CHAPTER-8 DEEMED EXPORTS Deemed Exports: Deemed Exports refers to those transactions in which the goods supplied do not

leave the country and the payment for such supplies is received either in Indian rupees or in free foreign exchange. Categories of Supply: The following categories of supply of goods by the main/ subcontractors shall be regarded as Deemed Exports under this Policy, provided the goods are manufactured in India: (a) Supply of goods against Advance Authorisation / Advance authorisation for annual requirement; (b) Supply of goods to EOU / STP / EHTP / BTP; (a) Supply of capital goods to holders of Authorisations under the Export Promotion Capital Goods (EPCG) scheme; (d) Supply of goods to projects financed by multilateral or bilateral Agencies / Funds as notified by Department of Economic Affairs (DEA). (e) Supply of goods to any project or purpose in respect of which the MoF, by a notification, permits import of such goods at zero customs duty; (f) Supply of capital goods, including in unassembled/ disassembled condition as well as plants, machinery, accessories, tools, dies and such goods which are used for installation purposes till the stage of commercial production and spares to the extent of 10% of the FOR value to fertilizer plants; (f) Supply of goods to any project or purpose in respect of which the Ministry of Finance, by a notification, permits the import of such goods at zero customs duty; (g) Supply of goods to the power projects and refineries not covered in (f) above; (h) Supply of marine freight containers by 100% EOU (Domestic freight containersmanufacturers) provided the said containers are exported out of India within 6 months or such further period as permitted by the customs; (i) Supply to projects funded by UN agencies; and (j) Supply of goods to nuclear power projects through competitive bidding as opposed to International Competitive Bidding. Benefits for Deemed Exports: Deemed exports shall be eligible for any/all of the following Exports benefits in respect of manufacture and supply of goods qualifying as deemed exports subject to the detailed terms and conditions as given in Handbook:(a) Advance Authorisation (b) Deemed Export Drawback. (c) Exemption from terminal excise duty where supplies are made against International Competitive Bidding. In other cases, refund of terminal excise duty will be given.

EXPORT MANAGEMENT
Start up documents required: y y y y y PAN number (with Income Tax dept), Importer Exporter Code (IEC ) number (with Regional: DGFT), Registration cum Membership certificate (RCMC) of EPC / Commodity board / FIEO, Registration with excise authorities (with Central Excise), Registration with sales tax authorities (with VAT / Central sales tax authorities).

Exemptions of domestic levies: Terminal Excise duty: Establishment of a bond with excise authorities & clearance under excise bon under AR form Sales tax exemption: Form H Octroi exemption : Form N. Types of Exports: Direct export: Exports made in the own name of the manufacturer exporter / merchant exporter. The export documents such as shipping bills, exchange control form etc indicate thename ofthe manufacturer exporter / merchant exporter as the exporter. Indirect export: Exports made by a manufacturer / merchant, in the name of another exporter. The export documents such as shipping bills, exchange control form etc do not indicate thename ofthe manufacturer exporter / merchant exporter as the exporter. Third party export:Third-party exports means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases,export documents such as shipping bills etc shall indicate thename of both the manufacturerexporter/manufacturer andthird party exporter(s). Deemed export:Sale to an EOU/EHTP/STP/BTP / UN organizations, where the goods / services do not leave the Indian territory but foreign exchange is received by the exporter (or foreign exchange is save by the EOU) as proceeds of sale. Types of exporters:
1. Manufacturer exporter, 2. Merchant exporter,

3. Third party exporter.

Int'l Business activity flow: Physical product export 1. Identification of potential buyers, distribution channels, shipping services & costs 2. Exchange & matching of buyer's requirements & product info 3. Offer of a quotation : Names & addresses of seller & buyer, adequate product description, packing & mode of transport, quantity, price per unit, currency of transaction, inco term agreed upon, delivery period, port of shipment, payment terms, banker's name & address, validity period of terms offered. 4. Negotiations for closing the deal 5. Offer of a Proforma invoice: Names & addresses of seller & buyer, adequate product description, packing & mode of transport, quantity, price per unit, currency of transaction, inco term agreed upon, delivery period, port of shipment, payment terms, banker's name & address, validity period of terms offered. 6. Finalization of contract : Names & addresses of seller & buyer, adequate product description, packing & mode of transport, quantity, price per unit, currency of transaction, inco term agreed upon, delivery period, port of shipment, payment terms, banker's name & address, other contractual terms including product warranty, jurisdiction. 7. Opening of LC by the buyer as per contract terms 8. Acceptance of LC terms by the seller including LC validity for shipments / negotiations. 9. Finance: Pre shipment finance, Forward Exchange Contract, Export insurance cover 10. Manufacturing 11. Pre-shipment inspection by buyer's nominated agency (if required by the buyer or stipulated by govt of importing country) 12. Packing 13. Pre shipment inspection by external agency, if required 14. Appointment of CHA / forwarder and selection of carrier (as per freight rate, LC / contract terms), 15. Pre shipment documentation, 16. Forwarding (to ICD / gateway port), inland insurance 17. Export clearance & shipment, 18. Payment of sea /air / multimodal fright, if required under contracted inco term 19. Payment of Marine / air /multimodal insurance, if required under contracted inco term 20. Obtaining negotiable carriage document and insurance document. 21. Post shipment documentation & routing through banking channel 22. Realization of proceeds 23. Obtaining proofs of exports, FIRC 24. Submission of POE docs, Claiming incentives, discharge of any export obligation for benefits under FTP

LETTERS OF CREDIT: Transactions flow:

Common types of L/Cs: At sight / Usance, Irrevocable / revocable Without recourse / with recourse, Confirmable Transferable Divisible

 Back to back Revolving Letters of Credit: Orientation, check lists for users of LCs Maincontents: Financial orientation LC ref number & validity (last date for shipment, negotiation, and expiry) Type of LC Payment terms (at sight / usance) Description of merchandise, Amount, currency, incoterm, beneficiary and openers names and addresses Contract reference LC advising, confirmation, reimbursement instructions Instructions regarding bank charges payment under LC Limit on presentation of documents / stale BL (Documents must be presented to bank within 10 day of BL date) Shipping orientation Type of B/L to be used (Shipped on board) Transshipment allowed / not allowed Partial shipments allowed / not allowed Port of shipment, destination, FPD / inland delivery point Restriction of shipping line, if any (nomination) Age of Vessel to be used for loading Shipment by regular liners/conference Approval of the Ship by Lloyds / other agencies for seaworthiness Non Israeli certificate Documentary orientation Commercial invoice

Packing list, marks & numbers, weight declarations Legalisation of documents, if any Certificate of Origin Freight certificate Insurance certificate Pre shipment inspection quality & quantity Shipment advise Routing of documents

CHECK LISTS FOR LETTER OF CREDIT (L/C) TRANSACTIONS Checklist for L/C Opener (Importer / Buyer) 1. Prior to opening L/C: a. Conformance of the goods / services to countrys import laws (are the goods being ordered allowed for import?) b. Availability of proper permissions such as Import License or Customs Clearance Certificate / permission. c. Availability of a valid Sales Contract from the Seller wherein all the terms of sale such as products / services, prices, quantity, specifications, terms of sale etc have been agreed. d. Availability of sufficient finance (credit limit) / cash margin with the L/C opening (issuing) bank to open the Letter of Credit. e. Submission of an application for opening L/C, which has no ambiguities and is consistent with the terms of sale contract, to the bank. f. Inclusion of necessary safeguards in the LC (such as shipment / expiry date of L/C, inspection / quality certification of goods etc). g. Avoidance of unnecessary / excessive details in the LC to ensure there is no misunderstanding. 2. While completing the application for a Letter of Credit: a. The type of L/C to be opened (irrevocable / confirmed etc) b. The currency and the amount (value) of credit.

