Export Import Procedure Documentation

CONTENTS
Unit Contents Page No.
Unit – I: Introduction.
1 • Meaning and Importance of International Trade. 1-9
• Meaning, Definition and Significance of Export and Import.
Unit – II: Regulations for Export and Import.

• Obtaining an I.E.C. number.
• Foreign Trade (Development and Regulation) Act.
2 • Foreign Exchange Management Act (FEMA). 10-23
• Pre-Shipment inspection and Quality Control Act and their importance.
• Exchange control manual.
• Foreign Trade Policy.
Unit – III: Export Import Contracts.

• Meaning of Export Import Contract.
3 24-29
• Elements of Export Import Contract.
• FOB and CIF Contract.
Unit – IV: EXIM procedures.

• Export procedure – Registration Stage.
• Pre shipment inspection.
• Sales post Shipment Stage.
4 • Quality Control and Pre shipment Inspection. 30-42
• Sales Tax Exemption.
• Excise Clearance.
• Shipping and Custom Formalities.
• Marine Insurance.
“Only for Private Circulation”

Unit – V: EXIM Documentations and International Logistics.
• Commercial Documents.
• Principal Export Documents – Commercial Invoice, Packing list, Bill of
Landing, Combined transport document, Certificate of Quality Control,
Insurance Certificate, Certificate of Origin, Bills of exchange and Shipment
advice.
5 43-69
• Auxiliary documents – Pro forma Invoice, Intimation for Inspection, Ship
ping Instructions, Insurance Declaration, Shipping Order, Certificate of
Origin, Letter of Bank.
• Logistics – Clearance of goods against B/L and AWB, Aims and Objective
of International trade and logistics.
• Organizations of overseas transport service.

EXPORT IMPORT
PROCEDURE
UNIT - I
DOCUMENTATION
INTRODUCTION
NOTES
Why international trade?

Now-a-days competition is increasing in the international market. It is not
possible for a particular to produce every type of products and services at required
cost. Factors of production i.e. labour; capital and raw material are not same in
each and every country. The countries are feeling pressure of economic
production it means production should be done while achieving economies of
scale. Every country has its own speciality when it comes to production of goods
or services. It can be said that international trade is needed by the countries to
effectively distribute the pressure of production, resources of production and cost
of production. Without shared production, it will be difficult for a country to
achieve consistent growth.
Definition of international trade

International trade is defined as the necessary and effective exchange of
goods and services between the nations for balanced growth of world economy.
The key participants in international trade are different countries using different
types of currencies and following rules and regulations of their particular country.
International trade is complex because every country has its own rules and
regulations. It can also be seen as trade between the residents of different nations.
International trade is for both commodities as well as services. Commonly
traded commodities are clothes, machine equipment, raw materials, food stuff
and shoes etc. while commonly traded services are banking, insurance, education,
transportation and tourism etc.
Domestic and international trade

Domestic trade can also be referred as internal trade. It is the trade between
the regions or state of same country while international trade is the trade between
two different countries. For example, if two traders from Punjab and Haryana
are involved in trading, it is called domestic or internal trade. While trading
between Indian and UK or India and China will be termed as international trade.
There are some similarities and dissimilarities between domestic and
international trade. Similarities between domestic and international trade are
mentioned below.
• Both domestic and international trade are based on specialization of
production.
Introduction 1

EXPORT IMPORT • While doing domestic or international trade, the traders always think
PROCEDURE about gain and losses.
DOCUMENTATION
• While in domestic trade or international trade, two parties and two
NOTES commodities are required. There is also a need of determination of
relative pricing.
• Research and development is important element of both international and
domestic. In both domestic and international trade research helps to
generate new products and services required to satisfy customers.
Differences between domestic and international trade

• Difference in currencies- When two regions of same country are
involved in trading, than there is no currency difference occurs between
them because internal or domestic trade involve same currency. For
example, when two traders from Delhi and Punjab are involved in trading
they will only deal in Indian rupees. While if India and US will involve
in international trading than there will be two different types of currencies
i.e. Indian rupees and US dollar will be involved. It will also lead to
foreign exchange risks.
• Difference in policies- When two countries are involved in international
trade than difference in government policies will affect their trading. For
example, India and China have different types of government. In India
democracy is followed while in China communist party is ruling. The
difference in government also affects trading between the nations. While
in internal or domestic trading government policies don’t affect much.
• Difference in factors of production- When two countries involve in
international trading, then factors of production can also made an impact
on their business. For example, India can be rich in certain type of natural
resources while US can be rich in other type of natural resources. In a
diverse country like India factors of production can also differ between
states or regions but it doesn’t make a huge impact on trading.
• Difference in culture- When two parties are involved in international
trading, culture difference can also affect the trading between them. The
cultural activities, etiquettes and business behaviour are completely
different in India and USA. When two traders are involved in domestic
or internal trade than cultural difference doesn’t matter because both the
traders are not going beyond the geographical boundaries of their nation.
• Trade restrictions- When two countries are involved in international
trading, it can be called export or import of goods. Trade restrictions such
as quotas and import duties can affect the international trade while
internal trade or domestic trade can’t be affected by trade restrictions.
2 Introduction

Importance of international trade EXPORT IMPORT
PROCEDURE
Today we are living in the world where words like globalization,
DOCUMENTATION
industrialization, global outsourcing, export and import are very much common.
International trade is playing an important role in fulfilling the meaning of all NOTES
the modern business words exist in the business. International trade helps in
almost all the sectors which affect the economy of the country.
• Many countries are facing the problem of poverty and unemployment.
International trade boost the economic development of such countries
and provide new opportunities of investment. International trade works
like oxygen for such countries.
• International trade also increase the competition between domestic and
international producer. It forces domestic manufacturer to produce better
quality products so that customers can prefer them over other products.
• International trade also develops new market and new production
possibilities. It is helpful for countries like India and China which are
trending as emerging economies of the world.
• As international trade brings new production possibilities, it will also
initiate the chances of creativity and innovation for a particular country.
The exchange of technology and labour helps in bringing more
innovation for a particular country.
• International trade opens the opportunity for more prolific business
activities hence the business expansion automatically occurs when trade
occurs between the countries.
• International trade brings more options for the customers. Customers
have different number of national and international products to choose
their particular product. For some products, international trade also lower
down the prices.
• International trade brings every country in active mode because the nation
needs to contribute its part in global trade. It improves the quality of
labour, product and customer services worldwide. The organizations also
start practicing new technology because the managers need to establish
communication with outside world.
• International trade also improves the relationship between the countries
because the countries involved in business maintain peace and harmony
among them. Their dependency on each other improves their relationship.
• International trade also saves the cost of the government because there
are many products and services which are costly in one country, those
products and services can be imported from other country.
Introduction 3

EXPORT IMPORT Advantages of international trade
PROCEDURE
Following are the advantages of international trade.
DOCUMENTATION
a. Income generation- Income generation is always a concern for the
NOTES
organizations. The international trade provides an opportunity to the
organizations and countries to generate more foreign exchange. That
foreign exchange can help in paying off the cost of imports from
abroad.
b. Growth and employment- International trade fasten up the process
of economic growth for the nation because it increases the potential
investment and add quality to the manufacturers. The international
trade has converted the whole world into market and in that market
employment opportunities are increasing.
c. Improved standard of living- International trade also helps the
countries in improving their life standard because when people of the
country have better employment opportunities, they have better
spending power as well. People have more payment options for
investment and it will help them in improving their life standard.
d. Promotes new technology- International trade promotes sharing of
technology and labour between the countries. New technology is
required for increasing the competitiveness and profitability of the
organization. If the technology can help an organization in creating a
product at a faster pace than it will automatically helps that
organization in achieving economies of scale too.
e. Diversity- International trade promotes diversity at the organizational
level because new ideas have been shared from different regions of
the world and those ideas have been implemented for the betterment
and profitability of the organization.
f. Creativity and innovation- All types of organizations whether big or
small are facing the pressure of competition. The international trading
helps the organizations in bringing new creativity and innovation
because technology sharing and labour sharing fills the bucket of
organizations with new ideas.
Disadvantages of international trade

The international trading is not only offering advantages to the countries
but also disadvantages. The followings are the disadvantages of international
trade.
a. Competition can kill novel industries- As international trade increase
the competition for domestic manufacturers; it can create pressure on
the new baby manufacturers. New manufacturers can’t compete with
experienced international traders; this can be a big threat for their
existence.
4 Introduction

b. Secrecy and information flow- International trade is based on the EXPORT IMPORT
principle of sharing knowledge, experience and resources with other PROCEDURE
countries. It is difficult to maintain secrecy when information flow is DOCUMENTATION
so easy between the countries. The confidential information can be NOTES
leaked out easily in foreign market.
c. Cultural identity issues- Licensing and franchising are also part of
international trading. When new brands from international market
come into a domestic market, it can create challenge for cultural
identity. For example, many researchers are claiming that it is not
globalization, it is Americanization of products and services because
consumers are adopting more American products and services.
For example, In India many companies like McDonalds, Coca-Cola,
and Starbucks are selling products and services which symbolize
American culture and values.
d. Threat for environment- While doing international trading,
international traders ignore the environment rules and regulations
formed by the authorities. Ignoring environmental regulations can be
dangerous for the society in longer term.
e. Many employees can also lose their job if more efficient technology
comes in the market and that technology has been shared among the
organizations in different country. For example, now-a-days
organizations are working on artificial intelligence technology which
can cost many jobs around the world.
Exercise
1. Why international trade is needed in modern business era?
2. Explain the scope and importance of international trade.
3. Define international trade and its importance for the nations.
4. State the differences between domestic and international trade.
5. What are the similarities between domestic and international trade?
6. Explain the advantages and disadvantages of international trade?
7. India is an emerging economy and developing country. State the
importance of international trade from the perspective of India.
Exporting-Importing
Meaning of import
In the previous section, we have talked about international trade. In this
section, we will talk about the key components of international trade. Import and
export are key components of international trade. Import means buying products
or services from another country for our own country. If India is purchasing any
number of goods and services from US or UK it has been considered as import. Introduction 5

EXPORT IMPORT Import should be in limited amount because excess of import can be a reason for
PROCEDURE trade deficit in balance of trade of a country.
DOCUMENTATION
NOTES Features of import

A product or service has been produced in another country and purchased
by home country.
A country can’t import all types of goods of services. It is advisable for a
country to import only those goods or services which are costly to produce inside
the country.
While importing goods and services, the country and organizations of that
country should take care of the domestic manufacturers. A country should not
import such goods which the domestic manufacturers are able to produce
otherwise such import can be harmful for those manufacturers.
Meaning of export
Export is another key component of international trade. Import of a home
country is export for a foreign country. Export can be defined as the good and
services produced in a country have been sold to another country. It is important
for a country to increase its exports so that balance of trade can lead towards
surplus and more foreign reserves can come to the country.
Why countries export

Export defines the potential of a particular country in terms of production
power of that country. If a country can export more number of goods it means
that country is more independent and it has competitive advantage over other
countries. Exporting set the tone for the country because it generates more
revenues. Exporting can increase sales and profits if a country is exporting good
number of products and services.
Features of export
Export can be seen as the old form of economic transfer and it is occurring
since ancient times.
Exporting helps a particular country in exploring new markets and thereafter
country can increase its sales and profits.
If a company is exporting more number of products and services, it is
exposed to high degree of foreign exchange risks.
Significance of importing and exporting

In this era of globalization, the whole world is converted into a market. It
doesn’t matter whether a country is big or small, developed or developing or
underdeveloped, superpower or emerging economy. No country can be self-
sufficient. Each and every country needs import or export from other country in
the form of raw materials or finished products. Export and import provide
6 Introduction

opportunity to every country whether it is small or big to participate in the world’s EXPORT IMPORT
economy. Creativity and innovation is needed in the current scenario. Export and PROCEDURE
import management can provide opportunity to a country to know about products DOCUMENTATION
and services preference of another country and accordingly they can change their NOTES
manufacturing practices. Exporting and importing is important because it is
improving the country’s economy. The loss of country A can be gain for
country B.
Export and import provide opportunity to countries to share their cultural
preferences with other. For example, when importer and exporter of India and
USA deal with each other in international market, it is an opportunity to share
their culture also. When an exporter starts selling products or services in another
home country, exporter is bound to customize products and services as per
demands of local residents.
Trade performance of India

India is a developing country and India’s merchandise export is showing
growth sign. The merchandise export of India has shown a Compound Annual
Growth Rate of 7.09 % from April 2009-10 to April 2018-19
(DepartmentofCommerce, 2019). Similarly the import value of India has also
increased. In April-Mar 2018-19, India’s import was equivalent to US $ 507.44
in comparison to US $ 465.68 of last year (DepartmentofCommerce, 2019).
The top commodities exported by India are petroleum products, pearls,
precious stones, drugs, gold jewellery and iron and steel etc. The top commodities
imported in India are crude oil, gold, pearl, coal, coke and petroleum products
etc. India is mainly exporting to United State of America, United Arab Emirates,
China, Hong Kong, Singapore etc. India is majorly importing from China, United
State of America, Saudi Arab and Iraq etc.
The major concern for India is that, India is still allowing more imports
rather than doing equivalent export. In the world India is 10th largest importer
but 19th largest exporter. In 1991 India has adopted liberalization, privatization
and globalization because the trade deficit increased a lot. Trade deficit increases
when a country do more imports rather than exports. Indian is a growing
economy and if India wants to come in the category of developed economy than
it should increase its exports rather than increasing trade deficit through imports.
The increase number of exports will bring more foreign reserves in India and it
will help in the economic growth of the country.
Advantages of export
• Exporting can increase the sales potential of the country. If the country
will focus more on exporting, it will improve the vision and increase the
manufacturing power of the country because they need to satisfy the
customer needs and demand outside their home country.
Introduction 7

