export import procedure

PGDIEM- SEM I

Exim Policy &

Export Procedure & Documentation

(102)

(I)

Preliminaries For Exports

Registration IEC,

Registration of Exporters/Importers

• All intending importers/ exporters are required to register themselves

with the following authorities before commencing business;

– DGFT( regional authority) for obtaining Importer-Exporter Code

Number (IEC Number)

– Concerned Export Promotion Councils / Federation of Indian

Export Organization) for obtaining Registration- cum Membership Certificates (RCMC)

– Registration with Value added Tax Authorities – Registration with Central Excise Authorities

Registration of Exporters /Importers

• Importer Exporter Code Number (IEC)

– No person is allowed to export or import goods

without obtaining an Importer-Exporter Code

Number, from the regional authority, unless

specifically exempted, under any other provision of

FTP.

– Exporter of goods to Nepal or Myanmar through

Indo-Myanmar border areas, are exempted,

provided that the CIF value per consignment, is

below Rs. 25,000.00.

Registration of Exporters /Importers

(cont)

• Application For Grant Of IEC Number

– An application for grant of IEC number shall be made by the

Registered Office/ H.O., of the applicant, to the Regional

Authority, (DGFT-Regional Office), under whose jurisdiction, the Registered Office in case of the company, or H.O. in case of others, falls in the Ayyat-Niryat Form, and shall be

accompanied by:

• DD or Bank Receipt for Rs. 1000.00

• ST registration certificate or passport copy (for an

individual), or copy of the legal authority letter when the application is signed by an authorized signatory.

• Certificate from banker of the firm as required

• A copy of PAN card duly attested, copies of passport size

Registration of Exporters Contd..1

• The regional Office concerned, will grant an IEC number

to the applicant, in the prescribed format. A copy of such

certificate, shall also be endorsed to the banker.

• An IEC number allotted, shall be valid, for all its

branches/ divisions / units/ factories, as indicated on the

IEC number.

• To facilitate collection of license / other documents,

identity cards are issued by Regional Authority, to the

authorized representative of the applicant.

Registration With EPCs

• Registration with Export promotion Councils/ Commodity

Boards/ Authorities

– To enable exporters avail of benefits/ concessions given under

the FTP, they are required to register with concerned EPC/ C.B /or authority and obtain an registration –cum-

membership certificate (RCMC)

– The Exporter is required to apply in the prescribed format to

EPC relating to their main line of business

– Status Holder can also obtain RCMC from FIEO.

– Application for obtaining RCMC, to be made in prescribed

manner & accompanied by IEC code number. If application is granted, EPC or FIEO will grant status of the exporter as

Registration With VAT Authorities

• Registration with Value added Tax Authorities (VAT)

– Goods which are to be shipped out of the country

for exports are eligible for are eligible for

exemption from both VAT & CST.

– For this , the exporters are required to register

themselves, with the VAT authorities of the state, in

which they are located.

– The registration has to be done in the manner

Registration With Central Excise & PAN

• Registration with Central Excise Authorities

– Goods meant for export are exempt from CED.

– For this the manufacturer has two options :

• either they can deposit CED at the time of clearance from

factory

• or take refund or avail procedure for export of goods

without payment at the time of clearance.

• Obtaining PAN

– Exporters & importers who obtain the IEC number

are also required to obtain PAN. An application in

form number 49A has to be submitted

Other Registrations

• Any exporter who wants to export his goods needs to

obtain PAN based Business Identification Number

(BIN) from DGFT prior to filing of Shipping Bill for

clearance of export goods.

• The exporter must also register themselves to the

authorized foreign exchange dealer code & open a

current account in the designated bank for credit of

any drawback incentive.

• All exporters intending to export under export

promotion schemes need to get their licenses, DEEC

Books

(II)

Categories Of Exports

Physical Direct & Indirect

Deemed Exports

Categories of Exporters

• Exporter

– Means a person, who exports or intends to export and holds an

importer-exporter code number, unless otherwise specifically exempted

• Manufacturer Exporter

– Manufacturer exporter means a person, who exports goods

manufactured by him, or intends to export such goods

• Merchant Exporter

– Merchant exporter means a person, engaged in trading activity

and exporting or intending to export goods.

Categories of Exporters (Cont)

• Supporting Manufacturer , means any persons who

manufactures any product or part/ accessories/ components of that product. Name of supporting manufacturer as well as exporter must be endorsed on export documents.

• Third Party exports means exports made by an exporter or

manufacturer on behalf of another exporter(s). In such

cases, export documents such as shipping bills shall include name of both manufacturer exporter/manufacturer & third party exporters. BRCs, GR declaration, export order & invoice should be in the name of third oarty exporter.

Categories of Exporters (Cont)

• Service Exporter means a person providing:

– Supply of service from India to any other country

– Supply of service to a service consumer of any other

country in India

– Supply of service from India through commercial or

physical presence in the territory of another country.

– Supply of service in India relating to exports paid in FFE • Services normally means services recognized by GATT /

WTO’S Agreement & includes 161 tradable services covered under GATS & where payment for services is received under FFE.

Deemed Exports

• Deemed Exports refers to those transactions in

which goods supplied do not leave the country &

payment for such supplies is received either in

Indian Rupees or in FFE.

