Export Import And Documentation Project Report

Project report
On
“BUSINESS DEVELOPMENT OF FASTENERS IN NORTH AND SOUTH AMERICA”
Prepared By:
SUMIT GULERIA
UID: - 12MBA1133
Course: - MBA
Specialization: - Marketing
Submitted to a University school of business in partial fulfillment of the degree of
Master of Business Administration.
Under the Supervision of: - Under the Guidance of: -
Mr. Anil Khosla Ms. Sandeep Bedi
Marketing Head Assistance Professor,
Eastman Impex University School of Business,
Ludhiana (Punjab) Chandigarh University, Punjab

PREFACE
As it is widely said in industry “An ounce of practical is better than tons of theory.” So I can say
that without practical knowledge the theory of anything would be nothing.
Industrial training is the bridge for a student that takes from his theoretical knowledge
to the practical industrial world. By undergoing the training in the industry a student can narrow
down the gap between his institute, workshop and the industry. The main purpose of the
industrial training is to expose us to the industrial environment, which is not possible in the
class-room. Keeping this view in the mind, the students are sent to different industrial units for
getting practical training. The present report is for the period of two months at “EASTMAN
IMPEX.” LUDHIANA. (PUNJAB)
During this training, I got the exposure to marketing department. The training helped
me in the view of implementing theoretical knowledge to the actual industrial environment. The
training at “EASTMAN IMPEX” Is definitely going to play an important role in developing an
aptitude for hard work and self-confidence necessary for my successes in future. At the end I
would like to say that it was an excellent experience to work with such a reputed organization.
SUMIT GULERIA
CHANDIGARH UNIVERSITY
GHARUAN
MOHALI

Acknowledgement
“It is not possible to prepare a project report without the assistance & encouragement of other
people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards
all the persons who have helped me in this endeavor. Without their active guidance, help,
cooperation & encouragement, I would not have made headway in the project.
I am ineffably indebted to Mr. ANIL KHOSLA, Mr. AMAN ARORA and Mr. GULSHAN
KUMAR for conscientious guidance and encouragement to accomplish this assignment.
I am extremely thankful and pay my gratitude to my faculty Ms. SANDEEP BEDI for her
valuable guidance and support on completion of this project.
I extend my gratitude to CHANDIGARH UNIVERSITY for giving me this opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards my parents and
members of my family, who has always supported me morally as well as economically.
At last but not the least, gratitude goes to all of my friends who have directly or indirectly helped
me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
SUMIT GULERIA

TABLE OF CONTENT
SR.NO CONTENT
PAGE NO
1 PART (A) 6-14
1.1 COMPANY PROFILE (EASTMAN IMPEX) 7
1.2 VISION & MISSION 7
1.3 MILESTONES 8
1.4 QUALITY POLICY 9
1.5 GLOBAL PRESENCE 9
1.6 THE EASTMAN GROUP 10
1.7 ACHIEVEMENTS 11
1.8 AWARDS 11
1.9 PRODUCT LINE 12-13
1.10 ORGANISATIONAL CHART 14
2 PART (B) 15-67
CHAPTER-1 15-26
1.1 INTRODUCTION 16
1.2 TYPES OF FASTENERS 17-18
1.3 INTRODUCTION TO THE PROJECT 19
1.4 OBJECTIVES OF THE STUDY 20
1.5 NEED FOR THE STUDY 20
1.6 RESEARCH METHODOLOGY 20
1.7 HOW TO GENERATE BUSINESS 21
1.8 HOW ONE BIENG DO EXPORT 22-24
1.9 NATURE OF INTERNATIONAL TRADE CONTRATS 25
1.10 ENTRING INTO AN EXPORT CONTRACT 26
CHAPTER-2 27-35
2.1 TERMS OF SHIPMENT-INCOTERMS 28-34
2.2 PROCESSING AN EXPORT ORDER 34
2.3 FINCIAL RISKS INVOLVED IN FOREIGN TRADE 35
CHAPTER-3 36-46
3.1 EXPORT DOCUMENTS 37-46
CHAPTER-4 47-52
4.1 SHIPPING AND CUSTOMS FORMALITIES 48-50
4.2 PROCEDURE OF EXCISE CLEARANCE 50-52
4.3 FACTORY STUFFING OF CARGO 52
CHAPTER-5 53-55
5.1 METHOD OF RECIVING PAYMENTS 54-55
CHAPTER-6 56-59

6.1 LETTER OF CREDIT 57
6.2 PARTIES TO LETTER OF CREDIT 57-58
6.3 TYPES OF LETTER OF CREDIT 59
CHAPTER-7 60-63
7.1 PREPARATION AND SUBMISSION OF DOCUMENTS
FOR BANK NEGOTTIATION /PURCHASE
61-62
7.2 SHIPMENT THROUGH COURIERS 63
CHAPTER-8 64-67
8.1 THE ECGC COVER 65-67
REFERENCE 68

Part (A)
Company Profile
Name: - Eastman Impex
Address: - Industrial Area-C, Dhandari Kalan, Ludhiana-141014 (INDIA)
Contact: - +91-161-3044000, 2511602-605

1.1) Eastman Impex
Company Profile
Eastman IMPEX Group is a leading manufacturer and exporter of Auto Parts, Light
Engineering Goods, fasteners, bicycle parts and hand tools all around the globe. They are
supplier to many OEM’s, Tier 1 and Tier 2 companies in the USA and Europe and their products
found end use in makes like Mercedes Benz, Cummins, Caterpillar, John Deere, Fiat,
Volkswagen and General Motors. Eastman Impex has created new horizons by providing quality
products to the optimum satisfaction of our esteemed global customers. They assure high
standards of quality, pricing, delivery and qualitative customer service to our international
customers.
The simple entrepreneurial skills and integrated corporate philosophy have mobilized the
company to become a Star Export House recognized by the Government of India, entirely
focusing on international trade.
1.2) VISION & MISSION
Vision
To be amongst the most admired & most trusted companies in the world, delivering reliable and
quality products & services to customers at competitive costs while adhering to international
standards, thereby delivering value for money and inspiring the confidence & trust of all those
we serve.
Mission
Our mission is to remain globally competitive by adapting latest technologies, acquiring relevant
skills and enhancing productivity. With a consistent focus to quality and customer satisfaction,
we strive to achieve a group turnover of US $200 million by the year 2014. This objective will
be achieved by increasing the sales volumes of our existing range of products and identifying
potential customers all across the globe. For this, the group is all set to collaborate with reputed
business enterprises through strategic alliances.

1.3) MILESTONES
2007
 A new casting unit was established for automobile industry.
2003
 A new unit for “SCAFFOLDING SYSTEMS AND FORMWORK ACCESSORIES” was
established at Kandla.
 The group now occupies a position among the top five exporters from India.
 Members of “SCAFFOLDING INDUSTRIES ASSOCIATION (SIA)”
 Regularly exhibiting at WORLD OFCONCRETE (LOS VEGAS), CONXPO (LOS
VEGAS) , BATIMAT (PARIS), BAUMA (MUNICH), BAUMA (GUANGZHOU).
2001
 JVR FORGINGS LIMITED was established with workstation from HAAS, USA.
 ISO-9001:2000 CERTIFICATION from UL Incorporation, USA.
 ISO/TS -16949-2002 certification from UL Incorporation, USA.
 Test Safe & Kieghley certifications from Australia & United Kingdom.
 Supplying to leading OEM’S, PSU’S & ARMY
 More than 200 products developed under the exclusive buy back arrangements.
 Exhibiting regularly at MOSBUILD MOSCOW), AUTOMECHANICA (HANNOVER).
1996
 Having started tools business in 1996, the group now occupies a position among top
exporters from India. For excellence in turnover, we were honored with a gold trophy (4
occasions) by the Govt. Of India. Brands: EASTMAN, APROTUFF, CASTLE, GLITRA.
 Quality Certification: ISO-9001:2000 from DNV, HOLLAND.
 Exhibiting products regularly at PRACTICAL WORLD (KOLN FAIR), INTERTOOL
(MOSCOW), NATIONAL HARDWARE SHOW (USA)

1.4) QUALITY POLICY
Eastman Impex considers quality as one of the principal strategic objectives to guarantee its
growth and leadership in the markets in which it operates.
Quality is our mission. The quality policy is our main tools in achieving it. The policy is clearly
defined, comprehensive and highly formalized. Our Quality Policy starts and ends with customer
as focal point:
Eastman Impex is ISO 9001:2008 certified company. Every stage of the process, from R&D to
design and manufacture and people to the machines, is monitored.
We shall continuously strive to exceed the expectations of our customers by providing defect-
free products, services and solutions, on time and within budget cost. We shall also endeavor to
nurture an environment where trust, fairness, and integrity flourish.
1.5) GLOBAL PRESENCE

1.6) THE EASTMAN IMPEX GROUP
1. JVR Forgings Limited: - JVR Forgings Ltd. is the leading supplier of precision Forged,
Pressed Steel, Machined components, Fabricated & Casted components. Originating as a
small manufacturing facility in Ludhiana (India) in 1997, it now comprises of 3
manufacturing facilities that operate in diverse fields like Automotive, Railways, and Bearing,
Heavy Fabrication, Scaffolding, formwork and construction industry components.
2. EASTMAN METTCAST LIMITED: - Eastman Mettcast Ltd a manufacturing unit
established with a vision to provide simplified solutions blended with the latest technology to
Automotive, Engineering and Construction Industry. We have been supplying a wide range of
Aluminum High Pressure Die Casted, Gravity Die Casted and high precision machined Sand
Casted parts to our customers in domestic market, Europe and other continents.
3. JANPATH ESTATES PVT.LTD: - JEPL is a company promoted by K. LALL GROUP
(KLG) and EASTMAN IMPEX GROUP (EIG). The company is in the business of colonizing
and land development since 2004. Built on a foundation of strong lineage and an established
reputation, Janpath Estates Private Limited have become one of the best and most sought
after Real Estate organization in this part of the country.

