Documenti di Didattica
Documenti di Professioni
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VS-1018
Certified
V skills
Export Import
www.vskills.in
Proficiency Testing Programme
(Foreign Trade)
Professional
of
Intelligent Communication Systems India
Limited
Export
Import
(Foreign
VS-1018
Copyright 2011
This book is provided on the condition that it shall not by way of trade or otherwise, be lent,
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Disclaimer:
Due care and diligence has been taken while editing and printing this book. Neither the Author, publisher nor the printer of the
book holds any responsibility for any mistake that may have crept in inadvertently. Cubezoid Solutions Private Limited the
publishers, will be free from any liability for damages and loss of any nature arising out or related to the content. All disputes are
subject to the jurisdiction of the competent courts in Delhi.
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FOREWORD
The purpose of this guide is to provide the candidate with general knowledge about export import
business, regulations in international trade, international bodies like WTO, documentation
involved in export import business and basic guidance on how to start an export unit.
The guide covers the practical and procedural aspects of the work related to export import trade
and covers some technicalities of the trade like Incoterms, documentation procedures, government
bodies and various related topics. It also gives an introduction to the international trade,
international trade bodies and some basic knowledge of operations
This goal of this manual is to introduce beginning professionals to all the essential aspects of export
import in a practical manner and to be a source of best answers on the typical questions as why are
export is happening, who are the exporters, what products / services do they export/ import, what
documentation is required to start an export firm, what documentation is required for export trade
and where the pertinent information may be obtained from. Mastering the content of an
appropriate section the user will be able to make his/her own decisions, test them, and ultimately
use recommended tools and approaches for his/her own benefit.
We do not claim that the text we have produced is complete, and this is a general guide only to the
relevant topics. It should be considered as a reference guide only, and doesnt include the entire
topics of Export / Import trade for certification purposes. The certification examination might have
questions outside the purview of this course.
Research Team, Export/Import Trade
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TABLE OF CONTENTS
1. International Trade................................
Trade ................................................................
................................................................................................
..................................................................................
..................................................7
..................7
1.1 Regulations of International Trade ......................................................................................................................8
1.2 Risks in International Trade ................................................................................................................................8
1.3 Top trading nations (2010 estimates) ...................................................................................................................9
1.4 Top traded commodities (Exports)....................................................................................................................10
8. INCOTERMS................................
INCOTERMS................................................................
................................................................................................
.......................................................................................
.......................................................56
....................... 56
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1. INTERNATIONAL TRADE
Trade is the transfer of ownership of goods and services from one person to another. Trade is
sometimes loosely called commerce or financial transaction or barter. A network that allows trade
is called a market. The original form of trade was barter, the direct exchange of goods and services.
Later one side of the barter was the metals, precious metals (poles, coins), bill, and paper money.
Modern traders instead generally negotiate through a medium of exchange, such as money. As a
result, buying can be separated from selling, or earning. The invention of money (and later credit,
paper money and non-physical money) greatly simplified and promoted trade. Trade between two
traders is called bilateral trade, while trade between more than two traders is called multilateral
trade.
Trade exists for man due to specialization and division of labor, most people concentrate on a
small aspect of production, trading for other products. Trade exists between regions because
different regions have a comparative advantage in the production of some tradable commodity, or
because different regions' size allows for the benefits of mass production. As such, trade at market
prices between locations benefits both locations.
International trade is exchange of capital goods, and services across international borders or
territories. In most countries, it represents a significant share of gross domestic product (GDP).
While international trade has been present throughout much of history, its economic, social, and
political importance has been on the rise in recent centuries.
Industrialization, advanced transportation, globalization, multinational corporations and
outsourcing are all having a major impact on the international trade system. Increasing
international trade is crucial to the continuance of globalization. Without international trade,
nations would be limited to the goods and services produced within their own borders.
International trade is in principle not different from domestic trade as the motivation and the
behavior of parties involved in a trade do not change fundamentally regardless of whether trade is
across a border or not. The main difference is that international trade is typically more costly than
domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time
costs due to border delays and costs associated with country differences such as language, the legal
system or culture.
Another difference between domestic and international trade is that factors of production such as
capital and labour are typically more mobile within a country than across countries. Thus
international trade is mostly restricted to trade in goods and services, and only to a lesser extent to
trade in capital, labor or other factors of production. Then trade in goods and services can serve as
a substitute for trade in factors of production.
Instead of importing a factor of production, a country can import goods that make intensive use of
the factor of production and are thus embodying the respective factor. An example is the import of
labor-intensive goods by the United States from China. Instead of importing Chinese labor the
United States is importing goods from China that were produced with Chinese labor.
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Non-acceptance (buyer rejects goods as different from the agreed upon specifications)
Credit risk (allowing the buyer to take possession of goods prior to payment)
Regulatory risk (e.g., a change in rules that prevents the transaction)
Intervention (governmental action to prevent a transaction being completed)
Political risk (change in leadership interfering with transactions or prices)
War and other uncontrollable events.
In addition, international trade also faces the risk of unfavorable exchange rate movements (and,
the potential benefit of favorable movements)
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Country
European Union
USA
Peoples Republic of China
Germany
Japan
France
United Kingdom
Italy
South Korea
Netherlands
Canada
Hong Kong
Singapore
Russia
Mexico
Spain
Belgium
India
Taiwan
Switzerland
Australia
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1.4 Top
Top traded commodities (Exports)
1
2
3
4
5
6
7
8
9
10
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1.658 trillion
1.605 trillion
1.520 trillion
841 billion
416 billion
396 billion
387 billion
320 billion
310 billion
273 billion
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(those on government procurement, bovine meat, civil aircraft and dairy products), but in 1997
WTO members agreed to terminate the bovine meat and dairy agreements, leaving only two.
Uruguay Round
Well before GATT's 40th anniversary, its members concluded that the GATT system was
straining to adapt to a new globalizing world economy. In response to the problems identified in
the 1982 Ministerial Declaration (structural deficiencies, spill-over impacts of certain countries'
policies on world trade GATT could not manage etc.), the eighth GATT round known as the
Uruguay Round was launched in September 1986, Uruguay.
It was the biggest negotiating mandate on trade ever agreed: the talks were going to extend the
trading system into several new areas, notably trade in services and intellectual property, and to
reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were
up for review. The Final Act concluding the Uruguay Round and officially establishing the WTO
regime was signed during the April 1994 ministerial meeting at Marrakesh, Morocco, and hence is
known as the Marrakesh Agreement.
The GATT still exists as the WTO's umbrella treaty for trade in goods
NonNon-Discrimination
It has two major components: the most favoured nation (MFN) rule, and the national treatment
policy. Both are embedded in the main WTO rules on goods, services, and intellectual property,
but their precise scope and nature differ across these areas. The MFN rule requires that a WTO
member must apply the same conditions on all trade with other WTO members, i.e. a WTO
member has to grant the most favorable conditions under which it allows trade in a certain product
type to all other WTO members. Grant someone a special favour and you have to do the same for
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all other WTO members. National treatment means that imported goods should be treated no less
favorably than domestically produced goods (at least after the foreign goods have entered the
market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security
standards et al. discriminating against imported goods).
Reciprocity
It reflects both a desire to limit the scope of free riding that may arise because of the MFN rule,
and a desire to obtain better access to foreign markets. A related point is that for a nation to
negotiate, it is necessary that the gain from doing so be greater than the gain available from
unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialize.
Transparency
The WTO members are required to publish their trade regulations, to maintain institutions
allowing for the review of administrative decisions affecting trade, to respond to requests for
information by other members, and to notify changes in trade policies to the WTO. These
internal transparency requirements are supplemented and facilitated by periodic country-specific
reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO
system tries also to improve predictability and stability, discouraging the use of quotas and other
measures used to set limits on quantities of imports.
Safety valves
In specific circumstances, governments are able to restrict trade. There are three types of
provisions in this direction: articles allowing for the use of trade measures to attain noneconomic
objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in
trade for economic reasons. Exceptions to the MFN principle also allow for preferential treatment
of developed countries, regional free trade areas and customs unions.
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Q2. The member countries of WTO have moved to a Product Patent Regime under
a)
b)
c)
d)
TRIMs
TRIPs
SAPTA
BoP
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Financial management effort: To minimize the risk of exchange rate, fluctuation and
transactions processes of export activity the financial management needs more capacity to cope
the major effort
Customer demand: International customers demand more services from their vendor like
installation and startup of equipment, maintenance or more delivery services
Communication technologies improvement: The improvement of communication
technologies in recent years enable the customer to interact with more suppliers while receiving
more information and cheaper communications cost at the same time like 20 years ago. This
leads to more transparency. The vendor is in duty to follow the real-time demand and to
submit all transaction details
Management mistakes: The management might tap in some of the organizational pitfalls, like
poor selection of oversea agents or distributors or chaotic global organization
Indirect selling
Indirect exports, is simply selling goods to or through an independent domestic intermediary in
their own home county. Then intermediaries export the products to customers foreign markets.
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3.6 Import
The term import is derived from the conceptual meaning as to bring in the goods and services into
the port of a country. The buyer of such goods and services is referred to an "importer" who is
based in the country of import whereas the overseas based seller is referred to as an "exporter".
Thus an import is any good (e.g. a commodity) or service brought in from one country to another
country in a legitimate fashion, typically for use in trade. It is a good that is brought in from another
country for sale. Import goods or services are provided to domestic consumers by foreign
producers. An import in the receiving country is an export to the sending country.
Imports, along with exports, form the basis of international trade. Imports of goods normally
require the involvement of the customs authorities in both the country of import and the country
of export and are often subject to import quotas, tariffs and trade agreements. Imports of services
consist of all services rendered by non-residents to residents.
There are two basic types of import
Industrial and consumer goods
Intermediate goods and services
Companies import goods and services to supply to the domestic market at a cheaper price and
better quality than competing goods manufactured in the domestic market. Companies import
products that are not available in the local market.
There are three broad types of importers
Looking for any product around the world to import and sell
Looking for foreign sourcing to get their products at the cheapest price
Using foreign sourcing as part of their global supply chain
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Registration
The firm has to be registered under the countrys prevalent law, such as the Company Act of India.
The company would be registered in one of its various forms like proprietorship, partnership,
private limited, public limited etc
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Declaration in duplicate
Central Excise
Goods are subject to exemption from excise duty on the final product meant for export. Where
exemption is not availed, the excise duty paid is refunded after actual export. Secondly, the refund
of excise duty is made on inputs used in the manufacture of goods meant for export. Form ARE-1
has to be used in India for this excise clearance.
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1 year
2 year
5 year
Permanent number without any expiry
Q2. The inspection under which every consignment is checked before it is allowed for export is
a)
b)
c)
d)
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leather goods, sports goods, films, steel, metals, engineering products, minerals and ores, coal,
petroleum products, mica, salt, etc. Although in administrative terms the responsibility for these
products remains with the Ministries concerned, this Division keeps itself in close touch with them
to ensure that production is sufficient to realize the full export potential besides meeting the home
consumption. This Division is also responsible for the working of export organisations and
corporations dealing with above commodities and products.
The Export Industries Division is responsible for development and regulation of rubber, tobacco
and cardamom. The Division is also responsible for handling export promotion activities relating
to textiles, woolens, hand-looms, readymade garments, silk and cellulosic fibres, jute and jute
products, handicrafts, coir and coir products.
The Export Services Division deals with the problems of export assistance including import
replenishment licensing, cash assistance, export credit, ex-port houses, Marketing Development
Assistance and grants there from, transport , free trade zones, dry ports, quality control and preshipment inspection, joint ventures abroad and capacity creation in export-oriented industries
including assistance to import capital goods and essential raw materials.
The Economic Division, headed by the Economic Adviser, is responsible the formulation of
export strategies, export planning, periodic appraisal and view of policies as also for maintaining
coordination and constant contacts the other Divisions as well as with various organisations which
have been under the Commerce Department to assist the export drive. This Division also
monitors work relating to technical assistance, management services for export and overseas
investments by Indian entrepreneurs.
The various government agencies that regulate the export import trade in India are
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4
5
6
7
8
9
10
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It plans, organizes, undertakes, sponsors and commissions marketing research and area surveys
in foreign countries in accordance with a planned programme in order to ascertain the
characteristics of the overseas markets and consumer preferences, assesses the current and
potential demand for Indian products, and determines the scope and the techniques to be
adopted for an increased absorption of Indian products in these countries. It also undertakes
commodity studies within the country with a view to locating new products or developing new
uses of existing products with export potential and drawing up long-term plans for their
development, processing and export.
The Institute undertakes and sponsors practical as well as fundamental research on various
problems of international trade. Be-sides its own research programmes, the Institute
undertakes research into problems referred to it by industry and trade and the government.
It provides consultancy to business firms in matters relating to foreign trade.
The Institute disseminates information through its quarterly journal Foreign Trade Review
and reports on various products and market studies undertaken by it. Its monthly Foreign
Trade Bulletin seeks to disseminate information on new decisions and developments affecting
Indias foreign trade.
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5.10
5.10 Directorate
Directorate General of Commercial Intelligence and Statistics (DGCI&S
(DGCI&S)
DGCI&S)
Collects & compiles complete information and disseminates it to trade organizations
Publishes journals and informative bulletins
Helps Indian businessmen with letters of introduction when they are going abroad
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Rendering financial or other assistance and to act as an agency for extension of relief and
subsidy as may be entrusted by the Government
Rendering other types of assistance and service to the industry in relation to market
intelligence, export promotion, trade enquiries and import of certain essential items required
in small quantities for the industry
Regulation of export of marine products
Improve the marketing of marine products overseas by providing market intelligence, market
promotion activities, information on the types of products in demand in different countries,
nature of processing for specific types of requirements
Arrange for training in different aspects connected with export with special reference to fishing,
processing and marketing
Such other measures that will be of importance to the export industry. MPEDAs services
extended to foreign buyers range from spotting the exporters and in ensuring that the products
are delivered in markets on time and in prime condition
Products
roducts covered by the Authority
Fruits, vegetables and their products
Meat and meat products
Poultry and poultry products
Dairy products
Confectionery, biscuits and bakery products
Honey, jaggery and sugar products
Cocoa and its products, chocolates of all kinds
Alcoholic and non-alcoholic beverages
Cereal products
Cashewnuts, groundnuts and papads
Guargum
Horticulture and floriculture products
Herbal and medicinal plants
Functions of APEDA
The development of industries relating to the above products for export by way of providing
financial assistance or otherwise for undertaking surveys and feasibility studies, participation in
the equity capital through joint ventures and other relieves and subsidy schemes
The registration of persons as exporters of the products concerned on payment of such fees as
may be prescribed
The fixing of standards and specifications for these products purposes of export
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The carrying out of inspection of meat and meat products in a slaughter house, processing
plant, storage premises, conveyance or other places where such products are kept or handled
for the purpose of ensuring the quality of such products
The improving of packaging of these products
The improving of the marketing of these products outside India
The promotion of export-oriented production and development of these products
The collection of statistics from the owners of factories or establishments engaged in the
production, processing, packaging, marketing or export of these products or from such other
persons as may be prescribed on any matter relating to these products, and the publication of
the statistics so collected, or of any portions thereof or extracts there from
The training in various aspects of the industries connected with these products
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Maintaining overseas liaison with International and U.N. Agencies- like, WTO,UNCTAD,
IMF, World Bank
Establishing rapport with overseas chambers of commerce, trade associations and government
departments concerned
Sponsoring special projects related to the export promotion of Indias consultancy services
Executing projects and responsibilities entrusted to it, from time to time, by the Government of
India and serving as a forum for two-way transmission of views and information between
government departments and the exporting community
Promoting trade, economic and technical co-operation between India and other countries by
way of international seminars and creating special infrastructure for follow-up
FIEO the primary servicing agency to provide integrated assistance to Government recognized
export houses as also the central coordinating agency for export promotion of consultancy
services. FIEO is now placing great emphasis on intra and inter-regional co-operation in trade
and economic matters with a view to promoting harmony and understanding through
economic, trade and technical ties
5.20 Department
Department of Commercial Intelligence and Statistics
The Department of Commercial Intelligence and Statistics is located at Calcutta. Its functions
comprise
Commercial intelligence
Collection, compilation and publication of the statistics of trade, tariffs and shipping
The work of the Department is broadly divided into the following principal categories
Collection and supply of commercial information required by the government and the trade
Maintenance of registers of Indian and foreign firms
Publication of the Directory of Exporters of Indian Products and Manufactures
Publication of the weekly Indian Trade Journal and Monthly Statistics of Foreign Trade of
India
Publication of the periodical reports received from Indian Government Trade Representatives
stationed in foreign countries in regard to economic conditions in these countries
Mediation in commercial disputes between Indian and foreign firms with a view to bringing
about amicable settlement
Trade introduction
Maintenance of Commercial Library in Calcutta for the use of the public
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Canalization
Canalization of Exports
State participation in imports is generally motivated by some other considerations. These are
To reap the advantage of bulk buying
To mop up any excess profit which the private sector firms might enjoy in import business
To ensure proper internal distribution of the imported items and to maintain stable domestic
price level
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Trading
Trading activities of the STC
Direct Trading
Direct trading includes those goods where STC has monopoly to deal with. Such goods are
procured, packed and shipped by STC while import items are purchased from the foreign
countries by STC offices located there. .