EXPORT IMPORT • Exporting gives the opportunity to sell products and services not only in
PROCEDURE domestic market but also in foreign market. It can be said that exporting
DOCUMENTATION can be considered good for increasing the profits of the company and the
NOTES country.
• If the government is doing more exports rather than import it will surplus
the balance of trade of the country. That nation’s reputation also emerges
well in the foreign market.
• Exporting can also enhance the research and development power of the
country because when an exporter produces for outside consumers, it
requires lot of research and development.
• Exporting also reduces the vulnerability of the country or organization
located in that country. It means even if the product or service is not
appreciated in the home country, the foreign country can provide new set
of opportunities.
• Exporting increases the product life cycle because in one market product
or service can be in saturation phase but other market can provide
excellent growth options.
• Exporting increase the creativity and innovation power of the
manufacturer.
Disadvantages of export
• More time and money- It is not easy to sell product in external market.
It needs investment of more time and money to create foreign market.
Normally the pay-back period is also high in foreign market so the
exporter needs to take care about that.
• More competition- When a domestic manufacturer enters in foreign
market, it should be ready to face tough competition. It requires special
efforts to survive in foreign market.
• Product customization- An exporter should always be ready for product
customization because every country has its own culture. In order to
satisfy the culture needs and expectations, product customization is
required.
• Chances of foreign exchange risks- Exporting also increase the chances
of foreign exchange risks because exporter always receives payment in
foreign currency. The fluctuations in foreign exchange can affect the
overall purchase.
Advantages of import
• In certain conditions importing increase the profit margin. There can be
a situation when the taxes are high and material cost is high in the home
country. In that situation importing can be a good option because
8 Introduction

importing from the country where fees, wages and taxes are low can EXPORT IMPORT
increase the profit margin. PROCEDURE
DOCUMENTATION
• Importing also leads to better quality of products because it is not easy
for domestic manufacturers to create quality products in every segment. NOTES
In that situation importing can help the country to deliver better products
and services to customers.
• It is possible to attract government assisted trade through importing.
• Successful importing helps in availability of all types of goods in the
country. Those goods have been produced at higher cost or can’t be
produced at all
• Importing also increase the efficiency of local producers in the home
country because when the foreign products come in home country, it will
lead to technology and labour sharing
Disadvantages of import
The first and foremost disadvantage of importing is that excess of importing
can be dangerous of nascent industries or newly born manufacturers because
these manufacturers will face tough competition from outsiders
Excess of importing can also put nation’s balance of trade in deficit position.
The dependency on other nations increase and it is harmful for the economic
health of the country
Importing can also reduce the amount of foreign currency in the country
because foreign currency went outside country while purchasing goods or
services from foreign countries.
Importing can also leads to proper erosion of domestic market.
Exercise
1. Explain the meaning and scope of importing.
2. Explain the meaning and scope of exporting.
3. What is the significance of exporting and importing in international
trading? State the example of India in reference.
4. What are the key advantages of importing and exporting for a country?
*****
Introduction 9

EXPORT IMPORT
PROCEDURE
UNIT - II
DOCUMENTATION
REGULATIONS FOR EXPORT

NOTES
AND IMPORT
IEC number
The abbreviation IEC stands for “IMPORTER EXPORTER CODE
NUMBER”. Importer-exporter code number has been mentioned section-7 of
Foreign Trade (Development and Regulation) Act, 1992. Any individual who
wants to involve in import and export requires IEC number. IEC number is a
unique 10 digit code issued by Director General of Foreign Trade on the
application of importer-exporter. IEC number has been granted by Director
General or any other officer designated by Director General. Director General
of the officer deputed by Director General can only grant IEC if proper specified
procedure has been followed.
Any type of bonafide individual or company looking for international trade
needs to go for IEC number. However few categories are exempted from IEC
number. These categories are mentioned below.
a. Importers under clause 3(1) and exporters under clause 3(2) as per
Foreign Trade Order, 1993
b. Central government, state government or ministries
c. If an individual is importing or exporting for personal use than he/she
not require IEC number
d. Fourth category is about individuals importing or exporting goods to
and from Nepal/ Myanmar through Indo-Myanmar border areas and
China following Gunji, Namgaya Shipkila and Nathula Ports. The CIF
(cost, insurance and freight) value of single consignment should not
exceed INR 25,000. If the importer or exporter has chosen Nathula
port than upper ceiling value should not exceed one lakh Indian rupees.
e. There are certain types of commodities which are exempted from IEC
number. The import-export of special chemicals, organisms, materials
and equipment and technologies are exempted from IEC number.
Regulations for
Export
10 and Import

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES
Procedure for obtaining IEC number

Importer exporter code number is available through both offline and online
mode. In DGFT website, the applicant needs to download APPENDICS &
AAYAT NIRYAT FORM. It is also called ANF2A form.
Mandatory documents required for IEC number are mentioned below
a. PAN number
b. Current Bank Account
c. Bankers Certificate
d. Application Fees: INR 500 (It can be paid through demand draft/bank
receipt or Electronic Fund Transfer)
e. Applicants can email but it is not mandatory. Email will fasten up the
process.
Final checklist of documents for IEC number

1. Covering letter on company’s letter head for IEC number
2. Two copies of Aayaat Niryaat Form ANF2A (Submitted at regional
DGFT office)
3. All the pages of application should be signed by applicant
4. If the individual is submitting application online, than Part 1 & Part 4
should be filled by applicants
5. Relevant portions of Part 2 should be filled
6. Fee receipt of INR 500 (Appendix 21B)
7. Banker applicant form (Appendix 18A)
8. Self certified copy of PAN number
9. Two copies of passport size photographs (Attested by banker)
10. Self addressed envelope (With INR 25/- postal stamp for registered
post of IEC number or INR 100/- postal stamp for speed post)
The normal processing time for IEC number is two days while cancellation
can take fifteen days.
• Duplicate IEC- If IEC number is lost or misplaced; the individual or Regulations for
Export
company can apply for duplicate IEC number along with an affidavit.
and Import 11

EXPORT IMPORT Stamp paper of INR 100/- duly notarized and application fees of INR
PROCEDURE 200/- for affidavit.
DOCUMENTATION
• Surrender of IEC number- IEC holder can also surrender his/her allotted
NOTES IEC number. He/she can surrender by calling issuing authorities. After
receiving intimation, issuing authorities cancel IEC number and inform
the same to Customs and Regional Authorities.
Foreign Trade (Development and Regulation) Act, 1992

In 1991, Indian balance of trade condition was adverse as India has
continuously facing trade deficit. Indian government has adopted privatization,
liberalization and globalization to boost its economic growth. Indian government
also enacted Foreign Trade (Development and Regulation) Act on 7th August
1992. Foreign Trade Act was not the first Act which was regulating the foreign
policy of India. Foreign Trade Act was seen as a replacement of Import and
Export, Control Act, 1947. With the introduction of FTA, Government of India
has the power to control the economic policy. This act was accomplishing all the
foreign trade happening in India. In the previous act central government has not
given all the powers. But this act has given all the power to central government
related to foreign trade. The government can formulate any provision or policy
related to import or export in the country.
Main features of Foreign Trade Act, 1992

The main features are mentioned below.
• Under this act all the powers have been rested with central government
regarding the development and regulation of foreign trade policy. Foreign
trade policy was established keeping in mind about import and exports
of the country.
• The government has all the power to formulate and announce the export-
import policy and keep track of it on timely basis.
• The government of India has also given power to restrict, prohibit or stop
export and import in both general and specified cases.
• Director General is important for formulating and regulation import and
export policy of the country. Under this act, the appointment of Director-
General was also under the discretion of central government.
• The act has provided the directions to importers and exporters to generate
IEC number from Director General by putting application to regional
DGFT.
• This act provides the necessary balancing of all the budgetary targets
related to imports and exports of the country which help the nation in its
economic development. The major objectives in this act were facilitation
Regulations for of continuous growth as to the exports of the country, the distribution of
Export appropriate goods and services to the domestic consumer at competitive
12 and Import

prices all around country, Indian agriculture and technical EXPORT IMPORT
competitiveness have also take care so that India can meet the demand PROCEDURE
of global market outside. DOCUMENTATION
• This act was taking care of the current scenario of export and import with NOTES
the intervention of central government.
The section 11 to 14 of Foreign Trade Development and Regulation Act,
1992 came into existence in June,1992. Certain definitions were given under
different sections.
• In section 13, “Adjudicating Authority” which means the authority
specified in or under has been defined.
• The definition of Appellate Authority has been specified in subsection
(1) under section 15.
• In this act, the conveyance means any vehicle, transport or aircraft used.
It can be any animal too.
• Director General here refers to Director General of Foreign Trade and it
comes under section 6.
• IEC number has been defined under section 7 of FTDA.
• Under license category a license to import and export which also includes
a custom clearance permission has been provided
• Order has been defined in section 3 by Central Government
Section 3 talks about powers

These are such powers which make provisions for imports and exports.
Central government may publish in official Gazette about regulations of foreign
trade. There will be discussion on facilitating imports and increasing exports
Provision for prohibiting and restricting certain trade commodities will also
be discussed
Section 4 – It relates to the continuance of existing orders

All the orders under Export and Import Act, 1947 will continue to be in
force under section 4 and shall be deemed to have made under this act.
Section 5- Export and Import policy

This section covers export and import policy. From time to time, central
government will make and amend export and import policy.
Section 6- Appointment of Director General

Under this section, first central government appoint any person as Director
General of Foreign Trade and afterwards Director General of Foreign Trade will
formulate the export and import policy. Regulations for
Export
and Import 13

EXPORT IMPORT Section 7- Importer-Exporter Code number
PROCEDURE
DOCUMENTATION In this section, no person can make any import or export without proper
IEC code number. That code number will be granted by Director General.
NOTES
Section 8- This section deals with suspension and cancellation of IEC
number
Under certain circumstances there will be suspension or cancellation of IEC
number, the first such circumstance is contravention of any law related to central
excise or customs or foreign exchange.
If IEC of any person got cancelled, he/she can deal with foreign trade only
after obtaining a special license from Director General of Foreign Trade.
Section 9- This section deals with issue, suspension, and cancellation of

license
Under this section, Director General will scrutinize the application for issue,
renewal or any other issue related to refuse the grant of license.
Section 10- This section provides power relating to search and seizure
Under this section controller general authorize a person to enter premise,
search or inspect the documents.
Section 12- Deals with penalty and confiscation

Under this section, there is a discussion that any type of penalty or
confiscation is not to interfere with other punishment. The penalty which will be
imposed under this act will not prevent the imposition of any other punishment.
Section 13- In section 13, adjudicating authority will adjudge the penalty
or confiscation.
Section 14- It is about giving opportunity to the owner of goods about
representation on writing and information on grounds.
Section 15- This section provides power to appeal- There may be a case
that a person is not satisfy with the decision made by adjudicating authority. That
person can appeal against any such decision in Appellate authority.
Section 16- Revision, under this section the record of any proceedings
should be checked for its correctness, legality, or any other propriety of such
decision. The decisions should be made within 2 years from the date of order.
Section 17- Powers of adjudicating and other authorities – The authority
which is making adjudication or hearing any type of appeal have all the powers
which rest with civil court under court of civil procedure,
• Summon and enforce the attendance of witnesses
• Require discovery and production of any document
Regulations for • Any public record or copy can be requested from the court or office
Export
14 and Import • Receive evidence on affidavits

Foreign Exchange Management Act (FEMA) EXPORT IMPORT
PROCEDURE
Foreign Exchange Management Act was formulated by Government of
DOCUMENTATION
India in 1999 to encourage the external payment and cross border trade in India.
FEMA was a replacement of FERA Act (Foreign Exchange Regulation Act) NOTES
which was followed earlier by Indian government. FEMA Act came into force
on 1st June 2000. FEMA Act was soft and liberal in comparison to FERA Act.
The aim of FEMA Act was to boost economic trade and investment in India.
FERA Act was more stringent and India was looking to felicitate international
trading after enactment of liberalization, privatization and globalization. The
orderly management of foreign exchange market was possible after enactment
of FEMA Act. FEMA was less complex in comparison to FERA. There were 81
sections in FERA Act but FEMA came up only with 49 sections. FEMA was
more flexible in nature and violation of FEMA Act has been considered as civil
offense while violation of FERA Act was considered as criminal offense.
Objectives of FEMA
• To utilize foreign exchange resources of the country effectively
• To facilitate international trade, payment and overall management of
foreign exchange in India
• This act was applicable to all parts of the India
• This act was also applicable to branches and offices located outside India
and controlled by the individual who was the resident of India
• This flexible act helped in maintaining good relationship with other
countries
Applicability of FEMA Act

a. FEMA Act was applicable throughout the India and to the branches
located outside owned by Indian resident.
b. Person, Person Resident in India and Person Resident outside India
were covered in FEMA Act.
c. Export, foreign currency, foreign exchange, import, security and
transfer were covered under FEMA Act.
If we see broader perspective, FEMA is applicable to whole of India. FEMA
was also applicable outside India for any branch, office or agency if that branch
or office has been owned by a person who is resident of India. As mentioned
above FEMA covers three different categories, Person, Person Resident in India
and Person Resident Outside India.
Who comes under the category of Person in FEMA?