1.7) ACHIEVEMENTS
ISO/TS 16949:2002
TUV issued this certificate to the firm JVR forgings Ltd., after assessing the Firm’s system and
finding it in compliance with ISO/TS16949:2002
ISO 9001:2008
TUV Issued this certificate to the firm JVR forgings Ltd., after assessing the Firm’s system and
finding it in compliance with ISO 9001:2008.
TUV Certification
TUV Rheinland issued this certificate to the firm Eastman Impex Ludhiana, after assessing the
Product Combination Spanners and finding it in compliance with GS (German Safety Standard).
1.8) AWARDS
2000-2001
All INDIA Certificate of export excellence
Engineering Export Promotion Council
Awarded by Engineering Export Promotion Council for achieving highest exports During 2001-
02 amongst the Non-SSI units in the Hand Tools Panel.
1999-2000
Award for export Excellence
Engineering Export Promotion Council
Awarded by Engineering Export Promotion Council for top exporter in the category of export
house exporting at least 75% of SSI Products.

1.9) PRODUCT LINE
 Auto Parts
 Forgings
 Castings
 Machining
 Bicycle and Parts
 Complete bicycle
 Tricycle
 Bicycle spare parts
 Ride on vehicle
 Floor and Wall Tiles
 Ceramic/ porcelain tiles
 Granites
 Sand stone
 Sanitary ware
 Wooden product
 Garden Fencing
 Hand Tools
 Scaffolding
 Stainless Steel Fasteners
 Anchors
 Bolts
 Thread rods / studs
 Nails
 Nuts
 Screws
 Special; products
 Hooks
 Stainless Steel Utensils
 Stainless Steel Railings

 Stationery & Office Supply
 Hospital Furniture

1.10) ORGANISATIONAL CHART
BOARD OF DIRECTORS
Sh.Dharampal
Gupta
Chairman
Sh.Jagdeep
Singal
Director
Sh. Vinay
Singal
Director
Sh. Rajeev
Singal
Director
Sh.Gaurav
Singal
Director

Part (B)
Title: - Business Development of Fasteners in North and South America
CHAPTER- 1

1.1) INTRODUCTION
Fasteners: - A fastener is a hardware device that mechanically joins or affixes two or more
objects together. Fasteners can also be used to close a container such as a bag, a box, or an
envelope; or they may involve keeping together the sides of an opening of flexible material,
attaching a lid to a container, etc. There are also special-purpose closing devices, e.g. a bread
clip. Fasteners used in these manners are often temporary, in that they may be fastened and
unfastened repeatedly. Some types of woodworking joints make use of separate internal
reinforcements, such as dowels or biscuits, which in a sense can be considered fasteners within
the scope of the joint system, although on their own they are not general purpose fasteners.
Furniture supplied in flat-pack form often uses cam dowels locked by cam locks, also known
as conformant fasteners.
Industry: - In 2005, it is estimated that the United States fastener industry runs 350
manufacturing plants and employs 40,000. The industry is strongly tied to the production of
automobiles, aircraft, appliances, agricultural machinery, commercial construction, and
infrastructure. More than 200 billion fasteners are used per year in the U.S., with 26 billion by
the automotive industry.
Eastman Fasteners:- Eastman Impex has a wide range of fasteners which includes carriage
bolts, hex bolts, round head bolts, saddle bolts, flange bolts, step bolts, U-bolts, thread bars,
studs, hinges, wooden screws, machine screws, self-drilling screws, all type of steel nails, all
type of anchors, all type of hooks, umbrella hook, spring toggle, shear nuts (break away nuts),
castle nuts, wing nuts, cap/ dome nuts, spring nuts, nylock nuts, hex nuts, hex lock nuts, wedge
nuts, wheel nuts, square weld nuts, hex weld nuts, rod coupling nuts/ long nuts, lynch pins, hair
pins, link pins & split pins. Eastman Impex is exporting these products to the end users over 40
countries across the globe from last three decades. Their group turnover is US$ 72 million,
which is growing with an annual rate of 30%.
Eastman Impex supplies above products in Stainless steel, High Tensile & Mild Steel as per IS/
BS/ DIN/ JIS/ ANSI/ AISI/ ASTM specifications in Zinc & Hot Dip Galvanized coatings.
Eastman Impex is quite capable to develop the products as per customer’s requirement &
specification, special if any. We can supply any type of Hot or Cold headed fasteners.
Today's discerning and fastidious customer refuses to make any compromise on quality and our
pleasure rests in their satisfaction, as we believe in the philosophy of customer's delight.
Therefore, all our processes converge towards maintaining consistent quality aided by a highly
mechanized infrastructure, trained dynamic and resourceful team of skilled engineers with
objective to achieve the target of zero-defect. Constant up gradation of technology and infusion
of resources enables our company to stay ahead in quality and productivity in meeting the
International standards at most competitive prices.

1.2) Types of Fasteners
ANCHORS
BOLTS
THREAD RODS
NAILS
Bolt Anchor Chemical Anchor
Hex Head
Bolt
U-Bolt/ Found Hex Socket Set
Thread Rod
U-type Nail Galvanized Nail

NUTS
CLAMPS/HINGES
SCREWS
SPECIAL PRODUCTS
WASHERS
Hex Nut Castle Nut Spring Nut Hex Long Nut
Pernopala Hinges Bullet Hinges Pipe Clamp Galvanized Wire
Wood Screw Hex Head Wod Hex Head
Flange Wood
Countersunk
Runners Hair Pin Linch Pin Top link pin
Flat Washer Spring washer Toothed Lock Square Taper

1.3) INTRODUCTION TO THE PROJECT
The project is based on business development in overseas market, in which I have studied about
export business. Export is one of the lucrative business activities in India. The government also
provides various promotional schemes to the exporters for earning valuable foreign exchange for
the country and for meeting their requirements for importing modern technology and essential
inputs. Besides, the income from export business is also exempted to the specified extent under
the Income Tax Act, 1961, Refund of Central Excise and Custom Duty on export is also made
under the Duty Drawback Scheme of the Government. There is no Sales Tax on products meant
for exports.
Types of exporters:-
Exporters can be basically classified into two groups
 Manufacturer Exporter: - As the exporter has the facility to manufacturer the product,
he intends to export and hence he exports the products manufactured by him.
 Merchant Exporter: - An exporter who does not have the facility to manufacture an
item. But he procures the same from other manufacturers or from the market and exports
the same.
An exporter can be both a manufacturer exporter as well as a merchant exporter, he can
export product manufactured by him or he can export items bought from the market.
The Eastman Impex Group is a merchant exporter.
Once it is decided to export, it is mandatory on one’s part to follow certain procedures,
rules and regulations as prescribed by various regulatory authorities such as DGFT
(Directorate general of foreign trade), RBI, and Customs. These procedures, rules and
regulations are laid down in the Exim Policy 2004-09, Exchange Control Manual, and
Customs Act etc. Accordingly Export documents are required to be prepared keeping in
view of the requirement of the foreign buyers and the regulatory authorities.

