RENUKOOT: General Overview

RENUKOOT: General Overview
Lying in the foot hills of the Vindhya Range, Renukoot is about 160 Kms from Varanasi and
154 Kms from Mirzapur. It is well connected to both these cities by beautiful metalled roads
passing through green forest.
There is a direct train named Muri Express between Jammu Tawi to Tatanagar and Ranchi
via Renukoot. Besides this there is direct train named Swarnajayanti Express between Ranchi
to New Delhi via Renukoot commuting both ways thrice a week.
Apart from the above, Renukoot is also connected with Kolkata through direct train name
Shaktipunj Express, which communicates between Jabalpur to Kolkata via Renukoot.
The nearest Airport is at Babatpur, Varanasi, which is about 180 Kms by road from
Renukoot.
ADITYA BIRLA GROUP: General Overview

Aditya Birla Group, with a turn of over US $ 8 billion and 72,000 employees, is among the
top three leading business houses in India. The Aditya Birla Group is India’s first truly
Multinational Corporation whose s over 30% of revenues flow from its operations across the
world.
The group is a transnational conglomerate with 72 state-of-the-art manufacturing units and
sectoral span, in India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia
and China. Over 66 units in India as well as abroad (in Thailand, Indonesia, Malaysia,
Philippines, Egypt, Canada, Australia and China) and international trading operations
spanning several countries including Singapore, Dubai, Russia, Vietnam, Myanmar, and
China make it India’s first truly multinational conglomerate.
Committed to being a Global Benchmark Group, the Aditya Birla Group reaches out to the
core sector in India- in industrial integral to the nation’s growth- Cement, Aluminium,
Fertilizers, Viscose Staple Fibre, Branded Apparel, Viscose Filament Yarn, Non-ferrous
Metals, Industrial Chemicals, Carbon Black, Power, Telecommunication, Sponge Iron,
Insulators and Financial Services.
The Aditya Birla Group enjoys a front-runner position:
Globally
• A metals powerhouse, among the world's most cost-efficient Aluminium and Copper
producers. Hindalco-Novelis from its fold is a Fortune 500 company. It is the largest
Aluminium rolling company
• It ranks as No. 1 in Viscous Staple Fibre
• The largest single location palm oil producer
• The third largest producer of insulators
• The third largest producer of carbon black
• The eleventh largest producer of cement and the largest in a single geography
• The largest single location copper smelter
• Among the world's top 15 BPO companies and among India's top three
• Among the best energy efficient fertilizer plants
In Asia
• The largest integrated Aluminium producer
In India
• A premier branded garments player
• The second largest in the chlor-alkali sector
• Among the top five mobile telephony companies
• Among the top three supermarket chains in the retail business

• Second largest player in viscous filament yarn
• Second largest private sector insurance company and a leading assets management
company.
GROUP VISION
To be premium metals major, global in size and reach, with a passion for excellence.
GROUP MISSION
To relentlessly pursue the creation of superior shareholder value by exceeding customer
expectations profitably, unleashing employee potential and being a responsible corporate
citizen adhering to our values.
GROUP VALUES
Integrity, Commitment, Passion, Seamlessness, Speed
HINDALCO: General Overview

HINDALCO was setup in collaboration with Kaiser Aluminium and Chemicals Corporation
USA, in a record time of 18 month. Hindalco started its commercial production in the year
1962 with an Aluminium facility at Renukoot in the eastern part of Uttar Pradesh with a
capacity of 20,000 tons per annum. Over the years, it has grown into the largest integrated
Aluminium manufacturer in the country.
The company has grown manifold and managed by Board of Director, with Shri Kumar
Mangalam Birla as the Chairman of the Board of Directors. Mr. Debu Bhattacharya, the
Managing Director, leads the entire Aluminium and Copper business of the group. Day to day
affairs of the company are managed by Professional Executives headed by Shri Ratan K
Shah as the Chief Operations Officer- Aluminium and Power.

HINDALCO ranks as the largest Aluminium producer in India, whose more than 58% sale is
in the value added product and has more than 40% in total market share. Hindalco’s
integrated operations and operational efficiency have enabled the company to be one of the
world’s lowest cost producers of Aluminium.
HINDALCO also own a large Captive Thermal Power Plant at Renusagar that meets the
power requirement of the company very effectively. Hindalco currently has primary
Aluminium capacity of 3, 45,000 MTPA.
VISION
“To strengthen our position as a Premium Aluminium Company, Sustaining Domestic
Leadership and Global Competitiveness through Innovation, Quality and Value Added
Growth.”
MISSION
“To pursue the creation of value for our Customers, Shareholders, Employees and Society at
large.”
STRATEGY
Efficiency Focus: - “To be one of the largest cost producers globally.”
Effectiveness Focus: - “To continue to remain market leader domestically.”
Growth Focus: - “To pursue value adding growth opportunities in Aluminium.”
QUALITY POLICY
• We, at Hindalco, shall aim to achieve and sustain excellence in all our activities.
• We are committed to total customer satisfaction by providing products and services,
which meet or exceed the customer’s expectations.

• Modernization of the manufacturing facilities, stress on technological innovation and
training of employees at all levels shall be a continuous process in Hindalco.
• A motivated workforce with a sense of pride in the Organization shall lead us towards
total Quality.
Organizational Profile of Hindalco Industries

Limited
Hindalco Industries Limited, a Non-ferrous Metal powerhouse, is the flagship company of the
Aditya Birla Group.
Hindalco is one of India’s producers of Aluminium. The company was incorporated on
December 15, 1958 and commenced production in 1962 with an initial smelting capacity of
20,000 TPA. The company has sales and distribution network that covers all of India and
includes five sales offices located in Mumbai, New Delhi, Bangalore, Chennai and Renukoot.
In India Hindalco enjoys a leadership position in Aluminium and Copper. All of the
Hindalco’s units are ISO 9001:2000, ISO 14001:2004 and several have attained the OHSAS
18001— the occupational health and safety certification. On the export front, the company
has been accorded a Trading House status by the Indian government.
Both in Aluminium and Copper, Hindalco is the largest Company in India. The company’s
Aluminium product range includes Primary Aluminium Ingots, Billets, Rolling Slabs,
Redraw Roads, Alloy Wire Rods, Flat Rolled Products, Extruded Profiles, Foils and Alloy
Wheels.
Hindalco is the largest manufacturer of the entire range of flat rolled products in India.
Hindalco’s domestic market share in Flat Rolled Products is nearly 60% and its rolled
products are widely used in various segments such as packaging, transportation, building and
construction, electrical, defense and general engineering applications. Hindalco is registered

as a star Trading House. About 35% of Flat Rolled Products are exported to more than 50
countries.
The company's commitment to quality and service along with its extensive infrastructure has
made Hindalco a prime source for best-selling brands. Continuous improvements in
manufacturing, processes, practices and systems ensure that customers' needs and
expectations are fully met.
Efficiency and product quality are ensured by using state-of-the-art equipment and a strong
research and development set-up, supported by dedicated and motivated employees and the
Oracle ERP system.
Wag staff Air Slip™ slab casting technology is used to ensure consistent quality and surface
finish of stock feed, which in turn ensures quality, finished products. The company's capacity
in flat rolled products at present is 2,30,000 tonne per annum and new plans are being
implemented to increase the manufacturing capacity Of the total production of Hindalco's flat
rolled products, around 40 per cent is exported and customers in more than 50 countries are
using the products.
Ever last, a Hindalco brand for aluminium-roofing sheets, offers ideal and economical
solutions for all roofing and cladding needs. Hindalco also offers colour-coated and tiled
roofing profiles.
Hindalco is one of Asia's largest producers of primary aluminium and one of the most cost-
efficient producers globally. In India, Hindalco enjoys a leadership position in specialty
alumina, primary aluminium and downstream products
The company's integrated complex at Renukoot houses an alumina refinery, aluminium
smelter and facilities for production of semi-fabricated products. Power is sourced from the
company's captive power plant at Renusagar, located at a distance of about 45 km from
Renukoot. It has a captive capacity of 820.2 mw.

Besides the integrated complex at Renukoot, Hindalco's other manufacturing facilities are
situated at locations across the country. While the captive bauxite mines are located in
western and eastern India, the alumina refineries are located in Belgaum in southern India
and Muri in eastern India.
Smelters are located at Hirakud, Orissa, with a captive power plant and coal mines, and at
Alupuram, Kerala. Rolled product manufacturing facilities are located at Belur and Taloja,
and an extrusion plant is situated at Alupuram. Foil plants are based in the Union Territory of
Silvassa and in Kalwa, Maharashtra. The foil plant at Kollur, Andhra Pradesh is the only
remaining entity with the erstwhile Indal after the merger of Indal with Hindalco. The wheel
plant of Hindalco is also located at Silvassa.
The company has two R&D centres: the Belgaum Research and Development Centre in
Belgaum, Karnataka and Taloja Research and Development Centre in Taloja,
Maharashtra. They have been recognized by the Government of India's Department of
Scientific and Industrial Research (DSIR).
Hindalco is a leading domestic player in two non-ferrous metals business segments-
Aluminium and Copper.
The Aluminium division's product range includes alumina chemicals, primary Aluminium
ingots and billets, wire rods, rolled products, extrusions, foils and alloy wheels.
The company has a significant market share in all the segments in which it operates. It enjoys
a domestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products,
20 per cent in extrusions, 44 per cent in foils and 31 per cent in wheels.
As a step towards expanding the market for value-added products and services, Hindalco has
launched several brands in recent years, which include Aura for alloy wheels, Freshwrapp for
kitchen foil and Ever last for roofing sheets. Our exclusive showroom, The Aluminium
Gallery, seeks to promote Hindalco products to its customers. It is a platform for the
company to showcase quality products to a quality audience in an appropriate ambience. The

exhibits include products like windows, doors, furniture, ladder, roofing sheets and ceiling
and cladding panels.
Hindalco's products are well received not only in the domestic market, but also in the
international market. The company's metal is accepted for delivery under the high-grade
aluminium contract on the London Metal Exchange (LME). The company exports about 17%
of its total sales volume of Aluminium.
The company's alumina chemical business is a leader in manufacturing and marketing of
speciality alumina and alumina hydrate products in the country. It has a market share of 90
per cent in the country. These speciality products find wide usage in diversified industries
including water treatment chemicals, refractories, ceramics, cryolite, glass, fillers and
plastics, conveyor belts and cables, among others. The company also exports these alumina
chemicals to over 30 countries covering North America, Western Europe and the Asian
region.
Birla Copper, Hindalco's copper division at Dahej in Gujarat, enjoys a leadership position in
India, having built over 40 per cent of the domestic market share within three years of its
commissioning. It has also made successful forays into the export markets of the Middle East,
Southeast Asia, China, Korea and Taiwan.
The copper plant produces world-class copper cathodes, continuous cast copper rods and
precious metals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic
fertilizers and phospho-gypsum are also produced at this plant.
Some recent milestones:

• In March 2005, the company entered into a MoU with the Government of Jharkhand to
set up aluminium smelter and captive power plant in the state.
• In April 2005, the company entered into MoUs with the Orissa and Jharkhand
governments for setting up a Greenfield alumina facility and aluminium facility
respectively, in the states.
• In April 2005, the company signed a MoU to establish a world-class integrated
aluminium project in the state of Orissa.
• In September 2005, the company split its shares in ratio of 10:1 in order to enhance
liquidity and to encourage participation from retail investors.
• In January 2006, the company concluded 4:1 rights issue of its shares on partly paid
basis. It was the largest ever rights issue in the history of corporate India and first one to
issue partly paid instruments.
• In March 2006, the company acquired an aluminium rolling mill and wire rods facility,
from Asset Reconstruction Company (India) Limited (ARCIL), belonging to Pennar
Aluminium Company Limited.
• In May 2006, the company's copper mining subsidiary Aditya Birla Minerals Limited
(formerly Birla Mineral Resources Pty Ltd.) came out with an equity offering and
subsequent listing on the Australian Stock Exchange (ASX).
• In May 2006, the company signed a MoU with the Government of Madhya Pradesh
for setting up a Greenfield aluminium smelter and a captive power plant. The company
also entered into a joint venture with Essar Power (M.P.) Ltd. to develop and operate
coalmines at Mahan, Madhya Pradesh. The joint venture will supply coal to the proposed
aluminium smelter and power complex in Madhya Pradesh.
• In May 2007, Novelis became a Hindalco subsidiary with the completion of the
acquisition process. The transaction makes Hindalco the world's largest aluminium rolling
company and one of the biggest producers of primary aluminium in Asia, as well as being
India's leading copper producer.
Products and Brands of HINDALCO
Key Products and Locations Capacities Country

Brands
Hindalco Industries Ltd.
Alumina Chemicals Renukoot (Uttar Pradesh), 1,160,000 tpa India
Muri (Jharkhand), Belgaum
(Karnataka)
Primary Aluminium Renukoot, Hirakud (Orissa), 489,000 tpa

Taloja
Extrusions Renukoot, Alupuram 27,700 tpa
Rolled Products Belur (West Bengal), Taloja 200,000 tpa

(Maharashtra), Renukoot,
Mauda (Maharashtra)
Wire Rods Renukoot, Alupuram (Kerala) 64,400 tpa
Aluminium Foil Silvassa (Dadra & Nagar 11,000 tpa

Haveli), Kalwa (Maharashtra)
Aluminium Wheels Silvassa (Dadra & Nagar 300,000 pcs

Haveli)
For Taloja recycling plant
Indal (subsidiary of Hindalco)
Foil Rolling Kollur (Andhra Pradesh) 4,000 tpa
Key Products and Locations Capacities Count

Brands ry
Birla Copper (Hindalco Industries Ltd.)
Copper Cathodes Dahej (Gujarat) 500,000 tpa India
Continuous Cast Copper 97,200 tpa
Rods
Sulphuric Acid 1,670,000 tpa
Phosphoric Acid 180,000 tpa
Gold (Birla Gold) 15 mt
Silver (Birla Silver) 150 mt
Power 135 mw
DAP and Complexes (Birla 400,000 tpa
Balwan)
Hindalco Industries Ltd. (Aditya Birla Minerals Resources Pty. Ltd.)
Copper Cathodes Nifty mines 25,000 tpa Australi
a
Copper in concentrate Mt. Gordon mines 40,000 tpa Australi
a
Power Mt. Gordon mines 28 mw Australi
a
Key Products and Brands Capacities Country
Aditya Birla Nuvo Ltd (Hi-Tech Carbon)
Carbon Black Birla Carbon 2,30,000 mtpa India
Thai Carbon Black Co. Ltd.
Carbon Black Birla Carbon 220,000 mtpa Thailand
Alexandria Carbon Co. S.A.E
Carbon Black Birla Carbon 285,000 mtpa Egypt
Liaoning Birla Carbon Co. Ltd.
Carbon Black Birla Carbon 55,000 mtpa China

Grasim Industries Ltd.
White Cement Birla White 475,000 tpa India
Grey Cement UltraTech 13.12 mn tpa
Cement
(formerly Birla
Plus), Birla
Super
Shree Digvijay
Grey Cement Kamal 1.08 mn tpa
UltraTech Cement Ltd.
Ordinary Portland Cement, 17 mn tpa
Portland Blast Furnace Slag
Cement, Portland Pozzolana
Cement and Grey Portland
Cement

Indo Gulf Fertilizers Ltd.
Urea Birla Shaktiman 864,600 mt India
Birla Copper (Hindalco Industries Ltd.)
DAP/NPK Birla Balwan 400,000 tpa India
Complexes

Aditya Birla Insulators
Insulators 38,800 tpa India

Pulp
Rayon Grade Pulp 70,000 tpa India
AV Cell Inc.
Softwood / Hardwood Pulp 122,500 tpa Canada
AV Nackawic Inc.
Dissolving Pulp 189,000 tpa Canada
Fibre
Viscose Staple Fibre Birla Viscose 270,100 tpa India
(VSF)
Thai Rayon Public Company Ltd.
VSF Birla Viscose 110,000 tpa Thailand
PT Indo Bharat Rayon
VSF Birla Viscose 155,000 tpa Indonesia
Thai Acrylic Fibre
Acrylic Fibre Texlan 100,000 tpa Thailand
Alexandria Fiber Company, S.A.E
Acrylic Fibre 18,000 tpa Egypt
Yarn
Aditya Birla Nuvo Ltd.
Viscose Filament Ray One 16,400 tpa India
Yarn
Aditya Birla Nuvo Ltd. (Jaya Shree Textiles)
Flax Yarns 15,340 spindles India
Worsted Yarns 25,548 spindles
PT Indo Liberty Textiles
Rayon Yarn, 45,120 ring spindles Indonesia
Polyester, Blended
Yarn
PT Elegant Textile Industry
Rayon, Polyester, 168,088 spindles Indonesia
Rayon-Polyester
Blended Spun Yarn
PT Sunrise Bumi Textiles
Viscose Rayon, Polyester Viscose, Spun 89,376 spindles Indonesia
Polyester, Polyester Combed Cotton, Anti Pill
Yarn, Sewing Thread, High Twist Yarn,
Reverse Twist Yarn, Flame Retardant Yarn,
Rayon Cotton Blended Yarn, Micro Denier
Polyester Rayon Yarn, Rayon Silk Yarn, Slub
Yarn, Lycra Core Spun Yarn
Indo Phil Acrylic Manufacturing Corporation
High Bulk Acrylic Dyed Yarn, Non-bulk 3,700 mtpa Philippines
Acrylic Dyed Yarn
Indo Phil Textiles Mills Inc
Poly Viscose Blended Yarn, Poly Cotton 13,500 mtpa Philippines
Blended Yarn, Polyester Yarn
Indo Phil Cotton Mills Inc
Cotton Yarn 10,000 mtpa Philippines
Indo Thai Synthetics Co. Ltd.
Synthetic Yarns 98,568 spindles Thailand
Fabrics
Fabric -Polyester, Viscose, Silk and Wool 146 looms India
Blends
Uncrushables, Ice Touch, Purista, and Clean 18 million meters
Fab
Pure Linen and Linen Linen Club 107 looms India
Blends
Flame Retardent Pyroguard
Fabrics
Branded apparel
Aditya Birla Nuvo Ltd. (Madura Garments)
Ready-to-wear Louis Philippe, India
Garments Allen Solly
Van Heusen, Peter
England
Grasim Industries Ltd. (Vikram Ispat)
Sponge Iron (HBI & DRI) 900,000 tpa India
Essel Mining & Industries Ltd
Iron and Manganese ore 15 million tons India

Caustic Soda 258,000 tpa India
Caustic Soda 82,125 tpa India
Liquid Chlorine 50,340 tpa
Hydrochloric Acid 5,475 tpa
Tanfac Industries Ltd.
Aluminium Fluoride 17,000 tpa India
Hydrofluoric Acid 17,000 tpa
Bihar Caustic and Chemicals Ltd.
Caustic Soda Lye 92,750 mt India
Liquid Chlorine 65,785 mt
Hydrochloric Acid 29,040 mt
Sodium Hypochlorite 1,800 mt
Compressed Hydrogen 17,42,400 nm3
Aluminium Chloride 12000 tpa
Captive Power Plant 30 mw
Aditya Birla Chemicals (Thailand) Ltd.
Sodium Polyphos Thailand
Triployphosphates, Epotec
Tetrasodium Birlasulf-SS,
Pyrophosphate, Birlasulf-
sodium SM,
Hexametaphosphate, Birlasol 35
Sodium Acid
Pyrophosphate,
Monosodium Phosphate,
Disodium Phosphate,
Trisodium Phosphate,
Speciality Phosphates
Epoxy Resins (bis-a and

bis-f), Diluents, Curing
Agents
and Allied Products
Sodium Sulphite, Sodium

Metabisulphite,
Sodium Bisulphite
Epichlorohydrin
Caustic Soda
Chlorine
Thai Peroxide Co. Ltd.
Hydrogen Peroxide, Encare, 15,000 mtpa Thailand
Peracetic Acid, Calcium Ecare, Aqua-
Peroxide x,
Birlox 5,
Birlox 12,
Ocare
PT. Indo Raya Kimia
Carbon Disulfide 50,000 tpa Indonesia
Pan Century Surfactants Inc.