It can be an individual, an undivided family of Hindu, any association of
Regulations for
person, a company, firm, agency or branch office.
Export
and Import 15

EXPORT IMPORT Person residents of India talks about the person who has been residing in
PROCEDURE India for more than 182 days in the last financial year, any office or branch which
DOCUMENTATION is owned by an Indian even the branch office or agency situated outside but
NOTES owned by the person who are resident of India.
Person resident outside India is “a person who is not resident in India”.
Provisions in Section 3
This section prohibits any dealing in the foreign exchange if it is not through
any authorized person. The authorized person is free to deal in foreign exchange.
The authorized person can make any payment to or for the credit of any person
who is residing outside India.
Section 4
This section stops or restrains any person who is the resident of India from
acquiring, holding or possessing any foreign exchange or security situated outside
India.
Section 5
The section 5 of FEMA argues that a person may sell or draw foreign
exchange to and from an authorized person if such sale is current account
transaction.
Section 6
Similar to section 5, this section allows a person to draw or sell a foreign
exchange from or to an authorized person for a capital account transaction.
Section 7
This section deals with exports of goods and services. In this section
exporter is required to furnish to RBI or any other authority equivalent to the full
export value.
Section 8 & 9
Both sections 8&9 deals with the persons who are resident of India and have
any amount of foreign exchange due or accrued to get realized.
Section 10 & 12
Both sections 10 & 12 deals with duties and liabilities of authorized persons,
money charger and authorized dealers. They are authorized dealers to deal in
foreign exchange of foreign securities for the time being.
An authorized person has to fulfil certain duties. It is the duty of authorized
person to comply with the directions of Reserve Bank of India. He/she should
Regulations for not engage in any unauthorized transactions. All the FEMA provisions should
Export be taken in compliance while transaction.
16 and Import

There are certain penalties also in FEMA act. As per section 13, FEMA EXPORT IMPORT
invite different types of penalties. If there is any amount for which offense is in PROCEDURE
quantities, then penalty will can be thrice the sum involved in contravention. If DOCUMENTATION
it is difficult to quantify the amount than the penalty may be imposed up-to two NOTES
lakh rupees. The penalty is not restricted to only rupees, it can also extend to any
currency, money or other property involved during contravention can be
confiscated.
Section 14
This section details that if a person is failed to make full payment of penalty
within 90 days than he shall be liable for civil imprisonment.
Section 15
This section empowers the Directorate of Enforcement and Officers of
Reserve Bank of India as may be authorized by Central Government to
compound the offenses.
Section 16
This section gives flexibility to the central government to appoint many
adjudicating authorities as it may fit for holding the enquiries on the cases.
Section 17
This section empowers the central government to appoint to appoint special
directors for hearing the appeals against orders of adjudicating authorities.
Section 18
This section provides empowerment to Central Government to establish
Appellate Tribunal. That Appellate Tribunal will hear the appeal against the
orders of adjudicating authorities.
Major Provisions of FEMA Act (1999)

• The current account transactions should be free there can be some
reasonable restrictions
• Reserve Bank of India will control all the capital account transactions
• There should be control over realisation of export proceeds
• Directorate of enforcement
• If a person is selling or drawing foreign exchange without prior
permission to Reserve Bank of India, he/she can inform RBI later
• FEMA violation will be dealt as civil offense
• FEMA Act was focussing on management but FERA Act was about
exchange control or regulation Regulations for
Export
• FEMA Act only permits authorized persons to deal in foreign exchange. and Import 17

EXPORT IMPORT Pre-Shipment Inspection and quality control
PROCEDURE
It is not advisable to export newly manufactured products or services
DOCUMENTATION
directly to the foreign country. It is the prime responsibility and duty of trade
NOTES operators (exporters and importers) to inspect newly manufactured material
before shipping. The pre-shipment inspection is required because:
• To keep a check on the quantity and quality required by merchandise
• To check the defects in products if any
• Every destination has its own safety requirement. To check the safety
requirement as per destination port, pre-shipment inspection is needed
• For billing purpose, pre-shipment inspection is required
Following are three methods of pre-shipment inspection

1. Consignment-wise inspection
2. In-process quality control
3. Self- certification
Consignment-wise inspection
As name suggest, in consignment wise inspection, each consignment has
been tested in packed condition. In this process, each package has been tested
on statistical sampling plan. On the basis of inspection if goods satisfy the
technical inspection, a certificate has been issued for export of the goods with a
validity period. The procedure for consignment wise inspection has been written
below.
I. Application to EIA- The first step is application to EIA in which
exporter writes to Export Inspection Agency for ‘Intimation of
Inspection’ with all the documents. The documents included are copy
of export contract, letter of credit, packaging specification, commercial
invoice based on FOB value of export consignment, DD in favour of
inspection agency and declaration about technical specifications.
II. Deputation of inspector- After receipt of application, Export
Inspection Agency, deputes an inspector who will go and check the
consignment at exporter’s factory or warehouse.
III. Inspection and testing- It is up-to the choice of inspector, he/se can
check the consignment on random basis or as per his/her convenience.
Finally inspector submits his report based on inspection of goods and
services.
IV. Packaging and sealing of goods- Once the inspector is satisfied with
the quality of goods, he issued order for packaging of goods. The
consignment is marked with seal of Export Inspection Agency.
Regulations for
Export
18 and Import

V. Submission of report- Once the inspector submit satisfactory report EXPORT IMPORT
than Deputy Director of Export Inspection Agency issue the PROCEDURE
satisfactory inspection certificate to the exporter for further process. DOCUMENTATION
VI. Rejection note- If the report is not satisfactory than deputy director NOTES
issue a rejection note.
VII. Appeal against rejection note- Exporter always has a choice to file
appeal against rejection note to deputy director of EIA.
In-process quality control

It is not mandatory for organizations to go for quality check after
manufacturing of whole consignment. Manufacturers can also apply for in-
process quality control. In this process, the manufacturers continuously check
the product while it has been manufactured. The various stage of production
when checking done is mentioned below:
• Purchase of raw material and other components required for production
• Process control
• Production control
• Packaging control
There is panel who investigates the production from raw material till final
packaging. Once the panel is satisfied, “export-worthy” status has been provided
to the manufacturer. After getting the export-worthy status, the manufacturer
manufactures the required stock.
Self-certification
Self-certification is not for all types of manufacturing units. It is only for
those manufacturing units which have proven record for quality production.
Those manufacturing units can self-certify their production. Once the unit has
given the self-certification, the goods are ready for exporting. The condition for
self-certification is that the unit should not have any proven record of poor quality
in last three years. The manufacturing unit has been tested for product quality,
design, development, raw materials, process, laboratory, equipments, and
packaging and after sales services etc.
Quality Control
Quality control is a process through which business officials assures that
product quality is as per specification of the buyer and errors have been
eliminated. Quality control enhances the zeal in both management and workers
to look for perfection in their production department. Employees or workers set
their own bench mark for product quality and test products on different types of
statistical variations. Proper training of employees is necessary so that they will
maintain the required quality of product. The education level needs to be Regulations for
increased as well. Export
and Import 19

EXPORT IMPORT It is advisable for both the parties’ importer as well as exporter to look after
PROCEDURE the necessary controls. Those control mechanism also helps in standardization
DOCUMENTATION of production process and overcoming all the quality issues. In this way the
NOTES probability of errors can be minimized and employees should also motivate
towards quality production.
Importance of pre-shipment and quality control act

The pre-shipment inspection and quality control is important because of the
following reasons.
• The quality control and pre-shipment inspection lowers down the cost of
trader because there can be a possibility that goods have some defect and
same goods have been transported along the sea. So quality control can
help in identifying those defects.
• There can be a possibility that the importers have ordered for certain type
of electronics but in actual when delivery of electronics arrived 40% of
the goods have found defected. Importer requires rework or repairs. If
proper quality control and pre-inspection have been done then such
situation could have been avoided easily.
• The proper quality control inspection also helps in getting more satisfied
customers. The customers got the desired quantity and quality as expected
by them. It improves their satisfaction level.
• Quality control and pre-shipment inspection reduces the unnecessary
delay in the production. While doing the necessary inspection during the
in-process stage, the inspectors can check for unnecessary delay in
various stages. Inspectors can also communicate to the production team
about the defects in production process.
• While doing inspection of raw material, the producer is able to find out
which supplier is supplying quality raw material and who is providing
defected raw material. The potential suppliers can be identified and those
suppliers will be used for future purchasing.
• The proper inspection and quality control help in maintaining harmonious
relationship between importer-exporter. If importer will understand its
responsibility and check all the equipments at primarily stage, they will
deliver the better product and it will reduce the unnecessary tension in
the minds of exporter. In the result, their relationship will increase.
Exchange Control Manual

The key points regarding exchange control manual are mentioned below:
• The statutory basis for exchange control manual is Foreign Exchange
Regulation (Amendment) Act, 1993.
Regulations for
• Earlier all the rules and other notifications introduced by central
Export
20 and Import government were according to FERA Act introduced in 1973 but later on

all such rules and notifications have been amended as per new act in EXPORT IMPORT
1993. PROCEDURE
DOCUMENTATION
• The key discussions in exchange control manual in on purchase and sale
of foreign exchange, how to realise proceeds of exports, payment options NOTES
for residents and non-residents of India, foreign travel with different types
of foreign exchange, discussion on export and imports, currencies,
cheques and other payment options, how to set up branches outside India
and payment options, discussion on acquisition and holding by Indian
nationals outside India and foreign people in India
• Authorized dealers have given the powers of foreign exchange for the
convenience of people. Authorization of currency exchange have been
also provided to banks.
• Cooperative and commercial banks were also authorized for foreign
exchange
• Authorized money changers were also categorized as full-fledged money
changers and restricted money changers. They were also involved in both
buying and selling of foreign currency and facilitating foreign exchange.
• All the rights of giving grants and taking grants of authorization rests
with Reserve Bank of India. It is under power of RBI to discontinue any
authorization of the authorized dealer.
• The various instructions from RBI have been given to Authorized dealers
in the form for A.D. circulars.
• All the authorized dealers were expected to exercise their powers within
the limit prescribed in the manual given by Reserve Bank of India, they
need to fulfil certain conditions mentioned in the manual.
• Proper marking of all the documents should be done by authorized
dealers if they are using such documents for any purpose that purpose
can be remittance to the non -residents or any other etc.
• There was different jurisdiction set for each state and in case of any
dispute, the matter to be sorted in those jurisdictions only.
• The restrictions on foreign exchange dealing are also described in the
exchange control manual. Only authorized dealers were permitted for
transactions. No other person, company or firm will be involved in any
such transaction.
• The rupee transfer to the correspondent of any authorized dealer or their
non-resident branch can be stopped immediately by RBI if any breach
of regulations has been found.
• It is permitted to employ the brokers but those brokers should follow the
regulations mentioned in exchange control manual Regulations for
Export
and Import 21

EXPORT IMPORT • All the transactions and foreign exchange will be in compliance with laws
PROCEDURE otherwise the provision of penalty has been mentioned in the exchange
DOCUMENTATION control manual.
NOTES
Foreign trade policy
India is an important member of global business community. India is one
of leading emerging economy of the world. Foreign trade policy is important for
India because its foreign trade policy can made a significant impact on the
investments around the world. Foreign trade policy has been amended every five
year. The current foreign trade policy is for year 2015-20. The Ministry of
Commerce and Industry, Government of India has formulated India’s foreign
trade policy 2015-20 on 1st April’2015.
Foreign trade policy helps in appropriate distribution of labour, stable
pricing and proper consumer advantage. A balanced foreign trade policy helps
in stable demand and supply situation. The stable balance of trade is helpful in
stability of pricing as well. The importers and exporters are looking for optimum
allocation and utilization of resources. A balanced foreign trade policy is helpful
in achieving economies of scale by optimum utilization.
Objectives of foreign trade policy of India

• To improve sustainable growth of imports and exports in India, it will
help balanced economical growth
• To reduce any type of deficit in balance of trade
• To improve the merchandise trade of India with outside world
• To expand trade activities, it will help in generating more employment
opportunities for the citizens of India
• To improve the technological capacity and access to raw materials for
the international dealers dealing in import-export market
• To explore all the opportunities available in outside world market related
to import and export
• The world is adopting internet and technology in business, the
formulation of policies should support e-business
• To reduce any type of hurdles in import and export of commodities
Important highlights of India’s foreign trade policy (2015-2020)

• India will become a key member or important participant in world trade
by 2020
• Two important schemes announced in India’s foreign trade policy (2015-
20) are “Merchandise Exports from India Scheme” and “Service Exports
Regulations for from India Scheme”
Export
22 and Import

• The main objective of “Service Exports from India Scheme” is to help EXPORT IMPORT
all types of service exporters in India. PROCEDURE
DOCUMENTATION
• “Make-in-India” programme is another key highlight of foreign trade
policy of India. India is looking to increase its exports and improve NOTES
manufacturing sector returns from international market.
• MEIS and SEIS should be subscribed with duty credit scrips as the goods
under these scrips will be fully transferable
• Different types of rate of rewards should be provided under MEIS and
SEIS scheme
• The government is focussing more on the exports of defence and hi-
technology items
• The government is also emphasizing on e-commerce based business. E-
commerce based exports of handloom products, books, toys, footwear
and other fashion products should also get benefit of MEIS scheme if the
value of goods is up-to INR 25,000/-
• More focus on digitisation and business growth of small-medium
enterprises in India. A cluster of 108 MSMEs have been identified for
boosting exports
Exercise
1. Explain the meaning and significance of IEC number for international
traders.
2. What are the necessary documents required for obtaining IEC number?
3. Explain the Foreign Trade (Development and Regulation) Act.
4. What are three methods of pre-shipment and quality control
inspection?
5. Write short notes:
FEMA Act
Foreign Trade Policy of India (2015-20)
*****
Regulations for
Export
and Import 23

EXPORT IMPORT
PROCEDURE
UNIT - III
DOCUMENTATION
EXPORT IMPORT CONTRACTS

NOTES
Export contract
In international trading, export contract is used for international sale of some
specific products like raw materials, semi-finished manufactured goods etc.
These products are applicable for resale, where buyer is trader. In this case
importer or the distributor needs to sell the products to other company. The
exporters use such contracts not for repetitive selling of products rather export
contracts are used for one time sale of the products. In export contract both seller
and buyer are the companies. Export contract gives direction to both buyer and
seller because it includes details about quantity ordered, price per unit of quantity
ordered, delivery conditions, payment terms and the documents need to be
submitted etc.
Essential elements of export import contract