• Following categories of supplies by main/sub

contractors shall be regarded as “deemed exports”

under FTP, provided goods are manufactured in

India:

– Supply of goods under advance authorization/

DFIA

Deemed Exports (cont)

– Supply of capital goods to holders of authorization

under EPCG scheme.

– Supply of goods to projects funded by multilateral or

bilateral agencies or funds as notified by DEA.

– Supply of capital goods to fertilizer plants.

– Supply of goods to power projects & refineries.

– Supply to projects funded by UN agencies & nuclear

Benefits For Deemed Exports

•

_{Deemed exports, shall be eligible for any/ all of}

the following benefits, in respect of manufacture &

supply of goods, qualifying as deemed exports

– Advance authorization/ DFIA

– Deemed export drawback.

– Exemption from terminal export duty where

supplies are made against ICB. In other cases

refund of terminal excise duty will be given.

Benefits For Deemed Exports (cont)

– In respect of supplies made against the Supplier

Authorization / DFIA in terms of paragraph 8.2(a)

of FTP, supplier shall be entitled to Advance

Authorization / DFIA, for intermediate supplies.

– If supplies are made against Advance Release

Order (ARO) or Back to Back Letter of Credit

issued against Advance Authorization / DFIA, in

terms of paragraphs 4.1.11 and 4.1.12 of FTP,

suppliers shall be entitled to benefits listed in

paragraphs 8.3(b) and (c) of FTP, wherever is

applicable

.

Export & Trading Houses

• Export & Trading Houses: Merchant as well as Manufacturer

Exporters, Service Providers, EOUs & units located in SEZs , AEZs, Electronic Hardware Technology Parks (EHTPs),

Software Technology Parks (STPs) & Bio-Technology Parks (BTPs) shall be eligible for status.

• Status is calculated on total FOB export performance during

current plus previous three years (taken together) upon exceeding limit given below:

– EXPORT HOUSE (EH): Rs. 20 Crores

– STAR EXPORT HOUSE (SEH): Rs. 100 Crores – TRADING HOUSE (TH): Rs. 500 Crores

– STAR TRADING HOUSE (STH): Rs. 2500 Crores

Export & Trading Houses Contd.

• Status holder will be eligible for a number of facilities including : – Authorization & customs clearance for both imports &

exports, on self-declaration basis.

– Fixation of input-output norms on priority within 60 days

– Exemption from compulsory negotiation of documents through

banks

– 100% retention of foreign exchange on EEFC account

– Enhancement of normal repatriation period from 180 days to

360 days.

– Exemption of providing Bank guarantee in schemes under

FTP.

– SEH & above to be permitted to establish export warehouses

(III)

Shipping Documents &

Terms Used In Shipping

III(a)

Documents For Declaration Of Goods

Under Foreign Exchange Rules

• Section 7 of FEMA 1999, lays down the statutory control

concerning exports.

• Under FEMA regulations ( number 3), every exporter of goods

or software in physical form or through any other form, either directly or indirectly, to anyplace outside India ( other than Nepal & Bhutan) shall furnish to the specified authority a

declaration in prescribed form & supported by such evidence as may be specified.

• Certain goods & services like trade samples, personal effects,

personal gifts, goods being sent for testing, defective goods being sent outside for repair etc are exempted from the above.

Documents For Declaration Of Goods

Under Foreign Exchange Rules

• The appropriate declaration forms are :

– GR Forms : To be completed in duplicate for all exports

(other than by post) including export of software in physical form.

– SDF Form : In duplicate and appended to the shipping Bill

for exports declared to customs offices notified by Central Government which have introduced EDI system for

processing Shipping Bill.

– PP Form : for exports by post

– SOFTEX : To be completed in triplicate for export of

software otherwise than in physical form ie. Magnetic tapes, disks & paper media.

GR Form

• GR Form is an exchange control document required by RBI. The

exporter through the GR Form has to assure to the RBI that the export proceeds will be realized within 180 days.

• It is submitted in duplicate, to the customs, at the port of shipment

along with the Shipping Bill & the customs certify the value declared by the exporter & also record the assessable value.

• Customs returns one copy to exporter & retains the original for

transmission to RBI

• The exporter is required to negotiate the shipping documents, through

his bankers (authorized dealers), along with the GR Form, within 21 days of the shipment.

• The authorized dealer reports to the RBI after negotiation of

documents & has to retain the documents till the full exports proceeds have been realized, & thereafter send the documents to RBI.

Electronic Data Interchange (EDI)

• Electronic data Interchange can be used to electronically transmit

documents such as purchase orders, invoices, shipping bills, receiving advices and other standard business correspondence.

• Coping with the increasing imports/exports the Excise & Customs has

computerized the manual process of assessment of Bills of entry, clearing of shipping bills for export & all documents relating to imports & exports are being processed on-line

• At present all types of bills of entry for import of goods under export

related schemes, e.g., 100% EOUs, EPCG scheme, EPZ, STP, EHTP, DEPB, DEEC, & imports for research purposes are being processed on EDI system.

• A new centralized electronic data system will be in place at major

ports, airports by the end of the year (2008), for speedy and hassle-free clearance of exports and imports as well as to reduce delays in

SDF Forms

• On account of introduction of EDI system at certain customs

offices, where shipping bills are processed electronically, the existing declaration in Form GR, is replaced by declaration in Form SDF ( statutory declaration form) .

