government on the exportation of the commodities on which they were levied. To entitle goods to drawback, they must be exported to a foreign port, the object of the relief afforded by the drawback being to enable the goods to be disposed of in the foreign market as if they had never been taxed at all. For Customs purpose drawback means the refund of duty of customs and duty of central excise that are chargeable on imported and indigenous materials used in the manufacture of exported goods. Goods eligible for drawback applies to

a.) Export goods imported into India as such;

b.) Export goods imported into India after having been taken for use

c.) Export goods manufactured / produced out of imported material

d.) Export goods manufactured / produced out of indigenous material

e.) Export goods manufactured /produced out of imported or and indigenous materials.

The Duty Drawback is of two types: (i) All Industry Rate (AIR) and (ii) Brand Rate.

The All Industry Rate (AIR) is essentially an average rate based on the average quantity and value of inputs and duties (both Excise & Customs) borne by them and Service Tax suffered by a particular export product. The All Industry Rates are notified by the Government in the form of a Drawback Schedule every year and the present Schedule covers 2837 entries. The legal framework in this regard is provided under Sections 75 and

76 of the Customs Act, 1962 and the Customs and Central Excise Duties and Service Tax Drawback Rules, 1995.

The Brand Rate of Duty Drawback is allowed in cases where the export product does not have any AIR of Duty Drawback or the same neutralizes less than 4/5th of the duties paid on materials used in the manufacture of export goods. This work is handled by the jurisdictional Commissioners of Customs & Central Excise. Exporters who wish to avail of the Brand Rate of Duty Drawback need to apply for fixation of the rate for their export goods to the jurisdictional Central Excise Commissionerate. The Brand Rate of Duty Drawback is granted in terms of Rules 6 and 7 of the Drawback Rules, 1995.The Duty Drawback facility on export of duty paid imported goods is available in terms of Sec. 74 (It is discussed in more detail in under mention Para) of the Customs Act, 1962. Under this scheme part of the Customs duty paid at the time of import is remitted on export 1/5 of the imported goods, subject to their identification and adherence to the prescribed procedure.

Background:

All Industry Rate (AIR) of Duty Drawback:

The All Industry Rate (AIR) of Duty Drawback are notified for a large number of export products every year by the Government after an assessment of average incidence of Customs, Central Excise duties and Service Tax suffered by the export products. The All Industry Rate (AIR) are fixed after extensive discussions with all stake holders viz. Export Promotion Councils, Trade Associations, and individual exporters to solicit relevant data,

which includes the data on procurement prices of inputs, indigenous as well as imported, applicable duty rates, consumption ratios and FOB values of export products. Corroborating data is also collected from Central Excise and Customs field formations. This data is analyzed and forms the basis for the All Industry Rate (AIR) of Duty Drawback. The All Industry Rate (AIR) of Duty Drawback is generally fixed as a percentage of FOB

price of export product. Caps have been imposed in respect of many export products in order to obviate the possibility of misuse by unscrupulous exporters through over invoicing of the export value. The scrutiny, sanction and payment of Duty Drawback claims in major Custom Houses is done through the EDI system. The EDI system facilitates credit/disbursal of Drawback directly to the exporter’s bank accounts once the EGM has been filed by respective airlines / shipping lines. The correct filing of EGM is essential for speedy processing and disbursal of Drawback claims.

Brand Rate of Duty Drawback:

Where the export product has not been notified in All Industry Rate (AIR) of Duty Drawback or where the exporter considers the All Industry Rate (AIR) of Duty Drawback insufficient to fully neutralize the duties suffered by his export product, he may opt for the Brand Rate of Duty Drawback. Under this scheme, the exporters are compensated by paying the amount of Customs, Central Excise duties and Service Tax incidence actually incurred by the export product. For this purpose, the exporter has to produce documents/proof about the actual quantity of inputs / services utilized in the manufacture of export product along with evidence of payment of duties thereon. The exporter has to make an application to the Commissioner having jurisdiction over the manufacturing unit, within 3 months from the date of the ‘Let Export’ order. The application should include details of materials/components/input services used in the manufacture of goods and the duties/taxes paid on such materials/ components/input services. The period of 3 months can be extended up to 12 months subject to conditions and payment of requisite fee as provided in the Drawback Rules, 1995. 2/5 In terms of Rule 6 of the Drawback Rules, 1995 on receipt of the Brand Rate application,

the jurisdictional Commissioner shall verify the details furnished by the exporter and determine the amount/rate of Drawback. Where exporter desires that he may be granted Drawback provisionally, the jurisdictional Commissioner may determine the same, provided the exporter executes a general bond, binding himself to refund the Drawback amount granted to him, if it is found later that the Duty Drawback was either not admissible to him or a lower amount was payable. The Brand Rate letter is thereafter issued to the exporter.

