Export

Management
Module 8/9
 Types of Exporters- Merchant
Exporters
• Merchant Exporter means a person engaged in trading activity
and exporting or intending to export goods.
• Merchant exporter procures the material from a manufacturer
and exports in his firm’s name. Here merchant exporter
procures the order from international market.
• Merchant exporter does not have own manufacturing unit or
processing factory.
• Merchant Exporter can export the excisable goods either
directly from the premises of the manufacturer, with or without
sealing of the export consignments, or through his premises
under claim for rebate .
Types of Exporters- Manufacturer
Exporters
• "Manufacturer Exporter" means a person who manufactures
goods and exports or intends to export such goods. The
manufacturer exporter procures and process raw materials at
his factory and exports finished products. Here, the
manufacturer exporter procures the export order and exports in
their own name.
 Categories of Exports
TWO CLASSES OF EXPORTS:

• Physical Exports: If the goods physically go out of the country or services

are rendered to outside the country then it is called as physical export.

• 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.
There are total of 10 categories of supply under deemed exports. E.g.
Supply of fabrics to the garment exporter in SEZ who exports the garments
made out of the said fabric. (https://www.cbic.gov.in/resources//htdocs-
cbec/gst/Deemed%20Exports%20in%20GST.pdf)
 Deemed Export
• Supply of goods against Advance Licence/Advance Licence for annual requirement/DFRC under
the Duty Exemption /Remission Scheme;
• Supply of goods to Export Oriented Units (EOUs) etc.
• Supply of capital goods to holders of licences under the Export Promotion Capital Goods (EPCG)
scheme
• Supply of goods to projects financed by multilateral or bilateral agencies/funds as notified by the
Department of Economic Affairs, Ministry of Finance under International Competitive Bidding in
accordance with the procedures of those agencies/ funds, where the legal agreements provide for
tender evaluation without including the customs duty;
• 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 fertiliser
plants.
• 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
• Supply of goods to the power projects and refineries not covered in (f) above.
• Supply to projects funded by UN agencies.
• Supply of goods to nuclear power projects through competitive bidding as opposed to International
Competitive Bidding.
Additional Reading
• http://dgftcom.nic.in/exim/2000/policy/pol05/cha
p-4.htm
• https://www.cbic.gov.in/resources//htdocs-
cbec/gst/Deemed%20Exports%20in%20GST.pdf
• https://www.startupindia.gov.in/content/sih/en/go
vernment-
schemes/duty_exemption_and_remission_schem
e.html
DUTY EXEMPTION & REMISSION SCHEMES
 Advance Authorisation Scheme
An Advance Authorisation is issued to allow duty free import of inputs, which are physically
incorporated in export product (making normal allowance for wastage). In addition, fuel, oil,
energy, catalysts which are consumed/ utilised to obtain export product, may also be allowed.
DGFT, by means of Public Notice, may exclude any product(s) from purview of Advance
Authorisation.

Advance Authorisation can be issued either to a manufacturer exporter or merchant exporter tied to
supporting manufacturer(s) for:

i) Physical exports (including exports to SEZ); and/ or

ii) Intermediate supplies; and /or

Advance Authorisations necessitate exports with a minimum value addition of 15 %,however it

varies for different products such as minimum VA for Tea is 50 %.
Advance Authorisations are exempted from payment of basic customs duty, additional customs
duty, education cess, anti- dumping duty and safeguard duty, if any.
 Allow duty free import of input, physically incorporated in export
product, on the basis of Standard Input Output Norms (SION) or Self

Advance uthorisation Declaration. Minimum 15% value addition is required to be

achieved.
Period for fulfillment of export obligation is 18 months from the date

A Scheme of issue of Authorization.

As per Trade Notice No. 11 dated 30.06.2017 under GST Regime, no
exemption from payment of IGST and Compensation Cess would be
available for imports under Advance Authorisation. However, as per
Notification No. 53 dated 10.01.2019, imports under Advance
Authorisation have been exempted from IGST and Compensation
Cess till 31.03.2020.
Special Advance Authorization Scheme for export of Articles of
Apparel & Clothing Accessories has been introduced for duty free
import of fabric, subject to the specified conditions.
Under Self Ratification Scheme, eligible exporter, on self-declaration and
Advance Authorization
self-ratification basis, can apply for an Advance Authorisation where
there is no SION/valid Adhoc Norms for an export product and where
SION has been notified but exporter intends to use additional inputs in
the manufacturing process.
Advance Authorization for annual requirements would only be issued
for items notified in SION and it shall not be available in cases of adhoc
norms.
 DUTY FREE IMPORT AUTHORISATION
(DFIA) SCHEME
DFIA is issued to allow duty free import of inputs, fuel, oil, energy sources,
catalyst which are required for production of export product. DGFT, by means
of Public Notice, may exclude any product(s) from purview of DFIA. This
scheme is in force from 1st May, 2006.
 Issued to allow duty free import of inputs and is exempted only
DUTY FREE IMPORT AUTHORISATION
from payment of Basic Customs Duty. Additional Customs
Duty/Excise Duty paid may be adjusted as CENVAT credit.
(D FIA) SCHEME
Value addition required 20%.