Fatty Acids 55000 mtpa Philippines
Fatty Alcohol 30000 mtpa
Glycerin 6500 mtpa
PSI Data Systems Ltd. (subsidiary of Aditya Birla Nuvo Ltd.)
IT Solutions (Banking, Finance and India

Insurance)
Aditya Birla Minacs Worldwide Limited (subsidiary of Aditya Birla Nuvo Ltd.)
BPO / ITES 9,089 seats India

Birla Global Finance Company Ltd.
Financial Services India
Birla Sun Life Insurance Company Ltd.
Insurance Solutions India
Birla Sun Life Asset Management Company Ltd.
Mutual Funds India
Birla Sun Life Distribution Company Ltd.
Investment Planning Services India
Birla Insurance Advisory Services Ltd.
Non-life Insurance Advisory Services India
Idea Cellular
Cellular Services Idea 21 million subscriber base India
Aditya Birla Retail Limited

Multi-format Stores More 170 retail outlets India
Sources: Through the website www.hindalco.com/www.adityabirla.com
Hindalco Product Range

1) -
2) -
3) - 4) -
5) -
Primary Aluminium Alloy ingots

Billets Slab Aluminium sheet
Ingots
6) - 7) -
8) - 9) - 10) -
Wire rods sheet Circle
Alloy Wheel Watch Blister Pack
11) - 12) -
13)
-
14)-
Ladder Door
Handle
Can
Hindalco Products
• Everlast aluminium roofing sheets
• Freshwrapp aluminium foil
• Freshpakk semi-rigid containers
• Permashield waterproofing
• Aluminium foil
• Aura alloy wheels
• Hindalco extrusions
What is International Marketing?

International marketing is simply the application of marketing principles to more than one
country. However, there is a crossover between what is commonly expressed as international
marketing and global marketing, which is a similar term. For the purposes of this lesson on
international marketing and those that follow it, international marketing and global marketing
are interchangeable.
The intersection is the result of the process of internationalisation. Many American and
European authors see international marketing as a simple extension of exporting, whereby the
marketing mix is simply adapted in some way to take into account differences in consumers
and segments. It then follows that global marketing takes a more standardized approach to
world markets and focuses upon sameness, in other words the similarities in consumers and
segments.
“At its simplest level, international marketing involves the firm in making one or more
marketing mix decisions across national boundaries. At its most complex level, it involves
the firm in establishing manufacturing facilities overseas and coordinating marketing
strategies across the globe.”
Doole
and Lowe (2001)
International Marketing is the performance of business activities that direct the flow of a
company's goods and services to consumers or users in more than one nation for a profit.
International marketing is the application of marketing orientation and marketing capabilities
to international business.
If the exporting departments are becoming successful but the costs of doing business from
headquarters plus time differences, language barriers, and cultural ignorance are hindering
the company’s competitiveness in the foreign market, then offices could be built in the
foreign countries. Sometimes companies buy firms in the foreign countries to take advantage
of relationships, storefronts, factories, and personnel already in place. These offices still
report to headquarters in the home market but most of the marketing mix decisions are made
in the individual countries since that staff is the most knowledgeable about the target markets.
Local product development is based on the needs of local customers. These marketers are
considered polycentric because they acknowledge that each market/country has different
needs.
What is Global Marketing?

Global marketing refers to marketing activities coordinated and integrated across multiple
country markets.
Johansson
(2000)
Global/transnational marketing focuses upon leveraging a company's assets, experience and
products globally and upon adapting to what is truly unique and different in each country.
The Oxford University Press defines global marketing as “marketing on a worldwide scale
reconciling or taking commercial advantage of global operational differences, similarities and
opportunities in order to meet global objectives.”
When a company becomes a global marketer, it views the world as one market and creates
products that will only require weeks to fit into any regional marketplace. Marketing
decisions are made by consulting with marketers in all the countries that will be affected. The
goal is to sell the same thing the same way everywhere.

Global marketing: Advantages and Disadvantages
Advantages
• Economies of scale in production and distribution
• Lower marketing costs
• Power and scope
• Consistency in brand image
• Ability to leverage good ideas quickly and efficiently
• Uniformity of marketing practices
• Helps to establish relationships outside of the "political arena"
• Helps to encourage ancillary industries to be set up to cater for the needs of the
global player
Disadvantages
• Differences in consumer needs, wants, and usage patterns for products
• Differences in consumer response to marketing mix elements
• Differences in brand and product development and the competitive environment
• Differences in the legal environment, some of which may conflict with those of the home
market
• Differences in the institutions available, some of which may call for the creation
• Differences in the institutions available, some of which may call for the creation of
entirely new ones
• Differences in administrative procedures
Differences in product placement
Developing A Marketing Plan

Once you have decided that your company is able and committed to exporting, the next step
is to develop a marketing plan.
Marketing Strategy Benefits

A clearly written marketing strategy offers six immediate benefits:
1. Because written plans display strengths and weaknesses more readily, they are a great
help in formulating and polishing an export strategy.
2. Written plans are not easily forgotten, overlooked, or ignored by those charged with
executing them. If deviation from the original plan occurs, it is likely to be due to a
deliberate and thoughtful choice.
3. Written plans are easier to communicate to others and are less likely to be misunderstood.
4. Written plans allocate responsibilities and provide for an evaluation of results.

5. Written plans are helpful when seeking financial assistance. They indicate to lenders that
you have a serious approach to the export venture.
6. Written plans give management a clear understanding of what will be required of them
and thus help to ensure a commitment to exporting. Actually, a written plan signals that
the decision to export has already been made.
Building an international business takes time. It usually takes months, sometimes even
several years, before an exporting company begins to see a return on its investment of time
and money. By committing to the specifics of a written plan, top management can make sure
that the firm will finish what it begins and that the hopes that prompted its export efforts will
be fulfilled.
Market Research
To successfully export our product, we should examine foreign markets through research.
The purpose is to identify marketing opportunities and constraints abroad, as well as to
identify prospective buyers and customers.
Market research encompasses all methods that a company can use to determine which foreign
markets have the best potential for its products. Results of this research inform the firm of:
the largest markets for its product, the fastest growing markets, market trends and outlook,
market conditions and practices, and competitive firms and products.
Firm may begin to export without conducting any market research if it receives unsolicited
orders from abroad.
A firm may research a market by using either primary or secondary data resources. In
conducting primary market research, a company collects data directly from the foreign
marketplace through interviews, surveys, and other direct contact with representatives and
potential buyers. Primary market research has the advantage of being tailored to the
company's needs and provides answers to specific questions, but the collection of such data is
time-consuming and expensive.
When conducting secondary market research, a company collects data from various sources,
such as trade statistics for a country or a product. Working with secondary sources is less
expensive and helps the company focus its marketing efforts. Although secondary data
sources are critical to market research, they do have limitations. Yet, even with these
limitations, secondary research is a valuable and relatively easy first step for a company to
take. It may be the only step needed if the company decides to export indirectly, since the
intermediary firm may have advanced research capabilities.
Methods of Market Research

Because of the expense of primary market research, most firms rely on secondary data
sources. The three following recommendations will help us obtain useful secondary
information:
1. Keep abreast of world events that influence the international marketplace, watch for
announcements of specific projects, or simply visiting likely markets. For example, a
thawing of political hostilities often leads to the opening of economic channels between
countries.
2. Analyze trade and economic statistics. Trade statistics are generally compiled by product
category and by country. These statistics provide the U.S. firm with information
concerning shipments of products over specified periods of time. Demographic and
general economic statistics, such as population size and makeup, per capita income, and
production levels by industry can be important indicators of the market potential for a
company's products.
3. Obtain advice from experts. There are several ways of obtaining this advice:
•Contact experts at the U.S. Department of Commerce and other government agencies.
•Attend seminars, workshops, and international trade shows.
•Hire an international trade and marketing consultant.
•Talk with successful exporters of similar products.

•Contact trade and industry association staff.
A Step-by-Step Approach to Market Research

It involves screening potential markets, assessing the targeted markets, and drawing
conclusions.
A. Screen Potential Markets

• Step 1:- Obtain export statistics that indicate product exports to various countries.
Published export statistics provide a reliable indicator of where U.S. exports are currently
being shipped. The U.S. Census Bureau provides these statistics in a published format.
Trade statistics also can be obtained using the National Trade Data Bank (NTDB).
• Step 2:- Identify five to ten large and fast-growing markets for the firm's product. Look at
them over the past three to five years. Has market growth been consistent year to year?
Did import growth occur even during periods of economic recession? If not, did growth
resume with economic recovery?
• Step 3:- Identify some smaller but fast-emerging markets that may provide ground-floor
opportunities. If the market is just beginning to open up, there may be fewer competitors
than in established markets. Growth rates should be substantially higher in these countries
to qualify as up-and-coming markets, given the lower starting point.
• Step 4:- Target three to five of the most statistically promising markets for further
assessment. Consult with a Department of Commerce Export Assistance Center, business
associates, freight forwarders, and others to further evaluate targeted markets.
B. Assess Targeted Markets

• Step 1:- Examine trends for company products as well as related products, that could
influence demand. Calculate overall consumption of the product and the amount
accounted for by imports. The National Trade Data Bank (NTDB) and the National
Technical Information Service (NTIS) offer Industry Sector Analyses (ISAs), Country
Commercial Guides (CCGs), and other reports that give economic backgrounds and
market trends for each country. Demographic information (such as population and age)
can be obtained from World Population (Census) and Statistical Yearbook (United
Nations).
• Step 2:- Ascertain the sources of competition, including the extent of domestic industry
production and the major foreign countries the firm is competing against in each targeted
market by using ISAs and competitive assessments. This information is available from
the NTDB and the NTIS. Look at each competitor's U.S. market share.
• Step 3:- Analyze factors affecting marketing and use of the product in each market, such
as end-user sectors, channels of distribution, cultural idiosyncrasies, and business
practices. Again, the ISAs and Customized Market Analyses (CMAs) offered by the
Department of Commerce are useful.
• Step 4:- Identify any foreign barriers (tariff or nontariff) for the product being imported
into the country. Identify any U.S. barriers (such as export controls) that affect exports to
the country.
• Step 5:- Identify any U.S. or foreign government incentives that promote exporting of
your particular product or service.
C. Draw Conclusions
After analyzing the data, the company may conclude that its marketing resources would be
applied more effectively to a few countries. Exporting to one or two countries will allow the
company to focus its resources without jeopardizing its domestic sales efforts. The company's
internal resources should determine its level of effort.
What is Export?
Export is the provision of goods, services or knowledge across national and international
boundaries.
Australia offers a wide range of goods and services to the world's markets. Export products
include manufactures, computer software, business consultancies, education services and
technology transfer.
Exporting of goods from Australia is controlled by laws and government policies. Goods may
not be exported unless all the necessary export permits have been obtained from the relevant
agency. The federal, state and territory governments provide a wide range of services to new
exporters including advice and information about getting into exporting and assistance on the
ground in foreign markets.
Types of Export
Export is divided into two main types: direct and indirect exports
Direct exports
Direct exports are transactions where exporters enter into direct relationships with importers
overseas and negotiate a contract for the sale of goods and services. Alternatively, exporters
may use a commission agent in the overseas market to solicit orders and generally represent
the exporter's interests. The agent is paid by means of a commission on the value of orders
obtained.
Indirect exports
Indirect exports are transactions arranged in Australia through local merchants or the
Australian-based branch of an overseas company. Sales are negotiated with a trader in the
exporter's country with payment made in local currency from the trader's office.
For example, a Japanese trading house in Victoria arranges the contract for the supply of a
particular product for the Japanese market. In such cases, payment will probably be made in
Australian dollars.
The Benefits of Export

The benefits of exporting products and/or services include:
Development of Additional Sales

For most companies, exporting is a logical way of expanding sales when the domestic market
has been fully developed.
Optimizing Prices
We may be able to achieve a much higher price for exported goods than is possible on the
domestic market.
Maximizing Resources
Expansion into overseas markets can be an excellent way of increasing production with
corresponding economies of scale in plant utilization and raw material purchases.
Levelling Seasonal Demand

Marketing internationally, especially in both northern and southern hemispheres, can achieve
an overall levelling of seasonal demand for products like summer and winter clothing, sports
equipment, heating and cooling equipment etc.
Distribution of Market Risk

A company can protect itself from the risk of a downturn in any one particular market by
operating in a number of different markets, both domestic and overseas.
Increased Competitive Advantage

An improvement in product and service will usually flow from exposure to international
competition. This in turn will lead to an increased competitive advantage in both the
international and domestic areas.
Improved Morale
Being part of an internationally successful company will boost staff morale, particularly if the
contribution of all staff members is recognized as an integral part of the company's
international success.
Capitalization of A Unique Product or Technology

A unique product, service or technology that's difficult to sell on the domestic market may be
easier to sell overseas.
A Proactive Measure to Combat Foreign Competition

It's possible to neutralize overseas competitors in the domestic market by exporting to the
overseas competitor's market.
The Risks From Export

It is not possible to eliminate risk from export transactions. The development of export
markets must be regarded as a long-term investment and companies should not expect an
immediate return on the time and capital they invest. Banks, accountants, export consultants
and government agencies can advise on ways of minimizing financial risks and exporters are
encouraged to use external advice to supplement their own skill base.
A risk management strategy developed as part of exporter export business plan will help
identify risks to your export business and provide a strategy to minimise and handle those
risks should they occur.
There are a number of different types of risks that exporter should consider, including:
• Financial
• Intellectual property
• Increased insurance claims
• Inadequate resources
➢ Financial risks
A. Failure to Pay
Be aware that there's a series of international payment terms ranging from totally secure
(exporter paid before goods are dispatched) to minimum security (exporter send the goods
and wait for payment). Which particular term is used is negotiable between the buyer and
seller when entering into a contract.

B. Cash Flow
Export will have a significant effect on the cash flow cycle of exporter business. It's not
always possible to negotiate payment in advance of or immediately after shipment. This may
lead to a considerable delay in receiving payment for goods and result in a cash flow
problem. Alternatively, if favourable terms are available, export can have a very positive
effect on the cash flow cycle.
C. Foreign Currency Risk

If export contracts are written in foreign currencies, fluctuations in rates of exchange can
result in financial loss. This risk can be avoided by quoting in Australian dollars or, if this
isn't acceptable to the overseas buyer, by taking forward exchange cover with the bank.
D. Inadequate Working Capital

Exporters may need additional working capital to purchase the raw materials and other
components they require to produce goods for export. Access to adequate pre-shipment
finance is crucial to export success. There are risks involved in over-borrowing and firms
must ensure that they can fully service the additional borrowings export may entail.
➢ Intellectual Property
Inexperienced exporters are vulnerable to the risk of losing intellectual property. The legal
systems in some countries do not afford the same level of protection for intellectual property
rights, as does the Australian system.
The cost of patenting a product or registering a trademark internationally can be substantial,
as can the defence of patents or trademarks if they are infringed.
Exporters should also ensure that their product does not infringe the intellectual property
rights of other companies already operating in the marketplace.

➢ Increased Insurance Claims
Transport over long distances with repeated handling can increase the risk of cargo damage.
Freight forwarders can advise on the best methods of packing and transport to prevent
damage and reduce the risk of claims.
Unethical trading partners may use spurious claims to achieve a discount on price. In such
circumstances it is advisable to obtain inspection certificates from cargo surveyors to prove
quality standards at the point of loading.
Given the increasing trend toward litigation, exporters are now more vulnerable to product
liability claims in the overseas market. Exporters must consider the difficulty of obtaining
adequate product liability insurance and the cost of such cover.
It is also important to consider the warranty, continuing technical update of products, spare
parts supplies, servicing of equipment etc that may be required to support export sales. All
these factors will affect the ongoing market acceptance of the product or service and its price
in the market place.
➢ Inadequate Resources
A business seeking to enter the international marketplace must ensure that it has adequate
resources, including raw materials, components and human and financial resources to meet
the export requirement. If these resources aren't available and part of the export work needs
to be subcontracted, the business runs the risk of losing control of quality or of spending time
and money on constant supervision.
Why we should Export?

There are many reasons for a country to export, some of these are:
• It provides valuable foreign exchange to country.
• It is one of the measures of country’s economic growth.
• To control over balance of payments.

• For employment generation.
• For poverty alleviation.
• It provides shield against demand fluctuations in domestic market.
• For import of capital goods at 0% duty.
• Prepares ourselves for duty free regime.
• For capacity utilization.
• To get the working capital loan at low rate of interest.
• In line with company’s & country’s image.
How to Export?
Golden Rule: In order to be successful in exporting one must fully research its markets.
No one should ever try to tackle every market at once. Many enthusiastic persons bitten by
the export bug fail because they bite off more than they can chew. Overseas design and
product requirements must be carefully considered.
Always sell as close to the market as possible. The fewer intermediaries one has the better,
because every intermediary needs some percentage for his share in his business, which means
less profit for the exporter and higher prices for the customer. All goods for export must be
efficiently produced. They must be produced with due regard to the needs of export markets.
It is no use trying to sell windows which open outwards in a country where, traditionally,
windows open inwards.
Sell Experience: If a person cannot easily export his goods, may be he can sell his
experience. Alternatively, he can concentrate on supplying goods and materials to exporters'
who already have established an export trade. He can concentrate on making what are termed
'own brand' products, much demanded by buyers in overseas markets which have the
manufacturing know-how or facilities.
Selling in Export: In today's competitive world, everyone has to be sold. The customer
always has a choice of suppliers. Selling is an honorable profession, and you have to be an
expert salesman.
On-Time Deliveries: Late deliveries are not always an exporters fault. Dock strikes,
go-slows, etc. occur almost everywhere in the world. If one enters into export for the first
time, he must ensure of fast and efficient delivery of the promised consignment.
Communication: Communication internal and external must be comprehensive and
immediate. Good communication is vital in export. When you are in doubt, pick up the phone
or email for immediate clarification.
Testing Product: The risk of failure in export markets can be minimized by intelligent
use of research. Before committing to a large-scale operation overseas, try out on a small
scale. Use the sample test, and any mistakes can then be corrected without much harm having
been done. While the test campaign may appear to cost more initially, remember that some of
the cost will be repaid by sales, so that test marketing often turns out to be cheaper.
Approach: If possible some indication of the attitudes towards the product should be
established, like any sales operation. Even if the product is successful, to obtain reactions
from the customer.
Advantages of Export
• The income from export business is exempted to the specified extent under the
Income Tax Act, 1961.
• Refund of central excise and custom duty on export is also made under the Duty
Drawback Scheme of the Government.
• There is no sales tax on products meant for exports.