The Custom House of the port of export is also given a copy to facilitate payment of Drawback to the exporter.

Imported goods re-exported-Drawback under Sec. 74

In case of goods which were earlier imported on the payment of duty and are later sought to be exported within a specified period, Customs Duty paid at the time of import of the goods, with certain cuts, can be claimed as Duty Drawback at the time of export of such goods. Such Duty Drawback is granted in terms of Sec. 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duty) Rules, 1995. For this

Purpose, the identity of export goods is cross verified with the particulars furnished at the time of import of such goods. Where the goods are not put into use after import, 98% of Duty Drawback is admissible under Sec. 74 of the Customs Act, 1962. In cases the goods have been put into use after import, Duty Drawback is granted on a sliding scale basis depending upon the extent of use of the goods. No Duty Drawback is available if the goods are exported 18 months after import. Application for Duty Drawback is required to be made within 3 months from the date of export of goods, which can be extended up to 12 months subject to conditions and

Payment of requisite fee as provided in the Drawback Rules, 1995.

Scope:

In this category, two types of cases are covered viz.,

1. Imported goods exported as such i.e. without putting into use – 98% of duty is refunded and

2. Imported goods exported after use – the percentage of duty is refunded according to the period between the date of clearance for home consumption and the date when the goods are placed under Customs control for exports. The percentage of duty drawback is notified under Notification. No 19 Custom, dated 6 Feb, 1965 as amended from time to time.

Elements necessary for drawback under Sec. 74:-

The elements necessary to claim drawback are;

1. The goods on which drawback is claimed must have been previously imported;

2. Import duty must have been paid on these goods when they were imported;3/5th

3. The goods should be entered for export within two years from the date of payment of duty on their importation (whether provisional or final duty). The period can be further extended to three years by the Commissioner of Customs on sufficient cause being shown.

4. The goods are identified as the goods imported.

5. The goods must be capable of being identified as imported goods.

6. The goods must actually be re-exported to any place outside India.

7. The market price of such goods must not be less than the amount of drawback claimed.

8. The amount of drawback should not be less than Rs. 50/- as per Sec. 76-(1) (c) of the

Customs Act.

Conclusion The main worry of exporters now is the delay in getting duty drawback. They apprehend that the government’s efforts to keep the fiscal deficit down will result in blocking the disbursal of their legitimate dues. Such delays will not only disrupt their cash flow but result in additional costs in raising finance to fund their operations. The increase in repo rates by the Reserve Bank can make funds costlier and, to that extent, make them relatively uncompetitive. Their sources of comfort are prospects of better growth in developed economies and weakening of the rupee against the dollar.

5. Write short notes on of the following:
    i) International Contract Terms
   ii) Standardized Pre-shipment Export Documents
  iii) Letters of Credit
  iv) Government Policy Making and Consultations Institutions.               (5x4)

Ans: -   

i) International Contract Terms

In international transactions, traders are from diverse nations, the specific term should be interpreted in a similar way by all parties concerned. Otherwise, disputes are bound to arise. To solve this problem the International Chamber of Commerce (ICC) Paris has developed Incoterms. These terms are commonly used in export-import transactions. These terms have been revised several times since they have been introduced to incorporate new commercial practices. The current version of Incoterms has been an issue in 2000. Incoterms have been almost universally adopted by many exporters and importers. Let us discuss them briefly.

1. Ex Works (Ex-W):

‘Ex Works’ means that the seller delivers when he places the goods at the disposal of the buyers at the seller’s premises or another named place (i.e. works, factory, warehouses, etc.) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all the costs and risks involved in taking the goods from  the seller’s premises.