DFIA will be exempted only from payment of Basic Customs

Duty and minimum value addition of 20% will be required to
be achieved.
Duty Free Import Authorization (DFIA) will be issued only on
post export basis separately for each SION and each Port and it
will not be issued for an export product where SION prescribes
’Actual User’ condition for any input.
DFIA Exports under DFIA shall be made from a single Port and
Regional Authority shall issue transferable DFIA with a
validity of 12 months from the date of issue. No further
revalidation shall be granted by Regional Authority.
 Duty Drawback

Duty drawback, or Drawback, is an export incentive program

that allows importers, exporters, and manufacturers to recover, in
part or in whole, certain duties, taxes, and fees paid on imported
merchandise or domestically produced
 Duty Drawback
The scheme is administered by Department of Revenue which has two
components viz-a-viz: All Industry Rate (AIR) and Brand Rate. It comes under
Duty Remission Scheme. Under the Scheme, Duty Drawback as per specified
rates in Schedule of All Industry Rate of Drawback is granted. Exporter has the
option to avail the benefit by getting fixation of Brand Rate on an application in
Duty Drawback the prescribed format.
Scheme

Rebate on State The Scheme was notified by the Ministry of Textiles on 07.03.2019 to be
and Central implemented by DGFT. The Scheme will rebate all embedded State and Central
Taxes and Levies Taxes/levies for meant for exports of made-up articles & garments. Under the
(RoSCTL) RoSCTL, the benefit to exporters shall be given by DGFT in the form of
transferable duty credit scrips.
Additional Reading
• https://www.taxmanagementindia.com/visitor/detail_article.a
sp?ArticleID=5868#:~:text=Duty%20Drawback%20has%20bee
n%20one,the%20manufacture%20of%20export%20goods
.

• https://fieo.org/uploads/files/file/about20.pdf
 PROMOTIONAL SCHEMES

In the Foreign Trade Policy 2015-20, under Export from India Schemes, there are two
Schemes for exports of merchandise and services viz.:

The objective of MEIS is to offset infrastructural inefficiencies and associated costs

involved in export of goods/products, which are produced/ manufactured in India,
especially those having high export intensity, employment potential and thereby
enhancing India’s export competitiveness.

Similarly, the objective of SEIS is to encourage export of notified Services from

India.
 The MEIS Entitlement would be 2% / 3% / 5% / 7% of FOB
value of notified goods exported to notified markets [based on
three distinct categories framed and covered in Appendix 3B]
in free foreign exchange or FOB value of exports as given in
the Shipping Bills in free foreign exchange, whichever is less.
As per recent announcement MEIS will now be replaced
by Remission of Duties or Taxes on Export Product
(RoDTEP).
Country Groups - Category A: Traditional Markets (30) -
European Union (28), USA, Canada. Category B - Emerging
& Focus Markets (139), Africa (55), Latin America and
Mexico (45), CIS countries (12),Turkey and West Asian
MEIS countries (13), ASEAN countries (10), Japan, South Korea,
China, Taiwan and Category C: Other Markets (70).
Units located in SEZs have also been made eligible for MEIS
& SEIS benefit.
Export of goods through Courier or Foreign Post Offices
using e-Commerce (as notified in Appendix-3C) of FOB
value only upto Rs. 5,00,000/- per consignment are entitled
for rewards under MEIS.
 Under SEIS, Service providers of notified services (under
Appendix 3D) will be eligible for rewards in the form of
duty credit scrips @ 5% and 7% on the net foreign exchange
earned from notified services (w.e.f. 05.12.2017).

Only services provided in the manner/mode specified at Para

9.51 (i) & (ii) are eligible, i.e. Supply of a ’service’ from
India to any other country (Mode 1-Cross border trade) and
Supply of a ’service’ from India to service consumers of any
other country (Mode 2- Consumption abroad).
Services Sector
Minimum net free foreign exchange earnings of USD 15,000
in the year of rendering service is the eligibility criteria. For
Individual Service Providers and Sole Proprietorship
minimum USD 10,000/- in the year of rendering service.
 Basic Custom duty paid in cash or through debit
under Duty Credit scrip shall be adjusted for Duty
Drawback benefits.

As per Trade Notice No. 11 dated 30/06/2017, under

the GST regime, the Duty Credit Scrips cannot be
used for payment of IGST, GST and Compensation
cess in inputs and CGST/SGST/IGST, GST and
Compensation cess for domestic procurement.

Duty Credit Scrip

Duty Credit Scrip issued on or after 01.01.2016
under Chapter 3 shall be valid for a period of 24
months from the date of issue and must be valid on
the date on which actual debit of duty is made.
 PROMOTIONAL SCHEMES

STATUS HOLDER
Status Holder Scheme is for business leaders who have
excelled in international trade and have successfully
contributed to country’s foreign trade.

An applicant shall be categorized as status holder on

achieving export performance during the current and
previous three financial years (for Gems & Jewellery
Sector the performance during the current and previous
two financial years shall be considered for recognition as
status holder) as under:
 PROMOTIONAL SCHEMES

Export Performance
FOB/FOR
Status Category
(as converted)
Value (in US $ million)

One Star Export House 3

Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
Five Star Export House 2000
 BENEFITS TO SPECIAL GROUP OF EXPORTERS

BENEFITS FOR EXPORTERS FROM CERTAIN REGIONS

Exporters and manufacturers from special region such as Sikkim, Jammu and Kashmir etc.
are given specific benefits by government. The exporters can contact the related
government agencies for more details.

Export benefits to units having ISO 9000 (series) / ISO 14000 (series) / WHOGMP /
HACCP / SEI CMM level-II and above status
Export units holding special status are also eligible for different exports benefits from
government modifying time to time.