• Duty free import of raw materials is allowed under various schemes of Ministry of
Commerce.
• Foreign exchange regulations have been substantially liberalized for exporters.
• Liberal release of foreign exchange is made available for travel abroad.
• Norms for establishing offices abroad by the exporters have been eased.
• Export credit is also available to the exporters at confessional rates of interest.
• Transport subsidy is given for export by air as well as rail.
• Import policy has also been liberalized substantially for export oriented importers.
Export Marketing Plan

An export marketing plan is step-by-step guide to strategy implementation. It addresses
strategic issues and outlines the corresponding operational action to be taken. It specifies
targets for each step. The plan should answer all questions on how the export firm’s strategy
is to be implemented and direct the enterprise in attaining the strategic objective.
A typical export marketing plan focuses on the following aspects:

• Marketing objectives
• Market segmentation and positioning,
• Market research,
• Characteristics of the product line,
• Export pricing,
• Distribution channels, and
• Promotional strategies.
Some Practical Suggestion

• The exporters should innovate new product designs, strategies and promotional
policies to improve the level of exports. This helps them to make ‘value rich offers’
that are better than the best.
• The exporter should aim at a Market Niche rather than at the mass market.
• Exporters should know the key buyers in the target market.
• Exporters should choose their markets carefully. The choice of market can make the
difference between success and failure in exporting.
• Exporters should clarify their motives for exporting and set their objectives at the
outset. They should know why they want to export and set their goals.
• Exporters should consider export market development a long-term investment.
Sustained efforts are essential in export marketing.
• Planning and strategy development are essential for success in the long run in export
trade.
• The export firm should have the requisite technical expertise, in addition to careful
planning and suitable products.
• No enterprise should seek entry an export market until it is ready. Any attempt at
exporting without experience in domestic marketing is bound to fail.
• The responsibility for the export effort should be assigned to a key staff member,
usually known as export manager.
Tips For Export Marketing

1. Select the product and the target market on the basis of desk research even before
considering exporting.
2. Once a market has been decided upon, the entrepreneur should carry out in-depth
study of the target market.
3. The aim of the first visit to foreign market should not be to do business or looking for
orders. Rather, the visit should be used to improve the preparation for entering the
market.
4. Evaluate all the information collected and then formulate a marketing strategy and
develop a marketing plan.
5. Gaining foothold in foreign markets can only be effective on a long term basis. Thus,
the entrepreneur should have the strong financial base.
6. The foreign buyers can’t afford to loose face and credibility by deterioration in quality
or alternatives to price and/or late deliveries. It is important to understand the
requirement of the foreign buyers before marketing commitments.
7. In exports, consumers are quality and price conscious in a market which enjoys large
and varied supplies. Success or failure in business will depend upon understanding
this sensitivity of the foreign buyer. The entrepreneur should adopt a consumer
oriented approach to manufacturing and selling.
8. International markets are trend sensitive. Designs frequently change and products may
not remain in demand. It is therefore, necessary to be aware of this trend and efforts
should be made to keep up-to-date with the market trends.
9. Foreign markets, particularly in the developed countries, are often highly segmented
into different age and income groups. The exporter should select the right market
segment and accordingly position the product in the market.
Process of Export Management

The process of export management is essentially the process of planning, scheduling and
controlling the complex of non-routine activities that must be completed to secure the export
orders and to ensure the timely shipment of goods. The managerial process involved in export
management relates to the following three activities:
1. Planning
2. Scheduling, and
PLANN
SCHEDU
CONTROL
ING
LING
LING
3. Controlling
Fig 1: Process of Export Management
1. Planning
Planning refers to taking various decisions involved in export business. This relates to
procurement of export orders and their timely and successful execution. Planning for export
order would involve making concerted efforts supported by proper market entry strategies to
get the export order.
2. Scheduling
Scheduling refers to deciding the logistics for execution of export order. This is
primarily concerned with implementation and monitoring of export order. This involves
defining in detail the various jobs/activities, the nature of those jobs/activities (parallel or
sequential), expected time frame for completion of those jobs/activities and fixing
responsibility for completion.
3. Controlling
It seeks to ensure whether the activities planned have been completed on time or not
and whether the various schedules drawn up for execution of those orders have been followed
or not. A system of reporting should be developed and implemented in every export
organization to ensure proper control of various activities involved in execution of export
orders.
EXPORT CYCLE
The various activities/stages involved in planning and execution of an export order are
performed in a sequential manner. Therefore, the activities/stages are viewed as different
links in the chain of a cycle called export cycle. The export cycle is divided into three phases:
a. Planning for exports
b. Implementation and monitoring of an export order
c. Post exports follow up action.

Implementation
Planning
Post-export
Co- follow-
for
& Monitoring
ordinatio
up
of Export
action
Exportsorder
n
Fig. 2: Export Cycle
A. Planning for Exports

Planning for exports involves the following activities namely,
1. Understanding the international trade environment
2. Setting up an export firm/organization structure
3. Identification of export opportunities
4. Procurement of export order, negotiation and confirmation.
B. Implementation and Monitoring of Export Order

This represents the second phase in the export cycle and involves the following activities:
1. Development of logistics for execution of export order
2. Export financing arranging pre-shipment finance
3. Procurement of goods/supplies-domestic procurement and imports
4. Labeling, packaging, packing and marking
5. Pre-shipment inspection
6. Export risks-identification, quantification and management
7. Pre-shipment documentation
8. Shipment of good-central excise and customs clearance and transportation
9. Compliance with exchange control regulations
C. Post Export Follow-up Action

Once the shipment of goods has been sent, export manager should take the necessary follow-
up action. This would involve the following steps:
1. Negotiation of documents with the bank to realize payment against the port shipment,
2. Arranging post shipment finance
3. Claiming incentives/facilities
4. Maintaining liaison with the importer
5. Settlement of disputes, if any.
Planning for Execution of the Export Order

Planning for the execution of the export order involves the following steps:
Step 1:- Acknowledgement of the Export Order

First of all, the exporter should send a letter of thanks to the foreign buyer for placing the
order.
Step 2:- Constitution of Team of Executives

The exporter should treat each export order as a separate project and constitute a team of
executives drawn from the marketing, production, finance and accounts, shipping, quality
control departments etc. to implement the order. One of the executives should be made the
Team Leader to coordinate with all the departments and external agencies involved in the
execution of the order.
Step 3:- Scrutiny of the Export Order

The careful scrutiny of the order in respect of its following aspects by the team of executive
appointed to observe the implementation:
i. The order has been received for the product for which quotation/offer was sent and the
exporter is still in a position to supply the product.

ii. Sizes and specifications should be same as per the offer and quotation.
iii. Pre-shipment inspection by Export Inspection Agency is required; the buyer should be
informed about the inspection scheme.
iv. Payment terms are the same as stipulated/negotiated. If the payment is by means of an
irrevocable Letter of Credit, it should be ensured that such an irrevocable letter of credit
(L/C) has been opened and its terms & conditions have been clearly understood by the
exporter and are also acceptable to him/her.
v. Special packaging, labeling and marketing requirements, if any, should be noted for
compliance.
vi. Shipment and delivery date is in conformity with the exporter’s production plan and
whether:
a. Part shipment is allowed.
b. Transhipment is permissible.
c. Port of shipment/destination is same.
i. Whether insurance is to be done by the exporter or the buyer, and conditions (terms) of
insurance.
ii. Documents required by the buyer. It should be examined as to whether the exporter can
arrange for the documents required by the buyer.
Step 4:- Confirmation of the Export Order
The buyer requires the exporter to confirm the order to him/her. Based on this confirmation
he/she can draw his/her own schedules for supply of goods to his/her customers or plan for
production schedules.
Step 5:- Developing Logistics for Execution of the Order
Logistics refers to the formulation of a detailed plan of action for the implementation of the
export order. This involves identification of the minutest possible activities/jobs that need to
be performed to ensure the successful execution of the order as per its terms and conditions.
This listing of various jobs/ activities should be done as a result of the brain storming sessions
amongst the members of the export team. The team should thus, prepare an Activity Profile
for the order. The Activity Profile should state the following:
a. Name of job/activity.
b. Nature of the activity/job whether it is to be performed sequentially or parallel to some
other activity.
c. Likely time required for the completion. It should be specified as to what would be
earliest start/finish time; the latest start/finish time of the activity and the total time
duration for its completion. This information can used to draw a network diagram to
control the likely delay in the execution of the order and as consequence control the
likely cost escalations.
d. The executive/agency responsible for its completion.
Step 6:- Contents of the Activity Profile
The contents of the Activity Profile are as follows:
1. Determination of materials/supplies required
2. Making arrangement for the procurement of the materials/supplies
3. Arrangements of funds to send the shipment i.e., packing credit from the bank
4. Labeling, packaging, packing and marking of the export consignments
5. Arrangements for ensuring pre-shipment inspection of goods for quality
6. Compliance with the statutory requirements as regards inspection/authentication of

export products
7. Managing the risks involved in the export shipment
8. Appointment of the clearing and forwarding agent
9. Preparing the pre-shipment documents for obtaining central excise and custom
clearance of the export shipment.
10. Compliance with the exchange control requirements

11. Shipment of goods
12. Negotiation of documents
13. Arranging post shipment finance from the bank
Step 7:- Reservation of Shipping Space
The exporter should plan for reservation of the shipping space much in advance in the ship.
The reason is that there is a shortage of shipping space and their frequency is also limited. It
is quite possible that exporter may not be able to obtain the reservation for the timely
shipment of the goods. As far as shipment by sea is concerned, there is not much difficulty in
booking the cargo with the airlines. The reservation can be arranged through the clearing and
forwarding agent. Thus, the exporter should appoint a clearing and forwarding agent at the
initial stages if the shipment is to be sent by sea.
PROCESSING OF AN EXPORT ORDER

Export Order is a document communicating decision of the foreign buyer to purchase
certain item(s) from the exporter. It specifies the description of the item(s), their quantity and
quality specifications, unit price, delivery terms, shipping marks, insurance requirements,
requirements as regards labeling, packing and packaging, payment terms, pre-shipment
inspection requirements, documents required and so on. The Export Order represents an ‘offer
to sell’ made by the exporter and its ‘acceptance’ by the foreign buyer.
Process of Securing Export Order

Generally, the process of obtaining the export order follows the sequence of the steps given
below:
Step 1:- The exporter locates a trade enquiry i.e., he/she comes across the details of a
foreign buyer who is willing to import the item(s). The exporter may get these details through
any of the following ways:
a) Websites of the import firms.

b) Visit to the exporter’s website by an interested foreign buyer.
c) Participation in a trade fair/visit to a trade fair by the exporter.
d) Business promotion visit to a foreign country.
e) Contact with the overseas marketing agent.
f) Contact with a buying agent in the exporter’s country.
g) Exporter’s own retail outlet in the foreign country.
h) Circulation of the trade enquiry by the trade promotion body in the exporter‘s country.
Step 2:- On receipt of the trade enquiry, the exporter sends his/her company profile,
product profile and the promotional literature of his/her product range to know the interest of
the buyer.
Step 3:- The buyer may like to have the details of certain product of his/her choice from the
exporter.
Step 4:- The exporter sends the quotation in respect of the product of interest to the buyer.
This quotation contains the basic details like its FOB price, mode of payment, photograph of
the item along with its specifications and the likely delivery time.
Step 5:- On receipt of this basic information, the foreign buyer puts forward his/her
requirements as regards the design, size, finish or other specifications of the product in view.
Once the product has been identified, then the process of negotiations of the other terms and
conditions begins. It is very likely that these terms and conditions would be negotiated only
as a result of personal meeting between the exporter and the foreign buyer particularly if the
exporter happens to be a new exporter.
Step 6:- The exporter sends the proforma invoice to the foreign buyer setting out in detail
the terms and conditions negotiated between the two parties. This proforma invoice
represents the ‘offer to sell’ made by the exporter.
Step 7:- The importer conveys his/her ‘acceptance’ of the exporter on the proforma invoice
originally sent by the exporter. It is however, not essential for the offer and acceptance to be
on the proforma invoice. These could be in the form of exchange of letters as well.
Terms and Conditions of an Export Order
The following are the standard clauses of an export order:
1. Product and its description
2. Product specifications as regards its quality
3. Price: FOB/CFR/CIF etc., as per INCOTERMS 2000
4. Quantity
5. Payment Terms: D/A, D/P, Letter of Credit, Advance Payment etc.
6. Delivery Schedule: Time Period; Partial/complete dispatch
7. Mode of Shipment: Air/Sea/Road
8. Type of Shipment: Direct/Transhipment
9. Inspection
10. Labeling, Packaging, Packing and Marking requirements
11. Insurance: By exporter/importer
12. Documents required
13. Escalation clause: Sharing of increase in cost
14. Force Majeure clause: Clause providing for excuse of non-performance due to acts of
God.
15. Arbitration Clause: Clause foe settlement of dispute
16. Fines/Penalties
17. Applicability of Law
The exporter and importer hold negotiations with regard to the above points to conclude the
business deal.
EXPORT PRICING, QUOTATIONS AND INCOTERMS

Proper pricing, complete and accurate quotations, choosing the terms of the sale, and
selecting the payment method are four critical elements in selling a product or service
overseas. Of the four, pricing can be the most problematic, even for an experienced exporter.
Pricing Considerations
The price considerations listed below will help an exporter determine the best price for the
product overseas:
• At what price should the firm sell its product in the foreign market?
• What type of market positioning (customer perception) does the company want to
convey from its pricing structure?
• Does the export price reflect the product's quality?
• Is the price competitive?
• Should the firm pursue market penetration or market-skimming pricing objectives
abroad?
• What type of discount (trade, cash, quantity) and allowances (advertising, trade-off)
should the firm offer its foreign customers?
• Should prices differ by market segment?
• What should the firm do about product line pricing?
• What pricing options are available if the firm's costs increase or decrease? Is the
demand in the foreign market elastic or inelastic?
• Are the prices going to be viewed by the foreign government as reasonable or
exploitative?
• Do the foreign country's antidumping laws pose a problem?
As in the domestic market, the price at which a product or service is sold directly determines
a firm's revenues. It is essential that a firm's market research include an evaluation of all of
the variables that may affect the price range for the product or service. If a firm's price is too
high, the product or service will not sell. If the price is too low, export activities may not be
sufficiently profitable or may actually create a net loss.
It is very important that the exporter take into account additional costs that are typically borne
by the importer. They include tariffs, customs fees, currency fluctuation transaction costs and
value-added taxes (VATs). These additional costs can add substantially to the final price paid
by the importer.
Foreign Market Objectives

An important aspect of a company's pricing analysis is determining market objectives. For
example, is the company attempting to penetrate a new market, looking for long-term market
growth, or looking for an outlet for surplus production or outmoded products? Many firms
view the foreign market as a secondary market and consequently have lower expectations
regarding market share and sales volume. This naturally affects pricing decisions.
Marketing and pricing objectives may be general or tailored to particular foreign markets. For
example, marketing objectives for sales to a developing nation where per capita income may
be one tenth of that in the United States are necessarily different from the objectives for
Europe or Japan.
Costs
The computation of the actual cost of producing a product and bringing it to market is the
core element in determining if exporting is financially viable. Many new exporters calculate
their export price by the cost-plus method. In the cost-plus method of calculation, the
exporter starts with the domestic manufacturing cost and adds administration, research and
development, overhead, freight forwarding, distributor margins, customs charges, and profit.
Marginal cost pricing is a more competitive method of pricing a product for market entry.
This method considers the direct, out-of-pocket expenses of producing and selling products
for export as a floor beneath which prices cannot be set without incurring a loss. For example,
additional costs may occur due to product modification for the export market that
accommodates different sizes, electrical systems, or labels. On the other hand, costs may
decrease if the export products are stripped-down versions or made without increasing the
fixed costs of domestic production.
Other costs should be assessed for domestic and export products according to how much
benefit each product receives from such expenditures. Additional costs often associated with
export sales include:
• Market research and credit checks;

• Business travel;
• International postage, cable, and telephone rates;
• Translation costs;
• Commissions, training charges, and other costs involving foreign representatives;
• Consultants and freight forwarders; and
• Product modification and special packaging.
After the actual cost of the export product has been calculated, the exporter should formulate
an approximate consumer price for the foreign market.
Factory price $7.50 $7.50
Domestic freight .70 .70
Final consumer price $14.15 $20.30
Table 1: Calculation of Final Consumer Price
Market Demand
For most consumer goods, per capita income is a good gauge of a market's ability to pay.
Some products may create such a strong demand such as popular goods like Levis, that even
low per capita income will not affect their selling price. The firm must also keep in mind that
currency fluctuations may alter the affordability of its goods. Thus, pricing should try to
accommodate wild changes in the U.S. and/or foreign currency. The firm should anticipate
the type of potential customers. If the firm's primary customers in a developing country are
expatriates or belong to the upper class, a higher price might be feasible even if the average
per capita income is low.
Competition
In the domestic market, few companies are free to set prices without carefully evaluating
their competitors' pricing policies. This situation is true in exporting, and is further
complicated by the need to evaluate the competition's prices in each potential export market.
If there are many competitors within the foreign market, the exporter may have little choice
but to match the market price or even under price the product or service in order to establish a
market share. On the other hand, if the product or service is new to a particular foreign
market, it may actually be possible to set a higher price than in the domestic market.
Pricing Summary
The key points to remember during determining product's price are:
• Determine the objective in the foreign market.
• Compute the actual cost of the export product.
• Compute the final consumer price.
• Evaluate market demand and competition.
• Consider modifying the product to reduce the export price.
• Include "nonmarket" costs, such as tariffs and customs fees.
• Exclude cost elements that provide no benefit to the export function, such as domestic
advertising.
Quotation and Proforma Invoice

Quotations
Many export transactions, particularly initial export transactions, begin with the receipt of an
inquiry from abroad that is followed by a request for a quotation. The preferred method for
export is a pro forma invoice, which a quotation is prepared in invoice format.
A quotation describes the product, states a price for it, sets the time of shipment, and specifies
the terms of the sale and terms of the payment. Since the foreign buyer may not be familiar
with the product, the description of it in an overseas quotation usually must be more detailed
than in a domestic quotation. The description should include the following 15 points:
1. Seller's and buyer's names and addresses.

2. Buyer's reference number and date of inquiry.
3. Listing of requested products and brief description.
4. Price of each item (it is advisable to indicate whether items are new or used and to
quote in U.S. dollars to reduce foreign-exchange risk).
5. Appropriate gross and net shipping weight (in metric units where appropriate).
6. Appropriate total cubic volume and dimensions packed for export(in metric units
where appropriate).
7. Trade discount (if applicable).
8. Delivery point.
9. Terms of sale.
10. Terms of payment.
11. Insurance and shipping costs.
12. Validity period for quotation.
13. Total charges to be paid by customer.
14. Estimated shipping date from U.S. port or airport.
15. Currency of sale.
The Proforma Invoice

A proforma invoice (sometimes written as pro forma invoice) is little more than a 'preadvice'
or indication of what will stand in the commercial invoice once negotiations have been
completed. Indeed, the proforma invoice and the commercial invoice often look exactly the
same, except that it should state clearly "proforma invoice" on this document, whereas the
commercial invoice will state "invoice" or "commercial invoice". The proforma invoice
serves as a negotiating instrument. The initial proforma invoice often sets the stage for the
first round of negotiations if the exporter and importer have not yet had any real discussions.
Difference Between a Proforma Invoice and a Quotation

In reality, there is very little difference in function between the two and the proforma invoice
is really a quotation in invoice form; in other words. The difference really comes about in
terms of the structure and layout of the proforma invoice/quotation. A typical quotation
appears more like a business letter describing a written offer, while a proforma invoice
appears exactly the same as a invoice (except with the words "proforma invoice" written on
the document). The proforma invoice essentially serves as a 'quotation' that sets the road to
further negotiations. Some exporters choose to prepare an 'official' quotation, while others
prefer to use the proforma invoice as their quotation. In fact, the quotation can contain the
same information as a proforma invoice. Sometimes a firm may send out a written quotation
and the importer may ask for a proforma invoice. It is important to note that there is no
standard format for the proforma invoice and one proforma invoice may differ redically in
layout from the next (although there is common agreement on the information that should be
included in the coument). It is a document prepared by the exporter and so will take the
format/layout decided on by the exporter.
Use of a Proforma Invoice

In summary, the proforma invoice is a popular document in exporting because:
• It is a widely accepted form of sales offer in the global export community.
• It clearly outlines all of the relevant information required to enable an export purchase
decision to be made by the importer
• It is a legal document, which if accepted by the importer is considered the basis of a
binding agreement
• Banks and other financial institutions will commonly accept proforma invoices in
order to establish a Letter of Credit on behalf of the importer
• The commercial invoice is almost identical to the proforma invoice (except for the
title) and is thus easy to prepare, thus minimising the possibility of errors.
Details Pertinent to the Proforma Invoice