1.4) Objectives of the Study
 To know how to develop business in North and South America.
 To know about the International marketing.
 To know about the import export process.
 To know what are the pre-shipment and post-shipment documents required.
 To know how to find out the needs and wants of the customers.
1.5) Need For the Study
The study is conducted to know how to generate the overseas business because fastener industry is
growing at very fast pace, as the demand for fasteners is increasing day by day.
Also it has become essential to study since presence of many players in the market have caused a
lot of competition.
1.6) Research Methodology
Data Collection
Primary Data Collection
 E-mails
 Telephones
 Invoice
 Packing List
Secondary Data Collection
 Invoice
 Packing List
 Shipping bill
 Internet

1.7) HOW TO GENERATE BUSINESS
The proper selection of organization depends upon.
 Ability to raise finance
 Capacity to bear the risk
 Desire to exercise control over the business.
 Nature of regulatory framework applicable to anyone
If the size of the business is small, it would be advantageous to form a sole proprietary business
organization. It can be set up easily without much expense and legal formalities. It is subjected to
only few governmental regulations. However, the biggest disadvantage of sole proprietorship
business is limited ability to raise funds which restricts the growth. Besides the owner has
unlimited personal liabilities. In order to avoid this disadvantage, it is advisable to form a
partnership firm.
CHOOSING APPROPRIATE MODE OF OPERATIONS:
You can choose any of the following modes of operation.
 Merchant Exporter i.e. buying the goods from the market or from the manufacturer and
then selling it to foreign buyers.
 Manufacturer Exporter i.e. engaged in manufacturing of goods in house for export.
 Sales Agent / Commission Agent / Indenting Agent i.e. acting on behalf of the seller and
charging the Commission.
 Buying Agent i.e. acting on behalf of the buyer and charging Commission.
 Service provider i.e. providing service from India to another country.

1.8) HOW ONE BEGINS TO DO EXPORT
Before entering into the venture of exports, one must look for the product to be exported and the
market where he intends to export.
In case of a manufacturer, obviously he would like to export the product he manufactures may be
with a little modification as required by the market. However, in case of a merchant exporter or a
trader, one has to identity the product to export. If the exporter is already in the trade in the
domestic market and is familiar with the product it would be an advantage to export the said
product of which he has reasonable knowledge.
Before selecting a product, one must simultaneously made a study and find out the prospective
market. For finding out the market of the selected product, the following methods will help.
 Get statistical information as to Export the products to various countries and their
growth prospects in the respective countries
 Approach the chamber of commerce for their guidance to find out the market.
 Approach the Export Promotion Council dealing in the selected product to get more
information.
The Preliminary
Once you are ready with the product you wish to export and have found the market for the same,
you are ready to proceed further. Following sequences can be followed:
 First of all get an Importer Exporter Code Number (IE Code).This can be obtained by
making a formal application to the office of the Regional Directorate General of
Foreign Trade (DGFT).
 Get yourself registered with the related Export Promotion Council and become a
member. Also arrange to obtain Registration-Cum-Membership Certificate (RCMC)
from the council. This has twin objectives:

o Under the Foreign Trade Policy, it is mandatory that an exporter gets himself
registered with the Export Promotion Council to avail of various export facilities.
o Being a member, you will have access to all the information relating to the
product that could be made available by the council.
o Many foreign buyers send their inquiries for the imports to the Export Promotion
Council. Hence you will have few customers interested in your product.
 If you are a manufacturer, find out the provisions under the EXIM Policy of getting the
raw materials duty free.
 Get familiar with the excise formalities as goods meant for export can be cleared without
payment of Customs & Excise duty on the finished product subject to compliance of
certain formalities.
 Understand the local government regulations in relations to the export of the product.
 Get information about the government regulations of the importing country as to
restrictions on the quantity, product specification, packing regulations, customs
regulations, requirement of specific documents/information etc.
 Availability of Vessels/Airlines, the transport charges, frequency of operation, etc.,
 To look for a Custom House Agent (CHA) (also known as freight forwarders or clearing
agents) for handling the documents/cargo in the customs.
 If the product is covered under any quota regulation, find out the agency/council who is
handling the quota distribution for the product and the availability of quota for exports.
Finding Customer
Once you have selected the market, the next step is to find a prospective customer.
This you can get:
 From the directory of the importers of the country.
 By writing to the Embassy of India in that country for assistance.
 By witting the Chamber of Commerce of that country.
 By means of participation in a Fair/Exhibition abroad either directly or through the
Export Promotion Council.
 By participating in international fair if organized locally.

 Through the personal contacts in that country. By these processes one can only have the
list of customers. One has to dialogue or correspond with these customers by sending
samples, getting feedback from the customers etc.
 Find out the association of that product and download member list of that association.
NEGOTIATING CONTRACT
Once the prospective customer is found, the business deal has to be concluded. The following
aspects may be considered before entering into a final contract with the buyer.
 Credit worthiness of the customer
 Availability of the Steamer/Airline and frequency
 The freight charges
 Full product specification
 The quantity price
 Terms of payment
 Types of packaging and marking on the packages
 Mode of shipment & Shipment schedule
 Tolerance of quantity to be shipped
 Documentation requirement for the customer
 Documentation requirement for the government of the importing country
 Compliance of the local governmental rules and regulations
Before entering into contract one should take note of the above factors. While these are
indicative, the requirements will vary from country to country, product to product and buyer to
buyer.
EXPORT SALES & CONTRACT TERMS & CONDITIONS
Very often exporters do not enter into any formal contract and finalize the trade deal through the
exchange of letters, cable, telex etc. It is, however, expedient that the parties (exporters &
importers) incorporate all important terms & conditions of their trade deal in a separate
document or contract that will avoid disputes arising out of uncertainty or ambiguity. Export
contract may be sent in duplicate along with the Performa Invoice to the overseas buyer.

1.9) NATURE OF INTERNATIONAL TRADE CONTRACTS.
There are certain, peculiar characteristics of international trade contract which are not present in
those for sales of goods in the domestic market
Whereas the parties to a domestic trace contract normally needs only agree on the elements
which are necessary for their particular trade transactions like price, description, quality and
quantity of goods, delivery terms etc. the situation will be quite different when the buyer and the
seller for sale/purchase contract belong to different countries. All parties to the international
trade contracts provide all their relative rights and obligations in several ways.
For example, they may agree to adopt either the Law of the country of the buyer or that of the
seller. The traders are normally reluctant to leave the determination of the rights and obligations
by implications under the legal system of either’s country. They prefer to make explicit
provisions regarding the rights and obligations by including a set of detailed and precise terms
and conditions in their contract.
EXPORT OF SAMPLESGIFTS.
Exports of bonafide trade and technical samples of freely exportable items shall be allowed
without any limit. Goods including edible items of value not exceeding Rs. 100000/- in a
licensing year, may be exported as a gift. However, items mentioned as restricted for exports in
ITC (HS) shall not be exported as a gift without a license/certificate/permission, except in the
case of edible items.

1.10) ENTERING INTO AN EXPORT CONTRACT
In order to avoid disputes, it is necessary to enter into an export contract with the overseas buyer.
For this purpose, export contract should be carefully drafted incorporating comprehensive but in
precise terms, all relevant and important conditions of the trade deal.
There should not be any ambiguity regarding the exact specifications of goods and terms of sale
including export price, mode of payment, storage and distribution methods, type of packaging,
port of shipment, delivery schedule etc. The different aspects of an export contract are
enumerated as under:
 Product, Standards and Specifications
 Quantity
 Inspection
 Total Value of Contract
 Terms of Delivery
 Taxes, Duties and Charges
 Period of Delivery/Shipment
 Packing, Labeling and Marking
 Terms of Payment-- Amount/Mode & Currency
 Discounts and Commissions
 Licenses and Permits
 Insurance
 Documentary Requirements
 Guarantee
 Force Majeure of Excuse for Non-performance of contract
 Remedies
 Arbitration clause

2.1) TERMS OF SHIPMENTS – INCOTERMS
The INCOTERMS (International Commercial Terms) is a universally recognized set of
definition of international trade terms, such as FOB, CFR & CIF, developed by the International
Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and
liabilities between buyer and seller. It is invaluable and a cost-saving tool. The exporter and the
importer need not undergo a lengthy negotiation about the conditions of each transaction. Once
they have agreed on a commercial terms like FOB, they can sell and buy at FOB without
discussing who will be responsible for the freight, cargo insurance and other costs and risks.’
The INCOTERMS was first published in 1936 --- INCOTERMS 1936 --- and it is revised
periodically to keep with changes in the international trade needs. The complete definition of
each term is available from the current publication --- INCOTERMS 2000. Under INCOTERMS
2000, the international commercial terms are grouped into E, F, C and D, designated by the first
letter of the term, relating to the final letter of the term. E.g. EXW—Exworks comes under
grouped ‘E’.
The purpose of Incoterms is to provide a set of international rules for the interpretation of the
most commonly used trade terms in foreign trade. Thus, the uncertainties of different
interpretations of such terms in different countries can be avoided or at least reduced to a
considerable degree. The scope of Incoterms is limited to matters relating to the rights and
obligations of the parties to the contract of sale with respect to the delivery of goods. Incoterms
deal with the number of identified obligations imposed on the parties and the distribution of risk
between the parties.
In international trade, it would be best for exporters to refrain, wherever possible, from dealing in
trade terms that would hold the seller responsible for the import customs clearance and/or
payment of import customs duties and taxes and/or other costs and risks at the buyer’s end, for
example the trade terms DEO (Delivery Ex Quay) and DDP (Delivered Duty Paid).
Quite often, the charges and expenses at the buyer’s end may cost more to the seller than
anticipated. To overcome losses, hire a reliable customs broker or freight forwarder in the
importing country to handle the import routines.