Indirect Trading
In the case of indirect trading, the contracts for the sale or the purchase of commodities are
negotiated by STC while the actual fulfillment of the contracts is entrusted to the private
businessmen enrolled by the STC.
Canalized Trade
Canalized trade includes the import or export of certain items through the concerned agencies of
STC. The canalized items of export include sugar, castor oil, molasses, groundnut extractions, etc.
Canalized items of imports include edible' oils, writing and printing paper, non-edible oils, etc.
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Other Activities
STC also performs servicing functions, thereby bringing buyers and sellers together and assisting
them in fulfilling contracts. It helps the government departments and, industrial concerns in
processing supplies of plant and machinery from abroad. In some cases, it settles trade disputes
between the Indian and foreign parties.
The corporation is successful in introducing several new commodities for exports and in
developing new markets for Indian goods. In recent years, the STC is also taking active interest in
marketing research, advertising and sales promotion. However, it is a public sector organization
with usual difficulties and limitations of its own.
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The functions of the STC as given in the Memorandum of Association are as follows
To organize and undertake trade with the State trading countries as well as other countries in
commodities entrusted to the company for such purpose by the Union Government from time
to time and to undertake the purchase, sale and transport of such commodities in India or
anywhere else in the world
To undertake at the instance of the Union Government import and/or internal distribution of
any commodities in short supply with a view to stabilizing prices and rationalizing distribution
To generally implement such special arrangement for imports, exports; internal trade and/or
distribution of particular commodities as the Union Government may specify in the public
interest
The following items have been canalized for import (subject to changes from time to time)
Newsprint, Wool, Palm oil (edible), Rayon grade wood pulp, Synthetic rubber, Caprolactum,
Alkaloid benzene, Endrine technical, Chlorine diphosphate, Palm oil (soap), Sunflower seed oil,
Sisal/manila hemp, Paraxylene, Tallow, Carbaryl technical, Tetracycline HCL, Poly filament yarn,
Ampicil trihyd, Art silk yarn, Chloram powder, Pot. Chloride, Soya bean oil, DMT, ME glycol,
Cement, Sugar, White printing paper, Non-ferrous metals, Asbestos fibre, Antimony metals,
Mercury and AG fluorspar.
The following items have been canalized for export (subject to changes from time to time)
Sugar, Semi-processed leather, Castor oil, Footwear leather, Cement and clinker, Rice basmati,
Shellac/lac, Opium crude, Salt, Lemongrass oil, Canvas/ Plastic footwear, Molasses, Groundnut
extractions, Barytes, Chrome ore, Silimanite and Processed mica.
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Future of STCs
With the Government's new economic policy taking shape, it is now evident that canalization,
except of very few sensitive commodities, will not be there in the country's export-import policy.
This, to a large extent, has already eroded the base and profitability of the State Trading
enterprises-a trend which will get strengthened in the coming years. These organisations will,
therefore, have to redefine their role and create capacity to emerge as global traders without the
support of any monopoly business on the Government account. Both MMTC and STC have
initiated measures in this direction but these have not become very successful. For example, while
canalized exports constituted per cent of MMTC's total exports in 1991-92, this increased to 59
per cent in 1995-96. However, in the case of STC, although is total turnover during 1995-96
amounted to Rs. 1,685 crores as compared to Rs. 1,861 crores during the previous year, the noncanalized turnover increased by 5 per cent from Rs. 847 crores in 1994-95 to Rs. 892 crores in
1995-96.
With a view to developing captive sources of supply for exports,. the STC has entered into a
number of joint ventures. It has also set up warehouses overseas for developing exports on a
sustained basis. The MMTC has also decided to set up joint ventures in various fields of its
activities.
Products
Over a period, the products handled by STC have also shown an increase. STC-The Merchant of
India, an STC publication, refers to 17 agricultural commodities, 8 consumer products, 15 items
of army software, 3 items of construction material, 6 major and a number of miscellaneous
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engineering items, 10 items of fresh and processed foods, 7 items of leather, 3 items of meat and
marine products, 19 items of textiles and garments, alcohol, sugar, molasses and castor oil. The
import items include edible oil (6 items), cement, explosives, and natural. Rubber, standard and
glazed newsprint and white printing paper
The major items of export in 1994-95 were cereals, coffee, cashew kernels, leather, drugs and
chemicals, engineering and construction material, sugar, textiles and garments. The major items of
imports were edible oils and sugar.
The STC has developed a sound infrastructure for development of exports in the form of 17
branches in India and 17 overseas offices and a large force of trained marketing personnel.
STC's Indian branches play a vital role in port clearance, storage, movement and distribution of
imported items, in addition to procurement and shipment operations for export items. The foreign
branches provide valuable support in identification of new products and markets, assessment of
market potential, quality and packaging needs, preparation of new product development strategy
and assistance in carrying out negotiations for import and export.
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To boost the exports of turnkey projects in the field of railway systems, public utilities and
industrial plants
To penetrate new markets
To promote the export of non-traditional and new products
Trading Groups
Minerals Group: mineral based products.
Metals Group: ferrous and non-ferrous metals and metal-based products.
Fertilizers Group: fertilizer raw material, intermediates and finished fertilizers.
Export Trade Group: light engineering products, gems and jewellery, handicrafts, agro
products and counter trade.
MMTCs imports have been steadily rising. From a level of Rs. 210,000 million in 1985 86,
imports have risen to Rs. 350,000 million in 1989 90. The intensity of exports has also been
steadily rising. There is however, a broad measure of agreement that imports do not offer any
substantial scope for pruning even in the face of severe balance of payments pressure. Most of
MMTCs imports are essential imports required for agriculture or industrial growth. A fair
proportion of imports are directly related to exports and another significant proportion pertains to
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capital goods imports. In the circumstances, the only meaningful solution available to MMTC is to
meet the challenge of balance of payments crisis and to plan for major thrust in exports.
Mica
Mica Trading Corporation of India Ltd. (MITCO)
During 1989 90, MITCO achieved record turnover of Rs. 322.85 million. Its total exports of
mica was Rs. 312.90 million highest ever registering an increase of about 28% over the previous
year export of Rs. 245.10 million. Export to General Currency Area increased by 36% from Rs.
125.50 million during 1988 89 to Rs. 170.13 million in 1989 90. For the RPA countries the
growth rate was about 19% with exports increasing from Rs. 118.92 million during 1988 89 to Rs.
141.82 million in 1989 90.
The sales turnover of mica products during 1989 90, however, stagnated around the previous
year level of Rs. 15 million due to continued teething problems in marketing of mica paper.
Report of mica paper increased marginally from Rs. 7.3 million in 1988 89 to Rs. 7.8 million
during 1989 90. Cost disadvantage vis a vis the long established competitors in the developed
countries was the major obstacle in boosting export of this product. Efforts are being made to
overcome these problems through change in marketing strategy. With the commissioning of the
first phase of the Insulating Materials Project it has become possible to convert mica paper into
heater micanite sheets for which there is good demand. Samples of heater micanite sheets have
been sent to the prospective buyers for evaluation. Second phase of the Insulating Material Project
is expected to be completed by the end of 1990.
The proposed R & D Centre by MITCO has been registered as an approved centre by the
Department of Science & Technology and further steps are being taken for its implementation.
The government has merged MITCO with its holding company MMTC Ltd.
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Ministry of finance
Ministry of Commerce
Ministry of External Affairs
Ministry of Home Affairs
DGFT
Export Minister
Shipping Manager
Ministry of Commerce
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6. EXPORT DOCUMENTATION
Correct documentation is critical to successful exporting. It has been found that many exporters
overlook the importance of documentation prior to commencing the business of exporting. Failure
in the understanding of export documentation requirements can have disastrous effects for the
business, like
non clearance by customs prior to export
non entry into the importing country, or worst of all
non-payment with no recourse for goods or services
A successful exporter should know these requirements of export
Government regulations affecting the goods he intends to export. (ECN requirements permit
requirements, inspection requirements and others).
The International Terms of Trade (Incoterms 2000) and the obligations under the chosen
Incoterm of the buyer and seller. Depending on the Incoterm used it may only be necessary to
complete a commercial invoice and packing list, or it could be that other documents are
required for sending to freight forwarders or shipping agents to obtain Bills of Lading.
Need to prepare Insurance Certificates or Permits. Learn at what point the risk will pass from
exporter to the buyer and how to ensure that exporter fulfill all his obligations under the
respective Incoterm for this to happen.
The different methods of payment available to ensure exporter receives full price for the
goods.
The exporter should know the risks associated with each method of payment as well as how to
minimize these risks. Because the documentation requirements vary according to the selected
method of payment, he should learn to identify and accurately complete the necessary
documentation requirements for each method to ensure prompt and effective payment. The
requirements for a commercial invoice or packing list to complete the various documents to
comply with a documentary credit. When is it recommended to have insurance to protect the
exporter and when is this not necessary?
Which documents are required for sea freight and those required for airfreight, the
information required for both, and how this can differ.
Export Documentation and Incoterms is a recommended pre-requisite to E-Business for
Exporting.
Importance of Documents
Documentation is the engine of exports in global trade. Documentation facilitates the movement
of freight, transfer of title, processing of payment, and customs clearance. Without documentation,
the shipment is at a standstill. Even with the continuing advances in technology playing a greater
role in international business, documentation is still required by all parties involved in global trade.
On an average, customs authorities worldwide physically inspect only 4 to 8 percent of the cargo
that moves through their borders. There are some exceptions, such as Saudi Arabia, but as a
general rule, the local customs authorities do not physically inspect most import shipments.
Customs authorities control the merchandise crossing the border and entering into commerce
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through the documentation provided by the importer and the importers customhouse broker.
Importers receive their import documentation from the exporter, thereby making documentation
the engine that moves the freight through the borders. We cannot stress enough that Export
Documents are Import Documents. In India, exporters create their documentation at the time the
freight is being exported. For a typical export shipment, the only export document actually
required by the Authorities is the Shippers Export Declaration (SED) or a validated Export
License. The other documentation created such as the commercial invoice, packing list,
certificate of origin, health and sanitary certificate, bill of lading, certificate of conformance, and
certificate of analysis are all for the account of the importer to meet the customs clearance
requirements in their country, thereby making export documentation into import documents.
Customs clearance and required import documentation are governed by local laws and vary from
country to country. What Korean customs may need to clear a pharmaceutical from India is very
different from what customs in Brazil, Nigeria or Germany may require. To the Indian exporter
this means it is crucial to have more than one set of criteria for our export documentation needs.
The exporter must implement a standard operating procedure (SOP). This SOP must be flexible,
particularly for those exporters that ship to numerous destinations. This flexibility allows the
exporter to meet and identify the specific documentation requirements for each country to which it
is exporting. Here are the factors that can vary significantly depending on the country to which he
is shipping
Number of copies
Notarization
Legalization/consularization
Language
Originals vs. copies
Format of documentation
Valuation
Commodity descriptions
Product labeling
Other government agency requirements
Black ink/blue ink
Standard operating procedures are somewhat arduous to create. However, once the standard is
created, it will only require updating. Through the utilization of a database (and there are many
available to choose from) a company can electronically store the documentation requirements for
each country. Once a shipment is packed and ready for export to a specific country, the document
requirements can be retrieved from the database with all of the nuances in place that are unique
for the particular destination. Import shipments accompanied by incomplete documentation are
held in storage areas until such time that proper documents are presented to authorities. These
delays can be costly in terms of storage fees. The very nature of these time delays can expose the
shipment to other factors such as bad weather, theft, damage, and/or loss. Additionally, incomplete
documentation moves the importer into a reactive position with the local customs authorities. In
many countries, the importer is responsible for all declarations made to customs. No importer
wants to have customs reject their shipment due to incomplete documentation. Repeated offenses
may cause customs to put a black mark against the importer. Your buyers measure of you as a
long-term supplier will be dictated by the quality of your documentation capabilities. Your overseas
customers will favorably receive complete and accurate documentation. Their customs clearance
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headaches will have been eased, their shipment delivered timely and safely. Another critical factor
in understanding the importance of export documentation is the role it plays in export compliance
management. Export documentation advise the government agencies that oversee it, should
include
Correct valuation
Correct classification
Accurate of written statements and affirmations
Verified license requirements
Correct SED information
Accurate reporting of Denied Party status
Legitimate claim of export readiness
The bottom of the Shippers Export Declaration contains the statement I certify that all
statements made and all information contained herein is true and correct. I understand that civil
and criminal penalties may be imposed for making false or fraudulent statements herein. The
individual signing this document, even though it is on behalf of his or her employer must be
knowledgeable of the export regulations, as the signer can be held liable for the accuracy of the
documentation. It is in every exporters best interest to make sure that export documentation is
done correctly. It will not only keep the customer satisfied, it will also keep you out of hot water
with the other government agencies.
Some important documents in the foreign trade are as follows
ProPro-forma Invoice
A pro forma invoice is much the same as a commercial invoice which, when used in international
trade, represents the details of an international sale to customs authorities. A pro forma invoice is
presented in the place of a commercial invoice when there is no sale between the sender and the
importer, or if the terms of the sale between the seller and the buyer are such that a commercial
invoice is not yet available at the time of the international shipment. A pro forma invoice is
required to state the same facts that the commercial invoice would and the content is prescribed by
the governments who are a party to the transaction.
Packing List
The packing list is a consolidated statement in a prescribed format, detailing how the goods have
been packed. It is informative and itemizes the material in each individual package, such as a box
or a carton. The packing list is an extension of the commercial invoice; as such it looks like a
commercial invoice. The exporter or his/her agent---the customs broker or the freight forwarderreserves the shipping space based on the gross weight or the measurement shown in the packing
list. Customs uses the packing list as a check-list to verify the outgoing cargo (in exporting) and the
incoming cargo (in importing). The importer uses the packing list to inventory the incoming
consignment.
Commercial Invoice
Invoice
A commercial invoice is a document used in foreign trade. It is used as a customs declaration
provided by the person or corporation that is exporting an item across international borders.
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Although there is no standard format, the document must include a few specific pieces of
information such as the parties involved in the shipping transaction, the goods being transported,
the country of manufacture, and the codes for those goods. A commercial invoice must also
include a statement certifying that the invoice is true, and a signature.
A commercial invoice is used to calculate tariffs, international commercial terms (like the Cost in a
CIF) and is commonly used for customs purposes.
Certificate of Origin
A Certificate of Origin (often abbreviated to CO or COO) is a document used in international
trade. It traditionally states from what country the shipped goods originate, but "originate" in a CO
does not mean the country the goods are shipped from, but the country where the goods are
actually made. A Certificate of Origin is issued by the local chambers of commerce
A preferential certificate of origin is a document attesting that goods in a particular shipment are of
a certain origin under the definitions of a particular bilateral or multilateral free trade agreement
(FTA). This certificate is required by a country's customs authority in deciding whether the imports
should benefit from preferential treatment in accordance with special trading areas or customs
unions such as the European Union or the North American Free Trade Agreement (NAFTA) or
before anti-dumping taxes are enforced.