c. Openers & Beneficiarys correct names & addresses. d. Incoterms for the LC, place of shipment/ destination, last date of shipment, whether partial shipments/ transshipment is permitted or not etc. e. Names of documents with number of copies for each. f. The maximum amount payable under the LC. g. Precise description of the goods including its nature, quantity, specifications, packing, markings etc. h. Instructions for submission of documents, negotiation/ payment. i. Instructions regarding the drafts (bill of exchange) to be drawn. j. Mode of advising L/C transmission (i.e. fax, airmail, by SWIFT). k. Expiry date of LC. l. Any other specific requirements to be included in the L/C. 3.On receipt of L/C copy from the Bank: Check whether the L/C issued is in accordance with the L/C application made. If there are any variations / mistakes as compared to the application, the L/C issuing Bank must be asked to immediately rectify the same under advice to the beneficiary. Checklist for Exporters (i.e. the beneficiary) 1. On receipt of Letter of Credit: a. Conformance of LC as per exporters requirement / sale contract. b. Acceptability of last shipment & L/C expiry dates c. Acceptability of the payment terms mentioned in the LC & place of payment. d. Correctness and acceptability of merchandise description, quantity, currency, value, incoterms, various preshipment requirements (Packing, shipping marks, inspection), certificate of origin, consular certificate, fumigation, documents checking, insurance cover e. Responsibility of paying LC related charges (advising / confirmation, negotiation, in exporters country and outside) f. Correctness of Beneficiarys name and address in the L/C. g. Acceptance of partial shipment, transshipment, last date of shipment. h. Availability and mention of any mandatory import requirements in buyers country (IDF, Forex allocation ref no.) in the LC.

i. Can all the requirements of the L/C be met? j. Presence of any contradictions in the L/C. k. Operativeness of the LC. l. Incorporation of all the required amendments with authentication by the advising bank. 2. On shipment: Conformance of all the documents exactly as stipulated in the L/C and compliance of all the terms of LC.

INCOTERMS 2000:
EXW : Ex works (named place): The Seller delivers when the goods are placed at the disposal of the buyer at the sellers premises or another named place (factory / warehouse), not cleared for exports & not loaded on any collecting vehicle. The risk of loss or damage to the goods, as well as any addl cost due to events occurring after the Delivery is transferred from seller to the buyer. FCA:Free Carrier (named place): The seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. If the delivery occurs at the sellers premises, the seller is responsible for loading (but not unloading at another place) Carrier=any person, who in a contract of carriage, undertakes to perform transport of goods by rail, road, air, sea, inland waterways or a combination of these. FAS: Free Alongside Ship (named port of shipment):The seller is required to customs clear the goods for export, at his cost.The Seller delivers when the goods are placed alongside the vessel at the named port of shipment. All costs upto point of the delivery are borne by the shipper. The risk of loss or damage to the goods, as well as any addl cost due to events occurring after the Delivery is transferred from seller to the buyer. FOB: Free On Board (named port of shipment) :The seller is required to customs clear the goods for export, at his cost.The Seller delivers when the goods pass the ships rail (& get on board the ship) at the port of shipment. All costs upto point of the delivery (on board the ship at port of loading) are borne by the shipper. The risk of loss or damage to the goods, as well as any addl cost due to events occurring after the Delivery is transferred from seller to the buyer. The term FOB is used for transport by sea or inland waterways. CFR or C&F:Cost and Freight (named port of destination) : The seller is required to customs clear the goods for export at his cost.The Seller delivers when the goods pass the ships rail

(& get on board the ship) at the port of shipment. All costs upto point of the delivery (on board the ship at port of loading) are borne by the seller. Additionally, the seller pays the costs & freight necessary to bring the goods to the named port of destination. The risk of loss or damage to the goods, as well as any addl costs due to events occurring after the Delivery are transferred from seller to the buyer. CIF: Cost, Insurance and Freight (named port ofdestination): The seller is required to customs clear the goods for export.The Seller delivers when the goods pass the ships rail (& get on board the ship) at the port of shipment. All costs upto point of the delivery (on board the ship at port of loading) are borne by the shipper. The seller pays the costs & freight necessary to bring the goods to the named port of destination. The seller also procures minimum marine insurance against the buyers risk of loss of or damage to the goods during the carriage. The marine insurance premium is paid by the Seller. Any additional insurance covered (as compared to the minimum) is paid for either by the seller or buyer as their contract. The risk of loss or damage to the goods, as well as any addl costs due to events occurring after the Delivery are transferred from seller to the buyer. CPT:Carriage Paid To (named point of destination) The seller is required to customs clear the goods for export.The seller delivers the goods to the carrier nominated by the seller and pays the cost of carriage necessary to bring the goods to the named destination. The buyer bears all risks & any addl costs occurring after the delivery of goods. Carrier=any person, who in a contract of carriage, undertakes to perform transport of goods by rail, road, air, sea, inland waterways or a combination of these. CIP: Carriage and Insurance Paid To (named point of destination): The seller is required to customs clear the goods for export.The seller delivers the goods to the carrier nominated by the seller and pays the cost of carriage necessary to bring the goods to the named destination. The seller also procures minimum insurance cover at his cost, against the buyers risk of loss of or damage to the goods during the carriage. Any additional insurance covered (as compared to the minimum) is paid for either by the seller or buyer as their contract. The buyer bears all risks & any addl costs occurring after the delivery of goods. Carrier=any person, who in a contract of carriage, undertakes to perform transport of goods by rail, road, air, sea, inland waterways or a combination of these.

The seller bears all the costs & risks involved in bringing the goods to the named destination, OTHER THAN any import duties, taxes, customs formalities / clearance charges in the country of destination (including the responsibility of directly / indirectly obtaining the import license). DEQ: Delivered Ex Quay (named port of destination): The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on the quay (wharf) at the named port of destination. The seller bears all the costs & risks involved in bringing the goods to the named port of destination & discharging on the quay. The buyer is responsible for import clearances & pays for the same. DES : Delivered Ex Ship (named port of destination) : The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on board the ship at the named port of destination. The seller bears all the costs & risks involved in bringing the goods to the named port of destination, before discharging. DDP : Delivered Duty Paid (named point): The seller delivers the goods to the buyer, cleared for import but not unloaded from any arriving means of transport, at the named place of destination. The seller bears all the costs & risks involved in bringing the goods to the named destination, including any import duties, taxes, customs formalities / clearance charges in the country of destination (including the responsibility of directly / indirectly obtaining the import license). DDU : Delivered Duty Unpaid (named point / place of destination): 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. DAF : Delivered AtFrontier (named point / place of destination):The seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport, not unloaded, cleared for export but not cleared for import at the named point & place at the frontier before the customs border of the adjoining country.

Export, Import Operations:

Export Operations: Pre shipment documentation & cargo flow: 1. Exporter prepares documents for export clearance and despatches following documents to CHA before despatch of goods: a. Shipping instructions (specific requirements, unusual cargo dimensions / weight; shipping line restrictions, vessel age etc) b. Instructions for preparation of appropriate shipping bill (with / without claim of drawback / DEPB or other schemes).

c. Exchange control form: Form SDF or GR1 d. Pro-forma / Customs purpose invoice e. Packing list f. Excise related form: AR4 form (in case of excisable goods) g. Octroi related form: N form h. Copy of related Letter of credit (to help preparation of BL) i. Copies of import licenses to be quoted in the shipping bill for meeting Export Obligations j. Preferential certs of origin (GSP / GSTP etc) k. Certification on nature of goods (in case of dangerous goods, perishables etc). 2. CHA prepares the shipping bill and submits to customs, based on the documents received from the exporter 3. Customs allocate the serial number of shipping bill. 4. Custom appraiser at custom house scrutinizes invoice and shipping bill and passes the shipping bill. In case of EDI, all the data as per declaration form is fed into electronic data information systems by customs data entry staff. In case of EDI, after data entry [is made, CHA verifies checklist generated (printed) by customs. 5. CHA takes carting order from shipping line / airline. 6. LCL consignments are taken into CFS (or export section of the air cargo complex, in case of air frt). Factory stuffed FCL containers are taken to the Port terminal or CY. 7. CFS or CY manager or airline accepts cargo on behalf of shipping line / airline on the basis of shipping bill and the gate pass. 8. Cargo is carted by the agent into the CFS / shed or air cargo examination hall 9. CHA approaches the customs appraiser and examiner (customs officials) located in this warehouse and requests them for cargo examination. 10. Few packages required by customs for physical examination are moved to customs desk. These boxes are opened for inspection of cargo and repacked after examination. 11. After examination, CHA obtains the let export order from custom officials. 12. After making necessary entry into register, warehouse operator hands over documents to relevant shipping line / airline representative.

