SR NO. NO.: S.Y.Bms - Sem - Iv - A.Y. 2005-2006 Exim Proc &

S.Y.BMS – SEM – IV – A.Y.
2005-2006 EXIM PROC & DOC
INDEX
SR TOPICS PAGE
NO. NO.
1 Important terminologies 1
2 Introduction to exports 2-3
3 Terms of payments 3-12
4 INCOTERMS 12-14
5 Export Credit Guarantee co operation of India ltd 14-22

(ECGC)
6 Export finance 23-28
7 Different Export Houses 29-30
8 Export Procedure 30-34
9 Export documents 35-41
10 Imports documents 41-42
11 Imports procedure 42-43
12 Export financing institutions 45-46
13 Exim bank of India 47-50
14 Export Incentives and Assistance 51-54
15 Export Promotion Organization 54-67
16 State trading corporation 68-70
IMPORTANT TERMINOLOGIES
 AUTHORISED DEALER: Reserve Bank of India gives license (could be

nationalized, private etc) against their own application to operate
foreign exchange transaction (currency and document). These banks
can be nationalized or non-nationalized.
 VESSEL: Ship
1
S.Y.BMS – SEM – IV – A.Y. 2005-2006 EXIM PROC & DOC
 ENTRY INWARD ORDER: When a foreign country vessel enters Indian

national boundary, the Indian custom officer goes there physically and
checks with details it has and enters the entry inward order register.
 BALANCE OF TRADE: Balance of trade is the difference between

balance of export and import for a year. When the value of exports is
greater than the value of imports, there is a favorable trade and is said
to be positive trade.
 BALANCE OF PAYMENTS: The net difference between the inflow and

outflow of foreign exchange transaction.
Apart from balance of trade there are other ways by which foreign
exchange is earned and spent by a country.
⇒ Providing shipping services
⇒ Commission earned or paid in international market
⇒ International tourism
⇒ Nationals settled abroad remitting money to the country
⇒ Loans taken by private organizations/government from abroad
The current picture of a country’s exports and imports gets
reflected through BOT and not BOP.
 LIBOR (LONDON INTER BANK OFFERED RATE):

 Berth
INTRODUCTION TO EXPORT
Exports are vital to any economy, be it developed or developing. No country

can isolate itself from exports in some form or other. Export performance is
one of the main economic parameter of a nation. However, exports all over
the world face tough challenges than before and Indian exporters are no
exception.
There is rapid expansion in the international market activities since the end
of 2nd world war. The world export trade is increasing by leaps and bound.
Due to exports countries have come closer for economic, cultural and social
co-operation. International Marketing offers benefits to all participating
countries.
In order to maintain a healthy balance of trade and foreign exchange reserve

it is necessary to have a sustained and high rate of growth of exports. Export
can be defined as “sale of goods and services from one country.”
According to B.S. Rathor, “Export Marketing includes the management of

marketing activities for products which cross the national boundaries of a
country.”
2
Export marketing involves the design of the products and services

acceptable to the overseas customers and the conduct of those activities,
which facilitate the transfer of ownership of goods and services from the
seller of one country to the buyer of another country.
Reasons to Exports (Why to Export?) / NEED & IMPORTANCE OF

EXPORT MARKETING.
The need and importance of export marketing can be explained from the
viewpoint of a country and that of a business organization:
A. From the Viewpoint of a Nation:
1. FOREIGN EXCHANGE: Export helps country to earn valuable foreign

exchange, which is mainly required to pay for import of capital
goods, raw materials, spares and components.
2. Balance of Payments: A country’s external economic strength

depends upon its balance of payment position. Since export brings
in foreign exchange, it helps a country to solve and improve its
Balance of Payments position.
3. Employment opportunities: Export trade calls for more production,

which ultimately opens door for more employment opportunities,
not only in the export sector but also in allied sectors like banking,
insurance etc.
4. Financing of Development plans: Export earning can be a source of

financing development plans through the import of capital goods
and technology. The foreign exchange earned thru exports can be
utilized for planned economic development of a country.
5. Optimum utilization of Resources: There can be optimum use of

resources. The excess production can be directed to other
countries, there by enabling the exporting country to earn favorable
foreign exchange.
6. Research & Development: Goods to be exported to other countries

may not be sold in the same form as it is available in the local
markets. Products have to be redesigned according the requirement
of the importing country. This leads to constant R & D, which
ultimately leads to improve technology and production system. The
fruits of R & D would benefit the customers not only in the overseas
market but also in the domestic markets.
7. Spread Effect: Because of export industry, other sectors also

expand such as banking, transport, insurance etc. and at the same
3
time a number of ancillary industries come into existence to support

the export sector.
8. High Standard of Living: Export trade calls for more production,

which in turn increases employment opportunities. More
employment means more purchasing power as a result of which
people enjoy new and better quality goods, which in turn improves
standard of living of the people.
B. From the viewpoint of a business organization:
1. Reputation: An organization, which undertakes exports can exports,

can bring fame to its company not only in export market but also in domestic
market. These companies enjoy worldwide reputation.
TERMS OF PAYMENT
An export contract payment terms are determined on the basis of the

specific circumstances of the exporters and importers. It is not possible to
make any generalization about the payment methods in any export
transactions. The method of payment in respect of export finance depends
upon the agreement between the exporter and importer. The method of
payment of exporter also depends upon the conditions laid down by RBI. In
India, export proceeds of consumer goods must be realized within a period of
180 days from the date of exports. However, in case of export of capital
goods sold on deferred credit terms, the exporter can realize payment later
than 180 days. There are commercial factors that affect the payment terms
or methods of payments.
1. Nature of Products: The terms of credit depends upon the nature of

goods. For e.g. perishable goods would not justify a longer credit term. In
case of capital goods, the exporter may allow “Deferred Payment Terms”
2. Creditworthiness of the buyer: The method of payment may also

depend on creditworthiness of the buyer. If the importer enjoys a sound
creditworthiness, then the exporter may accept the method of “Documents
against Acceptance.”
3. Economic situation in the importer’s country: If the economic
conditions are poor in the importer’s country, then the exporter may not
prefer to offer longer period terms.
4. Size of order: The exporter also has to consider the size of the order. If
the order is substantial, then the exporter may receive the money in
installment, and as such longer period can be given. The exporter may agree
to “Documents against acceptance” method.
4
5. Competitor’s Credit terms: The exporter also have to find out the credit
terms offered by the competitors. If they allow a longer period of credit, the
exporter may also follow the same.
6. Financial Position of the exporter: If the exporter’s financial condition is
sound, then the exporter may offer a longer term of credit to the importer.
7. Relations: The exporter may consider trading relations with the

importer. If the exporter has good relations, then he may provide longer
credit terms.
The terms of payment relates to country of shipment and not country of

payment. E.g. if the exporter is in Japan and goods are shipped from
Bangladesh (ACU) then the payment is made only in USD. But as per recent
decision if the seller is in any other country (in case of ACU), but demands
payment in any free convertible currency, the importer should make
payment as per the demand of exporter.
TYPE ASIAN CLEARING UNIONS NON - ACUs

(ACUs)
COUNTRIES Bangladesh, Myanmar, Iran, ALL OTHER COUNTRIES
Pakistan, Srilanka (India &
Nepal diff)
CURRENCY US $ 20 FREELY
CONVERTIBLE
CURRENCIES
Following are the recognized methods of effecting payments under

International Trade:
A) Advance Payment: When the buyer’s credit is doubtful or the

political or economical environment in the buyer’s country is unstable, seller
(exporter) may demand advance payment, which will be to his advantage.
This method does not involve any risk of bad debts. However, this is the
most unpopular method as a foreign buyer would not be willing to pay in
advance of shipment unless:
i. The goods are specifically designed for the customer, and

ii. There is heavy demand for the goods in buyer’s market
iii. Importer must receive the goods within 3 months from the date of
remittance. In case of capital goods he must receive within 3 years
from date of remittance.
iv. The advance remittance must not be more than USD 1,00,000.
v. If advance remittance is more than USD 1,00,000 than a bank
guarantee from exporter’s bank to importer (on behalf of exporter)
must be given by exporter to importer. Only banks having
international repute can give such guarantee.
5
B) Open Account: Under this method, the exporter ships the goods with
no financial documents to his advantage except commercial invoice. Sales
on open account are settled thru agreed period between buyer and seller.
Considerable risk is involved in the open account method, as exporter carries
no documentary evidences of transaction with him. Open account method is,
therefore, generally confined to between inter-related company and the
exporter and overseas buyers have long and favorable dealings together.
The system works favorably when there are no exchange restrictions and
stable economic and political conditions prevails in the importing country. In
India, commodities exported so far in this scheme have been tobacco, oils
and jute manufacturers.
C) PAYMENT AGAINST SHIPMENT ON CONSIGNMENT:
The exporter supplies the goods to the overseas consignee or agent, without
actually giving up the title. Payment is made only when the goods are
ultimately sold by the overseas consignee to other parties. This method is
very risky as the consignee may return the goods back if remained unsold
and even the consignee may not clear off dues in time. In India, prior
approval from RBI’s exchange control department is required to be taken for
adopting this method of payment. All the goods can be sold under this
method. The realization of export proceeds here is 15 months. Documents
are directly sent to buyer with consignment.
D Documentary Bills:
This is the most common method of payment in international trade. In this

method, the exporter agrees to present the documents to his bank along
with the “Bills of exchange.” The method has two parts; documents against
payment and document against acceptance.
Document against payment is also known as cash against documents.

This method indicates that the payment is made against sight draft. The
exporter ships the goods in the name of importer but documents concerned
are handed over to the buyer thru the bank only on receipt of payment of
bills of exchange. The risk involved is that the importer may refuse to accept
the documents and to pay against them. The reasons for non-acceptance
may be political or commercial ones. The advantage to the exporter under
this system is that the documents remain in the hands of the bank and the
exporter does not lose possession or the ownership of goods till the payment
is made.
Under Document against Acceptance, the documents and the bills to the
goods are handed over to the buyer. The documents are released against
acceptance of the Time draft i.e. credit is allowed for a certain period, say
30 days, 90 days etc. When the buyer accepts the bills of exchange, on due
date of payment, the bank presents the bills to the buyer who makes the
payment. In case of D/A as compared to D/P bills, the risk involved is much
6
greater, as the importer has already taken possession of goods, which may
or may not be in his custody on the maturity date of the bill. If the importer
fails to pay on due date, the exporter will have to start civil proceedings to
receive his payment, if all alternatives fails. The risk involved can be insured
with ECGC.
E. Letter of Credit (L/C):
“An undertaking by importer’s bank stating that payment will be made to the
exporter if the required documents are presented to the bank within the
validating of the L/C”
L/C is one of the most convenient methods of settling payments in

International Trade. It provides financial security to the Exporter. The
exporter may not know the credit worthiness of the importer and the
prevailing Regulations in the country of the importer. But once a Letter of
Credit is established by the buyer’s bank on behalf of the buyer in favor of
the seller and the seller submits the set of required documents to the
opening bank or to the nominated bank, seller submits the set of required
documents to the opening bank or to the nominated bank, the seller is
assured of payment. Importer also gets the advantage of his banker’s
assistance in closely scrutinizing the documents and only after receiving the
relevant documentary evidence from the exporter by the banker nominated
in the credit the nominated banker releases payment.
Parties to a Letter of Credit:
1. Applicant / Buyer – on whose behalf LC is opened

2. Beneficiary / Seller – in whose favor the LC is opened.
3. Opening Bank / Issuing Bank: Importer’s bank, which issues LC.
4. Advising Bank: Which advices LC. It is issuing bank’s branch or
correspondent bank in exporter’s country to which the LC is sent for
onward transmission to the beneficiary.
5. Confirming Bank: The bank in beneficiary’s country, which
guarantees the credit on the request of the issuing bank.
 Many a times the advising bank and confirming bank are one
and the same.
L/C DIAGRAM ON THIS PAGE (COPY WITH STUDENTS)
L/C transaction
7
EXPORTER
Reimbursing bank
Stan.Chart
(London) LONDON
3
UNION 2
BANK
(Californi
a)
Issuing bank
IMPORTER ICICI Bank

(MUMBAI) (Mumbai)
• ICICI buys funds ($) from market and funds Union Bank with $ which
makes payment to standard chartered London.
• An undertaking by importers bank stating that payment will be made
to the exporter if the required documents are presented to the bank.
Negotiating bank V/S Confirming Bank
Negotiating Bank’s presence comes only in case of unconfirmed L/C, else

confirming bank pays money.
(3) Exporter’s bank is known as Negotiating (confirming) bank.
(4) An L/C can be transferred only once. By default all L/Cs are non-
transferable.
8
(5) In case of transferable L/C, the importer cant find the share of distribution
to all parties who have got their shares thru exporter, but reverse is possible,
so to avoid that risk another L/C is available which is known as back-to-back
L/C.
(6) In case of Back-to-Back LC the beneficiary becomes applicant. The

second L/C is opened on the basis of original (parent) L/C, which is known as
back-to-back L/C
(7) Nominated bank is nominated by issuing bank. (Importer’s bank)
(8) In case of revolving L/C it is not subject to exhaustion. It is renewed

automatically for the same amount and the same period once it is utilized.
Such L/C is useful when two parties have frequent dealings between them for
a fixed amount.
Only with regular customers having regulated supply this L/C is opened.
Every month when L/C is reinstated reinstatement charges are charged for
every transaction. (Around 1000-2000 Rs.)
LETTER OF CREDIT FLOWS AS FOLLOW

• After L/C is established, shipment is made;
• Exporter procures and forwards the documents as per L/C terms to the
CONFIRMING BANK (here, Standard Chartered bank);
• Confirming bank scrutinizes the documents as per stated in L/C
• If documents are in order; confirming bank makes payment to the
exporter.
• Confirming bank forwards documents to the ISSUING BANK (here, ICICI
BANK), which also scrutinizes the documents.
• Issuing bank has to make the payment to confirming bank in $. This
bank should have NOSTRO account (Foreign currency account)
• Here, in this example, ICICI may have a NOSTRO account with Union
Bank of California in NY. ICICI buys dollars from market and funds
union bank with $. Union bank is known as REIMBURSING bank. This
bank will make payment to STANCHART LONDON.
• ICICI presents documents to importer who will again scrutinize
documents and make payment to ICICI.
Procedure involved in the Letter of Credit
1. Exporter’s Request: The exporter requests the importer to issue LC in

his favor. LC is the most secured form of payment in foreign trade.
2. Importer’s request to his bank: The importer requests his bank to open
an LC. He may either pay the amount of credit in advance or may request
the bank to open a credit in his current account with the bank.
9
3. Issue of LC: The issuing bank issues the LC and forwards it to its
correspondent bank with a request to inform the beneficiary that the LC has
been opened. The issuing bank may also request the advising bank to add its
confirmation to the LC, if so required by the beneficiary.
4. Receipt of LC: The Exporter takes in his possession the LC. He should
see to it that the LC is confirmed.
5. Shipment of goods: Then the exporter supplies the goods and presents
the full set of documents along with the draft to the negotiating bank.
6. Scrutiny of document: the negotiating bank then scrutinizes the

documents and if they are in order, then makes the payment to the exporter.
7. Realization of Payment: The issuing bank will reimburse the amount

(which is to be paid to the exporter) to the negotiating bank.
8. Documents to importer: The issuing bank in turn presents the

documents to the importer and debits his account for the corresponding
amount.
TYPES OF LETTER OF CREDIT

Revocable
A revocable letter of credit allows for amendments, modifications and
cancellation of the terms outlined in the letter of credit at any time to an
importer without the consent of the exporter or beneficiary. Because this
places the exporter at risk, revocable letters of credit are not generally
accepted.
In order to safeguard the interest of the exporter in a revocable L/C, a clause

is included that “any drawings negotiated against the L/C prior to notification
or revocation or amendment will be honored on presentation.” Still this type
of L/C is of limited utility and, hence, not very popular.
Irrevocable
an irrevocable letter of credit requires the consent of the issuing bank, the
beneficiary and applicant before any amendment, modification or
cancellation to the original terms can be made. This type of letter of credit is
commonly used and preferred by the exporter or beneficiary because
payment is always assured, provided the documents submitted comply with
the terms of the letter of credit. Irrevocable letters of credit can be both
confirmed and unconfirmed.
Other forms of irrevocable letters of credit are unconfirmed,

confirmed and back-to-back.
Confirmed & Unconfirmed L/C:A confirmed letter of credit is when a

second guarantee is added to the document by another bank. The advising
10
bank, the branch or the correspondent through which the issuing bank routes
the letter of credit, adds its undertaking and commitment to pay to the letter
of credit. This confirmation means that the Exporter / seller / beneficiary may
also look to the credit worthiness of the confirming bank for payment
assurance. If no confirmation is added it is unconfirmed. If an intermediary
bank adds its confirmation, it binds itself to negotiate documents under the
particular credit confirmed. Confirmation constitutes a definite undertaking
of such bank (confirming bank), in addition to that of the issuing bank,
provided that the stipulated documents are presented and that the terms
and conditions of the credit are compiled with. It may also be noted that if
any bank confirms an L/C without an authorization from the issuing bank, it
will continue to be unconfirmed.
With Recourse & Sans (without) Recourse:
In a “With Recourse” L/C, the exporter is bound to refund the money back to
the bank which has negotiated his bills in the event of refusal by the
importer to honor the bill” where the importer fails to pay after the specified
period or unduly delays his payments, the bank can have recourse to the
exporter for payment of not only the bill amount but also expenses.
However, in a “without recourse L/C” the liability of the exporter ends after
the bill is negotiated.”
The best form of L/C is therefore – “IRREVOCABLE, CONFIRMED AND

SANS RECOURSE.”
Back-to-Back Letters of Credit
Back-to-back letters of credit is a domestic letter of credit. It is an ancillary

credit created by a bank based on a confirmed export LC received by the
direct exporters. The direct exporters keep the original LC (received from
issuing bank) with the negotiating or some other bank in India, as a security
and obtains another LC in favor of domestic supplier. Through this route the
domestic supplier gains direct access to a pre-shipment loan based on the
receipt of domestic or back-to-back LC.
Transferable LC: A transferable LC is one, which can be transferred by the

beneficiary named therein in favor of another party. The issuing bank can
transfer a credit only if it is expressly designated as transferable.
Non-Transferable LC: The beneficiary cannot transfer the LC to a third

party. Usually all letters of credit are non transferable unless it is expressly
stated that LC can be transferred.
Revolving L/C: When LC is issued for fixed amount and for a fixed period, it
is called a fixed LC. Under this credit the beneficiary has the right to draw
the bills upto the specified amount within the specified period. The validity of
11
the LC gets over as soon as the bills upto the specified amount have been
paid within the specified time.
Under revolving type, the amount of credit is automatically renewed after

the bills are negotiated. A revolving credit is a credit, which is available for a
fixed amount only for fixed period, but when the fixed amount is withdrawn,
the credit is renewed automatically for the same initial amount. Thus, a
revolving credit is used to provide transactions are more or less regular and
continuous atlest over a certain period of time.
Red Clause LC: The red clause LC is the usual irrevocable LC, which further
authorizes the negotiating bank to make advances to the beneficiary for the
purpose of processing the export goods. Thus, the red LC enables the
exporter to obtain Packing Credit Facility for the purpose of processing the
goods. It is called a red-clause LC because it is generally printed in red ink.
ADVANTAGES OF L/C TO AN IMPORTER (BUYER)
Reduce your commercial risk by ensuring that your supplier will not be paid
until evidence has been provided that the goods have been dispatched.
Import L/Cs will also help you:
• Conserve your company's cash flow by eliminating the need to make

advance payments or deposits
• Demonstrate your creditworthiness to your supplier
• Support your supplier's access to bank credit (in many countries, L/Cs
are pledged by exporters as security against working capital loans)
ADVANTAGES OF AN L/C TO AN EXPORTER (SELLER)
• Assure that you get paid (if the buyer doesn't pay, the bank that issued
the L/C is obligated to pay)
• No blocking of fund. Once the exporter fulfills all the conditions of L/C
and presents as per the terms and conditions of L/C. the exporter is
entitled to receive the amount of exports. L/C ultimately reduces the
bad-debt of an exporter.
• L/C enables an exporter to avail pre-shipment finance, which is granted

by commercial banks. The strength of L/C helps exporter to avail pre-
shipment finance.
INCOTERMS
The first INCOTERMS - uniform rules for the interpretation of international

trade terms were published in 1936, by the International Chamber of
Commerce (ICC) used in buying and selling on a worldwide scale. Since then,
12
ICC has amended and modernized these rules in 1953, 1967, 1980, 1990 and
Incoterms 2000.
Incoterms 2000 describe the responsibilities of seller and buyer in

international trade. The full and authoritative definition of each trade term is
published in Incoterms 2000.
INCOTERMS 2000 (stands for International Commercial Terms) to provide a

set of rules to interpret the most commonly used trade terms in international
trade. This set of rules defines the precise obligations of buyer and seller to
reduce the possibility of misunderstanding between the exporter and
importer.
The purpose of these terms is to clarify who is responsible (seller or buyer)

for:
1. The cost of transporting the goods from one point to the other.
2. The risk of loss if the transportation cannot take place.
3. The risk of loss or damage to goods in transit.
In other words, Incoterms 2000 aim is to set out the rights and obligations of
the seller and the buyer when it comes to transporting the goods. Each term
means a different division of costs, risks, and responsibilities between the
seller and the buyer.
WHY SHOULD IMPORTERS AND EXPORTERS UNDERSTAND THE