• Name and addresses of the parties- The export and import contract
should clearly define the name, affiliation and address of both the parties.
• Product or goods specifications-Another important feature is to describe
the specifications of products or goods manufactured or transported. The
specifications should be clearly mentioned. The technical details of
products and buyers requirement should also be mentioned
• Quantity of products- The quantity of products should be specified both
in words and figures.
• Inspection procedure- As mentioned above pre-shipment and quality
inspection is needed before transit the products from one port to another.
The clear details about inspection agencies and quality control should be
mentioned.
• Contract value- The total contract value should be specified for the
transit of products
• Delivery terms- The delivery terms should be clearly mentioned.
Incoterms 1990 can be helpful in explaining delivery terms.
• Types of taxes and charges- All types of taxes and charges should be
clearly mentioned in export-import contract. The different types of levies
should also be mentioned.
• Delivery details- All the delivery details should be mentioned so that no
Export Import dilemma will be there. The delivery can start from the date of running
24 Contracts

the contract or from the date of issue of irrevocable letter of credit etc. EXPORT IMPORT
The place of delivery should also be specified PROCEDURE
DOCUMENTATION
• Part-shipment, trans-shipment and consolidation of cargo- The
contract should clearly about the shipment details. It can be trans- NOTES
shipment or part-shipment. The scheme on consolidation of cargos should
also be mentioned.
• Packaging, labelling and marking- The necessary packaging, labelling
and marking details should also be mentioned in contract.
• Payment terms and mode of delivery- All the payment terms should
be clearly stated in export-import contract. The payment mode and
delivery details should also be mentioned and the necessary fluctuations
should be recorded.
• Discounts and commissions- All the documents and commissions
should also be mentioned in the export-import contract. These details will
be helpful for both parties.
• Licenses and permits- The import and export transactions should also
required different types of licenses and permits. The details about those
licenses and permits should be mentioned.
• Insurance coverage- The contract should also cover details about
insurance against any type of loss or damage during transportation or any
such destruction. The type of coverage should also be mentioned.
• Documentary requirements- Documents needed for international trade
transactions fall into four categories:
- The documents required for import and export of goods
- The documents required by buyer for taking the delivery of goods
- The documents required for essential payments.
- Any special documents required as per nature or specialisation
of goods
• Product guarantee- All types of guarantee and warrantee related to
products
• Delay in delivery- What action will be taken if there will be delay in
delivery of products?
• Remedial action- In case any default occurs, the remedial action should
be mentioned in export-import contract.
• Applicable law- The law of the country should be clearly stated. Which
law to be followed as per export and import contract?
• Arbitration- The place of arbitration for clearing all the disputes between
both the parties
Export Import
Contracts 25

EXPORT IMPORT • Signature of the parties- The contract should have signature of both
PROCEDURE importer and exporters as per terms and conditions.
DOCUMENTATION
NOTES Import contract

When two companies are involved in business, one company is ready to
buy goods from another company. For example, if company A and B are involved
in business and company A is buying certain goods from company B. Company
A is termed as importer here. Both companies A and B can’t do business until
they have set standard of rules and regulations. Import contract is required in this
situation. Import contract set out the necessary terms and conditions required for
purchasing between company A and B. The import contracts include terms of
delivery, price, payment, contracting, packaging and inspection details,
confidentiality, inspection and insurance details etc.
Terms related to import and export contract on payment methods

Irrevocable letter of credit
What we understood by the name of Irrevocable letter of credit? Irrevocable
letter of credit can’t be withdrawn by the opening bank without the consent of
the beneficiary. This is secure method of payment as it relates to consent of
beneficiary.
Remittance
There are different types of remittance. Three different types of remittance
include mail transfer, telegraphic transfer and demand draft. While doing
payment through mail transfer, buyer handover the payment of goods to the
remitting bank thereafter remitting bank authorize its branch bank in the country
of beneficiary with the help of mail to make payment.
Telegraphic Transfer
In the telegraphic transfer, the buyer will handover the payment of goods
to the remitting bank as done in the case of mail transfer. Afterwards the remitting
bank inform its branch bank in the country of beneficiary to make payment
through telegraphic transfer. Telegraphic transfer is less costly in comparison to
mail transfer and saves time as well.
Demand draft is also an option for buyer to make payment. In this case seller
receive information about buyer’s payment through mail and thereafter the seller
designated someone for banker’s bank for cash.
Documentary Collection
D/P at sight- Under this category, the seller has the flexibility to draw or
not to draw a draft on buyer. Once he handover the shipping documents with or
without draft to the collecting bank, they can present it to buyer and ask the buyer
for payment at sight. At sight, buyer makes the payment and get the shipping
documents. After finishing the collection, the collecting notifies the same to
Export Import
remitting bank which further make payment to the seller.
26 Contracts

D/P at n (number of days) after the sight – In this category, the buyer accepts EXPORT IMPORT
the payment draft drawn by the seller at n (number of days) sight upon first PROCEDURE
presentation and make payment after on the maturity period. DOCUMENTATION
NOTES
Documents against acceptance
This is the case in which timely draft has been interchanged. In this buyer
get the shipping document from collecting bank after the bank has duly accepted
the draft. This option is risk prone for the seller.
What arise to risk in this situation? It can happen that buyer refused to pay
the amount once he got the draft and take the delivery of the goods. There is an
option that seller can go for legal action i.e. sue the buyer, in that case buyer can
claim bankruptcy. It will again be risky situation for seller
FOB Contract
It can be called as Free on Board contract or Freight on Board contract. The
main purpose of Free on Board contract is related to the insurance or risk
measurement of the goods. It can be of two types. FOB at the time of shipping
the goods and FOB at the time of receiving goods at destination. Free on Board
at shipping point means buyer will be responsible for risk as the seller has shipped
the goods in good condition while Free on Board at destination point means seller
will avail the risk till the time goods reached at the location of buyer. Accountants
are interested in FOB contract because this contract helps them in determining
the transaction of sales in company account books.
Different terms used in FOB contract are mentioned below
FOB at shipping point- In this buyer will avail all the risks for the shipping
of goods.
FOB at destination point- In this seller will avail all the risks for shipping
the goods until it reaches to its destined authority.
Freight paid- It is the cost paid by seller for shipping of goods.
Freight collected- It is the cost paid by buyer for shipping of goods.
Example
Rijul’s company purchase 10,000 buckets from XYZ. Ltd. Rijul pays the
shipping cost and the buckets are shipped FOB XYZ LTD. On the way to Rijul’s
store, the container carrying buckets meets with an accident that damages the
whole consignment. Rijul tries to sue XYZ Ltd. but he cannot because the
responsibility has already passed to him as soon as the buckets were loaded on
the container. Now take the case of FOB Destination. Here, Rijul can sue XYZ
Ltd and ask for the replacement of the damaged buckets because the title of the
goods throughout the travel will rests with the XYZ LTD. It is the responsibility
of XYZ Ltd. to deliver the buckets in safe manner.
Export Import
Contracts 27

EXPORT IMPORT Free on Board can be of three types
PROCEDURE
1. Classical or Strict Free on Board
DOCUMENTATION
2. Free on Board contract in which buyer contracting with carrier
NOTES
3. Free on Board with additional service
CIF contract
It is called as cost, insurance and freight contract. The CIF contract explains
what the seller should procure for his buyer and what buyer is paying for. CIF is
the expense paid by the seller which covers the costs, insurance and freight of
the buyer’s order while the goods are shipped from shipment location to
destination location. Till the time all the goods are loaded in transport ship, seller
bears all the cost of damage. After the loading of goods on ship, the responsibility
lies with the buyer.
• It is the most common method of trade shipping.
• This method helps in determining how responsibility of goods transfers
from buyer side to seller side.
CIF is a traditional method for shipping of goods by importers. Somewhere,
it is same as free on board shipping with some difference being about the party
who is responsible for the expenses up to the point of loading the product onto
the transport ship. The responsibilities of seller’s include:
• Purchasing the license for export of products
• It also covers the costs and contract of moving the goods
• Insurance cover for protection of the goods
• Necessary inspection for the products
• It also covers the cost of damage or destruction of goods
Difference between CIF and FOB contract

The responsibility of the goods during transit differentiates CIF and FOB
contracts. Mainly the nature of FOB and CIF differentiates it. In CIF contracts,
insurance and other necessary costs bear by the seller, all the liability and costs
associated during the transit period paid by the seller up till the time goods
reached the buyer. The seller’s responsibilities include the transportation of goods
to nearest port, load them into the vessel and pay for insurance and freight. In
certain conditions, goods are not considered to be delivered when those goods
reach to destination port until those goods actually reach to the buyer’s side; in
other condition, the goods are considered delivered when those goods reach
destination port and afterwards it is buyer’s responsibility.
Each type of agreement has its own merits and demerits for both buyer and
seller. On one hand sellers always prefer FOB on other hand buyers prefer CIF
Export Import contract. It also depends upon the nature of trade agreements which type of
28 Contracts

contract should be chosen either CIF or FOB contract. If the seller has expertise EXPORT IMPORT
in local customs then that seller would likely to go for CIF contract to encourage PROCEDURE
the buyer and go forward with it. In case two companies are dealing, one is small- DOCUMENTATION
medium type and other is large multinational, small company will always prefer NOTES
large multinational to take the responsibility because it will lower down the cost.
“Some companies also have special access through custom department, document
freight charges when calculating taxation, and other needs that necessitate a
particular shipping agreement.”
Exercise
1. What do you mean by export and import contracts?
2. How export and import contracts differ in nature and scope?
3. What are essential elements of export contract?
4. How FOB contract differs from CIF contract?
5. Write short note-
FOB contract
CIF contract
*****
Export Import
Contracts 29

EXPORT IMPORT
PROCEDURE
UNIT – IV
DOCUMENTATION
EXPORT PROCEDURE
NOTES
4.0 INTRODUCTION
4.1 Objectives
4.2 Export Procedure –Registration Stage
4.2.1Registration Stages (e-IEC)
4.2.2Post Shipment Procedure
4.3 Pre-shipment Inspection and Quality Control
4.4 Sales Tax Exemption and Central Excise (Now GST)
4.5 Shipping and Custom Formalities
4.6 Marine Insurance
4.7 Summary
4.8 Exercise
4.1. OBJECTIVES
After studying this chapter, students shall be able to

• Understand the pre-shipment and post-shipment export procedure.
• Understand the custom clearance formalities.
• Familiarize with the marine insurance and its role in International trade.
4.2. EXPORT PROCEDURE -REGISTRATION
Export procedure consists of numerous commercial and regulatory

formalities which must be performed by an exporter during export trade
transactions. Such formalities take time and requires considerable amount of
paperwork. It has been noted that the complexity in the procedures will have
adverse effect of trade. Government of India has been consistently working to
30 Export Procedur

simplify and ease out the procedures to promote trade. It has been reported that EXPORT IMPORT
if the number of procedures are more and takes more number of days for PROCEDURE
compliance then in that case it will adversely affect the ease of doing business in DOCUMENTATION
specific country. As a result Government of India has been doing consistent NOTES
efforts to reduce the compliance, procedures and number of days for various
registrations. Moreover, the procedures are shifting towards online modes which
includes availing importer exporter code number (e-IEC), filing the certificate
of origin through online as well as filing of shipping bill through online mode.
Banking Industry has also been able to provide the copy of bank realization
certificate (e-BRC) through online mode as per the foreign trade policy 2015-
20. We would further like to mention here that licence for exports is synonymous
with taking e-IEC which is essential to conduct either of business that is exports
or imports. Though, there are certain exceptions to availing e-IEC, notable
amongst them are the cabinet and state ministers, embassies of various countries
stationed in India, importing goods subject to custom baggage rules etc.
We will address the preliminary phases of establishing export business
(Registration Stage). In addition to other appropriate registrations needed to set
up an export company, we shall cover the e-(IEC) procedure in registration
stages.
4.2.1. Registration Stage
Registration with Reserve Bank of India (RBI)

RBI was the authority for the issuance of the import export code until 1997
and was later taken up by DGFT (Director General of Foreign Trade) as the
authority for issues.
Export Procedur 31

EXPORT IMPORT Registration with Director General of Foreign Trade (DGFT)
PROCEDURE
DGFT is the authority to issue and change the code number of the importer
DOCUMENTATION
to both the new and current exporters / importers. IEC is a ten digit number and
NOTES the PAN card is the IEC number according to new developments. Application
for an IEC number can be sent to DGFT's nearest regional authority. In order to
file for importer exporter code number, applicant is required to use the portal of
DGFT through its website: http:/dgft.gov.in. Moreover, as per the latest circular
the requirement of PAN card as well as the digital signature has been
dispense with.
One IEC is only issued against a single PAN number. Applicants are also
expected to apply their (copy of cheque) bank account number, in addition to the
PAN number. Price for IEC licence is Rs 500/- that can be charged online.
IEC Procedure
Importer-Exporter Code Number (lEC No.): IEC Code is special 10 digit
code issued to Indian Companies by DGFT – Directorate-General for Foreign
Trade, Ministry of Commerce and Government of India. IEC Code is "Importer
Export Code" IEC Code is mandatory to import or export into India. This number
of IEC is alphanumeric and if required then modifications in the address, branch
etc could be done by filing the application through online mode. Without an IEC
code number, no individual or organization can make any import or export. The
changes in the e-IEC can be done by applying onto the website of dgft and using
the option of modification with requisite fee. Importer exporter code is issued
for the life time and in case of change in address or the nature of firm etc, the
application for modification could be submitted through the dgft website.
Mandatory Requirements to apply for IEC Code Number

• Copy of Cheque (Bank account) - Government has further issues
directives that now there is no need to provide the specific format duly
signed and forwarded by the bank for the evidence of bank account.
Rather, the cancelled copy of cheque mentioning the name of
individual/proprietor /firm with account number will be sufficient to
justify the account in bank.
• Address Proof of the entity – The list includes the copy of voting card,
passport, electricity bill, telephone bill etc to file for address proof.
• Fee of 500/ Rs through online – DGFT has permitted most of the private
and public banks for making the payment through online mode.
• Though, the DGFT does not compel for the E-mail to be mandatory,
however it will facilitate towards speedier communication.
• Exceptions to IEC - Though few of the categories of exception have
already been mentioned further as per the trade policy we are mentioning
few more exceptions here :
32 Export Procedur

However, if the products are exported to Nepal, or to Myanmar via the Indo- EXPORT IMPORT
Myanmar border, or to China via the ports of Gunji, Namgaya or Shipkila, it is PROCEDURE
not mandatory to obtain an IEC number, given that the cif value of a single DOCUMENTATION
shipment does not exceed the Indian amount of Rs. 25.000/-. The ceiling at port NOTES
Nathula is Rs 1, 00,000.
Registration with Export Promotion Council