SSI/MSME BENEFITS
There are many schemes available for Micro Small and Medium Enterprises (MSME) and
SSI (Small Scale Industries) including scheme to promote exports.

Export benefits to Free Trade Zones (FTZ)

Export Units in Free Trade Zones can enjoy zero excise duty on goods manufactured
for export purpose. Import customs duty is exempted for import of components used
for manufacturing export goods.
 BENEFITS TO SPECIAL GROUP OF EXPORTERS
Export Advantages for Electronic Hardware Technology Park (EHTP)
Advantages like Single point contact service, income tax benefits, DTA sales up to certain
limit and many other export benefits can be enjoyed for units of Electronic Hardware
Technology Park (EHTP)

Export benefits for Software Technology Parks

Many advantages like Foreign equity permission, income tax benefits, DTA sales up to
certain limit and many other supports can be enjoyed for the units under STP.

Advantages to 100% Export Oriented Units (EOUs)

Import of second hand capital goods, re export of capital goods, income tax benefits, DTA
sales up to certain limit and many other government assistances can be enjoyed by Export
Oriented Units.

Export benefits to Bio Technology Park (BTP)

income tax benefits, re export of capital goods, DTA sales up to certain limit and many
other conveniences can be enjoyed from different government and non-government
agencies to BTP.
 BENEFITS TO SPECIAL GROUP OF EXPORTERS
Export merits for Agri Export Zone(AEZs)
income tax benefits, re export of capital goods, DTA sales up to certain limit and many
other export advantages can be availed for Agri Export Zone (AEZs)

Export supports to Special Economic Zones

Government provides many benefits to Special Economic Zones in India to create an
internationally competitive and smooth working environment for exports and thereby
economic development of the country. Some of the advantages enjoyed by SEZ are single
window clearance, free import of goods, exemption of customs duty for import of capital
goods, consumables, raw materials, spares etc, reimbursement of CST, 0% income tax for
5 years, Foreign Direct Investment, exemption on MAT, Service Tax, DDT, CST, Service
Tax, External commercial borrowing facility etc. and many more.
Additional Reading
• http://
www.eximguru.com/exim/indian-customs/customs-manual/st
p-ehtp-scheme.aspx
 Export Procedure - Summary
• Get an IEC code
• Get RCMC certificate from export promotion council
• Receipt of an indent or export order
• Verify credit worthiness of buyer
• Check if an export license is required for the goods
• Order acceptance and Performa invoice generation
• Arrange for any pre-shipment finances
• Arrange for goods
• Arrange for export documentations
• Shipment of goods
• Submission of documents to banks
• Payment realization
• Availing of export incentives schemes
Export Procedure
• Preliminary steps before an export takes place
IEC number : IMPORTER EXPORTER CODE ( in short IEC ) is
a ten digit number granted by Directorate General of Foreign
Trade under Ministry of Commerce and Industry, to any bonafide
person/ company for carrying out import/export.
IEC can be obtained from any of the Zonal and Regional offices
of Director General of Foreign Trade depending on area/region
where the individual/company is located.
 Export Procedure - RCMC
• As per the Foreign Trade Policy, a Status Holder exporter is required to get a
Registration-cum-Membership Certificate (RCMC) from FIEO for availing
various benefits under the Policy. RCMC is also required for getting certain
benefits from the Customs and Central Excise authorities. For registration
purposes, FIEO has been recognized by the Government as an Export
Promotion Council.
• Registration Cum Membership Certificate (RCMC) is by
issued
Promotion Councils/Commodity board/Development Export
authority authority as prescribed in FTP.
competent or
• An individual applying for the following purposes can apply for this certificate.
• An authorization to import/ export on restricted items other
• To seek benefits or concession under Foreign Trade Policy (FTP) like duty
drawback, duty credit scrips, etc.
Export Procedure
Inquiry and Offer under Exports
• Exporter may receive inquiries, directly. An inquiry is a request from the prospective buyer to
keep him informed of the terms and conditions of sale. Any export inquiry has to be attended
with promptness and meticulous care. It is to be remembered that importers are in an
advantageous position many exporters compete to clinch the deal.
• If the inquiry is from a new person it is usual to inquire about the credentials of the potential
importer. Importer may furnish his bank reference or trade reference.
• Trade reference means the importer may furnish the names of persons with whom he had
business dealings, earlier, to facilitate the exporter to gather required details.
• As export business is becoming highly competitive, many a time, exporters have to take the
initiative, without waiting for inquiries, in identifying potential buyers by gathering information
from trade journals which publish trade inquiries.
• Whatever be the mode of gathering information, exporter has to react with speed and elegance
by submitting the offer, through proforma invoice, with detailed literature in respect of product
such as specifications, quality, packing, price, mode of transport and period required for supply
of goods, after receipt of confirmed order.
Export Procedure
Confirmation of Order
• On receiving an export order, it should be examined
carefully in respect of items, specification, payment
conditions, packaging, delivery schedule, terms of payment,
licenses, insurance documents etc. and then the order
should be confirmed.
• Accordingly, the exporter may enter into a formal contract
with the overseas buyer.
Export Procedure

Export License
• All items are freely exportable except few items appearing in
prohibited/ restricted list.
• If its under prohibited list, proper licenses should be obtained
for exporting
Export Procedure
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.
Export Procedure
Production or 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.
Export Procedure
Shipping Space