Similarly, it would be best for importers not to deal in EXW (Ex Works) which would hold the
buyer responsible for the export customs clearance, payment of export customs charges and
taxes, and other costs and risks at the seller’s end.
MORE CLARIFICATION ON INCOTERMS
EXW {+the named place}
Ex Works: Ex means from. Works means factory, mill or warehouse, which are the seller’s
premises. EXW applies to goods available only at the seller’s premises. Buyer is responsible for
loading the goods on truck or container at the seller’s premises and for the subsequent costs and
risks. In practice, it is not uncommon that the seller loads the goods on truck or container at the
seller’s premises without charging loading fee
The term EXW is commonly used between the manufacturer (seller) and export-trader (buyer),
and the export-trader resells on other trade terms to the foreign buyers. Some manufacturers may
use the term Ex Factory, which means the same as Ex Works.
FCA {+the named point of departure}
Free Carrier: The delivery of goods on truck, rail car or container at the specified point (depot)
of departure, which is usually the sellers premises, or a named railroad station or a named cargo
terminal or into the custody of the carrier, at seller’s expense. The point (depot) at origin may or
may not be a customs clearance centre. Buyer is responsible for the main carriage/freight, cargo
insurance and other costs and risks.
In the air shipment, technically speaking, goods placed in the custody of an air carrier are
considered as delivery on board the plane. In practice, many importers and exporters still use the
term FOB in the air shipment. The term FCA is also used in the RO/RO (roll on/roll off) services
In the export quotation, indicate the point of departure (loading) after the acronym FCA, for
example FCA Hong Kong and FCA Seattle. Some manufacturers may use the former terms FOT
(Free on Trucks) and FOR (Free on Rail) in selling to export-traders.

FAS {+the named port of origin}
Free Alongside Ship: Goods are placed in the dock shed or at the side of the ship, on the dock
or lighter, within reach of its loading equipment so that they can be loaded aboard the ship, at
seller’s expense. Buyer is responsible for the loading fee, main carriage/freight, cargo insurance,
and other costs and risks In the export quotation, indicate the port of origin(loading)after the
acronym FAS, for example FAS New York and FAS Bremen. The FAS term is popular in the
break-bulk shipments and with the importing countries using their own vessels.
FOB {+the named port of origin)
Free on Board: The delivery of goods on the board the vessel at the named port of origin
(Loading) at seller’s expense. Buyer is responsible for the main carriage/freight, cargo insurance
and other costs and risks. In the export quotation, indicate the port of origin (loading) after the
acronym FOB, for example FOB Vancouver and FOB Shanghai.
Under the rules of the INCOTERMS 1990, the term FOB is used for ocean freight only.
However, in practice, many importers and exporters still use the term FOB in the air freight. In
North America, the term FOB has other applications. Many buyers and sellers in Canada and the
USA dealing on the open account and consignment basis are accustomed to using the shipping
terms FOB Origin and FOB destination.
FOB Origin means the buyer is responsible for the freight and other costs and risks. FOB
Destination means the seller is responsible for the freight and other costs and risks until the
goods are delivered to the buyer’s premises which may include the import custom clearance and
payment of import customs duties and taxes at the buyer’s country, depending on the agreement
between the buyer and seller. In international trade, avoid using the shipping terms FOB Origin
and FOB Destination, which are not part of the INCOTERMS (International Commercial
Terms).

CFR {+the named port of destination}
Cost and Freight: The delivery of goods to the named port of destination (discharge) at the
seller’s expenses. Buyer is responsible for the cargo insurance and other costs and risks. The
term CFR was formerly written as C&F. Many importers and exporters worldwide still use the
term C&F.
In the export quotation, indicate the port of destination (discharge) after the acronym CFR, for
example CFR Karachi and CFR Alexandria. Under the rules of the INCOTERMS 1990, the term
Cost and Freight is used for ocean freight only. However, in practice, the term Cost and Freight
(C&F) is still commonly used in the air freight.
CIF {+named port of destination}
Cost, Insurance and Freight: The cargo insurance and delivery of goods to the named port of
destination (discharge) at the seller’s expense. Buyer is responsible for the import customs
clearance and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the acronym CIF, for
example CIF Pusan and CIF Singapore. Under the rules of the INCOTERMS 1990, the term
CIFI is used for ocean freight only. However, in practice, many importers and exporters still use
the term CIF in the air freight.
CPT {+the named place of destination}
Carriage paid To: The delivery of goods to the named port of destination (discharge) at the
seller’s expenses. Buyer assumes the cargo insurance, import custom clearance, payment of
custom duties and taxes, and other costs and risks. In the export quotation, indicate the port of
destination (discharge) after the acronym CPT, for example CPT Los Angeles and CPT Osaka.

CIP {+ the named place of destination)
Carriage and Insurance Paid To: The delivery of goods and the cargo insurance to the named
place of destination (discharge) at seller’s expense. Buyer assumes the importer customs
clearance, payment of customs duties and taxes, and other costs and risks.
In the export quotation, indicate the place of destination (discharge) after the acronym CIP, for
example CIP Paris and CIP Athens.
DAF {+ the names point at frontier}
Delivered At Frontier: The delivery of goods to the specified point at the frontier at seller’s
expense. Buyer is responsible for the import custom clearance, payment of custom duties and
taxes, and other costs and risks.
In the export quotation, indicate the point at frontier (discharge) after the acronym DAF, for
example DAF Buffalo and DAF Well and.
DES {+named port of destination}
Delivered Ex Ship: The delivery of goods on board the vessel at the named port of destination
(discharge) at seller’s expense. Buyer assumes the unloading fee, import customs clearance,
payment of customs duties and taxes, cargo insurance, and other costs and risks.
In the export quotation, indicate the Port of destination (discharge) after the acronym DES, for
example DES Helsinki and DES Stockholm.
DEQ {+ the named port of destination}
Delivered Ex Quay: The delivery of goods to the Quay (the port) at the destination at buyers
expense. Seller is responsible for the importer customs clearance, payment of customs duties and
taxes, at the buyers end. Buyer assumes the cargo insurance and other costs and risks. In the
export quotation, indicate the Port of destination (discharge) after the acronym DEQ, for
example DEQ Libreville and DEQ Maputo.

DDU {+ the named point of destination}
Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point at
destination, which are often the project site or buyers premises at seller’s expense. Buyer
assumes the import customs clearance, payment of customs duties and taxes. The seller may opt
not to insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge) after the acronym DDU for
example DDU La Paz and DDU N’djamena.
DDP {+ the named point of destination)
Delivered Duty Paid: The seller is responsible for most of the expenses which include the cargo
insurance, import custom clearance, and payment of custom duties, and taxes at the buyers end,
and the delivery of goods to the final point of destination, which is often the project site or
buyers premise. The seller may opt not to insure the goods at his/her own risk. In the export
quotation, indicate the point of destination (discharge) after the acronym DDP, for example DDP
Bujumbura and DDP Mbabane.
“E”-term, “F”-term, “C”-term &”D”-term: Incoterms 2000, like its immediate predecessor,
groups the term in four categories denoted by the first letter in the three-letter abbreviation.
• Under the “E”-TERM (EXW), the seller only makes the goods available to the buyer at
the seller’s own premises. It is the only one of that category.
• Under the “F”-TERM (FCA, FAS, &FOB), the seller is called upon to deliver the
goods to a carrier appointed by the buyer.
• Under the “C”-TERM (CFR, CIF, CPT, & CIP), the seller has to contract for carriage,
but without assuming the risk of loss or damage to the goods or additional cost due to
events occurring after shipment or discharge.
• Under the “D”-TERM (DAF, DEQ, DES, DDU & DDP), the seller has to bear all costs
and risks needed to bring the goods to the place of destination.

All terms list the seller’s and buyer’s obligations. The respective obligations of both parties have
been grouped under up to 10 headings where each heading on the seller’s side “mirrors” the
equivalent position of the buyer. Examples are Delivery, Transfer of risks, and Division of costs.
This layout helps the user to compare the parties’ respective obligations under each Incoterms.
2.2) PROCESSING AN EXPORT ORDER
You should not be happy merely on receiving an export order. You should first acknowledge the
export order, and then proceed to examine carefully in respect of
 Items
 Specification
 Pre-shipment inspection
 Payment conditions
 Special packaging
 Labeling and marketing requirements
 Shipment and delivery date
 Marine insurance
 Documentation requirement etc.
If you are satisfied with these aspects, a formal confirmation should be sent to the buyer,
otherwise clarification should be sought from the buyer before confirming the order. After
confirmation of the export order immediate steps should be taken for procurement/manufacture
of the export goods. In the meanwhile, you should proceed to enter into a formal export contract
with the overseas buyer.
Before accepting any order necessary homework should have been done as to availability of the
production capacity, raw material etc. It would be in the interest of the exporter to look into
entering into forward contract to safeguard against exchange rate fluctuations. Ensure that the
mode of payment is also agreed upon. In case of shipment against letter of credit, the buyer
should be advised to open the credit well in advance before effecting the shipment.

