SP ITDOC MOD 1

Friday, April 28, 2023 Prepared by Sudhir Pasricha 1

Course Code : MBA 365

Course Title : International Trade Procedures & Documentation

Credit units : 03

INTERNATIONAL BUSINESS – MBA TRIM 3



Learning Objectives:

Learning the importance and procedural & documentation aspects of export-import of goods and services ;

Knowledge of governments, departments, international institutions involved ;

How an Export Manager to develop a systematic methodology to handle exports ;

Understand the relevance and importance of various government policy measures for export as well as import.



Module I: Introduction

Export documentation Framework – the need, entities & documents as per requirement of

(a) the contract

(b) Govt. of India

(c) Importing country

(d) for claiming export assistance.

Course Contents


International Trade Procedures & Documentation

To carry out International Trade , International managers are required to follow a certain set of procedures

and deal with wide range of docs.

Exporter needs to comply with rules, regulations & trade customs of both exporting & importing countries

and needs to assure himself that of receiving timely payment.

Importer needs to ensure that he timely receives the imported cargo in good condition as they cargo is

Exposed to a no. of risk factors such as damage , fire , loss & maritime damage due to perils of voyage.

International Trade transaction chain consists of a no. of entities that form an integral part of entire system.


Export – Import Procedures

Compliance with Legal Framework

Each country has its own legal framework for export-import trxns wich need to complied with by those entering into Intn’l trade.

For executing export order exporter needs to interact with No. of Govt regulatory & other agencies in both exporting & importing countries such as Govt agencies under M/o Trade, Commerce & Industry like :

Exporting county’s principal agency governing Intn’l Tarde – Eg. DGFT, M/o Commerce & Trade

Central bank of country e.g RBI

Inspection Agencies,

Insurance cos.

Customs & central excise

Banking institutions,

Port Trusts

Chambers of Commerce

Export Promotion Council Clearing & forwarding (C&F) agents , Shipping cos., Airlines, Carriers for inland transportation


Obtaining Import Export Code Number (IEC)

Mandatory for every exporter to hold a valid IEC for exporting or importing goods from India w/o which

customs dep't shall not permit ex-im transaction. IEC can be obtained from Regional Authority (RA) under DGFT.

IEC no. needs to be mentioned in various International Trade docs including shipping bill or bill of entry & is also

required for Forex declaration forms such as Guaranteed Remittance (GR) forms to be submitted to the negotiating

bank.

Registration with Sales tax & Central Excise Authorities

Goods shipped out of the country are generally eligible for exemption from the state’s sales tax , central sales tax, &

central excise duties. Indian exporters are required to get themselves regd .with sales Tax authority.

Both mfr & merchant exporter have the option to deposit central excise duty at the time of taking the goods

out of the factory & avail refund later or take out the goods under a bond to the central excise authority w/o paying

duty.

Once the central excise authorities receive the proof of shipment , including Bills of Lading (B/L), shipping bill & ARE-

1/ARE-2 form , exporter’s running a/c is credited.



Registration with Export Promotion Council

Exporter required to register with EPC relating to main line of biz for availing benefits under (FTP) Foreign Trade

policy.

Application for registration needs to be accompanied by Self certified IEC No. issued by the Regional Authority

Besides Export Promotion Councils, registration authorities include :

MPEDA -

APEDA - Commodity Boards such as :

Tea Board

Coffee Board

Spices Board

Jute Commissioner

KVIC –

Development Commissioners of SEZs

FIEO - Export House or Trading House need to be registered with FIEO

Export Promotion Agencies issue a Registration-cum Membership Certificate valid for 5 years.

Exporters are required to submit regular export returns to the registration agency.