• SDF form is to be submitted in duplicate, annexed to the relative

shipping bill to the concerned commissioner of customs.

• After verifying & authenticating the declaration, the commissioner

hands over to the exporter, exchange control copy of the shipping bill & the SDF form annexed thereto.

• This must be submitted to the authorized dealer, within 21 days

from the date of export, along with other shipping documents for negotiation.

• The manner of disposal of the shipping bill & the SDF form

SOFTEX Forms

• The exporter should submit declaration in Form SOFTEX in

triplicate in respect of export of computer software & audio/

video/ television software to the concerned designated official of GOI at STPI/ EPZ/FTZ/SEZ for valuation/ certification not later than 30 days from the date of invoice.

• The designated official may also certify the SOFTEX forms of

EOUs which are registered with them.

• In respect of long duration contracts, where the exporter bills the

client periodically, the exporter can submit a combined SOFTEX form of all invoices including advance remittance.

• Disposal of SOFTEX forms is done as per prescribed procedure in

Export Of Goods & Services Regulations, 2000. Duplicate copy of SOFTEX along with a copy of the invoice may be retained by

Documents For Transportation Of goods

• The documents required for transportation of goods are: – Airway Bill or Air consignment Note

– Bill Of Lading – Mate Receipt

– Combined transport document : ICDs have been set up

at various centers within the country for convenience of exporters.The movement of goods from ICDs to the

destination is covered by the Combined transport document.

Airway Bill or Air Consignment Note

• The receipt issued by an airline company or its agent for

carriage of goods, is called airway bill (AWB) or air-consignment note.

• It is not a document of title and it is not issued in a negotiable

form.

• The goods are delivered to the consignee mentioned in the AWB,

after identifying himself as the party named in the AWB as the consignee / receiver, against payment of charges if any.

• It is therefore desirable to cosign the goods in the name of the

foreign corresponding bank, as it will enable us to retain the control of the goods, till payment is made/ documents are accepted for payment.

Mate’s Receipt

• Mate’s receipt is a receipt issued by the

commanding officer of the ship when the cargo is

loaded on the ship.This receipt is a prima facie

evidence that goods are loaded in the vessel.

• Mate’s receipt is first handed over to the Port Trust

authorities & on receipt of port dues, the Port Trust

authorities, hand the mate’s receipt to the exporter

or his agent.

Mate’s Receipt (cont)

• The mate’s receipt has to be handed over shipping

company for obtaining the Bill of Lading.

• The mate’s receipt is a transferable document &

can be of two types

– Clean mate’s Receipt : This signifies that the goods have

been received well in order, properly packed & without any defect or damages

– Qualified Mate’s receipt: This signifies goods have not

been packed properly or received damaged. In this case the shipping company does not take any responsibility for damage in transit.

Bill of Lading

• Bill of Lading (B/L) is a document issued by the shipping company or

its agent acknowledging the receipt of goods on board the vessel, and undertaking to deliver the goods in the like order and condition as received, to the consignee or his order , provided the freight & other charges as mentioned have been duly paid. It is also a document of title to the goods & as such is freely transferable by endorsement & delivery.

• B/L serves three main purposes :

– As a document of title to the goods

– As a receipt from the shipping company

Types Of Bill of Lading

Clean B/L B/L acknowledging receipt of goods apparently in good order & condition & without any qualification is a clean B/L. Such B/L does not contain any negative remark about condition of goods.

Claused B/L B/L with a remark such as “goods insufficiently packed” is known as claused B/L.

Transshipment or through B/L

For multimode transportation, or when another shipping company’s vessel is used, this B/L is issued.

Stale B/L A B/L held too long (normally more than 21 days)), before negotiations, is termed stale B/L.

Freight paid B/L B/L issued when freight is paid at the time of shipment is a freight paid B/L

Contents Of The Bill Of Lading

• Name & logo of the Shipping Line • Name & address of the shipper • Name & number of vessel

• Name of the port of lading, port of discharge & place of delivery • Marks & container number, container seal number

• Packing & container description

• Total number of packages & containers

• Description of goods, gross weight, volume • Amount of freight paid or payable

• Shipping Bill number & date

Documents For

Customs Clearance Of Goods

• The Shipping Bill is the main document required by customs

for clearance of goods for shipment.

• Where the goods are to be cleared by Land Customs, Bill Of

Export is prepared instead of the Shipping Bill.

• Bill Of Exports are also of four types – White for export of duty free goods

– Green for export of goods under claim for duty drawback – Yellow for export of dutiable goods

Shipping Bill

• Shipping Bill is an important document required by

the customs authorities for allowing shipment.

• It is prepared by the exporter & it contains the name

of the vessel, name of port of discharge, country of

final destination, , exporter’s name & address,

details about packages, number & description of

goods, marks & numbers, quantity & details about

each case, FOB price, total number of packages

with the weight & value and the name & address of

the importer.

Shipping Bill (cont)

• The shipping Bills are of following types:

– Duty Free Shipping Bill : No duty or cess

applicable

– Dutiable Shipping Bill : Goods subject to

export duty / cess

– Drawback Shipping Bill :

– Shipping Bill for shipment Ex-bond.: For goods

Documents Required For Processing Of

Shipping Bill:

• The following documents are required for the processing of the Shipping

Bill:

– GR forms (in duplicate) for shipment to all the countries.