• The exporter has to make the necessary reservation, in case goods are to be sent by
sea. The reason is there is shortage of shipping space and equally their frequency
is also limited.
• Exporter has to gather information about the sailings for the port of destination,
matching the delivery schedule. Necessary information can be gathered from
Daily Shipping intelligence to which exporters may subscribe.
• Clearing and Forwarding agents are the specialized people in this line of activity
who can be appointed. Exporter sends the cargo to the clearing and forwarding
agents who take care of shipment of goods. In case, goods are to be sent by air, the
problem is not that difficult as there are adequate airlines for booking the cargo.
Export Procedure
Labelling, Packing and Marking

• The export goods should be labelled, 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 country of origin, address, package number, port and place of
destination, weight, handling instructions, etc. provides identification and information
of cargo packed.
• The British Standard Packing Code & Exporters Encyclopaedia published in US
provides detailed packaging instructions for shipping purpose.
Export Procedure
Labeling provides the following instructions-

• Shipper's mark
• Country of origin
• Weight marking (in pounds and in kilograms)
• Number of packages and size of cases (in inches and centimeters)
• Handling marks (international pictorial symbols)
• Cautionary markings, such as "This Side Up."
• Port of entry
• Labels for hazardous materials
Export Procedure
Handling and cautionary marks-
Purpose Symbol

FRAGILE

USE NO HAND HOOKS

THIS WAY UP

KEEP AWAY FROM SUNLIGHT

PROTECT FROM RADIOACTIVE

SOURCES
Export Procedure
Purpose
Handling and cautionary marks- Symbol

KEEP AWAY FROM RAIN

CENTRE OF GRAVITY

DO NOT ROLL

DO NOT USE HAND TRUCK HERE

USE NO FORKS
Export Procedure
Purpose Symbol

Handling and cautionary marks-

CLAMP AS INDICATED

DO NOT CLAMP AS INDICATED

STACKING LIMITED BY MASS

STACKING LIMITED BY NUMBER

DO NOT STACK
 Export Procedure
Handling and cautionary marks-
Purpose Symbol

SLING HERE

TEMPERATURE LIMITS
Export Procedure
Quality Control & Pre Shipment Inspection

• The Export Inspection Council of India (EIC) was set up by the Government of India under
Section 3 of the Export (Quality Control & Inspection) Act, 1963 as an apex body to provide
for sound development of export trade through quality control and pre-shipment inspection.
The Act empowers the Central Government to notify commodities and their minimum
standards for exports, generally international standards or standards of the importing
countries and to set up suitable machinery for inspection and quality control.
• 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.
Export Procedure

Custom Clearance
• custom clearance is a complex and time taking procedure that every exporter
face. Physical control is still the basis of custom clearance in India where each
consignment is manually examined in order to impose various types of export
duties.
• Multiplicity of exemptions and export promotion schemes also contribute
in complicating the documentation and procedures.
• So, a proper knowledge of the custom rules and regulation becomes
important for
the exporter.
 Export Procedure – Custom
Clearance Documents
• The exporter or the clearing and forwarding agent on behalf of the exporter should
present the following documents to the custom authorities :
• 1.Shipping bill
2.Invoice
3. Export license (if
required)
4. Quality control inspection certificate (wherever required) 5.Original
contract
6. Letter of Credit
7. Packing List
 Shipping Bill
• An exporter, while sending goods from one country to another has to go
through various formalities including submitting various applications,
acquiring licenses, paying duties and so on. To acquire a clearance for
export, from the Customs, an exporter will have to submit an application
called the ‘shipping bill’. One cannot load the goods unless the exporter
files the shipping bill. The export may be by air, vehicle, or vessel.

• A shipping bill can be filed after the particular vessel/ship, etc., is granted
with entry outwards that allows it to move out of the country. Once the bill
is submitted, it is physically verified and the value of the goods intended
for export are assessed by the customs authorities. The customs authorities
verify these bills and endorse the copy with ‘LET EXPORT ORDER’ and
‘LET SHIP ORDER.’
 Shipping Bill
Export General Manifest is a legal document mandatory to be filed by
carrier of goods wit customs department. This document is used by
government authorities as proof of export. The customs officials certify
proof of export on shipping documents to exporters on the basis of
EGM.

Remission of State Levies (ROSL)

 Commercial Documents
Commercial Invoice:
It is the basic and most important document in an export transaction and extreme
care has to be taken by the exporter to prepare this document.
• This document requires the exporter to submit details such as
1. his own details,
2. Invoice number with date,
3. details of the consignee and buyer (if the buyer is other than
consignee),
4. buyer’s order number with date,
5. country of origin of the goods,
6. country of final destination,
7. terms of payment and delivery,
8. pre-carriage details (Road/Rail),
9. vessel/flight number,
10.port of loading,
11. port of discharge,
12.final destination,
13.container number,
14.number and kind of packaging,
15.detailed description of goods,
16.quantity,
17.rate and
18.total amount chargeable etc
Commercial Documents
 Commercial
Documents
Packing List:

• This document provides the details of number of packages; quantity packed

in each of them; the weight and measurement of each of the package and
the net and gross weight of the total consignment.
• Net weight refers to the actual weight of the items and the gross weight
means the weight of the items plus the weight of the packing material.
• The packing list serves a useful purpose of the exporter while dispatching
the consignment as a cross check of goods sent.
 Commercial
Documents
• For the port personnel, it comes handy while planning the loading
and offloading of cargo.

• It is also an essential document for the customs authorities as they as

they can carry out the physical examination of the cargo and conduct
checks on the weight and measurements of the goods smoothly
against the declarations made by the exporter in the packing list.