INCOTERMS IN DETAIL?
Many international traders, unfortunately, have only a general idea of the

differences between such INCOTERMS such as EXW, FOB, and CIF etc. As a
result, they are unprepared for certain common contingencies with respect
to transfer of risk, loading / unloading, customs clearance and insurance. For
e.g. one of the more common uncertainties arising in international Sales is,
who is responsible for loading (or unloading) the goods? An understanding of
INCOTERMS will generally allow the matter to be solved.
"INCO TERMS 2000"
The important INCOTERMS ARE AS FOLLOWS:
FOB (Free On Board): Under FOB contract, the Exporter quotes a price
which includes all the expenses incurred until the goods are actually
delivered on board the ship at the port of shipment. This means packing
charges, local transport charges and dock dues are covered in the price
quoted. Even expected profit is included in the FOB price. It constitutes the
following:
13
Ex-Factory price, packing charges, Inland Transportation charges, Wharfage

and porterage, Customs dues, Export duty, if any.
Cost of checking operations like checking of quality, measure, weight or
quantity if any.
Thus FOB price is calculated by adding the cost of goods, the expenses upto
the board of the ship.
FOB Price = Cost Of Goods + Expenses Upto Board the Ship
Seller’s obligations under FOB quotation:
i. He has to load the goods on board the ship named by the buyer.
ii. He has to obtain bill of lading from the shipping company and
forward it to buyer to enable him to take delivery of goods.
iii. He must inform the buyer certain details like the name of the ship
and the possible date of delivery.
iv. He has to inform the buyer without delay that the goods have been
delivered on board the vessel.
Buyer’s obligations under FOB quotation:
i. He should inform the seller the name of the ship by which the goods
are to be sent and also the expected date of delivery.
ii. He has to bear the risk when goods are loaded on the ship.
iii. He should make the payment to the exporter as per the terms of
contract.
Under FOB quotation the seller has no right of lien (possession of property)
on goods and that of stoppage in transit, because the shipping company is
deemed to be the agent of buyer.
B. C & F- Cost and Freight (CFR): C & F / CFR means COST AND
FREIGHT. The quotation covers total cost of goods, packing, carriage, loading
charges and the payment of freight upto the port of destination. The other
arrangements like cartage, unloading charges and expenses of carrying the
goods from the port of delivery to importer’s warehouse are to be made by
the importer. Insurance arrangements are also to be made by the importer.
C & F Price = F.O.B. PRICE + FREIGHT
Seller’s Obligations under C & F Quotation:
In addition to the obligation mentioned under FOB quotation, the seller must
pay freight charges to the shipping company that undertakes to carry the
goods from the port of shipment to the port of destination.
Buyer’s Obligation under C & F Quotation:

14
i. He has to arrange and pay for insurance.

ii. He has to pay clearing charges, import duties etc.
iii. He has to make payment as per the commercial invoice.
iv. He has to bear the loss or damage to the goods, if any, from the
time and place at which the seller’s obligations are over.
C. CIF-COST, INSURANCE AND FREIGHT: It includes FOB price plus

freight plus marine insurance upto the port of destination. The importer
prefers it to FOB because there are fewer responsibilities for him as the
exporter takes all risk for fluctuations in rates of freight and insurance unless
otherwise specified in the contract. This term is exactly the same as CFR
except that the seller must in addition procure and pay for insurance for the
buyer.
CIF = FOB + FREIGHT (C & F) + MARINE INSURANCE
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD (ECGC)
Export Credit Guarantee Corporation of India Limited, was established in the

year 1957 by the Government of India to strengthen the export promotion
drive by covering the risk of exporting on credit.
Being essentially an export promotion organization, it functions under the

administrative control of the Ministry of Commerce, Government of India. It is
managed by a Board of Directors comprising representatives of the
Government, Reserve Bank of India, banking, insurance and exporting
community. ECGC is the fifth largest credit insurer of the world in terms of
coverage of national exports. The present paid-up capital of the company is
Rs.500 crores and authorized capital Rs. 1000 crores. The paid-up capital is
expected to be enhanced to Rs.800 crores.
What does ECGC do?
a) Provides a range of credit risk insurance covers to exporters against

loss in export of goods and services
b) Offers guarantees to banks and financial institutions to enable
exporters obtain better facilities from them
c) Provides Overseas Investment Insurance to Indian companies investing
in joint ventures abroad in the form of equity or loan.
How does ECGC help exporters?
ECGC provides
• Offers insurance protection to exporters against payment risks

• Provides guidance in export-related activities
15
• Makes available information on different countries with its own credit

ratings
• Makes it easy to obtain export finance from banks/financial institutions
• Assists exporters in recovering bad debts
• Information on credit-worthiness of overseas buyers
Need for export credit insurance
Payments for exports are open to risks even at the best of times. The risks
have assumed large proportions today due to the far-reaching political and
economic changes that are sweeping the world. An outbreak of war or civil
war may block or delay payment for goods exported. A coup or an
insurrection may also bring about the same result. Economic difficulties or
balance of payment problems may lead a country to impose restrictions on
either import of certain goods or on transfer of payments for goods imported.
In addition, the exporters have to face commercial risks of insolvency or
protracted default of buyers. The commercial risks of a foreign buyer going
bankrupt or losing his capacity to pay are aggravated due to the political and
economic uncertainties. Export credit insurance is designed to protect
exporters from the consequences of the payment risks, both political and
commercial, and to enable them to expand their overseas business without
fear of loss.
The covers issued by ECGC can be divided broadly into following

groups:
1. SCR – STANDARD POLICY
What is a SCR or Standard Policy?
Shipments (Comprehensive Risks i.e. coverage of commercial as well

as political risk; that is how known as COMPREHENSIVE RISK policy)
Policy, commonly known as the Standard Policy, is the one ideally suited to
cover risks in respect of goods exported on short-term credit, i.e. credit not
exceeding 180 days. This policy covers both
• Commercial and
• Political risks;
from the date of shipment. It is issued to the exporters whose anticipated

EXPORT TURNOVER for the next 12 months is more than Rs.50 lac. (The
appropriate policy for exporters with an anticipated turnover of Rs.50 lacs or
less is the Small Exporter's Policy, described separately).
16
What are the risks covered under the Standard Policy?
Under the Standard Policy, ECGC covers, from the date of shipment, the
following risks:
a. Commercial risks
• Insolvency of the buyer

• Failure of the buyer to make the payment due within a specified
period, normally four months from the due date.
• Buyer's failure to accept the goods, subject to certain conditions
b. Political risks
• Imposition of restriction by the Government of the buyer's country or

any Government action, which may block or delay the transfer of
payment made by the buyer.
• War, civil war, revolution or civil disturbances in the buyer's country.
• New import restrictions or cancellation of a valid import licence in the
buyer's country.
• Interruption or diversion of voyage outside India resulting in payment
of additional freight or insurance charges which can not be recovered
from the buyer.
• Any other cause of loss occurring outside India not normally insured by
general insurers, and beyond the control of both the exporter and the
buyer.
What are the risks not covered under the standard policy?
The policy does not cover losses due to the following risks:
• Commercial disputes including quality disputes raised by the buyer,

unless the exporter obtains a decree from a competent court of law in
the buyer's country in his favour.
• Causes inherent in the nature of the goods.
• Buyer's failure to obtain necessary import or exchange authorization
from authorities in his country.
• Insolvency or default of any agent of the exporter or of the collecting
bank.
• Loss or damage to goods, which can be covered by general insurers.
• Exchange rate fluctuation.
• Failure or negligence on the part of the exporter to fulfil the terms of
the export contract.
Which all shipments made by the exporter are required to be

covered under the Standard Policy?
The Standard Policy is meant to cover all the shipments made by an
exporter, on credit terms during the period of 24 months after the issue of
17
the policy. In other words, an exporter is required to offer for the cover of the
Policy each and every shipment that may be made by him in the next 24
months on DP, DA or Open Delivery terms to all buyers other than his own
associates.
Are there any shipments excluded from the purview of the Standard
Policy?
An exporter may exclude shipments made against advance payment or
those, which are supported by irrevocable Letters of Credit, which carry the
confirmation of banks in India, since he faces no risk in respect of such
transactions.
Is there any difficulty in covering air shipments under the Standard

Policy?
When shipments are made by air, the buyers are often able to obtain
delivery of the goods from the airlines before making payment of the bills or
accepting them for payment, as the case may be. As a result, shipments by
air can be covered by the Standard Policy if the exporter holds a valid credit
limit under DA and pays premium at the rates applicable for the relevant
credit period under DA.
Can pre-shipment risks be covered under the Standard Policy?

(Policy covered from DATE OF CONTRACT)
The Standard Policy provides cover only for the post-shipment risks. Pre-
shipment losses, i.e. losses which may be sustained by an exporter due to
impossibility of exporting goods already manufactured or purchased for
reasons like ban on export of the item, restrictions on import of the items
into the buyer's country, war, civil war, etc., are not covered under the
policy. Normally such a risk is very low in respect of raw materials, primary
products, consumer goods or consumer durables, which can easily be sold to
alternate buyers. Where, however, the export involves an item, which is
manufactured to the non-standard specifications of a buyer, cover can be
provided for the pre-shipment risks as well as the post-shipment risks under
the Contract Policy.
What is the percentage of cover provided by ECGC?

ECGC normally pays 90% of the loss, whether it arises due to commercial
risks or political risks. The remaining 10% has to be borne by the exporter
himself. However, ECGC reserves the right to offer a lower percentage of
cover in certain cases.
What is the time limit for declaration of shipments?
On or before the 15th of every month the policyholder is required to declare

to ECGC in a prescribed form, all the shipments made by him in the
18
preceding calendar month. If no shipment is made in a month, a NIL

declaration should be sent.
2. SOFTWARE PROJECTS POLICY
What are the software services exports that will be eligible for
cover under the Software Project Policy?
The following software services will be eligible for cover under the Software
Projects Policy:
Software project services, either on one time/turnkey basis or

progressive/milestone basis, involving
(I) Development of software off-shore (i.e. at the exporters location in India)
to be delivered and implemented in the buyer’s (client) location; or
(ii) Development of software on-site of the client and supply and
implementation; or
(iii) Both off-shore and on-site development.
What are the salient features of Software Projects Policy?
Considering that software projects have special characteristics, a separate

policy pertaining to software projects has been designed by ECGC. The loss
coverage will be restricted to 80%.
What are the risks covered under the Software Projects Policy?
The risks covered under the Policy would be similar to the risks covered
under standard policies in character but the wordings are slightly amended
to be in line with the special features of the software exports. The risks
covered would be as under:
Commercial risks:
(a) Default – the failure of the customer to pay to the exporter within four
months after the due date of payment the contract price of services
rendered to and accepted by the customer: or
(b) Insolvency of the customer: or
(c) Wrongful repudiation (denial) of the contract by the customer
after the exporter has incurred expenses for commencement of services.
Political risks:
(a) The operation of a law or of an order, decree or regulation having the
force of law, which, in circumstances outside the control of the Exporter
and/or of the buyer prevents, restricts or controls the transfer of payment
from the customer’s country to India: or
(b)The occurrence of war between the customers’ country and India: or
19
(c) The occurrence of war, hostilities, civil war, rebellion, revolution,

insurrection or other disturbances in the customer’s country; or
(d)The imposition in India or in the customer’s country after the date of
contract, of any law or of an order, decree or regulation having the force of
law, which in circumstances outside the control of the Exporter and/ or the
customer, prevents performance of the contract; or
(e) Any of the following causes of loss not being within the control of the
exporter and/ or the customer, which arises from an event occurring outside
India;
o Refusal of visa for employees of exporter who are required to be

in the place of the project to enable the exporter to execute
contractual obligations for reasons not attributable to the exporter or
customer.
3. SERVICES POLICY
What is the purpose of Services Policy?
Where Indian companies conclude contracts with foreign principals for

providing them with technical or professional services, payments due under
the contracts are open to risks similar to those under supply contracts. In
order to give a measure of protection to such exporters of services, ECGC
has introduced the Services Policy.
What are the different types of Services Policy and what protection
do they offer?
1. Specific Services Contract (Comprehensive Risks) Policy;
2. Specific Services Contract (Political Risks) Policy;
3. Whole-turnover Services (Comprehensive Risks) Policy; and
4. Whole-turnover Services (Political Risks) Policy
Specific Services Policy, as its name indicates, is issued to cover a

single specified contract. It is issued to provide cover for contracts, which
are large in value and extend over a relatively long period. Whole-turnover
services policies are appropriate for exporters who provide services to a set
of principals on a repetitive basis and where the period of each contract is
relatively short. Such policies are issued to cover all services contracts that
may be concluded by the exporter over a period of 24 months ahead.
20
4. Construction Work Policy
What is the purpose of a Construction Works Policy?
Construction Works Policy is designed to provide cover to an Indian

contractor who executes a civil construction job abroad.
What are the risks covered by Construction Works Policy?
1. The Construction Works Policy of ECGC is designed to protect the

Contractor from 85% of the losses that may be sustained by him.
5. SPECIFIC POLICIES FOR SUPPLY CONTRACTS
Why are specific policies needed for supply contracts?
The Standard Policy is a whole turnover policy designed to provide a

continuing insurance for the regular flow of an exporter's shipments for
which credit period does not exceed 180 days. Contracts for export of
capital goods or turnkey projects or construction works or rendering
services abroad are not of a repetitive nature and they involve
medium/long-term credits. Such transactions are, therefore, insured
by ECGC on a case-to-case basis under specific policies.
What are the different forms of specific policy for supply contracts
and what risks do they cover? The different policies are:
1. Specific Shipment (Comprehensive Risks) Policy;
2. Specific Shipments (Political Risks) Policy;
3. Specific Contract (Comprehensive Risks) Policy; and
4. Specific Contract (Political Risks) Policy.
Specific Shipments (Comprehensive Risks) Policy provides cover against all

the risks covered under the Standard Policy for shipments to be made under
the contract in question. It is, therefore, the appropriate policy for an
exporter to take if the payments are open to both commercial and political
risks. Where the Commercial risks are absent, e.g. where the payments are
guaranteed by a bank or by the Government of the overseas country, the
exporter may opt for the Specific Shipments (Political Risks) Policy for which
the premium rate will be lower than that for the Comprehensive Risks Policy.
Specific Contract Policy (which also can be for comprehensive or political

risks) differs from Shipments Policy in that the former provides the exporter
not only with the post-shipment cover like the latter but also with some pre-
shipment cover from the date of contract. In case shipments could not be
made due to any of the risks covered or due to restriction on export of the
goods from India, the loss in respect of unshipped goods will also be covered
under Contract Policies. Premium rates for Contract Policies will be higher
than that for Shipment Policies.
21
6. SMALL EXPORTER'S POLICY
The Small Exporter's Policy is basically the Standard Policy, incorporating

certain improvements in terms of cover, in order to encourage small
exporters to obtain and operate the policy. It is issued to exporters whose
anticipated export turnover for the period of one year does not exceed Rs.50
lac.
In what respects is the Small Exporter's Policy different from the

Standard Policy?
i) Period of Policy: Small Exporter's Policy is issued for a period of 12 months,

as against 24 months in the case of Standard Policy.
ii) Declaration of shipments: Shipments need to be declared quarterly

(instead of monthly as in the case of Standard Policy).
iii) Percentage of cover: For shipments covered under the Small Exporter's
Policy ECGC will pay claims to the extent of 95% where the loss is due to
commercial risks and 100% if the loss is caused by any of the political risks
(Under the Standard Policy, the extent of cover is 90% for both commercial
and political risks).
iv) Waiting period for claims: The normal waiting period of 4 months under
the Standard Policy has been halved in the case of claims arising under the
Small Exporter’s policy.
(1) …. Continued from Page No. 4 after the ACU table.
The payment terms relates to country of shipment and NOT country of

payment.
The recent decision permits to any exporter who is in any other country (in
case of ACUs), but demands payment in any free convertible currency, the
importer should make the payment as per the demand of the exporter. The
same has been explained with the help of following example:
If the seller is in Japan and goods are shipped from Bangladesh, the payment
is made in US $ only generally, but The recent decision permits to any
exporter who is in any other country (in case of ACUs), and if he demands
payment in any free convertible currency, the importer should make the
payment as per the demand of the exporter.
(2) … Continued from page number 10

(To be included either BEFORE or AFTER CONFIRMED V/S NON - CONFIRMED
LC)
Negotiating bank V/S Confirming Bank

22
Negotiating Bank’s presence comes only in case of unconfirmed L/C, else

confirming bank pays money.
(3) Exporter’s bank is known as Negotiating (confirming) bank.
(4) An L/C can be transferred only once. By default all L/Cs are non-
transferable.
(5) In case of transferable L/C, the importer cant find the share of distribution
to all parties who have got their shares thru exporter, but reverse is possible,
so to avoid that risk another L/C is available which is known as back-to-back
L/C.
(6) In case of Back-to-Back LC the beneficiary becomes applicant. The

second L/C is opened on the basis of original (parent) L/C, which is known as
back-to-back L/C
(7) Nominated bank is nominated by issuing bank. (Importer’s bank)
(8) In case of revolving L/C it is not subject to exhaustion. It is renewed

automatically for the same amount and the same period once it is utilized.
Such L/C is useful when two parties have frequent dealings between them for
a fixed amount.
Only with regular customers having regulated supply this L/C is opened.
Every month when L/C is reinstated reinstatement charges are charged for
every transaction. (Around 1000-2000 Rs.)
EXPORT FINANCE
RBI assures:
 Timely finance assistance.