The definition of "Country of Origin" and "Preferential Origin" are different. The European Union
for example generally determines the (non-preferential) origin country by the location of which the
last major manufacturing stage took place in the products production (in legal terms: "last
substantial transformation"). Whether a product has preferential origin depends on the rules of any
particular FTA being applied, these rules can be value based or tariff shift based. The FTA rules
are commonly called "Origin Protocols". The certificate of origin must be signed by the exporter,
and, for a small number of countries, also validated by a Chamber of Commerce or local consulate
of the destination country and notarized.
AREARE-I Form
This form is an application for the removal of excisable goods from the factory premises, for
export purposes. For example, if you are exporting a product which doesnt have an excise, you
dont have to fill this form.
The form has multiple copies, which are distributed to different authorities, including Customs,
excise, etc. Earlier this form was known as AR 4
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Mates receipt
After the cargo is cleared and handed over to the shipping company, Mates receipt is issued by the
captain of the ship. It contains the name of the vessel, shipping line, port of loading, port of
discharge, shipping marks and numbers, packing details, description of goods, gross weight,
container number, and seal number.
SOFTEX Forms
All exports of software/audio/video/television software is declared on SOFTEX form. The
SOFTEX form in triplicate is submitted to the designated official of Department of Electronics of
Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade
Zones (FTZs) or Export Processing Zones (EPZs).
After signing by the official, one copy is sent to RBI, one retained by the official, and one given to
the exporter
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Bill of exchange
exchange
It is an instrument in writing, containing an order, signed by the maker, directing a certain person
to pay a certain sum of money only to the order of a person to bearer of the instrument.
It is commonly known as a draft. The bill of exchange is a negotiable instrument. A negotiable
instrument is a document guaranteeing the payment of a specific amount of money, either on
demand, or at a set time. According to the Negotiable Instruments Act, 1881 in India there are just
three types of negotiable instruments i.e., promissory note, bill of exchange and cheque.
Types of Bills
Bills of exchange
Sight Draft
When the importer (drawee) makes payment immediately upon presentation of the draft, it is
called sight draft. The corresponding term of payment is referred to as Delivery against Payment
(D/P)
Usance Draft
Used when exporter gives credit to the importer. A draft may be drawn as per period of credit i.e.
30 days/60 days, after it is presented to the importer. On due date, the payment will be made to
the bank who then forwards it to the exporters bank.
When payment is received in advance, no bill of exchange is required.
Inspection Certificate
Inspection certificate is required by some countries to get the specifications of goods being shipped
and is normally given by a government agency or some independent testing organizations.
Bill of Lading
A bill of lading (BL - sometimes referred to as BOL or B/L) is a document issued by a carrier to a
shipper acknowledging that specified goods have been received on board as cargo for conveyance
to a named place for delivery to the consignee who is usually identified. A through bill of lading
involves the use of at least two different modes of transport from road, rail, air, and sea. The term
derives from the verb "to lade" which means to load a cargo onto a ship or other form of
transportation. A bill of lading can be used as a traded object.
B/L is generally made out in sets of three originals. All originals are duly signed by the master of
the ship or the agent of the shipping company and all the originals are equally valid for taking the
delivery of the goods.
B/L is the legal document for any dispute resolution and contains the following information
Name of the shipping company
Flag of nationality
Shipper's name
Order and notify party
Description of goods
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Gross/net/tare weight
Freight rate/measurements and weight of goods/total freight
Airway Bill
Air Waybill (AWB) or air consignment note refers to a receipt issued by an international airline
for goods and an evidence of the contract of carriage, but it is not a document of title to the goods.
Hence, the AWB is non-negotiable.
The first three letters of the Airway Bill Number normally represents the airline code. For
Example: 176 for emirates, 125 for British Airways etc.
There are several purposes that an air waybill serves, but its main functions are
Contract of Carriage. Behind every original of the AWB are conditions of contract for carriage
Evidence of Receipt of Goods
Insurance Certificate
Insurance certificate is to assure the consignee that goods will be covered for loss or damage to the
cargo during transit.
Consular Invoice
Consular invoice is a document required by certain countries, that needs to be submitted to the
embassy of the concerned country.
It is also known as certificate of origin and is required to be signed by the official in the embassy of
the importing country, to enable the importers country to collect accurate and authenticated
information about the value, volume, quantity, source etc of the import for assessing import duties
and for other statistical purposes.
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Q2. A document that is receipt for goods delivered to the common carrier for transportation, a
contract for the services rendered by the carriers, and a document of title is known as a/an
a)
b)
c)
d)
Export Licence
Commercial Invoice
Bill of Lading
Consular Invoice
Q4. What is the time duration in which an Indian exporter is expected to realize export proceeds?
a)
b)
c)
d)
Excise duty and sales tax are both exempted for export goods
Only excise duty is exempted for export goods
Only sales tax is exempted on export goods
None of the above
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7. PAYMENT TERMS
While doing business, an exporter often extends credit to an importer, which increases business
possibilities, but also increases risk of payment. Receiving the entire payment, in due time is the
foremost concern in exporters mind and the level of risk in various payment terms is the major
consideration.
Following are the recognized methods of effecting payments under International Trade
Payment in advance
Letter of Credit (Import LC)
Bill of Exchange
Open Account
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presentation of all required documents. The buyer pays his or her bank to render this service. An
LC is useful when reliable credit information about a foreign buyer is difficult to obtain, but the
exporter is satisfied with the creditworthiness of the buyers foreign bank. An LC also protects the
buyer because no payment obligation arises until the goods have been shipped or delivered as
promised.
Payment by an LC is made on the basis of documents and doesnt take into account the physical
condition of the goods. All terms of payments should be clearly specified in the LC in order to
avoid confusion and dispute in payment. Bank charges a small fee for the LC based on percentage
of the amount to be paid, and it is usually borne by the importer.
A modification to the LC is called an amendment, and the bank charges some fee for that as well.
Types of LCs
LCs
Revocable LC may be cancelled anytime without a prior notice to the beneficiary
Irrevocable LC cannot be revoked or amended without the consent of all the parties. A silent
LC is assumed to be an irrevocable LC
Revolving LC the amount under the revolving LC can revolve in relation to time or value. It
takes care of goods to be delivered in installments or intervals
Transferable LC in cases where the seller or beneficiary is not the actual producer of goods,
seller uses transferable LC, and on receipt of the same, will instruct transfer of funds to actual
supplier
Red Clause LC- contains a clause providing for payment in advance for purchasing raw
materials / processing and / a packing of goods enabling the beneficiary to avail advance
Green Clause LC advance is given only against a warehouse receipt given by the beneficiary
Sight Bill
A sight bill of exchange is used when the exporter wishes to get the payment before the importer
collects the goods from the port. The corresponding term of payment is Delivery Against Payment
(D/P).
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the time draft and receives the goods (e.g. 30 days of acceptance). By signing and writing
accepted on the bill, the importer is formally obligated to pay within the slated time. The
corresponding payment term is Delivery against Acceptance (D/A)
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It is undertaking of a bank
It is undertaking to make a payment
It is undertaking given on behalf of the person
All of the above
Q3. What is the time duration in which an Indian exporter is expected to realize export proceeds?
a)
b)
c)
d)
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8. INCOTERMS
International Commercial Terms, known as INCOTERMs, are a series of international sales
terms widely used and accepted throughout the world. They divide transaction costs and
responsibilities between a buyer and a seller.
Incoterms are connected to the steps in the delivery of the products from the seller to the buyer,
such a carriage of products, export and import clearance responsibilities, who pays for the which
cost, and who faces the risk for the products at different locations in the transport process.
Incoterms are always linked with geographical locations.
Incoterms were devised and published by the International Chamber of Commerce (ICC) and
endorsed by the United Nations Commission on International Trade Law (UNCITRAL)
The four basic groups of INCOTERM are as follows
E Terms
F Terms
C Terms
D Terms
The goods are placed at the disposal of the buyer at the sellers
premises / factory
The buyer is responsible for the cost and risk of the main
international carriage
The seller pays for the main international carriage, but does not bear
the risks during that carriage
The seller bears all costs and risks up to the delivery point atr the
agreed destination, which may be in buyers country or even at the
buyers premises
Ex Works
Free Carrier
FAS
Free Alongside
Ship
FOB
Free On Board
CFR
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CIF
CPT
CIP
DAF
DES
DEQ
DDU
DDP
Cost, Insurance
and Freight
Certain previously used terms were dropped at the 1990 revision of Incoterms, like FOB Airport
replaced by FCA (Free Carrier) and FOR/FOT (Free on Rail/Free on Truck) replaced by FCA
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Ex works
Free carrier
Free alongside ship
Free on board
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Packing Credit
Pre shipment finance is generally known as packing credit
Essentially a working capital advance made available for the specific purpose of
procuring/processing/manufacturing of goods meant for exports
All advances under packing credit need to be liquidated from the export proceeds
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Firm order of Letter of Credit or original correspondence between the exporter and
importer
DGFT licence if the export falls under restrictive list
Bank will scrutinize application and the details submitted by the exporter. Particulars recorded
in the Packing credit register by the bank include
Name of the buyer
Commodity to be exported
Quantity
Value of export
Last date of shipment
Any other relevant term
Quantum of finance is fixed on FOB value of the contract or the LC value whichever is lower.
Advances against insurance & freight charges are considered later when the consignment is
ready
Under some cases, packing credit advance may be more than LC or contract value (e.g.
incentives by the govt to export when market prices are more or there are by products formed
during the production process like oil or oil cakes that get sold)
Disbursements are made in stages and in cheques/drafts
Packing credit advances may be given for different durations depending upon the process of
procurement, manufacturing and export, and it is banks discretion, but normally doesnt
exceed 180 days
The duration may be extended by the bank after necessary procedures, but any extension
beyond 365 days needs ECGC approvals
In view of the concessional rate of interest, banks must ensure the end use of funds is for genuine
export purposes only
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Since the sub supplier is not liable for any penal provisions for the delay by EOH, the financing
bank of the sub supplier, before extending the credit facilities should make discreet enquiries to
confirm the track record of the EOH.
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Excise duty and sales tax are both exempted for export goods
Only excise duty is exempted for export goods
Only sales tax is exempted on export goods
None of the above
Q3. How long can bank finance be extended beyond initial 180 days?
a)
b)
c)
d)
45 days
90 days
135 days
180 days
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Export promotion policy in India has three main segments. They are as follows
Policies for increasing Investment and production in export sector
Price-support measures for rendering exports more competitive
Measures for strengthening marketing effort by the export sector
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Octroi Exemption
Octroi is a duty paid on manufactured goods, when they enter the municipal limits of a city or a
town. However, export goods are exempted from Octroi.
Fiscal Incentives
Exemption from Income Tax
In order to enable exporters to plough back their earnings and promote exports, the Government
of India has given tax exemption to exporters on export earnings under section 80 HHC provision
of the Income Tax Act. For example, for the A.Y. 2002-03, 60% of the export income is exempted
from tax. At the same time, a ten year tax holiday is provided to 100% EOUs and units in EPZs.
Marketing Assistance
Market Development Assistance (MDA)
The government of India has set up a separate fund under the head Marketing Development
Assistance (MDA) for developing marketing abilities of Indian exporters. It is granted by the
Ministry of Commerce for export market development and research abroad. The amount granted
under MDA varies from 25% to 60% of the actual expenditure incurred.
Supply
Supply of Raw Materials
Industrial Raw Material Assistance Centres (IRMAC) Scheme
IRMAC is established by the government of India as subsidiary of STC. Such centres import raw
materials in bulk and supply them to the registered exporters against a valid import licence. This
enables exporters to get timely supply of raw materials at reasonable prices, IRMAC has been
further simplified- by removing the actual user clause.
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goods for export on credit basis. It is a kind of pre-shipment finance procured by the exporter for
the processing of export order.
Institutional Measures
The Government of India (GOI) has established a number of organisations to promote and
expand export trade. These organisations are
Indian Institute of Foreign Trade (11FT) to provide training facilities
Indian Institute of Packaging (lIP) to upgrade, packaging standards
Export Promotion Councils (EPCs) to undertake export promotion activities
Export Inspection Council (EIC) to upgrade quality standards
Export Credit Guarantee Corporation (ECGC) to protect exporters against payment rises
Indian Council of Arbitration (ICA) to settle and solve disputes between importers and
exporters. Apart from the above institutions, there are a number of other organisations such as
Federation of Indian Export Organization (FIEO), EXIM Bank, etc
Relaxation in Industrial
Industrial Licensing Policy/MRTP/FERA/ Foreign Collaborations
With a view to facilitate relatively easier creation/expansion of production capacities for increasing
export potential of Indian economic, necessary relaxations have been provided for in the policies
for industrial licensing, MRTP (Monopolies and Restrictive Trade practices Act) and Foreign
Exchange Regulations, etc. The Foreign Exchange Regulation Act has been liberalized and Foreign
Exchange Management (FEMA) Act, 1999 has been made operational. The rupee has been made
fully convertible for all approved external transactions. As a result, exporters of goods and services
and those who are in receipt of remittances are able to sell their foreign exchange at market
determined rates. The importers and foreign travelers are also able to buy foreign exchange at
market determined rates. Exporters have also been allowed to maintain foreign currency accounts.
There is general liberalization of remittance of foreign exchange for visits abroad, agency
commission; export claims, reduction in export value, reimbursement of expenses incurred on
dishonoured export bills, consular fees, etc. Consequently, creation of additions of production
capacities for export is liberally allowed, both in the large-scale as well as small scale sectors.
Foreign collaboration and foreign capital investment is also liberally permitted for the export
sector. 100% foreign equity has been permitted to the units in EPZ/EOU/EHTP/ STP. All these
policy measures are envisaged to go long way in facilitating easy expansion as well as technological
up gradation of export base in India through attracting larger flows of investment and other
resources.
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Duty Remission Scheme consists of Duty Free Entitlement Certificate and Duty Entitlement
Passbook Scheme.
10.4 Eligibility
Eligibility for Export/Trading/Star Trading/Super Star Trading Houses
Export/Trading/Star Trading/Super Star Trading Houses have been accorded special status.
When exporters achieve the specified level of exports over a period, they may be recognized as
EH/TH/STH/SSTH. Exports made both in free foreign exchange and in Indian rupees shall be
taken into account for recognition. The objective of this scheme is to recognize them as the
respective houses with a view to building marketing infrastructure and expertise required for
export promotion. The exporters, registered with FlEO or EPC are, eligible for this purpose. The
export performance criteria may be based on either f.o.b. value of exports or net foreign exchange
earnings.
F.O.B. Criteria
The manufacturing or merchandising units, who have achieved the following targets can be
accorded the status of above mentioned Export Houses. Deemed exports are not counted for this
purpose.
Category of Houses
Export House
Trading House
Star Trading House
Super star Trading House
Export House
Trading House
Star Trading House
Super star Trading House
Exporters have also an option to get recognition for one year. In this case relaxation in above
earnings has been permitted. EH/TH/STH/SSTH are entitled to the following special benefits
Import Facilities
Marketing Development Assistance
Foreign Currency, Accounts
Foreign Exchange Facilities
Golden Status Certificate
Other facilities as specified in the policy
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Average free
foreign exchange
earning during
the preceding
preceding
three licensing
years in rupees
Free Foreign
exchange
earning during
the preceding
licensing year in
rupees
Average NFE
earned made
during the
preceding
licensing year in
rupees
NFE earned
during the
preceding
licensing year in
rupees
4 crores
6 crores
3 crores
5 crores
20 crores
30 crores
15 crores
25 crores
100 crores
150 crores
75 crores
125 crores
300 crores
450 crores
225 crores
375 crores
Service Export
House
International
Service Export
House
International
Star Service
Export House
International
Super Star
Service Export
House
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Fiscal Incentives
Fiscal incentives for export promotion include
Duty drawback
Central excise rebate
Income tax exemption, on export profits
Duty Drawback
In the manufacturing of many export products imported or indigenous raw materials and
components are used on which customs or central excise duty has been paid. When the finished
products are exported in which duty paid inputs are used, a part or whole of the amount of such
duty is allowed -to be drawn back by the exporter or if is refunded to him. This results in
substantial reduction in the cost of material inputs for export-production. In other words, import
duties and central excise duties, on material inputs for export activity are allowed to be drawback
by the exporters under the incentives policy for duty drawback.