Certificate of Inspection: This is the Certificate issued by the Export

Inspection Agency after it has conducted the pre-shipment inspection
of goods for export provided the goods fall under the notified
category of goods requiring compulsory shipment of inspection.
 Export Procedure
• The customs authorities scrutinise the shipping bill and other
requisite documents, and if prima facie satisfied they pass it for
export subject to the physical examination by the dock or air
transit staff of the customs.
Export Procedure
Bill of Lading:
• This is issued when the goods are shipped using ocean (marine) transport.
• When the exporter finally hand over the goods to the shipping company for
loading on board the ship for transport to their final destination, the
shipping company issues a set of Bills of Lading to the exporter.
Airway Bill:
• Airway Bill is a bill of lading when the goods are shipped using
air transport.
• It is also known as air consignment note or airway bill of lading.
Combined Transport Document:
• This is also known as Multi-modal Transport Document.
• Ever since containers have become popular, the concept of
Combined Transport Document has gained solid ground.
Export Procedure
• Negotiation of Documents

• After shipping the goods the exporters should arrange to obtain

payments for exports by negotiation of the relevant documents
through the bank. The set of negotiable documents usually consist of
the following : letter of credit, commercial invoice, packing slip,
GR-I form, certificate of origin, Marine insurance policy, bill of
lading

• In accordance with the foreign exchange regulations the exporter

must lodge a full set of shipping documents with the bank within
prescribed period. His bank would forward the necessary documents
to the buyer’s bank for the collection of the amount from the
importer.
 Export Procedure
Certificate Of Origin:
• This document serves as a proof of the country of origin of goods for the importer in his country.
• Imported countries usually require this to be produced at the time customs clearance of import cargo.
• It also plays an important part in computing the liability and the rate of import duty in the country of
import.
• This certificate declares the details of goods to be shipped and the country where these goods are
grown, manufactured or produced.
• This certificate is necessary where a country offers a Generalized System of Preference tariff to India
(29 nations offers GSP to India)
• A certificate of origin form may be obtained from Chambers of Commerce, Export Promotion
Councils and various trade associations authorized by government
Shipping Advice:
• The exporter sends this document , called shipping
advice, to the buyer soon after the shipment is made to
provide him all the shipment details.

• This serves as an advance intimation of the shipment

and allows the importer to arrange for delivery of the
same.
Export Procedure
Export incentives

• If the exporter is entitled to any export incentives, he should

take the necessary steps to realise it
 Commercial
Documents
Bill of Exchange:

• Also known as Draft, this is an instruments for payment realization. Bills of exchange
work the same way. Like cheques, bills of exchange are transferable. ... When a bill
of exchange is issued by a bank, it is sometimes called a bank draft. Trade draft is
another term used for bills of exchange issued by an individual payer

• Process by which a buyer (called a 'drawee') accepts the seller's bill of exchangeby
signing under the words 'accepted' on face of the bill. By this act, the drawee
becomes the acceptor and converts the bill into a post-dated check an unconditional
obligation to pay it on or before its maturity date.

• The exporter is the drawer and he draws (prepares and signs) this unconditional order
in writing upon the importer (drawee) asking him to pay a certain sum of money
either to himself or his nominee (endorsee).
 Commercial
Documents
Important parties to a Bill of Exchange:

• The Drawer: The drawer is the person who has issued the bill.
In an export transaction, exporter draws the bill as money is
owed to him.
• The Drawee: The drawer is the person on whom the bill is
drawn. Exporter draws the bill on the importer who is the
drawee. Drawee is the debtor who owes money the
exporter (creditor).
• The Payee: The payee is the person to whom the money is
payable. The bill can be drawn by the exporter payable to the
drawer (himself) or his banker.
Types of Bill of Exchange

(a)Sight Bill of Exchange: In this Bill of Exchange, also known

as demand Bill of Exchange, the drawee has to make the
payment, on presentation.

(b)Usance Bill of Exchange: In case of Usance or Time Bill of

Exchange, payment is to be made on the maturity date, after a
certain period, known as tenor.
 Payment Terms in EXIM
1. Clean Payments

In clean payment method, all shipping documents, including title documents are
handled directly between the trading partners. The role of banks is limited to
clearing amounts as required. Clean payment method offers a relatively cheap and
uncomplicated method of payment for both importers and exporters.
• There are basically two type of clean payments:
• Advance Payment
• In advance payment method the exporter is trusted to ship the goods after
receiving payment from the importer.
• Open Account
• In open account method the importer is trusted to pay the exporter after receipt
of goods.
• The main drawback of open account method is that exporter assumes all the
risks while the importer get the advantage over the delay use of company's cash
resources and is also not responsible for the risk associated with goods.
 Payment Terms in EXIM
2. Payment Collection of Bills in International Trade