There are various export promotion councils which helps an exporter in
multiple ways. Export promotion councils (EPC) are non-profit organisations
and provide RCMC (registration cum membership certificate) after registration.
EPCs help in export marketing, providing directories of trade, arranging buyer
seller meet and assist in participation in trade fairs. Moreover, the benefits
available under trade policy can be availed only if an exporter is member of
specific promotion council.
The RCMC certificate shall be effective from 1 April of the licensing year
in which it was given and shall, unless otherwise stated, be effective for five
years ending 31 March of the licensing year. In order to name some of the
promotion councils, we have CEPC (carpet export promotion council) for the
exports of carpets, then we have EPCH (export promotion council for
handicrafts) for export of handicrafts, then GJECPC (Gems and Jewellery export
promotion council) for the export of gems and jewellery. However, if the product
to be exported by an exporter does not fall in any of the specified categories of
exporter then an exporter is suggested to register with FIEO (Federation of Indian
Export Organisation).
Registration with Commodity Boards

Commodity Board is a registered entity approved for export-promotion
purposes by the Ministry of Commerce, Government of India, and has offices in
India and abroad. These Boards are responsible for exports of tea, coffee, rubber,
spices, and tobacco.
Registration with Tax Authorities

An exporter is required to comply with the statutory provisions laid down
by GOI (Government of India). As a result the businessman (exporter or
importer) is required to comply with various tax authorities which includes the
Income tax, GST Act, Customs Act etc. Goods sold outside the country are
eligible for various tax exemptions. Moreover, there are some tax concessions
and benefits available to those registered through SEZ Act (Special economic
zones). So, it is necessary for an exporter to get registered with the tax authorities
for compliance.
Opening of Bank Account

An exporter is required to maintain bank account preferably the current
account which can deal in foreign exchange transactions. Generally, exporter is
Export Procedur 33

EXPORT IMPORT required to deal with instruments such as Letter of credit for enabling the
PROCEDURE international transactions. Accordingly private or public banks which could
DOCUMENTATION transact in the foreign transactions including the Letter of credit should be given
NOTES preference.
4.2.2. Post-Shipment Procedure

Post-shipment export procedure is the stage where the products are finally
delivered to the purchaser via ship, air, or road. The most important task of the
exporter after the goods have been shipped is to present the documents to the
bank in order to receive the export proceeds and conclude the trade.
Post shipment stages are mentioned as follows
As most of the exporters 'trade transactions are done by a clearing and

forwarding agent, the key step is that the export documents are sent to the
exporter by the C&F agent after shipment of the products. The exporter must
forward the shipping advice to the buyer about the specifics of the shipping. The
shipping advice includes information such as shipping date, vessel name,
destination and the non-negotiable copy of the lading bill.
The exporter then submits the documents to the bank for negotiation on its
own or through the agent, as stated in the Letter of Credit. Documents shall be
provided on the basis of the documents specified in the letter of credit as
requested by the purchaser. In general, some of the documents needed by the
buyer are the copy of commercial invoice, packaging list, certificate of origin,
inspection report, exchange bill, shipping bill and full collection of bill of lading.
Negotiation takes place between the bank of the exporter and the bank of the
importers to ensure that enforcement is as per the Letter of Credit copy. The
shipping bill is also collected by the customs after the goods are delivered for
some kind of rewards, the duty downside the exporter has claimed. Finally, the
e-BRC (electronic bill of exchange) is issued by the commercial bank to the
exporter who concludes the transaction, depending on the form of credit and the
receipt of the export proceeds.
34 Export Procedur

EXPORT IMPORT
PROCEDURE
4.3. PRE-SHIPMENT INSPECTION AND QUALITY CONTROL DOCUMENTATION
NOTES
The Pre-Shipment Inspection and Quality control Act (1963) is in place to
comply with the quality of the export products. The objective of inspection for
the seller is to adhere to the specifications laid down by the buyer in the export
contract or through the copy of documentary credit. The task of inspection of
the products comes into play on the basis of the nature of the products and the
contract and therefore the certificate of pre-shipment inspection is to be submitted
by the exporter for document processing. There are other products that require
compulsory inspection of products that are taken care of by various agencies and
that allow the exporter to monitor the quality of the goods by notified agencies.
On the other hand, other companies are accredited by different quality standards
such as 9001, 14001 and so on, and are allowed to self-certify the products on
the basis of the quality criteria checked by their quality assurance Centre.
Third-party testing facility is also one of the ways buyer can certify the
quality of products. Buyer may select a third party to inspect products at the
exporter's premises, given that this is part of the export contract.
Inspection of Goods by EIA (Export Inspection Agency)

The role of the Agency for Export Inspection for pre-shipment inspection
in India is to ensure that the products exported by the exporter are as per the
contract. EIA implements the set procedure out below:
Exporters are expected to request an inspection application for the products
along with a copy of the contract and a copy of the invoice (as defined by the
buyer). Exporter shall apply to EIA with the appropriate fee for the processing
of the products testing. EIA inspector shall visit the premises of the exporter to
collect the sample of the products to be checked in laboratories. EIA shall prepare
and submit the report for laboratory testing of the products. Based on the
inspection report, the copy of the inspection certificate may be issued to the
exporter if the products are in compliance with the requirements indicated by the
buyer. Otherwise the EIA does not issue certificates for pre-shipment inspection.
Methods of Inspection
We will address the three essential methods of pre-shipment inspection
which are consignment inspection, in-process quality control and self-
certification system.
1. Consignment Inspection
Under this scheme, each shipment is subject to a thorough inspection
by the Export Inspection Agency in packed condition. They carry out
the inspection based on a statistical sampling method. When the
products adhere to the standard stipulated, the certificate of inspection Export Procedur 35

EXPORT IMPORT is given. The certificate also holds a term of validity until delivery of
PROCEDURE the export consignment. The real export consignment, in packed
DOCUMENTATION condition, is taken for inspection in the case of consignment-wise
NOTES inspection. Without the certificate issued by the approved inspection
agency, no consignment of any notified product is permitted to be
exported. This system applies to all commodities other than those
which undergo quality control in the process. Generally, small-scale
producers who cannot afford to provide their own facilities and staff
follow consignment-wise certificate inspection procedure.
2. In-process Quality Control

Few commodities such as paints and related goods, linoleum,
ceramics, ink printing, sanitary commodities etc. are subject to quality
control in-process. In the case of continuous process industries, they
are given the option to become an authorized "export-worthy" plant,
since they have the necessary infrastructure for standard quality
manufacturing / processing goods.
3. Self-Certification
With the experience gained in running the mandatory Quality
Assurance and Pre-Shipment Inspection Scheme in India, the
inspection program also underwent a qualitative improvement.
Recently a program of self-certification was implemented. This is
based on the idea that the manufacturing unit which has built-in
responsibility for quality assurance should have the right to export
certification for its own product.
4.4. GST
GST – In 2017, Goods and service tax replaced all of the taxes. Therefore
there is no part of sales tax and central excise tax. GST means one nation and
one tax and the characteristics of GST are described herein-
GST Procedure for Exports

In addition to generating additional revenue for domestic manufacturers,
exports have been a highlight of the Indian economy, but also because foreign
exchange adds crucial fuel to Indian economic growth. In view of these
advantages, the Goods and Services Tax (GST) scheme expanded the zero-rated
benefit to exports; in other words, the GST rate for exports was set at 0 per cent.
Businesses have a couple of options to export goods or services and properly
assert this benefit: they can have a bond or letter of enterprise (LUT) without
paying IGST fees. (Note: the LUT is only valid for one financial year. Exporters
are expected to apply for fresh LUTs annually); otherwise, they can include
36 Export Procedur payment for IGST and subsequently demand refund for the same.

Documents Required For Registration EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES
4.5. SHIPPING AND CUSTOM FORMALITIES
Customs regulations are in accordance with relevant customs act. The

custom protocol shall be followed for proper inspection, appraisal and evaluation
both at the time of export as well as for the import of products into India. Customs
Export Procedur 37

EXPORT IMPORT job is not only to collect the duties but also to ensure that there is no illicit trade
PROCEDURE and smuggling.
DOCUMENTATION
The custom officer shall, in general, ensure that - the products are of the
NOTES same kind, form, and value as the exporter has declared.
Shipping Bill
Filing of shipping bill is online through the form Form SB I on the website
ICEGATE. The online application is usually filed through the customs handling
agent wherein the details such as the address of seller as well as buyer to be
mentioned, details pertaining to port of loading, details of commercial invoice,
INCO terms, cargo details, and IGST details along with the incentives related to
duty drawback, advance authorisation and EPCG are to be filed. The document
is processed online and the CHA is required to upload the documents in the file
in the pdf format. While filing the shipping bill, the documents such as
commercial invoice, Export License, Packing List, Port trust copy, quality
certificate and Letter of credit are attached.
Custom Procedure for Export of goods through SEA

The shipment shall be checked by the customs officer which is electronic
as of now. Based on the electronic filing, the processing shall be done. Custom
officer shall ensure that the goods are exportable and not prohibited as per the
FTDR rules and if found suitable along with documents shall release the LEO
(let export officer). Custom preventive officer shall further add on
his endorsement and mention ‘Let Ship Order’ provided the procedures are
complied with.
Steps for Custom Clearance
38 Export Procedur

EXPORT IMPORT
PROCEDURE
4.6 MARINE INSURANCE DOCUMENTATION
NOTES
A Marine Insurance Policy is an arrangement under which the insurer
undertakes to compensate the insured in the manner and to the degree decided
against marine damages, that is, accidental damages to maritime adventure.
Marine Insurance applies to all sort of transportation and is mandatory in
global trade.
Insurer – General Insurance Company – New India Assurance Co/Oriental
fire and GIC/United India Fire & GIC/National Insurance Company etc.
Marine Insurance has to be taken by either importer or exporter depending
upon the contractual terms for which the delivery terms (INCO Terms) are in
place. Normally, for an export transaction having trade on FOB value the
responsibility to undertake the policy vests upon the buyer. However, in case the
seller uses any of the CIF or CIP then the seller is obligated to insure the cargo.
Insurable Interest
The Assured must be interested in the subject matter that is covered at the
time of failure but when the insurance is affected he need not be involved.
A individual has an insurable interest in an object if they benefit from their
protection or due arrival, or if they are prejudiced by their failure, harm or
detention or are held responsible for it.
Parties to Insurable Interest
• Ship/Cargo Owner
• Master and Crew (Only to the extent of their wages)
• Mortgager/Mortgagee
• Shipper and their agents
• Person who has paid advance freight
• A creditor who has advanced money on a ship or cargo
PRINCIPLES GOVERNING THE CONTRACT OF INSURANCE

The guarantee or contracts are based on the following principles
1. The principle of absolute good faith - Insurance business is a
business of trust or faith wherein the insured person is expected to
notify the insurer of all the relevant facts or circumstances which
known to him in the ordinary course of business.
2. Insurable interest principle – Anyone who is having vested interested
in the goods can file for the policy and includes the exporter, the
importer and the shipping company. The reasons are exporter owes Export Procedur 39

EXPORT IMPORT money, buyer shall claim the ownership of goods and the shipping
PROCEDURE company has interest in goods through the freight charges. Therefore,
DOCUMENTATION an individual may make a policy on his or her ship and the owner of
NOTES the goods may file for a policy and the person entitled to receive the
goods may also file for the policy. Many of these individuals have an
insurable interest in the matter.
3. Principle of indemnity, i.e. insurance plans, only reimburse for
damages resulting from the risk covered by the policy. Nonetheless, a
reasonable estimated profit is usually given to the owner of the freight.
4. Causal proxima: This concept assumes that the insurer is accountable
to pay for the loss if the insured risk is the direct cause of the loss. As
a result, the insurer will not pay for the loss of the products if they
were lost due to insecure packaging in the event that the policy issues
risk fraud, pilferage and non-delivery.
TYPES OF MARINE INSURANCE POLICIES

Open Cover
Open plan is not an enforceable arrangement, as opposed to an insurance
policy. Rather, it is an arrangement whereby the insurance provider will respect
and recognize claims of freight shipment and issue stamped unique insurance
certificates against each statement. An agreement is reached between the insured
and the insurer on the subject (e.g. goods) secured, packaging terms, transport,
risks covered, premiums and other conditions of coverage under the open cover
scheme. An agreement between both the parties consisting of subject matter of
insurance, transport risk, packaging terms etc. will provide insurance coverage.
Normally, the open cover is taken up by the large exporters who are
frequently exporting the consignments to different parties and countries. Open
policy is meant to cover all shipments over a period of time which is generally
one year.
Floating Policy
Often known as 'open rules,' the open cover has much in common. This
strategy provides consumers with high turnover and plenty of dispatches.
Therefore, it includes a series of shipments with all open cover stipulations,
except:
Open policy is properly stamped and is an enforceable insurance
arrangement. Moreover, open policy is for a negotiated amount, against which
a set of shipments may be delivered. Though the open policy ends one year from
the date of expiry. Hence, the insured amounts can exhaust before policy expires.
It is important to mention here that the open policy shall be subject to cancelation
by either party after giving in writing 15 days’ notice of cancelation.
3. Time Policy: - Time policy indicates the time period mentioned
40 Export Procedur within the subject matter of insurance.