The following details are pertinent to the setting up of the proforma invoice and need careful
attention:
• The document title should clearly state "Proforma Invoice"
• The name of the exporter (referred to as the shipper) and their contact details (tel,
fax, cell, e-mail), including physical (not postal) address
• The name of the importer (referred to as the consignee, meaning the person or firm to
whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail),
including physical (not postal) address (In the case of transshipment, there may be an
intermediate consignee and their contact details and address should then also be
included on the invoice.)
• If the person or firm buying the goods (the importer) is not the same as the person or
firm to whom the goods are being sent, then you should include both their contact
details and addresses in the proforma invoice
• The name of the person and company to notify once shipment has taken place and
their contact details and physical address (here the contact details such as telephone,
fax and cell number and e-mail address are more important than the physical address)
• A proforma invoice reference number
• An order number or similar reference to correspondence between the supplier and

importer
• The date of issue of the proforma invoice (the 'quotation date') - quite important
• A complete, detailed and clear description of the goods in question, incorporating the
appropriate HS codes and brandmarks if applicable (here the importer may ask you to
remove these codes as they may not be the same in the importing country and may
thus incur additional or higher duties to the importer's detriment because of their
inadvertent misuse)
• The quantity of goods in question, including the number of units/items
• The packing details, including their external dimensions, cubic capacity, weight,
numbers and contents of each package shipped, and kinds of packaging involved
(pallets, boxes, bags, etc.)
• The grand total price of the goods for the whole consignment
• Where applicable, the unit prices should be indicated - the unit price multiplied by the
number of units/items should be reflected in the line total. The various line totals (in
the case where different items are included in the same commercial invoice, or where
additional services are itemised in the invoice), should add up to the total price for the
whole consignment (also referred to as the 'Grand Total')
• The currency in which the goods will be sold (e.g. US dollars or rands)
• The type and amount of any discount given, where applicable
• The likely delivery schedule and delivery terms
• The payment methods (for example cash in advance, documentary collection, L/C,
etc.)
• The payment terms (for example 30 days on sight)
• The Incoterms to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.)
• Who is responsible for the banking fees and other related costs (insurance and freight
costs are covered by the incoterms in question)
• What the freight and insurance charges are
• The exporter's banking details
• A declaration of the country of origin of the goods
• The expected country of final destination
• Any freight details such as the port of loading and discharge
• Any additional exporter-provided services that should be added to the invoice to come
to the grand total
• Any transhipment requirements
• The validity of the proforma invoice - that is, when does the offer expire (leaving it
open-ended could be very risky)
• Any other information relevant to the order
• Make sure the proforma invoice is signed, together with the signature's name written
underneath, with initials, title and position
Pro forma invoices are not used for payment purposes. A pro forma invoice should include
two statements. One that certifies the pro forma invoice is true and correct and another that
gives the country of origin of the goods. The invoice should also be clearly marked "pro
forma invoice."
Pro forma invoices are models that the buyer uses when applying for an import license,
opening a letter of credit or arranging for funds. In fact, it is a good practice to include a pro
forma invoice with any international quotation, regardless of whether it has been requested or
not. When final commercial invoices are being prepared prior to shipment, it is advisable to
check with the U.S. Department of Commerce or another reliable source for any special
invoicing requirements that may be required by the importing country.
The Commercial Invoice

After the pro-forma invoice is accepted by the importer, the exporter must prepare a
commercial invoice. The commercial invoice is required by both the exporter (to obtain the
necessary export documents to enable the consignment to be exported, to prove ownership
and to enable payment) and importer (who requires the commercial invoice to facilitate the
import of the goods into the country in question). In exporting, the commercial invoice is
considered a very important document as it serves as the starting or initiating document that
underpins the rest of the export transaction.
The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the
buyer (the importer) describing the parties to the agreement, the goods to be sold, and the
terms involved, as agreed between the exporter and importer. As such, the commercial
invoice is the final bill exchanged between the seller and the buyer. The commercial invoice
will normally be presented on the exporter's letterhead and will be addressed to the importer.
It should contain full details of the consignment, including price and other related costs, in
order to facilitate customs clearance. It must also be signed and dated. Freight and insurance,
when included in the selling price, should be itemised separately as these charges are not
subject to duty in certain countries. It is important that the commercial invoice clearly
differentiates between the dutiable component of the order (the market value of the order),
any other typically non-dutiable charges such as freight and insurance, and the total invoice
value of the order. The commercial invoice is used by Customs authorities throughout the
world for assessing Customs duties, inspection purposes, and for the keeping of statistics.
Custom’s and Consular Invoices

Some countries, however, may require the commercial invoice to be completed on their own
specified forms - such commercial invoices are known as "Customs' invoices" and may be
provided in lieu of or in addition to the standard commercial invoices referred to above. In
addition, a "consular invoice" is required by certain countries. The consular invoice must be
prepared in the language of the destination country and can be obtained from the country's
consulate, and often must be "consularised" (i.e. stamped by an authorised Consul official in
the exporting country).
From the Proforma to the Commercial Invoice

There is usually very little, if any, difference between the final proforma invoice accepted by
the importer and the commercial invoice, except that the one is titled "Proforma Invoice",
while the other is titled "Commercial Invoice". Although the proforma invoice comes before
the commercial invoice, the proforma invoice really only serves as a means of negotiating the
actual contract. The proforma invoice is the 'offer' put to the importer by the exporter. The
importer may accept the terms specified in the proforma invoice, but a more likely scenario is
that the importer will negotiate some of these terms with the exporter. There may be some
backward and forward communication between the exporter and importer before the importer
finally agrees to the transaction. Once the importer indicates that he/she is happy with the
terms of the contract as outlined in the proforma invoice, the exporter will then be requested
to provide the importer with a commercial invoice. The commercial invoice should reflect the
final (agreed-upon) profroma invoice exactly - any deviances will result in problems
executing the transaction and/or receiving payment.

Based on the terms specified in this commercial invoice, the importer will instruct his/her
bank (referred to as the issuing bank) to issue a letter of credit (L/C). This L/C (or the
documentation associated with any other form of payment) will also need to reflect the terms
specified in the commercial invoice exactly, while all subsequent documentation must reflect
the terms of the L/C; there can be no exceptions. From this explanation, it is clear that the
commercial invoice plays a central role in an export transaction.
What should appear in the Commercial Invoice?

The following details should appear in the commercial invoice:
• The document title should clearly state "Commercial Invoice"
• The name of the exporter (referred to as the shipper) and their contact details (tel,
fax, cell, e-mail), including physical (not postal) address
• The name of the importer (referred to as the consignee, meaning the person or firm to
whom the goods are to be sent) and their contact details (tel, fax, cell, e-mail),
including physical (not postal) address (In the case of transshipment, there may be an
intermediate consignee and their contact details and address should then also be
included on the invoice.)
• If the person or firm buying the goods (the importer) is not the same as the person or
firm to whom the goods are being sent, then you should include both their contact
details and addresses in the commercial invoice
• The name of the person and company to notify once shipment has taken place and
their contact details and physical address (here the contact details such as telephone,
fax and cell number and e-mail address are more important than the physical address)
• A commercial invoice reference number
• A purchase order number or similar reference to correspondence between the supplier
and importer
• The date of issue of the commercial invoice
• A complete, detailed and clear description of the goods in question, incorporating the
appropriate HS codes and brandmarks if applicable (here the importer may ask you to
remove these codes as they may not be the same in the importing country and may
thus incur additional or higher duties to the importer's detriment because of their
inadvertent misuse)
• The quantity of goods in question, including the number of units/items
• The packing details unless provided in a separate packing list, including their external
dimensions, cubic capacity, weight, numbers and contents of each package shipped,
and kinds of packaging involved (pallets, boxes, bags, etc.) - if a separate packing list
is used, reference should be made in the commercial invoice to the packing list
• The grand total price of the goods for the whole consignment
• Where applicable, the unit prices should be indicated - the unit price multipled by the
number of units/items should be reflected in the line total. The various line totals (in
the case where different items are included in the same commercial invoice, or where
additional services are itemised in the invoice), should add up to the total price for the
whole consignment (also referred to as the 'Grand Total')
• The currency in which the goods will be sold (e.g. US dollars or rands)
• The type and amount of any discount given, where applicable
• The likely delivery schedule and delivery terms
• The payment methods (for example cash in advance, documentary collection, L/C,
etc.)
• The payment terms (for example 30 days on sight)
• The Incoterm to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.)
• Who is responsible for the banking fees and other related costs (insurance and freight
costs are covered by the incoterm in question)
• What the freight and insurance charges are
• The exporter's banking details
• A declaration of the country of origin of the goods
• The expected country of final destination
• Any freight details such as the port of loading and discharge
• Any additional exporter-provided services that should be added to the invoice to come
to the grand total
• Any transhipment requirements
• The validity of the commercial invoice - that is, when does the offer expire (leaving it
open-ended could be very risky)
• Any other information relevant to the order
• Make sure the commercial invoice is signed, together with the signature's name
written underneath, with initials, title and position
Commercial Invoices are the Basis for Assessing Duties and

Statistics
Commercial invoices are often used by governments to determine the true value of goods
when assessing customs duties and recording trade statistics. Governments that use the
commercial invoice to control imports will often specify its form, content, and number of
copies, language to be used, and other characteristics.
Examples of commercial invoice

• Unzco commercial invoice
• Meridian commercial invoice
• BellAir commercial invoice
Incoterms or Terms of Sale

In any sales agreement, it is important that there is a common understanding of the delivery
terms since confusion over their meaning can result in a lost sale or a loss on a sale. The
terms in international business transactions often sound similar to those used in domestic
business, but they frequently have very different meanings. For this reason, the exporter must
know the terms before preparing a quotation or a pro forma invoice.
There are a number of common sale or trade terms used in International Trade to express the
sale price and corresponding rights and responsibilities of the seller and the buyer. The
International Chamber of Commerce regulates these terms.
Then the exporter and the importer agree on the terms of delivery, they legally bind
themselves the four legal aspects of the transactions, which are:
• Which cost does the exporter and which are to be paid by the importer pay?
• Which costs the exporter will obtain and at whose expense?
• When the title of the goods and responsibility for them passes from the exporter to the
importer?
• Where and when the goods are delivered?
The following are a few of the more frequently used terms in international trade:
EXW-Export Works
The seller’s obligation to the deliver the goods under this term is complete when he passes
the goods at the disposal of the buyer at his own premises and other places named therein, i.e.
works, factory, warehouse etc. not cleared for export and not loaded on any collecting
vehicle. This term thus enjoys the minimum for the seller. The buyer has to bear all the cost
and risks. This term should therefore not be used if buyer cannot carry out the export
formality himself.
FCA-Free Carrier
Here the seller’s obligation to deliver the goods is complete when he delivers to the carrier
nominated by the buyer at the named place cleared for export. If the chosen place is the
exporter’s premises then the seller is responsible for loading. If it occurs at any other place,
the seller is not responsible for unloading.
FAS-Free Alongside Ship

Under this term the seller delivers the goods by placing them alongside the vessel at the
named port of shipment. The buyer bears all the cost and risk of loss of or damage to the
goods from that moment. This term can be used only of sea or inland waterway transport.
FOB-Free on Board
Under this term, the seller fulfills his obligation of delivery when goods pass the ship’s rail at
the named port of shipment. Form that point onwards buyer bears all costs and risks. The
seller clears the goods for export. If the intention is not to deliver the goods across the ship’s
rail, FCA terms should be used.
CFR-Cost and Freight

In CFR also, obligation of delivery is fulfilled when the goods pass the ship’s rail at the port
of shipment. The only addition is that the seller also pays the freight necessary to bring the
goods to the named port of destination but the risk of loss of or damage to the goods and also
additional costs occurring after the time of delivery are transferred from seller to the buyer.
Under this term the seller clears the goods for export. This term can be used only for the sea
or inland waterway transport. If the parties do not intend to deliver the goods across the
ship’s rail, the term should be used.
CIF-Cost, Insurance and Freight

Here again the delivery point is the goods passing the ship’s rail in the port of shipment. The
seller however paid the cost and freight necessary to the named port of destination and
contracts for insurance and pays the insurance and pays the insurance premium and the risk
of loss of or damage to the goods and additional costs occurring after the time of delivery at
transferred from the seller to the buyer. The seller obtains the insurance only for the
minimum cover. If the buyer whishes to have a greater cover, he would either need to agree
with the seller expressly or to make his own extra insurance arrangements. Clearance of
goods for export is the responsibility of the seller under this term as well. It can be used for
sea and inland waterway transport. If the parties do not intend to deliver the goods across the
ship’s rail, the CIP terms should be used.
CPT-Carriage Paid To
It denotes that seller delivers to the carrier nominated by him. If subsequent carriers are used,
the risks pass when the goods have been delivered to the first carrier. The must in addition
pay the cost of carriage to bring the goods to the named destination. The buyer bears all the
risks and any cost occurring after the goods have been so delivered. Here too, obtaining the
export clearance is the responsibility of the seller. It can be used for any mode of transport
including multi-modal transport.
FAO/FOB Airport
'FOB Airport' is based on the same main principle as the ordinary FOB term. You fulfill your
obligation by delivering the goods to the air carrier at the airport of departure. Without the
buyer's approval delivery at a town terminal outside the airport is not sufficient, your
obligations with respect to costs and risks do not extend to the arrival of the goods at the
destination.
CIP-Carriage and Insurance Paid To

The term corresponds to CPT except that under CIP the seller also to procure insurance
against risk of loss of or damage to the goods during the carriage. The seller therefore has to
obtain the insurance and pay the insurance premium for a minimum cover. For any additional
cover, the buyer needs to either have express arrangements with the seller or make his own
arrangement. Here again if subsequent carriers are used, the risks passes when the goods have
been delivered to the first carrier and clearance of goods for export is the responsibility of the
seller. The term can be used for any mode of transport including multi-modal transport.
DAF-Delivered At Frontier
Under this term the seller delivers the goods by placing them at disposal of the buyer on
arriving means of transport not unloaded, cleared for export but not cleared for imports at the
named point/place at the frontier but before the custom border at the adjoining country. Since
the term frontier includes the frontiers of the country of export naming the point and the place
in the term is of vital importance. For making the seller responsible for the unloading of the
goods and to bear the risk and cost therefore explicit working to this effect need to be
included in the contract. The term can be used for any mode of transport when goods are to
be delivered at the land frontier. When the delivery is to take place in the port of destination
on board, a vessel or on the quay, the DES or DEQ terms should be used.
DES-Delivered Ex Ship
This term applies that the seller delivers the goods by placing them at the disposal of the
buyer on the board, the ship not cleared for import at the named port of destination. The seller
bears all the cost and the risk involved in bringing the goods to the named port of destination
before their discharge. If the parties intend the seller to bear the cost and risk of discharging
goods then the DEQ term should be used. This term can be used for sea or inland waterways
or multimode transport on a vessel in the port of destination.
DEQ-Delivered Export Quay

The point of delivery at this term moves to the quay not cleared for export at the named port
of destination. The seller bears the cost of discharging the goods in quay in addition to the
cost of risk involved as per the term DES. The term DEQ has been modified in the incoterms
2000 and is a total reversal from the previous incoterms version. Under the modified DEQ
term the buyer clears the goods for imports and pays all formalities, duties, taxes and other
charges. If the buyer still wants the seller to undertake import clearance, it should be made
clear by adding an explicit warning. This term can be used only when the goods are to be
delivered by sea or inland waterways or multimode transport on discharging from a vessel
onto the port of destination. If the parties intend to include in the seller’s obligation the risk
and cost of handling of the goods from the quay to another place (warehouse, terminal
transportation station) in or outside the port, the DDU or DDP should be used.
DDU-Delivered Duty Unpaid

This term can be used irrespective of the mode of transport, but when the delivery is to take
place in the port of destination on board, the vessel or on the quay, the DES or DEQ terms
should be used. Under DDU, the seller delivers the goods to the buyer not cleared for import,
not unloaded from any arriving means of transport at the named place of destination. The
seller bears the cost and the risk involved in bringing goods there to other than, where
applicable, any duty of import in the country of destination. The term duty includes the
responsibility for and the risk in the carrying out the customs formalities, the payment of such
formalities, custom duties, taxes and other charges. Such duty has to be borne by the buyer,
so also any costs and risks caused by his failure to clear the goods for import in time. If the
intention is to make the seller carry out customs formalities and bears the risks resulting there
from as well as some of the costs payable upon import of goods. This should be made clear
by adding explicit wording to this effect in the contract of sale. The responsibility, risks and
costs for unloading or reloading of the buyer or the seller.
DDP-Delivered Duty Paid

Under the term the seller delivers the goods to the buyer cleared for imports but not unloaded
from any arriving means of transport at the named place of destination. Thus all cost and risk
involved in bringing the goods there to including, wherever applicable, any duty for import in
the country of destination. Thus the term represents minimum obligation to the buyer and
maximum obligation to the seller. It should, therefore not be used if the seller is unable to
obtain the import clearance. It the parties wish the buyer to bear all risks and costs of import
the DDU term should be used.
EXPORT PROCESS
Enquiry
Quotation
Order confirmation
Letter of Credit
Production planning
Production of material
Dispatch
Preparation of Pre-shipment documents

↓
Arrival at port
↓
Shipment
↓
Preparation of Post-shipment documents
↓
Document negotiation with bank
↓
Payment realization
Fig. 3: Export Process
PROCEDURE FOR EXPORT
There are various steps involved for the proper procedure of export of a product. These are as
follows:
• RECEIPT OF AN ENQUIRY.
• CHECK ON RESTRICTIONS ON FOREIGN EXCHANGE AND IMPORT IN
THE IMPORTER’S COUNTRY.
• SCRUITINISE THE ORDER.
• ACKNOWLEDGEMENT OF THE ORDER.
• ARRANGING FOR GOODS.
• EXPORT LICENCE.
• CENTRAL EXCISE CLEARANCE.
• APPLY TO EXPORT INSPECTION COUNCIL OF INSPECTION.
• APPLY FOR MARINE INSURANCE POLICY, IF IT IS A C.I.F. QUOTATION.
• ISSUE INSTRUCTIONS TO THE CLEARING AND FORWARDING AGENT.
• CLEARING AND FORWARDING AGENTS ROLE FOR SHIPPING AND
CUSTOMS AT PORT.
• DOCUMENTS RETURNED BY THE FORWARDING AGENTS.
• SHIPPING ADVICE TO IMPORTER.
• PRESENTATION OF DOCUMENTS BY THE BANK.
• CENTRAL EXCISE REBATE.
• DUTY ENTITLEMENT PASSBOOK SCHEME
STEP 1:- Receipt of an Enquiry

It is not possible to attend personally to all of these enquiries, as it would not be economical
to do so. The best way to do this is to ask the enquirers themselves to supply information
about their business.
If the enquirer is well established, he will be glad to give the information asked for, but if he
refuses to do so than it is fair evidence that his intensions are not good.
The exporter after having satisfied himself that the enquirer abroad is a fit person and is
capable of meeting his obligations should give him the details of his business.
STEP 2:- Check on Restrictions on Foreign Exchange and Import in
the Importer’s Country
When the order is received its first decision is based upon the approval of credit. For
example: War or any other disturbances in the buyer’s country could lead to the restriction of
transaction.
Therefore if the exporter is dealing with a well experienced importer, the latter will furnish
full information with reference to foreign exchange restrictions and import Licenses while
placing the initial order.
STEP 3:- Scruitinise the Order
The exporter should carefully scrutinize and check the contents of an export before its
confirmation. If should be broadly in accordance with the ‘elements of contract’ which might
have been conveyed to the overseas buyer, received along with the duplicate copy duly
signed of export contract. The export should be scrutinized on the following aspects:
• Terms of payment
• Documents
• Delivery schedule
STEP 4:- Acknowledgement of Order
In this step the order is to be acknowledged. The order must be acknowledged before the
exporter states that whether he would be able to fill it or not.
The acknowledgement should contain the essential features concerning the shipment which
the exporter should know.
STEP 5:- Arranging the Goods
As soon as the export order has been confirmed or finalized, preparations are made for the
production or procurement of goods to be exported.
STEP 6:- Export License
If the item being exported requires an export License, the same should be procured by the
exporter from the Licensing authority, i.e., chief Controller of imports and Exports.
STEP 7:- Central Excise Clearance
The excisable goods can be exported outside India either under claim for rebate of excise
duty or under bond.
STEP 8:- Apply to Export Inspection Council for Inspection
Exporter should apply to EIC for pre-shipment inspection. Under the EIC an inspector will
carry out the quality control and inspection for exportable products.
After carrying out inspection the consignment is found to confirm to the prescribed
specification.
STEP 9:- Apply for Marine Insurance Policy, if it is A C.I.F. Quotation
As soon as the goods are ready for export, the exporter has to apply to insurance company for
an insurance cover/policy as the case may be. The policy would be for C.I.F. value plus 10%
to cover expenses.
STEP 10:- Issue Instruction to the Clearing and Forwarding Agent
A detailed note is prepared for the clearing and forwarding agent, giving instructions
regarding the shipment of the consignment.
STEP 11:- Clearing & Forwarding Agents
Role For Shipping & Customs at the
Port
The clearing and forwarding agent then prepares the shipping bill and presents them along
with the above documents to the export department of the customs house.
STEP 12:- Documents Returned by the Forwarding Agent
The master document is returned by the clearing and forwarding agent to the exporter along
with:
• Shipping bill
• Original L/C
• AR-4/AR-4A form in duplicate
• Full set of clean-on-board of lading together with required number of non-negotiable
copies.
STEP 13: Shipment Advice to Importer