The Payment Collection of Bills also called “Uniform Rules for Collections” is
published by International Chamber of Commerce (ICC) under the document number
522 (URC522) and is followed by more than 90% of the world's banks.
• In this method of payment in international trade the exporter entrusts the handling
of commercial and often financial documents to banks and gives the banks
necessary instructions concerning the release of these documents to the Importer. It
is considered to be one of the cost effective methods of evidencing a transaction for
buyers, where documents are manipulated via the banking system.
• There are two methods of collections of bill :
• Documents Against Payment D/P
In this case documents are released to the importer only when the payment has been
done.
• Documents Against Acceptance D/A
In this case documents are released to the importer only against acceptance of a draft.
 Payment Terms - Letter of
Credit
• Letter of Credit L/c also known as Documentary Credit is a widely used term to make
payment secure in domestic and international trade. The document is issued by a financial
organization at the buyer request.
• The International Chamber of Commerce (ICC) in the Uniform Custom and Practice
for Documentary Credit (UCPDC) defines L/C as:
"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at
the request and on the instructions of a customer (the Applicant) or on its own behalf : Is to
make a payment to or to the order third party ( the beneficiary ) or is to accept bills of exchange
(drafts) drawn by the beneficiary.
• Authorised another bank to effect such payments or to accept and pay such bills of
exchange (draft).
• Authorised another bank to negotiate against stipulated documents provided that the terms
are complied with.
A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in
goods. The decision to pay under a letter of credit will be based entirely on whether the documents
presented to the bank appear on their face to be in accordance with the terms and conditions of
the letter of credit.
 Parties to Letters of Credit
• Applicant (Opener): Applicant which is also referred to as account party is
normally a buyer or customer of the goods, who has to make payment to
beneficiary. LC is initiated and issued at his request and on the basis of his
instructions.
• Issuing Bank (Opening Bank) : The issuing bank is the one which create a letter of
credit and takes the responsibility to make the payments on receipt of the
documents from the beneficiary or through their banker. The payments has to be
made to the beneficiary within seven working days from the date of receipt of
documents at their end, provided the documents are in accordance with the terms
and conditions of the letter of credit. If the documents are discrepant one, the
rejection thereof to be communicated within seven working days from the date of of
receipt of documents at their end.
• Beneficiary : Beneficiary is normally stands for a seller of the goods, who has to
receive payment from the applicant. A credit is issued in his favour to enable him
or his agent to obtain payment on surrender of stipulated document and comply
with the term and conditions of the L/c.
If L/c is a transferable one and he transfers the credit to another party, then he is
referred
to as the first or original beneficiary.
• Confirming Bank : Confirming bank adds its guarantee to the credit opened by
another bank, thereby undertaking the responsibility of payment/negotiation
acceptance under the credit, in additional to that of the issuing bank. Confirming
bank play an important role where the exporter is not satisfied with the undertaking
of only the issuing bank.
 Types of LC
1. Revocable Letter of Credit L/c
A revocable letter of credit may be revoked or modified for any reason, at any time by the
issuing bank without notification. It is rarely used in international trade and not considered
satisfactory for the exporters but has an advantage over that of the importers and the issuing
bank. There is no provision for confirming revocable credits as per terms of UCPDC, Hence
they cannot be confirmed. It should be indicated in LC that the credit is revocable. if there is
no such indication the credit will be deemed as irrevocable.

2. Irrevocable Letter of CreditL/c

In this case it is not possible to revoked or amended a credit without the agreement of the
issuing bank, the confirming bank, and the beneficiary. Form an exporters point of view it is
believed to be more beneficial. An irrevocable letter of credit from the issuing bank insures
the beneficiary that if the required documents are presented and the terms and conditions are
complied with, payment will be made.
 Types of LC
3. Confirmed Letter of Credit L/c
Confirmed Letter of Credit is a special type of L/c in which another bank apart from
the issuing bank has added its guarantee. Although, the cost of confirming by two
banks makes it costlier, this type of L/c is more beneficial for the beneficiary as it
doubles the guarantee.

4. Sight Credit and Usance Credit L/c

Sight credit states that the payments would be made by the issuing bank at sight, on
demand or on presentation. In case of usance credit, draft are drawn on the issuing
bank or the correspondent bank at specified usance period. The credit will indicate
whether the usance draft are to be drawn on the issuing bank or in the case of
confirmed credit on the confirming bank.
EXPORT ORIENTED UNITS (EOUs), ELECTRONICS
HARDWARE TECHNOLOGY PARKS (EHTPs), SOFTWARE
TECHNOLOGY PARKS (STPs) AND BIO-TECHNOLOGY
PARKS (BTPs)