2.3) FINANCIAL RISKS INVOLVED IN FOREIGN TRADE
As an exporter while selling goods abroad, you encounter various types of risks. The major risks
which you have to undergo are as follows:
 Credit Risk
 Currency Risk
 Carriage Risk
 Country Risk
You can protect yourself against the above risks by initiating appropriate steps.
Credit Risks:
You can cover your credit risk against the foreign buyer by insisting upon opening a letter of
credit in your favour. Alternatively one can avail of the facility offered by various credit risk
agencies. A specific insurance cover can also be obtained from ECGC (Exports Credit &
Guarantee Corporation) to cover your country risk besides covering credit risk.
Currency Risks:
As regards covering the currency risk, due to the exchange rate fluctuations, you can request
your banker to book a forward contract.
Carriage Risk:
The carriage risk can be covered by taking an appropriate general insurance policy.
Country Risk:
ECGC (Export credit Guarantee Corporation) provides cover to protect the exporter from
country risks. Detailed procedures how an exporter can get him protected against the above risks
are given in separate chapters later.

3.1) EXPORT DOCUMENTS
Any export shipment involved various documents required by various authorities such as
customs, excise, RBI, Inspection and according depending upon the requirements, there are
categorized into 2 categories, namely commercial documents and regulatory documents.
A. Commercial Documents. : - Commercial documents are required for effecting physical
transfer of goods and their title from the exporter to the importer and the realisation of
export sale proceeds. Out of the 16 commercial documents in the export documentation
framework as many as 14 have been standardized and aligned to one another. These are
proforma invoice, commercial invoice, packing list, shipping instructions, intimation for
inspection, certificate, of inspection of quality control, insurance declaration, certificate'
of insurance, mate's receipt, bill of lading or combined transport document, application
for certificate origin, certificate of origin, shipment advice and letter to the bank for
collection or negotiation of documents. However, shipping order and bill of exchange
could not be brought within the fold of the Aligned Documentation System,
1. Commercial Invoice: Commercial invoice is an important and basic export document. It is
also known as a 'Document of Contents' as it contains all the information required for the
preparation of other documents. It is actually a seller's bill of merchandise. It is prepared by
the exporter after the execution of export order giving details about the goods shipped. It is
essential that the invoice is prepared in the name of the buyer or the consignee mentioned
in the letter of credit. It is a prima facie evidence of the contract of sale or purchase and
therefore, must be prepared strictly in accordance with the contract of sale.
2 Inspection Certificate: The certificate is issued by the inspection authority such as the
export inspection agency. This certificate states that the goods have been inspected before
shipment, and that they confirm to accepted quality standards.
3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due
to fire on ship, perils of sea, theft etc. marine insurance protects losses incidental to
voyages and in land transportation. Marine insurance policy is one of the most important
document used as collateral security because it protects the interest of all those who have
insurable interest at the time of loss. The exporter is bound to insure the goods in case of

CIF quotation, but he can also insure the goods in case of FOB contract, at the request of
the importer, but the premium payment will be made by the exporter. There are different
types of policies such as
4. Consular Invoice: Consular invoice is a document required mainly by the Latin
American countries like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar,
Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, Zanzibar, etc. This invoice is the
most important document, which needs to be submitted for certification to the Embassy
of the importing country concerned. The main purpose of the consular invoice is to
enable the authorities of the importing country to collect accurate information about the
volume, value, quality, grade, source, etc., of the goods imported for the purpose of
assessing import duties and also for statistical purposes. In order to obtain consular
invoice, the exporter is required to submit three copies of invoice to the Consulate of the
importing country concerned. The Consulate of the importing country certifies them in
return for fees. One copy of the invoice is given to the exporter while the other two are
dispatched to the customs office of the importer's country for the calculation of the
import duty. The exporter negotiates a copy of the consular invoice to the importer along
with other shipping documents.
5. Certificate of Origin: The importers in several countries require a certificate of origin
without which clearance to import is refused. The certificate of origin states that the goods
exported are originally manufactured in the country whose name is mentioned in the
certificate. Certificate of origin is required when:-
 The goods produced in a particular country are subject to’ preferential tariff rates in the
foreign market at the time importation.
 The goods produced in a particular country are banned for import in the foreign market.

Types of the Certificate of Origin
(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is required
in general by all countries for clearance of goods by the importer, on which no preferential
tariff is given. It is issued by: ¬
 The authorized Chamber of Commerce of the exporting country.
 Trade Association. Of the exporting country.
(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin required
for availing of concessions under Generalized System of Preferences (GSP) extended by
certain, countries such as France, Germany, Italy, BENELUX countries, UK, Australia;
Japan, USA, etc. This certificate can be obtained from specialised agencies, namely;
 Export Inspection Agencies.
 Jt. Director General of Foreign Trade..
 Commodity Boards and their regional offices.
 Development Commissioner, Handicrafts.
 Textile Committees for textile products.
 Marine Products Export Development Authority for marine products.
 Development Commissioners of EPZs
(c) Certificate for availing Concessions under Commonwealth Preferences (CWP):
Certificate of origin for the purpose of Commonwealth Preference is also known as
'Combined Certificate of Origin and Value'. It is required by two member countries, i.e.
Canada and New Zealand of the Commonwealth. For concession under Commonwealth
preferences, the certificates or origin have to be submitted in special forms obtainable, from
the High Commission of the country concerned.
(d) Certificate for availing Concessions under other Systems of Preference: - Certificate of
origin is also required for tariff concessions. Under the Global System of Trade Preferences
(GSTP), Bangkok Agreement (BA) and SAARC Preferential Trading Arrangement
(SAPTA) under which India grants and receives tariff concessions on imports and exports.

Export Inspection Council (EIC) is the sole authority to print blank Certificates of Origin
under BA, SAARC and SAPTA which can be issued by such agencies as EPCs, DCs of
EPZs, EIC, APEDA, MPEDA, FIEO, etc...
6. Bill of Lading: The bill of lading is a document issued by the shipping company or its agent
acknowledging the receipt of goods on board the vessel, and undertaking to deliver the
goods in the like order and condition as received, to the consignee or his order, provided
the freight and other charges as specified in the bill have been duly paid. It is also a
document of title to the goods and as such, is freely transferable by endorsement and
delivery.
Bill of Lading serves three main purposes:
 As a document of title to the goods;
 As a receipt from the shipping company; and
 As a contract for the transportation of goods.
Types of Bill of Lading
 Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods apparently in
good order and condition and without any qualification is termed as a clean bill of lading.
 Claused Bill of Lading: - A bill of lading qualified with certain adverse marks such as,
"goods insufficiently packed in accordance with the Carriage of Goods by Sea Act," is
termed as a Claused bill of lading.
 Transshipment or Through Bill of Lading: - When the carrier uses other transport
facilities, such as rail, road, or another steamship company in addition to his own, the
carrier issues a through or transshipment bill of lading.
 Stale Bill of Lading: - A bill of lading that has been held too long before it is passed on
to a bank for negotiation or to the consignee is called a stale bill of lading.
 Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in
advance, the bill of landing is marked, freight paid. Such bill of lading is known as
freight bill of lading.

 Freight Collect Bill of lading :- When the freight is not paid and is to be collected from
the consignee on the arrival of the goods, the bill of lading is marked, freight collect and
is known as freight collect bill of lading
7. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued by an
airline for the carriage of goods. As each shipping company has its own bill of lading, so each
airline has its own airway bill. Airway Bill or Air Consignment Note is not treated as a document
of title and is not issued in negotiable form.
8. Packing List: The exporter prepares the packing list to facilitate the buyer to check the
shipment. It contains the detailed description of the goods packed in each case, their gross and
net weight, etc. The difference between a packing note and a packing list is that the packing note
contains the particulars of the contents of an individual pack, while the packing list is a
consolidated statement of the contents of a number of cases or packs.
9. Bill of exchange: The instrument is used in receiving payment from the importer. The
importer may prefer bill of exchange to LC as it does not involve blocking of funds. A bill of
exchange is drawn by the exporter on the importer, to make payment on demand at sight or after
a certain period of time.
Parties to bill of exchange.
1. The drawer: The exporter / person who draws the bill.
2. The drawee: The importer / person on whom the bill is drawn for payment.
3. The payee: The person to whom payment is made, generally, the exporter /
supplier of the goods.