The scheme of Duty Drawback has been formulated by the Drawback Director under the Central
Board of Revenue and Customs from the Ministry of Finance. The benefit of duty drawback has
been provided on the basis of (a) all industry rates or (b) brand rates separately fixed for individual
manufacturers of the export products. The incentive of duty drawback helps reduce significantly
the material cost of export products. It is very important for countries like India, which have
simple manufactures to offer for exports which are very much influenced by the material cost.
Income-Tax Exemption
In order to promote exports, income tax exemption has been granted under Income Tax Act.
This exemption scheme is to be phased out over a five-year period i.e. by 2004-2005 for all
exporters other than EPZ/EOU/EHTP/STP units. The major exemptions are as follows
Part of the profits derived from export of specified goods or merchandise is deducted for the
computation of income tax
Specified amount of profits of companies engage in the business of hotel or of a tour operator
or a travel agent is deducted
There is a partial tax relief on export of computer software and for import of system. The
benefit can also be claimed by a supporting software developer from 1-4-1999
The profits from export or transfer of film VT software, TV news software, telecast rights are
partially deducted
50% of the profits from project exports is deducted in computing taxable income of the Indian
company or resident tax payer
10 years tax holidays is granted to units in FTZIEPZ and 100% EOU ending with 2010-2011
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There is a tax rebate on remuneration received on services rendered outside India and other
rebate as specified in the policy
Financial Incentives
The major scheme of financial incentives include interest subsidy, financial assistance scheme for
agricultural, horticultural and meat exports.
Interest Subsidy
Export sector in India has also been given interest subsidy under which the working capital is made
available by the banks to the export sector at a concessional or subsidized rate of interest. Under
this scheme working capital required for pre- shipment credit as well as post shipment credit is
provided to the export sector at concessional rates of interest. This measure helps Indian exporters
to reduce the working capital cost of export operation.
10.6 Strengthening
Strengthening Export Marketing Effort
Another prerequisite of export promotion is the marketing effort. It may be noted that export is
primarily a sale transaction. Production can be converted into sale only through the marketing
effort. In other words marketing effort provides the necessary link or channel between
production and sales. Hence, success on the export front is dependent upon the marketing effort.
Export promotion policy in India therefore, pays special attention to the need for improving and
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strengthening export marketing effort. With this objective, the Government of India has
established a very comprehensive network of institutions for servicing the export sector.
In other words; an effort has been made to provide the necessary infra structure for servicing the
export sector, particularly to improve the export marketing effort. With this object in view,
Government of India has established a number of specialized institutions for providing necessary
services and assistance to individual corporate units from the export sector. Institutions established
for strengthening export marketing effort include Export Promotion Council, Commodity Boards,
Special Authorities and Industry Associations.
The primary function of these institutions is to provide the exporter with export marketing
guidance and advice as well as complete information and details covering almost all the critical
elements involved in export marketing effort at the individual corporate unit level on a continuous
basis.
In addition, separate institutions have also been established for providing technical and specialized
services to the export-sector in India. These institutions provide necessary guidance, help and
assistance to individual corporate units, especially in the field of packaging, quality control, risk
coverage, long- term credit, trade fairs and exhibitions, settlement of disputes, package service and
market information.
For supplementing the export-effort by the private sector, Govt, of India have also established a
number of Corporations in the Government sector for directly undertaking export -import activity.
Various state Governments have also established Export Corporations for promoting exports from
different states respectively.
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Customs Warehouse
Brokerage and Bonding Facility
Free Trade Zone
Manufacturing Facility
Q2. Which of the following is NOT the objective of levying customs duties in India?
a) To create a level playing field in Indian Markets for the international and domestic
manufacturers to compete with each other on equal and fair terms
b) To protect Indian industry from the unfair business practices adopted by the foreign
manufacturers
c) To prevent the foreign goods from entering into Indian markets
d) To collect revenues from import export trade
Q3. Which of the following is not the objective of conducting customs examination of goods?
a) To create trade barrier for export import business
b) To determine if proper documentation for customs clearance has been conducted
c) To help the government gather statistical data of all the goods imported into and exported
from the country
Q4. On which of the following components is duty drawback available?
a)
b)
c)
d)
Octroi
Sales Tax
Special Additional Duty (SAD)
Duty paid on packing material
Q5. Duty drawback on re export is not applicable under the following conditions?
a) Re exported goods are identifiable as having been imported
b) Goods are re exported within one year from date of payment of duty when they were
imported
Q6. Which one of the following obligations does a unit in an SEZ have to accept?
a)
b)
c)
d)
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Packing credit advances are normally granted on secured basis, which may mean collateral security
through a third party guarantee or mortgage of immovable property. Once the goods have been
acquired they are to be hypothecated. The banks have evolved their own documentation and
procedural systems for granting the credit.
Generally, following disbursement procedure is followed
The exporter hands over the export order letter of credit to the bank, which will accept it and
affix a rubber stamp on it reading export finance granted
The bank will calculate the drawing power of the exporter on the basis of a number of factors,
including the value of export order/letter of credit
Funds will be released by debiting to the packing credit account and credit to exporters
account
Goods will generally be required to be sent through the approved transport agencies and
forwarding agents
Goods will be suitably insured while in the warehouse and in transit
On the basis of the laid down procedures, the exporter will approach the bank for the preshipment credit. This credit is granted to enable the reporter to manufacture/ procure and pack
the goods for shipment overseas.
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bef6repermitting the shipment to take place. The basis of inspection is usually the importers
specification, except in the case of export of goods involving safety or health hazards, where
notified minimum standards are enforced. Inspection of export goods may be conducted under
Consignment-wise Inspection
In-process Quality Control
Self-Certification
Let us discuss consignment-wise inspection. Before the excise authorities seal packs, the process
of pre-shipment inspection must be completed. The production department is to apply to the
Export Inspection Agency for nominating an inspector for conducting examination of the export
goods. The application is to be made on a prescribed form known as Notice of Inspection and
submitted to the Agency with the following documents
A copy of the commercial invoice
Crossed cheque of demand draft as inspection fee
A copy of export contract
Importers technical specifications and/or approved sample
After the inspector has completed inspection, the Export Inspection Agency will issue the
Inspection Certificate in triplicate. The original certificate is for the customs verification. It is
submitted to the customs authorities, along with other documents, before permission to ship goods
is granted. The second copy may be sent to the buyer, if needed. The third copy is for the
exporters record.
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On receipt of these documents, the export department will appoint a clearing and forwarding agent
by signing and sending a document, generally known as Shipping Instruction Sheet or simply the
Shipping Instructions. This document contains full details of instructions of the exporter as well as
details or the consignment to be shipped. Along with this document, following documents will be
sent to the agent
Commercial Invoice (Generally 8-10 copies with at least one completed)
Customs Declaration Form in Triplicate (This is a legal requirement whereby the exporter
states that the declarations made to the customs authorities by the agent on his behalf are true)
Packing list, if needed
Original Letter of Credit/Contract
Inspection Certificate (Original)
GR Form- Original and Duplicate (it is a foreign exchange declaration form)
AR4/AR5 form (Original and Duplicate) Invoice
Railway Receipt/Lorry Way Bill
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down procedure is to be followed for obtaining allotment of wagon on a priority basis under a
scheme of the Railway Board. According to this scheme, wagons are allotted on the priority basis
for carrying export goods to the port town for sh1pinent. Following documents are submitted to
the booking railway yard/Station.
Forwarding Note (A railway document)
Shipping Order (as proof of reservation of shipping space)
Wagon Registration Fee Receipt
After wagons have been allotted, goods are loaded, for which railways will issue Railway Receipt
(RR). This receipt, along with other documents, is sent to the clearing and forwarding agent at the
port town. At this stage, the production export department makes an application to the insurance
company for insurance cover (internal as well as overseas) and obtains insurance policy/certificate
in duplicate with appropriate risk coverage.
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The Customs Appraiser/Examiner examines these documents and appraises the value having
regard to the following consideration
That the value and the quantity declared in the shipping bill is the same as in the export order or
letter of credit. That the formalities regarding exchange control, pre- shipment quality control
inspection etc. have been duly completed. After examination of documents and appraisement of
value, the Customs Examiner/Appraiser makes an endorsement on the duplicate copy of the
shipping Bill. He also gives directions to the Dock Appraiser about the extent of physical
examination of the cargo to be conducted at the Docks. All the Documents, except GR (original)
Form, the original Shipping Bill and a copy of the Commercial Invoice are returned to the
Forwarding Agent to be presented to the Dock Appraiser. After taking delivery of documents from
the Export Department, Forwarding Agent Presents the Port Trust Document to the Shed
superintendent of the port. He obtains carting order for bringing the export cargo to the transit
shed for physical examination by the Dock Appraiser and for their shipment. After bringing the
cargo into the shed he presents the following documents to the Dock Appraiser for conducting
physical examination of the cargo.
Duplicate, triplicate and export promotion copies of the shipping Bill Commercial Invoice
Packing List
AR 4 /AR 5 form (original and duplicate) and Invoice
Inspection Certificate (Original)
GR Form (Duplicate)
The Dock Appraiser after conducting physical examination records examination report and makes
Let Export endorsement on the duplicate copy of the Shipping Bill. He hands it over to the
forwarding Agent along with all other documents to be presented to the preventive officer of the
customs department who supervises the loading of cargo on board the vessel.
The preventive officer makes an endorsement Let ship on the duplicate copy of the Shipping
Bill. The duplicate copy of the Shipping Bill is then handed over to the agent of the shipping
company. This constitutes an authorization by the customs to the shipping company to accept the
cargo on the vessel. After the goods are loaded on board the vessel, the captain of the ship issues a
receipt known as Mates Receipt to the Shed Superintendent of the port. The forwarding agent
then makes a payment of the port charges and takes delivery of the Mates Receipt. He presents
the Mates Receipt first to the preventive officer who records the certificate of shipment on all the
copies of the shipping Bill, original and duplicate copies of AR4/ AR5 form. He returns the Export
promotion copy, a copy of Drawback shipping Bill and presents the Mates Receipt to the shipping
company and requests it to issue the Bill of Lading (2/3 negotiable and a few non-negotiable as
required).
Dispatch of Documents by Forwarding Agent to the Exporter After obtaining the Bill of Lading
from the shipping company, the agent sends the following documents to the exporter.
One copy of the Commercial Invoice duly attested by the customs
Export promotion copy of Shipping Bill
Drawback copy of Shipping Bill
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Full set of Clean On Board Bill of Lading together with non- negotiable copies
Original letter of credit! contract order Copies of Customs Invoice, if any
AR 4/ AR 5 (Duplicate) and Invoice
GR Form (Duplicate).
11.10 Claiming
Claiming Export Incentives
The process of claiming export incentives consists of
Excise Rebate
After completing the post- shipment formalities, the clearing and forwarding agent will file the
following documents with the Maritime Central Excise Collector or Jurisdictional Assistant
Collector of Central Excise for claiming the refund of excise duty or for obtaining release from
bond, as the case may be.
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AR4/ AR5 Form (Duplicate copy), which has been certified by the customs preventive officer
Non-negotiable copy of the Bill of Lading and lor shipping Bill certified by the customs
preventive officer
Additional documents to be submitted for claiming refund excise duty are - Application for
Refund in Form C and Pre-receipt
Duty Drawback
For claiming Duty Drawback, the exporters agent will submit the customs attested copy of the
Drawback Shipping Bill, along with the following documents, with the Drawback Department of
the Customs House
Drawback Claim pro forma (prescribed application form in five copies)
Bank or Customs Certified copy of Commercial Invoice
Non-negotiable copy of Bill of Lading
Any other specifically prescribed document
After finding the claim to be correct, the Drawback Department will dispatch the cheque of the
claim amount to the exporter. Alternatively, if the exporter so desires, this amount will be sent to
the exporters bank for being credited to his account with intimation to the exporter.
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Q3. Which of the following is the purpose for demanding Certificate of Origin for customs
clearance?
a)
b)
c)
d)
Q4. Which of the following is required for duty free clearance of import cargo?
a)
b)
c)
d)
Q5. Which of the following is not the objective of conducting customs examination of goods?
a) To create trade barriers for the export import business
b) To determine if proper documentation for customs clearance has been conducted
c) To help the government gather statistical data of all the goods imported into and exported
out of the country
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well as requirements for materials including packaging, equipment and technology. The feasibility
of producing each item is assessed.
Development of Samples is based on an initial indication of feasibility. The process of generating
these prototypes allows for important practical assessments including the identification of suppliers,
configuring of the production process, identifying capacity and capability, product testing in the
market and costing in relation to projected market demand.
Copyright and Intellectual Property (IP) Registration conveys legal recognition of ownership and
protection of ideas. Legal protection through copyright, patents and trademarks should be sought
before ideas are shown to anyone. This protection makes ideas more attractive for potential
licensing.
Production Planning involves sourcing of adequate raw materials and packaging components,
identifying and assigning the skills required to specific tasks, preparing a schedule of items to be
produced over a period of time (weeks/ months) and establishing preparation and assembly lines
for production based on a breakdown of the individual operations required.
Market Launch activities promote the product to potential customers, who may be businesses or
individuals. These events are designed to entice new and existing customers to purchase the
companys offerings but are also valuable opportunities to obtain customer feedback. Trade shows
provide ideal opportunities to launch new products to the market, as there is generally a
concentration of potential buyers in attendance; seeking new products and experiences.
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It is best to identify market requirements as far in advance of the intention to export as possible,
since these may influence the purchase of supplies of raw materials (e.g. lead-free glazes, flame
retardant fabrics or packaging) through suppliers. Support services in terms of testing and/or
certification may also be required.
The European Commission maintains an extensive Helpdesk for Developing Countries website at
http://exporthelp.europa.eu/. The site archives market requirements, rules of origin, applicable
import tariffs and Customs documentation required for the European market.
Information on United States Market requirements for highly regulated products including food,
cosmetics and preparations of plant material, may be obtained from the United States Food and
Drug Administration online at http://www.fda.gov/.
12.5
12.5 Market Research
Here are some simple methods which can be used to do quick and meaningful market research
Talk to your current buyers about changing buying patterns and products which are needed to
fill gaps in the market
Use the Internet and/or directories to research market profiles, culture, economic conditions,
pricing of competing products, similar products manufactured locally in target market and
potential trading partners in new target markets
Define your company's industry (e.g. giftware, furniture, fashion or accessories) and refer to
industry publications (including free/on-line publications available by signing up) for trends,
cultural, legal, technology and global issues
Contact Chambers of Commerce and Business Associations in the target market for
information on local enterprises who could be buyers/importers and partner organizations
Join your local exporters' association, Chamber of Commerce or industry association to be
informed on activities planned by them
When visiting the target market for a trade show or business activity, pay attention to telephone
and business directories (many are now posted on the Internet), magazines and even tourist
guides, which may provide information on the country and potential buyers.
Register to join mailing lists for free publications offered by various organizations
12.6
12.6 Successful product planning
Trade shows are a great opportunity to introduce new products and get feedback from the market.
Create an annual calendar trade shows and marketing events and a timetable for new product
launches; considering the 3 to 5 month cycle for production to distribution
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Develop concepts based on research (who is the customer and what is his/her profile?)
Create samples to test idea feasibility and generate costing
Prepare promotional material, packaging and labeling with photographs and brief on products
inspiration, materials and size for buyers
Develop a production plan and order supplies according to timetable for launches
Branding
Brands are more than names of individuals and companies or logos
Brands offer assurances to consumers of product quality and value
They connect emotionally with consumers and inspire feelings about values and experiences
In modern economies, registered brands have economic value and due to the existence of
international copyright laws, can legally be defended from copycats
Trademarks
Trademarks are consumer shorthand for the unique characteristics of a particular brand. They
may be a single word, letter, numeral, drawing (logo), symbol, three- dimensional sign (including
shape and packaging of goods), audible sign (musical / vocal sound), fragrance, or colour, used as a
distinguishing feature that identifies the product. Trademarks may also combine several of these
individual characteristics.
A trademark provides protection to the owner of the mark by conferring exclusive rights to use
it to identify goods or services or to authorize another to use it in return for payment.