– 4 copies of the packing list mentioning the contents, quantity, gross

and net weight of each package.

– 4 copies of invoices which contains all relevant particulars like

number of packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct & full description of goods etc.

– Contract, L/C, Purchase Order of the overseas buyer. – AR4 (both original and duplicate) and invoice.

Other Documents

• Other documents as shown in the following

pages are also necessary and required to

carry out various formalities for shipment

& negotiation of documents and for meeting

the regulations in the importing country.

Aligned Documentation System

• Aligned Documentation System is based on the

UN layout key.

• Under this system, different forms used in the

international trade transactions are printed on

paper of the same size & in such a way that the

common items of information are given in the

same relative slots in the same piece of paper.

Aligned Documentation System (cont)

• Commercial Documents

– These are required for effecting physical transfer of goods &

their title from the exporter to the importer & the realization of export proceeds. Out of the 16 commercial documents in the export documentation, as many as 14, have been standardized and aligned to one another. These are proforma invoice,

commercial invoice, packing list, shipping instructions,

intimation for inspection, certificate of inspection, insurance declaration, certificate of insurance, mate’s receipt, B/L,

application & certificate of origin, shipment advice & negotiation of documents.

– Shipping order & bill of exchange could not be brought under

Aligned Documentation System (Cont)

• Regulatory documents

– Regulatory pre-shipment export documents are

prescribed by different government department &

bodies in order to comply with various rules &

regulations under the relevant laws governing

export trade such as export inspection, etc.

– Out of the nine regulatory documents, four have

been standardized and aligned. These are Shipping

Bill, Exchange Control Declaration (GR Form),

port trust copy of the Shipping Bill for payment of

Port Charges.

Packing List

• The exporter prepares the packing list to facilitate the buyer

to check the shipment. It contains the detailed description of

the goods, packed in each case, their gross & net weights

etc.

• The packing list also contains all basic information about

the export order like name & address of the buyer & the

exporter, purchase order number & date etc.

• The packing order is the basic document used in the

preparation of further documents like proforma invoice &

so on.

Proforma Invoice

• The starting point of the export contract is in the

form of offer made by the exporter to the foreign

customer.

• The offer made by the customer is in the form of

the Proforma Invoice.

• It is a quotation given as a reply to an enquiry.

• It normally forms the basis of all trade

transactions & enables importer to obtain import

license, if required.

Proforma Invoice (cont)

• Contents of Proforma Invoice are generally the

following:

– Name & addresses of exporter & importer

– Mode of transportation, port of discharge, final destination – Buyer’s & seller's reference numbers / dates

– Description of the goods, mode of packing, total number of

packages, expected total weight etc.

– Origin of goods

– Price offer on FOB & CIF Basis – Basic terms & conditions of sale.

Commercial Invoice

• Commercial invoice is the basic export document & contains all

information required for making other documents.

• It is prepared by the exporter after the execution of the export order

giving details about the goods shipped

• It should be addressed to the consignee as per the letter of credit. • It is the basic evidence of the ‘contract of sale’ or purchase &

therefore must be prepared strictly in accordance to the terms 7 conditions mutually agreed between the buyer & seller.

• It should contain basic details as in the proforma invoice, the detailed

description of goods, as well as the final packing lists and the markings on packages plus details of shipment of goods, name & number of vessel/ voyage.

• This document is used for various export formalities, incentive claims,

Certificate Of Origin

• The importers in several countries require a Certificate Of

Origin without which clearances to import is refused.

• The certificate of origin states that the goods exported are

originally manufactured in the country whose name is

mentioned in the certificate.

• Certificates of origin are required when:

– Goods produced in a particular country are subject to preferential

tariff rates in the foreign market at the time of importation

– The goods produced in a particular country are banned for import

Types Of Certificate Of Origin 1

• (1) Certificate Of Origin for Availing Concessions under

GSP :

– Required by countries like France,Germany, Italy, Benelux

countries,UK, Australia, Japan, USA etc., which extend GSP benefits & are issued by specialized agencies like:

• Export inspection agencies

• Joint DGFT, Commodity Boards & their regional offices • Development Commissioner, Handicrafts

• Textile Committee for textiles

• Marine product export development authority for marine

products

Types Of Certificate Of Origin (cont)

• (2) Non-preferential Certificate Of Origin:

– These are normally required for clearance of goods by all

importers & are issued by the Chamber of Commerce of the exporting countries or by Trade Association of the importing country.

• (3) Certificate For availing concessions Under

Commonwealth Preferences:

– This is also known as “Combined Certificate Of origin &

value” & is required by two commonwealth countries, Canada & New Zealand for concessions under

Commonwealth preferences.

– These have to be obtained from the High commission of the

Types Of Certificate Of Origin (cont)

• (4) Certificate For Availing Concessions Under Other

System Of Preferences

– Certificates of Origin are also required for tariff

concessions under the Global system Of Trade

Preferences (GSTP), Bangkok agreement (BA),

SAPTA,

– Export Inspection Councils have the authority to

print blank Certificates of Origin & these are

issued by EPCs, DCs of EPZs, EIC, FIEO etc.

Consular Invoice

• Consular Invoice is a document required mainly by the African &

certain other countries like Kenya, Uganda, Tanzania, Mauritius, Australia, New Zealand Nigeria, Ghana etc.