 Interest rates should be cheaper.
Different types of Exports (From the viewpoint of Banker)
1. Cash exports: payment here is received within 6 months from the date
of shipment.
2. Project Exports:
2.a. Exports of capital goods on deferred payment (beyond 6 months)
2.b. civil construction abroad.
2.c. Turnkey projects.
2.d. Service exports / consultancy services abroad.
23
3. Deemed Exports: A Supplier to advance license holder or SEZ or EOU

are known as deemed exporters.
4. Software Exports:
4.a. On-site software development.
4.b. offshore projects.
4.c. Branded software sales.
4.d. customized projects: foreign company floating tenders and
Indian software engg. Develops projects (tailor made / customized projects)
Different types of exporters (From the viewpoint of Banker)
a. Manufacturer exporters
b. Merchant exporters.
c. EOUS / Units operating under EPZs / SEZs
d. Status holder exporters.
Export Finance is a short term, working capital finance allowed to an

exporter. An exporter may need financial assistance for execution of an
export order from the date of receipt of an export order till the date of
realization of the export proceeds at any stage. Financial assistance
extended to the exporter from the date of receipt of export order till the date
of shipment is known as pre-shipment credit. Pre-shipment finance is
extended to an exporter for the purpose of procuring raw materials,
processing, packing, transporting, warehousing of goods meant for exports.
It is also known as “Packing Credit” facility.
Credit facility extended to an exporter from the date of shipment of goods till
the realization of the export proceeds is known as post-shipment credit.
Interest for availing Pre-shipment finance is charged at PLR (Prime Landing

Rate) in case of Indian Rupee currency loan.
Conditions for availing packing credit loan
1. Maximum loan available against each order:
Say: the CIF Value of invoice is -------------- US $ 1,00,000

Maximum loan available -------------- US $ 75,000
(Banks generally does not give 100% loan)
around 25% Margin is kept generally.
US $ 75,000 * 46 (Rs. 46/-) = Rs. 33,75,000/-

Less 12% is the Insurance & Freight = Rs. 4,00,000/-
-----------------------
Rs. 29,75,000/- is the
loan amount obtained by the exporter initially.
24
Rs. 4,00,000 is released afterwards when exporter has to take the

responsibility to pay insurance and freight charges.
2. Maximum Period: Till the date of shipment / date of submission of

the documents OR upto a maximum period of 180 days from date of loan
whichever is earlier.
3. Extension of 90 days: (180 days + 90 Days = 270 Days): if the

exporter can’t ship the goods then, further extension upto 90 days is given
at concessional rate of interest.
4. Beyond 270 days: Packing credit can continue but at no concessional

rate of interest.
A manufacturer exporter dealing in any of notified 10 items or dealing with

any of notified 43 countries, he is eligible for packing credit at concessional
rate of interest upto 365 days.
Interest rate slabs
Description Slab Rupee Loan PCFC

1 – 180 Days 1st Slab PLR – 2.5 % (Max) LIBOR + .75 % B.P
181 – 270 days 2nd Slab PLR – 0.5 % (Max) LIBOR + .75% + 2%
Beyond 270 days No Extension is granted
E.g. if an exporter has availed loan for 240 days then for 1 – 180 days 
interest rate = PLR -2.5% & 181 days to 240 days – Interest rate = PLR –
0.5%
Types of Pre-shipment finance:
i. Extended Packing Credit Loan (PCL): it is granted to the clients

(exporters) for making advance payment to the suppliers for acquiring goods
to be exported. Thus, it is clean in nature and is usually extended to the
parties who are rated as first class, for a very short duration. However, bank
should assess the procurement period and once the goods are acquired and
are in the custody of the exporter client, convert the clean advance into PCL
hypothecation.
ii. Packing Credit Hypothecation: It is extended where raw materials,

Work-in Progress and finished goods meant for export are available as
security. The processing / manufacturing may be undertaken by the exporter
himself or thru sub-contractors unit.
iii. Packing Credit Loan: The PCL is granted as loan in the form of
pledge in cases where exporters are required to collect / obtain raw
materials in odd or bunched lots or the raw material is seasonal in nature
and the exports take place in due course in installment as the shipping
schedules agreed upon by the overseas buyers.
25
iv. Secured shipping loan: Once the goods are ready for shipment and
exporter/supplier has handed over the goods to the clearing and forwarding
agent for dispatch the advances can be granted as secured shipping loan.
Here bank ensures that the goods are handled by approved transport
operators / C & F agents.
DOCUMENTS REQUIRED: The following documents are to be submitted

along with application form for packing credit.
i. 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. This
undertaking is required where the exporter wants to avail him of packing
credit advance against preliminary information of contract whereby at the
later stage the contract or L/C, as the case may be, will be received by him.
ii. An undertaking that the advances will be utilized for the specific
purpose of procuring / manufacturing etc. of the goods meant for export only
as stated in the relative confirmed export order or the L/C.
iii. Where the exporter asking for the PCL is a sub-supplier and wants to
supply the goods to the Export / Trading / Super Star Trading House stating
that they have not / will not avail themselves of packing credit facility
against the same transaction for the same purpose till the original packing
credit is liquidated.
iv. Letter of hypothecation, partnership deed in case of partnership firm or

Memorandum of Association, Articles of Association for public/private
business.
v. Audited reports of past 3/5 years.
vi. Copies of RBI’s Exporter’s code number (CNX)
vii. Appropriate guarantee of the ECGC.
viii. Any other document required by the bank.
PCL is generally granted on secured basis. Nevertheless, clean packing

advances may also be granted. Money advances are clean at their initial
stage when goods are not yet acquired. Once the goods are acquired and are
in the custody of the exporter, banks usually convert the clean advance into
hypothecation. In such cases, rules regarding submission of stock statements
and insurance would have to be complied with.
26
Loan agreement: Before disbursement of loan, the banks require the

exporter to execute a formal “loan agreement.” The format of this
agreement differs from bank to bank.
Who is eligible for pre-shipment credit?

An exporter who holds an export order or Letter of Credit (LC) in his own
name to perform an export contract can avail of pre-shipment credit.
What is the purpose of this finance?
Pre-shipment finance can be availed of only for the specific purpose of

procuring raw materials / purchasing / manufacturing / processing /
transporting / warehousing / packing and shipping the goods meant for
export.
How much financing can an exporter get?
The banking practice is that the exporter can obtain 90% of the FOB value of
the order or 75% of the CIF value of the order.
A manufacturer exporter dealing in any of the notified item is eligible for

packing credit at concessional rate of interest upto 365 days. RBI has
enlisted 10 products and 43 countries to implement above case.
POST – SHIPMENT FINANCE
Post-shipment finance is a loan or advance granted by a bank to an exporter

of goods from India. This facility is available to an exporter subsequent to the
date of shipment of goods upto the date of realization of export proceeds.
Post shipment finance bridges the financial gap between the date of
shipment and actual receipt of payment from overseas buyer thereof.
Some key features of post-shipment finance are as follows:
• Finance is extended against evidence of shipping documents.

• Finance provides working capital to the exporter from the date of
shipment to the date of realization of export proceeds.
• Concessive rate of interest is available for a maximum period of 180
days, starting from the date of submission of documents. Normally, the
documents are to be submitted within 21days from the date of
shipment.
• 0-90 days – Ist slab – PLR – 2.5% / LIBOR + 0.75 BP
• 91-180 days – IInd slab – PLR – 0.5% / LIBOR +0.75 + 2 BP
What is the quantum of this finance?
Post shipment finance can be extended upto 100% of the invoice value of
goods.
27
Post-shipment finance can be further classified as under:
a. Export Bill Purchased (D / P Bills).

b. Export Bills discounted (D / A Bills).
Above two bills are Non – L/C Bills.
c. Export Bills negotiated (L/C Bills): An exporter can avail of post-

shipment credit by drawing bills or drafts under the L/C. The bank
insists on production of the necessary documents as stated in the L/C.
If documents are in order, the bank negotiates the bill and advance is
granted.
d. Advance against incentives / DBK: DBK means refund of custom duties
paid on the import of raw materials, components and packing material
used in the export product. It also includes refund of central excise
duties paid on indigenous materials. Banks offer pre-shipment
advances against claims for DBK. Banks offer pre-shipment as well as
post shipment advances against claims for DBK.
e. Advances against goods sent on consignment basis: Banks may grant
post-shipment advances against goods sent on consignment basis.
f. Advances against Retention Money: Banks advance against retention
money, which is payable within one year from date of shipment.
DIFFERENT EXPORT HOUSES
Merchant as well as Manufacturer Exporters, Service Providers, Export

Oriented Units (EOUs) and Units located in Special Economic Zones
(SEZs), Agri Export Zone (AEZ’s), Electronic Hardware Technology Parks
(EHTPs), Software Technology Parks (STPs) and Bio Technology Parks
(BTPs) shall be eligible for applying for status as Star Export Houses.
The applicant shall be categorized depending on his total FOB/FOR export
performance during the current plus the previous three years:
Category Performance (Rupees in Crores)

One Star Export House 15
Two Star Export House 100
Three Star Export House 500
Four Star Export House 1500
Five Star Export House 5000
DEEMED EXPORTS
"Deemed Exports" refers to those transactions in which the goods

supplied do not leave the country and the payment for such supplies is
received either in Indian rupees or in free foreign exchange.
28
The following categories of supply of goods by the main/ sub-contractors

shall be regarded as "Deemed Exports" under this Policy, provided the
goods are manufactured in India:
(a) Supply of goods against Advance License OR DFRC Scheme.
(b) Supply of goods to Export Oriented Units (EOUs) or Software

Technology Parks (STPs) or Electronic Hardware Technology Parks
(EHTPs) or Bio Technology Parks (BTP);
(c) Supply of capital goods to holders of licenses under the Export

Promotion Capital Goods (EPCG) scheme;
(d) Supply of goods to projects financed by multilateral or bilateral

agencies/funds as notified by the Department of Economic Affairs,
Ministry of Finance under International Competitive Bidding in
accordance with the procedures of those agencies/ funds, where the
legal agreements provide for tender evaluation without including the
customs duty;
(f) Supply of goods to any project or purpose in respect of which the

Ministry of Finance, by a notification, permits the import of such
goods at zero customs duty;
(i) Supply to projects funded by UN agencies; and
(j) Supply of goods to nuclear power projects through competitive

bidding as opposed to International Competitive Bidding.
CHPT - EXPORT PROCEDURE
Export procedure is the method or system or the manner in which various

formalities are required to be completed in the case of export trade
transaction. Export marketing activity start right from organizing one self by
way of establishing a firm. Its registration with concerned authorities,
choosing a product to sell in international market, identification of overseas
markets, export pricing quotation, receipt of order, shipment of goods and to
realize export proceeds including incentives.
The entire export procedure stated above briefly is divided into four stages
as given below:
EXPORT PROCEDURE
29
STAGE – I
A. PRELIMINARY
PRELIMINARY
STAGE
STAGE – III STAGE – II STAGE – IV

SHIPMENT PRE - SHIPMENT
STAGE STAGE POST –
SHIPMENT STAGE
STAGE:
I. Set – up of organization: The exporter should have an organization to
look after exports. Exporters may set up a complete new organization or add
an export section to an existing one.
ii. Registration with various authorities:
 In case of proprietary firm or partnership firm – register with registrar
of firms of the State territory wherein the same is located.
 Importers – Exporter’s Code (IEC) Number: Any firm exporting or
importing goods from / into India will require importer’s exporter’s
Code Number. This IEC number is to be filled in the Bill of Entry (in
case of import or Shipping Bill (in case of export). There being no date
of expiry, the IEC once allotted is valid till it is revoked.
 Registration with Export Promotion Councils and other authorities helps
in obtaining facilities provided by these organizations. The basic
objective of EPC is to promote and develop the exports of the country.
Each council is responsible for the promotion of a particular group of
products, projects and services. They are non profit organizations
registered under Indian Companies Act and supported by financial
assistance from the government of India. The EPC keeps up to date
details of the trends and opportunities in international markets for
goods and services and assist their members in taking advice of
opportunities in order to expand and diversify exports.
 Obtaining Registration cum Membership Certificate (RCMC) From EPC.
The RCMC is available only after availing IEC number. RCMC number
enables any exporter to avail benefits and concessions wherever
applicable under EXIM policy.
 Other registrations such as registration to Sales Tax authorities, etc.
iii. Approaching Foreign Buyers: The exporters then approaches foreign

buyers with a quotation.
B. Pre-Shipment Stage: This stage comprises of following sub-stages:

i. Confirmation of order
ii. Obtaining letter of credit (If required)
iii. Obtaining Pre-shipment finance
iv. Production and procurement of goods
30
v. Packing and marking: The goods must be packed and marked

Properly depending upon type of product, transit coverage etc. if required,
and necessary assistance can be obtained from IIP. The exporter should
prepare a packing list. The goods must be appropriately marked with country
of origin, net and gross weight, port of destination and shipment and other
details if any.
vi. Pre-Shipment Inspection: The methods and standards of pre-shipment
inspection vary from product to product as laid down under different
regulation and implemented by various organizations. Exporters should
therefore contact, concerned inspection agency to avoid delay or problem at
the time of shipment.
Exemption:
 Export Houses, Trading Houses, Star Trading Houses and Super Star
Trading Houses recognized by the Central Govt. are exempted from
preview of compulsory pre-shipment inspection of all products for
being exported by them.
 Approved EOUs and EPZ units are exempt from the purview of
compulsory pre-shipment inspection system.
 Units approved by the Export Inspection Agencies (EIA) under the in
process quality control system have been authorized to issue statutory
certificates by themselves instead of EIAs. How ever, this exemption is
not applicable to the exports of fish and fishery products and engg.
Goods. For e.g. manufacturing of sewing machines and electric fans as
are exercising adequate in-process quality controls are allowed to
export their products.
 Goods marked with ISI/AGMARK are not required to be inspected by

any agency.
Procedure for Pre-shipment Inspection

As stated above, the units, which are exercising adequate in-process quality
control (IPQC) and approved as Export Worthy Units have to only submit
their application known as “Intimation” for inspection in the prescribed form.
The necessary pre-shipment inspection certificate is issued by the concerned
agency.
1. For units in which Consignment wise inspection takes place or the units
which are not approved under IPQC should apply in the prescribed form in
duplicate submitting the original to EIA and duplicate to EIC (Export
Inspection Councils) [The EIC has set up 5 EIAs they are at Mumbai, Cochin,
Delhi, Calcutta and Chennai and the EIA has a network of nearly 60 offices
thru out India.] seven days in advance, of the expected date of shipment
with following documents:
 Crossed cheque / demand draft etc containing necessary amount of

inspection fee in favor of EIA.
 Commercial Invoice (5 Copies)
 Declaration Regarding importer’s technical specifications, if any.
31
2. Issue of Certificate: If the consignment is found in order, certificate

of inspection is issued in triplicate. While the original (White) copy is
to be submitted to the customs, the duplicate copy is for the
overseas buyers and the triplicate for the exporter.
3. Appeal against rejection: If the consignment is not approved for

export, the concerned EIA will issue a Rejection note. The exporter if
not satisfied with the decision of the inspection agency, can file an
appeal within 10 days of the receipt of the rejection note. On receipt
of such appeal, the EIA will convene a meeting of the panel. The
panel will review inspection report, here the exporter, if necessary,
and examine the consignment concerned, if called for, their
decision is final and binding on both the parties i.e. EIA and the
exporter.
Vii. Central Excise Clearance: Procedure as follows:
a. Filling up ARE-1 forms: The exporter has to fill up ARE-1 form for
removal of excisable goods in five copies:
Original Copy – White
Duplicate Copy – Buff
Triplicate Copy – Pink
4th Copy - Green
5 Copy -
th
Blue
6th Copy Yellow (Exporter’s office record copy)
The five copies of ARE-1 form is prepared in 5 colors for easy verification and
processing. A sixth copy is prepared for exporter’s reference.
The above application is submitted to the Superintendent of Central Excise.
On the receipt of the application, an inspector is appointed under whose
supervision; goods are removed from warehouse and loaded on the vehicle.
b. Processing of Forms:
 All 5 copies of ARE-1 Forms are presented to the inspector.
 The 5th copy is retained by Excise Authority. (BLUE).
 4th copy is sent by Excise Authority to Chief Account Officer of
Central Excise. (GREEN)
 The 3rd copy is sent to Maritime Collector of Central Excise at
the port of shipment.
 The original and duplicate copies are handed back to exporter.
 The exporter hands the original and duplicate copy to customs.
 The Custom Preventive Officer sends the original to the Maritime
Collector.
 The duplicate is handed back to exporter or his agent.
With this the Consignment is ready to leave the factory Premises.
32
SHIPMENT STAGE:
• The Commercial Invoice, Packing List and ARE-1 are submitted

to the customs.
• The customs grants permission by endorsing the documents
and caters with a Shipping Bill and Carting Order (The exporter’s
agent has to obtain permission to bring the goods inside the docks and
store them in proper sheds. It is issued by the Superintendent of Port
Trust. )
• Now, the container can be cleared at the Port Gate upon submission of
the Carting Order and the Shipping Bill along with the endorsed
Commercial Invoice, Packing List and ARE-1.
• The goods are examined by the Custom Officer, who, then issues “LET
EXPORT ORDER”
• On the basis of LET EXPORT ORDER, the Custom Preventive Officer
issues LET SHIP ORDER, which enables to load the container on the
ship (vessel).
• Once the container is loaded on the vessel and vessel sails,
Mate Receipt is issued by the Mate of the Ship to the exporter
confirming the date of sailing which is exchanged with the Bill
of Lading issued by the Shipping Company.
LAST STAGE: POST-SHIPMENT
i. DESPATCH OF DOCUMENTS BY C&F AGENT TO EXPORTER:

 Commercial Invoice (attested)
 Shipping Bill (Export Promotion Copy)
 Original L/C or Contract order
 B/L
 GR form (duplicate copy – duly attested)
 Form AR-4 (duplicate copy)
 Railway freight rebate form (attested by custom)
ii. Shipment Advice to Importer: at this stage exporter intimates importer
about the expected date of shipping.
iii. Presentation of Documents to Bank: exporter submits all required
documents to the bank for further processing and these documents are
processed by exporter’s bank to the bank of importer. Importer’s bank
intimates the importer about the receipt of the documents. General
documents here processed are Commercial Invoice, Custom Invoice (If
required), Packing List, Certificate of Origin, bill of exchange, Copy of B/L,
Marine Insurance Policy and other documents if required specifically.
iv. Realization of exports incentives by Exporter’s bank: (Hand Written)
v. Follow-up of exports sales:
CHPT - EXPORT DOCUMENTS
33
Export documents have to be prepared for various purposes viz.
1. Declaration of exports as per exchange control regulations of the

country.
2. Transportation of the goods.
3. Custom clearance of the goods.
4. Inspection of goods
5. To submit the documents to the importer.
Depending upon the usage, documents have been classified as under
o Financial Documents
o Commercial Documents
o Transport Documents
o Risk Covering Documents
o Official / Regulatory Documents
1. Financial Documents: Documents which perform the function of

obtaining finance collection of payment etc.
a. Bill of Exchange:
The bill of exchange is an order in writing, requesting the drawee to pay a

specified sum of money at a specified date. 3 parties are involved in this
transaction.
 The drawer, i.e. the person who draws the bill. (Exporter)
 The drawee, i.e. the person on whom the bill is drawn. (Importer)
 The payee i.e. the person to whom payment is made.
(Exporter/Supplier)
Prepared By: Exporter
Signed By: Exporter
No. of Copies: 3 Original
(1st and 2nd copy goes to bank, 3rd copy stays with
exporter)
In short, a bill of exchange is:
a. Means for collecting payment arising out of a transaction.
b. Means for demanding payment.
c. Means for extending credit (Under D/A Method of payment).
d. It is a promise of payment.
e. It is a receipt for payment.
2. Commercial Documents: The documents which are needed by the

exporter and the importer for their normal commercial transactions are
termed as commercial documents.
a. PROFORMA INVOICE
34
A Proforma Invoice is a quotation given to an importer by an exporter. A

Proforma Invoice is a reply to an enquiry made by an importer. It gives clear
idea to the importer in respect of terms and conditions of sale and the price
of goods. IT HELPS THE IMPORTER TO OBTAIN AN L/C.
b. COMMERCIAL INVOICE
 A basic export document, which contains all information, required for
the preparation of all other documents. It is exporter’s bill for goods.
There is no standard form for such invoice, but it can be designed as
per requirements.
 A Commercial Invoice is an evidence to verify the value and nature of
goods & in certain circumstances; it is an evidence of contract between
2 parties.