B) Auxiliary Documents: These documents generally form the basic documents based on which
the commercial and or regulatory documents are prepared. These documents also do not have
any fixed formats and the number of such documents will wary according to individual
requirements.
1. Proforma Invoice: The starting point of the export contract is in the form of offer made
by the exporter to the foreign customer. The offer made by the exporter is in the form of a
proforma invoice. It is a quotation given as a reply to purchase order. It normally forms
the basis of all trade transactions.
2. Intimation for Inspection: Whenever the consignment requires the pre-shipment
inspection, necessary application is to be made to the concerned inspection agency for
conducting the inspection and issue of certificate thereof.
3. Declaration of Insurance: Where the contract terms require that the insurance to be
covered by the exporter, the shipper has to give details of the shipment to the insurance
company for necessary insurance cover. The detailed declaration will cover:
 Name of the shipper exporter.
 Name & address of buyer.
 Details of goods such as packages, quantity, value in foreign currency
as well as in Indian Rs. Etc.
 Name of the Vessel Aircraft.
 Value for which insurance to be covered.
4. Application of the Certificate Origin: In case the exporter has to obtain Certificate of
Origin from the concerned authorities, an application has to be made to the concerned
authority with required documents. While the simple invoice copy will do for getting CO
from the chamber of commerce, in respect of obtained the same from the office of the
Textile Committee or Export Promotion Council, the documents requirement are
different.
5. Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship
when the cargo is loaded on the ship. The mate's receipt is a prima facie evidence that
goods are loaded in the vessel. The mate's receipt is first handed over to the Port Trust

Authorities. After making payment of all port dues, the exporter or his agent collects the
mate's receipt from the Port Trust Authorities. The mate's receipt is freely transferable. It
must be handed over to the shipping company in order to get the bill of lading. Bill of
lading is prepared on the basis of the mate's receipt.
Types of Mate's Receipts
 Clean Mate's Receipt: - The Commanding Officer of the ship issues a clean mate's receipt,
if he is satisfied that the goods are packed properly and there is no defect in the packing of
the cargo or package.
 Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualified mate's
receipt, when the goods are not packed properly and the shipping company does not take
any responsibility of damage. To the goods during transit.
Obtaining Mate's Receipt
The goods are then loaded on board the ship for which the Mate or the Captain of the ship
issues Mate's Receipt to the Port Superintendent.
6. Shipping order: it is issued by the Shipping/Conference Line intimating the exporter about the
reservation of space for shipment of cargo which the exporter intends to ship. Details of the
vessel, poet of the shipment, and the date on which the goods are to be shipped are mentioned.
This order enables the exporter to make necessary arrangements for customs clearance and
loading of the goods.
7. Shipping Instructions: at the pre-shipment stage, when the documents are to sent to the CHA
for customs clearance, necessary instructions are to be give with relevance to
 The export promotion scheme under which goods are to be exported.
 Name of the specific vessel on which the goods are to be loaded.
 If goods are to be FCL or LCL.
 If freight amount are to be paid / collected.
 If shipment are covered under A.R.E.-1 procedure.
 Instructions for obtaining Bill of Lading etc.

8. Bank letter for negotiation of documents: at the post shipment stage, the exporter has to
submit the documents to a bank for negotiation or discounting or collection for forwarding the
same to the customer and also for realization of export proceeds. The bank letter is the set of
instruction for the bank as to how to handle the documents by them and by the bank at the
buyer’s country which may include
 Name and address of the buyer.
 Details of various documents being sent and the number of the copies thereof.
 Name and address of the buyer’s bank if available.
 If the documents are sent L/C or on open terms.
 If the proceeds are to adjusted against any pre-shipment packing credit loan.
 If the bill amount is to be adjusted against any forward exchange cover.
 In case of credit bill who has to bear the interest, either exporter or if the same
is to be collected from the buyer.
 Instructions in case non-acceptance/non-payment by the buyer.
C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the
different government departments and bodies in order to comply with various rules and
regulations under the relevant laws governing export trade such as export inspection, foreign
exchange regulation, export trade control, customs, etc. Out of 9 regulatory documents four
have been standardized and aligned. These are shipping bill or bill of export, exchange control
declaration (GR from), export application dock challan or port trust copy of shipping bill and
receipt for payment of port charges.
1. Shipping Bill: Shipping bill is the main customs document, required by the customs
authorities for granting permission for the shipment of goods. The cargo is moved
inside the dock area only after the shipping bill is duly stamped, i.e. certified by the
customs. Shipping bill is normally prepared in five copies :-
 Customs copy.
 Drawback copy.
 Export promotion copy.

 Port trust copy.
 Exporter's copy.
2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central Excise rules
for export of goods. In case goods meant for export are cleared directly from the premises of
a manufacturer, the exporter can avail the facility of exemption from payment of terminal
excise duty. The goods may be cleared for export either under claim for rebate of duty paid
or under bond without payment of duty. In both the events the goods are to be cleared under
form A.R.E-1 which will show the details of the goods being exported, the relevant duty
involved and if the duty is paid or goods being cleared under bond, details of goods being
sealed either by the exporter or Central Excise officials etc.
3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange control
regulations all exporters must declare the details of shipment for monitoring by the Reserve
Bank of India. For this purpose, RBI has prescribed different forms for different types of
shipments like GRI, PP forms etc. These declaration forms must be presented to the customs
officials at the time of passing of export documentation. Under the EDI processing of
shipping bill in the customs, these forms have been dispensed with and a new form SDF has
to be submitted to the customs in the place of above forms.
4. Export Application: this is the application to be made to the customs officials before
shipment of goods. The prescribed form of the application is the Shipping Bill/Bill of
Export. Different types are required for shipment like ex-bond, duty free goods, and dutiable
goods and for export under different export promotion schemes such as claims for duty
drawback etc.
5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken inside the port
for loading, necessary permission has to be obtained for moving the vehicle into the customs
area. This permission is granted by the Port Trust Authority. This document will contain the
detail of the export cargo, name and address of the shippers, lorry number, marks and
number of the packages, driver’s licence details etc.
6. Bank Certificate of Realisation: this is the form prescribed under the Foreign Trade
Policy, wherein the negotiating bank declares the fob value of exports and for the date of

realisation of the export proceeds. This certificate is required for obtaining the benefit under
various schemes and this value of fob is reckoned as fob value of exports.

4.1) SHIPPING AND CUSTOMS FORMALITIES
The shipment of export cargo has to be made with prior permission of, and under the close
supervision of the custom authorities. The goods cannot be loaded on board the ship unless a
formal permission is obtained from the custom authorities. The custom authorities grant this
permission only when it is being satisfied that the goods being exported are of the same type and
value as have been declared by the exporter or his C&F agent, and that the duty has been
properly determined and paid, if any.
The custom procedure can be briefly explained as follows:
 Submission of Documents: The exporter or his agent submits the necessary documents
along with the shipping bill to the Custom House. The documents include:
o ARE-1 (Original and duplicate)
o Excise gate pass (Original and duplicate transporters’ copy
o Proforma Invoice
o Packing List
o GRI form (Original and duplicate)
o Customs Invoice (where required in the importing country)
o Original letter of credit/contract
o Declaration form in triplicate
o Quality Certificate
o Purchase memo
o Labels
o Licenses (if any required) including advance licence copy
o Railway receipt/lorry way bill
o Inspection Certificate by Export Inspection Agency
 Verification of Documents: The Customs Appraiser verifies the documents and
appraises the value of goods. He then makes an endorsement of “Examination Order” on
the duplicate copy of shipping bill regarding the extent of physical examination of the
goods at the docks. All documents are returned back to the agent or exporter, except

o Original Copy of GR to be forwarded to RBI
o Original copy of shipping bill
o One copy of commercial invoice
 Carting Order: The exporter’s agent has to obtain the carting order from the Port Trust
Authorities. Carting Order is the permission to bring the goods inside the docks. The
carting order is issued by the superintendent of Port Trust. Carting Order is issued only
after verifying the endorsement on the duplicate copy of shipping bill. The Carting Order
enables the exporter’s agent to cart goods inside the docks and store them in proper
sheds.
 Storing the Goods in the Sheds: After securing the carting order, the goods are moved
inside the docks. The goods are then stored in the sheds at the docks.
 Examination of Goods: The exporter’s agent then approaches the customs examiner to
examine the goods. The customs examiner examines the cargo and records his report on
the duplicate copy of the shipping bill. The customs examiner then sings the “Let Export
Order”
 Let Export Order: The Let Export Order is then shown to the Customs Preventive
Officer, along with other documents. The CPO is in charge of supervision of loading
operations on the vessel. If CPO finds everything in order, he endorses the duplicate copy
of shipping bill with the “Let Ship Order” This order helps the exporter/shipper to load
the goods on the ship.
 Loading Goods: The goods are then loaded on the ship. The CPO supervises the loading
operations. After loading is completed, the Chief Mate (Cargo Officer) of the ship issues
the “Mate’s Receipt”. The Mate’s Receipt is sent to the Port Trust Office. The C&F agent
pays the port trust dues and collects the mate’s receipt. The C&F agent then approaches
the CPO and gets the certification of shipment of goods on AR Forms and other
documents