13. Shipping line representative load LCL cargo in container. (After the cooling period, in case of airfreight). 14. Shipping line staff gives mates receipt or its equivalent to CFS manager. 15. LCL containers are sealed by customs and are moved to stack yard within CFS 16. 24-48 hours prior to arrival of vessel, containers are moved to pre-stack area in the port. The shipping line arranges this movement. 17. On arrival of the vessel, containers are moved to ship side and are loaded on to the ship. 18. CHA pays the wharfage or warehousing charges to the port / CFS and obtains Mates Receipt. 19. CHA obtains the BL / AWB from the carrier, on payment of their charges

Post shipment export Documentation:

1.Upon shipment, the exporter presents the original bills of lading / AWB issued by the carrier (shipping line / airline) and surrenders the same to his bank, along with the Bill of Exchange, commercial invoice, packing list and other documents specified in the LC & exchange control form attested by customs. 2. Exporters bank collects payment from importers bank & on receipt of value in forex, issues to the exporter, the Banks Realisation certificate (BRC) as a proof of receipt of payment. 3. Exporter submits Proof of Export documents to Excise authorities for restoration of bond value. 4. Exporter lodges required documents with licensing authority for discharge of Export Obligation if any. Post shipment import documentation / cargo flow: 1. Prior to arrival of the vessel, the carrier files an Import General Manifest (IGM) with the customs. Filing of IGM is a must. Without an IGM, the importer cannot file a Bill of Entry. 2. On receipt of cargo Arrival Notice from the carrier, the consignee approaches his bank and on payment & collects original negotiable documents from his bank. 3. Consignee / his CHA files / processes the Bill of Entry (with other necessary documents, invoice, Packing list, Import declaration form and import license copy) required for customs clearance.

4. Consignee / his CHA hands over Original BIL to the carrier and obtains the Delivery Order on payment of any dues. 5. CHA gets the goods examined by customs. After customs examination, CHA pays import duty (on behalf of the consignee) to the customs, pays the port / CFS charges and moves the goods to consignees warehouse.

Value added services / service providers in Global Logistics: Custom broker or Custom House Agent (CHA):
At origin, the shipper uses a CHA to clear cargo through customs, prior to export. At destination, the consignee uses custom broker / CHA to clear cargo through custom & pay duty on behalf of consignee.

Clearing & Forwarding Agent (C&F Agent):

Apart from the customs clearance services offered by CHA, a Clearing & Forwarding agent offers additional services, called freight forwarding service, such as: Octroi clearance formalities Selection of shipping line or airline Booking of space with carrier (ship / air) Release of B/L or AWB . Warehousing of import cargo Forwarding import cargo to importers warehouse. . Post shipment documents collection

Forwarders & international freight forwarders:

With containerization and multimodal concept, the Importers and exporters have changed their buying / supply pattern. Instead of buying on Port-to-Port basis, the trade has shifted to supply point to warehouse buying. This has necessitated the Door-to-Door delivery services. To survive competition Customs Brokers, CHAs and shipping lines offer value added services, outside their own original area of operations. Some CHAs became freight forwarders by offering value added services and some Shipping lines became Multi Modal Transport operators. When buyer wants to buy Ex Works or an exporter sells on DDP or DDU basis, they are required to rely on the forwarder who undertakes to organise all the necessary formalities at

origin and at destination, apart from the transportation. Thus the buyer / exporter gets is all the services involved from a single entity. As intermodal transportation becomes more complex, the job of a freight forwarder becomes more indispensable and complex. He needs to coordinate the complexity in commercial transaction, transport and other service activities. The Importers and Exporters expect following services from a freight forwarder: 1. Familiarity with the import laws of destination / transshipment countries. 2. Guidance from forwarders to comply with foreign laws involved and adherence to the necessary documentation. 3. Selection of the most suitable shipping line or airline for shipment of goods, to ensure that goods reach destination in the most efficient and cost effective manner. 4. On-going updation on the regulations which affect cargo movements (foreign documentation requirements, hazardous materials rules, government regulations, special packaging or handling restrictions, any applicable licensing provisions). 5. Assistance to the buyer / seller to select terms of sale. 6. Routing recommendations. 7. Advise regarding export packing. 8. Preparationof customs / commercial documentation. 9. Obtaining port / warehouse / shipping space. 10. Obtaining export licenses, certificates of origin, consular invoices 11. Issue export declarations. 12. Preparation of draft AWB / BL, obtaining an acceptable AWB / BL from the carrier. 13. Payment of freight charges, port / CFS charges, shipping line charges on behalf of client. 14. Obtaining cargo insurance. 15. Consolidation on behalf of buyer / for LCL cargo. 16. Tracking movement of cargo upto delivery point.

Types of freight forwarders:

1. Ocean freight forwarders

2. International air cargo agents, which are accredited by the international Air Transportation Association (IATA). Consolidation of cargo: Because of containerization, the consolidation or grouping of small consignments into full container loads (FCLs) has become a necessity, as large container carriers accept only FCL cargo. 1. Consolidator: Is an individual or a firm which accepts LCL shipments from individual shippers and then combines them for delivery to the carrier as FCL shipment. At times, a buyer negotiates FCL rates with the carrier & appoints aConsolidator to combines (consolidate) the LCL consignments. The consolidator earns from service charges / freight charge difference. 2. Non Vessel Operating Common Carrier (NVOCC): is an individual or firm who accepts LCL and FCL shipments from various shippers and then combines them for delivery to the carrier as FCLs. NVOCC earns money out of the difference between LCL / FCL freight earned and FCL freight paid to the shipping Line. Usually the NVO buys the shipping space in bulk from the carrier and resells the space to individual forwarders or shippers. In such an arrangement, the NVO acts as a carrier retailing another carriers space. NVO may own / lease containers. Liability of NVOCC is that of a principal and / or carrier and is subject to the terms & conditions that apply to the Bill of Lading (House BL) issued by them.

Bill of Lading : Bill of Lading (BL) is a transport document, which represents movement of goods by water. A Bill of Lading is a formal receipt given by a ship owner or their authorized agents stating that the goods mentioned therein (quantity, quality, description etc.) are shipped on a specified date and vessel and are deliverable to the consignee mentioned therein or to his order after payment of all dues of the shipping company. There are three main functions of a Bill of Lading: i. A receipt for the goods: A Bill of Lading is a receipt for the goods because the ship owner or their agents (carrier), who have issued the same, declare that the goods described therein are received from the specified shipper for shipment to a named port. Thus, it is an evidence of receipt of goods by the carrier. ii. An evidence of contract: A Bill of Lading is a memorandum of contract of carriage because it contains detailed terms and condition on which the carrier has accepted the goods for shipment (Carriage) from the shipper. iii. A document of title to goods: A Bill of Lading is a document of title to goods because it states that the goods received for shipment by the carrier are deliverable to the named person or his order.

A Bill of Lading is termed as " QUASI NEGOTIABLE" instrument because its negotiation may not be complete and free from qualification. Bills of Lading are usually issued in a set of 2 or 3 originals & 5-6 copies. The exact number of originals issued is indicated on each Bill of Lading. The Original bills of lading are called Negotiable Bills of Lading and presentation of any one of them will entitle the holder to claim the goods thereunder and render the other negotiable (original) copies void. Production of one copy of negotiable (original) Bill of Lading is a must for claiming the goods.