2. Free Carrier (FCA):

‘Free carrier’ means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading. If delivery occurs at any other place, the seller is not responsible for unloading, which is on account of an importer.

3. Free Alongside ship (FAS):

‘Free Alongside Ship’ means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment.

4. Free On Board (FOB):

‘Free on Board’ means that the seller delivers when the goods pass the ship’s rail at the named port of the shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only or sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail then only FOB term should be used otherwise the FCA term should be used.

5. Cost and Freight (CIF):

‘Cost and Freight’ means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination. But the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer.

6. Cost Insurance and Freight (CIF):

‘Cost, Insurance and Freight’ means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination. But the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer.

7. Carriage Paid to (CPT):

‘Carriage paid to’ means that the seller delivers the goods to the carrier nominated by him but the seller must, in addition, pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyers all risks and any other costs occurring after the goods have been so delivered. ‘Carrier’ means any person who, in a contract of carriage, undertakes to perform or to procure the performance of transport, by rail, road, air, sea, inland waterway or by a combination of such modes.

8. Carriage and Insurance paid to (CIP):

‘Carriage and Insurance paid to’ means that the seller delivers the goods to the carrier nominated by him, but the seller must, in addition, pay the cost of carriage necessary to bring the goods to the named destination, This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to insurance against the buyer’s risk of loss of or damage to the goods during the carriage.

9. Delivered at Frontier (DAF):

‘Delivered at Frontier’ means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier, but before the customs border of the adjoining country. The term ‘frontier’ may be used for any frontier including that of the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term.

10. Delivered Ex-Ship (DES):

‘Delivered Ex Ship’ means that seller delivers when the goods are placed at the disposal of the buyer on board the ship not cleared for import at the named port of destination. The seller has to bear all the costs risks involved in bringing the goods to the named port of destination before discharging. If the parties wish the seller to bear the costs and risks of discharging the goods, then the DEQ term should be used.

11. Delivered Ex-quay (DEQ):

‘Delivery Ex Quay’ means that the seller delivers when the goods are placed at the disposal of the buyer not cleared for import on the quay (Wharf) at the named port of destination.The seller has to bear all the costs and risks involved in bringing the goods to be named port of destination and discharging the goods on the quay (Wharf). The DEQ term requires the buyer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import.

12. Delivered Duty Unpaid:

‘Delivery duty unpaid’ means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable; any ‘duty’ (which term includes the responsibility for and the risk of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such ‘duty’ has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time.

13. Delivered Duty Paid (DDP):

‘Delivery Duty Paid’ means that the seller delivers the good to the buyers, cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear all the costs and risks involved in bringing the goods thereto including, where applicable, any ‘duty’ (which term includes the responsibility for and the risks of carrying out of customs formalities and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination.

Incoterms set out the rights and the obligations of the buyer and the seller for the reach of the terms. Therefore, each party has known precisely what he is supposed to do and in turn what he can expect from the other party, consequently, the scope of misunderstanding and dispute becomes less. There is, however, one point that you must note. Incoterms is not a treaty or a convention which has been adopted by the trading nations. This is only a document prepared by as business organization. Therefore, to make Incoterms applicable to an export contract, the parties must specifically mention that they would like their contract to be interpreted as per Incoterms.

ii) Standardized Pre-shipment Export Documents

Export documents based on the functions performed by them are broadly classified into four types:

1. Commercial Documents
2. Regulatory Documents
3. Export Assistance Documents
4. Documents required by Importing Countries.

Commercial Documents:

1. Commercial Invoice:

This is the first basic and the only complete document in an export transaction. It is, in fact, a document of contents containing information about goods. Harmonized System Nomenclature (HSN), price charged, the terms of shipment and marks and numbers on the packages containing the merchandise.
The exporter needs this document for other purposes also such as:

(i) Obtaining export inspection certificate                                            

(ii) Getting excise clearance
(iii) Getting customs clearance and
(iv) Securing such incentives as cash compensatory support (CCS) and import license.
This document is prepared at both the pre-shipment and post-shipment stages.
Besides commercial invoice, there is a proforma invoice also. It is a temporary commercial invoice which is sent by the exporter to the importer. It covers contemplated shipment which may or may not be made in future. The importer requires this document for obtaining an import license and opening a letter of credit in favour of the exporter. With such obvious importance of proforma invoice, the exporter should cultivate a habit of sending proforma invoice to the importer, even if the same is not demanded.