• The exporter is required to submit 3 copies of the Commercial invoice

& related documents for certification to the respective Embassy & one copy is returned to him after certification.

• Balance copies are sent by the Embassy to the customs department of

the importing country for verification upon arrival of goods & calculation of the import duty payable.

• The consular certified copy is negotiated by the exporter along with

Customs Invoice

• Countries like USA, Canada etc need customs invoice

• It is generally made out on a special form presented by the

customs authorities of the importing country & helps for

allowing entry of goods in the importing country at

preferential tariff rates.

• The invoice forms are generally available at the consular

office of the importing country and are required to be

Bill Of Exchange / Draft

• A Bill Of Exchange also known as Draft contains an order from the

creditor to the debtor to pay a specified amount to a person mentioned therein.

• The maker of the Bill is known as “Drawer” & the person who is

directed to pay is called the “Drawee”

• The person who is entitled to receive the amount is called “Payee” • A Bill Of Exchange is of two types: (i) Sight draft (immediate

payment) & (ii) Usance Draft ( Credit – Usance 30 days or usance 60 days)

• Unless & until the draft is retired, the negotiating collecting bank

does not hand over the shipping documents & the buyer can not take delivery of goods.

Legalization & Attestation Of Documents

• Documents issued in one country ('Source Country') which need to be

used in another country ('Destination Country') must be

'authenticated' or 'legalized' before they can be recognized as valid in the foreign country. This is a process in which various seals are

placed on the document.

• The number and type of authentication certificates depends on the

nature of the document and whether or not the foreign country is a party to the multilateral treaty on "legalization" of documents.

• "Embassy (Consular) Legalization" of official documents is a

procedure of confirmation of the validity of originals of official

documents or certification of authenticity of signatures of the officials, authorized signatures on documents, and also the validity of prints of stamps, seals by which the document is fastened.

III(b)

Terms Used In Shipping

(INCO Terms)

INCO Terms

• Incoterms are internationally accepted commercial

terms, developed in 1936 by the International Chamber

of Commerce (ICC), in Paris.

• Incoterms 2000 define the respective roles of the buyer

and seller, in the agreement of transportation and

other responsibilities and clarifies, when the ownership

of the merchandise takes place.

• Incoterms are used in union with a sales agreement or

other methods of sales transactions and define the

responsibilities and obligations of both, the exporter

and importer, in Foreign Trade Transactions.

INCO Terms

– Incoterms 2000, is mainly concerned with the

loading, transport, insurance and delivery

transactions.

– Its main function is the distribution of goods and

regulation of transport charges.

– Another significant role played by Incoterms is to

identify and define the place of transfer and the

transport risks involved.

– Incoterms make international trade easier and

help traders in different countries to understand

one another & are most widely used international

contracts

INCO Terms- Objectives

•

_{Incoterms safeguard the following issues in the}

Foreign Trade contract or International Trade

Contract:

– To determine the critical point of the transfer of the

risks of the seller to the buyer, in the process of

forwarding of the goods (risks of loss, deterioration,

robbery of the goods).

– To enable the person who supports these risks to

make arrangements in term of insurance & other

arrangements.

– To specify who is going to subscribe the contract of

INCO Terms- Objectives

• To distribute between the seller and the buyer, the logistic and administrative expenses, at the various stages of the process

• It is important to define, who is responsible for packaging, marking, operations of handling, loading and unloading, inspection of the goods.

• Need To confirm and fix respective obligations, for the

achievement of the formalities of exportation and importation, the payment of the rights and taxes of importation, as well as the sending of the documents.

• There are 13 Incoterms, globally adopted by the International Chamber of Commerce.

INCO Terms- Groups

• Incoterms 1990 / 2000 - which defines all trade terms are divided

into four basic groups.

• Group E comprise of Departure term. Where the seller makes the

goods available to the buyer at the seller's own premises, (EXW) - Ex Works

• Group F: Comprise of Shipment terms - Main carriage unpaid.

Where the seller is called on to deliver the goods to a carrier named by the buyer, (FCA, FAS and FOB). These are shipment contracts with the shipment point named, and carriage unpaid by the seller.

– FCA - Free Carrier

– FAS - Free Alongside Ship – FOB - Free On Board

INCO Terms- Groups

• Group C: Comprise of Shipment terms - Main carriage

paid. Where the seller has to contract for carriage, but

without assuming the risk of loss of or damage to the

goods or additional costs due to events occurring after

shipment and dispatch, (CFR, CIF, CPT and CIP).

• These are shipment contracts, with the destination point

named, and carriage paid by the seller.

• There are two critical division points, one for costs, the

other for risk.

• Costs being assumed by the seller until the destination

point; risk being transferred to the buyer at the point of

shipment.

INCO Terms- Groups

• In CIF & CIP terms, the seller arranges the

contract of carriage and payment of freight.

– CFR -

Cost and Freight

– CIF - Cost, Insurance and Freight

– CPT - Carriage Paid To

INCO Terms- Groups

• Group D: Comprise Of Arrival Terms. Where the seller

has to bear all costs and risk needed to bring the goods

to the country of destination, (DAF, DES, DEQ, DDU

and DDP). These are arrival contracts.