Intimation is sent to the imports, indicating the date of dispatch of goods and the name of ship
by which they have been sent.
STEP 14:- Presentation of Documents by the Exporter of the Bank

The following documents are presented by the exporter for negotiation/collection.
• Master Document
• GR-1 form
• Full set of clean-on-board bill of lading
• Original L/C
• Bank certificate in prescribed form
• Marine Insurance Policy
• Export Contract/Order
• Bill of Exchange
STEP 15:- Processing of Documents by the Bank

Bank examines the documents with reference to the terms and conditions of the original order
and also of the letter of credit. The exporter’s bank screens the above documents and sends a
set of the following documents to the importer’s bank:
• Master Document
• Marine Insurance Policy
• Negotiable Bill of Lading
• Bill of Exchange
STEP 16:- Central Excise Rebate
A claim is filled by the exporter with the concerned maritime collector of Central excise for
rebate on central excise duty.
STEP 17:- Duty Entitlement Passbook Scheme

The exporter should file an application to the Licensing authority for an advance
License/special License in accordance with export/import policy of the country at point of
time.
What Does Special Economic Zone -

SEZ Mean?
Designated areas in countries that possess special economic regulations that are
different from other areas in the same country. Moreover, these regulations tend to
contain measures that are conducive to foreign direct investment. Conducting
business in a SEZ usually means that a company will receive tax incentives and the
opportunity to pay lower tariffs.
Special Economic Zone (SEZ)

Is a geographical region that has economic laws that are more liberal
than a country's typical economic laws. The category 'SEZ' covers a broad
range of more specific zone types, including Free Trade Zones (FTZ),
Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE),
Free Ports, Urban Enterprise Zones and others. Usually the goal of a
structure is to increase foreign direct investment by foreign investors,
typically an international business or a multinational corporation (MNC).
Investopedia explains Special Economic Zone

- SEZ
While many countries have set up special economic zones, China has been the most
successful in using SEZ to attract foreign capital. In fact, China has even declared an
entire province (Hainan) to be an SEZ, which is quite distinct, as most SEZs are
cities.
{Introduction}
India was one of the first in Asia to recognize the effectiveness of the
Export Processing Zone (EPZ) model in promoting exports, with Asia's first
EPZ set up in Kandla in 1965. With a view to overcome the shortcomings
experienced on account of the multiplicity of controls and clearances;
absence of world-class infrastructure, and an unstable fiscal regime and
with a view to attract larger foreign investments in India, the Special
Economic Zones (SEZs) Policy was announced in April 2000.
This policy intended to make SEZs an engine for economic growth

supported by quality infrastructure complemented by an attractive fiscal
package, both at the Centre and the State level, with the minimum
possible regulations. SEZs in India functioned from 1.11.2000 to
09.02.2006 under the provisions of the Foreign Trade Policy and fiscal
incentives were made effective through the provisions of relevant
statutes.
To instill confidence in investors and signal the Government's

commitment to a stable SEZ policy regime and with a view to impart
stability to the SEZ regime thereby generating greater economic activity
and employment through the establishment of SEZs, a comprehensive
draft SEZ Bill prepared after extensive discussions with the stakeholders.
A number of meetings were held in various parts of the country both by
the Minister for Commerce and Industry as well as senior officials for this
purpose. The Special Economic Zones Act, 2005, was passed by
Parliament in May, 2005 which received Presidential assent on the 23rd of
June, 2005. The draft SEZ Rules were widely discussed and put on the
website of the Department of Commerce offering suggestions/comments.
Around 800 suggestions were received on the draft rules. After extensive
consultations, the SEZ Act, 2005, supported by SEZ Rules, came into
effect on 10th February, 2006, providing for drastic simplification of
procedures and for single window clearance on matters relating to central
as well as state governments. The main Objectives of the SEZ Act
are:
(a) generation of additional economic activity
(b) promotion of exports of goods and services;
(c) promotion of investment from domestic and foreign sources;
(d) creation of employment opportunities;
(e) development of infrastructure facilities;
It is expected that this will trigger a large flow of foreign and domestic
investment in SEZs, in infrastructure and productive capacity, leading to
generation of additional economic activity and creation of employment
opportunities.
The SEZ Act 2005 envisages key role for the State Governments in Export
Promotion and creation of related infrastructure. A Single Window SEZ
approval mechanism has been provided through a 19 member inter-
ministerial SEZ Board of Approval (BoA). The applications duly
recommended by the respective State Governments/UT Administration
are considered by this BoA periodically. All decisions of the Board of
approvals are with consensus.
The SEZ Rules provide for different minimum land requirement for
different class of SEZs. Every SEZ is divided into a processing area where
alone the SEZ units would come up and the non-processing area where
the supporting infrastructure is to be created.
The SEZ Rules provide for:
" Simplified procedures for development, operation, and maintenance of

the Special Economic Zones and for setting up units and conducting
business in SEZs;
Single window clearance for setting up of an SEZ;
Single window clearance for setting up a unit in a Special Economic Zone;
Single Window clearance on matters relating to Central as well as State

Governments;
Simplified compliance procedures and documentation with an emphasis

on self certification
Approval mechanism and Administrative set up of SEZs
Approval mechanism
The developer submits the proposal for establishment of SEZ to the

concerned State Government. The State Government has to forward the
proposal with its recommendation within 45 days from the date of receipt
of such proposal to the Board of Approval. The applicant also has the
option to submit the proposal directly to the Board of Approval.
The Board of Approval has been constituted by the Central Government in

exercise of the powers conferred under the SEZ Act. All the decisions are
taken in the Board of Approval by consensus. The Board of Approval has
19 Members. Its constitution is as follows:
(1) Secretary, Department of Commerce Chairman
(2) Member, CBEC Member
(3) Member, IT, CBDT Member
(4) Joint Secretary (Banking Division), Department of Economic Affairs,

Ministry of Finance
(5) Joint Secretary (SEZ), Department of Commerce Member
(6) Joint Secretary, DIPP Member
(7) Joint Secretary, Ministry of Science and Technology Member
(8) Joint Secretary, Ministry of Small Scale Industries and Agro and
Rural Industries Member
(9) Joint Secretary, Ministry of Home Affairs Member

(10) Joint Secretary, Ministry of Defence Member
(11) Joint Secretary, Ministry of Environment and Forests Member
(12) Joint Secretary, Ministry of Law and Justice Member
(13) Joint Secretary, Ministry of Overseas Indian Affairs Member
(14) Joint Secretary, Ministry of Urban Development Member
(15) A nominee of the State Government concerned Member
(16) Director General of Foreign Trade or his nominee Member
(17) Development Commissioner concerned Member
(18) A professor in the Indian Institute of Management or the Indian

Institute of Foreign Trade Member
(19) Director or Deputy Sectary, Ministry of Commerce and Industry,

Department of Commerce Member Secretary.
{Administrative set up}

The functioning of the SEZs is governed by a three tier administrative set
up. The Board of Approval is the apex body and is headed by the
Secretary, Department of Commerce. The Approval Committee at the
Zone level deals with approval of units in the SEZs and other related
issues. Each Zone is headed by a Development Commissioner, who is ex-
officio chairperson of the Approval Committee.
Once an SEZ has been approved by the Board of Approval and Central
Government has notified the area of the SEZ, units are allowed to be set
up in the SEZ. All the proposals for setting up of units in the SEZ are
approved at the Zone level by the Approval Committee consisting of
Development Commissioner, Customs Authorities and representatives of
State Government. All post approval clearances including grant of
importer-exporter code number, change in the name of the company or
implementing agency, broad banding diversification, etc. are given at the
Zone level by the Development Commissioner. The performance of the
SEZ units are periodically monitored by the Approval Committee and units
are liable for penal action under the provision of Foreign Trade
(Development and Regulation) Act, in case of violation of the conditions of
the approval.
Facilities and Incentives
Incentives and facilities offered to the SEZs
The incentives and facilities offered to the units in SEZs for attracting
investments into the SEZs, including foreign investment include:-
Duty free import/domestic procurement of goods for development,

operation and maintenance of SEZ units
100% Income Tax exemption on export income for SEZ units under
Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years
thereafter and 50% of the ploughed back export profit for next 5 years.
Exemption from minimum alternate tax under section 115JB of the Income
Tax Act.
External commercial borrowing by SEZ units upto US $ 500 million in a

year without any maturity restriction through recognized banking
channels.
Exemption from Central Sales Tax.
Exemption from Service Tax.
Single window clearance for Central and State level approvals.
Exemption from State sales tax and other levies as extended by the
respective State Governments.
The major incentives and facilities available to SEZ developers include:-
Exemption from customs/excise duties for development of SEZs for

authorized operations approved by the BOA.
Income Tax exemption on income derived from the business of

development of the SEZ in a block of 10 years in 15 years under Section
80-IAB of the Income Tax Act.
Exemption from minimum alternate tax under Section 115 JB of the
Income Tax Act.
Exemption from dividend distribution tax under Section 115O of the

Income Tax Act.
Exemption from Central Sales Tax (CST).
Exemption from Service Tax (Section 7, 26 and Second Schedule of the

SEZ Act).
Approved SEZs in India

SEZ Approvals granted under the SEZ Act, 2005
List of Formal Approvals granted under the SEZ Act,2005
In principle approvals granted under the SEZ Act, 2005
Statewise distribution of SEZs approved under the SEZ, Act, 2005
Sectorwise distribution of SEZs approved under the SEZ Act, 2005.
Setting up of SEZ
Application form for setting up of SEZ Enterprise
Form - A
APPLICATION FOR SETTING UP OF SPECIAL ECONOMIC ZONE
(See rule 3)
I. Name and address of the
Undertaking in full (Block Letters) __________________________________________
Name of the Applicant) __________________________________________
Full Address)
__________________________________________
(Regd. Office in case of limited
companies & Head Office for _________________________________________
others
Pin Code _________________________________
Tel. No. _________________________________
Fax No. _________________________________
Permanent E-Mail Address _________________________________
Name and address of each _________________________________
of the Directors/Partners/
Promoters, as the case may be
II. Nature of the applicant Firm or Company:
(a) Public Limited Company
(b) Private Limited Company
(c) Proprietorship
(d) Partnership
(e) Others (please specify)
Note:-Copy of certificate of incorporation alongwith Article of Association and
Memorandum in case of companies and partnership deed in case of partnership firms
may please be attached.
III. (i) Location of the proposed Special Economic Zone:
Whether the proposal is for –
(a) Special Economic Zone for Multi Product.
(b) Special Economic Zone for Specific Sector.
(c) Free Trade and Warehousing Zone.
(Tick [ ]as applicable)
1
2
IV. (a) Distance from the nearest Sea Port or Airport or Rail or Road head to the
proposed Special Economic Zone
(b) Indicate the area of the proposed Special Economic Zone (in hectares)
(c) Whether the applicant is owner of the land and the land is in his/its possession.
(d) In the case of lease hold land, name of the lessor and the lease conditions.
(e) If the land is not in ownership or possession, steps being taken for acquisition
of land.
(f) Whether the area is contiguous or not or whether there is any thoroughfare?
V. Proposed Financial/Investment Details:
(i) Cost of Land.
(ia) Type and quality of land i.e. waste and barren land,
single crop or double crop etc.
(ii) Cost of proposed infrastructure, namely:
(a) Development of land.
(b) Boundary walls, roads, drainage, water supply, electricity, etc.
(c) Ready Built up factory premises.
(d) Port.
(e) Airport.
(f) Others, if any, give details.
(iii) Total Investments
VI. Means of Financing
a) Equity Capital
b) Term Loan
c) External Commercial Borrowings, if any, furnish details.
d) Any other source
Total
VIA. Foreign Direct Investment (FDI)
(a) Extent of FDI (if any) in million U.S. Dollars
(b) Source of FDI (Country and Company details may be provided)”;
3
3
VII. Equity including Foreign Investment
(i)
$ Thousand) (Rs.lakhs)
(a) Authorized ________________ ________________
(b) Subscribed ________________ ________________
(c) Paid up Capital ________________ ________________
Note: If it is an existing company, please give the break up of the existing and proposed
capital structure
(ii) Pattern of share holding in the paid-up capital (Amount in Rupees)
(Rs. in lakhs) (US $ Thousand)
(a) Foreign holding ____________ ________________
(b) Non Resident Indian company / individual holding
(i) Repatriable ____________ ________________
(ii) Non-repatriable ____________ ________________
(c) Resident holding ____________ ________________
(d) Total ____________ ________________
VIII. Development of identified area as Special Economic Zone: Give the following
details:-
Area in hectares
(i) Total area proposed for development as Special Economic Zone.
(ii) Area proposed to be developed as processing area.
(iii) Development activities proposed in the processing area, namely: –
(a) site development,
(b) construction of boundary walls,
(c) construction of roads,
(d) installation of water supply and sanitation and sewage systems,
(e) power distribution system,
(f) telecom facilities,
(g) construction of factory buildings and warehouses.
(h) Any other activity which may be required in the processing area.
4
4
(iv) Area proposed to be developed as non-processing area.
(v) Activities proposed in the non-processing area, namely: -
(a) Residential.
(b) Commercial complex.
(c) Recreation facilities.
(d) Social amenities – give details.
(e) Others – specify.
(vi) Standards of operation and maintenance of the facilities proposed
IX. Indicate exports and direct and indirect employment likely to be generated during
the first five year period.
(Attach a Project Report outlining the economic and commercial viability of the
proposal)
X. Has the applicant obtained any, Permission or Approval from Government of
India for setting up any other SEZ/s, if so, details may be given and/or whether any such
application is pending consideration before the State Government or Government of
India?
XI. Has the applicant or any of his partners/Directors who are also partners/Directors
of any other company or its associate concerns are being proceeded against and have
been debarred from getting any License or Letter of Intent or Letter of Permission under
the Foreign Trade (Development and Regulation) Act, 1992/Custom Act, 1962/Foreign
Exchange Management Act, 1999/Central Excise Act, 1944.
Place :_________ Signature of the Applicant ____________________
Date :________ Name in Block Letters ____________________
Designation ____________________
Tel. No. ____________________
Official Seal/Stamp____________ E-mail. ____________________
Web-Site, if any ____________________
Full Residential Address ____________________
5
5
UNDERTAKING
I/We hereby undertake to abide by the provisions of the Special Economic Zones Act,
2005 and rules and orders made there-under.
I/We hereby declare that the above statements are true and correct to the best of my/our
knowledge and belief. I/We will abide by any other condition, which may be stipulated
by the Government of India or the State Government. I/We fully understand that any
Letter of Approval granted to me/us on the basis of the statement furnished is liable to
cancellation or any other action that may be taken having regard to the circumstances of
the case if it is found that any of the statements or facts therein are incorrect or false. An
affidavit duly sworn in support of the above information is enclosed.
Place :_________ Signature of the Applicant ____________________
Date :________ Name in Block Letters ____________________
Designation ____________________
Tel. No. ____________________
Official Seal/Stamp____________ E-mail. ____________________
Web-Site, if any ____________________
Full Residential Address ____________________
6
6
Check List
1. Name of the Developer.
2. Proposed area of the location of the SEZ.
3. Status of recommendation of the proposal by the State Government (if available).
4. Whether proposal is for formal or in-principle approval? (In case land is in possession
of the promoter, it is considered for formal approval)
5. Is it a multi-product SEZ?
6. If it is a sector specific SEZ, the sector is.
7. Whether it meets the area requirements.
8. Area of the SEZ (in hectares)
9. Whether Form- A has been filed?
10. Whether undertaking and affidavit has been submitted?
11. Whether project report has been submitted?
12. Whether land is owned/leased and is in possession of the Developer?
13. Does the proposal meet the area requirements of the Rules?
14. Whether the land has existing structures or is vacant?
15. Whether the land is contiguous?
16. Projected investment in the project.
17. Projected exports from the project.
18. Projected employment from the project.
19. Share capital and Reserves of the Developer Company.
20. Source of funds for the project.
21. Net worth of the Applicant (including Group companies) duly supported by Audited
Accounts of the Developer for last 3 Years (for all the constituents in case the Developer
is a SPV). If the company is a new company, audited accounts of Flagship
Company/promoters may be provided.
22. Extent of FDI (if any) in million U.S. Dollars
23. Source of FDI (Country and Company details may be provided)
24. Whether provisions contained in the Press Note No. 5 (2005 Series), issued by the
Ministry of Commerce and Industry have been followed in respect of Telecom/IT SEZ
development?
How to set-up an Export Oriented Unit