Types of Bills of Lading: i. Received for Shipment (RFS) Bill of Lading: It is a Bill of Lading, which merely acknowledges that the Shipping Line or their agents for shipment have received the goods. The goods received might be stored in a warehouse of shipping line / their agents and there is no guarantee that the ship named in the Bill of Lading will carry the goods. Therefore, many contracts do not accept RFS BL as a negotiable document. While issuing RFS B/L, the carrier must ensure that name of CFS is typed as place of receipt, if the receipt is at a CFS. ii. On Board / Shipped on Board (SOB) Bill of Lading: This B/L acknowledges the goods having been put on board a ship for shipment. Hence, this type of B/L is a safer document for the importer (since it is an assurance that the goods are being carried by the named ship). Hence, in international trade generally only On Board Bills of Landing are called for. This B/L has a notation Shipped on Board" or words to that effect. It mentions the name of the vessel, voyage number and is usually dated on the sailing date of the ship. A received for shipment B/L can also be inscribed with such notation with proper authentication and date, after the cargo is actually on board a vessel. In such a case that RFS B/L is considered as On Board (SOB) B/L. As per UCP, loading on board or shipment on a named vessel may be indicated by pre printed wording on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment. In all other cases loading on board a named vessel must be evidenced by a notation on the bill of lading, which gives the date on which the goods have been loaded on board. In this case the date of the board notation is deemed to be the date of shipment. If the bill of lading mentions intended vessel (or similar qualification in relation to the vessel), the physical loading on board a named vessel must be evidenced by an on board notation on the bill of lading which, in addition to the date on which the goods have been loaded on board, also includes the name of the vessel on which the goods have been loaded, even if they have been loaded on the vessel named as the intended vessel.

iii. Short Form Bill of Lading: Since a B/L is also a contract of carriage, in the normal course it contains the terms and conditions of carriage printed on it. However, in case of a short form B/L such terms and conditions are not stated on the B/L and even if they are stated, the same may be by reference to other document or source. Thus, a Short Form B/L is one which merely states the name of shippers, name of ship, date of shipment etc. and no terms and conditions of carriage are mentioned. Generally, charter party Bills of Landing is of this nature since terms and conditions of charter party and not liner B/L terms and conditions govern them. iv. Long Form Bill of Lading: In this BL the terms and conditions of carriage are given on the B/L. v. Clean Bill of Lading: A clean B/L is one, which does not bear any super-imposed clause or notation, which expressly declares the defective condition of the goods or packing. Such BL implies / indicates that " the carrier has received the goods in apparent good order and condition." Since the carrier acts as deliverer of the goods, by issuing a Clean B/L, he is required to deliver the goods in the same good order and condition.

vi. Claused Bill of Lading: This is also called as Foul B/L or Dirty B/L. It is the opposite of a clean B/L and contains superimposed clauses or reservations declaring the defective nature of goods, its packing etc. When a claused B/L is issued, the ship owners or their agents can disclaim their liability to deliver the goods in goods order and condition. This type of B/L is neither good for the seller nor for the buyer / Banker. vii. Through Bill of Lading: A B/L issued for the entire voyage covering several modes of transport and / or transshipments is called a Through B/L. viii. Straight Bill of Lading: It is a B/L issued directly in the name of the consignee. In this case the goods will be delivered to the named consignee. This B/L does not require any endorsement either in blank or otherwise by the shipper. From the banker's point of view this type of B/L is not safe. ix. Charter Party Bill of Lading: It is a B/L issued to the charterer (charter parties) in case of tramp shipping. Charter party B/L is issued subject to the terms and conditions agreed upon by the charterer and ship owner (tramp vessel owner) and is not subject to Liner B/L terms and conditions. x. Container Bill of Lading: It is a B/L which indicates that the goods are carried in a container as one unit of cargo. xi. Combined Transport B/L or Multi modal B/L: A combined Transport B/L resembles a Through B/L. It is a B/L issued by a shipping company or their agents who act as multi modal transport operators and carry the goods all through (from start to finish) accepting the liability for performance of carriage and for losses or damages to the goods wherever they occur (on land, sea or air). The essence of a combined transport B/L is that the shipping company or their agents act as principal carriers (called as contractual

carriers) guaranteeing the safe conduct of goods and losses from start to finish. In a through B/L no such guarantee of carrier is available. xii. Lash Bill of Lading: It is a B/L issued by operators stating that the goods are received and put on board a barge to be carried and put on a parent vessel. Thus, a B/L issued by a LASH operator is the same as a received for shipment B/L until it bears a clause stating that the barge is put on board the parent vessel (when it gets transformed to an on board B/L). xiii. House Bill of Lading: This type of B/L is issued by a forwarder / association / Logistics companies / NVOCC. Such bills of landing are safe only when they are issued subject to ICC Rules. The liability of carriers is limited in this case. Origin of this term is air cargo industry, where FIATA approved forwarders consolidate the consignments of several independent shippers that are destined to the same airport. Forwarders issue their own House AWB (HAWB) to their individual customers. Forwarders book and load such consolidated cargo with the airline. The air line issues one Master AWB (MAWB) for consolidated cargo. With emergence of NVOCC, Logistics companies and International Freight forwarders, terms such as Master BIL and House BIL were introduced in sea freight industry. NVOCC, Logistics companies and International Freight forwarders issue House BIL to shippers. Shipper negotiates this B/L through banks. However UCP doesnt recognize HBL but they recognize Marine/Ocean Bill of Lading, Sea Waybill, Multimodal Transport Document and Freight Forwarders B/L or FCR. The wording House B/Lis not printed on the HBsL.

xiv. Switch BL: This is used where a seller/trader wishes to keep the name of his supplier, named as shipper, secret from the ultimate buyer of goods. It is a B/L transferred to the name of a third party in a port other than the POL(port of loading) and POD(port of discharge), in order to satisfy the terms of trade-related documents. While issuing the Switch B/L, the data to be switched are restricted to the names of shipper, consignee, and notify party. The Place of receipt, Port of loading, Description of goods must not be changed. The rest of data is not allowed to be modified except in special circumstances. Procedure of the switch: The original Bills of Lading issued at POL are surrendered by the consignee / trader to the shipping line agent at a port other than POL or POD Switch bill of lading is also called the traders second set and is intended to replace the first set of bills of lading issued. Due care and consideration is exercised by the carrier when issuing such bills of lading because of inherent exposure to fraud/conversion of factual data. Consequently, many carriers do not permit issuance of switch BIL. RBI approves such trading transactions only if an Indian trader is earning more foreign exchange than what he is spending. xv. Master BL: A BL issued by the shipping line which actually carries the cargo. Master BL issued by shipping line works as a service BL if issued to NVOCC, because NVOCC, Forwarders dont negotiate this B/L through banks. AnyBL with Freight prepaid stamp does not mean that the freight is received by the BL issuer, subject to realization of cheque given by the shipper. Hence if the freight cheque is returned

unpaid, the carrier cant exercise LIEN over cargo. Hence shipping lines never issue FREIGHT PREPAID BsL to unknown customers against cheque. DOCUMENTS USED IN INTERNATIONAL TRADE Types of documents: Based on functional aspects, the documents used in International trade transactions are broadly classified into six categories, namely: 1. Official / Regulatory Documents 2. Commercial Documents 3. Financial Documents 4. Transport Documents 5. Risk Coverage Documents 6. Miscellaneous Documents If a document performs more than one function, it can be classified in to more than one category. (E.g. a commercial invoice may contain declaration regarding origin of goods, which is duly attested by a competent authority, in which case it is an invoice-cum-certificate of origin and fulfils the commercial as well as regulatory requirements. Hence it can be classified as a commercial document or a regulatory document A. Regulatory Documents: Documents which satisfy requirements of the statutory / trade / other regulatory authorities are called regulatory documents or official documents. In International Trade the commercial parties need to execute documents to satisfy the requirements of Trade Control Authorities, Exchange Control Authorities, Banking Authorities, etc. Some of the regulatory docs for export from India: Pre-shipment: 1. GR / SDF / PP forms: Issued by the exporter to guarantee receipt of export proceeds in foreign exchange thru banking channel within the specified time limit. 2. AR form: used to claim exemption from payment of excise duty on goods being cleared for export. The shipper is obliged to lodge Proof of Export (PoE) documents in support of having actually exported the goods so cleared without payment of excise duty, within the stipulated period. 3. N form: used for claiming exemption of octroi duty for goods being exported for octroi duty. The shipper is obliged to lodge Proof of Export (PoE) documents in support of having actually exported the goods so cleared without payment of octroi duty, within the stipulated period. 4. Export license / certs: from concerned commodity board / EPC, when quota is put on an export commodity or in case of controlled / banned commodity / articles. 5. Certificate of pre-shipment inspection: where goods being exported are covered by compulsory pre-shipment inspection. 6. Shipping Bill: which evidences details of goods being shipped, coverage of export goods under any promotional schemes / incentives. This is the document of control used by customs and when attested by customs it is used as a base document by other regulatory authorities and the carrier. 7. Certificate of origin: Preferential / non preferential: Preferential Certificate of origin: The Preferential Certificate of origin, issued in the country of export by the competent authority, entitles the importer to payment of import duties at