2. Bill of Lading:

Bill of lading (B/L) is a document which is issued by the shipping company acknowledging that the goods mentioned therein are either being shipped or have been shipped. This is also an undertaking that the goods in like order and condition as received will be delivered to the consignee, provided that the freight specified therein has been duly paid.

 3. Airway Bill:

In air carriage, the transport document is known as the airway bill. This document performs three functions of a forwarding note for the goods, receipt for the goods tendered, and authority to obtain delivery of goods. Since it is non-negotiable, so it does not carry the same validity as a bill of lading for sea transport carries.

4. Bill of Exchange (B/E):

Bill of exchange is an instrument or draft used for the payment in international / export business. It is an instrument in writing containing an unconditional order, signed by the marker, directing a certain person to pay a certain sum of money only to or to the order of a person or to the bearer of the instrument. The person to whom the bill of exchange is addressed is to pay either on demand or at a fixed or a determinable future.

5. Letter of Credit:

It is a written instrument issued by the buyer’s (importer’s) bank, authorizing the seller (exporter) to draw in accordance with certain terms and stipulating in a legal form that all such bills (drafts) will be honored. Letter of credit provides the exporter with more security than open accounts or bills of exchange.

Regulatory Documents:

1. Legal Documents for Export from India:
There are two types of regulatory documents:
(i) Documents needed for registration, and
(ii) Documents needed for shipment.
The first category documents include applications and other supporting documents for obtaining:
 (i) Code number from the Reserve Bank of India (RBI),
(ii) Importers and exporters’ code numbers from the Chief Controller of Imports and Exports,
(iii) Registration-cum-membership certificate (RCMC), etc.
The documents needed for shipment of goods include the following:

(i) GR Form:

        It is required to be filled in duplicate for all exports other than by post. Both of the copies have to be submitted to the customs authorities at the port of shipment. They will retain the original copy to be sent to the Reserve Bank of India directly. They will return the duplicate copy which is submitted to the negotiating bank along with other documents after shipment of goods. The negotiating bank sends the duplicate copy to the RBI after the export proceeds have been realized.

(ii) PP Form:

Exports to all countries by parcel post (PP), except when made on ‘value payable’ or ‘cash on delivery’ basis should be declared on PP forms.

(iii) VP/COD Form:

It is required to be filled in one copy for exports to all countries by post parcel under arrangements to realize proceeds through postal channels on ‘value payable’ or ‘cash on delivery’ basis.

(iv) EP Form:

Shipment to Afghanistan and Pakistan other than by post should be declared on EP forms.

(v) SOFTEX Form:

It is required to be prepared in triplicate for export of computer software in non-physical form.
 2. Shipping Bill:
The shipping bill is the main document on the basis of which the custom’s permission for export is given. Post parcel consignment requires customs declaration form to be filled in. There are three types of shipping bills available with the customs authorities.
3. Marine Insurance Policy:
It is the basic instrument in marine insurance. A marine policy is a contract and a legal document which serves as evidence of the agreement between the insurer and the assured. The policy must be produced to press a claim in a court of law. An exporter must also put up the marine insurance policy as a collateral security when he gets an advance against his bank Credit.

 Exports Assistance Documents:

For availing of a number of incentives and assistance, an exporter is required to fill in a number of documents.
1. Application Form for Registration:
Exporters desirous of availing themselves of the benefits of the import policy are required to register themselves with the appropriate registering authority such as Export Promotion Councils (EPC), Commodity Boards and Chief Controller of Imports and Exports (CCIE), New Delhi.
The application for registration should be accompanied by a certificate from the exporter’s bankers in regard to his financial soundness. In case of a firm having branches, the application for registration shall be submitted only by the Head Office.
2. Allotment of Indigenous Raw Materials on Priority Basis:
Manufacturer- exporters may apply to the Director of Export Promotion, Ministry of Commerce, for replenishment of the indigenous materials used in the manufacture of goods for export.
 3. Duty Drawback:
For claiming this incentive, the main document is the customs attested drawback copy of shipping bill. This is to be accompanied by other documents such as drawback payment order, final commercial invoice and a copy of bill of lading or airway bill, as the case may be.
4. REP License and CCS:
For claiming REP license and cash compensatory support (CCS), the exporter is required to prepare and file a number of documents.