EOU Scheme
The needs for higher level of technological and industrial progress made the Government
devise a series of export promotional schemes. EOU & SEZ Schemes are one among them,
which provides an internationally competitive duty free environment coupled with better
infrastructural facilities for export production.
Export Oriented Units (EOUs) now constitute a very important sector in the country’s Export
Production scenario. They have become dominant players in our export strategy, and their
share in the Country’s export performance is about 10%. The export growth rate of 30%
compares very favorably with the National export growth rate.
How to set-up an Export Oriented Unit (EOU)
“How to set-up an Export Oriented Unit (EOU)” is a step-by-step process.
The information is divided into 5 parts:
Eligibility Criteia Prior to Approval
How to apply Approval Procedure
After Approval (what to do for commencement of Production)
I. ELIGIBILITY CRITERIA
Who is eligible to become an EOU?
An EOU can be set up by any entrepreneur for manufacturing of goods and also for rendering
services. An EOU can be set up for repair, reconditioning, re-making and re-engineering
also.
Trading activity is not allowed in the EOU Scheme.
EOU unit is required to achieve only positive Net Foreign Exchange (NFE) over a period of
5 years.
Policy for EOU is given in Chapter-6 Foreign Trade Policy and Chapter 6 of Handbook of
Procedure (Vol. – I)
EOU can also be set up in the following sectors: -
Agriculture
Animal Husbandry
Aquaculture
Floriculture
Horticulture
Pisciculture
Viticulture
Poultry or
Sericulture
Conversion of existing DTA/EPCG (Export Promotion Capital Goods) units to EOU
Scheme
Existing DTA units or EPCG units are permitted for conversion into EOU Scheme as one
time option. In case there is an outstanding export commitment under the EPCG Scheme, it
will be sub summed in the export performance (EP) of the unit. If the unit is having
outstanding export commitment under the Advance Licensing Scheme, it will discharge the
same as well, as per its conditions before conversion into EOU Scheme. However, duties of
Customs and Central Excise already suffered shall not be refunded on conversion into EOU.
II.PRIOR TO APPROVAL
1) Planning your venture:
Is it your own or
Is it with foreign participation and, if so, nature of participation (foreign investment allowed
100%)
2) What process do you intend to do i.e. Manufacturing, rendering and export of
services or: -
Agriculture
Animal Husbandry
Aquaculture
Floriculture
Horticulture
Pisciculture
Viticulture
Poultry or
Sericulture
Repair, reconditioning, re-making, re-engineering etc.
3) Technology to be used:
Indigenous/ foreign
Related cost and conditions
4) Feasibility report:
On your own or with help of consultant
5) The finances involved:
Land, structure, buildings etc.(Please note, building construction material is not exempted
from duty).
Capital Goods, machinery etc.
Payment for royalties etc.
Administration and establishment
Others : like interest on loans, related taxes and levies etc.
6) The current competition overseas:
Main competitors
Demand and price levels.
7) The import laws and other requirements in target markets:
Any fiscal/ non-fiscal barriers, like anti-dumping laws.
Quota restrictions.
Preferential treatment to competitor countries.
8) Location of the Unit:
The first thing before setting up an EOU the entrepreneur has to decide the location of unit: -
i. close to port or rail/ road.
ii. availability of raw material and
iii. Environment clearance needed if unit is located within 25 kms of an urban town
Accordingly the application will be submitted to the concerned Development Commissioner
under whose jurisdiction that state comes.
9) Capital goods, machinery and equipment to be used:
Indigenous or foreign (allowed duty free)
Related cost
10) The raw materials and other inputs, like consumables etc. that would be required:
Source (allowed duty free)
Cost
Monthly, quarterly and annual requirements.
11) The production process:
Whether production process requires air-conditioning plant, special furnaces or kilns etc.
Details and cost. (Please note, air-conditioning equipment permitted duty free only if it is
essential for production process).
12) The production capacity and spare capacity:
Do you intend to utilize the same by doing sub-contracting work for other export units in
DTA or Export Oriented Units.
Whether you want to get job work done outside the EOU.
Details of sub-contractors.
Related costs.
13) Any by-products turned out in the production process:
Details of by-products
Whether these would be exported or sold in Domestic Tariff Area (DTA)
14) Effluents or waste-material:
How do you propose to treat these or discharge them.
15) Packaging
Details of packaging (packaging material allowed without payment of duty)
Source
Cost
16) Power:
Whether the normal grid could supply adequate power.
Or there would be a need for a captive power plant.
Cost of power plant
Fuel required for captive power plant (e.g. furnace oil, LPG, HSD, coal etc.) (allowed duty
free)
17) Other information:
Firm/company should be duly registered and details about Proprietor/Partner/ Directors etc.
A current account with the bank authorized to deal in foreign exchange should be opened.
Sale tax registration to be obtained from the Sale Tax Department.
Investment details
18) Mandatory clearances from State Government: -
Pollution clearance certificate.
Approvals of building plan in cases where building is proposed to be constructed.
Registration as a small scale industrial unit, if applicable
Registration under Factories Act.
III. HOW TO APPLY
All applications are to be filed with the concerned Development Commissioner of Special
Economic Zone (For jurisdiction of Development Commissioner) Appendix 14-I- K
The unit/ promoter has to apply in the application form, to be given in triplicate given in
Handbook of Procedures in Appendix 14-1A (Please click here)
Project Report including a write up on the background of the promoters establishing their
credentials and standing.
Please see Appendix 14-1B (Please click here) for documents required by the Development
Commissioner for approval.
For sector specific conditions Please see Appendix 14-1C (Please click here)
DD for Rs. 5,000/- drawn in favour of The Pay & Accounts Officer, Ministry of Commerce
and Industry, Department of Commerce, payable at the Central Bank of India, Udyog
Bhavan, New Delhi.
Registration –cum-Membership Certificate (RCMC) should be obtained from the office of
the concerned Development Commissioner.
Import Export Code: If the unit does not have an Import Export code (IEC), it will apply in
the prescribed form (Appendix 18-B) to the Zone Administration for the same.
IV. APPROVAL PROCEDURE
Letter of Permission (LOP)
After submitting the application form and if every thing is in order, Letter of Permission
(LOP) is issued by the Zone Administration within 2 weeks after interview of the promoter
by the Approval Committee. For format of LOP please see Appendix 14-IE (Please click
here)
Legal undertaking (LUT)
A legal undertaking in the prescribed form undertaking to abide by the terms and conditions
of the LOP has to be executed by the unit in format given at Appendix 14-1F (Please click
here ).
A Green Card will be issued to the unit by the Zone Administration on request.
Approval from State Government Agencies:
V. AFTER APPROVAL
After the approval from the Development Commissioner concerned, the manufacturing and
other activities have to be undertaken under customs bond for which formal application is to
be made to the jurisdictional Assistant Commissioner/ Deputy Commissioner of the Customs/
Central Excise for issuance of a Private Custom Bonded Warehouse Licence under section 58
and 65 of the Customs Act, 1962. The application shall be accompanied by the following
documents/information: -
Copy of notification whereunder the place (proposed location of unit) has been declared as
warehousing station under section 9 of the Customs Act. In case the approved place is not a
notified warehousing station, a separate application for issuance of such notification is to be
submitted to the Commissioner of Customs through the jurisdictional Assistant
Commissioner/ Deputy Commissioner.
Copy of LOI/LOP issued by Development Commissioner concerned and LUT accepted by
the Development Commissioner.
Details of the premises including ground plan, purchase/rent/lease deed, allotment letter from
Industrial Development Corporation/ Authority (if any)
Details about the constitution of the firm/company including its Proprietor/Partners/Directors
etc.
Project Report indicating stage wise manufacturing process.
List of raw material, consumables and capital goods etc. required.
Undertaking that cost recovery and other charges shall be paid.
After verification of the premises and relevant documents, the requisite licence under
section 58 and 65 of the Customs Act will be issued by the Assistant Commissioner/ Deputy
Commissioner Customs/ Central Excise on priority basis.
B-17 Bond:
B-17 bond is a multi – purpose surety bond which the unit has to execute with the
Jurisdictional Assistant/ Deputy Commissioner Customs/ Central Excise on a non-judicial
stamp paper of Rs. 300/-. Format of the Bond is prescribed under Notification No. 6/98 CE
(N.T) dt. 2-3-98.
B-17 Bond is a surety bond and in case valid surety cannot be arranged security @5% of the
bond amount has to be furnished. The bond amount shall be equal to 25% of the duty
foregone on the capital goods required in the next 5 years plus duty foregone on the value of
raw material for a period of 3 months.
B-17- Bond covers the following activities:-
Duty free import/ procurement of goods as per relevant notification and warehousing/storage
in the unit and their utilization.
Transhipment of import/ export of goods duty free between port of import/ export and units
premises.
Movement of duty free goods for job work and return.
Temporary clearance for repair and display in exhibitions, testing/ approval etc.
However it dose not cover differential duty amount against advance DTA sale for which a
separate bond is to be executed.
The unit has also to take a Central Excise Manufacture Code No. from the Superintendent,
Central Excise to enable them to sell in the domestic market.
The Development Commissioner is empowered to grant approvals on the following
matters: -
Import of additional capital goods
Enhancement of production capacity
Broad-banding/diversification
Change in name/ constitutions
Change of location/expansion
Extension of validity of LOP/LOI/LOA:
Import of Office equipment:
Merger of two or more EOU/SEZ Units
Import of spares and accessories of DG sets
Eligibility certificates for grant of employment visa to low level foreign technicians to be
engaged by EOUs as per Ministry of Home Affairs Letter No. 250227/7/99-F-1 dated 20-9-
1999 (Annexure-XI).
Sale of goods in DTA.
De-bonding/ Exit from EOU scheme.
Approval from State Government Agencies:
The unit has to secure approval for its wiring and electrical plan from the Electrical
authorities.
It has also to secure power allocation and wiring approval from the State Electricity Board.
The industrial water supply is undertaken by the
The unit has to take a registration under the State Government Sales Tax Act and Central
Sales Tax Act.
In case the unit already has a registration with the State Sale Tax Department the address of
the additional premises should also be endorsed in the registration certificate.
The unit has also to take Small Scale Industry (SSI) Registration from the District Industries
Center to apply for State Government’s Investment Subsidy.
In case there are effluents or emissions the unit has to secure approval form the Pollution
Control Board.
Every Zone has a statutory Single Window Clearance Board.
LOGISTICS PROCESS
Logistics is the management of the flow of goods, information and other resources, including
energy and people, between the point of origin and the point of consumption in order to meet
the requirements of consumers (frequently, and originally, military organizations). Logistics
involve the integration of information, transportation and inventory, warehousing, material-
handling, and packaging.
Logistics Management
Logistics management is that part of the supply chain which plans, implements and controls
the efficient, effective forward and reverse flow and storage of goods, services and related
information between the point of origin and the point of consumption in order to meet
customers' requirements. A professional working in the field of logistics management is
called a logistician.
Logistics Management Software
Software is used for logistics automation which helps the supply chain industry in automating
the work flow as well as management of the system. There is very few generalized software
available in the new market in the said topology. This is because there is no rule to generalize
the system as well as work flow even though the practice is more or less the same. Most of
the commercial companies do use one or the other custom solution.
But there are various software that is being used within the departments of logistics. Few
departments in Logistics are namely, Conventional Department, Container department,
Warehouse, Marine Engineering, Heavy haulage, Etc.
The software that is used in these departments are:

➢ Conventional Department: CVT software / CTMS software
➢ Container Trucking: CTMS software
➢ Warehouse: WMS
Note: In Hindalco, all the departments are interconnected with computer network
system and the software on which these department works is on the Oracle 11i
platform. This software is connected with Internet and the working in any department
in any region of Hindalco will make effect in all over India.
A Brief Description of the Flow of Logistics Process

Packaging
Planning
Production
Finished
Export
ExportImporter
Dept.
Goods
Control
Office
Process
Warehouse
Head
Fig. 4: Flow of Logistics Process in Brief
First of all Customer or Importer place their order to the company. This is done in the
following two ways:
1. Through Export Office
2. Directly to Planning Office
1. Through Export Office

For placing their order, Customer or Importer contacts to their respective Export Office.
There must be one Export Control Head who can deal with that order. Export Control Head
sends the information about the order to the Planning department. Planning dept. can make a
plan to execute that order and sends the information about the amount of production to the
Production Plant. After production, the product is being sent for packaging. There packaging
should be done according to the demand of the customer. When the product is being packed,
it is being sent to the Finished Goods Warehouse for storage. When the finished product
reaches to the warehouse, it can be informed to the Export Control Head that the product is
ready for the delivery to the customer. From warehouse the product reaches to the Export
office and from there it reaches to the respective Importer’s destination.
2. Directly to Planning Office

The second option for the customer to place their order is that they can place their order
directly to the planning office of the company. Rest all the process after planning till
warehousing is same as through Export office process. In this process the product is being
delivered to the importer from the Finished Goods Warehouse directly.
Logistics
Warehouse Inland Transportation Sea

Transportation
Storage of Stuffing of
By Sea By Air
Finished Goods Finished Goods
By Roadways
By Railways
Fig. 5: Diagram
Shows the Sub-
Division of Export
Logistics Process
Flow of Export Logistics Process Implemented by
Hindalco
Confirmation of the Export

Order
Container Indenting
Arrange empty Containers at ICD, Kanpur/Kolkata port based on Export

Order
Indent Container in advance based on Production

Schedule.
Inform Finished Goods Warehouse for segregating of material as per

container load.
Inform Finished Goods Warehouse with details of the

Order.
Pre-shipment Export Documentation & stuffing of materials in

containers.
Excise Clearance (Filling ARE-1 form & Excise Invoice, Verification of

exporting consignment by Excise Clearance Authority).
Arrival of consignment at Dry

Port.
Custom
Clearance.
Shipment.
Post-shipment
Documentation.
Document
Negotiation
Payment
Realization
Fig. 6: Flow of Export Logistics in Hindalco
Step 1:- First of all, order is being confirmed.

Step 2:- Container Indenting Process
• Order for the container is given to the Shipping Line according to the Production
schedule.
• Container comes via ICD, Kanpur in case of Mumbai Shipment and directly via
roadways or railways in case of Kolkata Shipment.
• A particular number is being allotted in the ICD or Kolkata port before sending it
to the factory.
• Information is being sent to the warehouse about the availability of containers for
the stuffing of containers.
Step 3:- According to the information, materials is being segregated as per container load in
the Warehouse.
Step 4:- Stuffing of material in the containers is being done as well as Pre-shipment
documents is being made in this step.
Step 5:- After the stuffing of material, Excise Clearance office is being informed to do the
Excise clearance process. In this stage ARE-1 form and Excise Invoice is being filled by the
exporter.
Step 6:- After the completion of Excise clearance process, stuffed containers is being sent
to the respective port according to their destination.
Step 7:- After the arrival of export consignment at the port, Custom Clearance process is
being done by the Custom clearing authority.
Step 8:- Shipment is being done after the Custom process is cleared.
Step 9:- Post-Shipment documents is being made by the exporter after the shipment of the
consignments.
Step 10:- When the post-shipment documents are made, these documents are being sent to
the bank for the negotiation.
Step 11:- After negotiation, the documents are cleared for making payments which exporter
receives. This stage is called Payment Realization stage.
EXPORT DOCUMENTATION
Any export shipment involves a number of documents required mainly by the customs or port
authorities.
According to the Customs Act, the person Incharge of a conveyance-vessel, vehicle aircraft
etc. cannot permit loading of export cargo at the customs stations unless & until the formal
permission given by proper customs office is presented.
An improved system of documentation for exports announced by the government of India on
31st March, 1991 is fine and should be adopted by the exporters as far as possible. Export
documentation work constitute heavy on our export activity. It’s complex, cumbersome and
costly. Some of the procedures that must be followed when an exporter has marketed his
goods and received an order. These procedures often involve a good deal of documentation.
This documentation is one of the major differences between trading in the home country as
well as in foreign country. The document materials to an export sales contract are not many
in number.
The documents used differed in size and layout, despite the fact that most of the information
requirements are common to a number of them. Therefore they have to be completed
individually.
➢ Importance of Export Documentation

Once the goods are ready, an exporter has to prepare and execute various documents at
different stages of sending the shipment of goods to the importer. These documents are
important for two reasons:
• As an evidence of shipment and title of goods

• For obtaining payment
The various documents are therefore of vital interest to the exporter and the bank which is the
usual media of payment. The documentary requirements are both regulatory and operational
in nature and have to comply with the rules and regulations of the Indian Government as well
as the importing country for different type of products. These requirements are different for
different type of products.
Accuracy and completeness are a prime necessity in documents covering export shipments.
Any alteration or addition made by an Authority issuing the documents must be endorsed
properly, with the signature of person issuing the signature of person issuing the documents
only. If the documents are not the correct ones, the importer may not be able to get the goods
when the ship arrives.
One of the major purposes of documentation is to provide a specific and complete description
of the goods, so that they can be correctly assessed for import duty. But documentation also
plays an important role in transport arrangements, in payment and credit procedures and in
relation to cargo insurance and claims.
➢ Set of Documents Required For Exports

The following documents are generally required for export of products:
1. Invoice-in 4 copies plus 10 copies for certification.
2. Packing List in4 copies.
3. Mill’s Certificate in 3 copies.
4. Insurance Certificate in duplicate.
5. Certificate of Origin in 3 copies.
6. Bill of Exchange-in duplicate.
7. B/L-full set plus 2 non-negotiable copies.
8. Material Safety Data Sheets/Analysis Report in 3 copies.

9. SDF Form & Custom certified Invoice both in original.
10. Above mentioned L/C in original.
➢ The Major Documents

Export documentation plays a vital role in international marketing as it facilitates the smooth
flow of physical goods and payments thereof across national frontiers. Export documentation
is however complex as the number concerned authorities to whom the relevant documents are
to be submitted.
On the basis of the function to be performed export documents can be classified under four
categories:
A. Trade Documents/Commercial Documents

The commercial documents are those by which customs of trade are required for effecting
physical transfer of goods and their title from the exporter to the importer. On an average
there are 16 commercial documents. The following 16 commercial documents are involved
in the pre-shipment stage:
➢ Pro-forma invoice
➢ Commercial invoice
➢ Packing list
➢ Shipping instruction
➢ Intimation inspection
➢ Certificate of inspection
➢ Insurance declaration
➢ Certificate of insurance
➢ Shipping order
➢ Mate’s receipt
➢ Bill of lading
➢ Application for certificate of origin
➢ Certificate of origin
➢ Bill of exchange
➢ Shipping Advice
➢ Letter to the bank for collection
Out of 16 documents 14 have been standardized and aligned to one another. Two documents
viz; Shipping Order and Bill of Exchange could not be standardized.
A. Regulatory Documents
These are the documents which are required for complying with the rules and regulations
governing export trade transactions such as foreign exchange regulations, customs
formalities, export inspection etc. The regulatory documents associated with the pre-
shipment stage of an export transaction are as follows:
➢ Gate Pass-1/gate Pass-2
➢ AR-4 form
➢ Shipping bill/bill of export
➢ Export application/dock Challan/Port trust copy of shipping bill
➢ Receipt for payment of port charges
➢ Vehicle chit
➢ Exchange Control declaration (GR/PP) Forms
➢ Freight Payment Certificate
➢ Insurance premium payment certificate
Out of the above 9 regulatory documents, 4 have been standardized.
A. Export assistance documents

These are the documents which are required for claiming assistance under the various export
assistance measures or may be in operation from time to time. Presently these refer to import
replenishment licenses, cash compensatory support scheme drawback of central excise &
custom duties & packing credit facilities.
B. Foreign documentation
These are the documents which are required by the importer in order to satisfy the
requirements of his governments. These include:
➢ Certificate of origin
➢ Consular invoice
➢ Quality control certificate etc.
Export documents can be classified into two categories depending upon the specific
requirements:
• Regulatory
• Operational
➢ Need for Export Documents

Export documents have to be prepared for various purposes:
• Declaration of exports as per exchange control regulation of the country.
• Transport of the goods.
• Customs clearance of the goods
• Other purposes.
➢ Significance of Some Export Documents

Some of the principal documents are discussed as follows:
• Letter of credit
• Export invoice
• Packing list
• Certificate of origin
• Bill of lading
• Shipping order/mate’s receipt
• Shipping bill
• Marine insurance policy
 Letter of Credit
Letter of credit is an undertaking by the importer’s bank that if the exporter exports the goods
and produces documents as stipulated in the letter, the bank would make payment to the
exporter. “Letter of credit” is the most important single document in international trade. It
forms the basis of very large volume of world trade. Letter of credit provides great security
to the exporter. “It is an arrangement by means of which (issuing bank) acting at the request
of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predetermined
amount by a given date according agreed stipulation and against presentation of stipulated
documents.”
Salient Features
♦ It is an undertaking by the bank.
♦ It is an undertaking to make payment.
♦ It is an undertaking to make on behalf of the person.
♦ It is an undertaking given to the third party.
♦ It is an undertaking given to the third person. (A person other than the one on whose
behalf it is given)
♦ It is a conditional undertaking, payment being subjected to compliance with some
conditions.
Parties to A Letter of Credit

A documentary credit has got four parties, namely:
• APPLICANT (opener)
• ISSUING BANK
• BENIFICIARY
• ADVISING BANK
Mechanism of L/C
• Is to make payment to the order of a third party (the beneficiary), or is to accept and pay
bills of exchange drawn by the beneficiary; or
• Authorizes another bank to effect such payment or to accept and pay such bill of
exchange; or
• Authorizes another bank to negotiate, against stipulated documents, provided that the
terms and conditions of the credit are complied with.
Types of a Letter of Credit

• Revocable Letter of Credit: - It is a credit which can be revoked. A revocable L/C
is the one which can be cancelled or amended by the issuing bank at any time without
prior notice to the beneficiary. Revocable credits indicate the nature by a specific clause
addressed to the advising bank.
• Irrevocable Letter of Credit: - It is a firm undertaking on the part of issuing bank

and cannot be cancelled or amended without the consent of the parties to L/C,
particularly the beneficiary. An irrevocable credit constitutes a definite undertaking of
the issuing bank to accept or pay bills drawn on another bank or make payment.
• Payment Credit: - It is a credit which will be paid at sight basis against presentation
of requisite documents to the designated paying bank. In a payment credit, beneficiary
may or may not be called upon to draw a draft.
• Deferred Payment Credit: - It is a usance credit where payment will be made by

designated bank, on respective due dates.
• Acceptance Credit: - It is similarly to defer payment credit except for the fact that in
this credit drawing of a usance draft is a must. Under this credit, drafts must. Under this
credit, drafts must be drawn on the specified bank.
• With recourse without recourse credit