preferential rates (which are lower than the otherwise applicable rates of import duty). Such preferential rates of import duty are applied as per the agreements of members of the regional cooperation (such as SAARC, NAFTA). Non preferential certificate of origin: The Non preferential certificate of origin doest not entitle the importer to financial benefits but is generally used for statistical purpose by the authorities in the importing country. Post shipment: 8. Banks Realisation Certificate(BRC): Issued by the exporters bank as a confirmation of having irrevocably received payment for an export consignment. 9. Bill of Entry: Customs control document for imports. B. Commercial (Operational) Documents: Documents used or executed to satisfy the normal commercial requirements of the parties to the transactions are referred to as commercial documents. Some of the common commercial documents are: 1. Proforma Invoice: Proforma invoice is basically a form of a quotation by the seller to a potential buyer. Normally, a proforma invoice is similar to an ordinary commercial invoice except for the fact that the word " PROFORMA" appears on it. The proforma invoice normally shows the terms of Trade and prices in addition to the description of goods so that once the buyer has accepted the order, there is a firm contract to be performed as per terms and conditions mentioned in it. The proforma invoice normally forms the basis of all Trade transactions and serves the basis for commercial invoicing. Hence the validity period of the proforma for conversion to a contract must be mentioned in the proforma. 2. Commercial Invoice: Commercial invoice is the basic document in any trade. It generally contains all the information required for the preparation of all other documents. A commercial invoice is the seller's bill of merchandise. it normally contains the following: a) Date b) Name and address of the seller and the buyer c) Precise Description, specifications and Quantity of the goods, Harmonized System Number (if required). d) Order number/ contract number/ proforma invoice number & / or details of Letter of Credit. e) Payment Terms. f) Port of shipment and port of destination (FPD in some cases), shipment details g) Currency, Unit price, value of the goods h) Shipping marks on packages. i) INCOTERMS The main use of a commercial invoice is to check whether the proper merchandise is shipped at an agreed price. Further, the form and the contents of the invoice enable the actual goods to be checked against the invoice and the invoice against the underlying commercial contract. 3. Consular Invoice: It is a special type of invoice, which is required by certain countries like Philippines and South America. As the name indicates, it is an invoice, which is "consularised" by an appropriate notation thereon by the Consul of the country of destination of goods (importer's country). Thus, a consular invoice is an invoice certified by the Consulate of the importer's country situated in the exporter's country. Generally consular invoice is in a prescribed format.

The main purpose of this invoice is to give an accurate record of the type of merchandise shipped, their quantity, value etc. so that it may facilitate fixing of duties, commitment & management of foreign exchange outgo in the importer's country. Further, this is used for statistical purposes and for avoiding delay on account of customs inspection etc. in the importer's country since the consul of that country has already verified its correctness. In addition, the consular fees are additional revenue for the importing country. 4. Customs Invoice: Countries like U.S.A., Canada etc, generally require customs invoice. This invoice is to be drawn in specific form to be supplied by the consular office of the importer's country. This facilitates entry of merchandise into Importer's country at preferential tariff rates etc. 5. Legalised Invoice: This invoice is also called as "Visaed" invoice. This is an invoice, which is legalised (stamped and attested) by the consul of the importer's country, situated in the exporter's country. This invoice is similar to the consular invoice as far as the aim of the importing country is concerned. The only difference is that the legalised invoice is not in a prescribed form unlike consular invoice. Mostly middle-east countries require this type of invoice. 6. Combined Certificate of Origin and Value: This is another type of commercial invoice, which is required by Commonwealth countries. In this, apart from all the basic details given in a commercial invoice, a declaration is provided in the commercial invoice by the shipper regarding the country of origin of goods. This declaration of origin is generally attested / certified by Chamber of Commerce and Industry or other agency designated for this purpose. The main purpose of this invoice is to allow goods of origin of specified countries in importer's country with a preferential (lower than normal) tariff. C. Financial Documents: are the documents, which perform the function of obtaining finance, collection of payment etc. The most common financial document used is a bill of exchange. Bill of Exchange (B/E): A Bill of Exchange is also referred to as "Draft" or "Hundi".A B/E performs the following five basic functions. a) Means for collecting payment: It is a well -known fact that the basic function of a B/E is to show that there is a commercial or trade transaction underlying the B/E drawn and it is a means for collecting payment arising out of such a transaction. b) Means for Demanding Payment: When a payment is due from a person, generally a demand has to be made on him. A B/E is drawn for demanding such payment. When a B/E is drawn and presented to the drawee for payment, it amounts to having a demand on the drawee to pay the amount. Thus, a B/E serves as a means for demanding payment. c) Means for extending credit: A B/E can be drawn in such a way that it can be made payable at sight or at a future date (Tenor). When it is drawn for a particular tenor it means that the drawer is allowing the drawee (or buyer) to make payment at a future date. In effect he is extending his buyer a credit. Thus, a B/E is a means for extending credit. d) It is a promise of payment: Certain B/E s are drawn on acceptance basis i.e. the drawee will be given the documents upon his acceptance to pay the bill at a specified tenor. Such an accepted B/E is sufficient evidence of promise of payment by the drawee. Thus, a B/E becomes a promise of payment after it is accepted for payment by the drawee at a specified tenor.

e) It is a receipt for payment: When the amount shown on B/E is paid by the drawee, the payee endorses the bill of exchange as Received payment" and hands it over to the drawee. Such a discharged B/E acts as a receipt for having paid the amount stated thereon. Thus, B/E also acts as a receipt for payment. Depending upon the time of payment allowed there under, Bills of exchange can be classified into two categories Sight B/E: Under such a B/E the drawee has to make payment on presentation / sight/ demand. Usance B/E: They are also known as "TENOR" or "TIME" B/E. The drawee is directed to make payment after a stated number of days or a period from a particular date or event. In international trade Usance B/E are normally drawn in two ways namely i) DP BASIS - Documents against Payment Basis: drawee is allowed to make payment after a stated tenor but documents covered by the draft will be delivered only on payment of the draft amount ii) DA BASIS - Documents against Acceptance Basis: documents will be delivered to the drawee against his acceptance of the draft for payment at the maturity on the due date C. TRANSPORT DOCUMENTS: 1. Bill of Lading: Already detailed earlier. 2. Airway Bill: AnAirway Bill is an acknowledgement issued by an Airline company or their authorized agents (and not forwarding agents) stating that they have received the goods detailed therein (number of packages, quantity and nature of goods) for dispatch by Air to the named consignee at the address stated therein. Unlike a B/L, AWB is not a document titled to goods because it is merely an acknowledgement of goods. When it is not a title of goods naturally it is not a negotiable document. Since an AWB is not a document of title to the goods it is not necessary for a consignee to process the AWB for taking delivery of goods. Thus, for shippers the AWB is not as safe a document as a B/L. Further, in case of AWB it is obligatory on the part of Airlines to notify the consignee on arrival of goods and they will normally deliver the goods to the consignee or his order on proper identification. 3. Air Consignment Note (Air receipt): Forwarding agents issue this. This document shows the departure and the destination stations as well as the name of the shipper and the addressee. It must also indicate forwarding station and date stamp. This document also gives the description of goods etc. and their apparent good order and condition (or otherwise) 4. House Airway Bill:is a receipt for goods issued on the same lines as Airway Bill by cargo consolidating agents. When Air cargo is shipped under consolidation, the Airline company issues an Airway Bill called Master Airway Bill to the consolidating cargo agent and he in turn issues his own House Airway Bills to individual shippers. Thus, House Airway Bill is a receipt for goods issued not by the actual carriers or their agents but an intermediatory cargoconsolidating agent. A House Airway Bill is not safe as a document as an Airway Bill. In case the consolidating agents fails to pay the freight, the carriers will have the right over the goods and the holder of House Airway will not get his goods. 5. Postal Receipt: is a receipt issued by postal authorities. It can be a Sea Mail receipt or Airmail receipt depending upon the mode by which they are sent. Postal receipt is also an acknowledgement of receipt of goods for delivery to a named consignee hence; it is not a document of title to goods nor is it a negotiable instrument. Though the postal receipt is not