4. Mixed Policy: - For a particular time and for a definite path, this form EXPORT IMPORT
of policy is taken. For example, a one-month policy can be taken for PROCEDURE
the voyage from Mumbai (JNPT) to UAE (Jebel Ali Port). DOCUMENTATION
5. Valued Policy:- In this situation, the value of the subject matter is NOTES
determined between the insured and the insurer at the time the scheme
is being carried out.
6. Unvalued policy:- In this situation, by the time the regulation is
carried out, the interest of the subject matter is not decided. This is
only determined in case of a defeat. It's also called 'open policy.'
7. Fleet policy:- That method is extended to a fleet of ships or vessels
belonging to the same organisation. This is suitable for those
businesses that own a number of vessels.
8. General Cover Policy:- This scheme is used to protect a single
shipment with various risks. To a frequent exporter, this approach is
not advisable, because he would have to follow a separate policy each
time he exports.
4.7 SUMMARY
Export procedure has good number of commercial and statutory

compliances in order to set up and export goods to the overseas markets. Export
procedure could be understood in two ways, first through pre-shipment
procedural formalities which includes the various registration formalities
including the e-IEC (importer export code number), opening of bank account
number, the GST number etc. Whereas the second way to look towards the
procedure is that of post-shipment export procedure which comes into play after
the goods are exported. Stages of post-shipment export includes the shipping of
goods, presenting the documents before the banking unit, intimating to the buyer
about export of said consignment and availing the incentives or duty drawback
through shipping bill. More in detail, the procedures also include the custom
procedure which can take place through either of the ways that is through SEA
or AIR. Moreover, the role of quality control and inspection Act is in place to
ensure that quality goods are exported by the exporter as per the order/standards
of the country. Number of procedures and agencies are place for quality control
notable amongst them is the EIA (Export Inspection Agency). Further, the risk
of export of goods through sea could be mitigated through the Marine Insurance
policy. An exporter can avail marine policy based on the need, nature of goods
and the policies available are floating policy, open cover etc. Moreover, an
exporter can avail different clause to increase the level of risk from A, B to C
and can take the cover for All-risk cover as well as War risk.
Export Procedur 41

EXPORT IMPORT
PROCEDURE
DOCUMENTATION 4.8 EXERCISE
NOTES
Q.1 Discuss the preliminary requirements for setting of an exporter
business.
Q.2 Discuss the post-shipment export procedure and the formalities
required to comply with?
Q.3 Write short note on pre-shipment quality control and its importance in
International trade?
Q.4 Discuss the various Marine Insurance Policies for mitigating the trade
risk?
Q.5 Discuss the steps for filing e-IEC and briefly mention the exceptions
to e-IEC?
Q.6 Briefly discuss the custom procedure and documents required for
clearance?
*****
42 Export Procedur

EXPORT IMPORT
PROCEDURE
UNIT – V
DOCUMENTATION
EXIM DOCUMENTATIONS AND

NOTES
INTERNATIONAL LOGISTICS
5.0 EXPORT DOCUMENTATION
5.1. Objectives
5.2. Introduction to Export Documentation
5.3. Types of Documents
5.4. Financial Document (Bill of Exchange)
5.5. Commercial Invoice and its types
5.6. Mate’s Receipt and Bill of Lading (Transport Document)
5.7. Types of Bill of Lading
5.8. Difference between Airway Bill and Bill of Lading
5.9. Certificate of Origin and its types
5.10. Auxiliary Documents
5.11. Custom Clearance Procedure (SEA and AIR)
5.12. Logistics
5.13. Overseas transport service
5.14. Summary
5.15. Exercise
5.1. OBJECTIVES
After studying this unit, students should be able to:

• Comprehend the need for export documentation in trade.
• Understand the various export documents used in international trade.
• Understand the custom procedure and documents required for clearance.
EXIM Documentations
and International
Logistics 43

EXPORT IMPORT
PROCEDURE
DOCUMENTATION 5.2. NEED FOR EXPORT DOCUMENTATION
NOTES
Trade documentation is regarded as an important and integral part of
international trade because export transactions require a lot of complex
documentation work. Trade data not only promotes foreign transactions but also
safeguards the interests of exporters and importers based in various countries.
Trade documentation is important in fulfilling the regulatory requirements of the
source as well as the destination country. Adherence to the statutory norms is
essential to avoid the complexities and penalties.
Documentation on exports has a significant role for exporters and importers
alike. Basically, the importer (buyer) is allowed to claim ownership of the
products in the documents. Whereas, the exporter must send various documents
to the buyer (importer) to receive the export proceeds. We will also expand on
the need for point to point documentation from the point of view of the exporter
as well as importer.
Export documentation is used by exporter
Need for export documentation by importer
EXIM Documentations
and International
44 Logistics

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES
5.3. TYPES EXPORT DOCUMENTATION
Types/Forms of Documents – The pre-shipment export documentation and

post-shipment export documentation are one of the common methods for
classifying the documents.
• Pre-shipment export Documentation
Are required upto the stage of custom clearance
• Post -shipment export Documentation
Are required for realization of export proceeds
Some ways of classifying the documents are
Figure 5.1 -Types of Export Documents

• Commercial documents – The need for commercial documentation
exists in order to meet the obligations of an export contract. The use of
records also leads to the transfer of title from exporter to importer and to
the collection of export income in the country of origin.
• Regulatory documents – There are some regulatory agencies which
require detailed compliance documents. FEMA Act, Customs Act, Excise
Act etc. are the statutory acts which require the enforcement of
documents.
EXIM Documentations
and International
Logistics 45

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES
Figure 5.2 Types of Commercial Documents
Understanding Documents
All documents, whether for export or import transactions, generally contain
following information which includes the name and address of the exporter and
importer, country of origin, description of the goods, port of discharge, port of
destination, value of the goods, terms of delivery and terms of payment.
5.4. FINANCIAL DOCUMENT
The exchange bill is the financial instrument used for foreign trade. Bill of
exchange is used for payments in the foreign trade. This is also known as draft
and is equivalent to post-dated cheque. The bill of exchange can include two or
three parties and the bill of exchange must clearly state the number, the date and
the parties concerned. There are two groups in general which are drawer and
drawee. The bill of exchange is negotiable and can be endorsed.
Types of Bill of exchange

• Sight bill of exchange (immediate payment)
• Usance bill of exchange –Credit period of 30/60/90 days is available.
5.5. COMMERCIAL INVOICE
Invoices are often called bills.

EXIM Documentations • Various types of invoices used in International Trade are
and International
46 Logistics • **Proforma Invoice (Auxilliary Document)

• Commercial Invoice EXPORT IMPORT
PROCEDURE
• Consular Invoice DOCUMENTATION
• Legalized Invoice
NOTES
• Customs Invoice
Commercial Invoice
Once a pro-forma invoice has been approved, the exporter must prepare a
commercial invoice. Commercial invoices are required by both the exporter and
the importer for different purposes. Exporter requires the copy of commercial
invoice to fulfil the requirement of contract as well as to get the proceeds of
exports by declaring the value of goods. Additionally, the exporter require
commercial invoice to declare the value of goods, for insurance purpose for
custom clearance purpose and finally to get incentives if any. On the other hand,
the importer claims the ownership of goods through commercial invoice along
with some other documents, also gets custom clearance done through the copy
of commercial invoice.
The commercial invoice is considered a very critical document when
exporting, because it acts as the starting document underpinning an export
transaction. It can take customs invoice form and consular invoice form.
The importer wants the commercial invoice because customs authorities
also use it to determine duties. For this reason, preparing a commercial invoice
is standard practice in English and in the language of the destination country.
The freight forwarding agent will inform you when you need a translated copy.
Commercial invoices are the basis for calculating duties and statistics
Commercial invoices are often used by governments when determining
customs duties and collecting trade statistics to calculate the true value of the
goods. Governments that use the commercial invoice to monitor imports will
also specify their type, quality, and number of copies, language to be used and
other features.
Consular Invoice – Many countries such as Latin American countries
generally need consular invoice to collect the information and forward it to the
destination country. In addition, an exporter is expected to provide the
information to that country's embassy (stationed in exporting country) in a
particular format. Since the copy is to be submitted to consular officer (embassy),
it is known as consular invoice.
5.6. TRANSPORT DOCUMENTS (BILL OF LADING AND

AIRWAY BILL)
EXIM Documentations
Transport documents serve the purpose essentially as evidence of shipment
and International
from source country to destination country. Transportation of bulk goods is Logistics 47

EXPORT IMPORT performed mainly by sea as a mode of transport for which bill of lading is used.
PROCEDURE The main mode of transport for perishable or valuable goods is air, and hence
DOCUMENTATION air war bill (AWB) is used. At the other hand, some countries have no sea / water
NOTES boundaries and mostly transport goods via road and rail for which bill is used.
Bill of Lading (Sea as mode of transportation)

• Way Bill or Consignment Note (for rail, or road)
• Combine or multimodal transport document (in multimodal transport),
• Air way Bill (By air)
Bill of Lading
At its simplest form a Bill of Lading is a receipt. The paper notes that the
shipment has been received by the carrier and includes information about the
shipper and the recipient. For the word "Bill of Lading," there are many
alternative names and abbreviations: Main abbreviations are Bill of Lading, BOL,
or B / L. Waybill (Alternate common name in the United States and Canada)
5.7. TYPES OF BILL OF LADING
Types of Bill of Lading Forms

Bill of lading is basically transport document and is an essential document
for trade. Generally, the document has negotiable as well as the non-negotiable
copies for trade purpose. Let us try to understand the various types of bill of
lading in brief.
1. Straight Bill of Lading: Straight lading bill is essentially the
transportation document used for shipping and for which payment was
made.
2. To order Bill of Lading: To order bill of lading is essentially the form
of transport used for shipping and for which the payment was not
made. Therefore payment is to be made at the time the customer
receives the goods.
3. Clean Bill of Lading: Clean bill of lading is provided in general
according to standard custom procedures 600. Clean lading bill notes
that the products are in good shape and packed properly. If the products
are not properly wrapped, however, then a clause lading bill (Soiled B
/ L) is given.
4. Inland Bill of Lading: Inland bill of lading is used when the goods
are shipped within the domestic country by road and rail and not
EXIM Documentations international.
and International
48 Logistics

5. Ocean Bill of Lading: This kind of lading bill is used in both the EXPORT IMPORT
domestic and foreign markets. PROCEDURE
DOCUMENTATION
6. Through Bill of Lading: This form of lading bill involves the inland
and/or ocean lading bill and is thus complex in nature. This form of NOTES
lading bill also helps shipping carrier to transfer the cargo through
various modes of transport.
7. Multimodal / Combined Transportation Bill of Lading: Multimodal
transportation requires the use of at least two separate modes of
transportation for, for example, the container may be transported
initially by road and then by truck.
8. Direct Lading Bill: This form of lading bill is used when the same
vessel delivers the goods until the point of destination.
9. Stale Bill of Lading: Sometimes the cargo arrives to port before the
Bill of Lading in cases of short-over-seas freight transport. The Bill of
Lading is then "stale" , if that happens.
10. Shipped On Board Bill of Lading: A Shipped On board Bill of
Lading is released when the cargo arrives at the port in good,
reasonable form from the shipping carrier and then is loaded onto the
container ship for overseas transport.
11. Received Bill of Lading: It is just a Bill of Lading expressing that the
cargo has reached at the port and is cleared for loading onto the ship,
which does not essentially mean that it has been loaded.
12. Clause Bill of Lading: A Claused Bill of Lading is given if the cargo
is damaged or there are insufficient amounts (Missing quantity).
Difference between Bill of Lading and Airway Bill
EXIM Documentations
and International
Logistics 49

EXPORT IMPORT Regulatory documents
PROCEDURE
Those documents which are required to fulfil both importing and exporting
DOCUMENTATION
countries 'statutory requirements. Such documents refer to different agencies in
NOTES government, such as the relevant department or the key international trade control
agency.
Exchange Control declaration form

Under the Foreign Exchange Management (Export of Products and
Services) Regulations, 1999, an exchange control declaration form must be
submitted by the exporter in the specified format such as: GR form, SDF form,
PP form or SOFTEX.
Shipping Bill/Bill of Export

It is the key document provided by the customs authorities detailing the
classification of goods, labels, numbers, quantity, FOB value, vessel name or
flight number, loading port, discharge port, destination place, etc.
Bill of Entry - It is required to get customs clearance on imported cargo
Types of Bill of Entry

• Bill of Entry for home consumption (white)
• Bill of Entry for warehousing (yellow)
• Ex-bond Bill of Entry (green)
5.9. CERTIFICATE OF ORIGIN AND ITS TYPES (COO)
COO is a certificate indicating that the products exported originated or were

produced in a given country. So, it's a kind of declaration that testifies to the
export source.
• An importer typically offers customs clearance of items. This is generally
necessary for an importer to clear goods from the customs. Customs
authority insists on importing country for political and social purposes
before goods are permitted to enter the country.
• It lets the importer, if any, take advantage of the duty concession. For
the goods imported under the Free Trade Agreement, for example.
• Customs that ensure, on the basis of the COO, that certain prohibited
goods are not imported from specific countries.
• It also ensures that goods have not been reshipped by a seller who has
brought them into his own country from some other place of origin.
EXIM Documentations
and International • It is sent to the importer by the exporter.
50 Logistics

• It is issued or signed by an independent official organization, such as a EXPORT IMPORT
Chamber of Commerce, on prescribed form. PROCEDURE
DOCUMENTATION
• These are often required:
NOTES
• to meet Customs requirements in the importing state
• to comply with Banking requirements
• for other official and commercial reasons.
There are two categories of Certificate of Origin :
1. Preferential Certificate of Origin and
2. Non-preferential Certificate of Origin
Preferential COO
It entitles the importing nation to preferential duty treatment.
• These certificates are regulated by rules of origin and are often part of
Preferential Trade Agreements signed between two countries or more.As
far as India is concerned the following agreements are noteworthy:
• Generalised System of Preferences (GSP)
• SAARC Preferential Trading Agreement (SAPTA)
• Asia- Pacific Trade Agreement (APTA)
• India-Sri Lanka Free Trade Agreement (ISLFTA)
• Some of the agencies which are authorised to issue PCOO are:
• Export Inspection Agencies – All products.
• Directorate General of Foreign Trade & its regional offices - All products.
• Spices Board, Ministry of Commerce & Industry - Spices and
Cashewnuts
• Central Silk Board through 8 regional offices all over India - Silk
Products.
• Coir Board – Coir and Coir Products.
• Textile Committee - Textiles and made-up
Non-Preferential COO
• Basically, the non-preferential coo is an evidence to the origin of goods
but does not provide any benefits in context to the tariffs.
In compliance with Article II of the International Convention on the
Simplification of Customs Formalities, the Government has also named several
approved agencies to issue Non-Preferential Certificates of Origin.
EXIM Documentations
and International
Logistics 51