Trademarks are distinctive signs used to identify goods or services as those produced or
provided by a specific person or enterprise. They protect a company's investments in its goods
and services; because the trademark system helps consumers to identify that a product or
service is produced by its owners
A collective mark is a type of trademark owned by an association; whose members use it
identify them with a certain level of quality and other requirements set by the association
Certification marks are not confined to any membership, but are given for compliance with
defined standards
Copyright
Copyright
Copyright is a legal protection extended to creators for their literary and artistic works
Copyright protects the original expression of ideas, not the ideas themselves
The requirements of copyright are that works must be original and fixed in a tangible
medium of expression
Copyright protection is free and automatic as soon as works are created and may be assigned
by using the symbol
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Display your logo, trademarks and brand name prominently on booth signage for trade shows,
labels and packaging
Remember Copyright can be assigned to an artist through use of the symbol on artwork
Develop a close dialogue and business relationship with buyers that will lead to brand loyalty
12.7
12.7 Packing and packaging
One of the main tasks facing any exporter is to make sure that goods reach their buyers and their
final consumers in perfect condition. The key is to get export packaging and labeling right. There
is a huge range of packaging options - from cartons and drums to wooden pallets and metal
containers. As well as making sure goods are securely packaged, one also should check that they're
appropriately marked or labeled to ensure they're handled properly while in transit.
Export Packaging
Export packaging is also often referred to as transport packaging, which is one of three main types
of packaging that are likely to be needed for exported goods.
Transport or export packaging is the outermost layer of packaging and is designed to protect
goods during transit. Examples include wooden crates, metal drums and plastic shrinkwrapping
Outer packaging is an intermediate layer of packaging, which often also serves a retailpromotion purpose. An example would be a box containing multiple units that doubles as a
retail display fixture and can be placed directly on a shop shelf, as is common with many
convenience foods
Sales packaging is the immediate layer of packaging around goods - the packaging that remains
when the goods reach their end-user. Examples include the bottles in which beverages are
contained, or the boxes many electronics items are sold in. Sales packaging often also serves a
marketing purpose by containing prominent branding images and information.
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Wrapping - often used with goods stacked on pallets, wrapping - such as shrink wrap or foil both adds to stability and protects goods
Pallets - allow smaller packing units such as boxes and cartons to be grouped together. They
allow easy mechanical transporting (e.g. forklift trucks), which eases the process of loading,
unloading and warehousing
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Waste legislation
Many markets abroad have waste regulations that favour packaging which can be easily recycled or
has a minimal impact on the environment when disposed of. In many export markets, there are
stricter rules on packaging waste and collection, e.g the 'green dot system' in Germany.
Exporter must comply with The Packaging (Essential Requirements) Regulations that aim to
minimize the amount of waste packaging businesses generate and ensure that packaging can be
reused, recovered or recycled.
Wood packaging requirements
International regulations and wood packaging standards exist to control the spread of forest pests
and timber diseases. Exporter may also need an import licence from his destination country to
import packaging that is made of, or contains wood.
Dangerous goods
Regulations for dangerous goods are very specific on acceptable inner and outer packaging.
Identification marks
Every package in the consignment should be clearly identifiable. Ensure the following details are
provided
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Handling instructions
A set of internationally recognized symbols is used to indicate how cargo handlers should handle
packages. For instance,
A picture of a wine glass indicates fragile goods
Sets of cross-hairs on two sides indicate centre of gravity
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Packaging for a trader (Wholesale, retail, shop, and departmental store) is influenced by
Unit Size
Intermediate Pack Size
Bulk Pack Size
Unit Load handling
Storage
Redistribution
Inventory Control
Display
Packaging for a defense consumer is influenced by
Long term inventory
Safety level beyond normal shelf life
Guaranteed performance
Distribution systems
Inspection/Q.C. Systems
Standards
The packaging for household consumer is influenced by
Positioning
Convenience
Quantity/pack size
Value
Regulations
Consumer protection
Environment protection
Packaging, while takes into account all of the above factors, is not a work of art. Packaging is
expected to communicate a favorable association of the content and a desirable connotation
motivating consumer to buy. Confidence in the product can be generated by the pack design and
graphic design. The Communication capability is conditioned by
The name of the product
The theme
The illustration
Typography
Colour Scheme
Pack Shape/styling
Overall execution surface, substrate, technology, treatment
Packaging involves products into a shipping box or carton to maximize protection from damage.
The key issues to keep in mind are: breakage, weight, moisture and additional shipping costs.
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No matter how lovely the products, buyers will not appreciate receiving them broken
Remember that excess packing leads to extra weight and by extension
Products can be damaged in shipping by rough handling or bad weather
Damage can also happen from movement of items within the box or pressure from stacking on
the outside of the box
To avoid damage include protective wrapping around individual fragile items, pack items snugly to
avoid movement and use strong, durable boxes.
To select packing materials, consider type and value of products, mode of transportation (i.e. air or
sea) and the weather likely to be encountered during the journey. Where cardboard boxes become
wet, their structure strength is reduced; therefore avoid overloading individual boxes and consider
surface protection for individual products to repel moisture as well as cardboard inserts to support
and protect the products packed inside. Packing can be used as a self promotion tool. Attractive,
sturdy, corrugated boxes to which sticky labels can be easily attached are highly recommended.
Appropriate printed markings depending on the type of product enclosed and include: keep dry,
this way up and fragile.
Dimensions of the package should support easy handling and it is recommended that weight
should not exceed 25kg per carton. Standardizing the size of shipping boxes used reduces cost
and allows for efficient stacking on pallets while in transit, thereby reducing the likelihood of
damage in handling
Remember to check if environmental regulations concerning packing exist in the target market
and to discuss preferences for packing with buyers
Packaging (as distinct from packing) refers to the design and method of enclosing the product to
provide for the following functions
Protection, preservation and containment of product during transportation
Breakdown of product into saleable units and increase consumer access
Conveyance of a message to the buyer and consumer through styling and provision of
information, by means of marking and labeling
Selection of packaging is one of the most significant decisions which any exporter is required to
make. Producers must consider
Technical aspects such as printing, strength of protective materials, resistance to moisture, dust,
vibration and shock
Aesthetic aspects such as shape, patterns, materials, colours
Economic aspects such as costs, re-usability, recyclability
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Customs agent
Distributor
Sales representative
Commission agent
Q2. In _________ the exporter sells goods directly to or through an independent domestic
intermediary in the exporters home country that exports the products to foreign markets.
a)
b)
c)
d)
Direct Selling
Indirect Selling
Multilevel Marketing
Global Resource Planning
Q3. All of the following are major type of indirect intermediaries except
a)
b)
c)
d)
Q5. An arrangement in which one company allows another company to use its name, products,
patents, brands, trademarks, raw materials, and/or production processes in exchange for a royalty
is called
a)
b)
c)
d)
Licensing
Joint Venture
Direct Investment
Trading Company
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above example receives the US dollars, to him this is a foreign currency. He must do something
with this foreign currency.
He may maintain a foreign currency account with his bank in the currency of payment if he
expects regular receipts in that currency. For example, the Indian seller may maintain a US
dollar currency account with his bank to meet the regular receipts in that currency. This would
also enable him to make regular payments in that currency. So by keeping a currency account
he may avoid having to buy and sell foreign currency every time he makes a sale or purchase in
that currency
The Indian Seller in the above example can ask his bank to hold on to the foreign currency
received. He may perhaps invest it in an interest bearing account until it is required to make a
payment in the future
Whether the foreign exchange deal is done in the local currency of the Indian seller or in the
foreign currency, it involves the need for foreign exchange in international trade.
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The Foreign Exchange market, commonly referred as FOREX, is where banks, investors and
speculators exchange one currency to another. It is also the largest financial market in the world.
The US stock market may trade $10 billion in one day, whereas the Forex market will trade up to
$2 trillion in one single day.
The Forex market is an open 24 hours a day. This market follows the sun around the world,
moving from the major banking centres of the United States to Australia and New Zealand to the
Far East, to Europe and finally back to the Unites States.
The Forex market is not centralized, like in currency futures or stock markets. Trading occurs over
computers and telephones at thousands of locations worldwide.
Until now, professional traders from major international commercial and investment banks have
dominated the FX market. Other market participants range from large multinational corporations,
global money managers, registered dealers, international money brokers, and futures and options
traders, to private speculators.
There are three main reasons to participate in the FX market
One is to facilitate an actual transaction, whereby international corporations convert profits
made in foreign currencies into their domestic currency
Corporate treasurers and money managers also enter the FX market in order to hedge against
unwanted exposure to future price movements in the currency market
The third and more popular reason is speculation for profit. In fact, today it is estimated that
less than 5% of all trading on the FX market is actually facilitating a true commercial
transaction
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estimated at $3.98 trillion, a growth of approximately 20% over the $ 3.21 trillion daily volume as
of April 2007.
The $3.98 trillion breakdown is as follows
$1.490 trillion in spot transactions
$475 billion in outright forwards
$1.765 trillion in foreign exchange swaps
$250 billion in options and other products
Trading in London accounted for 36.7% of the total, making London by far the most important
global centre for foreign exchange trading. In second and third places respectively, trading in New
York City accounted for 17.9% and Tokyo accounted for 6.2%.
Most developed countries permit the trading of FX derivative products (like currency futures and
options on currency futures) on their exchanges. All these developed countries already have fully
convertible capital accounts. A number of emerging countries do not permit FX derivative
products on their exchanges in view of controls on the capital accounts. The use of foreign
exchange derivatives is growing in many emerging economies. Countries such as Korea, South
Africa, and India have established currency futures exchanges, despite having some controls on the
capital account.
Main factors that influence this spectacular growth in volume is indicated below.
Business Internationalization
In recent decades the business world the competition has intensified, triggering a worldwide hunt
for more markets and cheaper raw materials and labor. The pace of economic internationalization
picked up even more in the 1990s, due to the fall of Communism in Europe and to up-and-down
economic and financial development in both Southeast Asia and South America. These changes
have been positive toward foreign exchange, since more transactional layers were added.
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Developments in Telecommunications
The introduction of automated dealing systems in the 1980s, of matching systems in the early
1990s, and of Internet trading in the late 1990s completely altered the way foreign exchange was
conducted. The dealing systems are online computer systems that link banks on a one-to-one
basis, while matching systems are electronic brokers. They are reliable and much faster, allowing
traders to conduct more simultaneous trades. They are also safer, as traders are able to see the
deals that they execute. The dealing systems had a major role in expanding the foreign exchange
business due to their reliability, speed, and safety.
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In the exchange rate quotation USD 1 = CAD 1.0195, the USD dollar is the primary currency and
the Canadian dollar is the counter currency. The US dollar is priced in Canadian Dollar terms.
In one case the US dollar is the counter currency and in another it is the primary currency. There
is no fixed convention which indicates which currency should be the primary currency. The
primary currency is normally one unit in the exchange quotation.
In the days when the pound sterling was the principal world currency, it was customary for the
Commonwealth currencies to be quoted as primary currency. With the rise to prominence of the
US economy, most exchange rates are now generally quoted with the US dollar as the primary
currency. However, the old convention still applies for several of the former Commonwealth
currencies.
The convention that is followed is
EUR
GBP
AUD
NZD
USD
JPY/CAD/CHF and all other currencies
So the currency at the top is generally taken as the primary currency and the currency that follows
is the counter currency. So, conventionally, we would make a quote in EUR/GBP and not
GBP/EUR. Similarly we would make a quote as GBP/USD, NZD/USD, GBP/NZD, USD/INR,
where the first is the primary currency.
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Therefore the Bid rate is always lower than the Offer rate, because the bank (market maker)
always wants to make a profit.
The market taker performs the opposite side of the transaction to the market maker. If the market
maker buys USD then the market taker sells USD, and if the market maker sells USD, then the
market taker buys USD.
If the market taker wishes to buy USD from the market maker, it must buy USD at its offer
rate (i.e. selling rate) of 82.54
If the market taker wishes to sell USD from the market maker, it must sell USD at its bid price
(i.e. buying rate) of 82.50
An alternative definition of bid rate would be the rate at which the market taker can sell the
primary currency. Similarly, an alternative definition of the offer rate would be the rate at which
the market taker can buy primary currency.
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market, it will tend to become cheaper in terms of other currencies that are being purchased in
exchange. Then the price of the currency being readily supplied and offered for sale will fall. On
the other hand, if a currency is in demand, and a few people are offering it for sale, the price of
that currency will rise.
So fluctuations in exchange rates are caused by an excess of supply over demand, or vice versa. For
example, if demand of customers to buy USD and sell GBP exceeds the counter balancing
demand to buy GBP and sell USD, GBP will lose value against USD. Similarly, if demand to buy
EUR and sell INR exceeds the demand to buy INR and sell EUR, EUR will gain value against
INR.
The factors that create demand, or lack of demand, for a particular currency are very often difficult
to identify or isolate. However, the following factors are known to affect rate of exchange
The balance of payments
Confidence and speculation
Central bank intervention and exchange controls
International interest rate differentials
Leads and lags
Hot Money
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Confidence, or lack of it, can lead to speculation in a currency. If people think a currency is going
to devalue, they obviously wish to protect themselves by making sure they have none of that
currency on their books. So if speculation is against a currency, investors will sell that currency. If
speculation is in favour of a currency, investors buy that currency.
Therefore, if speculation becomes strong, the pressure of demand for or against the currency will
force exchange rate movements in the direction intended by speculators. So, speculative forces can
have a major effect on exchange rates.
Exchange Control
Exchange control regulations can also affect exchange rates. The introduction of new regulations
which restrict the free movement of funds will cause a reduction in demand for a currency.
Conversely, the relaxation or abolition of exchange control regulations will make for a freer market
in that countrys currency and will usually lead to an increase in demand.
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Leads
Leads and Lags
Leads means a rush to pay in currency (or sell currency) ahead of time normally chosen for
payments
Lags means a delay in payment or sale of currency
These are anticipatory factors. They are defined as a displacement from normal in time at which
settlement is made in the course of international trade. Expectations about future movements in
exchange rates are likely to affect the way that companies make decisions about buying and selling
foreign currencies.
Suppose that Indian traders expect that INR will fall in value against other currencies
An Indian importer who must pay for goods in a foreign currency will probably
Pay now instead of taking a period of credit (leads)
Import more of goods now (leads) while INR still has a high value, and keep larger
inventories
On the other hand, an Indian exporter who receives payment in foreign currency will delay
asking his bank to buy the currency for INR (lags). This is because by waiting, he will hope to
obtain more INR in exchange when INR eventually falls in value
Moreover foreign buyers may be aware that INR might fall in value. They will be tempted to
delay buying goods (lags). They will expect that prices of goods from India will soon fall in
terms of their own currency
Hot Money
Hot money is a vast sum of international money which is available for investment or for
speculative purposes. When it is used for investment the money moves from one country to
another in order to obtain the benefits of higher interest rates. When it is speculative, it is money
which will flow from a weak currency into a stronger one in the hope that the stronger currency will
increase in value and enable a capital profit to be made. Just as hot money flows into a country, it
can just as quickly flow out, putting speculative pressure on the countrys currency to weaken.
Euro
The euro was designed to become the premier currency in trading by simply being quoted in
American terms. Like the U.S. dollar, the euro has a strong international presence stemming from
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members of the European Monetary Union. The currency remains plagued by unequal growth,
high unemployment, and government resistance to structural changes. Recent problems in Greece
and Ireland highlight the problems with the Euro.
Japanese Yen
The Japanese yen is the third most traded currency in the world; it has a much smaller
international presence than the U.S. dollar or the euro. The yen is very liquid around the world,
practically around the clock. The natural demand to trade the yen concentrated mostly among the
Japanese keiretsu, the economic and financial conglomerates. The yen is much more sensitive to
the fortunes of the Nikkei index, the Japanese stock market, and the real estate market.
British Pound
Until the end of World War II, the pound was the currency of reference. Its nickname, cable, is
derived from the telex machine, which was used to trade it in its heyday. The currency is heavily
traded against the euro and the U.S. dollar, but has a spotty presence against other currencies. The
two-year bout with the Exchange Rate Mechanism, between 1990 and 1992, had a soothing effect
on the British pound, as it generally had to follow the deutsche mark's fluctuations, but the crisis
conditions that precipitated the pound's withdrawal from the ERM had a psychological effect on
the currency. Prior to the introduction of the euro, both the pound benefited from any doubts
about the currency convergence. After the introduction of the euro, Bank of England is attempting
to bring the high U.K. rates closer to the lower rates in the euro zone. The pound could join the
euro in the early 2000s, provided that the U.K. referendum is positive.
