Contemporary Issues in International Business

Presently there are multiple challenges in international business since every country has its
business policies that outline the laws & regulations, cultural & language variations,
exchange rates, time zones, and inflation rates. Therefore, steering the global business issues
today can be a difficult task. The further sections of the article highlight the changing trends
and challenges of global business and how to overcome them.
12 Challenges in International Business
The following factors highlight the problems of international business:
1. Managing globally distributed teams
Developing and successfully managing teams at the international level is a tough job. The
complexities of international businesses like varying labor laws, payroll laws, compliance,
tax laws, employee rights, and varying technology access increase global team management
challenges.
To maintain a strong work association with your team spread across the globe, you must
ensure regular check-ins, preferably through a video conferencing platform that enables real-
time interactions. Many researchers have shown that employees who regularly interact with
their managers are three times more likely to be engaged in their work than employees who
do not interact.
In the aftermath of the COVID-19 pandemic, when many companies have shifted to remote
working, distance divides teams. Therefore, effective communication and collaboration are
essential to ensure employees feel valued and productive work engagement.
2. Language obstacles
In international business, it’s prevalent to meet people speaking different languages. The
language barrier is one of the most significant international business challenges. Therefore,
most multinational companies hire employees fluent in at least one foreign language.
It’s noteworthy that organizations often face difficulty explaining their goals to the customers
due to the information lost in translation. It’s also vital to consider the languages your team
members speak, and the customer support executives should be in line with your target
customers. Significant investment in interpreters and maintaining a pool of employees
comfortable in major global languages ensures that your business operates smoothly.
In some countries, labor laws dictate that employment contracts are written in the local
language. While employing talent in another country becomes a challenge for international
business. Employing a local to verify the correctness and compliance of these contracts is one
way to solve this problem.
3. Currency exchange and inflation rate issues
An international business receives payments from multiple nations. The value of a dollar for
your native country will not always be equal to the same amount in other currencies.
Therefore, it’s one of the major problems of international business as the currency’s value
consistently fluctuates for the same amount of goods & services.
It’s recommended that you familiarize yourself with the currency exchange rates and the
inflation rates of the nations where your international business operates. The inflation rates
influence the price of commodities and labor costs, which eventually steers the final product
pricing. Monitoring these two rates provides essential insights into the market value of your
product & services in different locations over time.
4. Cultural variations
The different counties worldwide, sometimes other regions within these countries, have a
unique cultures. Understanding the different cultures your employees and clients follow
enhances the management and increases cross-cultural business relationships. Eventually, this
reduces the complexities of international business and makes your processes highly effective.
Whether managing your overseas office, selling your products/services to international
clients/retailers, or operating an overseas manufacturing set-up, it will significantly benefit
your international operations once you understand their cultures and employ emotional
intelligence.
5. Nuances of foreign policies, geopolitics, and cross-country relations
The international business environment is greatly affected by political scenarios and the
foreign relations between the countries. When you expand your business in the international
market, it’s essential to know the financial systems, trade policies, and country-specific tax
regulations. Friction in cross-country relations is one of the significant complexities of
international business. This knowledge affects your business strategy and ensures that you
abide by the rules and regulations of the operating country.
The political decisions taken by the leaders influence the taxes, labor wages, commodity
prices, transportation & infrastructure costs, etc. Therefore, you should update yourself with
the strategic decisions, and the workplace policy should comply with all the regulations.
6. Supply chain risks
Managing the supply chain that encompasses national borders lies among the significant
problems of international business. The particulars of imports, exports, offshore shipping, and
related logistics are steered by international laws and other foreign legislations. If your
business sources products & services overseas, managing the supply chains can pose a
significant threat to international business.
International expansion is a strategic decision that should be taken after developing a solid
supply chain strategy as it affects the future of your business. Supply chain strategies need to
be unique based on your business requirements, and you need to develop them specifically
for the locations you wish to expand. This includes studying the local trade regulations,
external influences, existing supply chain, and local material availability.
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7. Talent acquisition and onboarding
Hiring and retaining talented employees is an essential aspect of international expansion.
Talented and motivated staff with the required knowledge base and industry experience of the
specific region are assets to the organization. If your business lacks experienced employees
who can act as an anchor for that location, your international expansion can face challenges.
This challenge is amplified in the case of venture mergers or acquisitions.
For an international business, hiring employees across the globe involves multiple challenges
like an onboarding plan unique to remote work, increased overhead expenses, extensive HR
support, etc. When you hire employees from overseas, access to these employees is not the
same for all as in offline work, making it challenging to make the right decision.
8. Compliance issues
Tax compliance issues are one of the challenges of expanding globally. All international
businesses have to deal with multiple countries having different business regulations, tax
rates, and other commercial fees; these are hindrances that must be complied with to operate
globally.
If the business fails to comply with regulations, it can hinder business expansion and pay
hefty compliance charges. This means that employers must do thorough research and
legitimate paperwork to comply with the dynamic international regulations.
9. New market competition
When multiple companies offer similar products and services, their business models create
aggressive competition. If you wish to explore a new market, you need to do a market search
regarding the companies already providing the products and services in that segment. The
challenges of expanding globally also call for differentiating factors in your products and
services so that they gain a competitive edge in the market.
It’s a profitable business idea to venture into unique products & services to create your own
market while developing reputable business relationships with local vendors, shipping
agencies, suppliers, and logistics to strengthen your supply chain.
10. Brand consistency
International businesses solve different problems for different customers worldwide; it’s
challenging to create brand consistency and leverage it in the global market. Brand
consistency refers to the functional language, logo, work culture, and many factors affecting
your brand’s growth. Evolving a global corporate strategy is imperative to brand consistency.
A company’s brand differentiates it from the other companies as it is the company’s
trademark. Another challenge with brand consistency is that your business must maintain
consistency in its deliverables. If the business is successful, the brand recall value increases,
leading to exponential growth in profit.
11. Environmental issues on a global level
The environmental risks and effects of global warming and climate change are evident daily.
Therefore, sustainability is high on the priority list of the foremost multinational corporations.
The UN’s Sustainable Development Goals have elevated environmental issues as the
challenges of expanding globally. Businesses should develop and implement more
environmentally sustainable business processes.
It’s essential to be aware of the country-specific environmental regulations to expand your
business overseas and avoid legal issues in global business. This highlights the importance of
sustainable production methods and non-conventional energy resources for your production
process.
12. Payrolling challenges
The global expansion comes at a cost; the payroll challenges can accumulate if not
appropriately managed. It’s noteworthy that each global payroll challenge gets multiplied by
the number of nations your company serves. Since every country has laws and regulations
related to taxes, retirement benefits, and healthcare requirements, managing all these factors
poses a significant challenge when you venture into a new country.
INTERNATIONAL SALES CONTRACTS
Defining an International Sales Contract
An international sales contract is an agreement between a buyer and a seller that identifies the
parties in the transaction, the goods or services being sold, the terms and conditions of
the sale, and the price to be paid.
International sales fall under the United Nations Convention on Contracts for the
International Sale of Goods (CISG).
A sales contract can be a verbal agreement between two parties, a collection of documents
such as a purchase order and an order acknowledgement exchanged between two parties, or a
formal, written agreement signed by the buyer and the seller. The type of agreement your
company uses may depend on the value of the sale, the nature of the goods, and the
complexity of the terms of the agreement. We always recommend having a written contract.
Exporters Should Insist On a Written Sales Contract
A written contract forces both the buyer and seller to think about the details of the sale up
front. Before a contract is written, it is much easier for both parties to bargain; once a contract
is created, it becomes much more difficult. A written contract also reminds both parties of the
terms of the sale.
Finally, a written contract offers legal protection, explaining the details of the agreed-upon
arrangement to a judge, jury or arbitrator. Contracts should be unambiguous, and written in
such a way that even those who are not involved in the world of commercial exporting would
understand the terms of the agreement.
Creating a Sales Contract
In real life, most exporters and importers do not sit down together to sign a single, formal
document called a contract. Contracts are typically created via a process that may include an
offer, acceptance, rejection and counteroffer. Not all of these components occur in every sale.