– DAF - Delivered At Frontier

– DES - Delivered Ex Ship

– DEQ - Delivered Ex Quay

– DDU - Delivered Duty Unpaid

– DDP - Delivered Duty Paid

Ex-Works Contract (EXW)

• Title and risk pass to buyer, (including liability for

payment for all transportation and insurance costs)

from the seller's door.

• Used for any mode of transportation.

• Seller : In EXW shipment terms the Seller (Exporter)

provides the goods for collection by the Buyer

(Importer) on the seller’s or exporter's premise.

• Responsibility for the seller is to put the goods, in a

good package which is adaptable and disposable by

the transport.

Ex-Works Contract (EXW)

• Buyer : The buyer or Importer, arranges

insurance for damage in transit goods & have to

bear all costs and risks involved in shipment

transactions.

• (However, if the parties wish the seller to be

responsible for the loading of the goods on

departure and to bear the risks and all the costs of

such loading, this should be made clear by adding

explicit wording to this effect in the contract of

FCA -Free Carrier (…. Named place)

• "Free Carrier" means that the seller fulfils his obligation to

deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point.

• If no precise point is indicated by the buyer, the seller may

choose within the place or range stipulated where the carrier shall take the goods into his charge.

• When, according to commercial practice, the seller's assistance

is required in making the contract with the carrier (such as in rail or air transport), the seller may act at the buyer's risk and expense.

• This term may be used for, any mode of transport, including

FCA -Free Carrier (…. Named place)

• "Carrier" means any person who, in a contract of carriage,

undertakes to perform or to procure the performance of carriage by rail, road, sea, air, inland waterway or by a combination of such modes.

• If the buyer instructs the seller to deliver the cargo to a person, e.g.

a freight forwarder who is not a "carrier", the seller is deemed to have fulfilled his obligation to deliver the goods when they are in the custody of that person.

• "Transport terminal", means a railway terminal, a freight station, a

container terminal or yard, a multi-purpose cargo terminal or any similar receiving point.

• "Container" includes any equipment used to unitize cargo, e.g. all

types of containers and/or flats, trailers etc and applies to all modes of transport.

FAS - ( Free Alongside Ship) Contract

• FAS- Free Alongside ship: Title and risk pass to buyer, including

payment of all transportation and insurance cost, once delivered alongside ship by the seller.

• Used for sea or inland waterway transportation. The export clearance

obligation rests with the seller.

• In FAS price includes all costs incurred in delivering the goods

alongside the vessel, at the port or nominated place of the buyer, but seller does not pay charges for loading on board of vessel, as well as ocean freight charges and marine insurance.

• Seller: The responsibility of the seller are fulfilled, when goods are

placed cleared along the ship.

• Buyer: Buyer or Importer bears all expenses and risks of loss or

Free On Board (FOB) Contract

• FOB is one of the most frequently used price

quotation, in the international market.

• Under this quotation, the exporter undertakes to pay

all expenditure till the loading of goods, on board

the ship, including documentation charges.

• All expenditure thereafter, such as ocean freight,

marine insurance, unloading charges etc are borne

by the importer.

Free On Board (FOB) Contract (cont)

• The sellers obligations are :

– To provide goods & the commercial invoice , or its equivalent

electronic message, in conformity with the contract of sale.

– To obtain any export license or other official authorization,

and carry out all customs formalities, necessary for exportation of goods.

– To deliver the goods on board of vessel, at the port of

shipment, on the date, or within the period, stipulated.

– To give the buyer sufficient notice, that, the goods have been

delivered on board the vessel

– To pay the costs of checking quality, measuring, weighing,

Free On Board (FOB) Contract ( Cont)

• The buyer’s obligations in a FOB contract are:

– To pay the price as provided, in the contract of sale

– To obtain import license or other official authorization &

carry out all customs formalities, for the importation of goods

– To take delivery of goods, when the goods have been

delivered, in accordance with the terms of the contract.

– To reserve the necessary shipping space and give due notice

of the same, to the exporter ; &

– To bear all costs and risks of the goods, from the time, when

Cost & Freight (CFR) Contract

• In this term the exporter bears the cost of carriage or transport to

the selected destination port, & the risk transferable, to the buyers at the port of shipment.

Seller: chooses the carrier, concludes and bears the expenses by paying freight to the agreed port of destination, unloading not included. The loading of the duty-paid goods on the ship falls on him as well as the formalities of forwarding. On the other hand, the transfer of risks is the same one as in FOB.

Buyer: The buyers supports all the risk of transport. When the goods are delivered aboard by ship at the unloading port, buyer receives it from the carrier and takes delivery of the goods from nominated destination port.

CIF Contract

• Cost, insurance & freight means, that, the seller has

the same obligations as under the FOB contract, but

with the addition, that, he has to organize the marine

freight & procure marine insurance, against the

buyer’s risk of loss or damage, to the goods during

carriage.

• The seller contracts the insurance and pays the

CIF Contract(cont)

• The seller has the following additional obligations as

compared to FOB Contract :

– To arrange for the carriage of the goods to the named port of destination by the usual route in a sea-going vessel & to pay its costs & freights.

– To obtain cargo insurance as agreed in the contract & to provide the buyer with the insurance policy or other evidence of insurance cover.

• The above obligations are excluded from the buyer’s

obligations. Buyer still has the obligations, as indicated in

the “ buyers’ obligations, in FOB contracts.

CPT- Carriage Paid To….