a must for taking delivery of goods in certain countries receipt must be shown to the Customs and postal authorities for clearance and delivery. 6. Courier / Expected Delivery Service : A courier / Service document evidences receipt of goods for delivery and should appear on its face to indicate the name of the courier/ service and should be stamped/ signed or otherwise authenticated by such named courier/service unless the credit specifically calls for a document issued by a named courier/ service. This document should also indicate the date of pick-up or receipt. If no name of courier/service is stated in the letter of credit, bank can accept the document issued by any courier/service. 7. Multimodal Transport Document ("Combined Transport Document): This document is issued when the movements of goods involve more than one mode of transport. Thus, in a multimodal transport document the carriers (called as Multimodal Transport Operators) take the liability for safe conduct of transport of goods by various modes of transport from the place of receipt of goods to the place of delivery. In most respects it has the characteristics of a Bill of Lading. It is a document evidencing receipt of goods and not shipment on board. It is also a negotiable document and issued in sets. D. Risk Coverage Documents 1. Insurance Policy: is a contract of insurance. It is an undertaking given by the insurers promising to pay or secure payment of money as compensation in case the goods under movement or otherwise are subjected to loss, theft, damage etc. In international trade marine insurance is the most common document obtained either by exporter or importer for the safety of goods. Insurance policies are of different nature and may cover different types of risks. But the basic cover is perils of sea. Insurance policies are generally freely assignable to anyone who acquires insurable interest without notice to the underwriters. The assignment is usually effected by bank endorsement. Specific policy: When a policy is issued for a particular voyage covering specific goods, such policy is termed as a specific policy. Open policy: It is a blank policy issued by the insurers for a specified amount and period and exporter can cover any number of shipments within the stipulated amount and period and he gets the insurance. This type of policy is commonly used these days. In these cases generally the cover becomes more effective only when details of shipment are informed in good time to the insurers along with premium if any, as agreed to. 2. Insurance Cover Note: When a specific policy is required and the details of ship or shipment are not known, the insurance company issues a cover note, which acts as a provisional policy to be replaced by a regular policy, where the details of ship /shipment are furnished to insurers. Insurance cover notes are generally valid for short periods of normally three months and within that validity period the insurer has to supply the details of ship/shipment and get it replaced by a regular policy failing which he is deprived of the insurance. Thus, the cover notes are not as secure a document as a policy and generally not acceptable in international trade.

E. MISCELLANEOUS DOCUMENTS: Documents which may differ from one transaction to another. 1. Packing List: It is a document, which shows the nature and number of goods, etc. put in each packet/ container etc. with distinctive numbers of marks. It forms the basis for identifying & checking contents, storage and distribution. . 2. Weight Certificate: a document certifying the weight of the goods. It may also give the net weight as well as the gross weight. This certificate is generally required in case of bulk goods like IronOre. 3. Certificate of Analysis and Quality: is a certificate, which indicates the quality, technical composition and intricate nature of the goods broadly described in the invoice. The exporter himself or an institution/ organization, which is component or nominated to give such a certificate, may give this certificate. 4. Certificate of Inspection: is a document certifying having inspected the goods (prior to shipment). In some cases this can take the form of a Clean report of findings (CRF). 5. Health Certificate: When live animals or plants are exported generally the importer insists on a certificate of health issued by a recognised agency, indicating the health and transportability of the export product. Other certificates of this category are RADIATION/ FUMIGATION certificates. 6. Advance Declaration for export: Required for shipments to USA to USA as a US customs regulatory requirement.

IMPORT MANAGEMENT:
Reasons for import: Non availability of the desired product from the domestic vendors in the desired specifications, quality, quantity, delivery schedule, price. Competitve overseas sourcing for use in export production. Increase in productivity. Technological upgradation Categories of importers in India under FTP: Actual users (Industrial) Actual users (non industrial): a. for commercial /trade/ business, b. Laboratories, R&D, Educational, hospitals usage or c. Service industry Non actual users: for stock & sale, personal use, gifts. An import license is required for imports of all restricted, prohibited or state trading items listed in ITC(HS) Classification of Export & Import. The applications

for import of such items s are submitted to the regional authorities of DGFT, who are authorized to issue the import licenses. IE Code Number Customs authorities do not allow import of goods into India to the persons who are not in possession of IEC no. Custodians (Port Trusts, CWC/ICD/CFS, airports) Imported goods unloaded in a custom area are required to be in the custody of a person as may be appointed by the Commissioner of Customs, until they are cleared or are transhipped in accordance with the provisions of the Customs Act, 1962. Goods remain in the custody of port trusts at various sea ports or CWC/ICD/CFS, at airports or CFS's. They are termed as the custodians of the cargo & are supposed to allow the cargo to be exported / cleared for import only after the customs authorities allow & carrier a issues the D.O. (imports) or mate receipt (export). Customs Administration: The customs administration vests in Central Board of Excise & Customs for implementing the provisions of the Customs Act, 1962. There are two main wings of of Customs House, namely, Appraisement & Preventive. 'Appraisement' is assigned the job of collection of revenue (for assessment of value & revenue collection) and 'Preventive' is for prevention of smuggling, Commissioner of Customs is the Administrative head, assisted by Addl., Deputy &Asst.Commissioners. Indian Customs Tariff Classification: The basic legislation concerning Ievy of Customs duties is the Indian Customs Act, 1962 read with Customs Tariff Act, 1975. Section 12 of the Customs Act, 1962 empowers for levy of duties of customs on goods imported into or exported from India. Customs clearance procedure: All goods imported into India have to pass through the procedure of customs clearance after theycross the Indian Border. The goods are examined, appraised, assessed, evaluated and then, after payment of applicable duties, allowed to be taken out of customs charge for use by the importer. The entire process of customs clearance is complex and to carry out this procedure smoothly, the help of accredited custom clearing agents has to be taken. These agents are licenced by the Commissioner of Customs. They are experienced and capable of handling the documents/goods. Bill of Entry: Bill of Entry is the control document used for customs clearance of goods imported in India. Types of BE:

Goods entered for: a. Goods entered for Home consumption (white BE) b. Goods entered for bonded warehousing : into bond BE (yellow BE) c. Goods cleared ex-bond for home consumption: ex bond BE (green BE) The BE is presented to the customs dept after the carriers agent files the Import General Manifest (IGM). It can be filed upto 30 days in advance of arrival of the ship. The rate of customs duty prevailing on the date of filing BE is applied to the import covered under that BE. A BE contains exhaustive info on the import covered by the BE such as: Origin & details of the ship on which import has arrived, Details of the goods (description, no. of packages, wt, volume), Value of imported goods (with details of frt, ins, agents commission, exchange rate, landing charges etc). Duties leviable Various code no.s (IEC, port code, CHA code, currency code etc) Importers (or CHA on importers behalf) declaration undertaking the correctness of info provided in the BE. The BE is noted as per IGM & scrutinized by the customs dept with the help of supporting documents such as: Copy of the contract / order, Suppliers commercial invoice, Import licence, IEC no.copy of LC, original & NN B/L, packing list, Freight & insurance certs, cert of origin, exchange slip (for conversion to INR), D.O. of shipping line / carrier, importers declaration reg agents commission paid / payable in India, customs declaration, test certs of manufacturer, brochures / catalogues of the imported item, literature showing chemical composition of chemical & allied products etc. Procedure in general The Second check procedure: 1. On receiving the advice of arrival of the vessel, the importer is required to present a Bill of Entry either for Home Consumption or for warehousing the goods. 2. The Bill of Entry is noted in Import Department, with corresponding endorsement made against the consignment entry in the I.G.M. The date of noting is importantbecause the rate for duty applicable to the goods imported would be that as in force on the date of noting, except in the case of warehoused goods where the rate applicable would be that in force on the date of physical clearance. 3. The Bill of Entry is thereafter be presented in the Appraising Department with all the relevant documents like Invoice, Bill of lading, Import licence if required, and catalogue / literature wherever necessary. Where the documents produced are adequate for determining the classification, value, ITC licence etc., the Bill of