Documents required by importing Countries:

In case of export business, the importing countries need some documents because of the legal necessity. These documents are obtained by the exporter and are sent to the importer.

1. Consular Invoice:

It is usually issued on the specified form by the consulate of the importing country situated in the exporting country. It gives a declaration about the true value of goods shipped. The customs authorities of importing company charge valorem based on the value mentioned on consular invoice.

 2. Certificate of Origin:

This certificate is issued by the independent bodies like chamber of commerce or export promotion council in the exporting country. This is a certification that the goods being exported were actually produced in that particular country.

3. GSP Certificate of Origin:

Goods which get the benefit preferential import-duty treatment in countries which implement the Generalized System of Preferences (GSP) should be accompanied by the GSP certificate of origin. This certificate is given on the forms prescribed by the importing countries.

4. Customs Invoices:

It is also made out on a specified form prescribed by the customs authority of the importing country. The details given on the document will enable the customs authority of the importing country to levy and charge import duty.

5. Certified Invoice:

This is the self-certified invoice by the exporter about the origin of the goods.
iii) Letters of Credit
International trade between an Exporter and Importer would entail multiple transactions in terms of documentation exchange, physical cargo movement as well as settlement of payment which have to be clearly defined and setup in order to ensure smooth business transaction.
Over the years international trade has established various methods and payment mechanisms that are accepted globally by all financial institutions and other related parties.
Normally when the Customer is new to the Exporter, the business transactions are done either based on advance payment or Letter of Credit option. LC is one of the safest mechanisms available for an Exporter to ensure he gets his payment correctly and the importer is also assured of the Exporters adherence to his requirement in terms of quality, quantity, shipping instructions as well as documentation etc.
A letter of Credit is the Buyer’s Banker’s promise to the Bank of the Seller / Exporter that the bank will honor the Invoice presented by the Exporter on due date and make payment, provided that the Seller/Exporter has complied with all the requirements and conditions set by the Importer in the said letter of credit or the Buyer’s Purchase Order and produced documentary evidence to prove compliance, along with the necessary shipment related documentation.

Confirmed Letter of Credit

A Letter of Credit is always sent by the Buyer’s bank to the Seller’s Bank or any bank that is becomes an advising bank. Normally the Seller’s bank becomes an advising bank when a normal LC is received and it delivers or advises the buyer regarding the receipt of LC with no responsibility towards it. In case of a Confirmed LC, the Seller’s bank checks out the authentication of the LC from the Buyer’s bank and confirms to stand responsible for negotiating, collecting payment from the Buyer’s bank and making payment to the seller in line with the terms and conditions stipulated in the LC. By adding confirmation to the LC, the Seller’s bank too becomes equally responsible to make payment for the transaction under the LC.
Seller’s Bank in turn will charge and collect service charges from the Seller for the same.

Revocable and Irrevocable Letter of Credit

Normally the Letter of Credits issued is irrevocable, which means that no single party can unilaterally make any changes to the LC, unless it is mutually agreeable to both the parties involved. However an LC is said to be revocable if the terms allow any one single party to be able to make changes to the LC unilaterally.
However it is in the interest of the buyer that he should always insist on irrevocable Letter of Credit.

Sight LC

When the LC is opened, stipulating the condition that, on presentation of the negotiable set of shipping document by the seller as per the terms of the LC are made, the buyer’s bank will make payment at sight meaning immediately to the seller’s bank subject to fulfillment of terms and conditions of the LC being fulfilled, the LC is called Sight LC.