Signed By: Front side signed by the exporter
No. of copies: 3 Copies.
IMPORTANCE OF COMMERCIAL INVOICE TO IMPORTER:
 It helps him to pay Custom Duty.

 It helps to know the exact amount payable to exporter.
 It helps importer to obtain preferential tariff rates.
c. Packing list: It is a list showing details of goods contained in each

carton / shipment. It shows item-by-item the contents of the containers.
A PACKING LIST is
 A document showing the nature and number of goods, etc. put in each
packet / container etc.
 Needed by an importer, when he is importing different sizes of goods
(assorted items) so that he may identify the nature of goods in each
package.
 It is also required by customs to randomly check the goods.
 Thus packing list facilitates easy identification of goods in each
package / container by importer or Customs etc.

Signed By: Inspector of Central Excise
No. of copies: Minimum 4 Copies.
d. Inspection Certificate: This certificate certifies having inspected the

goods prior to shipment. This certificate is desired by importer for assuring
himself for the right type of goods. In India, Export Inspection Council (EIC)
was set up by the Government of India in order to ensure sound
development of export trade of India through Quality Control and Inspection
and for matters connected thereof.
35
EIC plays an important role in raising quality standards of export

commodities and also in creating goodwill for Indian goods abroad.
3. Transport Documents:
a. Bill of Lading (B/L):

On loading the cargo on board the exporter get mate’s receipt (MR), which is
temporary receipt for the cargo loaded. Mate’s receipt is to be exchanged for
BL soon. BL is issued by the shipping company of the exporter.
 It is a proof that the goods have been loaded on the ship. It contains
that information of the exporter & the importer & gives the details of
the vessel the goods have sailed on. It is also required by the importer
to clear the goods at the port of destination.
Prepared By: Shipping Company.
Signed By: Shipping Company
No. of Copies: 3 Original Negotiable Copies &
5 Non Negotiable Copies.
Functions of BL:
(i) It is negotiable document through bank: when the exporter

submits all the documents and original BL to the bank duly endorsed in
favor of bank, the properties and rights thereon are transferred to
endorsee. Hence the bank becomes possessory custodian of cargo
against the security of which bank releases money to the exporter. Letter
of credit also mentions that exporter has to submit BL and other
documents before bank releases money to exporter. This explains how BL
is negotiable through bank.
ii) It is document of title: when the holder of BL endorses BL to another

party, the property and rights thereon are transferred to endorsee, hence
the endorsee has the title to claim the goods.
Types of BL
1) Stamped and Unstamped BL

In case of stamped BL, a court fee of stamp is affixed of certain value.
This fetches revenue to the government. All original BLs must be
stamped. Unstamped BL is only a copy of original BL.
2) Clean BL
On a BL, when no remarks are present of cargo not being in good order
or condition, such BL is known as clean BL. In case of LC transaction
always a clean BL is preferred.
3) Claused BL
Adverse remarks appear on BL stating the problem in the cargo. E.g. 2
cases broken. A stamp of clause BL is put on the BL.
36
4) Stale BL
An exporter has to submit original BL to the bank along with other
documents within 21 days from the date of shipment. If after 21 days
the exporter submits the BL, it becomes stale BL.
5) Short BL
In a normal BL there are two sides. On front side all particulars are
present which are essential for transaction and on back side all clauses
and conventions are printed in small letters. They provide legal
framework to the shipper. In short BL, only front side of BL is issued
mentioning it is subject to all terms and condition of regular BL.
Sometimes it may be stated in L/C that short BL will not be accepted in
which case exporter will insist on regular BL which will be issued.
6) Freight Paid B/L: if exports are effected on CIF basis i.e. freight is
paid by exporter, a freight paid B/L is issued
7) Freight Collect B/L: if goods are exported on FOB basis, Freight

Collect B/L is given.
8) Straight B/L: Straight B/L is made out usually when payment for
goods is made through confirmed, irrevocable and without recourse
letter of credit.
SEA WAY BILL
In the recent times, at the request of Shipper Sea way bill is issued instead of
bill of lading. It is not negotiable to bank as it is not endorsable. It is
consigned to one party only who can take delivery of goods after proper
identification. Sea way bill is generally preferred by MNCs for shipping cargo
to their branches abroad where payment through bank is not involved.
b. AIRWAY BILL: Airway bill is an acknowledgement issued by an Airline

Company or their authorized agents stating that they have received the
goods detailed therein for dispatch by Air to the named consignee at the
address stated therein. Unlike a B/L, AWB is not a document of title to goods
because it is merely an acknowledgement of goods. When it is not a title to
goods naturally it is not a negotiable document.
The Airway bill is prepared in 3 Originals. The first Original (Green) is
retained by the airline for accounting purpose. The second (Pink) copy
accompanies the consignment to final destination (Exporter’s copy) and
Original (Blue) 3rd copy is given to the importer for his reference purpose.
c. Multimodel Transport Document: Multimodel B/L

4. Risk Covering Documents:
37
a. Marine Insurance Policy: A marine insurance policy is a contract

that covers perils on high sea.
MARINE INSURANCE POLICY PROCEDURE

Marine Insurance is governed by Marine Insurance Act, 1963. It covers:
a. Transportation by Sea, Air and land.
b. Inland water voyages.
c. Rail/road transport.
d. Registered post.
Goods quoted under C.I.F
What risks are covered?
a. Fire or explosion
b. Sinking or grounding of vessels.
c. Derailment of land transport.
d. Collision (accident) of the vessel.
e. Discharge of cargo at a port of distress.
f. Jettison (discard/throw away).
g. Theft, pilferage and non-delivery.
h. Total loss of any package lost overboard or dropped whilst
loading on to or unloading from the vessel or craft.
i. Loss/damage to goods caused by entry of sea, lake or river water
into the vessel, craft etc.
j. Any other reason acceptable to the insurance company.
Following is the procedure:
1. Selecting the Insurance Company: a no of cos. operating the

marine insurance business. Exporter is bound to insure with GIC or its 4
subsidiaries. Prior permission is required from RBI if the exporter intends to
insure with insurance companies in foreign country.
2. Proposal Form: fill up
3. Verification of the same:
4. Payment of premium:
5. Insurance policy is issued after payment:
5. Regulatory documents:
a. G.R Form: If the export takes place in PHYSICAL FORM thru a Non-
computerized port, then GR Form is to be filled by the exporter. This form (In
duplicate) is to be used when exports are made to all countries otherwise
than by post.
 Original copy is sent to the RBI by customs and second copy is handed
over to exporter. The exporter hands over 2nd copy to his bank. After
realization of remittance, bank sends 2nd copy of GR to the RBI for
verification purpose.
a.1. SDF Form: If exports takes place in PHYSICAL FORM thru a fully
computerized port then SDF form is filled.
38
•This form denotes that exporter undertakes to bring back full export
proceeds within the prescribed time limit.
b. P.P Form: This form (in duplicate) is to be used when exports are
made to any country by parcel post.
c. SOFTEX FORM: This form is to be used when computer software is
being exported in NON-PHYSICAL FORM.
GR WAIVER:
The exporter need not declare under following circumstances:
• Sending Trade Samples.
• Consignment moved out for trade fair. The trader has to bring back the
consignment. A limit is allowed, e.g. upto US$ 5,000/- as donation,
charity.
d. CERTIFICATE OF ORIGIN
A Certificate of Origin is a document, required by foreign governments,

declaring that goods in a particular international shipment are of a certain
origin. Even though the commercial invoice usually includes a statement of
origin, some countries require that a separate certificate be completed.
Customs offices will use this document to determine whether or not a
preferential duty rate applies on the products being imported and whether a
shipment may be legally imported during a specific quota period.
A Certificate of Origin is a signed statement as to the country of origin of the

exported products for a particular shipment. The country of origin is NOT the
country from where the product is shipped. The certificate of origin must be
signed by the exporter and be certified by a local chamber of commerce. The
chamber must have access to the commercial invoice in order to verify that
the exporter claims the goods originated in a particular country than his
country. In India, certificate of origin is issued by the Chambers of Commerce
and Export Promotion Councils.
MATE RECEIPT
Mate Receipt is issued by the assistant to the captain of the ship. It is issued
after the goods are shipped. The Mate Receipt being Prima Facie document
is the proof that goods are loaded in the vessel.
Prepared & Signed By: Captain of the Ship
No. of copies: 1 copy
HAZARDOUS CERTIFICATE:
A declaration, certifying that the nature of goods is hazardous and yet sea /
air worthy. It also indemnifies the carrier from any losses or damage caused
due to the hazardous nature of the cargo.
Prepared & Signed by: Exporter

No. of Copies: 1 copy
39
IMPORT DOCUMENT
BILL OF ENTRY
This document is to be used in case of import of goods. In case of Import of
goods, duties are paid on the basis of furnishing a challan form. This challan
is known as Bill of Entry. The bill contains the information regarding the
name of the seaport, importer’s name and address, details of goods being
importer (in brief).
Bill of Entry: A Bill of Entry (BoE) talks everything about a consignment to

be imported. The purpose of BoE is to access the value of cargo and assess
the duty value.
Types of BoE:
1. BoE for Home Consumption: (White Color)
This BoE is filed when goods imported are to be consumed within India.
2. Warehousing / Into - Bond BoE: (Yellow)

When the imported goods are not required immediately, the importer may
like to store the goods in a warehouse without paying the duty under a bond
and clear the consignment when required, by paying the stipulated amount
of duty.
3. Ex-Bond BoE: (Green Color)
For releasing the above goods from warehouse, the importer has to file this
BoE, he pays the duty and releases the goods. This BoE can be filed only if
an importer has filed the above (yellow color) BoE.
Documents required under BoE:
 Commercial Invoice (attested by custom)

 B/L or AWB
 L/C (if required)
 Insurance Policy, COO, Pkg List.
Number of Copies:
Under EDI system: 3 copies are required

Under Manual system: 5 Copies are required
Distribution of Copies
EDI MANUAL
40
1st Copy Customs  RBI Customs  RBI

2nd Copy Importer Customs  RBI
3rd Copy Bank for the payment Importer
purpose
4th Copy ---- Bank for payment purpose
5th Copy ---- Port Authorities
The Original (or original and duplicate both) is forwarded by Customs to RBI
Import Procedure
The various steps that are involved in import procedure are as

follows
1. Obtaining of IEC:
This is the very first requirement of an import transaction. In this stage the
importer obtains an IEC i.e. Importer Exporter Code Number. It serves as a
license for carrying out import export trade. Without the IEC number no
person can carry out any import export transaction.
2. Trade Enquiries:
After getting the IEC number, the next procedure is to generate the enquires
related to the products in which the importer is interested to deal. For this
trade journals and various other sources are available.
3. Sampling\
Here, the importer may be interested in testing the product in his market.
The proposed exporter is required to send some samples of his products so
that the importer can test the product in his market and find out whether the
product will do well in his market, or any form of modification is required
before the final order is to be placed.
4. Communication and Negotiation
The next stage is to have the communication and negotiation before placing
the final order. Here, the negotiation takes place as to who will take the
responsibilities for getting the product marine insured and book the ship for
exporting the product. Also negotiation takes place for deciding the final
price for the consignment. Even the after sales services to be received can
be negotiated in this stage.
5. Placing of the order
After both the parties are satisfied with the product quality and terms and
conditions the actual order is placed.
6. Arranging for the payment.
41
Once the actual order is placed the importer now has to arrange for the
necessary finance to pay the exporter. There are few options that the
importer has which are D/A, D/P or Letter of Credit method.
7. Applying to the bank for release of documents and fulfilling the

requirements for release of documents.
8. Presenting the documents at the port of arrival.

After receiving the documents from the bank, the importer present to the
shipping authorities to release the consignment and get the possession of
the goods.
9. Preparation of bill of entry and payment of custom duty if required.
10. Releasing the consignment from custom authorities and making an

arrangement for shifting the consignment to the importer’s warehouse.
11. Payment for delay (if required).
12. Payment to the clearing agent.
EXPORT FINANCING INSTITUTIONS
In India, export finance is undertaken by COMMERCIAL BANKS as well as by

FINANCIAL INSTITUTIONS.
Following are the institutions, which are directly or indirectly concerned with
export financing:
 COMMERCIAL BANKS (SHORT TERM LOAN)

 EXIM BANK (MEDIUM & LONG TERM LOAN)
 SIDBI (LONG TERM LOANS TO EXPORTERS)
 RBI
 EXPORT CREDIT GUARANTEE CORPORATION (ECGC)
ROLE OF COMMERCIAL BANKS IN EXPORT FINANCE
 IT PROVIDES MAJOR PART OF FINANCE TO EXPORTERS

 ALSO PROVIDES OTHER FACILITIES AND SERVICES TO EXPORTERS.
42
A s s i s t a n c e o f f e r e d
C o m m e r c i a l B a n k
F u n d B aN s o e n d - F u n d B a
A s s i s t a n Ac e s s i s t a n c e
 At Pre-Shipment Stage
 At Post-Shipment Stage
 Bank Guarantee
 Advisory & other services
43
EXIM PROC & DOC
At Pre-Shipment Stage:
 Short-term basis Finance – duration 180 days.
It is available in following forms:
I Cash Packing Credit Loan
Ii Advance against Hypothecation/Pledge
Iii Other forms. (Details covered in earlier topic)
b. At Post Shipment Stage:

 Duration – 90 days
It is available in following forms:
I Negotiation of Bills drawn under LC.
ii. Purchase/Discount of Bills.
iii. Advance against bills under collection
iv. Other forms.
NON-FUND ASSISTANCE:
(i) Bank Guarantees: Commercial Banks are authorized by RBI to issue

guarantees and furnish bid bonds in favor of overseas buyers. Prior
Permission from RBI is not required except in case of exports of capital goods
under differed payments, construction contracts, consultancy and technical
services contracts and turnkey projects. Following are the guarantees:
 PERFORMANCE GUARANTEE: Incase of exports of capital goods and
turnkey and construction projects.
 GUARANTEE FOR FOREIGN CURRENCY LOANS sanctioned by financial
institution abroad to Indian exporters who raise funds to finance their
projects abroad.
 Bank issues GUARANTEE FOR PAYMENT OF RETENTION MONEY by
overseas party who would release the retention money to Indian party
only after receiving guarantee from bank.
Other services:
 Collects export proceeds from the importer and credit the same to
exporter’s account.
 Helps exporter to collect useful information on the creditworthiness of
buyers thru their foreign agents.
 Bank issues draft in case of payment of freight charges and other
charges.
 The bank sends duplicate copy of GR form to the RBI after realization
of export proceeds.
 It provides information on the exchange rates of various countries.
 It issues bank certificates in respect of export sales value, which are
useful for claiming incentives.
EXIM BANK OF INDIA
44
EXIM PROC & DOC
EXIM BANK was set up by an Act of Parliament in September 1981 and it

started its operations in March 1982. Export-Import Bank of India was set up
for the purpose of financing, facilitating and promoting foreign trade in India.
EXIM is the principal financial institution in the country for coordinating
working of institutions engaged in financing exports and imports.
PURPOSES:
The EXIM bank was established for the purpose of financing medium and
long-term loans to the exporters thereby promoting foreign trade of India.
The main objectives of EXIM Bank are:
 To provide financial assistance (medium term and long term) to

exporters and importers.
 To function as the principal financial institution for coordinating the
working of institutions engaged in providing export finance.
 To promote foreign trade of India.
 To deal with all matters that may be considered to be incidental to the
attainment of above objectives.
Functions of EXIM Bank:
A S S IS T A N C E O F F E R E D
B Y E X IM B A N K
F U N D B A S E D N O N - F U N D B A S E D
A s s is t a n c e t o : F in a n c ia l G u a r a n t e e s
In d ia n E x p o r t e r s & B o n d s
O v e r s e a s B u y e r s A d v is o r y
& A g e n c ie s & O t h e r S e r v ic e s .
In d ia n C o m m e r c ia l
B a n k s
FUND BASED ASSISTANCE:
A. Assistance to Indian Exporters:
I. Direct financial assistance to exporters on deferred payment terms.

II. EXIM also provides finance to 100% EOUs and units set up in FTZ
(Free Trade Zones).
45
EXIM PROC & DOC
III. Financing export and import of machinery and equipment on lease

basis.
IV. Financing Indian joint ventures in foreign countries.
V. Pre-shipment finance to eligible exporters for procuring raw
materials and other inputs required to produce machinery and
equipment to be exported.
VI. Finance to Indian exporters to undertake various export marketing
activities in India and foreign thru Export Marketing Fund.
VII. Provide Export Development Fund (EDF) to finance techno economic
survey / research or any other study for the development of Indian
Exports.
B. Assistance to Overseas parties:
i. It offers “Overseas Buyer’s Credit” facility to foreign importers for

import of Indian capital goods and related services with repayment spread
over a period of years. (EXIM  FOREIGN IMPORTER)
II It offers long term credit under “Lines of Credit” to finance government

and financial institute abroad, which in turn, extend finance to importers of
their country to buy Indian capital goods. (EXIM  GOVT. ABROAD  BUYER
OF THAT COUNTRY)
LINES OF CREDIT
EXIM Bank extends lines of credit to overseas governments/agencies

nominated by them or financial institutions overseas to enable buyers in
those countries to import capital/engineering goods, industrial manufactures
and related services from India on deferred payment terms. This facility
enables importers in those countries to import from India on deferred credit
terms as per the terms and conditions already negotiated between EXIM
Bank and the overseas agency. The Indian exporters can obtain payment of
eligible value from EXIM Bank against negotiation of shipping documents,
without recourse to them.
Features
The lines of credit are denominated in convertible foreign currencies or

Indian Rupees and extended to sovereign governments/agencies nominated
by them or financial institutions. Such governments/agencies/institutions are
the borrowers and EXIM Bank the lender.
How it works
The buyer arranges to obtain allocation of funds under the credit line from
the borrower. The exporter then enters into contract with the buyer, for the
eligible items covered under the line of credit. The contracts would need to
conform to the basic terms and conditions of the respective credit lines.
46
EXIM PROC & DOC
All contracts should provide for pre-shipment inspection by the buyer or

agent nominated by buyer.
• The buyer arranges to comply with procedural formalities as applicable

in his country and then submits the contract to the borrower for
approval. The borrower in turn forwards copies of the contract to EXIM
Bank for approval.
• EXIM Bank advises approval of the contract to the borrower, with copy
to exporter, indicating approval number, eligible contract value, last
date for disbursement, and other conditions subject to which approval
is granted.
• The Buyer, on advice from the borrower, establishes an irrevocable
Letter Of Credit (L/C). An L/C is to be opened, covering the full eligible
value of the contract including, freight and/or insurance as laid down in
the contract.
• The letter of credit is advised through a bank in India designated by
EXIM Bank.
• Exporter ships the goods covered under the contract and presents
documents for negotiation to the designated bank. The Bank forwards
negotiated documents to the buyer.
• On receipt of set of shipment documents along with the relative
invoices, inspection certificate and a certificate that documents
negotiated are as per terms of L/C and after having satisfied itself, that
all formalities have been complied with in conformity with the terms of
the Credit Agreement, EXIM Bank reimburses the eligible value of
shipment in equivalent rupees to the negotiating bank for payment to
the exporter.
• EXIM Bank debits the borrower's account and arranges to collect
interest and principal receivable on due dates as per the terms of the
line of credit agreement between EXIM Bank and the borrower.
47
EXIM PROC & DOC
III It also provides re-lending facility to overseas banks to make available

term finance to their clients for import of Indian goods.
(EXIM  OVERSEAS BANKS  IMPORTER OF THAT COUNTRY)
C. Assistance to Indian Commercial Banks:
I. Refinance facilities to commercial banks so that they can offer credit to

Indian exporters who extend term credit to importers. (EXIM
COMMERCIAL BANKS  EXPORTER)
II Export Bills rediscounting facility to commercial banks in India so
that it helps commercial banks to fund post-shipment credit extended to
Indian exporters.
B. NON-FUND BASED ASSISTANCE:
(I) Guarantee and Bonds: SIMILAR TO BANK GUARANTEES OF

COMM-BANK.
(II) Advisory and other services:

a. Advises Indian companies, in executing contracts abroad and
sources of overseas finances.
48
EXIM PROC & DOC
b. Advises Indian exporters on global exchange control

practices.
c. Financial and advisory services to Indian construction projects
abroad.
Advises small-scale manufacturers on export markets and product areas.
EXPORT INCENTIVES AND ASSISTANCE
NEED FOR EXPORT PROMO MEASURES
Export assistance and incentives is a financial help given by the

government to Indian exporters to improve their ability to compete in
foreign markets. Indian exporters can survive provided they can produce
good quality goods at reasonable cost. In the domestic market practically
everything is highly taxed. The exporters need various concessions and
rebates to make the price competitive. The main reasons for such export
promotion measures are as follows:
(a) The exporters from India face Price and quality disadvantage due to
high cost of production and the type of technology used to produce
export goods.
(b) Indian exporters have considerably less expertise in marketing of
products, since many of them are new in the export field. In order to
facilitate marketing of goods, GOI assists the exporters thru number of
export orgn. Such as EPCs, etc.
(c) Manufacturers are reluctant to export due to the presence of lucrative
domestic market, so in order to induce them the GOI provides a
number of incentives.
(d) Fulfill the requirement of finance.
(e) Exporters need training for the development of their skills in export
fields. It is provided thru IIFT and the institutions alike.
(f) A number of countries have launched attractive export promotion
schemes to their exporters, and therefore, to face competition, GOI has
also introduced such measures.
(g) India is facing balance of payment crisis, so to correct it, export
promotion measures have been undertaken.
(h)Through export promotion, a country can enhance its name and
goodwill in the international market.
(i) A lot of encouragement is needed for small-scale entrepreneur
exporters, and such encouragement is provided through export
incentives and facilities.
The advantages of export promotion measures can be summarized.