Entry is completed by the Appraiser and the same is countersigned by the Assistant Commissioner. 4. The BE is then be forwarded to the Licence Department for licensing debit and audit and then returned to the importer for payment of duty in the Accounts/ Cash department. 5. After recovery of duty, the original Bill of Entry is retained in the Accounts Department and the duplicate and other copies returned to the importers for getting the goods examined in the docks. 6. In the Docks, Shed Appraiser/Examiner examines the goods and if found in order, gives the out of charge for taking delivery from the custodian of the goods viz. Port Trust, after payment of the Port Trust charges. This second check procedure is followed for clearance of 80% to 90% of the consignments, wherein the customs dept is clear regarding the classification of the item imported. When the customs dept is in doubt regardinmg the classificationof the item imported, they usually resort to the First check procedure. In the First Check Procedure, the Scrutinising Appraiser in the Group gives the examination order. The goods are then examined in the docks and the Bill of Entry returned to the Scrutinising Appraiser for completion and licence debit. In this case the Customs 'out of charge' is given by the Accounts Department, after the recovery of duty. This procedure is resorted to only in cases where the appraisers or the assessing group finds it difficult to complete the assessment on the basis of the documents made available. No person shall, except with the permission of the proper officer of Customs open any packages of goods imported into India and lying in a Customs Area. Examination of cargo for assessment purpose is chiefly the function of the Appraising Department who have special staff of examiners in the docks/Air cargo shed. The result of the examination or weighments is noted on the reverse of the Bill of Entry. It is absolutely essential that records of examination and weighment should be made, attested and dated at the time of examination or weighment. If examination or weighment takes place on more than one day, the result of examination or weighment made on each day is clearly recorded. The Officer at the same time, obtains on the documents the importer's or his accredited representative's signature on the entries made from day to day showing the result of weighment. Fast track clearance: Apart from the second check & first check procedures, a Fast Track clearance procedure is also allowed to certain categories of importrs (such as got depts., EOUs, STPs, EHTPs & top few importers of selected customs houses. Under this scheme the importer is allowed to go through the customs clearance of eligible goods. Theimporterdeclares a self assessed value of the dutiable goods, pays the applicable duty and after the payment of duty, the goods are allowed out of customs without physical examination. However, an audit of the duty thus paid is completed by the customs within 48 hours of clearance and a physical (post clearance) examination

of the imported goods may be carried out in 3 days, if deemed necessary. In case the customs audit reveals a short payment of customs duty, the same is recovered from the importer. If the customs discover a deliberate evasion on of duty / wrong declaration, they may also take penal actions in addition to the duty recovery. The 'Import Tariff' and 'Export Tariff: The rates at which the different import or export duties shall be leviable have been respectively specified in the First and Second Schedule to the Customs Tariff Act, 1975- called the 'Import Tariff' and 'Export Tariff, respectively. Whereas the Export tariff is very limited in scope (as only specified types of articles are subject to Export duties), the Import Tariff is all pervasive and very comprehensive. The Customs Tariff (amendment) Ordinance, 2003 was promulgated In Feb 2003 which uses the 8 digit codes as per the Harmonised System of Nomenclature. The import tariff nomenclature comprises of: a. List of Headings, b.Section& chapter notes & c. Rules for interpretation of nomenclature. Types of customs duties: i.Basic duty, ii.Additional duty or countervailing duty (equivalent to the excise duty for similar Indian made products, for protection of Indian industry), iii. Special additional duty of 4% iv. Anti dumping duty v. Safeguard duty vi. Educational cess of 2% on aggregate customs duty. Valuation of goods for the purpose levying duties is done by customs dept as per the Customs Valuation Rules, 1988. Illustration of customs duty calculations: a.Landed cost of the consignment of dutiable goods in India b.Basic customs duty, say 25% on Rs.100000/c.AddAdd addl duty (CV) (inclEducess), say 16.48% of (a+b) d.AddAddl duty of customs @ 4% of (a+b+c) i.e.on Rs.145600/e.Add Educational cess& secondary Educess @ 3% of (b+c) : Rs.1,00,000/:Rs. 25,000/:Rs. 20,600/:Rs. :Rs. 5,824/1,368/-

Thus the total customs duty payable is: (b+c+d+e) = 25000/-+20600/-+5824/-+1368/- = Rs.52,792/-

ICD / CFS : Concept & operations:

Inland Container Depot (ICD) / Container Freight Station (CFS): Is a freight station built at inland (away from ports / sea coast) location to facilitate all port operations normally carried out at a sea port, except physical shipment on the vessel. An ICD provides: 1. Adequate area for movement of cargo / containers in & out of ICD 2. Facilities for unloading / loading of cargo / containers 3. Adequate customs bonded warehousing area 4. Customs clearance facilities for import & export 5. Under-bond movement of cargo to & from gateway port 6. Transport facility / options (road / rail) 7. Custodianship of cargo to the carrier & customs 8. Documentation 9. Working area for customs & CHAs ICDs earn revenues from the above activities by charging appropriately to the shippers, consignees and carriers. ICD / CFS operators in India: Private entities Container Warehousing Corporation (CWC) : Container Corporation of India (CONCOR): Concor is a part of Indian railways is primarily reliant on rail service for transportation. They have an extensive network from ICDs to gateway ports (Tughlakabad, Hyderabad, Aurangabad, Nagpur, Bhusaval, Miraj, Dronagiri, Chinchwad, Pithampur, Kanpur) ICD / CFS Operations: 1. Provsion of empty containers to shipper as per shipping lines orders 2. Receipt, loading / unloading & storage of export & import consignments at ICD 3. Facilitation of customs clearance for export / import. 4. Transportation to & from gateway port under bond 5. Transportation to & from shippers / consignees factory / warehouse ex-bond 6. Coordination with gateway port & local customs 7. Storage of cargo at bonded warehouse 8. Release of cargo only after ensuring payment of customs duties & carriers charges 9. Fixing tariff for all above activities 10. Maintenance of equipment / security. 11. Cabotage, where feasible. Benefits of ICD/CFS: 1. Exporter / importer need not liaise with a CHA at distant gateway port 2. Quicker follow up 3. Better cost control for shipper / importer 4. Shorter ex-bond transportation, hence safer 5. Availability of a bonded warehouse in case of need 6. Importers can order the carrier to deliver upto ICD of choice (if carrier can offer this service). 7. Congestion at gateway port does not affect cargo delivery to port by rail. 8. Helps decongest gateway port, reduces clearance / documentation load at gateway port. Disadvantages of ICD/CFS:

1. No control on movement of consignment between gateway port & ICD 2. Likely delays in transportation to & from gateway 3.Tariff may work out costlier than direct clearance / transport from / to gateway port. 4. Possibility of restrictions of certain cargo clearance only at gateway port 5. All carriers may not offer ex-ICD delivery of import consignments.

port

EXIM Bank:
Objectives: Exim Bank is a service institution set up to serve the foreign trade sector in the form of finance, advice, consultancy, market intelligence, credit information services, etc. It has both, developmental and finance functions. The objectives of Exim bank are set out as "granting loans and advances in India solely or jointly with commercial banks and other financial bodies to persons exporting or importing or intending to export from India goods and services including export of turnkey projects, joint ventures and civil construction services". Therefore, Exim bank is an apex institution providing finance and refinance in connection with the foreign trade of the country (similar to NABARD for agricultural finance and IDBI for industrial finance. Functions of Exim Bank: The operations of EXIM Bank include funded assistance and guarantees. Funded assistance: Suppliers credit, pre-shipment credit finance for EOUs, Export marketing finance, Besides it provides lines of credit, buyers credit, refinance of export credit, bulk import finance, Export Product Development Finance, Pre-shipment Finance, Bridge loans, overseas investment finance, production equipment finance, finance for leasing etc. The Exim Bank performs the following functions: 1. Granting loans and advances in India solely or jointly with commercial banks to persons /companies exporting or intending to export from India goods including export of turnkey projects, civil construction contracts or other contracts and services including consultancy services. 2.Granting loans and advances solely or jointly with commercial banks to persons /companies outside Indiaforimport from India of goods, including turnkey projects, civil constructions contracts or other contracts and services, including consultancy services. 3.Grantinglines of credit to governments, financial institutions and other suitable organisations in foreign countries to enable persons / co.soutside India to import from India, goods including turnkey projects, services, including consultancy services. 4.Handlingtransactions where a mix of government-to-government credit and commercial credit for exports is involved.

5.Issuingbidbonds and guarantees and other similar facilities in India or abroad solely or jointly with commercial banks on behalf of persons exporting or intending to export from India goods including turnkey projects, consultancy, etc. 6.Purchasing, discounting and negotiating export bills etc. Incidental Functions : (1) (2) (3) (4) Maintaining of foreign currency accounts with banks and correspondents abroad for purposes connected with the business of Exim Bank. Buying and selling currencies or foreign exchange and undertaking such other functions of authorised dealers as may be necessary for the discharge of its functions. Undertaking and financing of research surveys, studies etc., in connection with promotion and development of international markets. Providing technical, administrative and financial assistance to any exporter in India or any other person who intends to export goods from India for promotion, management and expansion of any industry with a view of promoting international trade. Planning, promoting, developing and financing export-oriented industries. Forming or conducting subsidiaries for carrying out its functions. Acting as an agent of the Centre and State Governments, RBI, IDBI etc.