Within both the Uniform Commercial Code (UCC) and the United Nations Convention on
Contracts for International Sale of Goods (CISG), there are variations on whether or not a
contract exists and when or if it is accepted.
Your Sales Contract Negotiations
The following is a partial list of recommended terms and conditions buyers should have in
their purchase orders and sellers should have in their acceptance/confirmation documents.
 Price. (Agreed-upon price, when buyer pays for goods, currency, taxes, offsets, and
payment terms.)
 Description of goods.
 Method of carriage and bill of lading.
 Transfer of ownership. (When does the buyer become owner of goods? This is not the
same as Incoterms!)
 Pre-shipment inspection conducted by independent third parties.
 Post-shipment inspection and rejection. (Buyers should have a certain amount of time
to inspect and determine whether goods conform to contract. If goods do not conform,
what are the remedies?)
 Warranties. (Terms and conditions that should be negotiated by the buyer and the
seller and included in the sales contract.)
 Incoterms. (Incoterms rules identify what the buyer and seller are each responsible for
in a shipment, including packaging, inspection, export licenses, import clearance,
inland carriage in buyer/sellers countries, and cargo insurance. They also indicate
where the risk of loss or damage transfers from seller to buyer.)
Types of International sales contracts
International sales contracts are essential for businesses that want to expand internationally.
These contracts define the terms and conditions of the sale and help to establish a framework
for handling any disputes that may arise. There are different types of international sales
contracts, each with its own advantages and disadvantages. In this article, we will explore the
most common types of international sales contracts.
1. Ex-works (EXW) Contract
The Ex-Works (EXW) contract is the simplest form of international sales contract. The seller
only delivers the goods to the buyer at a specific place, such as the seller`s warehouse or the
port of shipment. The buyer is responsible for all costs associated with moving the goods
from the seller`s location to the buyer`s destination. This type of contract puts all the
responsibility on the buyer, and the seller has very little involvement in the process.
2. Free on Board (FOB) Contract
The Free on Board (FOB) contract is a more complicated form of international sales contract.
The seller is responsible for delivering the goods to the port of shipment, and the buyer is
responsible for arranging transport from the port of shipment to the final destination. The
seller is responsible for loading the goods onto the carrier and obtaining any necessary export
documentation. The buyer is responsible for any costs associated with transport after the
goods have been loaded onto the carrier.
3. Cost Insurance and Freight (CIF) Contract
The Cost Insurance and Freight (CIF) contract is a more comprehensive contract that covers
all costs involved in shipping the goods from the seller to the buyer`s location. The seller is
responsible for arranging shipping and insurance for the goods, as well as any necessary
export documentation. The buyer is responsible for any import duties, taxes, or fees
associated with importing the goods into their country.
4. Delivered Duty Unpaid (DDU) Contract
The Delivered Duty Unpaid (DDU) contract places the responsibility on the seller to deliver
the goods to the buyer`s location. However, the buyer is responsible for paying any import
duties and taxes associated with importing the goods into their country. The seller is
responsible for obtaining any necessary export documentation and arranging for
transportation to the buyer`s location.
5. Delivered Duty Paid (DDP) Contract
The Delivered Duty Paid (DDP) contract is the most comprehensive form of international
sales contract. The seller is responsible for all costs associated with shipping the goods to the
buyer`s location. This includes all transport costs, import duties, taxes, and fees. The seller is
responsible for obtaining all necessary export and import documentation and arranging for
transportation to the buyer`s location.
In conclusion, choosing the right type of international sales contract is critical for ensuring a
successful international transaction. Each contract has its own advantages and disadvantages,
and it is important to consider factors such as cost, risk, and responsibility when selecting a
contract. By understanding these different types of contracts and their implications,
businesses can make informed decisions and mitigate risks when conducting international
business.
Major Laws in international trade
Trade in goods The General Agreement on Tariffs and Trade (GATT) has been the backbone
of international trade law since 1948 after the charter for international trade had been agreed
upon in Havana. It contains rules relating to "unfair" trading practices—dumping and
subsidies. International trade law includes the appropriate rules and customs for handling
trade between countries. However, it is also used in legal writings as trade between private
sectors. This branch of law is now an independent field of study as most governments have
become part of the world trade, as members of the World Trade Organization (WTO). Since
the transaction between private sectors of different countries is an important part of the WTO
activities, this latter branch of law is now part of the academic works and is under study in
many universities across the world.
International trade law is a very complex and an ever expanding area. There are basically four
levels of international trade relationships: unilateral measures (national law), bilateral
relationships (Canada-United States Free Trade Agreement), plurilateral agreements1, and
multilateral arrangements (GATT/WTO). The focus of this guide is on international trade
generally and on some of the major bilateral or multilateral international trade agreements:
FTA, NAFTA, and GATT/WTO. Many of the sources listed throughout this guide will
contain information about other trade agreements and arrangements.
United States—Canada Free Trade Agreement (FTA)top
This agreement was signed by President Reagan and Prime Minister Mulroney on January 2,
1988 and, after implementing legislation was enacted in the United States and Canada, the
Agreement entered into force on January 1, 1989. Its main purpose is to eliminate all tariffs
on trade between the U.S. and Canada by January 1, 1998. According to Treaties in Force, "
[t]his agreement is suspended, subject to certain transition arrangements with respect to
dispute settlement proceedings under Chapters 18 and 19, for such time as the United States
and Canada are parties to the North American Free Trade Agreement signed at Washington,
Ottawa, and Mexico City December 8, 11, 14, and 17, 1992." (p.49, 2003).
Free Trade Area of the Americas Agreement (FTAA)top
In December 1994, the Summit of the Americas was held to begin the effort to unite the
economies of the Western Hemisphere. Since then, there have been several Ministerial
meetings and Summits to negotiate the proposed agreement. The FTAA will be established by
2005 with the goal of progressively eliminating barriers to trade and investment in the region.
General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO)top
The GATT is one third of the Bretton Woods system that was created after World War II to
ensure a stable trade and economic world environment. The IMF and the World Bank are the
other two bodies created by the Bretton Woods system. The GATT has completed 8 rounds of
multilateral trade negotiations (including the Uruguay Round). The GATT is a multilateral
agreement and the text can be located at 55 UNTS 194, TIAS 1700. The Final Act from the
Uruguay Round was concluded on December 15, 1993 and produced the World Trade
Organization (WTO) agreement and its annexes. The text is located at 1867 UNTS 14. The
Annexes, which contain the WTO agreement, GATS, TRIPS, etc. are in the subsequent
UNTS volumes 1868 and 1869). GATT 1947 and GATT 1994 are two distinct agreements.
GATT 1994 incorporates the GATT 1947 provisions (except for the Protocol on Provisional
Application).
INCOTERMS
Incoterms, widely-used terms of sale, are a set of 11 internationally recognized rules which
define the responsibilities of sellers and buyers. Incoterms specify who is responsible for
paying for and managing the shipment, insurance, documentation, customs clearance, and
other logistical activities.To facilitate commerce around the world, the International Chamber
of Commerce (ICC) publishes a set of Incoterms, officially known as international
commercial terms. Globally recognized, Incoterms prevent confusion in foreign trade
contracts by clarifying the obligations of buyers and sellers.
Parties involved in domestic and international trade commonly use Incoterms as a kind of
shorthand to help understand one another and the exact terms of their business arrangements.
Some Incoterms apply to any means of transportation, while others apply strictly to
transportation across water.
1. International commercial terms—Incoterms for short—clarify the rules and terms that
buyers and sellers use in international and domestic trade contracts.
2. The International Chamber of Commerce (ICC) developed Incoterms in 1936 and
updates them periodically to conform to changing trade practices.1
3. Examples of Incoterms for modes of transportation include Delivered at Terminal
(DAT), Delivered Duty Paid (DDP), and Ex Works (EXW).2
4. Incoterms were updated for 2020, and although only one term changed, there are
notable differences in security costs.3
5. The terms are standardized, but certain buyers and sellers prefer individual terms over
others. As such, which terms will be used is a matter of negotiation.