• Growth and diversification of export trade.
• Increased earnings of foreign exchange.
• Reduction in trade deficit.
• Improvement in balance of payment.
• Production of quality goods.
49
EXIM PROC & DOC
• Further utilization of available resources.

• Provision of employment opportunities.
• Facilitates debt - servicing.
• Enhances name and goodwill in the international market.
• Expansion of infrastructure within the country.
• It results in socioeconomic development of the country.
Various Export Promotion Assistance & Incentives
1. Market Access Initiative (MAI)
The Market Access Initiative (MAI) scheme is intended to provide financial

assistance for medium term export promotion efforts with a sharp focus on a
country and product.
The financial assistance is available for Export Promotion Councils, Industry

and Trade associations , Agencies of State Governments , Indian Commercial
Missions abroad and other eligible entities as may be notified from time to
time,.
A whole range of activities can be funded under the MAI scheme. These
include market studies, setting up of showroom/ warehouse, sales promotion
campaigns, international departmental stores, publicity campaigns,
participation in international trade fairs, brand promotion, registration
charges for pharmaceuticals and testing charges for engineering products
etc. Each of these export promotion activities can receive financial
assistance from the Government ranging from 25% to 100% of the total cost
depending upon the activity and the implementing agency.
2. Marketing Development Assistance:
The Marketing Development Assistance (MDA) Scheme is intended to provide

financial assistance for a range of export promotion activities implemented
by export promotion councils, industry and trade associations on a regular
basis every year.
As per the revised MDA guidelines with effect from 1st April,2004 assistance
under MDA is available for exporters with annual export turnover upto Rs 5
crores.
These include participation in Trade Fairs and Buyer Seller meets abroad or
in India, export promotion seminars, etc
Further, assistance for participation in Trade Fairs abroad and travel grant is
available to such exporters if they travel to countries in one of the four Focus
Areas, such as, Latin America, Africa, CIS Region, ASEAN countries, Australia
and New Zealand.
50
EXIM PROC & DOC
For participation in trade fairs, etc, in other areas financial assistance without
travel grant is available.
Financial assistance would be provided to deserving exporters on the
recommendation of Export Promotion Councils for meeting the cost of legal
expenses relating to trade related matters.
3. SALES TAX EXEMPTION
State Government has exempted exportable goods from payment of sales

tax. However, exemption is not granted unless the exporter or his firm is
registered with sales tax authorities.
4. OCTROI REFUND:
When the exporter brings manufactured goods inside the municipal limits
of the city, he is required to pay octroi duty to the Municipal Corporation.
He can claim the refund of the duty, when he shows the proof of exports
to the relevant Municipal Authorities.
5. Duty Drawback (DBK):
DBK means refund of custom duties paid on the import of raw materials,
components and packing material used in the export product. It also includes
refund of central excise duties paid on indigenous materials.
The govt. of India announces every year on 31st May, the rates of duty
drawback in respect of schedule of items. All such rates are called All
Industry Rates i.e. rates of drawback announced for a class of goods. These
rates are made effective for one year from 1st of June.
Brand Rate: In case duty drawback rate is not announced for a product, its
manufacturer / exporter can submit an application in the prescribed for
determination of specific rate of duty drawback for that particular product.
Such a rate is known as Brand Rate.
Special Brand Rate: When the rate of duty drawback is less than 80% of the
duties paid, then the exporter can apply for its upward revision in the
prescribed form. The modified rate of DBK is known Special Brand Rate.
Maximum entitlement of duty paid is 98%, how ever under following

dealings, drawback entitlement goes upto 100%.
Supply of fuel to a foreign going Indian /foreign vessel.
Supply of ship stores (spares and components) to Indian navy ships.
Drawback is available on the following items:
(i) Raw materials and components used in the process of
manufacture.
(ii) Materials used in the manufacture of raw materials and
components used in the manufacture of finished products.
51
EXIM PROC & DOC
(iii) Irrecoverable wastages, which arises in the process of

manufacturing.
(iv) Material used for packing the finished export products.
(v) Finished products.
DBK is not admissible if the
(i) Amount of drawback entitlement is less than Rs. 50/-.
(ii) Selling goods at less than cost price.
(iii) Goods have been taken into use after manufacture, except tea
chest used as packing materials for export of blended tea.
(iv) Goods are produced using imported materials or excisable
materials in respect of which duties have not been paid.
(v) Products manufactured by 100% E0Us, and units located in FTZs/
EPZS.
(vi) Amount of drawback is less than 2% of net FOB Value of exports.
(vii) Export to countries like Nepal & Bhutan where consideration is in
Indian currency.
Procedure to Claim DBK
Whom to Apply: The application needs to be made to the nearest Customs

House.
What Documents Required:
(a) Non-negotiable copy of Bill of Lading.
(b)A copy of duty drawback.
(c) A copy of commercial invoice.
(d)A copy of special brand rate letter, if required.
(e) Other required documents.
EXPORT PROMOTION ORGANIZATIONS
The Govt. of India, in order to assist the export trade of India, started a
number of Institutes in 1951. These institutes do not participate directly in
India’s export trade, but they provide number of assistance to the exporters
in terms of finding out suitable markets in foreign, inform them about
governmental policies and incentives offered, packaging requirement,
documentation, participation in international trade fairs and exhibitions,
advertising of Indian goods abroad and procedure in export trade
transaction. Some of these institutions also provide educational / training
facilities, market intelligence and benefits of marketing research to
exporters. Their contribution in export promotion is indirect in character.
Following are important Export Promotion Organizations:
1. Export Promotion Councils:
The basic objective of EPC is to promote and develop exports of country. At
present, there are around 20 EPCs functioning in country. Some of them are
as follows:
Apparel Export Promotion Council
52
EXIM PROC & DOC
Basic Chemicals Pharmaceuticals & Cosmetic Export Promotion Council
Chemicals & Allied Products Export Promotion Council

Cotton Textiles Export Promotion Council
Council for Leather Exports
Engineering Export Promotion Council
Gem & Jewellery Export Promotion Council
Indian Silk Export Promotion Council
Plastics & Linoleum Export Promotion Council
Synthetic & Rayon Textiles Export Promotion Council
Wool & Woolen Export Promotion Council
The EPCs are non-profit organizations registered under the Indian companies
Act or the societies act, as the case may be and supported by financial
assistance from GOI.
Functions:
 It provides commercially useful information and assistance to their
members in developing and increasing their exports.
 It offers professional advice to their members in areas such as
technology upgradation, quality and design improvement, standards
and specifications, product development and innovations.
 It organizes visits of delegations of its members abroad to explore
overseas market opportunities.
 It organizes participation in trade fairs, exhibitions and buyer-seller
meets in India and abroad.
 It promotes interaction between the exporting community and govt.,
both at central and state level.
 It builds a statistical base and provide data on the
 It issues Certificate of Origin
The assistance provided by EPC is not at all financial. It provides purely
advisory assistance to the members. All exporters of products, coming under
the purview of the council are entitled to become members of the council.
The members have to pay an annual subscription fee for the services
rendered to them by the council. All members are given registration-cum-
membership certificate from the respective EPC. RCMC enables any exporter
to avail benefits and concessions wherever applicable under EXIM policy.
2. COMMODITY BOARDS (CBs):
 Commodity Boards have been established by GOI for primary
commodities having high export potential.
 These boards are supplementary to EPCs and function on the same
lines.
 Commodity Boards promote India’s specific traditional commodities
including tea, coffee, rubber, and handloom items.
 The board takes interest in introduction of new methods of cultivation
of commodities, market research, publicity and assistance to
manufacturers and exporters
 The functions of CB are same as EPCs. Few commodity boards are as
follows:
53
EXIM PROC & DOC
 Rubber board, Tea Board, Spices Board, Coffee Board, Central Silk
Board
3. Indian Institute of Packaging (IIP):
 The Indian Institute of Packaging was incorporated as a society under

the Societies Registration Act 1860, on 14th May 1966. The Institute
has its head office and principal laboratories at Mumbai and regional
testing and development laboratories at Calcutta, New Delhi and
Chennai.
 IIP over the years has built up a very strong and capable expertise in
various fields of packaging Sciences and Technologies, and with the
excellent infrastructural facilities available is geared to cater to the
various needs of the package manufacturing and package user
industries both with regard to the domestic distribution and export
market requirements.
 IIP provides service facilities for domestic / export package
certification to comply with National and International codes
and regulations
 IIP also conducts SHELF LIFE EVALUATION i.e. assessment of

package for shelf life under Varying climatic condition In different
packaging media.
 Following products are covered

Food
Pharmaceuticals
Chemicals
Others
 IIP also conducts specific research and development programme for

package development for keeping food fresh.
4. INDIAN INSTITUTE OF FOREIGN TRADE:
The Indian Institute of Foreign Trade (IIFT) was set up in 1963 by the
Government of India as an autonomous organization to help professionalize
the country's foreign trade management and increase exports by developing
human resources; generating, analyzing and disseminating data, and
conducting research.
IIFT is an academic institute which studies various aspects of foreign trade

including research and market surveys. Thus, IIFT is essentially an academic,
research and training organization specialized in international marketing.
Functions:
1. Training of export management personnel in modern technique

of international trade:
54
EXIM PROC & DOC
IIFT provides training to various exporters In different and important areas of

export management such as EXIM policy, export procedure, export finance,
export promotion, international marketing, etc.
2. Conducting Research Process in foreign trade: The IIFT conducts

academic and research activities on various problems relating to export
marketing to enable govt to frame export policies and taking decisions. IIFT
IS NOW INTERNATIONALLY RECOGNIZED AS AN EXCELLENT
RESEARCH ORGANIZATION ON FOREIGN TRADE. IIFT also organizes
commodity survey, market survey and area survey within the country and
abroad.
3. Providing information arising out of its activities relating to

research and market studies
IIFT provides information gathered in its monthly and quarterly bulletins. This
publication work provides information and guidance to exporters as well as
export promotion organizations and commodity boards.
4. Consultancy services: IIFT gives advice to Indian exporters in

different aspects of foreign trade such as export pricing, export promotion,
export procedure, product development and publicity abroad. IIFT also
invites and sends trade delegations abroad to have communications
between Indian exporters and foreign buyers. Seminars and workshops are
organized for providing consultancy services to exporters.
5. IIFT also conducts training programmes for various officers in export

units. Its training courses are conduced at different centres.
5. EXPORT INSPECTION COUNCIL (EIC):
The Export Inspection Council (EIC) was set up by the Government of India
under Section 3 of the Export (Quality Control and Inspection) Act, 1963 in
order to ensure sound development of export trade of India through Quality
Control and Inspection and for matters connected thereof.
 EIC notifies commodities which will be subject to quality control and/ or

inspection prior to export.
 At present EIC conducts pre-shipment inspection for nearly 1100 items
such as chemicals, jute, footwear, food, coir and so on.
 It establishes standards of quality for such notified commodities, and
 It specifies the type of quality control and / or inspection to be applied
to such commodities.
Export Inspection Council, also exercises technical and administrative control

over the five Export Inspection Agencies. (EIAs), one each at Chennai, Delhi,
Kochi, Kolkata and Mumbai established by the Ministry of Commerce.
55
EXIM PROC & DOC
 Although, IPQC is the responsibility of concerned manufacturer, the EIC

ensures that adequate controls are exercised by periodic inspection
and testing of export consignments at random.
EIC plays an important role in raising quality standards of export

commodities and also in creating goodwill for Indian goods abroad.
Another important contribution of EIC in increasing India’s exports is thru

setting up Quality Development Centre (QDC) at Chennai. Also, QDC has
started Regional QDCs at Mumbai, Kolkatta, Cochin and Delhi. These centres
arrange workshops and training programmes for personnel connected in
industry with quality management.
6. SPECIAL ECONOMIC ZONES (SEZ)
Following products are dealt in SEZ

Gems & Jewellery
Electronic & Hardware
Software
Textile & Garments
Engineering Goods
Leather Products
Chemicals and allied products
Following are currently functioning SEZs in India:
 SEEPZ Special Economic Zone

 Kandla Special Economic Zone,
 Cochin Special Economic Zone,
 Madras Special Economic Zone
 Visakhapatnam Special Economic Zone
 Falta Special Economic Zone
 Noida Export Processing Zone
 Surat Special Economic Zone
 Manikanchan, Salt Lake SEZ (for gems and Jewellery)
 Indore Special Economic Zone (Multi-product)
 Jaipur Special Economic Zone (Gems and Jewellery)
 Mahindra City-SEZ, Chennai (Tamil Nadu)
 Salt Lake Electronic City-SEZ, Kolkata. (Software development
and IT enabled services)
A policy was introduced on 1.4.2000 for setting up of Special Economic

Zones in the country with a view to provide an internationally competitive
and hassle free environment for exports. Units may be set up in SEZ for
manufacture of goods and rendering of services. All the import/export
operations of the SEZ units will be on self-certification basis. The units in the
Zone have to be a net foreign exchange earner but they shall not be
56
EXIM PROC & DOC
subjected to any pre-determined value addition or minimum export

performance requirements. Sales in the Domestic Tariff Area by SEZ units
shall be subject to payment of full Custom Duty and import policy in force.
Further Offshore banking units may be set up in the SEZs.
The policy provides for setting up of SEZ's in the public, private, joint sector
or by State Governments.
It was also envisaged that some of the existing Export Processing Zones
would be converted into Special Economic Zones. Accordingly, the
Government has converted Export Processing Zones located at Kandla and
Surat (Gujarat), Cochin (Kerala), Santa Cruz (Mumbai-Maharashtra), Falta
(West Bengal), Madras (Tamil Nadu), Visakhapatnam (Andhra Pradesh) and
Noida (Uttar Pradesh) into a Special Economic Zones. In addition, 3 new
Special Economic Zones approved for establishment at Indore (Madhya
Pradesh), Manikanchan – Salt Lake (Kolkata) and Jaipur have just
commended operations.
In addition, approval has been given for setting up of 42 Special Economic

Zones in various parts of the country in the private/joint sectors or by the
State Government.
Definition:
“A duty free enclave, which is deemed to be foreign territory in geographic

Indian area, as far as trade, operations, duties and tariffs are concerned.”
Thus, Special Economic Zone (SEZ) is a specifically delineated duty free
enclave and shall be deemed to be foreign territory for the purposes of trade
operations and duties and tariffs.
 SEZ can import / export anything except negative list, without any
permission. SEZ units may export goods and services including agro-
products, partly processed goods, sub-assemblies and components
except prohibited items of exports in ITC (HS). The units may also
export by-products, rejects, and waste scrap arising out of the
production process.
 Inputs coming to SEZ area from domestic (DTA – Domestic Tariff Area)
is exports for DTA & goods coming from the SEZ TO DTA is considered
as imports for DTA
 Any inputs to SEZ from outside India is NOT IMPORTS for SEZ. (it is
duty free)
 Any output to other country by SEZ is exports done under SEZ.
 Any material supplied by DTA to construct / develop SEZ is considered
as exports (although payment is received in Rupees)
57
EXIM PROC & DOC
DTA Sales and Supplies
 SEZ unit may sell goods, including by-products, and services in DTA in
accordance with the import policy in force, on payment of applicable
duty.
 DTA sale by service/trading unit shall be subject to achievement of
positive NFE cumulatively.
 The following supplies effected in DTA by SEZ units will be counted for
the purpose of fulfillment of positive NFE:
o Supplies to other EOU/SEZ/ EHTP/ STP/BTP units provided that
such goods or services are permissible to be procured/rendered
by these units.
o Supplies against special entitlement of duty free import of goods.
o Supplies of goods and services to such organizations which are
entitled for duty free import of such items in terms of general
exemption notification issued by the Ministry of Finance.
 SEZ units may be set up for manufacture of goods and rendering of
services.
Entitlement for Supplies from the DTA

DTA supplier shall be entitled for:
 Drawback /DEPB/DFRC/Advance Licence

 Discharge of Export performance, if any, on the supplier.
SEZ units shall be entitled for
 Exemption from Central Sales Tax.
 Exemption from payment of Central Excise Duty on all goods eligible
for procurement by the unit.
 Reimbursement of Duty paid on fuels or any other goods procured
from DTA as per the rate of drawback notified by the Directorate
General of Foreign Trade from the date of such notification.
Export Through Status Holder
SEZ unit may also export goods manufactured/software developed by it

through a merchant exporter/ status holder recognized under this Policy or
any other EOU/SEZ/ EHTP/STP unit.
Sub- Contracting Rule
SEZ unit may subcontract a part of their production or production process

through units in the DTA or through other SEZ/EOU/ EHTP/ STP, with the
annual permission of Customs authorities. Subcontracting of part of
production process may also be permitted abroad with the approval of the
Development Commissioner. Scrap/waste/remnants generated through job
work may either be cleared from the job worker’s premises on payment of
applicable duty or returned to the unit. (See below for more details)
58
EXIM PROC & DOC
Sub-contracting by SEZ gems and jewellery units through other SEZ units or
EOUs or units in DTA shall be subject to following conditions
 Goods, finished or semi-finished, including studded jewellery, taken
outside the zone for subcontracting shall be brought back to the unit
within 90 days.
 No cut and polished diamonds, precious and semi-precious stones shall
be allowed to be taken outside the zone for sub-contracting.
 SEZ units other than gems and jewellery units may be allowed to
undertake job-work for export, on behalf of DTA exporter, provided the
finished goods are exported directly from SEZ units. For such exports,
the DTA units will be entitled for refund of duty paid on the inputs by
way of Brand Rate of duty drawback.
Exit from SEZ Scheme
SEZ unit may opt out of the scheme with the approval of the Development
Commissioner. Such exit from the scheme shall be subject to payment of
applicable Customs and Excise duties on the imported and indigenous capital
goods, raw materials etc. and finished goods in stock. In case the unit has
not achieved positive NFE, the exit shall be subject to penalty, that may be
imposed by the adjudicating authority under Foreign Trade (Development
and Regulation) Act, 1992.
Disposal of Rejects/Scrap/ Waste/ Remnants
Rejects/scrap/waste/remnants arising out of production process or in

connection therewith may be sold in the DTA on payment of applicable duty.
No duty shall be payable in case scrap/waste/ remnants/ rejects are
destroyed within the Zone after intimation to the Custom authorities or
destroyed outside the SEZ with the permission of Custom authorities.
Destruction as stated above shall not apply to gold, silver, platinum,
diamond, precious and semi precious stones.
OBLIGATION
1. NFEP (Net Foreign Exchange Export Performance):