• "Carriage paid to... " means that the seller pays the freight for the

carriage of the goods to the named destination. The risk of loss of or damage to the goods, as well as any additional costs, due to events

occurring after the time the goods have been delivered to the carrier, is transferred from the seller to the buyer, when the goods have been

delivered into the custody of the carrier.

• "Carrier" means any person who, in a contract of carriage, undertakes to

perform or to procure the performance of' carriage, by rail, road, sea, air, inland waterway or by a combination of such modes.

• If subsequent carriers are used for the carriage to the agreed destination,

the risk passes when the goods have been delivered to the first carrier.

DAF- Delivered At Frontier(Named Place)

• "Delivered at Frontier" means that the seller fulfils his

obligation to deliver when the goods have been made available, cleared for export, at the named point and place at the frontier, but before the customs border of the adjoining country.

• The term "frontier" may be used for any frontier including that of

the country of export. Therefore, it is of vital importance that the frontier in question be defined precisely by always naming the point and place in the term.

• The term is primarily intended to be used when goods are to be

carried by rail or road, but it may be used for any mode of transport.

DES - DELIVERED EX SHIP

(... named port of destination

)

• “Ex Ship" means that the seller fulfils his obligation to

deliver, when the goods have been made available to the buyer on board the ship, uncleared for import at the

named port of destination.

• The seller has to bear all the costs and risks involved in

bringing the goods to the named port of destination. This term can only be used for sea or inland waterway

DEQ -"Delivered Ex Quay (duty paid)"

• "Delivered Ex Quay (duty paid)" means that the seller fulfils his

obligation to deliver when he has made the goods available to the buyer on the quay (wharf) at the named port of destination. The seller has to bear all risks and costs including duties, taxes and other charges of delivering the goods thereto.

• This term should not be used if the seller is unable directly or

indirectly to obtain the import license.

• Buyer has to clear the goods for importation and pay the duty. • If the parties wish to exclude from the seller's obligations some of

the costs payable upon importation of the goods (such as value added tax (VAT)), this should be made clear by adding words to this effect: "Delivered ex quay, VAT unpaid (... named port of destination)",.

DDU- "Delivered duty unpaid"

• Delivered duty unpaid" means that the seller fulfils his

obligation to deliver when the goods have been made

available at the named place in the country of

importation.

• The seller has to bear the costs and risks involved in

bringing the goods thereto (excluding duties, taxes and

other official charges payable upon importation) as

well as the costs and risks of carrying out customs

formalities.

• The buyer has to pay any additional costs and to bear

DDU- "Delivered duty unpaid“(cont)

• If the parties wish the seller to carry out customs

formalities and bear the costs and risks resulting there

from, this has to be made clear by adding words to this

effect.

• If the parties wish to include in the seller's obligations

some of the costs payable upon importation of the

goods (such as value added tax (VAT)), this should be

made clear by adding words to this effect: Delivered

duty unpaid, VAT paid, (... named place of destination),

• This term may be used irrespective of the mode of

DDP- Delivered Duty Paid

• "Delivered duty paid" means that the seller fulfils his obligation to

deliver when the goods have been made available at the named place in the country of importation.

• The seller has to bear the risks and costs, including duties, taxes and

other charges of delivering the goods thereto, cleared for importation whilst the DDU should be used.

• If the parties wish to exclude from the seller's obligations some of the

costs payable upon importation of the goods (such as value added tax (VAT)), this should be made clear by adding words to this effect:

"Delivered duty paid, VAT unpaid (...named place of destination)".

(IV)

IV(a)

Excise Clearance Benefit/ Rebate

• Excise Duty

– Excise duty is a tax imposed by the Central government

on goods manufactured in India.

– It is collected at source I.e. before removal of goods

from the factory premises

– Exporters are totally exempted from payment of CED

– However, necessary clearances must be obtained by the

Excise Clearance Benefit/ Rebate (cont)

• (i) Export Under Rebate

– Under this system, an exporter is required to pay

CED initially & then claim it from central excise

department after shipment of goods.

• (ii) Export under Bond

– Under this system, an exporter is required to execute

a bond, in favor of excise authorities, for a sum

equivalent to the amount of excise chargeable on

such goods. Such bond should be supported by an

appropriate bank guarantee.

Excise Clearance Under Rule 18 & Rule 19

of Central Excise Rules

• Export Procedures for Excise - There are basically

two procedures for dispatching the goods out of

India.

– (a) (Rule 18 of Central Excise Rules).

• In the first procedure, duties are paid and subsequently

rebate (refund) is claimed after exportation of such goods. Alternatively, rebate is granted of duty paid on inputs used in the exported final product.

• Rebate claim had to be made to A.C. of Central excise

along with original of ARE-1 & other prescribed documents.

Excise Clearance Under Rule 18 & Rule 19

of Central Excise Rules (cont)

– (b) (Rule 19 of Central Excise Rules).

• The other procedure is to export goods under bond

without payment of excise duty.

• On actual exportation of goods and on presentation

of necessary proofs regarding exports, the bond is released. Regular Exporters can have a running bond for this purpose.

• A merchant exporter has to furnish bond in form B-1

Conditions For Central Excise

Clearance

• As a part of further simplifications and

rationalization of excise rules announced by the

Finance Minister a new set of Central Excise

Rules, 2001, has come into effect from 1

March

2002.