Advantages and Disadvantages of Incoterms
The single greatest advantage of using Incoterms is the standardization and specificity of
complicated international trade aspects. Having a system that eliminates ambiguity between
nations has made trading much simpler, especially when negotiating terms. This saves time
and money that would have previously been spent on lawyers, who would draft terms
basically breaking down Incoterms into different languages.
A notable disadvantage of Incoterms is that buyers and sellers often have different
preferences when using them. Sellers, for example, may choose CIF because they understand
their shipments better than buyers do. Buyers, in contrast, may prefer FOB for the same
reasons. However, the terms themselves are not the issue, and it becomes more a matter of
negotiation over which terms to use vs. the clarity of the terms themselves.
Pros
 Easily understood terms
International standardization
Updated and clarified by an international body (ICC)
Cons
Differences between buyer and seller preferences when choosing terms
Certain terms can expose one party to inflated costs
Incoterms 2010 vs. Incoterms 2020
Although the 2010 Incoterms were updated in 2020, there are no significant differences in the
naming conventions between the two. There was only one change in terminology: the 2010
term Delivered at Terminal (DAT) was clarified to the 2020 term Delivered at Place
Unloaded (DPU). This was done to include all places of unloading, not just those in
terminals. In both instances, there are 11 terms. Things become more involved when you
move past the terms themselves. For example, the amount of freight insurance required under
the CIP term has been increased. However, this does not have an effect on the CIF term.
Incoterms 2020 covers situations where either the buyer or seller transports goods using their
own vehicles. In 2010, it was assumed that these services were provided by a third-party
carrier. And there is a change in the way that the FCA rule is used in conjunction with a letter
of credit.
In addition, security-related cost responsibilities have changed. These can be associated with
export clearance processes as well as the import clearance process. The Incoterms revision
clarified that the most common cost headings are those associated with transport that are the
responsibility of the arranging party. Security costs associated with export clearance will be
borne by the seller other than for Ex Works cases. Security costs associated with import will
be borne by the buyer, except for DDP cases.
Can one still use Incoterms 2010 after Jan. 1, 2020?
Yes, it is still acceptable to use the 2010 Incoterms. However, both buyer and seller should
agree in writing to use either the 2010 or 2020 Incoterms version.2
What are the 11 Incoterms?
The 11 Incoterms are
1. Ex Works (EXW);
2. Free Carrier (FCA);
3. Carriage Paid to (CPT);
4. Carriage and Insurance Paid to (CIP);
5. Delivered at Place (DAP);
6. Delivered at Place Unloaded (DPU);
7. Delivered Duty Paid (DDP);
8. Free Alongside Ship (FAS);
9. Free on Board (FOB);
10. Cost and Freight (CFR); and
11. Cost, Insurance, and Freight (CIF).
What are the clauses of the international trade contract?
It is common for international trade contracts to be made subject to force majeure or
"hardship" clauses that excuse the parties from performance when their failure is due to
impediments beyond their control or which were reasonably unforeseeable such as the
outbreak of a war, earthquake or hurricane.
The International Sale Contract is the most used among those governing trade relations
between companies in different countries. This agreement sets out the rights and obligations
of the parties (exporter-seller and importer-buyers) and the remedies for breach.
This contract is greatly influenced by the United Convention on Contracts for the
International Sale of Goods (CISG), widely accepted by lawyers of different traditions and
backgrounds. It articulates practical requirements arising from commercial practice with the
general rules of CISG. Besides CISG, other sources of uniform contract law used in drafting
this contract are the following: Uniform Law on the International Sale of Goods (ULIS),
UNIDROIT Principles of International Commercial Contracts and the Principles of European
Contract Law.
Multinational companies usually have their own specific international sale contracts as well
as General Conditions of Sale and Purchase. On the contrary, small and medium size
companies tend to use general forms or model contracts templates and for that reason it is
important to negotiate and draft the most important clauses. Below, we select and describe the
10 key clauses of an international sales contract:
1. Description of goods
This clause is one of the central clauses in a sale contract. As a general rule, the buyer will
prefer more precise and detailed descriptions than the seller. If the goods are not described
precisely enough, the buyer may have no recourse should the seller deliver goods which
technically meet the contract description but are unsatisfactory for the buyer´s commercial
purposes. On the other hand, exporters would like to define the goods precisely when they are
sure of delivering exactly those goods. In other commercial situations, however, it may be
practical to foresee and permit slight deviations from the contract description; for example, in
statements of colors or dimensions, are not necessary to precisely identify the goods, and they
should not be included in the product´s description.
2. Contract price
The parties shall indicate clearly the contract currency and the price amount in both figures
and words. Should the parties fail to agree on a price in the contract, a provision explaining
the method for determining the price should be included in the contract.
3. Delivery Terms
It is advisable to use Incoterms 2010 published by the International Chamber of Commerce as
"delivery terms" or "shipping terms". Incoterms rules allocate the following between seller
and buyer:
International transport and administrative costs.
The point of transfer and risk of the goods.
Responsability for customs and payment of import duties
Responsability for obtaining insurance coverage.
When using Incoterms, it is necessary to describe precisely the place and within that place the
exact point of delivery. Additional specifications may also be necessary to specify such as the
amount of the extent of insurance coverage and any necessary limitations on suitable
transport. Further information about the use of Incoterms can be founded in The Practical
Guide to Incoterms.
4. Time of delivery
In the contract, the parties should indicate a specific date for delivery (e.g., october 24, 2013)
or a period (e.g, november 2013).
5. Payment conditions
The contract should permit the use of all international payment modes, including at least:
payment in advance, open account, documentary collection and documentary credit (also
known as letter of credit).
6. Documents
Exporters are well advise to be meticulous in their management of export documentation,
especially when the payment method is letter of credit. The parties should include a clause
with a list of documents most commonly required for seller in international sales contracts.
7. Inspection of goods by the buyer
The parties should indicate whether they agree to inspection "before shipment" (also known
as pre-shipment inspection or PSI); the parties may indicate the place of inspection as well as
other details such as inspection company. The inspection require the seller to notify the buyer
of the availability of the goods for inspection.
8. Retention of title
The retention of title (RoT) clause is a common one in international trade. It provides that the
seller retains ownership of the goods until the full purchase price is paid and also that the
seller may reclaim the goods if the price is not paid. There are several variations of RoT
clause, but to major types can be distinguished: (a) the simple RoT clause, under which the
seller retains title until price is paid, and (2) the extended clause, under which the seller seeks
to extend its title to include: the proceeds from any sale of goods and any other indebtedness
owed to the seller by buyer.
9. Force Majeure
It is common for international trade contracts to be made subject to force majeure or
"hardship" clauses that excuse the parties from performance when their failure is due to
impediments beyond their control or which were reasonably unforeseeable such as the
outbreak of a war, earthquake or hurricane.
10. Resolution of Disputes
The parties should have the alternative between arbitration and litigation. In the event the
parties opt for arbitration should specify the place of arbitration and the language. If the
parties opt for litigation as the required mode of dispute resolution, the parties should
designate the national or municipal courts in which lawsuits are be filed.
INDIAN COUNCIL OF ARBITRATION
Based in New Delhi, the main objective of ICA is to promote amicable, quick and
inexpensive settlement of commercial disputes by means of arbitration, conciliation,
regardless of location.The Indian Council of Arbitration, India's chief and premier arbitral
organization, is a registered society under the Societies Registration Act, 1860, operating on a
not-for-profit basis with its administrative center and head office in New Delhi and ten
branches in a Pan- India network.
The ICA was built-up and established in the year 1965 as a particular and specialized arbitral
body at the national level under the initiatives and idea of the Government of India and zenith
business associations, for example, FICCI, etc. However, the ICA achieved a self-governing
status and turned into a free and independent body. The primary objective of ICA is to
promote amicable, quick, fast, inexpensive, and cheap settlement of commercial disputes by
methods for arbitration, conciliation, regardless of location.
In the present scenario, ICA is not only the main and leading arbitral institution in India, but
it is also one of the most significant and major arbitration centers in the Asia Pacific, handling
more than 200 local, domestic and international arbitration cases every year. It additionally
gives the business and commercial world unrivaled and time-tested Maritime Arbitration
benefits, services, and impart education and training in alternative dispute resolution
mechanisms. Combined with our quality case administration and board of judges and
arbitrators, ICA is the one asset for all dispute resolution needs.