=A-B=>0
Where A = inflow of foreign exchange (FOB Exports, NET FOB EARNED)
B = Outflow foreign exchange (CIF imports)
PLUS
Everything that goes out of country in US$ is considered as outflow – it also
includes following:
 Dividend to equity partner
 Interest on external commercial borrowings
 Commission to agents
 1/5th of capital goods value to be taken every year as depreciation.
59
EXIM PROC & DOC
 Misc. outflow.
Applications to SEZ
 SEZ unit shall be a positive Net Foreign exchange Earner. Net Foreign
Exchange Earning (NFE) shall be calculated cumulatively for a period of
five years from the commencement of production according to the
formula given above.
 SEZ is provided I. Tax holiday for ten years.
 SEZ can be established as govt / state govt and as a private venture. In
case of pvt. Venture, there are two parties involved: owner of SEZ and
owner of a unit in SEZ. The income of owner is also given 10 yrs tax
benefits. He does not have to fulfill obligation.
 A bank established in SEZ is given status of overseas branch.
 SEZ can sell to DTA and vice versa, when SEZ sells to DTA, for DTA it is
import. But it won’t add to NFEP of SEZ. For SEZ it is NOT an EXPORT,
which is sold to DTA, but if SEZ sells any goods in foreign country, the
sale is considered as exports.
 The DTA selling to SEZ will get all benefits of Advance License, DEPB
etc.
 There are no benefits given to SEZ in terms of duty refund etc, as there
is no duty payable by exports.
 None of the Indian act except Indian labor law is applicable to SEZ.
 SEZ has no limit in exhibiting samples in India / Outside for display /
sale. Sale in such case accounts as part A of NFEP.
 Additional benefit to SEZ:
SEZ can donate imported or locally procured computer peripherals such as

plotters, printers, scanners etc without payment of duty after using for 2
years to recognized non-commercial educational institute, such as registered
charitable hospital, public libraries & public funded R & D establishment and
such donation will get exemption in B part of NFEP (1/5th value).
Entitlements of SEEPZ SEZ
• SEEPZ SEZ units are eligible for a tax holiday as per the provision
of the Income-tax Act.
• Duty free import of capital goods and equipment from preferred
sources.
• Exemption from Customs duty on imported capital goods, raw
materials, components, consumables, spares, tooling and packaging
materials.
• Exemption from Central Excise duties and other levies on
products manufactured within the Zone.
• Excise exemption on capital goods, raw materials, computers
etc. procured from Domestic Tariff Area.
• Special dispensations and relaxations in local laws and levies
including Octroi, Sales Taxes and Property Tax.
60
EXIM PROC & DOC
• Capital Goods and all other inputs supplied to the Zone from the
rest of the country are treated as Deemed Exports and are eligible for
deemed export benefits such as Duty Drawbacks, Terminal Excise Duty
and CST Reimbursement. This enables easy availability of materials at
International Prices.
• The SEEPZ Service Centre within the Zone is the One-Stop Shop,
which caters to all the needs of the Zone units. The supportive
administrative system helps new firms to get down to production
within the shortest possible time, concentrate on their export activity
and run their operations smoothly.
• Units set up in SEEPZ SEZ will be charged rent for lease of
industrial plots and standard design factory buildings as per the rate
fixed from time to time.
• Foreign Equity upto 100% is permissible in the case of SEEPZ
SEZ units.
• Goods manufactured in SEEPZ SEZ are permitted to be sold on
payment of applicable duties.
7. EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE

TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs) AND
BIO-TECHNOLOGY PARKS (BTPs)
Between EOU and SEZ, the SEZ unit has to be located at the specified
locations where such zones are developed, while EOU unit can be set up at
any place declared as ‘warehousing station’ under Customs Act. There are
over 300 such places all over India. Thus, there is very wide choice of
location. Even within the factory of manufacturer, a separate unit for EOU
can be set up, thus saving considerably in administrative costs. Even use of
common utilities is possible. - - If export orders dry up, conversion of EOU to
DTA unit by exit (de-bonding) is comparatively very easy. On the other hand,
if a unit is SEZ, it has to be physically moved out of the zone after exit (de-
bonding).
1764 units are in operation under the EOU scheme as on March 2004.
EOU/EHTP/STP unit shall be a positive net foreign exchange earner. Net
Foreign Exchange Earnings (NFE) shall be calculated cumulatively for a
period of five years from the commencement of production according to the
formula given below.
Positive NFE = A – B > 0 (Rest of the details are same as EOU)
Under the EOU scheme, the units are allowed to import or procure locally
without payment of duty all types of goods including capital goods, raw
materials, components, packing materials, consumables, spares and various
other specified categories of equipments including material handling
equipments, required for export production or in connection therewith. Even
the goods appearing in the restricted list of the EXIM Policy (1997-02) are
61
EXIM PROC & DOC
permitted to be imported. However, the goods prohibited for import are not
permitted.
General Conditions of Duty free Import:
The facility of duty free import (extending exemption both from basic &
countervailing duty) is subject to certain general conditions in accordance
with the EXIM Policy and these are summed up as follows:
(i) The goods are required to be imported into the EOU premises directly.
However, Granite Quarrying units, agriculture and allied sector units are
allowed to supply /transfer the capital goods and the inputs in the
farms/fields with prior permission of Customs.
(ii) Prior to undertaking import / local procurement duty free, the unit is
required to get their premises customs bonded. The unit is also required to
execute a B-17 bond with surety/ security with jurisdictional Customs/
Central Excise officers and take out a licence under section 58 of the
Customs Act, 1962.
(iii) The goods, except capital goods and spares, are required to be utilized
within a period of one year or within such period as may be extended by the
Customs authorities.
(iv) The importer is required to maintain a proper account of the import,
consumption and utilization of all imported/locally procured materials and
exports made and submit them periodically to the Development
Commissioner/ Customs.
(v) The importer is required to achieve minimum NFEP/export performance
as per the provisions of EXIM Policy.
The entire production of EOU/EHTP/STP units shall be exported subject to the

following:
1. Rejects may be sold in the Domestic Tariff Area (DTA) on payment of
duties. Such sales shall be counted against DTA sale entitlement.
However, sale of rejects upto 5% of FOB value of exports shall not be
subject to achievement of NFE.
2. Units, other than gems and Jewellery units, may sell goods/ services
upto 50 % of FOB value of exports, subject to fulfillment of positive NFE
on payment of applicable duties.
3. No DTA sale shall be permissible in respect of motor cars, tea (except
instant tea) and books
4. Gems and Jewellery units may sell upto 10% of FOB value of exports of
the preceding year in DTA subject to fulfillment of positive NFE.
5. Scrap/ waste/ leftovers arising out of production process or in
connection therewith may be sold in the DTA on payment of duties as
applicable. Such sales shall not, however, be subject to achievement
of positive NFE.
6. For services, including software units, sale in the DTA in any mode,
including on-line data communication, shall be permissible up to 50%
of foreign exchange earned.
62
EXIM PROC & DOC
7. Supplies from the DTA to EOU/EHTP/STP units will be regarded as

"deemed exports for DTA."
All EOU/ EHTP/ STP are given following facilities:
1. Duty free input/ raw materials
2. Plant/ Plot/ SDF
3. Energy/ water supply
4. Communication facility
5. Single window clearance
6. International level banking facility
7. Post/Parcel services
8. Warehousing facilities
Other facilities to EOU/EPZ/EHTP/STP:
1. Although the EOU… can sell upto 50% of Export performance in

DTA, subject to applicable duties. For DTAs it is considered to be
import, However, EOUs… supplying to an A/L holder, EPCG holder,
Govt. floating global tender, nominated projects by MOC/MOF of
national importance, the goods by these DTAs can be imported from
EOUs…duty free.
2. An EOU… can sell to another EOUs… SEZ, is considered as “A” part
of NFEP
3. Other entitlements of EOU/EHTP/STP/BTP units are as under:
a. An EOU… is exempted from payment of Income Tax as per
the provisions of Section 10A and 10B of Income Tax Act.
b. Exempted from industrial licensing for manufacture of items
reserved for SSI sector.
c. Export proceeds will be realized within 12 Months.
d. Will be allowed to retain 100% of its export earning in the
EEFC account.
e. 100% FDI investment permitted through Automatic Route
similar to SEZ units.
SUB CONTRACTING RULES FOR EOUS….
1. EOU/EHTP/STP/BTP units, including gem and jewellery units, may on

the basis of annual permission from the Customs authorities,
subcontract production processes to DTA through job work which may
also involve change of form or nature of goods, through job work by
units in the DTA.
2. These units may also subcontract upto 50% of the overall production of
the previous year in value terms for job work in DTA with the
permission of the Customs Authorities.
3. However, Goods, finished or semi finished, including studded jewellery,
taken out for subcontracting shall be brought back to the unit within
90 days.
4. No cut and polished diamonds, precious and semiprecious stones shall
be allowed to be taken out for sub-contracting.
63
EXIM PROC & DOC
5. EOU may, on the basis of annual permission from the Customs

authorities, undertake job work for export, on behalf of DTA exporter,
provided that the goods are exported directly from EOU and export
document shall jointly be in the name of DTA/EOU. For such exports,
the DTA units will be entitled for refund of duty paid on the inputs by
way of Brand Rate of duty drawback.
6. Export of finished goods from the job worker's premises may be
permitted provided such premises are registered with the Central
Excise authorities. Where the job worker is SEZ/EOU/EHTP/STP/BTP
unit, no such excise registration is required and export may take place
either from the job workers’ premises or from the premises of the unit.
7. Subcontracting of both production and production processes may also
be undertaken without any limit through other EOU/EHTP/ STP/SEZ/BTP
units on the basis of records maintained in the unit (Standard Input-
Output Norms).
8. Subcontracting of part of production process may also be permitted
abroad with the approval of the Development Commissioner.
9. Scrap/waste/remnants generated through job work may either be
cleared from the job worker’s premises on payment of applicable duty
on transaction value or destroyed in the presence of Customs/ Excise
authorities or returned to the unit. Destruction shall not apply to gold,
silver, platinum, diamond, precious and semi precious stones.
10. In case of sub-contracting of production process abroad, the
goods may be exported from the sub-contractor premises subject to
the conditions that job work charges shall be declared in the export
declaration forms, invoices etc. and full repatriation of foreign
exchange will take place to our country.
8. FREE TRADE & WAREHOUSING ZONES
Objective: The objective is to create trade-related infrastructure to facilitate

the import and export of goods and services with freedom to carry out trade
transactions in free currency. The scheme envisages creation of world-class
infrastructure for warehousing of various products, state-of-the-art
equipment, transportation and handling facilities, commercial office-space,
water, power, communications and connectivity, with one-stop clearance of
import and export formality, to support the integrated Zones as
‘international trading hubs’. These Zones would be established in areas
proximate to seaports, airports or dry ports so as to offer easy access by rail
and road.
Status: The Free Trade & Warehousing Zones (FTWZ) shall be a special
category of Special Economic Zones with a focus on trading and
warehousing.
Establishment of Zone: (i) Proposals for setting up of FTWZs may be

made by public sector undertakings or public limited companies or by joint
64
EXIM PROC & DOC
ventures in technical collaboration with experienced infrastructure

developers.
(ii) Foreign Direct Investment would be permitted up to 100% in the

development and establishment of the zones and their infrastructural
facilities.
(iii) The developer shall be permitted to import duty free such building
materials and equipment as may be required for the development and
infrastructure of the zone. Such equipment and materials as are sourced
from the DTA shall be considered as physical exports for the DTA suppliers.
(iv) Once it has developed the FTWZ, the developer shall also be permitted
to sale/lease/rent out warehouses/workshops/office-space and other facilities
in the FTWZ to traders/exporters.
Functioning: (i) The scheme envisages duty free import of all goods (except
prohibited items, arms and ammunitions, hazardous wastes and SCOMET
items) for ware housing.
(ii) Such goods shall be permitted to be re-sold/re-invoiced or re-exported.

Re-export shall be permitted without any restrictions. However export of
SCOMET items shall not be permitted except with the permission of Inter-
Ministerial Committee.
(iii) These goods shall also be permitted to be sold in the DTA on payment of
customs duties as applicable on the date of such sale. Payment of duty will
become due only when goods are sold/delivered to DTA.
(iv) Packing or re-packing without processing, and labeling as per customer

or marketing requirements could be undertaken within the FTWZ.
(v) The maximum period that goods shall be permitted to be warehoused

within the FTWZ will be two years, after which they shall necessarily have to
be re-exported or sold in the DTA. On expiry of the two year period, customs
duties as applicable would automatically become due unless the goods are
re-exported within such grace period, not exceeding three months, as may
be permitted.
Entitlement of units (i) Income Tax exemption as per 80 IA of the

Income Tax Act.
(ii) Exemption from Service Tax.
NFE criteria: Units in FTWZs shall be net foreign exchange earners. Net
foreign exchange earning shall be calculated cumulatively for every block of
five years from the commencement of warehousing and/or trading
operations as per formula applicable for SEZ units.
65
EXIM PROC & DOC
STATE TRADING CORPORATION (STC)
The State Trading Corporation of India Ltd. (STC) is a premier international

trading house owned by the Government of India. Having been set up in
1956, the Corporation has developed vast expertise in handling bulk
international trade. Though, dealing largely with the East European countries
during the early years of its formation, today it trades with almost all the
countries of the world.
By virtue of infrastructure and experience possessed by the Corporation, it

plays an important role in arranging import of essential items into India and
developing exports of a large number of items from India. It exports a large
number of items ranging from agricultural commodities to manufactured
products from India to all parts of the world. Because of Corporation's in
depth knowledge about the Indian market, STC is able to supply quality
products at most competitive prices and ensure that the goods reach the
foreign buyer within the prescribed delivery schedule. It also imports bulk
commodities for Indian consumer as per demand in the domestic market.
Performance Indicators:
Annual Turnover: 2005-06 Rs 7125 Crores (US$ 1608 million)
Net Profit: 2005-06 Rs 39 Crores (US$ 8.8 million)
EXPORTS FROM INDIA
STC exports a diverse range of items to a number of destinations throughout

the world. Exports by STC vary from traditional agricultural commodities to
sophisticated manufactured products.
Besides negotiating, contracting and shipping, STC seeks to introduce new

products, explore new markets and undertake wide ranging ancillary
functions such as Product Development, Financing, Quality Control and
Import of machinery and raw materials for export production.
STC makes purposeful use of its world-wide connections, abundant

experience, up-to-date information about the market trends and long term
perspective on various commodities to ensure competitive prices, right
quality and adherence to delivery schedules to the buyers abroad.
Principal Items of Export
Agricultural Commodities / Manufactured Products
Wheat, Cashew, Coffee, Rice, Tea, Sugar Extractions, Opium, HPS Groundnut,
Spices, Castor oil & Seeds, Jute Goods, Chemicals, Drugs & Medical
66
EXIM PROC & DOC
Disposables, Engineering & Construction Materials, Consumer Products,

Textiles and Garments, Leatherwear, Processed Foods, Iron Ore, Steel
IMPORTS INTO INDIA
STC imports a number of essential commodities to cover the domestic

shortfalls and hold the price line. STC serves the national objective by
arranging timely imports at most competitive prices. In the process, the
Corporation makes best use of its strength in handling bulk imports, vast
infrastructure and above all an experience of over four decades in fulfilling
the needs of the industry.
Principal Items of Import
Agricultural Commodities / Manufactured Products
Edible oils, Sugar, Wheat, Fatty Acids, Pulses, Hydrocarbons, Gold &
Silver, Minerals/Metals, Petro-chemicals, Fertilizers,
Scientific Instruments & Hospital/ Police equipments, FMCG Goods, IT
Products,
(AFTER DBK)
6. EXPORT PROMOTION CAPITAL GOODS SCHEME
 This scheme allows import of New Capital Goods and upto 10 yrs old
second hand capital goods at concessional rate of duty (5% Import
duty) subject to an export obligation of 8 times CIF value of imports to
be fulfilled over a period of 8 years.
 However, in respect of EPCG licenses with a duty saved of Rs.100 crore
or more, the same export obligation shall be required to be fulfilled
over a period of 12 years.
 The concept is to facilitate import of technology for line balancing,
modernization, and expansion and to improve the quality and
productivity of the resultant product.
 Spares for existing plant and machinery can also be imported under
the scheme.
 Second hand capital goods without any restriction on age may also be
imported under the EPCG scheme.
 Capital goods means any plant, machinery, equipment or accessories
required for manufacture or production of goods or for rendering
services, including those required for replacement, modernization,
technical upgradation or expansion.
 Capital goods also include packaging machinery and equipment,
refrigeration equipment, power generation sets, machine tools,
catalysts for initial charge, and equipment and instruments for testing,
research and development, quality and pollution control.
67
EXIM PROC & DOC
 Capital goods may be used for mining, agriculture, aquaculture, animal

husbandry, floriculture, horticulture, poultry and sericulture as well as
for use in the service sector.
 EPCG holder must declare a resultant product, which will be produced
by using the imported capital goods.
 A bond between the capital goods to be imported and resultant
product has to be established.
 A multi product company can export other products manufactured by it
to complete export obligation.
 Exports of services can also be used to fulfill export obligation.
 EPCG license holder can source the capital goods from a domestic
manufacturer who can apply for advance license for deemed exports
so as to import inputs including components required for
manufacturing the said capital goods.
 All EPCG licenses are valid for a period of 24 months.
 The license holder will fulfill the export obligation over the specified
period in the following proportions:
Period from date of Proportion of Export Obligation