 Obtaining Bill of Lading: The Mate’s Receipt is then handed over to the shipping
company (on whose vessel the goods are loaded). The shipping company issues bill of
lading. The Bill of Lading is issued in:
o 3 negotiable copies of Bill of Lading
o 10 to 12 Non-negotiable copies of Bill of Lading.
The negotiable copies have title to goods; whereas non-negotiable copies do not have title to
goods but are used for record purpose.
4.2) PROCEDURE OF EXCISE CLEARANCE:
The common procedure of excise clearance under “bond” and under “rebate” is discussed as
follows:
 Preparing of Invoice: The export goods have to be cleared from the factory under
invoice. The invoice contains details like name of the exporter, value of goods, excise
duty chargeable, etc. The invoice is to be prepared in triplicate. In case of export under
Bond, the invoice should be marked as “For Export without payment of duty”. In
addition to the invoice, a prescribed for ARE 1 has to be filed in by exporter.
 Filling up of ARE-1 form (Annexure-20): The ARE-1 form needs to be filled in four
copies. A fifth (Optional) may be filled in by the exporter, which can be used at the time
of claiming other export incentives. The ARE-1 copies have distinct color for the purpose
of verification and processing.
 Application to Assistant Commissioner of Central Excise (ACCE): The exporter has
to make an application to ACCE regarding the removal of goods from the
factory/warehouse for export purpose.
 Information to Range Superintendent of Central Excise (RSCE): The ACCE will
inform the RSCE under whose jurisdiction the goods are intended to be cleared for
export

 Deputation of Inspector: The RSCE will then depute an inspector to clear the goods,
either at the factory or warehouse, or in certain cases at the port.
 Processing of ARE-1 Form: The Excise Officer/Inspector will make endorsement on all
copies of ARE-1. The handling of ARE-1 Form is done as follows:
o The inspector returns the original and duplicate copies to the exporter
o The triplicate copy is sent to officer (ACCE or Maritime Commissioner (MCCE)
to whom bond was executed or letter of undertaking (LUT) was given. This copy
can also be handed over to the exporter in a tamper proof sealed cover to be
submitted to ACCE/MCCE.
o The 4th
copy will be retained by the excise inspector.
o The 5th
copy is also handed over to the exporter.
o At the time of export, original, duplicate and the 5th
copy (optional) will be
submitted to customs officer. The customs officer will examine these copies and
then export will be allowed.
o The customs officer will then make endorsement of export on all copies of ARE-
1. He will cite shipping bill number and date and other particulars of export on
ARE-1.
o The original copy and quintuplicate (optional) will be returned to the exporter.
The duplicate copy will be sent directly to the ACCEMCCE i.e. excise officer
with whom bond was executed will get 2 copies, one from RSCE (or excise
inspector) when goods are cleared from factory and other Custom Officer after
export. This will enable him to keep track to ensure that all goods cleared from
factory or warehouse without payment of duty are actually exported. In case of
export after payment of duty, under claim of rebate, the basic procedure is same
as above, except that the triplicate copy (by excise inspector) and duplicate
copy(by customs officer)will be sent to the officer to whom rebate claim is filed.
If claim of rebate is by electronic submission, these copies well be sent to excise
rebate audit section at the place of export.
 Refund or Release of Bond: The exporter should make an application to the excise
officer for refund or release of bond. The application must be supported by original copy

of ARE-1 form. The excise officer crosschecks the original copy of ARE-1 form and the
duplicate and triplicate copies of ARE-1 form, which he had received earlier. If the
copies match, then refund is given or the bond is released.
4.3) FACTORY STUFFING OF CARGO
Clearance of goods to docks: If the goods meant for export is of a small quantity which may not
be sufficient to make one full container, the cargo is said to be less than container load (LCL)
cargo. Such cargo has to be taken to the docks where the goods will be consolidated (combining
the cargo of other exporters to make up quantity for a full container) by the agent and loaded into
a container. Here the examination of the cargo is done at the docks.(There are also inland
container depots approved by the customs where the goods can be consolidated and stuffed into
the container by the agent under the supervision of the customs officer)
If the goods meant for export is of sufficient quantity to make up a full container, the exporter
has the option to take the goods to the docks and get them examined and stuffed into a separate
container. An exporter gets the benefit on the freight amount for a full container. (Generally
called box rate)
Alternatively, he can have a container allotted to him and get the same to his Mills Premises. The
goods meant for exports can be stuffed into the container under the supervision of the regional
Central Excise Authority. Here the exporter has to
 Obtain permission from the Customs for getting the container to his mills premises
for stuffing (House Stuffing)
 Inform the C.Excise Authorities at least 24 hours before bringing the container for
loading.
The C.Excise Authority will supervise the loading, seal the container and certify the invoice as
directed in the permission given by the custom authorities. A special Lock is used to lock the
doors of the container. Samples from the goods will be drawn, if necessary, as required under
the customs permission. Such samples will be sealed and forwarded along with the container.
The examiner in the docks may arrange to send the sample for testing.

5.1) METHODS OF RECEIVING PAYMENT AGAINST EXPORTS
Before we proceed to understand the concept of Letter of Credit, let us understand the various
types of payment methods available against export.
METHODS OF PAYMENT
There are five methods of payment depending upon the terms of payment, and each method of
payment involves varying degrees of risks for the exporter. The methods are:
 Payment in advance
 Documentary Bills
 Letter of Credit
 Open Account
 Counter Trade
A. PAYMENT IN ADVANCE
This method does not involve any risk of bad debts, provided entire amount has been received in
advance. At times, a certain per cent is paid in advance, say 50% and the rest on delivery. This
method of payment is desirable when:
 The financial position of the buyer is weak or credit worthiness of the buyer is not
known.
 The economic/ political conditions in the buyer’s country are unstable.
 The seller is not willing to assume credit risk, as un the case of open account method.
However, this is the most unpopular methods as a foreign buyer would not be willing to pay
advance of shipment unless:
 The goods are specifically designed for the customer, and
 There is heavy demand for the goods (a seller’s market situation).
B. DOCUMENTARY BILLS:
Under this method, the exporter agrees to submit the documents to his bank along with the bill of
exchange. The minimum documents required are
 full set of bill of lading
 commercial Invoice

 Marine Insurance policy and other document, if required.
There are two main types of documentary bills:
 Documents against Payment,
 Documents against Acceptance.
Documents against payment (D/P): The documents are released to the importer against
payment. This method indicates that the payment is made against Sight Draft. Necessary
arrangements will have to be made to store the goods, if a delay in payment occurs.
The risk involved that the importer may refuse to accept the documents and to pay against them.
The reason for non-acceptance may be political or commercial ones. In India, ECGC covers
losses arising out of such risks. Under this system, as compared to D/A, the exporter has certain
advantages:
 The document remain in the hands of the bank and the exporter does not lose
possession or the ownership of goods till payment is made,
 Other reason may include that the exporter may not be able to allow credit and wait for
payment.
Documents Against acceptance (D/A): The document are released against acceptance of the
Time Draft i.e. credit allowed for a certain period, say 90 days. However, the exporter need not
wait for payment till bill is met on due date, as he can discount the bill with the negotiating bank
and can avail of funds immediately after shipment of goods.
In case of D/A as compared to D/P bills, the risk involved is much grater, as the importer has
already taken possession of goods which may or may not be in his custody on the maturity date
of the bill. If the importer fails to pay on due date, the exporter, will have to start civil
proceedings to receive his payment, if all other alternatives fails. The risk involved can be
insured with ECGC.
C. LETTER OF CREDIT (L/C):
This method of payment has become the most popular form in recent times, it is more secured as
company to other methods of payment (other than advance payment).
A letter of credit can be defined as “an undertaking by importer’s bank stating that payment will
be made to the exporter if the required documents are presented to the bank within the variety of
the L/C”.

6.1) 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. Buyer also provides the necessary instructions in preparing the document.
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 bank (the Issuing bank) acting at the
request and on the instructions of a customer (the Applicant) or on its own behalf:
1. 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.
2. Authorized another bank to effect such payments or to accept and pay such bills of
exchange (draft).
3. Authorized 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.
6.2) PARTIES TO LETTER 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 payment 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.
 Advising Bank: An Advising Bank provides advice to the beneficiary and takes the
responsibility for sending the documents to the issuing bank and is normally located in the
country of the 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.
 Negotiating Bank: The Negotiating Bank is the bank who negotiates the documents submitted
to them by the beneficiary under the credit either advised through them or restricted to them for
negotiation. On negotiation of the documents they will claim the reimbursement under the credit
and makes the payment to the beneficiary provided the documents submitted are in accordance
with the terms and conditions of the letters of credit.
 Reimbursing Bank: Reimbursing Bank is the bank authorized to honor the reimbursement
claim in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank. It
is normally the bank with which issuing bank has an account from which payment has to be
made.
 Second Beneficiary: Second Beneficiary is the person who represents the first or original
Beneficiary of credit in his absence. In this case, the credits belonging to the original beneficiary
is transferable. The rights of the transferee are subject to terms of transfer.