Swiss Franc
The Swiss franc is the only currency of a major European country that belongs neither to the
European Monetary Union nor to the G-7 countries. Although the Swiss economy is relatively
small, the Swiss franc is one of the four major currencies, closely resembling the strength and
quality of the Swiss economy and finance. Switzerland has a very close economic relationship with
Germany, and thus to the euro zone. Therefore, in terms of political uncertainty in the East, the
Swiss franc is favored generally over the euro. Typically, it is believed that the Swiss franc is a stable
currency. Actually, from a foreign exchange point of view, the Swiss franc closely resembles the
patterns of the euro, but lacks its liquidity. As the demand for it exceeds supply, the Swiss franc can
be more volatile than the euro.
Canadian Dollar
Canada decided to use the dollar instead of a Pound Sterling system because of the ubiquity of
Spanish dollars in North America in the 18th century and early 19th century and because of the
standardization of the American dollar. The Province of Canada declared that all accounts would
be kept in dollars as of January 1, 1858, and ordered the issue of the first official Canadian dollars
in the same year. The colonies that would come together in Canadian Confederation progressively
adopted a decimal system over the next few years.
Australian Dollar
The Australian Dollar was introduced in February 14, 1966, not only replacing the Australian
Pound but also introducing a decimal system. Following the introduction of the Australian Dollar
in 1966, the value of the national currency continued to be managed in accord with the Bretton
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Woods gold standard as it had been since 1954. Essentially the value of the Australian Dollar was
managed with reference to gold, although in practice the US dollar was used. In 1983, the
Australian government floated the Australian dollar, meaning that it no longer managed its value
by reference to the US dollar or any other foreign currency. Today the value of the Australian
Dollar is managed with almost exclusive reference to domestic measures of value such as the CPI
(Consumer Price Index).
Currency Symbol
GBP
USD
EUR
JPY
CAD
CHF
AUD
Currency
British Pound
US Dollar
Euro
Japanese Yen
Canadian Dollar
Swiss Franc
Australian Dollar
14.12 Effect of fluctuations in exchange rates: exposure and foreign exchange risk
Fluctuations in exchange rates represent a serious risk to business. They may lead to losses or gains
for exporters or importers. The major effect of fluctuating exchange rates for international trade is
the risk for exporters or importers that the value of foreign exchange they may have to deal in turns
out to be different from what they had hoped and intended.
Effects on exporters
When exporters invoice foreign buyers in foreign exchange, they have to exchange their income
for their home currency. If foreign currency has weakened in value, they would earn less home
currency than planned. For example suppose that a UK exporter sells goods costing GBP 85,000
to a US buyer for USD 120,000 when the exchange rate is USD 1.20 = GBP 1. The USD buyer is
allowed 90 days credit. When payment is eventually received (more than 90 days later) the UK
exporter asks his bank to exchange the USD 120,000 for GBP. The UK exporter finds exchange
rate is 1 GBP = 1.5 USD
At an exchange rate of USD 1.20, the sale would have earned him GBP 100,000 in GBP, and
the UK exporter could have expected a profit on the sale of GBP 15,000
At an exchange rate of USD 1.50, the sale would earn him only GBP 80,000 , and the UK
exporter would end up with a loss on the sale of GBP 5,000, caused entirely by movements in
exchange rates
We can say that the UK exporter was exposed in US dollars for 90 days or more to the extent of
USD 120,000. Whenever a business has foreign exchange exposure, it is at risk of making a loss
from currency fluctuations.
Sometimes the USD might have strengthened against GBP in those 90 days. If the exchange rate
had changed to GBP = 1 USD, by the time the USD 120,000 were received, the UK exporter
would have obtained GBP 120,000 from the sale. Then he would have made a profit of GBP
35,000, which was bigger than expected.
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So foreign exchange exposure and foreign exchange risk might bring extra profit as well as loss.
However being exposed in a currency does involve a gamble. Most businessmen would prefer not
to put their companys profits or losses on a gamble if they can avoid it. Therefore business men
look for ways of reducing their foreign exchange exposure so that they can plan their business and
foresee their profits with greater confidence.
Effects on importers
Importers also want to minimize their foreign exchange exposure for the same reasons. Suppose
that a UK importer arranges to buy goods from a US supplier for USD 540,000, and takes 60
days credit. When he signed the purchase contract, the exchange rate was GBP =1.5 USD. When
he has to pay for the goods (more than 60 days later) the rate might have changed to GBP = 1.2
USD as the USD have strengthened against GBP. The importer would ask his bank to sell him the
USD 540,000 to pay the US supplier, but instead of costing GBP 360,000 (@ 1.5 USD per GBP),
it would cost GBP 450,000 (@ 1.2 USD per GBP).
If the USD had weakened against the GBP, say to 1.8 USD for 1 GBP, the importer would only
have to pay GBP 300,000 for the goods. So they would have made a profit from the movement in
the exchange rates. Even though, most businessmen would prefer to minimize their foreign
exchange exposure, or avoid it just as with the case of the exporter. The importers would generally
prefer to know what they will have to pay in their own currency, rather than take a gamble on
exchange rate movements.
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Credit Risk
Credit risk is connected with the possibility that an outstanding payment may not be repaid as
agreed, due to a voluntary or involuntary action by a counter party.
The following forms of credit risk are known
Replacement risk which occurs when counter parties of the failed bank find their books
unbalanced to the extent of their exposure to the insolvent party. To rebalance their books,
these banks enter new transactions.
Settlement risk which occurs because of different time zones on different continents. Such a
way, currencies may be credited at different times during the day. Australian and New Zealand
dollars are credited first, then Japanese yen, followed by the European currencies and ending
with the U.S. dollar.
Therefore, payment may be made to a party that will declare insolvency (or be declared insolvent)
immediately after, but prior to executing its own payments.
The credit risk for instruments traded off regulated exchanges is to be minimized through the
customers' creditworthiness. Commercial and investment banks, trading companies, and banks'
customers must have credit lines with each other to be able to trade. Even after the credit lines are
extended, the counter parties financial soundness should be continuously monitored. Along with
the market value of their currency portfolios, end users, in assessing the credit risk, must consider
also the potential portfolios exposure.
Country Risk
The failure to receive an expected payment due to government interference amounts to the
insolvency of an individual bank or institution, a situation described under credit risk. Country risk
refers to the government's interference in the foreign exchange markets and falls under the joint
responsibility of the treasurer and the credit department. Outside the major economies, controls
on foreign exchange activities are still present and actively implemented.
For the exporters it is important to know or be able to anticipate any restrictive changes concerning
the free flow of currencies. If this is possible, though trading in the affected currency will dry up
considerably, it is still a manageable situation.
The risk culture of your business is critical and must be established at the most senior level. Above
all it calls for honesty. Too often individuals are criticized for decisions that, at the time, were in
tune with the organizations perceived appetite for risk. But it is never easy to set down effective
guidelines and the range of exposures for even a simple transaction can be extensive.
For example, an exporter needing to borrow to finance a sale in foreign currency may have to
consider counterparty credit risk, funding risk and interest rate risk. The permutations are endless
and the costs of hedging transactions to reduce or eliminate every possible exposure could
potentially swallow any profit from a deal.
Effective risk management requires thinking the unthinkable. This does not in any way lessen the
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great value of the many sophisticated risk-management systems available. The problems come if
people start to think of them, and the models they are based on, as infallible.
It is also common for the development of control systems to come after any new risk-related
products. Be careful not to bet the business until the exposure is known. To be in business you
must make decisions involving risk. However sophisticated the tools at your disposal you can never
hope to provide for every contingency. But unpleasant surprises should be kept to a minimum.
Ask yourself
Can the risks to your business be identified, what forms do they take and are they clearly
understood - particularly if you have a portfolio of activities?
Do you grade the risks faced by your business in a structured way?
Do you know the maximum potential liability of each exposure?
Are decisions made on the basis of reliable and timely information?
Are the risks large in relation to the turnover of your business and what impact could they have
on your profits and balance sheet?
Over what time periods do the risks exist?
Are the exposures one-off or are they recurring?
Do you know enough about the ways in which you exposures can be reduced or hedged and
what it would cost including the potential loss of any upside profit?
Have trading and risk-management functions or decisions been adequately separated?
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FERA
FEMA
FDI
FII
Q2. As per RBI manual, which of the following is the permitted currency for export transaction?
a)
b)
c)
d)
Malaysian Ringitt
Chinese Yuan
Srilankan Rupee
US Dollar
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15.1 Advantages
Reduction in documentation costs
Speed of execution
Most current database maintenance
Speedier and efficient movement of cargo
Cost reduction and savings
Faster information flow
Improved accuracy
Reduced paperwork and intervention
A lot of effort has been made internationally to make the systems automated and electronic
15.2 ASYCUDA
The Automated System for Customs Data (ASYCUDA) is a computerized system designed by the
UNCTAD to administer a country's customs. In 2004 there were more than 50 operational project
with expenditures exceeding 7 million US$. It is the largest technical cooperation programme of
the UNCTAD covering over 80 countries and 4 regional projects.
ASYCUDA is a computerized customs management system which covers most foreign trade
procedures. The system handles manifests and customs declarations, accounting procedures,
transit and suspense procedures.
Currently there are three different generations of ASYCUDA in use: ASYCUDA 2.7,
ASYCUDA++ and ASYCUDA World. All of them were built using different paradigms and
solutions available at the time of conception, being ASYCUDA World the most recent one and
less used so far (early 2009).
UNCTAD premise was to build a computer system to assist customs authorities (or their local
equivalent) all over the world to automate and control their core processes and obtain timely,
accurate and valuable information to support government projections and planning.
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Telecommunications
Insurance
Banks
Other statutory bodies
Port Operators (container terminals)
Shipping lines
Customs brokers / forwarders
Road transport companies
Importers / exporters
Facilitation
While ensuring proper enforcement of Customs laws and regulations, Customs Administration
should strive to improve facilitation of Customs clearance procedures.
Accountability
Customs Administration should be accountable for their actions through a transparent and easily
accessible process of Administration and/or judicial review.
Consistency
Customs laws, regulations, administrative guidelines and procedures should be applied in a
uniform manner.
Transparency
Customs laws, regulations, administrative guidelines and procedures should be publicly available in
a prompt and easily accessible manner.
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Simplification
Customs laws, regulations, administrative guidelines and procedures should be simplified to the
extent possible so that Customs clearance can proceed without undue burden.
Overview
The objective was to roll out systems and processes that improve the way the business is
conducted.
ICES system is not only a technology solution but it transformed the way business was done. ICES
comprises of two main sub systems namely, India Customs EDI system/Imports (ICES/I) and
Indian Customs EDI System/Export (ICES/E).
ICES/I system is used for processing of Bill of Entry; and ICES/E for processing of Shipping Bills.
The Exporters, Importers and Custom House Agents (CHAs) transmit Bills of Entry, Shipping
Bills and other related documents such as Invoice, Packing List over dial-up links to the NICNET
EDI Server which, in turn, submit them to Customs computer system for clearance. The trading
community is not required to travel physically to the Custom House for submitting the documents
except at the last stage for physical examination of goods, and for taking delivery.
The Custom House Agents use the Remote EDI System (RES) which is a standalone software
package for preparation of Bill of Entry and Shipping Bills and other related documents. It has
been developed by NIC as part of Indian Customs EDI System. The documents transmitted
electronically over NICNET are submitted to Customs Computer System for further processing.
ICES/I consists of the following main modules
Import General Manifest
Service Centre
Appraising
Audit
Assistant Commissioner
Cash
Examination
DEPB/DEEC/100% EOU
Bonds
Licence
Baggage
System Manager
MIS
Ex Bond
Transshipment
Import General Manifest
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Examination
Assistant Commissioner
Preventive Officer
Export General Manifest
MIS
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Security
ICES provides for security at all levels of access to the system. At the Service Centre. Security
features are implemented at module level. System keeps track of any transaction carried by an
user.
Help
System includes powerful help features which can be invoked by the Assessing Officers from their
respective screens to facilitate their assessment work.
Benefits
Computerization of customs procedures resulted in time and cost savings due to the reduced need
to prepare, handle, store and deliver customs documentation.
Improvements in communications, access to information and the transparency of customs
processes and appeals increased the level of certainty and fairness.
A good compliance track record resulted in faster clearance and less intrusive verification
techniques.
Importers know the amount of duties and taxes owing as a result of the clear and consistent rules.
More efficient clearance will produce time and cost savings and provide the certainty required to
exploit modern business practices such as just-in-time inventory.
Exporters benefited from having similar customs rules and procedures apply across the
international market, thus increasing market access opportunities, while reducing costs and
complexity.
Customs Brokers have the opportunity to refocus their services from dealing with forms and
complexity to using their expertise and knowledge to bring a new range of professional services to
clients operating in an expanding and evolving trade market.
Carriers benefit from faster service, lower costs and the ability to use their equipment to its utmost
capacity rather than having it delayed at Customs.
Operations
Fully automated process with little or no intervention by either party providing a virtual on-line
scenario
Declarations can be accepted round the clock automatically, resulting in maximum productivity
Quicker retrieval of cargo through reduction of clearance times
Reduction in manual administrative processes resulting in fewer errors and no duplication
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Harmonized business relationships with other bodies such as Ports, DGFT, Airlines,
Container Depots etc
Time Saving
Notification of releases are speeded up as a result of the electronic releases being generated
automatically No capturing of the release required by the client Communication errors reported
and communicated electronically to client
Data Accuracy
Electronic messaging has the proven advantage of minimizing data capture which in turn ensures
less errors and quicker releases
The accuracy of data received can be incorporated into clients Track and Trace
Cost Effectiveness
Cost of processing the documents has come down drastically.
Cargo Handling
Electronic clearances provide quicker cargo releases, resulting in more efficient deliveries
Technical
Indian Customs EDI system is developed for better management of Custom Activities. The
existing processes were analyzed in depth for re-engineering and improvement. The main
achievements of the system are simplified and harmonized procedures which has not only
provided efficient and reliable environment to the customs but also to the business communities
and other agencies involved in the trade. The business processes of the customs and the trading
partners along with their boundaries and interfaces were analyzed in depth and reengineered from
the viewpoint of
Higher efficiency
Customer satisfaction
Lower Cost
Facilitation
Lower inventory level
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Functional
Document Preparation and submission
Indian Customs EDI System can accepts the documents from the trading partners in the
Electronic Format. The documents can be prepared and submitted using either the Electronic
Data Interchange or Service Centre. The Importers/Exporters and Custom House agents can use
the Graphical User Interface based package Remote EDI System implemented using Visual
Basic/Oracle 8 from their offices to create the documents in the desired format and then
transmitting them over the Internet using the secure server of NIC for submission at customs
house for further processing.
The document received over the Internet at Custom house is then loaded to the ICES after the
proper validation checks.
Importers/Exporters and CHAs who do not have access to Internet can get their documents
electronically prepared and submitted for further processing at the Service Centre. The Service
Centre module of NIC running on powerful Sun machine under Oracle 7.0 allows entry of data,
modifications and submission.
The data entered through EDI or Service Centre gets validated before their storage into ICES. If
errors are found, the same are reported to the Importer/Exporter/CHA through EDI or at the
Service Centre.
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the status of his documents from his own system. He can view any memo or objections on his
documents as they are posted in the system.
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Community
As mentioned, the main objective of introduction of EDI in International trade was to move away
from customs controls to trade facilitation. A number of parties, most of which are government
agencies, are involved in a trade transaction. NIC submitted a re-engineering proposal in 1998 to
the Customs, which is subsequently implemented. The main features of the system are
Integration of the agencies involved in a trade transaction
All the agencies presenting single face to the customer
Customer interact with only one agency as far as possible
Data once captured made available to other agencies
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This has been achieved primarily by re-engineering the processes of these regulatory agencies
involved. The internal functions of these agencies are automated and are made EDI capable. The
inter-agency data files are automatically transferred and received by the system and act upon the
messages received and the response messages are generated.