Export Procedure Flow Chart


Concluding an export deal/contract

Arranging export finance Procuring / Mfg. of Goods Appointing C/f agent

Arranging cargo insurance Booking shipping space

Sending docs. to C&F agent Sending goods to C&F at port

Receipt of goods & cargo by C&F agent

Customs clearnce , completion of port formalities & cargo loading by C&F agent

Sending of docs. to the exporter by C&F agent

Sending shipping advice to the importer

Claiming export incentives Presenting of docs to the negotiating bank

Receiving export incentives Exporter receives payment


Step 1:In the case of first time exporters , Importers ,they need to apply to the Director General of Foreign Trade (DGFT) regional office for getting Importer Exporter Code (IEC) Number

Step 2The exporter has to register with the concerned export promotion council in order to obtain various permissible benefits given by the government. ,they need to get registered with sales tax office, and even Export Credit Guarantee Corporation.

Step 3The exporter can now go in for procuring orders, by first sending a sample, if required. The importer sends a purchase order once both exporter and importer have agreed upon the terms and conditions of the contract like pricing, documents, freight charges, currency etc.

Step 4With export order in hand, the exporter starts manufacturing goods or buying them from other manufacturers.

Step 5The exporter makes arrangements for quality control and obtains a certificate confirming the quality of the goods from inspector of quality control.

Step 6Exportables are then dispatched to ports/airports for transit

STEPS INVOLVED IN EXPORT TRANSACTION


Step 7The export firm has to apply to an insurance company for marine/air insurance cover.(The exporter asks the importer to take marine/ air insurance under cost and freight , free on board etc., terms of contract.)

Step 8The exporter contacts the clearing and forwarding agent (C & F) for storing the goods in warehouses. A document called Shipping Bill, required for allowing shipment by Customs Authority is presented by the forwarding agent.

Step 9Once the goods are loaded into the ship , a receipt called ‘Mate’s Receipt ‘ is issued by the captain to the ship superintendent of the port.

Step 10The superintendent calculates port charges and handover to the exporter /C&F agent.

Step 11After making the port payments , the C&F agent or exporter gets the Bills of Lading or Airway Bill from the official agent of the shipping company or the airline

Step 12The exporter applies to the relevant Chamber of Commerce for obtaining Certificate of Origin, stating that the goods originated from India



Step 13

The exporter sends a set of documents to the importers, stating the date of shipment, name of vessel, etc.

Step 14

Within 21 days after shipment the exporter must present all the documents at his bank which scrutinizes

these documents against the original letter of credit /purchase order.

Step 15

The exporter’s bank sends these documents to the importer’s bank which should make the payment on of

before the due date.



Concluding an Export Deal / Contract

Recommended that exporters conclude & comply with the written contract rather than relying on verbal agreement to avoid future disputes. Substantial amount of exports from India in case of gems, jewelery , Garments, handicrafts, handloom etc. are carried out w/o written contract.

W/o written contract ‘constructed contract’ comes into existence inferred from relevant docs . Viz., emails, Fax, telex, proforma invoice, L/c, commercial inv. Etc. – all such docs preserved by the exporter carefully.

Flow Chart for Concluding Export Deal

Identify & Negotiate with Importer

Confirm the Export Deal

Receive the Export Order /Contract

Examine thoroughly & ask for Amendments, if any

Receive Letter of Credit

Scrutinize thoroughly, compare with terms of contract, ask for amendments , if reqrd

Receive amended letter of credit




Soon after the shipment, the exporter files for getting export incentives/ assistance for :

1. Claiming Excise Rebate

Exporter or the C&F Agent files claim with Maritime Commissioner of Central Excise in the port town

for getting refund of the excise duty paid or getting credit in the Personal Ledger A/c (PLA) &

getting discharge of bond liabilities. Duplicate copy ARE-1/ ARE -2 certified by customs & a non-

negotiable copy of bill of lading or shipping bill are the only docs. required for this.

2 Receiving Duty Drawback

Exporter has to file duty drawback claim with the drawback dep't of customs by submitting draw back

claim proforma, bank or customs certified copy of commercial invoice & non negotiable copy of bills

of lading . After examining the exporter’s claim , the duty drawback claim amount is sent to exporter’s

bank under intimation to him.