• The procedure for export of excisable goods

(except to Nepal & Bhutan) is subject to certain

conditions & limitations.

Conditions & Limitations

( Under payment of CED)

• The excisable goods can be exported directly from a factory

or a warehouse after the payment of excise duty

• The excisable goods must be exported within 6 months from

the date within which they were cleared for export from the

factory of manufacture or his warehouse.

• The market price of the excisable goods at the time of

exportation is not less than the amount of rebate duty

claimed.

• The amount of rebate of duty admissible is not less than Rs.

Conditions & Limitations

( Without payment of CED)

• The exporter is required to submit a General Bond

( Surety or security) to the Assistant Commissioner of

Central Excise or the Maritime Commissioner for a sum

equivalent to the duty chargeable on the goods.

• The excisable goods must be exported within 6 months

from the the date on which they were cleared for exports

from the factory of manufacturer or his warehouse.

Procedure For Central Excise Clearance

• The following is the procedure for obtaining central excise clearance: – (i) Application to the Assistant Collector/ commissioner of Central

Excise (ACCE)

• The exporter is required to make an application to the

Superintendent or the Inspector of Central Excise, having

jurisdiction over the factory of production or warehouse of the exporter, by filling up 4 copies of ARE-I form, in five copies with distinctive colors.

– (ii) Information to the Range Superintendent

• The ACCE informs the range superintendent, in whose area the

exporter’s factory or warehouse is located. On receiving

Procedure For Central Excise Clearance

(Cont)

• (iii) Sealing of goods :

– The inspector of Central Excise verifies the

goods mentioned in the application and the

particulars of the duty paid or payable.

– If satisfied, he seals each package or the

container in the manner as may be specified by

the Commissioner of Central excise and

(iv)Processing of ARE-I Forms

ARE-I(Original) ARE-II(Duplicate)

The Superintendent or Inspector returns the original & the duplicate to the exporter

ARE-I (Triplicate) The triplicate copy of ARE-I is sent to the Maritime Commissioner at the port of shipment or to the Excise Rebate Audit section in case the rebate is to be

claimed by EDI (Electronic Data Interchange) system of customs.

ARE-I

(Quadruplicate) This copy of ARE-I is retained by the Superintendent or Inspector of Central Excise. ARE-I This copy is returned to the exporter for claiming any

Procedure For Central Excise Clearance

(Cont)

• (v)

Examination of the goods at the place of exports

– At the port of shipment, the exporter presents goods

together with original, duplicate & quintuplicate copies of the ARE-I to the Commissioner of Customs.

– The Commissioner of Customs examines the consignments

and if satisfied, certifies the goods for exports, by an endorsement on all the copies of ARE-I.

– The original & quintuplicate copies are returned to the

exporter and the duplicate copy is sent to the Maritime Commissioner.

Procedure For Central Excise Clearance

(Cont)

• (vi) Submission of the claim

application in form “C”(in triplicate) to Assistant Commissioner of central excise / maritime collector

– Original copy of ARE-I duly endorsed by customs officer

– Duplicate copy of ARE-I received from customs officer in a sealed cover. – Duly attested copy of shipping bill

– Duly attested copy of Bill of Lading or airway bill

Procedure For Central Excise Clearance

(Cont)

• (vii) Verification of the application

– Assistant or Deputy Commissioner of Central Excise compares the

details listed in the different copies of ARE-I & if he is satisfied that the exports are not under claims for duty drawback, he sanctions the rebate.

• (viii) Refund of duty

– If any refundable amount is not paid to the applicant within 3

months from the date of filing the claim, interest at the rate of 20% is paid for the period between the expiry of 3 moths & the date of refund.

• (ix) Cancellation of documents

– If the excisable goods are not exported, the Assistant Commissioner

of Central Excise cancels the export documents on request of the exporter.

IV(b)

Shipment Of Goods

(Sea Shipment)

Shipping & Customs Formalities

• According to Section 40 of Customs Act, the person in charge of

conveyance vessel, vehicle, aircraft etc., can not permit loading of

export cargo, at the customs station, until & unless a formal approval to the export given by the authorized customs officer is presented.

• Before granting permission, the customs officer ensures that the

goods being exported are in accordance with different regulations, particularly in terms of the following:

– Goods must be as declared by the exporter

– The duty or cess leviable thereon has been properly declared &

paid.

– Provision of Export Control order, Export (Quality Control &

Procedure For Shipping &

Customs Clearance

• (a) Preparation & Submission of Export Documentation

required to submit the following documents along with 5 copies of Shipping Bill to the customs appraiser at the Customs House.

– Letter of Credit along with Export Contract or Export Order – Commercial Invoice (2 copies)

– Packing List or Packing Note – Certificate of Origin

– GR Form ( original & duplicate) – ARE-I Form

Procedure For Shipping & Customs

Clearance ( cont 1)

• (b) Verification Of Documents

– The Customs appraiser verifies the details listed in each document

& ensures that all formalities relating to exchange control etc., have been properly complied with by the exporter. If satisfied, he issues a Shipping Bill Number.

• (c) Valuation Of Goods

– The customs appraiser assesses the Shipping Bill and values the

goods.The value as determined by the customs officer, holds good in future transactions, especially for the claim of incentives. All documents are then returned to the exporter, except the following:

• Original copy of GR, to be forwarded to the RBI • Original Copy of Shipping Bill