• Introduction and Objective

• (a) Units undertaking to export their entire production of
goods and services (except permissible sales in DTA), may
be set up under the Export Oriented Unit (EOU) Scheme,
Electronics Hardware Technology Park (EHTP) Scheme,
Software Technology Park (STP) Scheme or Bio-Technology
Park (BTP) Scheme for manufacture of goods, including
repair, re-making, reconditioning, re-engineering,
rendering of services, development of software,
agriculture including agro-processing, aquaculture, animal
husbandry, bio-technology, floriculture, horticulture,
pisciculture, viticulture, poultry and sericulture. Trading
units are not covered under these schemes.
• (b) Objectives of these schemes are to promote exports,
enhance foreign exchange earnings, attract investment
for export production and employment generation.
• EOU scheme was introduced in early 1980’s
• Provides an internationally competitive duty free
environment coupled with better infrastructural
facilities for export production
• An EOU unit may import/and or procure from DTA or
bonded warehouse in DTA /international exhibition
held in India without payment of duty of all types of
goods, including capital goods, required for its
activities , provided they are not prohibited items of
import
• EOU shall be a positive net foreign exchange earner .
• EOUs have to achieve only positive Net Foreign
Exchange (NFE) within 5 years i.e., A - B > 0 where
(A) is the FOB value of Exports and (B) is CIF value of
Investment
Criteria
• Only projects having a minimum investment of Rs. 1
Crore in plant & machinery shall be considered for
establishment as EOUs. However, this shall not
apply to existing units, units in EHTP / STP / BTP, and
EOUs in Handicrafts / Agriculture / Floriculture /
Aquaculture / Animal Husbandry / Information
Technology, Services, Brass Hardware and
Handmade jewellery sectors. BOA may allow
establishment of EOUs with a lower investment
criteria.
New initiatives for EOUs, EHTPs
and STPs
• EOUs, EHTPs, STPs have been allowed to share infrastructural facilities among
themselves. This will enable units to utilize their infrastructural facilities in an optimum way
and avoid duplication of efforts and cost to create separate infrastructural facilities in
different units.
• Inter unit transfer of goods and services have been allowed among EOUs, EHTPs, STPs,
and BTPs. This will facilitate group of those units which source inputs centrally in order to
obtain bulk discount. This will reduce cost of transportation, other logistic costs and result
in maintaining effective supply chain.
• EOUs have been allowed facility to set up Warehouses near the port of export. This
will help in reducing lead time for delivery of goods and will also address the issue of
un-predictability of supply orders.
• STP units, EHTP units, software EOUs have been allowed the facility to use all duty free
equipment/goods for training
purposes. This will help these units in developing skills of their employees.
• 100% EOU units have been allowed facility of supply of spares/ components up to 2% of
the value of the manufactured articles to a buyer in domestic market for the purpose of
after sale services.
• EOUs having physical export turnover of Rs.10 crore and above, have been allowed the
facility of fast track clearances of import and domestic procurement. They will be allowed
fast tract clearances of goods, for export production, on the basis of pre-authenticated
procurement certificate, issued by customs / central excise authorities. They will not have
to seek procurement permission for every import consignment.
 Export and Import of Goods
• An EOU / EHTP / STP / BTP unit may export all kinds of goods and services except items that
are prohibited in ITC (HS).
• Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)
shall be subject to fulfilment of the conditions indicated in ITC (HS). In respect of an EOU,
permission to export a prohibited item may be considered, by Board Of Approval, on a case
to case basis, provided such raw materials are imported and there is no procurement of
such raw material from DTA.
• Procurement and supply of export promotion material like brochure / literature,
pamphlets, hoardings, catalogues, posters etc up to a maximum value limit of 1.5% of
FOB value of previous years exports shall also be allowed.
• An EOU / EHTP / STP / BTP unit may import and / or procure, from DTA or bonded
warehouses in DTA / international exhibition held in India, without payment of duty, all
types of goods, including capital goods, required for its activities, provided they are not
prohibited items of import in the ITC (HS).
• Any permission required for import under any other law shall be applicable. Units shall
also be permitted to import goods including capital goods required for approved activity,
free of cost or on loan / lease from clients.
• Goods imported by a unit shall be with actual user condition and shall be utilized for
export production.
 Exchange Earner's Foreign
Currency (EEFC) Account
• Exchange Earners' Foreign Currency Account (EEFC) is an account
maintained in foreign currency with an Authorised Dealer
Category -
i.e. a bank authorized to deal in foreign exchange. It is a facility
provided to the foreign exchange earners, including exporters, to
credit 100 per cent of their foreign exchange earnings to the
account, so that the account holders do not have to convert foreign
exchange into Rupees and vice versa, thereby minimizing the
transaction costs.
• All categories of foreign exchange earners, such as individuals,
companies, etc., who are resident in India, may open EEFC
accounts.
• An EEFC account can be held only in the form of a current
account. No interest is payable on EEFC accounts.
Permissible Credits in EEFC
Account
• Inward remittance through normal banking channels, other than remittances
received on account of foreign currency loan or investment received from abroad
or received for meeting specific obligations by the account holder;
• Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a
unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic
Hardware Technology Park for supply of goods to similar such units or to a unit in
Domestic Tariff Area;
• Payments received in foreign exchange by a unit in the Domestic Tariff Area for
supply of goods to a unit in the Special Economic Zone (SEZ);
• Advance remittance received by an exporter towards export of goods or services;
• Professional earnings including directors’ fee, consultancy fee, lecture fee,
honorarium and similar other earnings received by a professional by rendering
services in his individual capacity;
• Re-credit of unutilised foreign currency earlier withdrawn from the account
permissible debits
• Payment outside India towards a permissible current account transaction
[in accordance with the provisions of the Foreign Exchange Management
(Current Account Transactions) Rules, 2000] and permissible capital
account transaction [in accordance with the Foreign Exchange
Management (Permissible Capital Account Transactions) Regulations,
2000].
• Payment in foreign exchange towards cost of goods purchased from a
100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone
or (b) Software Technology Park or
(c) Electronic Hardware Technology Park
• Payment of customs duty in accordance with the provisions of the
Foreign Trade Policy of
the Central Government for the time being in force.
• Trade related loans/advances, extended by an exporter holding
such account to his importer customer outside India, subject to
compliance with the Foreign Exchange Management (Borrowing
and Lending in Foreign Exchange) Regulations, 2000.
• Payment in foreign exchange to a person resident in India for
supply of goods/services
including payments for airfare and hotel expenditure.
Marine
Insurance
• Exporter may suffer financial loss if goods are damaged during
transportation from the port of dispatch to the point of destination. To
protect from loss, exporter may have to take insurance policy to
protect him from physical damage to the goods. Here is the
importance of ‘cargo Insurance’.