6.3 TYPES OF LETTER OF CREDIT
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.
2. Irrevocable Letter of Credit L/C: In this case it is not possible to revoke or amended a
credit without the agreement of the issuing bank, the confirming bank, and the
beneficiary. Form an exporter’s 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.
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,
drafts are drawn on the issuing bank or the correspondent bank at specified usance
period. The credit will indicate whether the usance drafts are to be drawn on the issuing
bank or in the case of confirmed credit on the confirming bank.
5. Back to Back Letter of Credit L/C: Back to Back Letter of Credit is also termed as
Countervailing Credit. A credit is known as back to back credit when a L/c is opened
with security of another L/C. A back to back credit which can also be referred as credit
and counter credit is actually a method of financing both sides of a transaction in which a
middleman buys goods from one customer and sells them to another.
6. Transferable Letter of Credit L/C: A transferable documentary credit is a type of credit
under which the first beneficiary which is usually a middleman may request the
nominated bank to transfer credit in whole or in part to the second beneficiary.

7.1) PREPARATION AND SUBMISSION OF DOCUMENTS FOR BANK
NEGOTTIATION /PURCHASE
Document against exports should normally be realized through an authorized dealer foreign
exchange. However payment of export can be received directly from the overseas buyer in the
form of bank draft, pay order, banker’s cheque, personal cheque foreign currency notes, foreign
currency traveler’s cheque, etc. Without any monetary limit provided the exporter’s track record
is good, he is a customer of the authorized dealers through whom documents are to be negotiated
and prima facie the instrument of payment represents export proceeds realization. Take care to
submit various documents in a proper manner and within the prescribed time schedule. Apply to
the Reserve Bank for extension of time in case you feel there is likely to be a delay in realizing
export proceeds.
The following are the steps in realizing export proceeds:
 Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter
should approach his bank (authorized dealer) with a formal request to realize sale
proceeds from the foreign buyer. It is obligatory to submit the shipping documents to an
authorized dealer within 21 days of the date of shipment (subject to certain exceptions).
In India, the exporters have to realize the full value of exports within 180 days from the
date of shipment, (unless the payment terms offered are “deferred payment terms”).
Where it is not possible to realize the sale proceeds within the prescribed period, the
exporter should apply for extension in prescribed form ETX (in duplicate) to RBI.
 Submission of Documents to the Bank: The exporter should submit the following
documents
o Bill of Exchange
o Full set of Bill of Lading
o Commercial Invoice Copies
o Certificate of Origin
o Insurance Policy
o Inspection Certificate

o Packing List
o GR (duplicate copy to forward it to RBI)
o Bank Certificate
o Other relevant documents.
The above documents need to be submitted in two complete sets, because it is customary to
dispatch two sets of documents, one after the other. This is because, if one set is misplaced or
delayed in transit, the importer can get at least the other set and clear the goods.
 Verification of Documents: The bank will verify the documents to find
o Whether the required documents are in order.
o Whether the required documents are attested by customs and other authorities.
 Letter of Indemnity: If the exporter wants immediate payment from his bankers, then his
bankers may provide advance payment only when the exporter signs an indemnity letter.
The implications of an indemnity letter is that in the event of refusal of payment by the
issuing bank in respect of LC, then the negotiating bank can ask the exporter to pay back
the money advanced along with necessary charges.
 Discounting of bills: the bank may discount or negotiate the bills drawn against LC, and
make immediate payment to the exporter, if so required.
 Dispatch of documents: before the submission of documents for negotiation/collection,
the bank examines them thoroughly with reference to the terms and conditions of the
buyer’s order. Letter of credit and the laws relating to foreign exchange control. If any
scrutiny, the documents are in order, the bank dispatches them to its overseas
branch/correspondent branch as early as possible. The overseas branch of the bank then
submits the document to the importer’s bank, and the importer’s bank hands it over to the
importer.

7.2) SHIPMENT THROUGH COURIERS
In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under the
courier imports or exporters (clearance) Regulation Act, 1998.
These regulations shall apply for clearance of goods carried by authorized courier on outgoing
flights on behalf of exports. Consigner for a commercial consideration.
Export Terms & conditions:
Export of any item can be affected by courier, except the following.
 Goods which are subject to cess.
 Goods proposed to be exported with claim of duly drawback.
 Goods proposed to be exported under DEPB, EPCG, AL (Advance License)
 Where the value of goods is more than Rs. 25,0000/-
 Goods where weight of individual packet is more than 32 kg.

8.1) THE ECGC COVER
The abbreviated form for Export Credit and Guarantee Corporation is ECGC. As the name
indicates this is a sort of guarantee or a sort of cover for the exporter. Let us now see what this is
all about.
Needless to say that an exporter before entering into a contract with the overseas buyer for
making any supply, takes care to ensure that the customer with whom he is dealing have some
credit worthiness. This he may be able to do either through the local agent who is in a better
position to know about the customer or through a bank or through any of the exporter’s
associates if happens to be in the area of the customer etc., But, in a business things may change.
The financial status of a customer may take drastic turn and an established customer may go
bankrupt within a short period of time.
Moreover, the buyer may be willing to make the payment, but there is other environment which
prevents him from affecting the transfer of funds through the bank. For e.g., there could be
break out of war, the balance of payment position of the country may become unfavorable, there
may be some coup of the government etc., and all transactions could be sealed.
These are the risk factors for the exporters. What is the guarantee that he will get paid for the
supplies he has made?
With a view to provide support to Indian exporters, the Govt. of India set up the Export Risk
Insurance Corporation (ERIC) in 1957. This was transformed into Export Credit & Guarantee
Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus the name was again
changed to Export Credit & Guarantee Corporation of India Ltd., in 1983. This is a company
wholly owned by the Govt. of India and functions under the administrative control of the
Ministry of Commerce and managed by the Board of Directors representing Government,
Banking, Insurance, Trade, Industry etc.
Though one may insist for a Letter of Credit, still there could be some elements of risk which we
will study later here. Except getting an advance payment for the full value of the supplies, any
other mode of payment will have some risk.

Take the case of an exporter who has made supplies and before the payment is received the
buyer goes bankrupt or there comes some new provision or policy of Government of the
importing country preventing repatriation of the funds to other countries what recourse the
exporter has to recover his dues. The litigation procedure might be time consuming and the
exporter can never be sure of getting his full payment. An ECGC cover a safeguard his interest to
a great extent.
An exporter can either agree for sight payment or can made shipment on credit terms for say 60
days, 90 days etc., in project exports the period of payment may extend to some years. Longer
the period of cre3dit given to the customer, more will be the risk factor for the exporter.
In respect of sight bill, there is almost no risk because the customer has to make payment first
before he retires the documents. Therefore, before the title of the goods is passed on to the
customer, the importer makes the3 payment. However, in respect of usance bill (credit bills) the
buyer retires the documents by accepting the usance draft and takes delivery of the goods. In
case the customer goes bankrupt or become insolvent, before the due date of payment, the
exporter is totally at a loss. While big units may be able to absorb the onetime loss, small
exporters will get broke even with one such transaction. Here the ECGC comes into picture. It
takes up the responsibility of paying the funds to the exporter and makes all efforts including
legal proceedings to recover the dues from the customer, provided the exporter has taken an
ECGC cover.
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 the form of equity or loan

How does ECGC help exporters?
 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
Need for export credit insurance
Payments for exports are open to risks even at the best of times. The risks have assumed large
proportions today due to the far-reaching political and economic changes that are sweeping the
world. An outbreak of war or civil war may block or delay payment for goods exported. A coup
or an insurrection may also bring about the same result. Economic difficulties or balance of
payment problems may lead a country to impose restrictions on either import of certain goods or
on transfer of payments for goods imported. In addition, the exporters have to face commercial
risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer
going bankrupt or losing his capacity to pay are aggravated due to the political and economic
uncertainties. Export credit insurance is designed to protect exporters from the consequences of
the payment risks, both political and commercial, and to enable them to expand their overseas
business without fear of loss.

REFERENCE
 www.eastmanimpex.com
 www.eastmanauto.in
 www.wikipidia.com
 www.eximguru.com
 www.foreign-trade.com
 www.thedti.gov.za
 www.cargaaerea.com
 www.investopedia.com
 www.ecgcindia.com

Export Import And Documentation Project Report

More Related Content

What's hot (20)

Viewers also liked (20)

Similar to Export Import And Documentation Project Report (20)

Recently uploaded (20)

Export Import And Documentation Project Report