• Revolving letter of credit
• Confirmed letter of credit
• Transferable credit
• Revolving credit
• Transit credit
• Bank to back credit
• The sight credit
• Usance credit
• The deferred payment credit.
 Export Invoice
Commercial Invoice
It is one of the most important documents issued by the seller in the standardized format. The
invoice is usually made out of the full realizable amount of the Trader term. The invoice
should be strictly as per the contract of sale and must be signed by the seller or the person on
his behalf.
Consular Invoice
A consular invoice is required to be prepared in a prescribed format and it should be
signed/certified by the council of the importing country located in the country of export. The
main purpose of consular invoice is to enable the importer’s country to collect accurate and
authenticated information about the value, volume, quality, source etc of the import for
assessing Import duties and for other statistical purposes. It helps the importer to get cleared
the goods through the customs without any undue delay. This document is required mainly
by the Latin American countries like Kenya, Tanzania, Nigeria, Mauritius, New Zealand etc.
 Packing List
Packing list may be shown on invoice or separately and should contain item by item, the
contents of cases or containers or of a shipment with its weight and description set forth in
such a manner as to permit checks of the contents by the customs on arrival at the port of
destination.
The packing list is a relatively simpler document and the whole of the information can
be reproduced from the master by masking information not desired on the packing list.
Special information, if any can be given in the blank space in the lower third position of the
document. It is a list showing the details of goods contained in each Parcel shipment.
Packing list has to be prepared in the Aligned document from.
 Bill of Lading
A Bill of lading is a document issued by the sipping company or its agent, acknowledging the
receipt of goods for carriage which are deliverable to the consignee or his assignee in the
same condition as they were received. A bill of lading serves the following purposes:
• It is a receipt of goods received by the shipment company.
• A Contract with the carrier: it contains the terms of contract between the shipper
and the shipping company, between stated points at a specific charge.
• Evidence of title: It is a certificate of ownership or title to the goods.
Contents of Bill of lading
The usual form of a bill of lading includes the following information:
• Name of the shipping company.
• Name of the shipper.
• Name and address of the importer.
• Name and address of the party to be notified on the arrival of shipment.
• Name of the carrying vessel.
• Name of the ports of loading and discharge.
• Whether freight is payable or whether freight has been paid.
• Number of originals in the set of bill of lading documents.
• Marks and number identifying goods.
• Brief description of the goods (including weights and dimensions).
• Number of packages.
• Signature of ship’s master or his agent.
• Date on which goods were received for shipment.
• Signature of the exporter (or his agent) and his designation applicable.
Importance of Bill of Lading

• It is a contract between the shipper and the shipping company for the carriage of
goods to the port of destination.
• It is an acknowledgement indicating that the goods mentioned in the document
have been received on the board for the purpose of shipment.
• It issue for claiming incentives offered by the government to exporters.
 Marine Insurance Policy

The safe conduct of the goods from the time it leaves the exporter’s godowns and till it
reaches the warehouse of the importer is what all the parties in the transaction pray for. It
depends upon the safety of the goods during the voyage and safety of the vessel that carries
the goods. Marine insurance Policy offers the desired cover against the loss or damage of the
goods during the transit. It allows a free flow of international trade. In India Marine
insurance is governed by the marine Insurance act’ 1963. Section 3 of the act defines a
contract of marine insurance as “as agreement in which the insurer undertakes to indemnify
the assured in the manner and to the extent thereby agreed”.
Nature of Marine Cargo Insurance

• Parties
• Insurable interest
• Utmost good faith
• Indemnity
• Assignment
 Certificate of Origin
This certificate certifies the place of origin of the merchandise’ Besides the federation of
Indian Chamber of Commerce and Industry, EPC’s and various other trade associations have
been authorized government of India to issue certificate of origin. These certificates are
important in case of shipments to countries which have preferential rates of tariff for Indian
goods.
Certificates of origin are issued by Chamber of commerce on their own printed forms
differing in sizes and layout. The standard documents in respect of certificate of origin are
included in the series of aligned documents.
A Certificate of origin declares the place of actual manufacture or growth of the goods. A
country may place restrictions on imports from certain countries.
 Shipping Order/Mate’s Receipt

When a cargo is loaded on the ship the commanding officer of the ship will issue a receipt
called the mate’s receipt for the goods. The mate receipt is first handed over the port trust
authorities so that all the port dues are paid by the exporter to the port trust.
The bill of lading is prepared by the shipping agent only after the male receipt has been
obtained.
The aligned shipping order and the mate’s receipt have been prepared after examining the
forms of the two documents issued by the different shipping companies. The information
required in these documents can be reproduced with great ease from the master. The issuance
of these documents in the standard from will also facilitate the processing of documents at
various stages.
 Shipping Bill
Shipping bill is required by the customs. It is only after the shipping bill is stamped by the
customs that cargo is allowed to be carted to the docks. The aligned shipping bill has been
prepared after taking into consideration the requirement of custom’s public notice no. 39
which suggests a uniform shipping bill for different categories of exports. Basically shipping
bill is of four types:
• Export duty/cess
• Free of duty/cess
• Entitlement to duty drawback
• Re-export of imported goods.
The format presented for shipping bill is as under:
• White shipping bill.
• Green shipping bill.
• Yellow shipping bill.
• Pink shipping bill.
Where goods are to be cleared by the Land customs, Bill of export is prepared instead of
shipping bill.
 Bill of Exchange
A bill of exchange is an instruction by the exporter (drawer) to the (importer) or the
importer’s bank to make payment of the amount mentioned in it. A bill of exchange is a
negotiable instrument and is governed by the Negotiable Instruments Act in India and by
similar enactments in other countries. The Negotiable Instruments Act defines a bill of
exchange as “an instrument in writing containing an unconditional order, signed by the maker
directing a certain person to pay a certain sum of money only to or order of a certain person
or to the bearer of instrument”. A bill of exchange is also called as draft contains an order
from the credit to the debtor to pay a specified amount to a person mentioned therein.
There are three parties to B/E.

• The Drawer (exporter):- The person who executes the B/E.
• The Drawee (importer):- The person on whom the B/E is drawn and who is
required to meet the terms of the document.
• The Payee (the exporter’s bank):- The party to receive the payment.
Types of Bill of Exchange

• Sight and usance bills.
• D/A and D/P bills.
• Inland and foreign bill.
 GR Form
The RBI to ensure that the foreign exchange receipts in respect of exports are repatriated to
India has prescribed this form. This has to be prepared in duplicate. The original copy has to
be submitted to the customs authorities at the port of shipment. This is sent to the RBI
directly by the customs authorities. The duplicate copy is submitted to the negotiating bank
along with the other documents after shipment of goods. The negotiating bank sends the
duplicate copy to the RBI.
➢ Common Defects in Documentation

The bank making payment on behalf of its foreign correspondent must verify that all
documents & drafts conform precisely to the terms & conditions of the L/C. to avoid payment
delays, the beneficiary should prepare & examine all documents carefully before presenting
them to the paying bank. Paying banks find that the following discrepancies between the
documents & the letter of credit occur most frequently:
i. Drafts are presented after L/C has expired or after time for shipment has expired.
ii. Invoice value or draft exceeds amount available under L/C.
iii. Charges included in the invoice are not authorized in the L/C.
iv. Amount of insurance coverage is inadequate or coverage does not include risks
required by the L/C.
v. Insurance document is not endorsed and/or countersigned.
vi. Date of insurance policy or certificate is later than the date on bill of lading.
vii. Bills of lading are not “clean” that is, they bear notations that qualify good order &
condition of merchandise of its packing.
viii. Bills of lading are not marked “On Board” when so required by L/C.
ix. “On Board” endorsement or charges on bills of lading are not signed by carrier or its
agent or initialed by party who signed bills of lading.
x. “On Board” endorsement is not dated.
xi. Bills of lading are not endorsed.
xii. Bills of lading are made out “to order” (Shipper’s order, Blank endorsed) where L/C
stipulates “Straight” (direct to consignee bills of lading or vice versa.
xiii. Bills of lading do not indicate, “Freight prepaid” as stipulated in the L/C.
xiv. B/L are not marked “Freight prepaid” when freight charges are included in invoice.
xv. Descriptions, marks & nos. of merchandise are not same on all documents presented
or are not as required by L/C.
xvi. Not all documents required by L/C are presented.
xvii. Invoice states “used”, “Second hand” or “rebuilt” merchandise when L/C does not
authorize such condition.
xviii. Invoice does not specify shipment terms (C & F, CIF, FOB, etc) as stated in L/C.
xix. Invoice is not signed as L/C requires.
EXPORT INCENTIVES
The Government of India has framed several schemes to promote exports and to obtain
foreign exchange. These schemes grants incentive and other benefits. The few important
export incentives, from the point of view of indirect taxes are briefed below:
Free Trade Zones (FTZ)

Several FTZs have been established at various places in India like Kandla, Noida, Cochin,
etc. No excise duties are payable on goods manufactured in these zones provided they are
made for export purpose. Goods being brought in these zones from different parts of the
country are brought without the payment of any excise duty. Moreover, no customs duties are
payable on imported raw material and components used in the manufacture of such goods
being exported. If entire production is not sold outside the country, the unit has the provision
of selling 25% of their production in India. On such sale, the excise duty is payable at 50% of
basic plus additional customs or normal excise duty payable if the goods were produced
elsewhere in India, whichever is higher.
Electronic Hardware Technology Park / Software Technology

Parks
This scheme is just like FTZ scheme, but it is restricted to units in the electronics and
computer hardware and software sector.
Advance License/ Duty Exemption Entitlement
Scheme (DEEC)
In this scheme advance license, either quantity based (Qbal) or value based (Vabal), is given
to an exporter against which the raw materials and other components may be imported
without payment of customs duty provided the manufactured goods are exported. These
licenses are transferable in the open market at a price.
Export Promotion Capital Goods Scheme(EPCG)
According to this scheme, a domestic manufacturer can import machinery and plant without
paying customs duty or settling at a concessional rate of customs duty. But his undertakings
should be as mentioned below:
Customs Duty Rate Export Obligation Time
10% 4 times exports (on FOB basis) of 5

CIF value of machinery. years
Nil in case CIF value is Rs200mn or 6 times exports (on FOB basis) of 8
more. CIF value of machinery or 5 times years
exports on (NFE) basis of CIF
value of machinery.
Nil in case CIF value is Rs50mn or 6 times exports (on FOB basis) of 8
more for agriculture, aquaculture, CIF value of machinery or 5 times years
animal husbandry, floriculture, exports on (NFE) basis of CIF
horticulture, poultry and sericulture. value of machinery.
Table 2: Undertaking of EPCG
Note:-
• NFE stands for net foreign earnings.
• CIF stands for cost plus insurance plus freight cost of the machinery.
• FOB stands for Free on Board i.e. export value excluding cost of freight and
insurance.
Deemed Exports
The Indian suppliers are entitled for the following benefits in respect of deemed exports:
• Refund of excise duty paid on final products
• Duty drawback
• Imports under DEEC scheme
• Special import licenses based on value of deemed exports
The following categories are treated as deemed exports for seller if the goods are
manufactured in India:
• Supply of goods against duty free licenses under DEEC scheme

• Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software
technology park or a unit in a hardware technology park
• Supply of goods to holders of license under the EPCG scheme
• Supply of goods to projects financed by multilateral or bilateral agencies or funds
notified by the Finance Ministry under international competitive bidding or under
limited tender systems in accordance with the procedures of those agencies or funds
where legal agreements provide for tender evaluation without including customs duty
• Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants
under international competitive bidding
• Supply of goods to any project or purpose in respect of which the Ministry of Finance
permits by notification the import of goods at zero customs duty along with benefits
of deemed exports to domestic supplies
• Supply of goods to power, oil and gas sectors in respect of which the Ministry of
Finance permits by notification benefits of deemed exports to domestic supplies
Manufacture under Bond

This scheme furnishes a bond with the manufacturer of adequate amount to undertake the
export of his production. Against this the manufacturer is allowed to import goods without
paying any customs duty, even if he obtains it from the domestic market without excise duty.
The production is made under the supervision of customs or excise
authority.
Duty Drawback
It means the rebate of duty chargeable on imported material or excisable material used in the
manufacturing of goods in and is exported. The exporter may claim drawback or refund of
excise and customs duties being paid by his suppliers. The final exporter can claim the
drawback on material used for the manufacture of export products. In case of re-import of
goods the drawback can be claimed.

The following are Drawbacks:
• Customs paid on imported inputs plus excise duty paid on indigenous imports.
• Duty paid on packing material.
Drawback is not allowed on inputs obtained without payment of customs or excise duty. In
part payment of customs and excise duty, rebate or refund can be claimed only on the paid
part.
In case of re-export of goods, it should be done within 2 years from the date of payment of
duty when they were imported. 98% of the duty is allowable as drawback, only after
inspection. If the goods imported are used before its re-export, the drawback will be allowed
as at reduced per cent.
Process
The
Various
After
Necessary
Hard
Shipping
A
BRC
application
bunch
receipt
copy
data
isBill
prepared
application
of
ofregarding
of
for
Application
20-25
is
DEPB
Export
digitally
for
Shipping
license,
fee
export
claiming
ofform
in
signed
Goods
the
Bills
this
made
along
form
the
and
license
under
and
are
export
submitted
of
with
their
EFT
feeded
claim
along
E.P.is
copy
towith
inJt.
for
respective
the
of
DGFT,
respective
DEPB
Shipping
ExcelVaranasi
made
Scheme
system
BRCs
DEPB
Bills
incentives
through
has
for
is
&through
copy
made
original
the
beensystem
of
purpose
after
made
shipping
theBRCs
Internet
shipment
for
ofhas
online
one
billsbeen
Site
&
duplicate
sent to Jt.copy
feeding
DGFT,of BRCs
application
on
Varanasi
the&DGFT
a statement
for Site
issuingshowing
DEPB
comprehensive details License
of claims has been sent to
respective customs house through the clearing
agents for verification
Fig. 8: Process of Getting Export Incentives
Step 1: – First of all, Shipping Bill has been made for claiming the Export Incentives. It is
made as SHIPPING BILL FOR EXPORT OF GOODS UNDER CLAIM FOR DUTY
ENTITLEMENT PASS BOOK (DEPB) SCHEME. Under this the main things which have
been covered are:--
1. Invoice No. & Date
2. Custom House agent’s Description
3. Nature of Contract
4. Exchange Rate
5. Currency of Invoice
6. Statistical Code & Description of Goods & Exim Scheme code where
applicable.
7. Analysis of Export Value
8. Amount
9. DEPB Rate
10. Rate List Sr. No.
11. Product Group
12. DEPB No.
13. LET Export date Passed for Shipment
There are two copies of this document. 1st one is export promotion copy & the 2nd one is
DEPB copy. These document having the stamp of Custom & Excise and the signature & seal
of Custom Inspector.
Step 2: – When Shipping Bill has been prepared, after that Bank Realization Certificate
(BRC) has been made for negotiation process in claiming the Export Incentives. This
document has two parts; the 1st part contains 17 columns named Invoice no. & date, Shipping
Bill no. & date, Description of goods, Bill of Ladings’ no. & date, Destination, Bill amount,
Freight amount, Insurance amount Commission Paid, FOB value, Date of realization of
export proceeds and No., date & category of applicable Licence which has been filled by the
exporter. Under these columns Place, Date, Seal & Signature of the exporter have been
mentioned. The 2nd part of this document contains Bank’s Certificate which has to be filled
by the Banker with their authorization seal & signature.
When the exporter gets this BRC, it means that exporter had got the exported amount in his
bank account.
Step 3: – After getting the BRC from the bank, one application have been prepared for a
bunch of 20-25 Shipping bills and their respective BRCs. This application is in favor of the
Jt. Director General of Foreign Trade (DGFT). Description of application for issue of DEPB
license, description of EFT towards the application fee, description of Export Promotion
Copy of Shipping Bills & the description of self-addressed envelop with a relevant amount of
stamp fixed on it have been mentioned in this application.
Step 4: – On the DGFT site, there is application software for filling the data regarding
export made. For this purpose various data regarding export made are feeded in the Excel
system.
Step 5: – After filling the necessary information regarding export made in the DGFT site,
relevant application fee in the EFT form is made through system.
Step 6: – After that application is digitally signed & submitted to DGFT through the
Internet.
Step 7: – A hard copy of application form has been made and along with Export Promotion
Copy of Shipping Bills & original BRCs, it has been sent to Jt. DGFT, Varanasi for issuing
DEPB License.
Step 8: – After getting the DEPB license from DGFT, this license along with respective
DEPB copy of shipping bills & original BRCs & a statement showing comprehensive details
of claims, it has been sent to respective customs house through the clearing agents for
verification.
The DEPB license from DGFT which an exporter receives after the verification of
application regarding export made under DEPB scheme contains the following:
1. Authorization Forwarding Letter
2. DEPB License
3. Details of the exported items
4. Application Submission Details
5. DEPB E-Commerce Version, under this-
♦ IEC Details
♦ Application Firm Details
♦ Nature of Concern
♦ Type of Exporter
♦ Industrial Registration Details
♦ Service Tax Registration Details
♦ RCMC Registration Details
♦ Status House Details
♦ Excise Details
♦ VAT Details
♦ Past Turnover (Rs. Lakhs)
♦ Name & Address of the exporter
♦ Payment Details
♦ FOB value of Exports
♦ DEPB Claimed
♦ DEPB Applied for
♦ DEPB Entitlement for 100%
♦ DEPB Entitlement after cut
♦ Shipping Bills Details
♦ Declaration/Undertaking
♦ Signature & Description of the applicant
♦ Sign of DGFT
is being covered.
GOVERNMENT POLICIES FOR EXPORT

EXIM Policy
The EXIM Policy was announced by the government on 1st April, 1992 which is effective for
a period of 5 years upto March, 1997 co-terminus with the 8th Five year Plan. This is the first
time that an EXIM Policy for a Five Year Plan was announced against earlier policies for 3
years or one year duration. This was done in response to the appeal made by the trade that
frequent and radical changes in the EXIM policy had adversely affected country’s export
efforts and the credibility of the Indian exporters abroad.