• In case, goods are shipped by sea, the insurance is known as Marine

Insurance’. The term cargo insurance is used in case of air shipment.
However, in practice, both the terms are interchangeably used and
their regulations are common.
• The need for insurance is mainly for two
reasons, Legal and Commercial.
• Legal liability of the intermediaries is Limited.
Intermediaries include clearing and forwarding agents,
carriers port and customs authorities etc. that handle the
goods at various stages. They do not incur any liability, if
the damage is due to circumstances beyond their control
or if the loss caused despite their reasonable care taken by
them.
• In case of sea shipment, their legal liability is limited to
100 pounds per package at present and in case of air
shipment, the liability of airlines is limited to $16 per kg
at present which is amended time to time.
• As and when post-shipment finance is made,
banks also insist for insurance coverage to
protect their financial interests.
• Insurance is required even on commercial
considerations. Once goods are damaged, importer
may not accept the bill of exchange.
Scope of Marine Insurance Policy
The scope of the insurance policy depends on the risks it covers. Here, risks are termed as
perils. Perils are referred as causes of events. The various kinds of perils are:
Maritime Perils:
• These are the events which are created by God or man made. Events created by God are
earthquake, collision, storm, lightning, and entry of sea water into the vessel, volcanic
eruption, rain water damage and washing overboard of cargo.
• The man made events are fire, smoke, water used to extinguish fire, piracy, barratry
(fraud, gross criminal negligence of the crew to prejudice ship owner)., sabotage,
vandalism etc.
Extraneous Perils:
• These are incidental perils. These perils are caused due to faults in loading,
carrying and unloading. Examples are rough handling, leakage, breakage,
pilferage and non-delivery etc.
• War Perils: These perils relate to losses due to war including civil war, revolution, rebellion
and detainment of the carrier etc. if the goods are confiscated by the customs on charges
of smuggling, then insurance does not cover.
Strike Perils:
• This means damage or loss due to lockouts, strikes, labor disturbances, riots, and civil
commotion and by any terrorist acting from political motive.
Types of Marine Insurance
Policies
The shipper or insured covers the risks depending on the terms of letter of
credit/ export order. The Institute of London Underwriters has drawn up the
different clauses in marine insurance policy in respect of risk coverage. The
risk coverage is done in terms of various institute cargo clauses. Different
marine insurance policies with different risk coverage are :
• Institute Cargo Clause (C): Named Peril basis.
This is the most restricted clause and covers only: loss or damage reasonably
attributable to
• Fire or explosion
• Vessel or craft being stranded grounded sunk or capsized
• Overturning or derailment of land conveyance
• Collision or contact of vessel craft or conveyance with any external object
other than water
• Discharge of cargo at a port of distress and loss or damage caused by –
General Average Sacrifice / Jettison
• Institute Cargo Clause (B): Named Peril basis.
This cover is similar to ‘C’ Clause, but in addition covers:
• Earthquake, volcanic eruption or lightning
• Washing Overboard
• Entry of sea, lake or river water into the vessel,
craft, hold, conveyance, container, lift van or place
of storage
• Total loss of any package lost overboard or dropped whilst
loading onto, or unloading from, vessel or craft
• Institute Cargo Clause (A): The widest form of
cover under Marine Cargo Insurance in so far as it
relates to the perils covered. ICC (A) is an
unnamed perils clause.
 Summary of Institute Cargo Clauses Coverage
Loss or Damage Caused by: Clause A Clause B Clause C
General Average   
Both to Blame Collision   
Fire or explosion   
Vessel or craft being stranded   
Overturning or derailment of land conveyance   
Collision or contact of vessel, craft or conveyance with any external
object other than   
water
Discharge of cargo at a port of distress   
General average sacrifice   
Jettison   
Earthquake, volcanic eruption or lightning  
Washing overboard  
Entry of sea, lake or river water into vessel, craft, hold,
conveyance, container, liftvan or place of storage  

Total Loss of any package lost overboard or dropped whilst

loading on to, or unloading from, vessel of craft  

Theft or Pilferage 
Contamination (own damage) 
Rain &/or fresh water damage 
 Implied Condition for Marine
Insurance Policy
• Utmost good faith – insured is obligated to disclose to
the insurance all facts related to the risk when
applying for the insurance. For example – if an
exporter misrepresents the kind of packaging used
and breakage occurs, the insurance company might
refuse to pay the damage.
• Another implied warranty is that venture must be
legal
 Major exclusions in Marine
Insurance Policy
• Under Normal Conditions :
Due to nature certain goods carry inherent vice such as easy
breakage. Damage to fragile glassware is not covered, if inadequately
packed. Damages caused during original packing are excluded, no
matter when the damage occurs, for instance, damages caused by a
nail driven by careless packers into the contents of packages.
• Insurance Contract Specifically Excluded:
Losses due to leakage or hook losses in case of goods packed
in bags may be excluded by the insurance contract itself.
Solidification of palm and coconut oil may be excluded,
unless heated storage is available.
 Major exclusions in Marine
Insurance Policy
• Delayed Arrival:
Loss of profit, market loss due to delayed arrival or deterioration arising due to
delay is excluded.
• Ordinary and Unavoidable Trade Losses:
Shrinkage and evaporation in the bulk shipment or infestation in case of copra are
excluded, unless specifically provided.
• Violence:
Certain perils such as wars, strikes, riot and civil wars ae excluded, unless
specifically endorsed.
• Dangerous Drugs Clause:
Insurance policy stipulates losses connected with shipment of opium and other
dangerous drugs are not paid unless specified conditions are met.