The central function of ICA is the organization and administration of arbitration proceedings.
The ICA has its arrangement of procedural standards and rules which govern the direction of
the whole mediation procedures, from its initiation to its termination. Also, ICA is entrusted
with the mission of advancing, promoting, and building capacity in the zone of ADR
(Alternative Dispute Resolution). In its constant and continuous effort in capacity
construction and spreading plus providing data and information on ADR, the ICA sorts out
different courses and discussion forums on the various fields and avenues of ADR.
The Indian Council of Arbitration prescribes and recommends to all the parties desirous of
referring to arbitration by the Indian Council of Arbitration, the utilization of the following
arbitration clause in their agreements and contracts:
" Any dispute, matter and difference at all emerging or arising between the parties out of or
relating with the development, construction, meaning, scope, activity or impact of this
agreement/contract or the breach thereof will be settled by arbitration as per the Rules of
Arbitration of the Indian Council of Arbitration and the award made in compatibility and
pursuance thereof shall be binding on the parties."
Indian Council of Arbitration advances, encourages, and promotes arbitration among
merchants/ traders, particularly among individuals who are engaged in international trade and
businesses. It additionally also energizes the smooth and simple settlement of foreign trade
disputes to create altruism in the field of foreign and international trade.
Objectives of Indian Council of Arbitration:
1. Prolongation, popularization, and advocacy of commercial arbitration concerning
foreign trade.
2. Arranging arbitration of matters and disputes in international trade through its
constituent individual members.
3. Maintenance of boards of people to act as judges and arbitrators.
4. Collaboration with global and international associations and arbitral bodies
corresponding to international commercial arbitration.
5. Conducting training and instructional course on commercial arbitration.
The Indian Council of Arbitration organizes and conducts regular meetings and conferences
in which businessmen, delegates, and representatives of Export promotion boards, public
sector undertakings, chamber of commerce, and trade association meet together to discuss
and talk about issues of settlement of the matter in dispute.
INTERNATIONAL CHAMBER OF COMMERCE
The International Chamber of Commerce is an organization designed to promote international
trade and investment as means of achieving growth and prosperity. The ICC's flagship
International Court of Arbitration administers arbitration proceedings involving international
commercial and business disputes.
What is the ICC?
The International Chamber of Commerce (ICC) is an international trade association that
offers policy advocacy, dispute resolution services, and is also involved in rules and standards
setting for international trade.
It has a vast global membership, made up of 45 million companies in 100 countries.
The main arms of the ICC’s dispute resolution service are the ICC International Court of
Arbitration and the ICC International Centre for Amicable Dispute Resolution (ADR), which
provides mediation services.
The ICC's networks of committees and experts represent the full range of business sectors.
They also maintain contact with the United Nations, the World Trade Organization, and other
intergovernmental agencies.
Key Takeaways
1. The International Chamber of Commerce (ICC) is the largest business organization in
the world, with 45 million member companies from more than 100 countries.
2. The International Chamber of Commerce (ICC) aims to foster international trade and
commerce to promote and protect open markets for goods and services and the free
flow of capital.
3. The ICC performs a number of functions for businesses, including the establishment
of rules, dispute resolution, policy advocacy, and training.
 4. The ICC's vast networks of committees and experts belong to a full range of business
sectors and keep members informed of all issues that affect their industries.
5. The ICC maintains contact with the United Nations, the World Trade Organization,
and other intergovernmental agencies.
Understanding the International Chamber of Commerce (ICC)
The ICC aims to foster international trade and commerce to promote and protect open
markets for goods and services and the free flow of capital. The ICC is responsible for a
number of functions, including the establishment of rules, dispute resolution, policy
advocacy, and training. The ICC also wages war on commercial crime and corruption to
bolster economic growth, create jobs and stabilize employment, and ensure overall economic
prosperity.1
Because members of the ICC and their associates engage in international business, the ICC
has unparalleled authority in setting rules that govern cross-border business. While these rules
are voluntary, thousands of daily transactions abide by the ICC-established rules as part of
regular international trade.
The History of the International Chamber of Commerce (ICC)
The ICC was founded in Paris, France in 1919. The organization’s international secretariat
was also established in Paris, and its International Court of Arbitration was formed in 1923.
The first chair of the chamber was Étienne Clémentel, the early-20th-century French
politician.2
The ICC’s Governing Bodies
There are four primary governing bodies of the ICC. The lead governing body is the World
Council, which is composed of national committee representatives. The highest officers of
the ICC, the chair, and vice-chair are elected by the World Council every two years.
The executive board provides strategic direction for the ICC. The board is elected by the
World Council and is comprised of 30 business leaders and ex-officio members. The
executive board's prominent duties are the development of ICC strategies and policy
implementation.

The Export Administration Regulations (EAR) are implemented by the Bureau of Industry
and Security (BIS) within the Department of Commerce. The EAR regulates the export of
“dual use” goods and services (goods and services having both military and civilian uses) that
are identified on the Commerce Control List (CCL).
In India, imports and exports are regulated by the Foreign Trade (Development and
Regulation) Act, 1992, which empowers the federal government to make provisions for the
development and regulation of foreign trade.
HOW TO EXPORT
India’s Foreign Trade i.e. Exports and Imports are regulated by Foreign Trade Policy notified
by Central government in exercise of powers conferred by section 5 of foreign trade Home
(Development and Regulation) Act 1992. Presently Foreign Trade Policy 2015-20 is effective
from 1st April, 2015. As per FTD & R act, export is defined as an act of taking out of India
any goods by land, sea or air and with proper transaction of money. The FTP 2015-20 has
been extended till 30th September, 2021.
Starting Exports
Export in itself is a very wide concept and lot of preparations is required by an exporter
before
starting an export business. To start export business, the following steps may be followed:
1) Establishing an Organisation
To start the export business, first a sole Proprietary concern/ Partnership firm/ Company has
to be set up as per procedure with an attractive name and logo.
2) Opening a Bank Account
A current account with a Bank authorized to deal in Foreign Exchange should be opened.
3) Obtaining Permanent Account Number (PAN)
It is necessary for every exporter and importer to obtain a PAN from the Income Tax
Department.
4) Obtaining Importer-Exporter Code (IEC) Number
• As per the Foreign Trade Policy, it is mandatory to obtain IEC for export/import from India.
Para 2.05 of the FTP, 2015-20 lays down the procedure to be followed for obtaining an IEC,
which is PAN based.
• An application for IEC is filed online at www.dgft.gov.in as per ANF 2A, online payment of
application fee of Rs. 500/- through net Banking or credit/ debit card is made along with
requisite documents as mentioned in the application form.
5) Registration cum membership certificate (RCMC)
For availing authorization to import/ export or any other benefit or concession under FTP
2015-20, as also to avail the services/ guidance, exporters are required to obtain RCMC
granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.
6) Selection of product
All items are freely exportable except few items appearing in prohibited/ restricted list.
After studying the trends of export of different products from India proper selection of the
product(s) to be exported may be made.
7) Selection of Markets
An overseas market should be selected after research covering market size, competition,
quality
requirements, payment terms etc. Exporters can also evaluate the markets based on the export
benefits available for few countries under the FTP. Export promotion agencies, Indian
Missions abroad, colleagues, friends, and relatives might be helpful in gathering information.
8) Finding Buyers
Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web browsing are an
effective tool to find buyers. EPC’s, Indian Missions abroad, overseas chambers of commerce
can also be helpful. Creating multilingual Website with product catalogue, price, payment
terms and other related information would also help.
9) Sampling
Providing customized samples as per the demands of Foreign buyers help in getting export
orders. As per FTP 2015-2020, exports of bonafide trade and technical samples of freely
exportable items shall be allowed without any limit.
10) Pricing/Costing
Product pricing is crucial in getting buyers’ attention and promoting sales in view of
international competition. The price should be worked out taking into consideration all
expenses from sampling to realization of export proceeds on the basis of terms of sale i.e.
Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of
establishing export costing should be to sell maximum quantity at competitive price with
maximum profit margin. Preparing an export costing sheet for every export product is
advisable.
11) Negotiation with Buyers
After determining the buyer’s interest in the product, future prospects and continuity in
business, demand for giving reasonable allowance/ discount in price may be considered.
12) Covering Risks through ECGC
International trade involves payment risks due to buyer/ Country insolvency. These risks
can be covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd
(ECGC). Where the buyer is placing order without making advance payment or opening letter
of Credit, it is advisable to procure credit limit on the foreign buyer from ECGC to protect
against risk of non-payment.
Processing an Export Order
i. Confirmation of order
On receiving an export order, it should be examined carefully in respect of items,
specification, payment conditions, packaging, delivery schedule, etc. and then the order
should be confirmed.
Accordingly, the exporter may enter into a formal contract with the overseas buyer.
ii. Procurement of Goods
After confirmation of the export order, immediate steps may be taken for procurement/
manufacture of the goods meant for export. It should be remembered that the order has been
obtained with much efforts and competition so the procurement should also be strictly as per
buyer’s requirement.
iii. Quality Control
In today’s competitive era, it is important to be strict quality conscious about the export
goods. Some products like food and agriculture, fishery, certain chemicals, etc. are subject to
compulsory pre shipment inspection. Foreign buyers may also lay down their own
standards/specifications and insist upon inspection by their own nominated agencies.
Maintaining high quality is necessary to sustain in export business.
iv. Finance
Exporters are eligible to obtain pre-shipment and post-shipment finance from Commercial
Banks at concessional interest rates to complete the export transaction. Packing Credit
advance
in pre-shipment stage is granted to new exporters against lodgment of L/C or confirmed order
for 180 days to meet working capital requirements for purchase of raw material/finished
goods, labour expenses, packing, transporting, etc. Normally Banks give 75% to 90%
advances of the value of the order keeping the balance as margin. Banks adjust the packing
credit advance from the proceeds of export bills negotiated, purchased or discounted.
Post Shipment finance is given to exporters normally upto 90% of the Invoice value for
normal transit period and in cases of usance export bills upto notional due date. The
maximum period for post-shipment advances is 180 days from the date of shipment.
Advances granted by Banks are adjusted by realization of the sale proceeds of the export
bills. In case export bill becomes
overdue Banks will charge commercial lending rate of interest.
v. Labeling, Packaging, Packing and Marking
The export goods should be labeled, packaged and packed strictly as per the buyer’s specific
instructions. Good packaging delivers and presents the goods in top condition and in
attractive way. Similarly, good packing helps easy handling, maximum loading, reducing
shipping costs and to ensuring safety and standard of the cargo. Marking such as address,
package number, port and place of destination, weight, handling instructions,
etc. provides identification and information of cargo packed.
vi. Insurance
Marine insurance policy covers risks of loss or damage to the goods during the while the
goods are in transit. Generally in CIF contract the exporters arrange the insurance whereas for
C&F and FOB contract the buyers obtain insurance policy.
vii. Delivery
It is important feature of export and the exporter must adhere the delivery schedule. Planning
should be there to let nothing stand in the way of fast and efficient delivery.
viii. Customs Procedures
It is necessary to obtain PAN based Business Identification Number (BIN) from the Customs
prior to filing of shipping bill for clearance of export good and open a current account in the
designated bank for crediting of any drawback amount and the same has to be registered on
the
system. In case of Non-EDI, the shipping bills or bills of export are required to be filled in the
format as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An
exporter need to apply different forms of shipping bill/ bill of export for export of duty free
goods, export of dutiable goods and export under drawback etc. Under EDI System,
declarations in prescribed format are to be filed through the Service Centers of Customs. A
checklist is generated for verification of data by the exporter/CHA. After verification, the
data is submitted to the System by the Service Center operator and the System generates a
Shipping Bill Number, which is endorsed on the printed checklist and returned to the
exporter/CHA. In most of the cases, a Shipping Bill is processed by the system on the basis
of declarations made by the exporters without any human intervention. Where the Appraiser
Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to
draw two samples from the consignment and enter the particulars thereof along with details
of the testing agency in the ICES/E system. Any correction/ amendments in the check list
generated after filing of declaration can be made at the service center, if the documents have
not yet been submitted in the system and the shipping bill number has not been generated. In
situations, where corrections are required to be made after the generation of the shipping bill
number or after the goods have been brought into the Export Dock, amendments is carried
out in the following manners.
1. The goods have not yet been allowed "let export" amendments may be permitted by the
Assistant Commissioner (Exports).
2. Where the "Let Export" order has already been given, amendments may be permitted only
by the Additional/Joint Commissioner, Custom House, in charge of export section.
In both the cases, after the permission for amendments has been granted, the Assistant
Commissioner / Deputy Commissioner (Export) may approve the amendments on the system
on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has
already been generated, the exporter may first surrender all copies of the shipping bill to the
Dock Appraiser for cancellation before amendment is approved on the system.
ix. Customs House Agents
Exporters may avail services of Customs House Agents licensed by the Commissioner of
Customs. They are professionals and facilitate work connected with clearance of cargo from
Customs.
x. Documentation
FTP 2015-2020 describe the following mandatory documents for import and export.
· Bill of Lading/ Airway bill
· Commercial invoice cum packing list
· shipping bill/ bill of export/ bill of entry (for imports)
(Other documents like certificate of origin, inspection certificate etc may be required as
per the case.)
xi. Submission of documents to Bank
After shipment, it is obligatory to present the documents to the Bank within 21 days for
onward dispatch to the foreign Bank for arranging payment. Documents should be drawn
under Collection/ Purchase/Negotiation under L/C as the case may be, along with the
following documents
– Bill of Exchange
– Letter of Credit (if shipment is under L/ C)
- Invoice
- Packing List
- Airway Bill/Bill of Lading
- Declaration under Foreign Exchange
- Certificate of Origin/GSP
- Inspection Certificate,
wherever necessary- Any other document as required in the L/C or by the buyer or
statutorily.
xii. Realization of Export Proceeds
As per FTP 2015-2020, all export contracts and invoices shall be denominated either in freely
convertible currency of Indian rupees, but export Subscribe now proceeds should be realized
in freely convertible currency except for export to Iran. Export proceeds should be realized in
9 months.
How To Import Goods In India ? Procedure For Importing Goods
Step 1. Obtaining import license and quota
In all countries there are many government regulations to be followed. Sanction of the
government is necessary. Importer has to apply to the controller of imports for getting
necessary permission.Importer has to attach the following documents to his application
form :-
• Receipt which shows that import license fee has been paid.
• Certificate from a Chartered Accountant showing the total value of goods to be imported.
• Verification Certificate for income tax.
An import license may be general or specific. A general license allows imports from any
country. But a specific license allows imports from a specific country only.The importer also
has to obtain an import quota certificate from the concerned authority. It mentions the
maximum quantity of goods which can be imported.
Step 2. Obtaining foreign exchange
Before placing any order, the importer must apply to the Exchange Control Department
(ECD) of RBI (India’s Central Bank) for the release of requisite foreign exchange. The
importer should forward the application through his bank. The ECD verifies the application
of the importer, and if found valid, sanctions the foreign exchange for the particular
transaction.
Step 3. Placing an order
The importer may either place the order directly or through the indent house (Agent). In case
of canalised items, he obtains the imports through the canalizing agency. (Canalisation means
channelisation of goods through a government agency like MMTC). The importer cannot
directly import such canalized items. They have to place an order with the canalizing agency
who shall import and supply the same.
Step 4. Dispatching letter of credit
After getting the confirmation from the supplier regarding the supply of goods, the importer
requests his bank to issue a Letter of credit in favour of the supplier. It can be defined as “an
undertaking by the importer’s bank stating that payment will be made to the exporter if the
required documents are presented to the bank”.
Step 5. Appointing clearing and forwarding agents
The importer makes arrangements to appoint clearing and forwarding agents to clear the
goods from the customs. Since clearing of goods is a specialized job, it is better to appoint C
& F agents.