The changes in the present EXIM Policy announced on 31st March, 1995 are a result of the
intense interaction between trade and industry. One of the highlights of revised policy is the
widening of the scope of the Export Promotion Capital Goods (EPCG) scheme to provide for
zero duty import of capital goods of a value of at least Rs. 20 crores.
Exports and imports in India are governed by the EXIM policy published by the Director
General of Foreign trade (DGFT).
The EXIM policy allows imports and exports from/to any country in the world except Fiji,
Iraq, Yugoslavia (Serbia and Montenegro).
➢ Main Objectives of EXIM Policy

• Globalization of India’s foreign trade.
• Augmenting exports by facilitating access to imported inputs.
• Promoting efficient and internationally competitive import substitution.
• Encouraging high and internationally accepted standards of quality.
• Transparency in the export-import policies, minimization of quantitative
restriction/licensing and other discretionary controls.
• Strengthening and stimulating the country’s research and development capabilities.
• Simplifying and streamlining procedures governing imports and exports.
EXPORT FINANCE
Financial assistance to the exporters are generally provided by Commercial Banks, before
shipment as well as after shipment of the said goods. The assistance provided before
shipment of goods is known as per-shipment finance and that provided after the shipment of
goods is known as post-shipment finance. Pre-shipment finance is given for working capital
for purchase of raw-material, processing, packing, transportation, ware-housing etc. of the
goods meant for export. Post-shipment finance is provided for bridging the gap between the
shipment of goods and realization of export proceeds. The later is done by the Banks by
purchasing or negotiating the export documents or by extending advance against export bills
accepted on collection basis. While doing so, the Banks adjust the pre-shipment advance, if
any, already granted to the exporter.
 Pre-Shipment Finance
An application for pre-shipment advance should be made by you to your banker along with
the following documents:
• Confirmed export order/contract or L/C etc. in original. Where it is not available, an
undertaking to the effect that the same will be produced to the bank within a
reasonable time for verification and endorsement should be given. An undertaking
that the advance will be utilised for the specific purpose of
procuring/manufacturing/shipping etc., of the goods meant for export only, as stated
in the relative confirmed export order or the L/C. If you are a sub-supplier and want to
supply the goods to the Export/Trading/Star Trading House or Merchant Exporter, an
undertaking from the Merchant.
• Exporter or Export/Trading/Star Trading House stating that they have not/will p 7 3
not avail themselves of packing credit facility against the same transaction for the
same purpose till the original packing credit is liquidated. Copies of Income
Tax/Wealth Tax assessment Order for the last 2-3 years in the case of sole proprietary
and partnership firm. Copy of Exporter's Code Number (CNX). Copy of a valid
RCMC (Registration-cum-Membership Certificate) held by you and/or the
Export/Trading/Star Trading House Certificate. Appropriate policy/guarantee of the
ECGC.
• Any other document required by the Bank. For encouraging exports, R.B.I. has
instructed the banks to grant pre-shipment advance at a concessional rate of interest.
The present rate of interest is 10% p.a. for pre-shipment advance upto an initial period
of 180 days. Pre-shipment advance for a further period of 90 days is given at the
concessional rate of 13% p.a. Banks are free to determine the interest rate for
advances beyond 270 days and upto 360 days.
Following special schemes are also available in respect of pre-shipment finance:
• Exim Bank's scheme for grant of foreign currency pre-shipment credit to exporters for
financing cost of imported inputs for manufacture of export products.
• Scheme of export packing credit to sub-suppliers from export order.
• Packing credit for deemed exports.
• Pre-shipment Credit in Foreign Currency (PCFC). For further details refer to Nabhi's
"How to Borrow from Financial and Banking Institutions".
 Post Shipment Finance

Post-shipment finance is the finance provided against shipping documents. It is also provided
against duty drawback claims. It is provided in the following forms:
➢ Purchase of Export Documents drawn under Export Order: -

Purchase or discount facilities in respect of export bills drawn under confirmed export
order are generally granted to the customers who are enjoying Bill
Purchase/Discounting limits from the Bank. As in case of purchase or discounting of
export documents drawn under export order, the security offered under L/C by way of
substitution of credit-worthiness of the buyer by the issuing bank is not available, the
bank financing is totally dependent upon the credit worthiness of the buyer, i.e. the
importer, as well as that of the exporter or the beneficiary. The documents dawn on
DP basis are parted with through foreign correspondent only when payment is
received while in case of DA bills documents (including that of title to the goods) are
passed on to the overseas importer against the acceptance of the draft to make
payment on maturity. DA bills are thus unsecured. The bank financing against export
bills is open to the risk of non-payment. Banks, in order to enhance security, generally
opt for ECGC policies and guarantees which are issued in favor of the exporter/banks
to protect their interest on percentage basis in case of non-payment or delayed
payment which is not on account of mischief, mistake or negligence on the part of
exporter. Within the total limit of policy issued to the customer, Drawee-wise limits
are generally fixed for individual customers. At the time of purchasing the bill bank
has to ascertain that this Drawee limit is not exceeded so as to make the bank
ineligible for claim in case of non-payment.
➢ Advances against Export Bills Sent on Collection: - It may sometimes

be possible to avail advance against export bills sent on collection. In such cases the
export bills are sent by the bank on collection basis as against their
purchase/discounting by the bank. Advance against such bills is granted by way of a
'separate loan' usually termed as 'post-shipment loan'. This facility is, in fact, another
form of post- shipment advance and is sanctioned by the bank on the same terms and
conditions as applicable to the facility of Negotiation/Purchase/Discount of export
bills. A margin of 10 to 25% is, however, stipulated in such cases. The rates of
interest etc., chargeable on this facility are also governed by the same rules. This type
of facility is, however, not very popular and most of the advances against export bills
are made by the bank by way of negotiation/purchase/discount.
➢ Advance against Goods Sent on Consignment Basis: - When the goods

are exported on consignment basis at the risk of the exporter for sale and eventual
remittance of sale proceeds to him by the agent/consignee, bank may finance against
such transaction subject to the customer enjoying specific limit to that effect.
However, the bank should ensure while forwarding shipping documents to its
overseas branch/correspondent to instruct the latter to deliver the document only
against Trust Receipt/Undertaking to deliver the sale proceeds by specified date,
which should be within the prescribed date even if according to the practice in certain
trades a bill for part of the estimated value is drawn in advance against the exports.
➢ Advance against Undrawn Balance: - In certain lines of export it is the

trade practice that bills are not to be drawn for the full invoice value of the goods but
to leave small part undrawn for payment after adjustment due to difference in rates,
weight, quality etc. to be ascertained after approval and inspection of the goods.
Banks do finance against the undrawn balance if undrawn balance is in conformity
with the normal level of balance left undrawn in the particular line of export subject to
a maximum of 10% of the value of export and an undertaking is obtained from the
exporter that he will, within 6 months from due date of payment or the date of
shipment of the goods, whichever is earlier surrender balance proceeds of the
shipment. Against the specific prior approval from Reserve Bank of India the
percentage of undrawn balance can be enhanced by the exporter and the finance can
be made available accordingly at higher rate. Since the actual amount to be realised
out of the undrawn balance, may be less than the undrawn balance, it is necessary to
keep a margin on such advance.
➢ Advance against Retention Money: - Banks also grant advances against

retention money, which is payable within one year from the date of shipment, at a
concessional rate of interest up to 90 days. If such advances extend beyond one year,
they are treated as deferred payment advances which are also eligible for concessional
rate of interest.
➢ Advances against Claims of Duty Drawback: - Duty Drawback is

permitted against exports of different categories of goods under the 'Customs and
Central Excise Duty Drawback Rules, 1995'. Drawback in relation to goods
manufactured in India and exported means a rebate of duties chargeable on any
imported materials or excisable materials used in manufacture of such goods in India
or rebate on excise duty chargeable under Central Excises Act, 1944 on certain
specified goods. The Duty Drawback Scheme is administered by Directorate of Duty
Drawback in the Ministry of Finance. The claims of duty drawback are settled by
Custom House at the rates determined and notified by the Directorate. As per the
present procedure, no separate claim of duty drawback is to be filed by the exporter.
A copy of the shipping bill presented by the exporter at the time of making shipment
of goods serves the purpose of claim of duty drawback as well. This claim is
provisionally accepted by the customs at the time of shipment and the shipping bill is
duly verified. The claim is settled by customs office later. As a further incentive to
exporters, Customs Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, and
Hyderabad have evolved a simplified procedure under which claims of duty drawback
are settled immediately after shipment and no funds of exporter are blocked.
However, where settlement is not possible under the simplified procedure exporters
may obtain advances against claims of duty drawback as provisionally certified by
customs.
➢ Negotiation of Export documents Drawn under L/C: - This aspect has
been discussed in the chapter on Special Care for negotiation of Export Documents
under Letter of Credit.
➢ Rates of Interest: -The rate of interest depends on the nature of
the Bills, i.e., whether it is a demand bill or usance bill. Like pre-shipment, post-
shipment finance is also available at concessional rate of interest.
The Present Rates of interest are as under:
• Demand Bills for transit period Not exceeding (as specified by FEDAI) 10%
p.a.
• Usance Bills (for total period comprising usance period of ex-port bills, transit
period as specified by FED AI and grace period, wherever applicable:
• Upto 90 days 10% p.a.
• Beyond 90 days and upto six 12% p.a. months from the date of shipment.
• Beyond six months from the 20% date of Shipment (Minimum)
➢ Normal Transit Period: - Foreign Exchange Dealers Association of India

(FEDAI) has fixed transit period for export bills drawn on different countries in the
world. The concept of this transit period is that an export bill should normally be
realised within that period. The transit period so fixed by FEDAI is known as 'Normal
Transit Period' and mainly depends on geographical location of a particular country.
➢ Direct and Indirect Bill: - If the currency of the bill is the same as the currency
of the country on which it is drawn, it is termed as direct bill, e.g. an export bill in US
$ drawn on a place in U.S.A. However, if the currency of the bill in which it is drawn
is different than the currency of the country on which it is drawn, it is termed as
indirect bill, e.g. an export bill in US $ drawn on a place in Japan. The normal transit
period fixed for indirect bill is on higher side as compared to transit period fixed for
direct bills.
➢ Notional Due Date: - To determine the due date of an export bill we have to
consider the following 3 components: - (1) Normal transit period as fixed by FEDAI,
(2) Usance period of the bill and (3) Grace period if applicable in the country on
which the bill is drawn. Grace period is applicable only in the case of Usance bills.
The notional due date of an export bill may thus be calculated after adding all the
above 3 components the concessional rate of interest is chargeable upto the notional
due date subject to a maximum of 90 days.
➢ Forfeiting Finance by Authorised Dealers: - Reserve Bank has now

permitted the authorised dealers (Banks) to arrange forfeiting of medium term export
receivables p 7 3 on the same lines as per the scheme of EXIM Bank and many
International forfeiting agencies have now become active in Indian market. Forfeiting
may be usefully employed as an additional window of export finance particularly for
exports to those countries for which normal exports credit is not intended by the
commercial banks. It must be noted that charges of forfeiting are eventually to be
passed on to the ultimate buyer and should, therefore, be so declared on relative
export declaration forms.
➢ External Commercial Borrowings: - Proposals for raising foreign currency

loans/credits viz., Buyer's Credits, Supplier's Credits or Lines of Credits by
firms/companies/lending institutions, banks, etc. for financing cost of import of
goods, technology or for any other purposes, other than short-term loans/credits
maturing within one year should first be submitted to government of India, Ministry
of Finance (Department Economic Affairs), ECB Division, New Delhi for necessary
clearance. The proposals are considered by the government on merits of each case and
in the light of prevailing Government policy.
➢ EXIM Bank Finance: - Besides commercial banks, export finance is also made
available by the EXIM bank. The EXIM bank provides financial assistance to
promote Indian exports through direct financial assistance, overseas investment
finance, term finance for export production and export development, pre-shipment
credit, lines of credit, re-lending facility, export bills re-discounting, refinance to
commercial banks, finance for computer software exports, finance for export
marketing and bulk import finance to commercial banks. The EXIM Bank also
extends non-funded facility to Indian exports in the form of guarantees. The
diversified lending programmed of the EXIM Bank now covers various stages of
exports, i.e. from the development export markets to expansion of production capacity
for exports, production for export and post shipment financing. The EXIM Bank's
focus is on export of manufactured goods, project exports, exports of technology,
services and export of computer software.
Hindalco Export Data (From Renukoot Plant)

Although, EXIM bank is assisting finance to the exporters but Hindalco is not availing this
facility provided by the EXIM bank.
HINDALCO’S EXPORTS
(From Renukoot Plant)
YEAR QTY. (MT)
2003-04 20393
2004-05 32828
2005-06 36559
2006-07 35477
2007-08 39317
Table 3: Hindalco’s Export in terms of Quantity (MT)
SWOT ANALYSIS OF HINDALCO
➢ STRENGTH
• A global leader in value-added high-end aluminium flat rolled products and
aluminium can recycle.
• It is the largest manufacturer of the entire range of flat rolled products in India &
enjoys nearly 60 per cent of market share.
• The company exports about 17 per cent of its total sales volume of aluminium.
• The company has been accorded the Five Star Trading House status in India.
• The company's metal is accepted for delivery under the high grade aluminium
contract on the London Metal Exchange (LME).
➢ WEAKNESS
Since I had done my project in Renukoot plant then the only weakness which I found here
in Renukoot plant is that Marketing process is very difficult from here due to its remote
location and it is also very far from ports.
➢ OPPORTUITIES
• Takeover of Indal is taking Hindalco to the way of increased production to meet the
Importer’s requirements without any delay in time and it also giving the opportunities
to export marketing department to secure as much export order due to increased
capacity of production.
• Acquisition of Novelis giving the opportunities to the Hindalco to expand more its
global market, since, Novelis has the unrivaled capability to provide its customers
with a regional supply of technologically sophisticated rolled aluminium products
throughout Asia, Europe, North America and South America.
➢ THREATS
Due to high International Inflation rate, price of the Aluminium is increasing in the
International Metal Market. As a result, the Aluminium, which was said as the product of
poor peoples, now it has been gone far from the hands of a middle class people. Now, it
becomes a product of high class society. So, poor and middle class peoples are searching
and getting the alternatives of the Aluminium metal i.e. Iron and Steel which is low in
cost as comparison to Aluminium now-a-days.
FINDINGS & RECOMMENDATIONS

➢ Findings
• Hindalco is the leading exporter of Aluminium Semi-Finished products in India.
• FIEO (Federation of Indian Export Organisation) has awarded Hindalco as a Five
Star Trading Houses on their export achievements.

• Hindalco is following all the norms as per Central Excise & Customs and other
government rules & regulations in the export process.
• Hindalco is following positive and proactive approach towards export.
• Hindalco is exporting from Kolkata and Mumbai port both.
• Hindalco is exporting all over the world, from underdeveloped countries to advance
countries.
➢ Recommendations
Hindalco is a reputed Aluminium industry in the world and its products are well accepted in
the market but as we know that there is always a scope of improvement.
Following are the recommendations in all the three areas i.e. Export Process, Export
Documentations and Export Logistics:
• Sometimes 3-4% execution of export order has been delayed due to rejection of
partial quantity of the product due to quality problems and manufacturing defects. So, it
is recommended that Hindalco should have to keep advance stock or backup products in
their warehouse to overcome this problem and to execute the order on time.
• Some of the Caster product order is being delayed due to limited capacity of the
Caster Plant. So, it is recommended that Hindalco should have to increase the capacity
of their Caster Plant.
• Hindalco is using Oracle 11i & IVL software system for making export documents.
The working of this software is from Order management to Shipment. This process is
time taking due to partly adoption of the software system. So, it is recommended that
this software should have been start from Enquiry management to Shipment. It would
ease in making documents in faster way manual interruption will be minimized.
• Sometimes there is unavailability of containers for any particular destination occurs.
This problem have been overcome by helding a meeting and making a successful
negotiation process from the shipping line companies for the arrangement of empty
containers.
• Unavailability of tailors due to non-uniformity of production occurs. This problem
should have been solved by the proper working collaboration of the Marketing &
Production department.
• Movement of export consignment tailors disturbs due to creation of problems by the
Naxalieds in Jharkhand and Bihar. This problem will be overcome by the Indian
Government only, company have not any solution of this problem.
Some other recommendations are:
• Company should focus on small-scale industries.
• Improved and advanced technologies should be used for better Quality and more
Quantity.
• Company should focus on CRM .
BIBLIOGRAPHY
Books:
➢ Khurana P. K., Export Management, 4th Edition, Galgotia Publication Company.
➢ Philip R. Cateora and John L. Graham, International Marketing, 11th Edition, Tata
McGraw-Hill Publication Company Limited.
➢ Francis Cherunilam, International Trade and Export Management, 15th Edition,

Himalaya Publication House.
➢ Rothor B.S. & J.S. Rathor, Export Management, 6th Edition, Himalaya Publication
House.
Magazines:
➢ Aluminium International Today
➢ Aluminium Times
➢ APT – Aluminium Process and Product Technology
➢ Induction Manual
Internet:
➢ http://www.unzco.com/basicguide
➢ http://www.fieo.org
➢ http://www.wikipedia.com/trade_policy/export_procedures
➢ http://www.google.co.in
➢ http://www.altavista.com
➢ http://www.hindalco.com
➢ http://www.novelis.com
➢ http://www.adityabirla.com
➢ http://www.bxa.doc.gov
SPECIMEN OF PROFORMA INVOICE
Exporter Invoice no. Exporter’s Ref

& date
Buyer’s order no. & date
Other references
Consignee Buyer
Country of origin of Country of
goods Final
destination
Terms of delivery and payment
Pre-carriage by Place of Receipt by Pre-
carrier
Vessel/Flight Port of lading
No.
Port of Final destination
discharge
Marks and no. No. and Description Quality Rate Amount
of containers kind of of goods
Pkgs.
Signature & date
SPECIMEN OF PACKING LIST
Exporter Invoice No. Date

Buyer’s order no. & date
Other reference(s)
Consignee Buyer
Country of origin of Country of

goods Final
destination
Pre-carriage by Place of Receipt by

Pre-carrier
Vessel/Flight Port of lading
No.
Port of discharge Place of delivery
Marks & No.s/ No. and kind of Pkgs. Description Quality Remarks
containers no. of goods
Signature &
date
SPECIMEN OF CERTIFICATE OF ORIGIN

Exporter
NAME OF THE
CHAMBER OF COMMERCE
Consignee
Pre-carriage by Place of receipt of Pre-

Carrier
Vessel Port of loading
Port of discharge Final destination
No. and kind of packages :
Description of goods
Gross weight (kg)
Measurement
Certification : Declaration by Exporter :

It is hereby certified that this declaration was made before We hereby declared that the above mentioned goods were
me and that to the best of my knowledge and believe the produced in the Indian Union and are shipped to
above mentioned goods are of Indian origin.
Name of the authorized Signatory
Place and date of issue
Place & date of issue
Signature Secretary
Signature
SPECIMEN OF BILL OF LADING
Shipper
B/L NO.
Consignee NAME AND LOGO

OF
SHIPPING LINE
Notify Party
Local Vessel From

Ocean Vessel Port of Lading
Port of Discharge Final Destination (if on
carriage)
Marks & Numbers No. & Kind of Packages; Gross weight(kg) Measurement
Description of goods

RENUKOOT: General Overview

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

RENUKOOT: General Overview

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

RENUKOOT: General Overview

Uploaded by

Copyright:

Available Formats

RENUKOOT: General Overview

passing through green forest.

to New Delhi via Renukoot commuting both ways thrice a week.

Shaktipunj Express, which communicates between Jabalpur to Kolkata via Renukoot.

ADITYA BIRLA GROUP: General Overview

The group is a transnational conglomerate with 72 state-of-the-art manufacturing units and

China make it India’s first truly multinational conglomerate.

Metals, Industrial Chemicals, Carbon Black, Power, Telecommunication, Sponge Iron,

Insulators and Financial Services.

The Aditya Birla Group enjoys a front-runner position:

Aluminium rolling company

• It ranks as No. 1 in Viscous Staple Fibre

• The largest single location palm oil producer

• The third largest producer of insulators

• The third largest producer of carbon black

• The largest single location copper smelter

• Among the best energy efficient fertilizer plants

• The second largest in the chlor-alkali sector

• Among the top five mobile telephony companies

• Among the top three supermarket chains in the retail business

expectations profitably, unleashing employee potential and being a responsible corporate

citizen adhering to our values.

HINDALCO: General Overview

Aluminium manufacturer in the country.

Shah as the Chief Operations Officer- Aluminium and Power.

world’s lowest cost producers of Aluminium.

Aluminium capacity of 3, 45,000 MTPA.

Effectiveness Focus: - “To continue to remain market leader domestically.”

Growth Focus: - “To pursue value adding growth opportunities in Aluminium.”

• We are committed to total customer satisfaction by providing products and services,

which meet or exceed the customer’s expectations.

training of employees at all levels shall be a continuous process in Hindalco.

Organizational Profile of Hindalco Industries

Aditya Birla Group.

Hindalco is one of India’s producers of Aluminium. The company was incorporated on

has been accorded a Trading House status by the Indian government.

construction, electrical, defense and general engineering applications. Hindalco is registered

made Hindalco a prime source for best-selling brands. Continuous improvements in

expectations are fully met.

Oracle ERP system.

using the products.

efficient producers globally. In India, Hindalco enjoys a leadership position in specialty

alumina, primary aluminium and downstream products

The company's integrated complex at Renukoot houses an alumina refinery, aluminium

company's captive power plant at Renusagar, located at a distance of about 45 km from

Renukoot. It has a captive capacity of 820.2 mw.

and Muri in eastern India.

plant of Hindalco is also located at Silvassa.

Belgaum, Karnataka and Taloja Research and Development Centre in Taloja,

Maharashtra. They have been recognized by the Government of India's Department of

Scientific and Industrial Research (DSIR).

Hindalco is a leading domestic player in two non-ferrous metals business segments-

Aluminium and Copper.

company to showcase quality products to a quality audience in an appropriate ambience. The

and cladding panels.

of its total sales volume of Aluminium.

The company's alumina chemical business is a leader in manufacturing and marketing of

fertilizers and phospho-gypsum are also produced at this plant.