(5) (6) (7)

Operations: Indian exporters of capital goods, producer goods, engineering goods, turnkey projects, construction projects and consultancy services are all eligible for term finance - funded and unfunded assistance from the Exim Bank. Proposals of more than Rs. 1 crorevalue are scrutinised by an inter-institutional working group, consisting of Exim Bank as leader, RBI and ECGC as members. Exports on deferred payment credits are eligible for finance and refinance from the Exim Bank, for periods beyond six months and up to 100 per cent of finance required and granted by commercial banks. The rates of interest and margins for various schemes vary from time to time. Normally, periods of credit vary from 1 to 10 years and margins from 10 to 20 per cent. Finance in rupees as well as in foreign currencies depending on the needs is made available by the Exim Bank. There are two types of operations by Exim Bank, namely, funded and nonfunded operations. Funded operations involve financial outgo while non-funded operations include various types of guarantees such as advance payment guarantee, performance guarantee, guarantee for retention of money and guarantee for borrowings abroad, guarantee required for execution of export contracts and for issue of Bid bonds. Exim Bank's main funded facilities:

a.Direct Financial Assistance to Exporters: Funds are provided ondeferred payment terms to Indian exporters of eligible goods and services which enable the Indian exporter to extend deferred payment credit to the overseas buyers. Commercial banks can participate in this directly or under Risk Syndication Facility, when risk of non payment by supplier is shared by banks with the Exim bank. b.Consultancy and Technology Services: Indian companies can avail themselves of Exim Bank's financial facility against deferred credit extended to overseas buyers of Indian consultancy, technology and other services. c. Pre-shipment Credit: While pre-shipment credit up to six months is provided by banks, the per-shipment creditbeyond six months is given by Exim Bank jointly with banks to facilitate the provision of rupee funds for expenses in construction exports and turnkey project exports, enabling them to buy raw materials and other inputs. d.Facilities for Export-orientedUnits: The Exim Bank provides term loans or deferred payments guaranteesto EOUs / FTZs to acquire Indian plant and machinery or foreign plant and capital goods. e.Overseas Investment: The Bank provides funds to Indian promoters of joint ventures overseas for equity participation over a period of 1 to 10 years to set up projects abroad or in third countries. f.Buyers' Credit:Types : (a) Direct credit to importers for Indian capital goods, consumer durables and others; (b) Lines of credit to foreign governments for provision of term credit to importers of Indian goods and services; and (c) Re-lending facility to overseas banks or multinational banks to enable them to provide them finance to importers of eligible goods and services from India. g.Refinance of Term Loans to Indian Banks h.Facilities for Deemed Exports: The deemed exports are also provided with the same facilities, both funded and non-funded, as in the case of others, by the Exim bank. i.Small Scale Industry Export Bills RediscountingThe commercial banks can rediscount with Exim Bank, the export bills of SSIs arising out of post-shipment export credit.

Export Insurance:
The following types of insurances are desired in export operations: 1. Insurance for WIP, finished goods, warehousing before export (after import clearance, in case of DDP/DDU terms), transit to the gateway port, during multimodal transportation till the delivery occurs to the consignee. 2. Credit insurance to cover the transactional losses, which are not covered by srl 1. While the insurance cover is made available by the GICs for serial 1, they do not cover the risks at srl 2.

Need for export credit insurance Payments for exports are open to risks even at the best of times. The risks have assumed large proportionstoday due to the far-reaching political and economic changes that are sweeping the world. An outbreak ofwar or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring aboutthe same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers.The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated dueto the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss. What is ECGC? Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.800 crores and authorized capital Rs.1000 crores. What does ECGC do? Provides a range of credit risk insurance covers to exporters against loss in export of goods and services. Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them. Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in theform of equity or loan. How does ECGC help exporters? ECGC Offers insurance protection to exporters against payment risks Provides guidance in export-related activities Makes available information on different countries with its own credit ratings Makes it easy to obtain export finance from banks/financial institutions Assists exporters in recovering bad debts Provides information on credit-worthiness of overseas buyers

Standard Policy Shipments (Comprehensive Risks) Policy, commonly known as the Standard Policy, is the one ideally suited to cover risks in respect of goods exported on short-term credit, i.e. credit not exceeding 180 days. This policy covers both commercial and political risks from the date of shipment. It is issued to exporters whose anticipated annual export turnover of more than Rs.50 lacs.

Under the Standard Policy, ECGC covers, from the date of shipment, the following risks: a. Commercial Risks Insolvency of the buyer. Failure of the buyer to make the payment due within a specified period, normally four months from the due date. Buyer's failure to accept the goods, subject to certain conditions.

b. Political Risks Imposition of restriction by the Government of the buyer's country or any Government action, which may block or delay the transfer of payment made by the buyer. War, civil war, revolution or civil disturbances in the buyer's country. New import restrictions or cancellation of a valid import license in the buyer's country. Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which can not be recovered from the buyer. Any other cause of loss occurring outside India not normally insured by general insurers, and beyond the control of both the exporter and the buyer.

The policy does not cover losses due to the following risks: Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyer's country in his favor. Causes inherent in the nature of the goods. Buyer's failure to obtain necessary import or exchange authorization from authorities in his country. Insolvency or default of any agent of the exporter or of the collecting bank. Loss or damage to goods which can be covered by general insurers. Exchange rate fluctuation. Failure or negligence on the part of the exporter to fulfill the terms of the export contract. The Standard Policy is meant to cover all the shipments made by an exporter, on credit terms during the period of 24 months after the issue of the policy. An exporter may exclude shipments made against advance payment or those, which are supported by irrevocable Letters of Credit, which carry the confirmation of banks in India. Shipments to foreign buyers who are associates of the exporters, i.e. in whose business the exporter has a financial interest, are normally excluded from the policy. They can, however be, covered against political risks under the policy if an exporter so desires.

The Standard Policy provides cover only for the post-shipment risks. Pre-shipment lossesare not covered under the policy. The policy is normally meant to provide cover for shipments involving a credit period not exceeding 180 days. ECGC fix a Maximum Liability under each Standard Policy, which is intended to cover all the shipments during a period of 24 months from the date of issue of the Policy. The Maximum Liability is the limit upto, which ECGC would accept liability for shipments made in each of the policy-years, for both commercial and political risks. The exporter has to get a credit limit approved from ECGC in respect of each foreign buyer to whom he would like to make shipments on DP/DA/OD terms of payment. In addition, if shipments are made to a buyer in some of the countries classified by ECGC as restricted cover countries, Specific Approval of ECGC should be obtained for such shipment. Further, the exporter has to declare to ECGC all his shipments and pay premium as explained later. ECGC charges a status enquiry fee of Rs.500 for each credit limit application. An exporter need not pay status enquiry fee for credit limits upto Rs.5 lac, if he furnishes a bank report not older than 6 months on the buyer. What are restricted cover countries? For a large majority of countries, the Corporation places no limit for covering political risks. Such countries are referred to as 'open cover' countries. More than 85% of the countries in the world, which account for over 99% of the country's exports are open cover countries. However, in the case of certain countries where the political risks are very high, cover is granted on a restricted basis. When does an exporter become eligible for receiving payment of a claim under the Policy? A claim will arise when any of the risks insured under the policy materializes. If any overseas buyer goes insolvent, the exporter becomes eligible for a claim one month after his loss is admitted to rank against the insolvent's estate or after four months from the due date, whichever is earlier. In case of protracted default the claim is payable after four months from the due date. ECGC normally pays upto90% of the loss, whether it arises due to commercial risks or political risks. The remaining 10% has to be borne by the exporter himself. All amounts recovered, net of recovery expenses should be shared with ECGC in the ratio in which the loss was originally shared. It is also to be noted that receipt of a claim from ECGC does not relieve an exporter from obligations to the Exchange Control Authority for recovering the amount from the overseas buyers. *****************************************************************************************************