Step 6. Receipt of shipment device
The importer receives the shipment advice from the exporter. The shipment advice states the
date on which the goods are loaded on the ship. The shipment advice helps the importer to
make arrangements for clearance of goods.
Step 7. Receipts of documents
The importer’s bank receives the documents from the exporter’s bank. The documents
include bill of exchange, a copy of bill of lading, certificate of origin, commercial invoice,
consular invoice, packing list, and other relevant documents. The importer makes payment to
the bank (if not paid earlier) and collects the documents.
Step 8. Bill of entry
This is a document required in case of import of goods. It is like a shipping bill in case of
exports. A Bill of Entry is the document testifying the fact that goods of the stated value and
description in specified quantity are entering into the country from abroad. The customs
office supplies this form which is prepared in triplicate. Three different colours are used to
prepare the bill of entry.One copy is retained by the customs department, another is retained
by port trust and the third is kept by the importer.
Step 9. Delivery order
The clearing agents obtain the delivery order from the office of the shipping company. The
shipping company gives the delivery order only after payment of freight, if any.
Step 10. Clearing of goods
The clearing agent pays the necessary dock or port trust dues and obtains the port Trust
Receipt in two copies.He then approaches the Customs House and presents one copy of Port
Trust Receipt, and two copies of Bill of. Entry to the customs authorities. The customs officer
endorses the Bill of Entry Forms and one copy of Bill of Entry is handed back to the
importer. The importer then pays the customs duty and clears the goods. In case, the customs
duty is not paid, then the goods are stored in the bonded warehouses. As and when the duty is
paid, the goods are cleared from the docks.
Step 11. Payment to clearing and forwarding agent
The importer then makes the necessary payment to the clearing agent for his various expenses
and fees.
Step 12. Payment to exporter
The importer has to make payment to the exporter. Usually, the exporter draws a bill of
exchange. The importer has to accept the bill and make payment.
Step 13. Follow up
The importer then informs the exporter about the receipt of goods. If there are any
discrepancies or damages to the goods, he should inform the exporter.
Exchange regulations
Exchange control procedures envisage to ensure that no foreign exchange arising out of
exports from India is lost. The important provisions include declaration of exports on
prescribed forms, realisation of export proceeds in permitted methods, permitted currencies
prescribed period and prescribed manner.
PRE-SHIPMENT INSPECTION
7 Important Steps in a Pre-Shipment Inspection Procedure are as follows:
Step 1. Inspection Visit
Pre-shipment inspections are carried out on-site at the factory or production house. If the
inspectors suspect that the products could contain restricted chemicals, they may advise
further off-site lab testing of those products. An example would be products suspected of
containing toxic chemicals such as lead and toxins derived from azo dyes, which are tightly
regulated by Europe’s REACH directives and the Federal Trade Commission in the US.
Step 2. Quantity Verification
The inspectors count the shipping cartons to verify the correct quantity. In addition, this step
ensures that the correct number of products and boxes will be sent to the correct destination;
therefore, the pre-shipment inspection can be agreed upon between a buyer, a supplier, and a
bank to initiate payment for a letter of credit.
The packaging is also checked to verify that the correct packing materials are being used to
ensure safe transportation, and that correct packaging labels are applied.
Step 3. Random Selection
Professional pre-shipment inspection services use the internationally recognized statistical
sampling procedure ANSI/ASQC Z1.4 (ISO 2859-1).
The acceptable number of defects in a batch before it’s rejected is defined with an Acceptance
Quality Limit (AQL). The AQL varies depending on the type of product being evaluated, but
the objective is to provide a balanced, unbiased view.
Step 4. Cosmetic and Workmanship Check
The first thing an inspector looks at from the random selection is the overall workmanship of
the finished products, to check for any immediately visible defects.
Defects are typically classified as minor, major, or critical based on predetermined acceptable
tolerance levels, which are usually agreed upon between the manufacturer and supplier
during product development.
Step 5. Conformity Verification
Quality control inspectors check product dimensions, material and construction, weight,
color, marking, and labeling. If the pre-shipment inspection is for garments, the inspector
checks whether correct sizes have been assigned to the shipment and that the sizes correspond
with production dimensions and the labels.
For other products, dimensions may be much more important, so this is when the dimensions
of the finished product can be measured and compared with your original specifications.
Step 6. Function and Safety Test
Function Testing for Garments
For garment, apparel and footwear inspections, the inspectors perform physical tests on the
products to determine the strength of buttons, zippers, and other accessories with pull tests,
fatigue tests, and stretch tests.
Fabric density and composition tests determine the density or thickness of fabrics used in
garment production. Special tools are used to measure fabric density. The quality control
inspectors can also physically count the number of stitches per inch.
A fabric that’s too thin or not dense enough could mean your manufacturer has used an
inferior fabric or textile that won’t stand up to normal wearing and washing.
Mechanical Safety Tests
Mechanical safety tests are required for products with moving parts such as bicycles and
pushchairs that could potentially cause injuries if they are defective.
The inspection involves testing the product’s shape and design to see whether there are any
sharp edges or parts that could pinch or entrap fingers, toes, and other appendages.
Mechanical safety testing includes checking the safety of critical components such as screws
and hinges used in a completed product.
Electrical Safety Testing
Electrical and electronic products must be tested to ensure they comply with a wide range of
safety regulations before they can be certified and labeled. Evaluating a product for electrical
safety is often performed under laboratory conditions rather than on-site at the factory. It
includes the following tests:
High voltage test (dielectric withstand test) - Measures the ability of an electrical product
to withstand a high voltage applied between a product’s electrical circuit and the ground.
Leakage current test - Evaluates whether current that flows between an AC source and the
ground exceeds a specified limit.
Insulation resistance test - Calibrates the quality of the electrical insulation used.
Ground continuity test - Ensures that a clear path is available between all exposed metal
surfaces and the power system ground.
Country-Specific Labels & Markings for Electrical Products
What are the country-specific labels and markings for electronic products? The type of
electrical safety testing required depends on the type of product as well as the destination
market.
UL Certification Mark - Underwriters' Electrical Bureau for the U.S. federal agency
Occupational Safety and Health Administration (OSHA).
CE Marking - The CE mark is recognized worldwide and indicates conformity with health,
safety, and environmental protection standards for products sold within the European
Economic Area (EEA).
VDE e.V. (Germany) - The VDE Association for Electrical, Electronic & Information
Technologies (Verband der Elektrotechnik, Elektronik und Informationstechnik) is a standard
widely recognized in Germany and internationally for electrical engineering, developing
recognized technical regulations as national and international standards as well as testing and
certifying electrical and electronic devices and systems.
CSA (Canada) - The Canadian Standards Association (CSA) registered mark shows that a
product has been independently tested and certified to meet recognized standards for safety or
performance required for Canada.
BSI (UK) - The British Standards Institution (BSI) is the national standards body of the
United Kingdom. BSI produces technical standards on a wide range of products and services,
and also supplies certification and standards-related services to businesses.
CCC Mark (China) - The China Compulsory Certificate mark (CCC) is a compulsory
safety mark for many products imported, sold, or used in the Chinese market.
Step 7. Inspection Report
Once the pre-shipment inspection is completed, a report is compiled with a pass/fail result, an
overview of key findings, and a detailed account of the inspection results. Some pre-shipment
reports include clear images showing all inspection points, so you can see exactly what was
discovered.
Shipping and Customs Formalities
According the Section 40 of the Customs Act, the person in-charge of the conveyance vessel,
vehicle, aircraft, etc., cannot permit loading of export cargo at the Customs Station unless and
until a formal permission to the export given by the authorised Customs Officer is presented.
Before granting the permission, the Customs Officer ensures that the goods being exported
are in accordance with different regulations, particularly in terms of the following:
(a) The exporter. goods are of the same type sort and value as have been declared by the
exporter.
(b) The duty or cess leviable thereon has been properly determined and paid.
(c) Provisions of Export (Control) Order, Export (Quality Control and Inspection) Act and
Foreign Exchange (Regulation) Act are complied with.
The Procedure for shipping and customs clearance is as under:
(a) Preparation and Submission of Export Documents: For the clearance of cargo from
customs, the exporter or his agent is required to submit the following set of documents along
with five copies of shipping NI to the Customs Appraiser at the Customs House.