EXPORT IMPORT
PROCEDURE
DOCUMENTATION 5.10. AUXILIARY DOCUMENTS
NOTES
Auxiliary documents are the supporting documents for getting the principal
commercial documents. Some of the common auxiliary documents are proforma
invoice, application for insurance, application for certificate of origin and the
Mate’s receipt.
Let us now discuss the following auxiliary documents:
A) Proforma Invoice
B) Shipping Instructions
C) Intimation for Inspection
D) Shipment Advice
E) Packing List
F) Insurance DeclarationApp for COO
G) Letter of Bank
A) Proforma Invoice
Proforma invoice is the basis of trade used to finalize the contract and
consists of the name of the purchaser and the seller, the description of
the products, the model number / size etc., the weight, the Inco terms,
the payment terms and the packaging terms. In fact, the proforma
invoice is an essential document for the buyer to receive both the
license and the foreign exchange. The invoice of Proforma plays a
significant role in the formation of the contract as well as in the
opening of the letter of credit.
B) Shipping Instructions
A shipping instruction (SI) is a document provided to the carrier by a
customer, containing details of the cargo to be shipped and the physical
transport requirements. The SI contains basic information necessary
for drawing up the lading bill (B / L), such as: booking number or B /
L number. Moreover, the instructions are given by exporter to the
transporter as to how to handle the goods in order to take precautionary
measures for the safe delivery of goods.
C) Intimation for PSI (Application for PSI)

Pre Shipment Inspection (PSI) is a method that ensures quality and
quantity of the goods which is going to be exported as per PSI Act,
EXIM Documentations 1963. Exporter is required to apply for pre-shipment inspection as per
and International the contract between buyer and seller (in duplicate). Generally, the
52 Logistics

exporter approaches the EIA (Export inspection Agency) in the country EXPORT IMPORT
of exporter for getting the goods inspected. A specific format for PSI PROCEDURE
along with the copy of contract is to be submitted with a requisite fee DOCUMENTATION
for the purpose of testing of goods to be exported. Application for PSI NOTES
is an auxiliary document for getting the key document that is
inspection certificate.
D) Shipping Advice
Shipment Advice is the alert issued to the consignee by the shipper
prior to the delivery of the goods at the destination containing the
specifics of the shipment. Shipment advice is a contractual document
provided by the exporter in order to provide details of the shipment to
the importer. Once the export procedures have been completed by the
exporter or his designated agent, the goods shall be handed over to the
carrier. The carrier shall arrange for the shipment to be transported to
the final destination in compliance with the negotiated mode of
transport. Exporter provides the details about the shipment including
the transportation details, the expected time of departure, expected
time of arrival etc. and these details are then shared with the buyer.
Buyer uses this information to track the arrival of goods in order to
take the delivery of goods.
E) Packing List
The export packing list is a comprehensive document containing all
the specifics of the product and packaging found in each shipment.
The export packing list shall provide the exporter, the foreign freight
forwarder and the final consignee with information on the shipment,
the packaging descriptions and the labels and numbers displayed on
the outside of the boxes.
It shall set out the quantity and type of goods found in each individual
package to be loaded on a train, railcar, vessel or aircraft. The packing
list shall also be used as a reference document in the event of a
disagreement between the carrier and the exporter concerning the
measurement and weight of the freight.
Generally, 10-12 copies of packing list are prepared which are
provided for processing of documents at various stages. Exporter
provides the copy of packing list easily due to the reason that this
document does not have any place for price and hence there is no risk
on maintaining the secrecy of price etc.
F) Insurance Declaration
While applying for Marine Insurance Policy, the auxiliary document
required is the application for insurance. An exporter is required to EXIM Documentations
approach the insurance agency for getting the Marine Insurance as per and International
Logistics 53

EXPORT IMPORT the contractual terms. Generally, the exporter is required to apply in
PROCEDURE the prescribed format and the details including the particular of goods,
DOCUMENTATION the value of goods etc. are to be mentioned for getting the insurance
NOTES certificate. Insurance declaration is an auxiliary document for the
purpose of availing the commercial insurance certificate.
G) Letter to Bank
An exporter is required to provide the letter to the bank for
collection/negotiation of documents based on the contractual terms.
Thus, the exporter is required to mention as to the trade is on sight
basis or usance basis. Details, for bill of exchange and Letter of credit
are to be complied as per the instructions mentioned by exporter.
H) Mate’ Receipt
Mate’s receipt is the document for getting the bill of lading which is
transport document. Generally, it is of two types namely the clean and
clause.
5.11. CUSTOM PROCEDURE
Customs regulations are in accordance with relevant customs act. The

custom protocol shall be followed for proper inspection, evaluation and
evaluation both at the time of export as well as for the import of products into
India. Customs job is not only to collect the duties but also to ensure that there
is no illicit trade and smuggling. The custom officer is usually responsible for
ensuring that the products are of the same kind, sort and value as the exporter
has declared. There on, the obligation or leviable was properly calculated
and paid.
Documents are required to be uploaded through online mode that is shipping
bill is to be filed either by the exporter or the CHA. However, the following
documents are to be uploaded for processing of shipping bill which includes the
copy of documentary credit, the copy of commercial invoice, filling up the details
for IGST and various incentives such as drawback, DFIA etc.
Custom Procedure for Export of goods through SEA (Bill of Lading)
As per the latest notification, the processing is done through online portals.
ICEGATE is the portal through which the shipping bill is filed and the e-sanchit
procedure is followed. Therefore, either the exporter or the CHA shall file the
shipping bill through the customs portal that is the ICEGATE. The details which
are required includes the e-IEC number, the invoice, and details of GST etc. The
details of HS Code are also filed in order to ensure that whether the goods are
EXIM Documentations
freely exportable or not. The number of files and the size of file have been
and International
54 Logistics decided and as such five files could be uploaded with size of 1 MB each.

Moreover, the incentives to be claimed are also filed online and includes the EXPORT IMPORT
MEIS scheme, incentive for drawback, the scheme under EPCG etc. These PROCEDURE
documents are processed by the custom officer and accordingly the goods are DOCUMENTATION
cleared. Running number is given at the time of filing of shipping bill number. NOTES
The document also requires the digital signature for processing. Custom officer
accordingly processes the let export order as well the let ship order.
Steps for Custom Clearance
Custom Procedure for Export of goods through AIR (Air Way Bill)
Electronic Data Interchange (EDI) system is in place for processing at IGI
airPort, New Delhi and other airports that is Bangalore, Chennai and mumbai.
ICEGATE is the portal through which the shipping bill is filed and the e-sanchit
procedure is followed. Therefore, either the exporter or the CHA shall file the
shipping bill through the customs portal that is the ICEGATE. The details which
are required includes the e-IEC number, the invoice, and details of GST etc. The
details of HS Code are also filed in order to ensure that whether the goods are
freely exportable or not. The number of files and the size of file have been
decided and as such five files could be uploaded with size of 1 MB each.
Moreover, the incentives to be claimed are also filed online and includes the
MEIS scheme, incentive for drawback, the scheme under EPCG etc. These
documents are processed by the custom officer and accordingly the goods are
cleared. Running number is given at the time of filing of shipping bill number.
The document also requires the digital signature for processing. Custom officer
accordingly processes the let export order as well the let ship order.
After having completed the formalities through portal, the trade members
can get the electronic documents through the gateway round the clock. Thus, SB
(shipping bill) is filed online and it saves both transaction cost as well as time.
The documents are then processed by the custom officers as per norms and
processed accordingly. EXIM Documentations
and International
Logistics 55

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
5.12. DEFINITION OF LOGISTICS AND INTERNATIONAL
NOTES LOGISTICS
Definition of Logistics
Logistics is linked to a centralized approach from the internal movement of
products (raw material), its production and the outward movement to customers
of finished goods.
Logistics can be described as planning, implementing and managing the
process of flow of material and final physical products from point of origin to
point of sale.
Logistics is the process in which the movement of raw materials and finished
products from the production to the place of consumption is effectively controlled.
Definition of International Logistics

International logistics involves handling these services across at least one
international boundary in the supply chain of a business.
International Logistics includes the design and management of a network
that governs the movement of materials into, through and out the international
market.
Logistics Aspects
Logistics aspects in maintaining flows
Key elements of logistics comprises of inventory management,
warehousing, transportation, material handling, packing and packaging. More
focus is stressed upon the logistics sector keeping in view the major role of
logistics in domestic along with International trade. Indian firms have been
pushing themselves for efficient movement of goods and services in order to
address the infrastructural bottlenecks.
Integrated logistics covers inbound logistics, logistics procedures, outbound
logistics, and reverse logistics. Inbound logistics refers to the procurement for
manufacturing purposes of products and raw materials from outside the business.
When these raw-materials are further processed using utilities (manpower,
infrastructure) in the manufacturing unit then it is termed as process logistics.
On the other hand, the physical distribution of final goods and services to the
consumer is termed as outbound logistics.
EXIM Documentations
and International
56 Logistics

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES
Figure 5.3 Process of Trade Logistics
Figure 5.4 Components of logistics
5.12.1. Objectives and importance of Logistics

Objective of logistic management
The final motive of the logistics management is providing efficient and
effective service to the customer with least cost. We are mentioning some of the
objectives of logistics as follows:
EXIM Documentations
and International
Logistics 57

EXPORT IMPORT
PROCEDURE
DOCUMENTATION
NOTES Importance of logistics

Business logistics is an illustrated term, as well as an effective and
productive depository of raw materials, inventory, finished goods and services.
It also refers to the flow of goods and shipments from factory to customer.
Service-organizations often value the logistics of the business. At the time of
service delivery, logisticians ensure that materials and information are received.
Logistics and transport play a significant part in the economy.
Maintaining Competitive Edge

Logistic firms are giving strong competition to the rivalries. This offers an
adequate method or a streamlined mechanism through which customer needs can
be addressed more effectively. A business should also be prepared to deliver
shipments more efficiently and at the same pace as rivals. The Internet has made
this possible for many businesses.
Building Good Consumer Relations

Providing a product in a time-efficient and cost-effective manner, backed
by business logistics, also illustrates the need to establish good customer
relationships. It is important not only for immediate monetary gain, but also
because good customer relationships will lead to further sales. Some of the best
ways to promote and grow a business in today's era is to provide a good, reliable
service that consumers can sell to other consumers by word of mouth and, more
importantly, by means of an electronic word of mouth.
Creating Finished Product

A manufacturer needs to make sure that ample raw materials are available
to manufacture finished goods. A company cannot make quality product without
qualitative products. Having enough goods in stock is also a must for the purposes
of supply and demand and to improve customer service.
Organisational Support
Business logistics will prove to be of great benefit each time a product is
produced to ensure that the process is completed without any interruption. It is
very important to ensure that inventory is monitored, shipped, processed, and
produced in a manner that fits all departments of an organization. A systematic
transport and trade logistical system is mandatory for sustained economic
development for any nation of the world. It is specifically more important for an
emerging economy like India which has one of the highest transactional costs of
doing business in the world.
EXIM Documentations
and International
58 Logistics

The paramount reasons for high transactional cost in India’s foreign trade EXPORT IMPORT
are poor logistical infrastructure in India, poor logistics management practices, PROCEDURE
and lower use of technology in logistical operations. DOCUMENTATION
Logistic merits and a well-planned transport network also play an important NOTES
role in advancing the development of backward regions, including the hinterland
of countries, and in helping to successfully incorporate these areas into the
mainstream economy by opening them up to trade and investment.
In a liberalized set-up, a coherent transport network, including
developments in virtual as well as physical infrastructure and overall efficiency
in logistical system of the nation, become all the more vital factors in order to
enlarge productivity and increase the competitiveness of the economy in the
world market.
Importance of Logistics
Logistics plays a key role in establishing trade between the parties and hence
responsible for generating the demand. Thus, logistics is bridging the gap
between demand and supply by connecting the seller and buyer. It is to be noted
that infrastructure plays an important role when it comes to international logistics.
Infrastructural facilities are important to reduce the cost of transportation for
smooth flow of goods. Infrastructural facilities includes the availability of port
facilities including the crane and IT facilities, containers, better roads etc. Thus,
reduction in time and improving the efficiency and effectiveness is important for
overseas trade.
5.13. ORGANIZATIONS OF OVERSEAS TRANSPORT

SERVICES
Transportation Services -Modes

There are five distinct transportation modes that can be espoused by the
organization in the delivery of their products to the dealers, warehouses and
customers. These five modes of transportation are classified under Sea, Air, Road,
Rail and the pipeline. Students may note that about 80 percent of international
trade is done through Sea whereas Air constitute less than 3 per cent of trade and
thereafter the other modes of transportation are used.
Air
The air mode of transportation is the least common among corporate
organizations and only about 1 per cent of the total freight is transported by air.
But still, this mode of transport is becoming extremely common. Due to high
freight rates, air transport costs are much higher, but it is the fastest mode of
transporting items, especially perishable goods and a smaller quantity of highly EXIM Documentations
and International
worthy goods. Moreover, the air transportation is not only the fastest mode but
Logistics 59

EXPORT IMPORT also is used for valuable and perishable goods. While exporting the goods using
PROCEDURE Air the document used is known as Airwaybill (AWB). AWB is issued by the
DOCUMENTATION authorised agents who are registered under IATA (International Air Transport
NOTES Association).
Shipping (Water)
Shipping is the oldest way of moving goods from one place to another, but
it is time-consuming than other methods of transport. Shipping and other forms
of transport shall be used. Generally, the bulk goods are transported using sea
routes and the cost is minimum. There are some types of intermodal transport
hereafter such as Fishy Back, Piggy Back etc.
Rail
Any nation's main carrier is the railways, which is responsible for carrying
goods of the total tonnage of freight miles. Colossal quantities of bulk goods can
be transported in a cost-effective manner to remote locations via rail transport,
such as sand, coal, agricultural and forestry goods and minerals, etc. In recent
years, a range of improvements have been made to the railway networks in order
to transfer goods easily from one place to another, such as special flat cars
designed for the transport of truck trailers by rail.
Trucks
The mode of transport of trucks has played a significant role in the transport
of goods from one place to another in recent years in the domestic market. Trucks
are regarded as the main form of transport within cities. Trucks routing and timing
systems are extremely flexible and run much quicker than railroads.
Pipelines
Transport by pipeline is the mode of transport by pipe of goods or materials.
The proprietors use pipelines mainly to distribute their own goods.
5.13.1. Multimodal transport system