License
Block of 1st to 6th Year 50 %
Block of 7th and 8th Year 50 %
tARIFF BARRIERS v/s NON TARIFF BARRIERS:
I. Meaning:
Tariff barriers refer to duties and taxes imposed by the govt. on the goods
imported from abroad.
Non tariff barriers are various quantitative and exchange control restrictions
imposed in order to restrict imports.
II. Types:
Tariff barriers include import duties, specific duties, and valorem duties
protective duties, etc
Non tariff barriers includes import licensing , import quota, consular
formalities and so on
III. Effectiveness:
Tariff barriers are not very effective as they arise the price but the effect on
demand may be limited.
As a protective measure, non tariff barriers are more effective as they
restrict imports within the required limits.
IV. Flexibility:
Tariffs are not flexible. They can be imposed quickly but it is difficult to
remove due to the opposition of powerful vested interests.
Quotas (non tariff barriers) tend to be more flexible more easily imposed and
more easily remove.
68
EXIM PROC & DOC
V. Effects On Imports:
Tariff barriers restrict imports indirectly.
Non tariff barriers restrict imports directly.
VI. Revenue Earning Capacity:
Provide huge revenue to the government.
Non tariff barriers do not provide additional revenue to the government.
VII. Nature Of Protection:
Tariff barriers do not offer direct protection to home industries.
Non tariff barriers can offer direct protection to home industries.
VIII. Formation Of Monopolies:
Tariff barriers do not facilitate the formation of monopolistic group of
production.
Non tariff barriers encourage the formation of the monopolistic group of
procedures for their benefit.
IX. Effect On Price:
Tariff barriers affect (increase) the prices of imported items
Non tariff barriers normally do not lead to rise in the prices of imported
items.
X. Time Required For Effects:
Changes in tariff are quick and give immediate effect in terms of import
reduction.
Non tariff barriers take longer time for introduction of changes. The effects
on imports are also slow
XI. Preferences:
Many countries prefer tariff barriers as they give more revenue and are easy
to introduce Not preferred as they do not provide additional revenue and
need complicated procedure.
HEALTH AND SAFETY REGULATIONS:

Many countries have their specific rules and regulation regarding health and
safety regulation as regards imports from other countries.
Such regulation mainly relate to food items and raw materials.
Exporters have to export goods with due consideration to such health and
safety regulation. Imports are not allowed when such regulation are not
followed properly.
In this sense, health and safety regulation can be treated as non tariff
barrier.
In addition to tariffs and quota many countries introduce foreign exchange
regulations for restricting imports. Under exchange control, countries impose
restrictions on the use of foreign exchange earned through exports.
If exchange control is to be made effective, it must be fairly comprehensive
and strict.
Objective of exchange regulation /control:
1. To restrict the demand for foreign exchange and to use the available
foreign exchange as per the requirements of the national economy.
69
EXIM PROC & DOC
2. To protect domestic industries
3. To check the flight of capital
4. To maintain over valued exchange rates
5. To follow independent monetary and fiscal policies.
6. To earn revenue in the form of difference between selling and purchasing

rates of foreign exchange.
Export Import Bank Of India Schemes for Export credit - May 21st,
2009
Export Import Bank Of India Schemes for Export credit:-
a) Direct Financial Assistance to Exporters:-

Under this scheme, assistance is provided in the form of credit on medium
term basis for periods exceeding 6 months to enable the exporters to extend
deferred credit to importers. Indian exporters of plant and machinery and
equipment are eligible for this scheme. Assistance is generally in the form of
deferred payment suppliers credit foreign currency6 and rupee term loans to
project exporters and finance for export consultancy and technology
services. So far the scheme can facilitate the exports of products like
commercial vehicles, transport material, construction projects, textile
machinery, mining equipments, glass making machinery and transmission
line projects. As per the provisions of the scheme, the assistance may be
granted in participation with commercial banks but the commercial banks
have been hesitant to assume larger risks involved in bigger projects. After
the introduction of the Risk Syndication Scheme, commercial banks have
been encouraged to assume part of the risks of EXIM banks funding for
various export contracts. The rate of interest charged on the financial
assistance extended by the EXIM bank has been 8.5%p.a.
b) Finance for Export Oriented units:-
This program was introduced by EXIM bank in 1984 to provide term finance
to export oriented finance. Under this program, EXIM bank offers financial
assistance to export oriented units on concessional terms with a view to
enhance their competitiveness in overseas markets. Export oriented units
set up in Free Trade Zones and export units recognized by the Government
of India are 100% export oriented and are eligible for financial assistance
under this program.
c) Export Bills rediscounting:-
EXIM bank provides funds, under this scheme, for a period of not more than
90 days against short term usance export bills that have an unexpired
usance of a maximum of 90 days. Commercial banks in India which are
eligible to deal in foreign exchange are allowed to rediscount their short term
export bills with EXIM bank for unexpired usance period of not more than 90
days. This enables banks to fund post-shipment export credit to Indian
exporters. The limit authorized by the RBI for the program is Rs 50 crores.
70
EXIM PROC & DOC
The interest rates chargeable to such assistance are 7.5%.p.a.

d) Finance for Export Marketing:-
The Export Marketing Fund (EMF) was started by EXIM bank to finance Indian
companies export marketing activities. Such finance covers upto 50% of the
total cost of marketing activities incurred by the exporters in the form of
grants. The EMF program covers desk research, minor product overseas
travel, product inspection services, establishing overseas operations and
travel to India by buyers overseas.
EXPORT PROMOTION
Since 1951, the Government of India has started a number of

institutions to assist the export trade sector. Such institutional agencies
provide organizational support to exporters. However, they do not participate
directly in export trade. They only help exporters in finding out suitable
markets guide them through suitable information about foreign markets and
inform them about government policies and incentives offered.
Foreign trade organization for export promotion indirectly helps Indian

exporters in their export promotion efforts. For example, they provide
information and guidance to exporters as regards foreign markets,
packaging, and documentation, participation in international trade fairs and
exhibitions, advertising of Indian goods abroad and procedure and
formalities in export trade transactions. They also provide education/training
facilities, market intelligence and benefits of marketing research to
exporters. Their contribution in export promotion is collective and also
indirect in character. Foreign trade organization can be better described as
organization for export promotion.
FEATURES OF EXPORT PROMOTION ORGANIZATIONS.
1. Service organization: Foreign trade organizations are basically

service organizations and not trading organizations. These autonomous
bodies are connected with export promotion activities.
2. Create favourable image: Foreign trade organizations are
performing well in certain areas such as awareness about India’s
export potential, favourable impression in foreign countries about
India’s industrial and technological developments and finally creation
of favourable image of India in foreign countries.
3. Easy availability of service: The service of foreign organizations are
available easily and economically to all exporters as they are
established basically for the benefit of exporting community.
4. Government initiative in formation: The GOI look initiative in
establishing many foreign trade organizations in order to develop
institutional infrastructure for promoting large-scale exports.
Government provides financial support to such organizations and see
that they offer service to Indian exporter and foreign buyer.
71
EXIM PROC & DOC
5. Provide non-financial service: Foreign trade organizations do not

provide financial services to exporters. They issue certificates, etc.,
which are useful for bank finance and benefits of government
incentives and facilities.
6. Government recognition: Government gives due recognition to
foreign trade organizations and enables them to work with official
status and recognition.
7. Operating since long: the foreign organizations are operating in
India since long. They are popular with exports and their services are
useful for export promotion.
EXPORT PROMOTION COUNCILS (EPCs)
The establishment of export commercial council (EPCs) is one major

step taken for promotion and diversification of Indians export trade. The
EPCs has been established with an object to develop a specialized effort in
export promotion. The council assists in the promotion of export of a
particular group of products, projects and services. They perform both
advisory and executive function. The functions of all EPCs are more or less
identical. However, every EPC performs functions relating to specific
commodity with which it is directly connected.
The EPCs are registered under the Indian companies Act 1956 as non
profit seeking quasi-government organizations to give direct institutional
stimuli to the Indian exporter, producer and businessmen. The EPCs are also
known as the Registering Authorities under the import policy for registered
exporters. They also serve as a bridge between the government and
industry for export development.
At present, there are 20 EPCs functioning in the country out of which
11 are under the ministry of commerce. These councils deal with various
commodities like basic chemicals and allied products, cotton, textiles,
handlooms, apparels, cashew, silk, marine products, carpets, leather
manufactures, gems and jewellery, plastic and linoleum, spices, sports
goods, engineering goods, tobacco, wools and woolen, handicrafts,
electronics and computers software.
FUNCTIONS/ROLES OF EPCS
1. Providing information: To assist exporters to understand, interpret and
implement the export policies and export assistance schemes of
Government.
2. Providing assistance: To provide assistance in export promotional
activities such as external publicity, participation in fairs and exhibitions,
promotion of exclusive exhibitions and trade fairs of specific products.
3. Collecting data: To collect complete data on export growth, the
problems faced by exporters, the specific help needed by the
manufacturers and present the same to the Government in order to
enable it to evolve appropriate export policies.
4. Acting as liaison: To carry on an effective liaison with industry and trade
in order to identify the problems in export activities.
5. Sending trade delegations: To make arrangements for sending trade
delegations and study teams to one or more countries for promoting the
72
EXIM PROC & DOC
export of specific products and to circulate the reports of specific products

and diversifying to new products.
6. Opening office abroad: To open offices abroad to help exporters in
consolidating the existing exports and diversifying to new products.
7. Registering authority: To ct as registering authority under the import
policy for registered exporters and to help them in expanding overseas
market for their products.
8. Motivating exporters: To create consciousness among exporters
through seminars, discussion and to motivate them for export promotion.
9. Co-operation with EIC: To provide co operation to the export
inspection council on quality control and preshipment inspection of export
goods.
10. Disposing applications: To provide assistance to members for speedy
disposal of export assistance applications
11. Offering guidance: To offer guidance to member on various matters
like utilization of GSP, export finance, insurance of goods and joint
ventures aboard.
12. Indicating export opportunities: To collect and supply market
information to exporter and thereby to help them to take benefits to take
benefits of export opportunities available abroad.
13. Settling disputes: To help the member in settling their trade disputes
through peaceful negotiations.
14. Solving transport problems: To help members to resolve their
transport problems.
15. Concessions: To assist members in getting freight and other
concessions for shipping conferences.
16. Issuing certificate of origin: To issue certificate of origin to Indian
exporters certifying the origin of goods.
The EPCs helps Indian exporters through these functions in direct or
indirect ways. They provide various services to Indian exporting
communities. Each EPC has its working committee which elected by the
members
EPCs do not provide financial or other type of direct assistance.

They are purely advisory in character. All exporters of products, coming
under the purview of council, are entitled to become member of the
council. The members have to pay an annual subscription fee for the
services rendered to them by the council. All members are given
Registrations-Cum-Membership Certificate (RCMC) for the respective EPC.
This certificate is useful for securing the benefits of various concessions
and incentives offered by the government for export promotions.
SERVICES OFFERED BY EPCS

1. Providing trade inquiries: Information about trade enquiry receive
by the council are circulated among members. As a result, members
get the intimation much in advance of the publication.
2. Make available publications: The bulletins and publications of the
council provide reliable information about foreign markets regularly.
73
EXIM PROC & DOC
3. Sponsor trade delegation: Exporter can join the trade delegation

sponsored by the EPC.
4. Provide publicity: Exporter can give wide publicity to his products
under the council’s publicity plans.
5. Solve problems: The difficulties and problems of the exporters are
solved by the council by approaching proper authorities.
6. Display products: Exporter can display products in the trade fairs
and exhibitions arranged by the EPC.
7. Settle disputes: Trade disputes of exporters can be settled
peacefully and amicable through the co-operation EPC.
8. Obtain incentives: Exporter can get the benefits of various
incentives and facilities provided by the government by joining the
EPC.
9. Overall guidance: Exporter get timely help and guidance from the
EPCs as regards financial, marketing and other export problems
10. Explore overseas markets: The benefits of market service, product
developments programmes, etc. undertaken by the EPC (Exploration of
overseas markets) are available to member of EPC.
11. Help to government: The export promotion councils are helping the
government in framing export policies and programmes.
12. Create export consciousness: The EPCs are raising exports
consciousness amongst Indian manufactures, traders and exporters.
The councils use various media of communication for this purpose.
The contribution of EPCs in the area of export promotion is certainly
remarkable.
COMMODITY BOARDS
Along with EPCs, commodity boards have been established by the GOI
for many commodities with high export potential. These boards are
supplementary to EPCs and function on the same lines. The CBs are foe
promoting exports of specific commodities particularly the traditional
commodities including tea, coffee, rubber and handloom items. The
commodity boards are autonomous bodies.
The functions and activities of commodity boards are similar to that of
EPCs. The difference is that the commodity boards look after the export
promotion of primary and traditional items of exports while the EPCs look
after the export promotions of non traditional items like engineering goods,
computers, chemicals, etc while promising export potential.
ACTIVITIES OF COMMODITY BOARDS:
Commodity boards take active interest in introduction of new methods

of cultivation of commodities, market research, publicity and assistance to
manufacturers and exporters. They act as a connecting link between Indian
manufacturers and foreign importers. These boards have open foreign
offices.
74
EXIM PROC & DOC
They participate in international trade fairs/exhibitions and also

undertake market service and other research activities. Trade delegations
are often sent by these boards for promoting exports. Preshipment
inspection of export items is also arranged by some CBs.
Operating commodity boards

At present, the following nine commodity boards are operating
1. Tea board
2. Coffee board
3. Rubber board
4. Tobacco board
5. Cardamom board
6. All India handicraft board
7. Coir board
8. Central silk board
9. All India handloom board
As the name indicates, every commodity board deals with one specific
commodity only. The functions of all boards are rather identical as they
are basically concerned with the export promotion of specific
commodities. These boards offer different services to exporters, growers,
producers and cultivators of various commodities.
Services of commodity boards
The commodity boards are statutory in character an operate under the
administrative control of the ministry of commerce
These boards offer the following services:
1. Advice to government- the boards offer advice to the government on
export matters such a fixing quota for exports and signing trade
agreements
2. Registration facility- any exporter concerned with the export of specific

commodity can get himself registered with concerned board
3. Provide information- the commodity boards provide trade information,

guidance and various other services to the members and help them in
their export promotion efforts
4. Trade fairs and exhibitions- the boards participate in trade fairs and
exhibitions aboard
5. Sponsor trade delegation- the boards also sponsor trade delegations

and conduct market surveys for the benefit of their members
Role of commodity boards in export promotion:

75
EXIM PROC & DOC
Commodity boards play a constructive and positive role in the export

promotion of primary and traditional commodities such as tea, coffee,
rubber, handicrafts, handlooms, coir, etc. these boards offer varied
services to government as well as exporters of these commodities.
Trade information and guidance is given to exporters. The boards
participate in trade fairs and exhibitions and also sponsor trade
delegations. Market surveys are conducted for the benefit of exporters
and timely advice is given to government on export matters. These
services of commodities boards indicate the active interest which the
boards take in export promotion and their positive role in promoting
exports of traditional commodities. Along with exporters, services are
also offered to growers, producers and cultivators of different
commodities.
The functional areas of commodity boards are extremely board

based .The functions/activities of commodity boards include market
research, publicity, introduction of new methods of cultivation, introduction
of new varieties and products for exports and so on……. They also act as a
connecting links between India manufacturers/exporters and foreign
importers. All these functions are directly and indirectly useful for export
promotion of agro based production. The activities of commodity boards are
expanding in recent years. There is diversification in functions/activities and
services offered by commodity boards. These boards have made substantial
contribution in promoting exports of traditional Indian commodities. Their
role is certainly unique and praise worthy as export promotion organizations.
THE EXPORT INSPECTION COUNCIL (EIC)
The Export Inspection Council is a statutory organization set up under

the Export (Quality Control and Inspection) Act, 1963 to adopt measures for
the introduction and enforcement of quality control and compulsory pre-
shipment inspection of various exportable commodities. The EIC was
established in 1964 with headquarters at Calcutta.
Objectives of EIC
1. To maintain high quality of goods to be exported as regards

quality of goods exported and thereby to create a good market
2. To check unfair practices of exporters as regards quality of goods
exported to inferior quality goods prove to be too costly to the country in
the long run
3. The quality control and pre-shipment inspection is one useful
provision for maintenance of quality of export items. At present pre-
shipment inspection covers nearly 1056 items which includes
engineering, chemicals, jute, footwear, food and agriculture, coir and so
on.
Functions of EIC
76
EXIM PROC & DOC
1. To advise the government regarding measures for enforcement of

quality control and inspection in relation to commodities intended for
export.
2. To make arrangements for voluntary pre-shipment inspection of
commodities not covered by the compulsory inspection.
In process quality control is the responsibility of concerned

manufactures and they are expected to take necessary precautions in this
regards. The EIC only ensures that adequate controls are exercised by
periodic inspection and testing of export consignment at random. In addition,
the EIC may recognize a manufacturing unit as an “export worthy unit” only
after ensuring that the unit is adequately supported with the facilities for the
enforcement of the quality control fixed by the Council. Such export worthy
unit is eligible to obtain certificate of quality control and inspection for their
export consignments without physical inspection of their consignments.
Exports worthy units are given self certification status by EIC. Naturally, such
units are allowed to export without quality inspection by an outside agency.
The EIC also keeps watch on such export worthy units through periodical
surprise visits.
Role of EIC
EIC plays an important role in raising the quality standards of export
commodities and also creating goodwill for Indian abroad. The EIC has also in
creating goodwill for Indian goods abroad. The EIC has also set up quality
complaints cells at Mumbai, Calcutta, Cochin, Chennai, etc. in order to study
the complaints of overseas buyers regarding quality and suitable follow-up
actions. EIC also issues certificates of origin under the generalized systems
of preference.
In order to create quality consciousness among Indian exporters, the
EIC has also set up Quality Development Centre (QDC) are also started at
Mumbai, Calcutta, Cochin, and Delhi. These centers arrange workshop and
training programmes for personnel connected with quality management at
the industry level.
The activities of EIC are important as India can promote exports only
by manufacturing and exporting quality products in global markets. The EIC
provides technical guidance to industry for upgrading the manufacturing
units so as to introduce in process quality control and self certification
systems.
A note on ISO 9000
Quality standards recognized at the global level is called ISO 9000. It is

developed by the International Standards Organization (ISO) and provides
common standard of products and services worldwide. The ISO 9000 series
of standards have been adopted by more than 100 countries.
In India we have BIS 14000 which is equivalent to ISO 9000. At

present, developed nations prefer to import from the suppliers who have
obtained ISO 9000 certification to their products. Such companies adhere to
77
EXIM PROC & DOC
strict quality control norms. They have better opportunities to export as

compared to other countries which have not secured this certification.
ISO 9000 is essentially a mark of quality assurance. Lengthy procedure

needs to be followed for obtaining ISO 9000 certification. Indian companies
with ISO 9000 certification do maintain good quality standards and in their
case quality inspection from EIC is not required. This benefit is similar to the
convenience given to export worthy units. Many Indian companies have,
now, obtained ISO 9000 certification for their product.
100% EXPORT ORIENTED UNITS (100% EOUS).
The government has introduced cent percent Export Oriented Units

Scheme from 31st December, 1980 in order to have local advantages in
production and all facilities of a FTZ. This 100% export oriented units (EOUs)
scheme is in operation since 1981. It is compulsory to the EZP schemes. It
adopts the same production regime but offers a wider source of raw
materials, ports of exports, hinterland facilities, availability of technological
skills, existence of an individual base and the need for a larger area of land.
Benefits of 100% EOUs:
1. The EOUs are mainly concentrated in the engineering, chemicals, plastics,
granites and food processing.
2. Such units are permitted to import raw materials, spare parts, machinery,
etc., without the payment of import duty.
3. They need not pay excise duty when they use the domestic raw materials,
etc., for the production of goods which are to be exported.
4. 100% EOUs need not be located in the FTZs. Such units may be located at
any place and may be of any size.
5. They are given special concessions such as five year tax holiday, two
years gestation period before exporting.
6. They export practically the entire or atleast 75% of their total production
abroad and help the country is promoting exports.
The government policy is for encouraging such units to export more.
As on 31st March, 1990, 176 units had commenced production and achieved
exports worth about Rs. 1,907 crore. These units can sell upto 25% of their
production in domestic tariff area, after paying appropriate duties. However,
such units are supposed to produce and export their production (75%) for a
period of 10 years .
EXPORT-IMPORT BANK
(EXIM BANK)
Exim bank was established on January 1, 1982 to finance, facilitate and
promote foreign trade in India. It makes available finance to exporters of
capital and manufactured goods, exporters of software and consultancy
services and to overseas joint-ventures and turkey and construction projects.
This bank is the main financial institution in India foe coordinating the work
of institutions engaged in financing export and import trade. It finances R &
D and techno economic studies. It also provides goods on deferred
78
EXIM PROC & DOC
payments, financing of Indian machinery, manufactures goods consultancy

and technological services.
Functions of Exim Bank:
Exim bank has classified its functions into two categories viz.,
(1). Fund based assistance.
(2). Non fund based assistance.
FUNCTIONS OF EXIM
BANK
FUND BASED ASSISTANCE. NON FUND BASED