1. Letter of Credit along with export contract or export order.
2. Commercial Invoice (2 copies)
3. Packing List or Packing Note.
4. Certificate of Origin.
5. GR Form (original and duplicate)
6. ARE-I Form.
7. Original copy of Certificate of Inspection, where necessary.
8. Marine Insurance Policy.
 (b) Verification of Documents: The Customs Appraiser verifies the details listed in each
document and ensures that all the formalities relating to exchange control, pre-shipment
inspection and licensing have been complied with by the exporter. If satisfied, he issues a
'Shipping Bill Number', which is very important from exporter's point of view.
(c) Valuation of the Goods: The Customs Appraiser assesses the shipping bill and values
the goods. The value of goods as determined by the Customs Appraiser is considered for all
future transactions, especially for the claim of Incentives. All documents are returned to the
exporter or his agents except:
1. Original copy of GR to be forwarded to the RBI.
2. Original copy of Shipping Bill.
3. One copy of Commercial Invoice.
The validity of assessed shipping bill is for one month only. If the exporter fails to deliver the
goods in that period, he will have to undergo the above procedure again.
(d) Obtaining 'Carting Order' from the Port Trust Authorities: The C&F agent, then,
approaches the Superintendent of the concerned Port Trust for Obtaining the 'Carting Orders
for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is
physically moved into the port area and stored in the appropriate shed.
(e) Customs Examination and Issue of 'Let Export Order': The Customs Examiner at the
port of shipment physically examines the goods and seals the packages in his presence. The
same can be arranged for at the factory or warehouse of the exporter by making an
application to the Assistant Collector of Customs. The Customs Examiner, if satisfied, issues
a formal permission for the loading of cargo on the ship in the form of a 'Let Export Order'.
The above procedure is now processed through Electronic Data Interchange (EDI) System.
(f) Obtaining 'Let Ship Order' from the Customs Preventive Officer: 'Let Export Order'
must be supplemented by a 'Let Ship Order' issued by the Customs Preventive Officer. The
C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs
Examiner, to the Customs Preventive Officer who endorses it with the 'Let Ship Order'.
(g) Obtaining Mate's Receipt and Bill of Lading: The goods are then loaded on board the
ship for which the Mate or the Captain of the ship issues Mate's Receipt to the Port
Superintendent. The Port Superintendent, on receipt of port dues, hands over the Mate's
Receipt to the C&F Agent. The C&F Agent surrenders the Mate's Receipt to the Shipping
Company for obtaining the Bill of Lading. The Shipping Company issues two to three
negotiable and two to three non-negotiable copies of Bill of Lading.
Port Formalities and Customs Clearance
Let’s learn more about Port Formalities and Customs Clearance. On receipt of the documents
sent by the export department, the clearing and forwarding agent takes delivery of the cargo
from the railway station or the road transport company and arranges its storage in the
warehouse. He also initiates action to obtain customs clearance and permission from the port
authorities to bring cargo into the shipment shed. According the Section 40 of the Customs
Act, the person in-charge of the conveyance vessel, vehicle, aircraft, etc., cannot permit
loading of export cargo at the Customs Station unless and until a formal permission to the
export given by the authorised Customs Officer is presented. Before granting the permission,
the Customs Officer ensures that the goods being exported are in accordance with different
regulations.
 The exporter goods are of the same type sort and value as have been declared by the
exporter.
 The duty or cess leviable thereon has been properly determined and paid.
 Provisions of Export (Control) Order, Export (Quality Control and Inspection) Act
and Foreign Exchange (Regulation) Act are complied with.
The objectives of customs control are:
  To ensure that the goods go out of the country after compliance with different laws
concerning export trade
 To ensure the authenticity of the value of export goods to check over/under-invoicing
 To correctly assess and collect export duty, if applicable
 To compile data on cargo movements
Role of clearing and forwarding agents in exports
Choosing the right clearing and forwarding agent in export process is important to ensure
smooth and timely shipment of goods. Here’s a guide to know more about their importance
roles and responsibilities. One of the key steps in exports is logistics and shipping. In the
process of international shipping, clearing and forwarding agents play an important role to
ensure smooth and timely shipment of export products. Exporters can seek advice from them
about the availability of alternative modes of transport and then make a final choice of
transport to achieve the optimal cost of transporting goods within the delivery schedule.
These clearing and forwarding agents undertake most of the functions connected with exports
such as marketing, labelling, packaging of goods, advising on trade laws, arranging local
transportation, and also help exporters with claiming duty-drawback.
Who is a clearing agent?
Clearing agents are experts who assist in getting goods cleared through customs formalities,
coordinating with the carrier and handling shipping and delivery-related activities. The
presence of a clearing agent allows exporters to focus on their core business activities.
Who is a forwarding agent?
Forwarding agents, also known as freight forwarders, act on behalf of exporters to organize
the transport of international freight in a secure, efficient and cost-effective manner.
Why do exporters need the services of clearing and forwarding agents?
Clearing and forwarding agents are well-versed with customs and shipment procedures. They
support exporters with facilities like1:
• Warehousing facilities before goods are transported to docks
• Booking of shipping space or freight
• Advice on cost of shipping via sea or air
• Arrangement of loading goods onboard
• Information on shipping lines and freight to different destinations
• Obtaining marine insurance policies
• Preparation and processing of shipping bills like Bill of Lading, Dock receipt, Export
declarations, Consult invoice, Certificate of Origin, Commercial invoice, etc
• Forwarding of bank collection papers
Roles and responsibilities of a clearing and forwarding agent
Clearing and forwarding agents play an important role in ensuring smooth shipment and
clearance of cargo. Their responsibilities include timely documentation, submission of
appropriate paperwork to authorities and related subsidiary activities such as arranging
specialized labour and transport to help clear goods quickly. Some of their key roles are2:
• Determining harmonised tariff of goods for customs duties
• Calculating import duties and taxes or VAT as applicable
• Assisting with clearing instructions to confirm that all information received from shipper
and consignee is accurate before submitting for customs clearance
• Framing Bill of Entry (BOE) to be submitted
• Arranging customs clearance or release with relevant requirements as per the cargo to avoid
penalties and delays
• Facilitates shipments for exporters while acting as a guarantor to ensure that commercial
operations take place under agreed conditions
How to choose a clearing and forwarding agent?
Some of the parameters to consider while choosing a clearing and forwarding agent are:
• Experience: Choose an agent who has a good amount of experience in this field to ensure
they understand the requirements as per your shipment
• Problem-solving ability: The agent must be capable enough to resolve problems related to
customs clearance, logistics challenges and problems related to government policies and their
interpretation
• Cost involved: Consider your budget and choose a clearing and forwarding agent
accordingly
By availing the services offered by clearing and forwarding agents, exporters can focus on
their business goals. These agents ensure smooth shipment and delivery without any hassles
due to documents or licenses.
CONSULAR INVOICE
A consular invoice is a document specifying the contents and details of a shipment certified
by the consul of the country the merchandise is being sent to. Customs officials use the
invoice to confirm what's in the shipment, the number of goods, and the cost—and thus
determine the import duty.
EXPORT DECLARATION
An export declaration is a form that is submitted by an exporter at the port of export. It
provides information about the goods being shipped, including type, number, and value. This
information is used by customs to control exports, in addition to compiling statistical
information about a country's foreign trade.
BILL OF LADING
Bill of lading is a legal document that works as proof of shipment when the cargo is shipped
overseas. Here’s a complete guide for exporters on BOL and how to obtain it. A bill of lading
is a legal document that outlines the terms of the contract for the transportation of goods
between the shipper and the carrier. The shipper receives these records from the
transportation company (carrier). In international trade, this document keeps track of the
exchanged items brought on board, just like inland bills of lading for products moved by
roads or railroads. Bill of lading is a legal document that plays a crucial role when the cargo
(goods) is shipped from India. Here’s why bill of lading is necessary:
• Bill of lading acts as the ‘Evidence of Contract’ between the shipper and the carrier, as a
proof that there is an agreement between the parties.