The main agencies other than Custom House and CHA/Importer/Exporter integrated into the
Customs EDI Community System are
Directorate General of Foreign Trade
Airport Authority of India
Apparel Export Promotion Council
Export Promotion Council(EPC)/Commodity Board
Airlines
Port Authorities
Shipping Lines and Shipping Agents
Inland Container Depots
Container Freight Stations
Banks
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Microsoft
Acer Computers
Dell Computers
Amazon.com
Perfumes
Books
Footwear
Garments
Q5. Which of the following is NOT among the top five logistics services supported by IT?
a)
b)
c)
d)
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Principle
Principle Objectives of the Policy
To facilitate sustained growth in exports from India and import in India
To stimulate sustained economic growth by providing access to essential raw materials,
intermediates, components, consumables and capital goods required for augmenting
production and providing services
To enhance the technological strength and efficiency of Indian agriculture, industry and
services, thereby improving their competitive strength while generating new employment
opportunities, and to encourage the attainment of internationally accepted standards of quality
To provide clients with high-quality goods and services at globally competitive rates
Canalization is an important feature of EXIM Policy under which certain goods can be imported
only by designated agencies. For an example, an item like gold, in bulk, can be imported only by
specified banks like SBI and some foreign banks or designated agencies.
The Export Import Policy is updated every year on the 31st of March and the modifications,
improvements and new schemes became effective from 1st April of every year.
All types of changes or modifications related to the EXIM Policy is normally announced by the
Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance, the
Directorate General of Foreign Trade and its network of regional office.
Trade is an indispensable means for sustaining the economic growth and development of a nation.
In India, the main legislation governing foreign trade is the Foreign Trade (Development and
Regulation) Act, 1992. As per the provisions of the Act, the Government of India formulates and
announces a foreign trade policy and amends it from time to time.
The Ministry of Commerce and Industry is the most important organ concerned with the
promotion and regulation of foreign trade in India. The Ministry has an elaborate organizational
set up to look after the various aspects of trade. Its two important offices concerned with trade are
the Directorate General of Foreign Trade (DGFT) and the Directorate General of Commercial
Intelligence and Statistics (DGCI&S)
DGFT is mainly responsible for implementing Foreign Trade Policy/EXIM Policy with the main
objective of promoting Indian Exports. It also issues licenses to exporters and monitors their
corresponding obligations through a network of regional offices. DGCI&S is entrusted with the
work of collecting, compiling and publishing/disseminating trade statistics and various types of
commercial information required by the policy makers, researchers, importers, exporters, traders
as well as overseas buyers.
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India is also engaged in trade negotiations and agreements at multilateral, regional and bilateral
levels. It is interacting with international agencies such as the World Trade Organization (WTO),
the United Nation Conference on Trade & Development (UNCTAD), the Economic and Social
Commission for Asia and Pacific (ESCAP), as well as with individual countries or group of
countries on a wide range of issues including tariff and non tariff barriers, international commodity
agreements, preferential/free trade arrangements, investment matters etc. Some of the major
regional trading arrangements that India has entered into include: Agreement on South Asian Free
Trade Area (SAFTA), Asia Pacific Trade Agreement (APTA), Framework Agreement on
Comprehensive Economic Cooperation between ASEAN and India etc.
The foreign trade policy 2004-09 announced in 2004 had set two objectives
To double our percentage share of global merchandize trade within 5 years
Use trade expansion as an effective instrument of economic growth and employment
generation
The results of the FTP 2004-2009 have been remarkable. Our exports witnessed robust growth to
reach a level of USD 168 billion in 2008-09 from USD 63 billion in 2003-04. Our share of global
merchandise trade was 0.83% in 2003, which rose to 1.45% in 2008 as per WTO estimates. Our
share of global commercial services export was 1.4% in 2003, which rose to 2.8% in 2008. Indias
total share of goods and services trade has gone up from 0.92% to 1.64% during 2004-09.
The new Foreign Trade Policy (FTP) announced on 27th Aug 2009, covering a five year period of
2009-2014
2008 has seen recession worldwide, especially in the developed markets. The short term objective
of NFTP 2009-14 is to arrest and reverse the declining trend of exports and to provide additional
support especially to those sectors which have been hit badly by recession in the developed world.
The policy objective is to achieve an annual export growth of 15% with an annual export target of
USD 200 billion by March 2011. In the remaining three years of this FTP 2014, the country
should be able to come back to the high export growth path of around 25% per annum, and
double Indias export of goods and services by 2014. The long term policy objective for the
Government is to double Indias share in global trade by 2020. In order to meet these objectives,
the Government would follow a mix of policy measures including fiscal incentives, institutional
changes, procedural rationalization, and enhanced market access across the world and
diversification of export markets. Improvement in infrastructure related to exports, bringing down
transaction costs, and providing full refund of all indirect taxes. Endeavor will be made to see that
the Goods and services Tax rebate all indirect taxes and levies on export.
A special thrust has been provided to employment intensive sectors which have witnessed job
losses in the wake of recession, especially in the field of textiles, leather, handicrafts etc
Attention is being paid to diversify export markets and offset the inherent disadvantage for our
exporters in emerging markets of Africa, Latin America, Oceania and CIS countries such as Credit
risks, higher trade costs etc through appropriate policy instruments. The policy aims to diversify
products and markets through rationalization of incentive schemes including the enhancement of
incentive rates which have been based on the perceived long term competitive advantage of India
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in a particular product group and market. New emerging markets have been given a special focus
to enable competitive exports. This would of course be contingent upon availability of adequate
exportable surplus for a particular product. Additional resources have been made available under
the Market Development Assistance Scheme and Market Access Initiative Scheme. Incentive
Schemes are being rationalized to identify leading products which would catalyze the next phase of
export growth.
As part of our policy for market expansion, a Comprehensive Economic Partnership Agreement
with South Korea has been signed that will give enhanced market access to Indian exports. A
goods agreement has also been signed with ASEAN and has been effective since Jan 2010. These
trade agreements are in line with Indias Look East Policy.
Made in India shows are being planned to promote Brand India throughout the year. An
important part of increasing exports is technology upgradation. So, a major thrust area of Foreign
Trade Policy 2009-14 is to help exporters in technological upgradation. For this purpose, import
of Capital goods for certain sectors is being under EPCG at zero duty
For upgradation of export sector infrastructure, Towns of Export Excellence and units located
therein would be granted additional focused support and incentives.
In order to reduce the transaction costs and institutional bottlenecks, the e trade project is being
implemented in a time bound manner to bring all stake holders on a common platform.
Additionally ports/locations would be enabled on the EDI over the next few years.
Market Diversification
Weaker demand in developed economies in the wake of recession and increased economic
uncertainty has pulled back Indias exports to the developed countries. This has led to a fresh
though to diversify and insulate the exports from a regional shock. Focus is being shifted to
economies of Latin America, parts of Asia and Oceania. 26 new countries have been included
within the ambit of Focus Market Scheme The incentives provided under Focus Market Scheme
have been increased from 2.5% to 3% .
There has been a significant increase in the outlay under Market Linked Focus Product Scheme
by inclusion of more markets and products. This ensures support for exports to all countries in
Africa and Latin America
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Technological Upgradation
To usher in the next phase of export growth, India needs to move up in the value chain of export
goods. This objective is sought to be achieved by encouraging technological upgradation of our
export sector. A number of initiatives have been taken in this policy to focus on technological
upgradation. Such initiatives include
EPCG Scheme at zero duty has been introduced for certain engineering products, electronic
products, basic chemicals and pharmaceuticals, apparel and textiles, plastics, handicrafts,
chemicals and allied products and leather and leather products
The existing 3% EPCG Scheme has been considerably simplified, to ease its usage by the
exporters
To encourage value added manufacture export, a minimum of 15% value addition on
imported inputs under Advance Authorization Scheme has been stipulated
A number of products including automobiles and other engineering products have been
included for incentives under Focus Product, and Market Linked Focus Product Schemes
Steps to encourage Project Exports shall be taken
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Higher allocation for Market Development Assistance (MDA) and Market Access Initiative
(MAI) schemes is being provided.
Technological Upgradation - To aid technological upgradation of our export sector, EPCG
Scheme at Zero Duty has been introduced. This Scheme will be available for engineering &
electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics,
handicrafts, chemicals & allied products and leather & leather products (subject to exclusions
of current beneficiaries under Technological Upgradation Fund Schemes (TUFS),
administered by Ministry of Textiles and beneficiaries of Status Holder Incentive Scheme in
that particular year). The scheme shall be in operation till 31.3.2011.
Jaipur, Srinagar and Anantnag have been recognized as Towns of Export Excellence for
handicrafts; Kanpur Dewas and Ambur have been recognized as Towns of Export Excellence
for leather products; and Malihabad for horticultural products.
EPCG Scheme Relaxations - To increase the life of existing plant and machinery, export
obligation on import of spares, moulds etc. under EPCG Scheme has been reduced to 50% of
the normal specific export obligation.
Taking into account the decline in exports, the facility of Re-fixation of Annual Average Export
Obligation for a particular financial year in which there is decline in exports from the country,
has been extended for the 5 year Policy period 2009-14.
Support for Green products and products from North East - Focus Product Scheme benefit
extended for export of green products; and for exports of some products originating from the
North East.
Status Holders - To accelerate exports and encourage technological upgradation, additional
Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports.
The duty credit scrips can be used for procurement of capital goods with Actual User
condition. This facility shall be available for sectors of leather (excluding finished leather),
textiles and jute, handicrafts, engineering (excluding Iron & steel & non-ferrous metals in
primary and intermediate form, automobiles & two wheelers, nuclear reactors & parts, and
ships, boats and floating structures), plastics and basic chemicals (excluding pharma products)
[subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes
(TUFS)].
Transferability for the Duty Credit scrips being issued to Status Holders under FTP under
VKGUY Scheme has been permitted. This is subject to the condition that transfer would be
only to Status Holders and Scrips would be utilized for the procurement of Cold Chain
equipment(s) only.
Stability/ continuity of the Foreign Trade Policy - To impart stability to the Policy regime, Duty
Entitlement Passbook (DEPB) Scheme is extended beyond 31-12-2009 till 31.12.2010.
Interest subvention of 2% for pre-shipment credit for 7 specified sectors has been extended till
31.3.2010 in the Budget 2009-10.
Income Tax exemption to 100% EOUs and to STPI units under Section 10B and 10A of
Income Tax Act has been extended for the financial year 2010-11 in the Budget 2009-10.
The adjustment assistance scheme initiated in December, 2008 to provide enhanced ECGC
cover at 95%, to the adversely affected sectors, is continued till March, 2010. Marine sector
Fisheries have been included in the sectors which are exempted from maintenance of average
EO under EPCG Scheme, subject to the condition that Fishing Trawlers, boats, ships and
other similar items shall not be allowed to be imported under this provision. This would
provide a fillip to the marine sector which has been affected by the present downturn in
exports.
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Additional flexibility under Target Plus Scheme (TPS) / Duty Free Certificate of Entitlement
(DFCE) Scheme for Status Holders has been given to Marine sector. Gems & Jewellery Sector
23. To neutralize duty incidence on gold Jewellery exports, it has now been decided to allow
Duty Drawback on such exports.
In an endeavor to make India a diamond international trading hub, it is planned to establish
Diamond Bourse(s).
A new facility to allow import on consignment basis of cut & polished diamonds for the
purpose of grading/ certification purposes has been introduced.
To promote export of Gems & Jewellery products, the value limits of personal carriage have
been increased from US$ 2 million to US$ 5 million in case of participation in overseas
exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has
also been increased from US$ 0.1 million to US$ 1 million. Agriculture Sector
To reduce transaction and handling costs, a single window system to facilitate export of
perishable agricultural produce has been introduced. The system will involve creation of multifunctional nodal agencies to be accredited by APEDA.
Leather Sector - Leather sector shall be allowed re-export of unsold imported raw hides and
skins and semi finished leather from public bonded ware houses, subject to payment of 50% of
the applicable export duty.
Enhancement of FPS rate to 2% would also significantly benefit the leather sector.
Tea - Minimum value addition under advance authorization scheme for export of tea has been
reduced from the existing 100% to 50%.
DTA sale limit of instant tea by EOU units has been increased from the existing 30% to 50%.
Export of tea has been covered under VKGUY Scheme benefits.
Pharmaceutical Sector - Export Obligation Period for advance authorizations issued with 6APA as input has been increased from the existing 6 months to 36 months, as is available for
other products.
Pharma sector extensively covered under MLFPS for countries in Africa and Latin America;
some countries in Oceania and Far East.
Handloom Sector - To simplify claims under FPS, requirement of Handloom Mark for
availing benefits under FPS has been removed.
EOUs have been allowed to sell products manufactured by them in DTA upto a limit of 90%
instead of existing 75%, without changing the criteria of similar goods, within the overall
entitlement of 50% for DTA sale.
To provide clarity to the customs field formations, DOR shall issue a clarification to enable
procurement of spares beyond 5% by granite sector EOUs.
EOUs will now be allowed to procure finished goods for consolidation along with their
manufactured goods, subject to certain safeguards.
During this period of downturn, Board of Approvals (BOA) to consider, extension of block
period by one year for calculation of Net Foreign Exchange earnings of EOUs.
EOUs will now be allowed CENVAT Credit facility for the component of SAD and Education
cess on DTA sale.
Thrust to Value Added Manufacturing - To encourage Value Added Manufactured export, a
minimum 15% value addition on imported inputs under Advance Authorization Scheme has
now been prescribed.
Coverage of Project Exports and a large number of manufactured goods under FPS and
MLFPS.
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DEPB rate shall also include factoring of custom duty component on fuel where fuel is allowed
as a consumable in Standard Input-Output Norms.
Flexibility provided to exporters - Payment of customs duty for Export Obligation (EO)
shortfall under Advance Authorization / DFIA / EPCG Authorization has been allowed by way
of debit of Duty Credit scrips. Earlier the payment was allowed in cash only.
Import of restricted items, as replenishment, shall now be allowed against transferred DFIAs,
in line with the erstwhile DFRC scheme.
Time limit of 60 days for re-import of exported gems and jewellery items, for participation in
exhibitions has been extended to 90 days in case of USA.
Transit loss claims received from private approved insurance companies in India will now be
allowed for the purpose of EO fulfillment under Export Promotion schemes. At present, the
facility has been limited to public sector general insurance companies only.
Waiver of Incentives Recovery, On RBI Specific Write off. In cases, where RBI specifically
writes off the export proceeds realization, the incentives under the FTP shall now not be
recovered from the exporters subject to certain conditions.
Simplification of Procedures: To facilitate duty free import of samples by exporters, number of
samples/pieces has been increased from the existing 15 to 50. Customs clearance of such
samples shall be based on declarations given by the importers with regard to the limit of value
and quantity of samples.
To allow exemption for up to two stages from payment of excise duty in lieu of refund, in case
of supply to an advance authorization holder (against invalidation letter) by the domestic
intermediate manufacturer. It would allow exemption for supplies made to a manufacturer, if
such manufacturer in turn supplies the products to an ultimate exporter. At present, exemption
is allowed upto one stage only.
Greater flexibility has been permitted to allow conversion of Shipping Bills from one Export
Promotion scheme to other scheme. Customs shall now permit this conversion within three
months, instead of the present limited period of only one month.
To reduce transaction costs, dispatch of imported goods directly from the Port to the site has
been allowed under Advance Authorization scheme for deemed supplies. At present, the duty
free imported goods could be taken only to the manufacturing unit of the authorization holder
or its supporting manufacturer.
Disposal of manufacturing wastes / scrap will now be allowed after payment of applicable
excise duty, even before fulfillment of export obligation under Advance Authorization and
EPCG Scheme.
Regional Authorities have now been authorized to issue licences for import of sports weapons
by renowned shooters, on the basis of NOC from the Ministry of Sports & Youth Affairs.
Now there will be no need to approach DGFT (Hqrs.) in such cases.
The procedure for issue of Free Sale Certificate has been simplified and the validity of the
Certificate has been increased from 1 year to 2 years. This will solve the problems faced by the
medical devices industry.
Automobile industry, having their own R&D establishment, would be allowed free import of
reference fuels (petrol and diesel), upto a maximum of 5 KL per annum, which are not
manufactured in India.