Assistance in Indian exporters. ASSISTANCE.
Assistance in overseas parties. Guarantees and bonds.
Assistance to Indian commercial banks. Advisory and other services.
EXPORT PROCESSING ZONE (EPZ)/ FREE TRADE ZONE (FTZs)

As a part of export promotion drive, the government of India has established
free trade zones (also known as export processing zones) in different parts of
country. The basic idea behind setting up EPZs/FTZs is to provide an
internationally competitive duty free environment for export promotion at
low cost so that exporting units will operate successfully in the international
markets. A free trade zone is an area or industrial belt near a sea/airport
where a manufacturing unit can import goods duty free provided the
products manufactured are for exports only. Import of goods is duty free but
the entry of foreign nationals is not free in the FTZs. The units operating at
the free trade zone are expected to export their production to the full extent.
The purpose is to offer certain special insensitive in the zones and their by to
encourage manufacturers to promote exports. These zones have emerged as
effective instruments to boost exports of manufactured products, especially
to developing countries. The zones are expected to provide favorable
environment for export production.
At present, there are seven export processing zones operating in India

(Kandla, Santacruz, Cochin, Chennai, Noida, Falta, and Vishakhapatnam).
Each zone provides basic infrastructure facilities in addition to a whole range
of fiscal incentives. Custom clearance facilities are also offered within the
79
EXIM PROC & DOC
zone. Government has recently permitted development of EPZs by the

private, state or joint sectors. The inter-ministerial committee or private EPZs
has already cleared the proposal for private EPZs to be set up in Mumbai,
Surat, Tirunelveli and Kancheepuram and at greater Noida.
Along with EPZs, manufacturing units undertaking to exports their

production of goods may be set up in Electronic Hardware Technology Parks
(EHTPs) and Software Technology Parks (STPs) set up in different parts of the
countries.
Advantages/ role of FTZs
1. Free trade zones (FTZs) are industrial estates which from enclaves from
the national customs territory of a country and are usually situated near
sea ports or airports.
2. The entire production in such zones is usually meant for exports.
3. Suitable vast area with infrastructure facilities is selected for such free
zones. The normal facilities for manufacturing activities are provided by
the government in the FTZs
4. Special concession and incentives are offered to units for promotion of

exports. Such incentives and concessions include (i) duty free import of
capital goods and equipment, (ii) exemption from customs and other
taxes on imported raw materials, (iii) exemption from central excise, (iv)
liberal policy for import of technical know how, (v) advance import
licenses of raw materials to meet one year requirements.
Facilities/incentives offered to units operating in FTZs:
 Exemption from import duty on capital goods, raw materials, spare

parts, tooling and packaging.
 Exemption from import licensing as all imports to the FTZs have been
placed under OGL
 Capital goods, raw materials etc supplied to the zones from the
rest of the country are treated as exports and are eligible for
admissible export benefits
 Fiancé is provided on concession term
 Exemption is given from municipal taxes and sales tax
 Cash subsidy benefit is offered on investment in fixed assets
 Items banned for the rest of the country can be imported with few
exemptions in the free trade zones.
 Items manufactured in and exported form the zone are
exempted from the export control order but prescribed export
duty has to be paid
 Goods manufacture within the zone and meant for exports are
exempted from central excise and other levies
80
EXIM PROC & DOC
 Transport subsidy is provided to units operating in the zones

 Foreign exchange sanctioned including blanket permit for export
promotion is granted.
 Sale of goods permitted to Indian domestic market against value
added is at least 30%
 Manufacturing units in the free trade zone are now allowed to
offload up to 25% of their production in the domestic tariff area
under the payment of relevant duties
 Five – year income tax holiday on profits earned.
As a supplement to EPZs a centrally sponsored export promotion industrial
park (EPIP) scheme has been introduced in August, 1994 with a view to
involving the state governments in production. It provides for 75% (limited to
rupees 10 cores) grand to state governments towards creation of such
facilities. So far 18 proposals for establishment of EPIPs have been
sanctioned.
WORLD TRADE CENTRE
World trade centre (WTC) is one more export trade organization and is useful
to Indian exporters in
different ways. It is
promoted by M.Visvesvarya
industrial research and
development centre (non-
profit organization) and is
located in Mumbai city. At
this centre offices of all
agencies and institutions
connected with the foreign
trade are located. They
include export promotion councils, importers, consultancy firms, government
agencies and so on. An exporter can establish contact with all such agencies
by visiting the office of world trade centre. This is how the services of all
export related agencies are available at the world trade centre. The centre
has also started showrooms where Indian goods are displayed and
information is supplied to overseas buyers.
The activities of WTC are useful to Indian exporters in different ways.
It brings under one roof all the agencies, business know how and sources of
information connected with international trade. WTC is a regular member of
world trade center’s association, New York, with more than 200 members
spread over 60 countries.
Objectives and functions of WTC:
1. Providing information to Indian exporters on various matters relating to
exports
2. Providing education and training to export personnel in regards to

exports procedures
3. Conducting research and development activities relating to foreign

trade
81
EXIM PROC & DOC
4. Arranging seminars and workshops on matters relating to export trade
5. Arranging buyer-seller meetings for export promotion.
Activities of WTC:
1. Provides space for exhibitions: the WTC provides space an facilities to
exporters to arrange exhibitions of export items
2. Publications: the WTC publishes booklets, magazines and other

information literature which gives information about new
developments in the field of import and export trade
3. Provision of trade information service: the WTC has set up a

computerized trade information service called IMPEX on India’s imports
and exports
4. Seminars and workshops: the WTC arranges seminars and workshops

periodically in order to give the latest available information to Indian
exporters
5. Meetings with overseas buyers: the WTC arranges meetings of

overseas buyers and Indian businessman are also arranged
occasionally for direct negotiations and trade deals
6. Training facility: the WTC conducts short term training courses for the
education of young Indian exporters.
EXPORT HOUSES (EH)
According to the dictionary of management by D. French and H.

Saward, export house means an enterprise specializing in selling goods to
foreign buyers. An export house may act:
(1) As a merchant buying a manufacturer’s products and attempting to
sell them abroad;
(2) As an agent for manufacturer, promoting and arranging the sale of
his products abroad;
(3) As an agent for foreign buyer, seeking sources of supply in the
export house’s country and arranging purchases there.”
An export house acts as a professional middleman exclusively
devoted to export marketing. It acts as a middleman and gets income for the
services rendered. An export house conducts various activities such as
procuring goods, finding buyers’ abroad (collection of foreign orders), making
arrangements for transportation, preparation of shipping and other
documents and customs clearance. It relieves manufacturers from the entire
botheration of export procedures.
Export houses are operating in other countries since long. This
was felt in India after 1958 for promotion of exports. The government also
felt to give legal recognition to export houses with sizeable export
performance and offer them certain facilities. In India, merchant exporters
and manufacturer exporters who fulfill certain conditions laid down by the
82
EXIM PROC & DOC
government are eligible for recognition as registered export houses. Even

100% EOUs and units operating in the EPZs are eligible to function as export
houses.
Export house certificate: in India, an export house is defined

as a registered exporter holding a valid export house certificate issued by
the director general of foreign trade. Recognition to a business house is
given after taking into account certain factors such as (a) ability to export
difficult items to newer destinations, (b) maintenance of a high standard of
ethics and, (c) diversion of a part of net profits towards trade development.
For the issues of such certificate, the business house/firm must
be registered with the federation of Indian export organizations (FIEO).
Secondly, it should have sufficient experience, professional expertise and
funds for handling export trade. Recognition of export houses in India is
based on their capacity to export the products which are classified by the
government of India in two broad types: (a) select product, and (b) non-
select products. Select products are manufactured through technological
processes. They include engineering goods, chemicals and electronic goods.
The non-select products are actually traditional items of exports. They
include tea, coffee, jute, iron ore, etc.
Eligibility criteria for an export house:
The Eligibility criteria for export house recognition are made

liberal in the Exim policy statements issued since 1990.
The Eligibility criterion for export house is: annual average FOB
value of exports during the preceding three licensing years should be Rs. 15
crore.
As per the modified Exim policy 1997-2002, all exporters who
maintain export house status for three successive terms or more will be
eligible for a golden status certificate which will entitle them to all benefits
accruing from such status in perpetuity, irrespective of their performance in
future.
Recognized export houses are given the following import

facilities and foreign exchange facilities:
(A) Import facilities:
1. REP are admissible to them. In addition, REP licenses can be

transferred to them by others.
2. They can import items placed on open general license (OGL) as per
export-import policy.
3. They can get additional license as provided in Exim policy.
4. They can avail of import license to the extent of 100% of their value of
REP licenses earned against their own exports made during the
previous year.
5. Te export houses may be allowed to import capital goods against REP/
additional licenses so as to enable them to set up servicing centers for
83
EXIM PROC & DOC
the benefit of their supporting manufacturers and other exporting

units.
6. They may be allowed to import non-OGL capital goods, other than the
banned list items, upto Rs. 40 lakhs CIF during the licensing year as
per Exim policy.
7. They can import one electronic telephone exchange (PBX/PABX) for
use in their offices.
8. They are free to import technical designs and other documentation for
a value not exceeding Rs. 10 lakhs against REP/Additional licenses
issued in their favour.
9. The export houses are also eligible to claim raw materials and
components through IRMAC. The purpose is to enable them to supply
raw materials and components to the actual users.
(B) Foreign Exchange Facilities:

RBI may allow registered/recognized export house to utilize
foreign exchange upto Rs. 2.5 per cent of F.O.B. value of its total exports
during the previous year subject to a maximum of Rs. 10 lakhs for the
following purposes:
1. Foreign exchange expenditure on promotional activities permitted
under the code of grants-in-aid for exports efforts;
2. Import of testing instruments and equipments for packing and tagging
and their spare parts for setting up common service centres; and
3. Setting up warehouses and offices abroad without obtaining prior
approval of the RBI.
The permission given by the RBI in this regard must be used within
one year of its issue as the permission itself is valid for one year from the
date of issue. The EH can cross the limit of 2.5 per cent of F.O.B. value of
its exports foe certain purposes like exploring foreign markets,
undertaking research and development for upgrading product technology,
opening of showrooms to display Indian goods abroad, participating in
exhibitions and advertising of Indian goods abroad.
Export houses operate mainly at the port towns. They are useful to
Indian manufacturers in securing foreign markets for their products. They
also give various services to their suppliers i.e. manufacturers. Such
services may be financial and/or technical.
PREFERENTIAL TREATMENT THROUGH TRADING BLOCS -
Some countries from small regional and offer special concessions and
preferential treatment to member-countries as result, trades develop among
the member countries and give benefits to all participating members.
However trade with non members is discouraged. This naturally acts as non
tariff trade barrier.
Even trade agreements and join commissions are used as non tariff barriers
as they restrict free movement of goods at the international level.
CONSULAR FORMALITIES
Consular formalities are one type of non tariff barrier on trade, particularly
imports. Some importing country imports strict rules regarding consular
84
EXIM PROC & DOC
documents necessary for importing goods.

Such documents include import certificate of origin and certified consular
invoice.
Penalties are provided for non compliance of such documentation formalities.
The purpose of consular formalities is to restrict imports to some extent and

not to allow free imports of commodities which are not necessary or harmful
to national economy or social welfare.
IMPORT LICENSING
Import licensing is an alternative to quota system. It is useful for restricting
the total quantity to be imported.
In this system, imports are allowed under license permission from the
government.
importers have to approach the licensing authorities for permission to import
certain commodities.
Foreign exchanges for imports are provided against such license issued.
Such licensing for imports exists in many countries.
Import licensing may be used for controlling the quantity of imports.
QUOTA SYSTEM:
Quota system or quantitative restriction is one important non-tariff trade

barrier. Under quota system, the country fixes in advance the limit of import
quantity of a commodity that would be permitted from various countries
during a given period.
Such quotas are usually administered by requiring importers to have licenses

to import particular commodities. The impact of quotas on imports is direct
as the imports are not allowed over and above a specific limit fixed.
Tariffs restrict imports in an indirect manner. In this sense, quotas are

superior to tariffs. They are used in many developing countries in places of
tariffs or in conjunction with tariffs.
Types of quotas:
There are different types of quotas and a country may introduce any type of
quota as per the need of the situation. The types of quotas are as noted
below:
(1)Tariff quotas: A tariff quota combines the features of the tariff as well as
quota. Here, the imports of a
Commodity up to a specified volume is allowed duty free or at a special low
rate duty.
Imports in excess of this limit are subject to a higher rate of duty.
2)Unilateral quotas: In unilateral quota system, a country on its own fixes a

ceiling on quantity of import of
a particular commodity.
85
EXIM PROC & DOC
(3)Bilateral quotas: In bilateral quota, negotiations are made between the

importing countries and a particular supplier country and the quantity to be
imported is decided.
(4)Mixing quotas: Under the mixing quota, the producers are obliged to
utilize domestic raw materials upto a certain proportion in the manufacturing
of a finished product.
Effects of quotas:
NON TARIFF BARRIERS
MEANING
Along with different types of tariffs, there are some quantitative restrictions
which can be imposed in order to restrict imports from abroad. Such
restrictions are called non tariff barriers.
Non tariff barrier include different rules, regulations and restrictions imposed
by the government on imports. Such barriers have become common in the
post World War II period, especially among developed countries to regulate
their imports of labour-intensive products from developed countries.
Non tariff barrier are normally useful for reducing the total quantity which
can be imported from abroad. A quota represents a ceiling on the physical
volume of imports of a commodity. All such quantitative restrictions are also
called invisible tariffs or non- tariff trade barriers.
Any measure introduced for restricting free flow of goods among the
countries of the world can be treated as non-tariff barrier. The objectives
behind introducing tariff and non tariff trade barriers are more or less
identical. Such barriers restrict the quantity of goods imported. The balance
growth of world trade is adversely affected due to non-tariff barriers. They
also raise the prices just as tariff does.
BENEFITS/ ADVANTAGES OF TARIFFS.
1. Imports From Abroad Are Discouraged, restricted or even
eliminated to a considerable extent.
2. Protection Is Given To Home Industries and manufacturing activities.
This facilitates increase in the domestic production.
3. Consumption Of Foreign Good Reduces to a considerable extent
and the attraction for imported goods is brought down considerably.
4. Tariffs Give Substantial Revenue To The Government. In addition,
it also creates employment opportunities as there is encouragement to
domestic production.
5. Tariffs Remove Or At Least Reduce The Deficit in the balance of
trade and balance of payments.
6. Tariffs Encourage Research And Development Activities within
the country. They create favourable atmosphere for industrial
development and generation of employment opportunities.
86
EXIM PROC & DOC
7. Tariffs may be used to influence the political and economic

policies of other countries. A country, for example, may raise its tariffs to
protect against tariffs raised by other countries.
8. Tariffs avoid competition from foreign manufacturers and this
may lead to monopolistic tendencies among domestic industries.
9. Tariffs create favourable impact on the economy of the country
imposing them in a number of ways. Some people believe that tariffs
enable a nation to improve its economy.
On the other hand, most economists believe that tariffs lower the
standard of living throughout the world by reducing trade.
CLASSIFICATION OF TARIFFS
D. On The Basis Of Trade Relations Between The Importing Country
And Exporting Country:
Here, tariffs are classified into following 3 categories:
1) Single Column Tariff: Under this system, the tariff rates are fixed
for various commodities and the same rates are charged for imports from
all countries. In brief, rates are uniform for all countries and discrimination
between countries sending goods is not made
.2) Double Column Tariff: Under this double column tariff , two rates
of duty on all or some commodities are fixed. The lower rate is made
applicable to a friendly country or the country with which bilateral trade
agreement is entered into. The higher rate is made applicable to all other
countries that is, countries with which such bilateral trade agreements are
not made.
3) Triple Column Tariff: Under this triple column tariff 3 rates are
fixed. They are:
- General rate,
- International rate,
- Preferential rate.
The first two rates are similar to lower and higher rates while the
preferential rate is substantially lower than the general rate and is
applicable to friendly countries with trade agreement or with close trade
relation.
87

SR NO. NO.: S.Y.Bms - Sem - Iv - A.Y. 2005-2006 Exim Proc &

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

SR NO. NO.: S.Y.Bms - Sem - Iv - A.Y. 2005-2006 Exim Proc &

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SR NO. NO.: S.Y.Bms - Sem - Iv - A.Y. 2005-2006 Exim Proc &

Uploaded by

Copyright:

Available Formats

S.Y.BMS – SEM – IV – A.Y.

2005-2006 EXIM PROC & DOC

2 Introduction to exports 2-3

3 Terms of payments 3-12

5 Export Credit Guarantee co operation of India ltd 14-22

7 Different Export Houses 29-30

8 Export Procedure 30-34

9 Export documents 35-41

10 Imports documents 41-42

11 Imports procedure 42-43

12 Export financing institutions 45-46

13 Exim bank of India 47-50

14 Export Incentives and Assistance 51-54

15 Export Promotion Organization 54-67

16 State trading corporation 68-70

 AUTHORISED DEALER: Reserve Bank of India gives license (could be

 ENTRY INWARD ORDER: When a foreign country vessel enters Indian

 BALANCE OF TRADE: Balance of trade is the difference between

 BALANCE OF PAYMENTS: The net difference between the inflow and

 LIBOR (LONDON INTER BANK OFFERED RATE):

Exports are vital to any economy, be it developed or developing. No country

In order to maintain a healthy balance of trade and foreign exchange reserve

According to B.S. Rathor, “Export Marketing includes the management of

Export marketing involves the design of the products and services

Reasons to Exports (Why to Export?) / NEED & IMPORTANCE OF

A. From the Viewpoint of a Nation:

1. FOREIGN EXCHANGE: Export helps country to earn valuable foreign

2. Balance of Payments: A country’s external economic strength

3. Employment opportunities: Export trade calls for more production,

4. Financing of Development plans: Export earning can be a source of

5. Optimum utilization of Resources: There can be optimum use of

6. Research & Development: Goods to be exported to other countries

7. Spread Effect: Because of export industry, other sectors also

time a number of ancillary industries come into existence to support

8. High Standard of Living: Export trade calls for more production,

B. From the viewpoint of a business organization:

1. Reputation: An organization, which undertakes exports can exports,

An export contract payment terms are determined on the basis of the

1. Nature of Products: The terms of credit depends upon the nature of

2. Creditworthiness of the buyer: The method of payment may also

7. Relations: The exporter may consider trading relations with the

The terms of payment relates to country of shipment and not country of

TYPE ASIAN CLEARING UNIONS NON - ACUs

Following are the recognized methods of effecting payments under

A) Advance Payment: When the buyer’s credit is doubtful or the

i. The goods are specifically designed for the customer, and

C) PAYMENT AGAINST SHIPMENT ON CONSIGNMENT:

This is the most common method of payment in international trade. In this

Document against payment is also known as cash against documents.

E. Letter of Credit (L/C):

L/C is one of the most convenient methods of settling payments in

Parties to a Letter of Credit:

1. Applicant / Buyer – on whose behalf LC is opened

L/C DIAGRAM ON THIS PAGE (COPY WITH STUDENTS)

IMPORTER ICICI Bank

Negotiating bank V/S Confirming Bank

Negotiating Bank’s presence comes only in case of unconfirmed L/C, else

(3) Exporter’s bank is known as Negotiating (confirming) bank.