Future or Credit LC

If the payment schedule under the said LC stipulates payment at certain future dates after presentation of negotiable set of shipping documents by the Seller and fulfilling the LC terms and conditions, such an LC is termed Future LC or Credit LC. It is quite normal for sellers to extend credit of 30 days to 60 days under LCs. However the shipping documents would have to be presented to the bank immediately so that they documents reach the buyer well ahead in time before the consignment reaches the foreign shores and the buyer is able to clear the consignment and take delivery.
  iv) Government Policy Making and Consultations Institutions.
         The primary aim to set up machinery for consultation is to create the required forum and environment for consulting various quarters interested and engaged in foreign trade. It facilitates to develop a dialogue between Government, industry and the entrepreneurs, at various levels, to discuss varied problems faced by the enterprises and suggest necessary measures to solve the problems. Export is a dynamic industry and faces stiff international competition. It requires innovation, flexible approach and expeditious action to catch the swift changes that emerge as new opportunities. Further, orientation in attitude has to be developed to visualize and anticipate the changes that may overtake the scene. Equally, appropriate Government policies are important to support for rapid growth in international trade. To gear up with the changes, exporter needs guidance and assistance at different stages of export effort. For this purpose, Government has set up several institutions whose function is to support exporter in his endeavors. Institutions that are engaged in expo falls in six distinct tiers. The set-up is:

Six Tiers Consultative Set-up
Department of Commerce
Primary Government agency responsible for formulating and directing Foreign Trade Policy and programs including establishing relations with other countries where needed
Board of Trade
Mechanism to maintain continuous dialogue with trade and industry for appropriate policy measures and corrective action by Government
Commodity specific organizations
Tackling problems connected with individual commodities and groups of commodities Service Institutions Assist exporters to expand their operations to reach world markets more effectively Government Trading organizations Handling export/import of specified commodities & supplementing efforts of private enterprises in export promotion and import management
6. Agencies at State Level: Export Promotion
GOVERNMENT POLICY MAKING AND CONSULTATIONS
The following bodies are involved in policy making and consultation process:
1. Department of Commerce
Ministry of Commerce is the apex ministry at the central level to formulate and execute India's foreign trade policy and to initiate various exports promotional measures. e main functions of the Ministry are formulation of international commercial policy, negotiation of trade agreements, formulation of export-import policy and their implementation. has created a network of commercial sections in Indian embassies and high commissions various countries for export-import trade flows. It has set up an "Exporters' Grievances dressal Cell" to assist exports in quick redressal of grievances. The department of Commerce, in the Ministry of Commerce, has been made responsible for India's external trade and all matters connected with the same. This is the main organization to formulate and guide India's foreign trade, formed with the responsibility of promoting India's interest in international market. The Department of Commerce has six divisions and their functions are as under:
Trade Policy Division
To keep abreast of the developments in the International organizations like UNCTAD, WTO, the Economic Commissions for Europe, Africa, Latin America and Asia and Far East
Foreign Trade Territorial
Development of trade with different countries and regions of the world
Export Products Division
Problems connected with production, generation of surplus and development of markets for the various products under its jurisdiction
Export Industries Division
Development and Regulation of tobacco, Rubber and cardamom.
Export Services Division
Export promotion activities relating to handlooms, textiles, woolens, readymade garments, silks, jute and jute products, handicrafts, coir and coir products Problems of Export Assistance
Economic Division
Formulation of exports strategies, Export planning, Periodic appraisal and Review of policies
2. Board of Trade
It has been set up on May 5, 1989 with a view to provide an effective mechanism to maintain continuous dialogue with trade and industry in respect of major developments in the field of international trade. It provides regular consultation, monitoring and review of India's foreign trade policies and operations. The board has the representatives from commerce and other important Ministries, Trade and Industry Associations and Export Services Organizations. It is an important national platform for a regular dialogue between the Government and trade and industry. The deliberations in the Board of Trade provide guidelines to the Government for appropriate policy measures for corrective action
             The Minister of Commerce is the chairman of the Board of Trade. The official membership includes Secretaries of the Ministries of Commerce and Industry, Finance (Revenue), External Affairs (ER), Textiles, Chairman of ITPO, Chairman/MD of ECGC, MD of Exim Bank and Deputy Governor of Reserve Bank of India. The non-official members are President of FICCI, ASSOCHAM, CH, FIEO, All India Handloom Weavers Marketing Co-operative Society
Representatives various Trade and industry sectors, media and other eminent personalities
in the field of Export and Import Trade.
Cabinet Committee on Exports
Cabinet Committee regular and effective monitoring of India’s foreign trade performance and related policies
4. Empowered Committee of Secretaries
For speedier and quicker decision making, an Empowered Committee of Secretaries has been set up to assist the Cabinet Committee on Exports.
5 Grievances Cell
Grievances Cell has been established to entertain and monitor disposal of grievances and suggestions received. The purpose is to redress the genuine grievances, at the earliest. The grievance committee is headed by the Director General of Foreign. Trade. At the State level, the head of the concerned Regional Licensing authority heads the grievances committee. The committee also includes representatives of FIEO, concerned Export Promotion Council/ Commodity Board and other departments and organizations. The grievances may be addressed to the Grievances Cell, in the prescribed proforma.
6. Director General of Foreign Trade (DGFT)
DGFT is an important office of the Ministry of Commerce to help formulation of India's Export4mport formulation policy and implementation thereof. It has set up regional offices in almost all the states and Union territories. These offices are known as Regional Licensing Authorities. The Regional Licensing offices also act as Export facilitation centers.
7. Ministry of Textiles
This is another ministry of Government of India which is responsible for policy formulation, development, regulation and export promotion of textile sector including sericulture, jute and handicrafts etc. It has a separate Export Promotion Division, advisory boards, development corporations, Export Promotion Councils and Commodity Boards. The advisory hoards have been set up to advice the government in the formulation of the overall development programmes in the concerned sector. It also devises strategy for expanding markets in India and abroad. The four advisory boards are as under:
(a) All India Hand loom Board
(b) All India Handicrafts Board
(c) All. India Power loom Board
(d) Wool. Development Board.
There are Development Commissioners, Handicrafts and Handlooms who advise on matters relating to development and exports of these sectors. There are Textile Commissioner and Jute commissioner who advise on the matters relating to growth of exports of these sectors. Textile committee has also been set up for ensuring textile machinery indigenously, especially for exports.
8. Institutional Framework
Export Promotion Councils and Commodity Boards have been established with the objective of promoting and strengthening commodity specialization. They are the key institutions in the institutional framework, established in India for export promotion.
(A) Export Promotion Councils: There are 19 Councils covering different products. These Councils advise the Government the measures necessary to facilitate future exports growth, assist manufacturers and exporters to overcome various constraints and extend them full range of services for the development of overseas market. The councils also have certain regulatory functions such as the power to de-register errant and defaulting exporters. An idea of the functions of the Export Promotion Council can be had from understanding some of the functions of the Engineering Export Promotion Council. Some of their functions are:
(a) to apprise the Government of exporters' problems;
(b) to keep its members posted with regard to trade inquiries and opportunities;
(c) to help in exploration of overseas markets and identification of items with export potential;
(d) to render assistance on specific problems confronting individual exporters;
(e) to help resolve amicably disputes between exporters and importers of Indian engineering goods and (f) to offer various facilities to engineering exporters in line with other exporting countries.
Over the years, the role of Export Promotion Councils has reduced to traditional liaison work and has lost their importance. Now, the procedures connected with the foreign trade are more simplified. So, they have to redefine their role to offer concrete market promotional and consolidation programmes and services to their members.
Commodity Boards:
  There are 9 statutory Boards. These Boards deal with the entire range of problems of production, development, marketing etc. In respect of these commodities concerned, they act themselves as if they are the Export Promotion Councils. These Boards take promotional measures by opening foreign offices abroad, participating in trade fairs and exhibitions, conducting market surveys, sponsoring trade delegations etc.
9. States' Cell:
  This has been created under Ministry of Commerce. Its functions are to act as a model agency for interacting with state government or Union territories on matters concerning export or import from the state or Union territories. It provides guidance to state level export organizations. It assists them in the formulation of export plans for each state.
10. Development Commissioner, Small Scale industries Organisation:
   The Directorate has the headquarter in New Delhi and Extension Centers are located in almost all the States and Union Territories. They provide export promotion services almost at the door steps of small-scale industries and cottage units. The important functions are: (i) To help the small scale industries to develop their export capacities (ii) To organize export training programmes (iii) To collect and disseminate information (iv) To help such units in developing their export markets (v) To take up the problems and other issues related to small-scale Indus Corporation tries Besides, there are Directorates of Industries, National Small Scale Industries exports from small-scale industries.



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