Acceding to the demand of trade & industry, the application and redemption forms under
EPCG scheme have been simplified.
Reduction of Transaction Costs. No fee shall now be charged for grant of incentives under the
Schemes in Chapter 3 of FTP. Further, for all other Authorizations/ licence applications,
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maximum applicable fee is being reduced to Rs. 100,000 from the existing Rs 1,50,000 (for
manual applications) and Rs. 50,000 from the existing Rs.75,000 (for EDI applications).
To further EDI initiatives, Export Promotion Councils/ Commodity Boards have been advised
to issue RCMC through a web based online system. It is expected that issuance of RCMC
would become EDI enabled before the end of 2009.
Electronic Message Exchange between Customs and DGFT in respect of incentive schemes
under Chapter 3 will become operational by 31.12.2009. This will obviate the need for
verification of scrips by Customs facilitating faster clearances.
For EDI ports, with effect from December 09, double verification of shipping bills by customs
for any of the DGFT schemes shall be dispensed with.
In cases, where the earlier authorization has been cancelled and a new authorization has been
issued in lieu of the earlier authorization, application fee paid already for the cancelled
authorization will now be adjusted against the application fee for the new authorization subject
to payment of minimum fee of Rs. 200.
An Inter Ministerial Committee will be formed to redress/ resolve problems/issues of
exporters.
An updated compilation of Standard Input Output Norms (SION) and ITC (HS)
Classification of Export and Import Items has been published.
Directorate of Trade Remedy Measures: To enable support to Indian industry and exporters,
especially the MSMEs, in availing their rights through trade remedy instruments, a Directorate
of Trade Remedy Measures shall be set up.
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Q2. Foreign Trade Policy 2009-2014 aims to increase Indias share in global trade by
a)
b)
c)
d)
Two times
Three times
Five times
Ten times
Q3. The incentive available under Focus Market Scheme has been raised from 2.5% to
a)
b)
c)
d)
3%
4%
5%
10%
Q4. Market Linked Focus Product Scheme (MLFPS) benefits are available when the products are
exported to
a)
b)
c)
d)
United Kingdom
USA
France
Australia
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Road Transport
Part of Land transport, roads are the means that connect one place to another on the surface of the
land.
Rail transport
Transportation of goods on rail lines through trains is called rail transport. It occupies an
important place in land transport system of our country and is the most dependable mode of
transport to carry goods over a long distance.
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Pipelines transport
In modern times, pipelines are used for various purposes. Petroleum and natural gas are also
transported from one place to another through pipelines. This is the most convenient as well as
economical mode of transport for petroleum as well as natural gas in comparison to road and rail
transport, provided the volume to be transported is large. But the cost of installation and
maintenance requires large capital investment. Pipelines can be the target of vandalism, sabotage,
or even terrorist attacks. In war, pipelines are often the target of military attacks, as destruction of
pipelines can seriously disrupt enemy logistics.
Water transport
Water transport refers to movement of goods on waterways by using various means like boats,
steamers, launches, ships, etc. With the help of these means, goods are carried to different
places, both within as well as outside the country. Within the country, rivers and canals
facilitate the movement of boats, launches, etc.
Air transport
This is the fastest mode of transport. It carries goods through airways by using different aircrafts. It
generally carries goods that are less bulky or of high value. In hilly and mountainous areas where
other mode of transport is not accessible, air transport is an important as well as convenient mode.
International air transport is used for carrying goods between different countries. Air transport is
carried out in fixed air routes, which connect almost all the countries.
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17.2 Containerization
Containerization is a system of freight transport based on a range of steel intermodal containers
(also 'shipping containers', 'ISO containers' etc). Containers are built to agreed upon standard
dimensions and can be loaded and unloaded, stacked and transported efficiently over long
distances, often by container ship, rail and semi trailer trucks without being opened. The system
developed after WWII and led to greatly reduced transport costs and supported a vast increase in
international trade.
It is a method of distribution of goods using containers. The use of containers has not only
facilitated but has also revolutionized the carriage of goods among the developed countries. The
exporters in developing countries are also making greater use of containers for the transportation
of the goods. The enactment of Multi Modal Transportation of Goods Act, 1993 has enabled
exporters from India to use containers for transportation of export cargo. Train or road to the
seaports carries the containers, where they are loaded on the ships for onward transportation to
their destination.
Containers
The container, as the meaning implies, is the equipment used to store and carry goods. In
shipping, the term was used to refer to any type of box used to carry cargo.
The International Organization for Standardization (ISO) defined a freight container as an article of
transport equipment,
Of a permanent character and accordingly strong enough to be suitable for repeated use
Specially designed to facilitate the carriage of goods by one or more modes of transport,
without intermediate reloading
Fitted with devices permitting its ready handling, particularly its transfer from one mode of
transport to another
So designed as to be easy to fill and empty
Having an internal volume of 1m.cube (35.3cu.ft) or more
Further, the general-purpose freight container is defined as "A freight container is rectangular in
shape, weatherproof, used for transporting and storing a number of unit loads, packages or
bulk material; it confines and protects the contents from loss or damage, it can be separated
from the means of transport, handled as a unit load and transshipped without re-handling the
contents
Advantages of Container
Use of containers offers many advantages to the exporters. These are as follows:
The risk of damage (due to pilferage and mishandling) to the goods during transport is reduced
substantially.
The cargo arrives in better condition and this creates a better impression about the exporter in
the mind of the importer. This perception of delivery of goods in good condition enables an
exporter to gain an edge over other competitors.
There are no damages due to mishandling of the cargo at terminal ports in the case of
transshipment.
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The widespread use of ISO standard containers has driven modifications in other freight-moving
standards, gradually forcing removable truck bodies or swap bodies into standard sizes and shapes
(though without the strength needed to be stacked), and changing completely the worldwide use of
freight pallets that fit into ISO containers or into commercial vehicles.
Improved cargo security is also an important benefit of containerization. The cargo is not visible to
the casual viewer and thus is less likely to be stolen and the doors of the containers are generally
sealed so that tampering is more evident. Some containers are outfitted with electronic monitoring
devices and can be remotely monitored for changes in air pressure, which happens when the doors
are opened. This has reduced the "falling off the truck" syndrome that long plagued the shipping
industry.
Use of the same basic sizes of containers across the globe has lessened the problems caused by
incompatible rail gauge sizes in different countries. The majority of the rail networks in the world
operate on a 1,435 mm (4 ft 8 12 in) gauge track known as standard gauge but many countries (such
as Russia, India, Finland, and Lithuania) use broader gauges while many other countries in Africa
and South America use narrower gauges on their networks. The use of container trains in all these
countries makes trans-shipment between different gauge trains easier.
Containers have become a popular way to ship private cars and other vehicles overseas using 20 or
40ft containers. Unlike roll-on/roll-off vehicle shipping, personal effects can be loaded into the
container with the vehicle, allowing for easy international relocation
Container Standards
There are five common standard lengths, 20-ft (6.1 m), 40-ft (12.2 m), 45-ft (13.7 m), 48-ft (14.6
m), and 53-ft (16.2 m). United States domestic standard containers are generally 48 ft (15 m) and
53-ft (rail and truck). Container capacity is often expressed in twenty foot equivalent units (TEU, or
sometimes teu). An equivalent unit is a measure of containerized cargo capacity equal to one
standard 20 ft (length) 8 ft (width) container. As this is an approximate measure, the height of the
box is not considered, for instance the 9 ft 6 in (2.9 m) High cube and the 4-ft 3-in (1.3 m) half
height 20 ft (6.1 m) containers are also called one TEU.
Classification
Classification of containers
By raw material
A container can be classified in terms of its building or cladding materials i.e. it is defined by what
it is made of. The maximum numbers of containers are made of steel, aluminum or GRP (glass
fiber reinforced plywood). Almost 65 per cent of the entire container fleet presently consists of
steel containers.
By size
The ISO has worked a great deal on standardization of container dimensions and published
recommendations. Containers are defined in multiples of l0ft. i.e., 10ft or 20 ft, or 30ft, or 40ft.
Presently 20ft, 40ft containers are used predominantly, and around 65-70 per cent of world fleet
consists of 20 ft containers. Twenty-foot containers are referred as Twenty Foot Equivalent Unit or
TEU and 40 footers as FEU (Forty foot Equivalent Unit). If all the containers are expressed -in
terms of TEU, it becomes easier for the container terminal operators and, ship owner to estimate
the space required in a container terminal or inside the vessel.
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Most of the containers have width of 8 ft. However, in height containers vary from 8ft to 8Y2 ft.
Presently about 75 per cent of world box fleet has a height of 8Y2 ft. and about 20 per cent have a
height of 8 ft. However, there is an increasing tendency to use containers of 9Y2 ft (High cube).
The inside volume of a standard 20ft x 8 ft. X 8Y2 ft. container is around 33m3
Classification of Containers
Containers can also be classified by their uses. Containers maybe broadly classified into three types
by cargo to be stowed therein.
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Special Containers
The category of container comprises of the balance types under the broad head of Special
Containers. Prominent types in this head are: Bulk containers, Tank containers, open top
Containers, Side Open containers, Flats, Car containers, Pen containers (to carry livestock).
Bulk Containers: These containers are designed for the carriage of dry powders and gram
substances in bulk
Ventilated Containers: These containers have full length ventilation galleries.
Half-height version of the open top container is designed for the carriage of heavy dense
cargoes such as steel, pipes and tubes etc
Tank Containers: These containers are generally constructed for the carriage of a specific
product or range of products in mind
Open Sided Containers: These containers are designed to accommodate specific commodities
such as plywood, perishable commodities and livestock
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side doors, i.e., the entire side of the container can be opened for easier stuffing and unstuffing.
These types of containers are useful when stuffing operations are carried out while the container is
mounted on a wagon or trailer. There are various "dry specials" like open top containers, flat racks,
bulk containers, garment container, ventilated containers, etc.
Other Container
Insulated Containers: Such containers protect the cargo against head loss or gain and are used
in conjunction with a blown-air-refrigeration system to protect perishable or other cargo which
needs to be carried under temperature control
Fruit Containers: These are insulated containers with internal dimensions slightly longer
Refrigerated Containers: These containers are fitted with their own refrigeration units which
require an electrical supply for their operation
Hanger Containers: These containers are used for dry cargo and are equipped with removable
beams in the upper part. They are used for the shipment of garments on hangers
Bin Containers: These containers have no doors and are ideal for heavy dense cargoes such as
steel, pipes etc
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Q3. Which amongst the following is NOT among the top five container ports in the world?
Singapore?
a)
b)
c)
d)
Hong Kong
Shanghai
Dubai
Shenzhen
Q6. Which of the following products is NOT suitable for sea transportation?
a)
b)
c)
d)
Timber
Hazardous Cargo
Gems and Jewellery
Automobiles
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The implementation of quality system based on the ISO 9000 series should provide an
opportunity for evaluating how an enterprise is conducting its business, and whether or not there
are further opportunities for meeting the service needs of its clientele.
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the cheapest road to get a certificate on the wall and ignore problem areas uncovered in the
audits
How well the ISO system integrates into their business practices. Many organizations that
implement ISO try to make their system fit into a cookie-cutter quality manual rather than
create a manual that documents existing practices and only adds new processes to meet the
ISO standard when necessary
How well the ISO system focuses on improving the customer experience. The broadest
definition of quality is "Whatever the customer perceives good quality to be". This means that
you don't necessarily have to make a product that never fails, some customers will have a
higher tolerance for product failures if they always receive shipments on-time, or some other
dimension of customer service. Your ISO system should take into account all areas of the
customer experience, the industry expectations, and seek to improve them on a continual
basis. This means taking into account all processes that deal with the three stakeholders (your
customers, your suppliers, and your organization), only then will you be able to sustain
improvements in your customer experience
How well the auditor finds and communicates areas of improvement. While ISO auditors may
not provide consulting to the clients they audit, there is the potential for auditors to point out
areas of improvement. Many auditors simply rely on submitting reports that indicate
compliance or non-compliance with the appropriate section of the standard, however, to most
executives; this is like speaking a foreign language. Auditors that can clearly identify and
communicate areas of improvement in language and terms executive management understands
allows the companies they audit to act on improvement initiatives. When management doesn't
understand why they were non-compliant and the business implications, they simply ignore the
reports and focus on what they do understand
Advantages
It is widely acknowledged that proper quality management improves business, often having a
positive effect on investment, market share, sales growth, sales margins, competitive advantage, and
avoidance of litigation.ISO 9000 guidelines provide a comprehensive model for quality
management systems that can make any company competitive implementing ISO often gives the
following advantages
Create a more efficient, effective operation
Increase customer satisfaction and retention
Reduce audits
Enhance marketing
Improve employee motivation, awareness, and morale
Promote international trade
Increases profit
Reduce waste and increases productivity.
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Customs Duty
Compulsory pre shipment inspection
Letter of Credit
All of the above
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19.
19. GLOSSARY (ACRONYMS)
ACRONYMS)
Acronym
ACU
AEZ
ANF
ARO
ASIDE
BG
BIFR
BOA
BOT
BRC
BTP
CBEC
CCP
CEA
CEC
CIF
CIS
CoD
CoO
CVD
DA
DC
DEPB
DFIA
DFRC
DGCI&S
DGFT
DIPP
DoBT
DoC
DoE
DoIT
DoR
DoT
DTA
EDI
EEFC
EFC
EFT
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Explanation
Asian Clearing Union
Agri Export Zone
Aayaat Niryaat Form
Advance Release Order
Assistance to States for Infrastructure Development of Exports
Bank Guarantee
Board of International and Financial Reconstruction
Board of Approval
Board of Trade
Bank Realization Certificate
Biotechnology Park
Central Board of Excise and Customs
Customs Clearance Permit
Central Excise Authority
Chartered Engineer Certificate
Cost, Insurance & Freight
Commonwealth of Independent States
Cash on Delivery
Certificate of Origin
Countervailing Duty
Document against Acceptance
Development Commissioner
Duty Entitlement Passbook
Duty Free Import Authorization
Duty Free Replenishment Certificate
Director General, Commercial Intelligence & Statistics
Director General of Foreign Trade
Department of Industrial Policy & Promotion
Department of Bio Technology
Department of Commerce
Department of Electronics
Department of Information Technology
Department of Revenue
Department of Tourism
Domestic Tariff Area
Electronic Date Interchange
Exchange Earners Foreign Currency
Exim Facilitation Committee
Electronic Fund Transfer
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EH
EHTP
EIC
EO
EODC
EOP
EOU
EPC
EPCG
EPO
FDI
FIEO
FIRC
FMS
FOB
FPS
FT (D&R)
FTDO
FTP
GATS
GRC
HACCP
HBP v1
HBP v2
ICD
ICES
ICM
IEC
ISO
ITC (HS)
ITPO
LoC
LoI
LoP
LUT
MAI
MDA
MEA
MoD
MoF
NC
NFE
NFTP
NOC
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PRC
PSU
PTH
R&D
RA
RBI
RCMC
REP
RSCQC
S/B
SEH
SEI CMM
SEZ
SFIS
SIA
SION
SSI
STE
STH
STP
TEE
TH
TRA
TRQ
UNCTAD
VA
VKGUY
WHOGMP
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Chapter 11
d
d
Chapter 2
1
2
3
d
b
d
Chapter 3
1
2
b
d
Chapter 4
1
2
d
c
Chapter 5
1
2
3
4
b
d
d
d
Chapter 6
1
2
3
4
5
c
c
a
c
a
Chapter 12
Chapter 13
Chapter 14
14
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b
d
b
d
Chapter 15
c
a
c
c
a
a
c
1
2
3
4
a
a
b
1
2
3
4
5
6
c
b
d
b
a
d
c
Chapter 16
a
a
a
d
Chapter 17
Chapter 10
1
2
3
4
5
6
b
b
d
c
a
1
2
3
4
Chapter 9
1
2
3
d
b
1
2
3
4
5
Chapter 8
1
2
3
4
c
a
d
b
a
1
2
1
2
3
4
5
6
7
Chapter 7
1
2
3
1
2
3
4
5
c
d
a
c
a
c
b
d
c
a
d
c
Chapter 18
1
2
3
d
b
d
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