• It acts as a ‘Receipt’ handed over by the carrier to the receiver of the products. This states
that the goods have been loaded.
• It acts as the ‘Document of the list of goods’, where the importer receives the goods and
verifies them using this document.
When your products are shipped, the possession of the shipment is transferred from you – an
exporter – to the carrier. To ensure this is done smoothly, BOL is obtained with information
on export products, number of products, billing details, payment details, special instructions
to be taken care of while storing or during the transit of the products, etc.
Contents of a bill of lading
A bill of lading may vary depending on the type of contract between the buying and selling
parties and depending on the business terms of the buyer and exporter. A few details that
remains constant in Bill of Lading is:
1. Name and details of the shipping line/shipping partner
2. Shipping bill number and date
3. Hazardous products, if any, and necessary certification for it
4. Name and address of the shipper (consigner), receiver (consignee) along with other
contact details and date of dispatch
 5. Purchase order number to cross-check terms and conditions agreed upon by the buyer
and seller
6. Any specific instructions or reminders for the carrier about the shipment
7. Complete details about consignment like the number of units, weight, dimensions of
the products, etc.
8. Information about packaging used in the shipment like cartons, crates, pallets, drums,
etc
9. Freight classification
10. Signature of the concerned officer
Before signing the Bill of Lading, one must ensure that the details mentioned in the
documents are not ambiguous. The terms and conditions must be carefully checked before
confirming the document.
Types of bills of lading
To export, following are the different types of bill of lading:
House bill of lading:
This BOL is issued when the consignor is the actual seller of the product and the consignee is
the actual buyer of the product. For example, a buyer from the US receiving a consignment of
leather bags purchased from a seller from India. The rest of the details in the documents
remain the same.
Straight bill of lading:
Straight bill of lading is issued when the buyer has made complete payment of the shipment
in advance. In this case, the importer will receive the consignment directly.
Open bill of lading
An open bill of lading is negotiable, meaning the consignees' signatures can be used to
transfer ownership and modify the name of the consignee. There are several ways to transfer
this. A switch bill of lading is an example of an open bill of lading.
Master bill of lading
This document is issued by the shipping company and is also known as the carrier bill of
lading. In this case, the consignor is the agent of the seller and the consignee is the agent of
the importer.
Order bill of lading:
With an order BOL, the buyer can nominate someone else (say third party or a nominee) to
receive the goods.
Bearer bill of lading:
In this type of BOL, the name of the consignee is ‘bearer’. This bill allows the delivery of the
consignment to whoever holds the document.
Clean bill of lading:
The carrier inspects the export consignment and then issues a clean bill of lading to state that
the shipment received was in good condition without any damage.
Foul/ claused bill of lading:
This document contains clauses about the quality and defects of the consignment. It mentions
that the bill of lading did not provide delivery as stated in the contract. This bill allows the
consignee to reject the consignment and the bank to refuse to release the payment.
Inland bill of lading:
BOL for domestic shipments.
Ocean bill of lading:
BOL for international shipments.
Through bill of lading:
This document is issued when the shipment travels through multiple destinations using
different modes of transportation.
Multimodal bill of lading:
When the goods move across more than 2 modes of transport.
Shipped bill of lading
This bill of lading is issued as soon as the cargo is placed onto the ship. It immediately ties
the shipowner and shipper together.
Received bill of lading
This bill is forwarded by the agent/charterer to the shipper. Although it guarantees that the
carrier has received the cargo, the endorsement of this bill does not guarantee that they are
sailing on the designated vessel.
Container bill of lading
It is a document that provides details on items that are shipped between ports in a secure
container from one port to another.
Surrender bill of lading
Surrender bill of lading is an official document provided by exporters that formally
recognises importers as the legitimate owners of the items they have transported is known as
a surrender bill of lading. This bill works on the principle of import documentary credit, in
which the importer is not required to pay the bank until the maturity of the draft of the
relative credit6.
Charter party bill of lading
Charter party bill of lading is an agreement between the charterer and the vessel owner, and
the former issues this bill of lading to the shipper6.
Forwarder’s bill of lading
A freight forwarder's bill of lading (FBL) is a transportation document employed in sea and
multimodal shipments. It is issued and endorsed by a freight forwarder, typically in a format
specific to freight forwarders. It serves as proof of the agreed terms and conditions for the
shipment of goods as determined by the freight forwarder7.
Short-term bill of lading
It is provided when the specific terms and conditions of the transport agreement are not
included within the main content of the bill of lading.
CERTIFICATE OF ORIGIN (COO)
Certificate of Origin (COO) is an important document in export trade that certifies that the
products being exported have been manufactured and processed in that particular country.
Here's a guide on COO document, process to obtain it and and its types. In the process of
exporting from India, sellers need to obtain various documents for seamless trade of goods
across countries. A Certificate of Origin (COO) is one such important document, which
certifies that the products being exported have been manufactured and processed in that
particular country.
Types of Certificates of Origin
Preferential COO
This type of COO specifies that the products are subject to exemptions or reduced tariffs
when it is exported to a country that extends these privileges. This COO is closely associated
with the regional trade agreements.
Non-preferential COO
This type of COO is issued for the purpose of complying with non-preferential rules of
origin. It specifies the country of origin of the product without giving the exporter the right to
receive preferential tariff under preferential trade regimes.
Documents required to obtain Certificate of Origin
• Cover letter addressed to the Director General of Indian Chamber of Commerce (ICC)
• Filled Certificate of Origin form
• Shipping Invoice, Packing List, and Letter of Credit stamped and signed by the applicant
• PAN and IEC issued to the exporter
• Relevant clearance certificate from the customs department stating that all necessary taxes
and duties have been paid2
Procedure to obtain Certificate of Origin
The Certificate of Origin can be obtained from the office of the Indian Chamber of
Commerce (ICC). Along with the above-mentioned documents, the stamp paper, duly filled
Certificate of Origin form and cover letter need to be submitted in the name of the company
or establishment.
To provide a seamless experience for exporters, DGFT also provides COO on its website.
After registering on the COO portal of DGFT, you can follow the steps below to apply for the
certificate3:
1. Click on Online Exporter Register & Login option under online services.
2. Log in using your username (IEC).
3. Click on Apply for Certificate of Origin under the main menu.
4. Click on Online Application for Certificate or Origin CoO/Scheme icon on the dashboard.
5. Fill the required details like invoice number, product details and trade agreement. Click on
Save and add more button.
6. Enter product description.
7. Click on ‘Please check and confirm that you have added export products details for this
certificate.’
8. Upload necessary documents that have been signed digitally.
9. Fill the required information in Declaration summary and confirm.
10. Check all the details, save and submit.
11. Once submitted, you will be required to make a payment. Post payment, click on List of
Submitted Applications in the main menu for a list of all the applications successfully paid
for and submitted.
The document exists in traditional and digital format and is approved by the customs
authority or the Indian Chambers of Commerce. Once you have obtained the necessary
documents required to ship your products, you can register and export via e-commerce.
COMMERCIAL INVOICE
Commercial invoice is a legal document used in international trade to process agreements.
Here’s a guide to understand its uses and how to obtain it. Among a host of bills required
during the export process, a commercial invoice is one such crucial document, especially in
case the goods are being shipped via ocean freight. It is a legal document provided by an
exporter (seller) to the importer (buyer) in an international transaction that functions as a
contract and evidence of sale between the two respective parties. Customer departments
across the world use a commercial invoice for inspection, computing customs charges and
keeping track of international trade data.
What is a commercial invoice?
Commercial invoice is a legal document used in international trade to process agreements. An
importer uses this invoice, along with additional shipping documents, to clear the cargo at
customs in both the export and import countries. It usually contains information regarding
price, value, quantity, etc, giving customs authorities details about the shipment. In some
cases, a commercial invoice in export is also used to authorize the transfer of money to the
exporter for payment by the importer.
According to the Indian law, for the export/import of goods, certain mandatory documents are
required, which are officially outlined in DGFT notification no. 08/2015-2020, dated 4th June
2015. These documents include:
 Bill of lading/ airway bill
 Shipping bill
 Commercial invoice and packing list