Multimodal transport network is a mix of foreign transportation with
multiple modal combinations. The modes can apply to transportation vehicles or
service operators. Transport modes that include ship, train, plane, car, tram etc.
The service modes may be such as public/private operating agencies. Therefore,
multimodal transport system relates to a single trip comprising combination of
modes between which the consignment has to make a transfer. The transportation
of consignment from the origin i.e., shipper’s door to the destination i.e.,
consignee’s door will be taken up by a single contract. The Contractor manages
and synchronizes the total task and ensures responsibility for the safe custody of
consignment. The system also ensures continuous movement of the goods along
EXIM Documentations the best route by the most time-efficient and cost-effective means. The system
and International also involves simplified documentation. Further, the term ‘Intermodal transport’
60 Logistics

is also used synonymously with ‘multimodal transport’ and thus, used in the EXPORT IMPORT
context of movement of goods from origin to destination. These two terms have PROCEDURE
somewhat similar meanings, i.e. the transportation of goods through more than DOCUMENTATION
one mode of transport and a freight rate through. NOTES
Consequently, a warehouse packed consignment says H carried manually
by walk to truck situated at A. The same is loaded onto a truck and, claim B,
reaches airport. The consignment will be transferred to the B flight and will arrive
at Airport C. This will be moved in to the truck upon arrival at C and will enter
railway station D. Thereafter, the consignment will be moved to E by train.
Having unloaded at E, it reaches the destination F through manual carrying.
The following Figure display multimodal transport with different agencies.
Accordingly, the consignment is booked through private truck from A to B,
thereafter moved through flight from B to C. At C, the consignment is moved on
private truck to D and finally, it travelled through D to E on train.
Advantages of Multimodal Transport System: The following are advantages
of multimodal transport system.
1. Minimizes Time Loss
When a single process, multimodal transport network is designed and
managed, it mitigates the loss of time and the possibility of delay and
harm to consignment or goods at transhipment points.
2. Ensures Smooth and Safe Transport

Multimodal transport operator not only maintains its own
communication connections, but also schedules carriage interchange
and forward equally at different transhipment points.
3. Provides Faster Transport Service

Multimodal transport system provides quick transport of goods. It
mitigates the disadvantages of distance from markets and the tying-up
of capital.
4. Saves Transport Costs

Multimodal transport system assist in the reduction of transport costs
as single operator completes the entire job of transhipment of goods.
Furthermore, the system also helps in the reduction of cargo insurance
costs.
5. Improves International Price Competitiveness

As multimodal transport system aids in the reduction of transport costs,
it will in turn result in reduced export costs and thereby enhances the
international price competitiveness.
6. Reduces Burden of Documentation and Formalities

In case of traditional transport system i.e., segmented transport system, EXIM Documentations
there arises various documentation and other formalities at distinct and International
stages. However, multimodal transport system lessens the burden of Logistics 61

EXPORT IMPORT multiple documentation and other formalities as single operator
PROCEDURE completes the entire job of transshipment of goods.
DOCUMENTATION
7. Establishes Unique Agency to deal with
NOTES
Unlike segmented transportation system, multimodal transport system
establishes distinctive agency to deal with the entire job of
transportation. Therefore, the consigner deals with only one operator
relating to transport, insurance, loss and damage of goods.
5.13.2. Liner and Tramp Services

Liner Service –Liner shipping operates on the fixed routes and operates on
schedule as per published dates. However, this form of service usually fulfils the
schedule, unless, due to natural or man-made reasons, a call at one of the ports
has been unduly postponed.
At the other hand, a tramp service is a ship that has no set route or itinerary
or schedule, and is available for loading any cargo from any port to any port at
short notice.
5.14. SUMMARY
Export documentation plays an important role in trade operations. Exporter

needs document in order to get the export proceeds in time whereas the buyer
needs documents to claim the ownership of goods. Documents are listed as
commercial and regulatory. Commercial refers to the terms and condition of
buyer and seller and the documents which are required to fulfil the trade
operations and includes documents such as commercial invoice, Bill of lading
etc. On the other hand there are certain regulatory frameworks which are to be
fulfilled by both the parties. Therefore, the need of regulatory documents is to
get clearance from various agencies. Custom clearance plays an important role
in processing of documents and goods for export and import. Custom appraisal
officer and custom preventive officer are responsible for smooth flow of goods
from the customs. In order to expedite the processing, the shipping bill is file
online using the EDI. The document can be filed through the portal which is
notified by customs and in general e-sanchit and ICEGATE are used for
processing of document.
5.15. EXERCISE
1. Discuss the different types of invoices used in external trade?

2. Differentiate between Air way bill and Bill of lading?
3. Discuss the different types of bill of lading?
4. Discuss the significance and types of certificate of origin?
5. Briefly explain the need for export documentation?
EXIM Documentations
and International *****
62 Logistics

EXPORT IMPORT
PROCEDURE
MULTIPLE CHOICE QUESTIONS

DOCUMENTATION
NOTES
1. Marine insurance is the responsibility of exporter under which of the

following term :
A. CPT B. CIF
C. CFR D. FCA
Answer: B
2. In order to have the benefit of lower rate of duty the importer needs-
A. Bill of Lading B. Bill of Entry
C. Certificate of origin D. Commercial invoice
Answer: C
3. .....quotation is the expression of the number of U.S. dollars required
to buy one unit of foreign currency.
A. Direct B. Indirect
C. Common D. None of the above
Answer: A
4. In which of the following places can foreign exchange trading take
place?
A. Private office B. Home
C. Banks D. All the given options
Answer: D
5. Under advance remittance as a method of payment the credit risk is
borne by
A. Buyer B. Seller
C. Importers Bank D. None of the given option
Answer: A
6. Letter of Credit is beneficial for which party:
A. Seller (Exporter)
B. Buyer (Importer)
C. Both of the given option
D. None of the given option
ANSWER: C Multiple Choice
Questions 63

EXPORT IMPORT 7. The bank in the beneficiary country that guarantees the issuing bank’s
PROCEDURE commitment to pay the letter of credit is the:
DOCUMENTATION
A. Advising bank B. Correspondent bank
NOTES
C. Issuing bank D. Confirming bank
Answer: D
8. Interbank transactions including transfers and foreign exchange
confirmations benefit from the use of a network called:
A. EDI
B. FARINE
C. SWIFT
D. MAC, first introduced by the U.S. International Trade
Administration (ITA)
Answer: C
9. Letters of credit consist of a contractual relationship between the
following:
A. Buyer and its bank
B. Issuing bank and seller
C. Issuing bank and correspondent bank
D. All of the above
Answer: D
10. According to classification of IMF, the exchange rate of India falls
under:
A. Managed floating B. Independent floating
C. Crawling peg D. pegged to basket of currencies
Answer: A
11. The reduction in the value of currency due to market forces is known as:
A. Depreciation B. Devaluation
C. Revaluation D. Inflation
Answer: A
12. The buyer does not receive the documents and thus will not obtain
possession of goods until payment is made to the collecting bank in
documentary payments. This method is often called:
A. Time draft B. Date draft
C. Sight draft D. Acceptance draft
Multiple Choice
Answer: C
64 Questions

13. The following payment method could be risky for the seller: EXPORT IMPORT
PROCEDURE
A. Cash in advance B. Irrevocable letter of credit DOCUMENTATION
C. Open account D. Bank collection time draft
NOTES
Answer: C
14. What has been the major focus of developing countries with regard to
trade?
A. Increase international trade
B. Increase production and exports
C. Demand tariff cuts by wealthy countries
D. Increase trade aid
Answer: B
15. The supply and demand of currency in international market determines
A. Exchange rate B. GNI
C. GNP D. None of the given options
ANSWER: A
16. Exports create:
A. Low wage employment
B. High wage employment
C. No increase or decrease in employment
D. None of the above
Answer: B
17. Which of the following method is the least costly for a buyer?
A. Cash in advance B. Negotiable note
C. Open account D. Bank collection time draft
Answer: C
18. Select one or more answers from choices below regarding commercial
invoice.
A. It contains the AWB.
B. The importer needs commercial invoice since it is often used by
commercial authorities to assess duties.
C. Commercial invoice should be signed and dated.
D. Commercial invoice should be written in red ink only.
Answer: B
Multiple Choice
Questions 65

EXPORT IMPORT 19. Which Incoterm includes the price of rail transport to port (including
PROCEDURE transit insurance) and getting goods onto the Ship?
DOCUMENTATION
A. Ex works
NOTES
B. Free Carrier
C. Free Along Side the Ship
D. Free on Board
Answer: D
20. IEC number is …….digits and when allotted is valid for a period of…
…:
A. 10, It has no expiry life
B. 10, 3 Years from the date of issue
C. 10, 5 Years from the date of issue
D. 10, 10 Years from the date of issue
Answer: A
21. Incoterms are devised and published by –
A. International Chamber of commerce
B. World Bank
C. World Trade Organisation
D. United Nations
Answer: A
22. Export control refers to restrictions on
A. Domestic firms from engaging in exports.
B. Items that can be exported from the country.
C. Foreign countries exporting to the country.
D. Domestic firms engaging in trade with nation.
ANSWER: B
23. Which of the following is not a benefit of countertrade for buyers?
A. Transfer of technology
B. Alleviating balance of payments difficulties
C. Maintenance of stable prices for imports and exports
D. All of the given options are benefits of countertrade
Answer: C
Multiple Choice
66 Questions

24. If the transaction involves the use of money, it is considered: EXPORT IMPORT
PROCEDURE
A. Counterpurchase B. Offset DOCUMENTATION
C. Buyback D. All of the given options
NOTES
Answer: D
25. A country with open economy
A. trade and integrate fully with other countries
B. trade partially with other countries
C. doesn't trade with other countries
D. None of the given options
ANSWER: A
26. The term Nostro Account means:
A. Our account with you B. your account with us
C. Their account with them D. None of the above
Answer: A
27. The term Vostro Account means:
A. Our account with you B. your account with us
C. Their account with them D. None of the above
Answer: B
28. Which of the following is not an example of an international trade
draft?
A. Time draft B. Sight draft
C. Both of the given otions D. None of given options
ANSWER: C
29. A shipment document indicating the details of the shipment and
delivery of goods and their ownership is a _
A. bill of lading B. sight draft
C. time draft D. letter of credit
ANSWER: A
30. A written statement by the exporter ordering the importer to pay a
specific amount of money at a specified future date is known as a_
A. bill of lading B. sight draft
C. time draft D. letter of credit
ANSWER: C
Multiple Choice
Questions 67

EXPORT IMPORT 31. A trade agreement in which a domestic firm accepts whiskey for full
PROCEDURE payment on a sale of computer equipment is an example of_
DOCUMENTATION
A. export factoring
NOTES
B. forfaiting
C. a scene from the classic movie "Animal House"
D. countertrade
ANSWER: D
32. Depreciation of home Currency is helpful for:
A. Importers B. MNC
C. Exporters D. Importers & Exporters
Answer: C
33. Revolving LC can be -
A. The revolving credit may be irrevocable.
B. The revolving credits are opened in those cases where the
importer regularly imports goods from a certain exporter.
C. Importer saves on the transaction costs by opening the revolving
credit.
D. All the GIVEN options
Answer: D
34. Exporter has maximum obligation for-
A. FAS B. Ex-works
C. DDU D. DDP
Answer: D
35. Which of the following term can only be used through SEA as a mode
of transportation?
A. CPT B. CIP
C. CFR D. FCA
Answer: C
36. Which of the following document is not mandatory for exporters as
per FTP 2015-20?
A. Commercial invoice cum packing list
B. Bill of Entry C. Bill of Lading
D. Shipping Bill
Multiple Choice Answer: B

68 Questions

37. Which of the following statement is correct for incentives under FTP EXPORT IMPORT
2015-20. PROCEDURE
DOCUMENTATION
A. Advance authorisation is transferable.
NOTES
B. Duty free import authorization is not transferable.
C. Minimum 15% value addition is required for Duty Free Import
Authorisation.
D. DFIA is issued on post export basis for products for which Standard
Input Output Norms (SION) have been notified.
Answer: D
38. Export control refers to restrictions on
A. Domestic firms from engaging in exports.
B. Items that can be exported from the country.
C. Foreign countries exporting to the country.
D. Domestic firms engaging in trade with nation.
ANSWER: B
39. Which of the following is not the commercial principal document.
A. Bill of Exchange
B. Air way Bill
C. Insurance declaration (Application)
D. Shipment Advice
Answer: C
40. Exporter should insist for advance payment due to the reasons
A. Buyer is an established and experienced businessman within his
country.
B. Creditworthiness of buyer is doubtful and political risk is high.
C. Track record of buyer is good.
D. Importers country is politically stable.
Answer: B
*****
Multiple Choice
Questions 69

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CONTENTS

Unit Contents Page No.

Unit – II: Regulations for Export and Import.

Unit – III: Export Import Contracts.

Unit – IV: EXIM procedures.

“Only for Private Circulation”

“Only for Private Circulation”

Why international trade?

Definition of international trade

Domestic and international trade

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Differences between domestic and international trade

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Disadvantages of international trade

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NOTES Features of import

Why countries export

Significance of importing and exporting

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Trade performance of India

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REGULATIONS FOR EXPORT

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Procedure for obtaining IEC number

Final checklist of documents for IEC number

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Foreign Trade (Development and Regulation) Act, 1992

Main features of Foreign Trade Act, 1992

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Section 3 talks about powers

Section 4 – It relates to the continuance of existing orders

Section 5- Export and Import policy

Section 6- Appointment of Director General

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Section 9- This section deals with issue, suspension, and cancellation of

Section 12- Deals with penalty and confiscation

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Applicability of FEMA Act

Who comes under the category of Person in FEMA?

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Major Provisions of FEMA Act (1999)

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Following are three methods of pre-shipment inspection

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In-process quality control

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Importance of pre-shipment and quality control act

Exchange Control Manual

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Objectives of foreign trade policy of India

Important highlights of India’s foreign trade policy (2015-2020)

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EXPORT IMPORT CONTRACTS