Claiming Export Assistance


Proforma Invoice

Proforma Invoice, as the name suggests ,is a proforma of the invoice. It is prepared by an exporter and sent to the importer for necessary acceptance. It suggests to a buyer what the actual invoice would look like and is sent to him when he is ready to purchase the goods.

Packing List

This statement gives the packing details of goods in a prescribed format. It is a very useful document for customs at the time of examination and for warehouse keeper of the buyer to maintain a record of inventory and to effect delivery.

Commercial Invoice

An invoice is very important as it contains the names of the exporter, importer, and the consignee, and the description of goods. It has to be signed by the exporter. Other documents are prepared by deriving information from the invoice. It is required to be presented before different authorities for different purposes.

Certificate of Origin

This certificate issued by the local Chamber of Commerce indicates that the goods, which are being exported, are actually manufactured in a specific country mentioned therein. It is sent by the exporter to the importer and is useful for the clearance of the goods from the customs authority of the importing country.

COMMON EXPORT - IMPORT DOCUMENTATION



Generalized System of Preference Certificate of Origin

It indicates that the goods being exported have originated/ manufactured in a particular country and is mainly useful for taking advantage of a preferential duty concession ,if available. It is issued by government authorized agencies like The Directorate General of Foreign Trade and its regional offices, Development Commissioners, Export Promotion Councils etc.

Shipping Bill/Bill of Entry

It is a requisite for seeking the permission of customs to export goods .It contains a description of export goods by sea/air. It contains a description of export goods, number and kind of packages, shipping marks, and number numbers, value of goods, the name of the vessel, the country of destination ,etc.

On the other hand, importers have to submit copies of document called Bill of Entry for customs clearance. Later, a copy has to be given to the bank for verification.

ARE-1 Form

This form is an application for the removal of excisable goods from the factory premises for export purposes. The ARE-1 form has multiple copies which are distributed to different authorities, including Customs, Range office of Excise, Refund office of Excise , etc.

Exchange Declaration Form (GR/SDF Form)

The RBI has prescribed has prescribed a GR form (SDF) , a PP form, and SOFTEX forms to declare the export transactions. The GR form contains:


a) Name and address of the exporter and description of goods.b) Name and address of the authorized dealer through whom proceeds of the exports have been or will be realized.c) Details of commission and discount due to foreign agent or buyer.d) The full export value, giving break up of FOB, Freight, Insurance, Discount , and Commission ,etc.

Bills of ExchangeIt is an instrument in writing, containing an order ,signed by the maker , directing a certain person to pay a certain sum of money only to the order of a person to the bearer of the instrument. It is commonly known as a draft.

Inspection CertificateIt is required by some importers and countries in order to get the specifications of the goods shipped attested. The attestation is usually performed by a government agency or by independent testing organizations.

Bill of LadingThis document is issued by the shipping company acknowledging the receipt of the goods mentioned in the bill, for shipment on board of the vessel. The B/L is the legal document to be referred in case of any dispute over the shipment. It contains :

The shipping company’s name and address The consignee’s name and address The port of loading and port of discharge Shipping marks and particulars Number of packages and the goods Gross weight and net weight Freight details and name of the vessel Signature of the shipping company’s agent



Airway Bill

This receipt issued by an airlines company or its agent for carriage of goods is a contract between the owner of

the goods and the carrier. It should indicate freight pre-paid or freight to collect. The first three digits of the

Airway Bill Number represents the code, which identifies the carrier.

Insurance Certificate

This document ,obtained from the freight forwarder , is used to assure the consignee that insurance will cover

the loss or damage to the cargo during transit (marine/air insurance).

Consular Invoice

This invoice is needed to be submitted for certification to the embassy of the country concerned .Its main

purpose is to enable the importer’s country to collect accurate and authenticated information about the value,

volume, quantity, source etc. of the import for assessing import duties and for statistical purposes. It helps the

importer to get goods cleared through customs without any undue delay.



End of Module 1

Thank You !!

Documents

SP ITDOC MOD 1