FOREIGN TRADE

Some Common Terms of Payment:

1. Advance Payment 3. Documents on Payment DP, COD, DAP
2. Letter of Credit LC, DC, DLC 4. Documents on Acceptance

MOQ Minimum Order Quantity RFQ Request For Quotation

RBI has given permission to bank to deal with foreign exchange, the branch which has that
facility should have Authorized Dealer Code. Only few branches have that facility in each banks.
Each foreign trade, money with different currency will go to that branch which as AD Code and
from their all the money will get converted in to INR and transfer into the account holding branch.

Methods of Advance Payment

By Cash It is allowed, importer can meet exporter directly and pay cash either at the
office, during trade fair meet etc.
By Electronic Fund Transfer Authorised Dealer Code and IFS Code to be provided to
Importer to get payment via EFT
By Demand Draft Beware of bogus DD, encash the DD and deliver goods.
By Cheque Beware of bouncing, encash the cheque and deliver the goods.
By Telegraphic Transfer before deliver the goods can be accepted, if the importer asks TT
after shipment of goods, then it is cheating.

Methods of Part Advance Payments

75% Advance Payment + 25% Other Types of Payment
50% Advance Payment + 50% Other Types of Payment
There is no risk in this method, because Importer have to receive goods if he pays
balance 25% payment only, since he paid 75% of money as advance, there is 100%
chance to receive his goods. Even risk of 25% Other Types of Payment can be covered
under ECGC.
25% Advance Payment + 75% Other Types of Payment
There is some risk in this method, because Importer may receive goods if he pays
balance 75% payment only, since he paid just 25% of money as advance, there is some
chance to receive his goods. Even risk of 75% Other Types of Payment can be covered
under ECGC.
Letter of Credit (Guarantee Letter for Payment)
Importer have to pay margin money (security deposit) atleast 25% of Order Value in order to
open LC
Importer Bank will send fax copy of LC to Exporter
Importer Bank will send LC to Exporter Bank and Exporter can get LC from his bank.
Importer Bank is responsible for making payment to Exporter
Exporter can avail loan from LC documents issued by Importer Bank, if Importer Bank send
LC directly to Exporter. In that case, consult with your bank for LC confirmation and to
identify bogus LC
Collection charges to be paid by Exporter and Opening Charges to be paid by Importers.
No Amendment Charges for doing amendment in LC
Terms LC is as equal as DA, both are problematic way of receiving payment
LC process needs 4 parties involvement i.e. Importer, Exporter and their banks
Opening of LC process needs 3 parties involvement i.e. Importer, Exporter and Importer
Bank
Collection of LC process needs 3 parties involvement i.e. Exporter, Importer and Exporter
Bank

Issues in LC Payment
Major Discrepancy Minor Discrepancy
Penalty Rs 25,000 per discrepancy Penalty Rs 10,000 per discrepancy
Delay in Shipment Date Date Format (4/12/2014 or 12/4/2014)
Terms Violation Usage of number and name (Chennai / Madras)
eg. No trans-shipment allowed (ICD, shipment In order and LC SARI but in Invoice
at Port Tutocorin is a violation of the terms) SAREE

Send Thanks mail to helping organisations like HC after getting Importer Addresses
Don't trust lengthy communications especially from African Countries in mails of Importers.
Eco friendly Straw mats for floors available at Tirunelveli
Prime Bank Letter of Credit are considered confirmed if opened in Prime Bank
Agreement Model Can be read in www.tradeportalofindia.com mentioned in page 4 point
8 in Handbook of Information for International Traders by Agilam Institute.
Exporter should ask Importer for IRREVOCABLE AND CONFIRMED LETTER OF
CREDIT FROM PRIME BANK
STAGE II
Contacting Importers and Getting successful Export Orders
1. Send your Offer Letter
2. If there is no reply, send reminder after 10 days
3. Again if there is no reply, send reminder after another 10 days
4. Further there is no response, stop contacting.
Steps Involved:
Write brief offer letter, and there will be about 5 to 10 communications required before
getting Order confirmation.
There is no formalities to send samples. It can be sent through registered post, parcel
services, courier services etc. Minimum weight considered for courier services is 500g. DHL
charges Rs 3000 / 500g, other courier services are Blue Dart, Fedex etc.
You can track your courier online and no need to confirm with Importer but you can inform
about your samples.
No payment will be done for samples.
Glasswares and oil products should not be sent by Courier as samples.
Diesel Engine / Jewellery cannot be sent by Courier as samples, but small orders can be
executed.
At DHL, Rs 3000 per courier, if sign contract for sending samples regularly, then Rs 1300
can be the charge at discounted price. Now scanning can be done so physical verification is
not required, so it can be packed.
At DTDC, Rs 850 per courier, can be done and you can get bills monthly, payment can be
done later.

STAGE III
Successful Execution of the received Export Order
There is no secrecy in Foreign Trade. Invoice will be viewed by about 12 different parties:
1. Exporter 4. Importer Bank 7. CHA
2. Exporter Bank 5. ECGC 8. Port Trust
3. Importer 6. EPC 9. QC Agency etc.
Retaining Customer is more important than getting Customer
1. Verify your Order thoroughly
2. Precautionary Measures (Bank, ECGC, EPC and CHA)
3. Check for feasibility
In terms of Product Specifications Within time and Schedule
 Within Price As per the desired quality
4. Finance
Getting advance from Importer Applying for Loan
Packing Credit from Bank using LC Taking help from Supplier
5. Then, we have to accept the Order by email to Importer. All the terms to be mentioned in LC
and have to verify in LC too and agree the Order. Then it becomes the responsibility of
Exporter to carry out the Order.
6. After accepting Order, simultaneously
Place Order with Supplier as per the agreed order terms
Reserve Space in Ship with CHA as per shipping date
7. Documentation to send goods i.e. Billing works
Exporters have to generate only 3 documents
Invoice Rest of the documents will be
Packing List generated by CHA etc
Letter to Bank for Collection
There are 24 documents are generated during execution of an Order

STAGE IV
Receiving payment
Send original documents through bank to Importer, service charges is applicable. If 100%
advance payment done by Importer, then original documents can be sent to Importer directly
by Exporter.
Within 21 days, (including holidays) if goods sent through sea, with reference to bill of
laden date, original documents to be submitted in the bank
Within 5 working days, if goods sent through air, with reference to air way bill date, original
documents to be submitted in the bank
Otherwise, penalty will be charged by the bank.
A set of copies of the original documents submitted at bank to be sent to Importer along with
shipment advice
A set of Office Copy to be maintained.
Receiving eligible incentives
Why Incentives to Exporter
Products manufactured in India incurred taxes and duties, products which is going to Export should
not bear that taxes and duties. That taxes and duties are returned to Exporter as Incentives.
Details about the specific product can be availed from EPC
WTO India is a founder member and objects incentives in monetary forms
Ministry of Commerce India supports incentives to Exporters
Ministry of Finance India No co-operation with Commerce Ministry

Export Incentives
1 Direct Incentives
1.1 Common Incentives
1.1.1 DDB (Central Excise Duty Drawback) for any production made in India
1.1.1.1 All Industry Rate (common rate for specific Industry) eg zero etc.
1.1.1.2 Brand Rate (Special rate for specific brand) eg. Park avenue etc.
1.1.1.3 Marketing Development Assistance Exporter related business
expenses can be claimed. Eligibility criteria to be fulfilled.
1.1.1.4 Market Access Initiatives Expenses incurred on Focused Marker
Schemes
1.2 Product Specific Incentives
1.2.1 For Agri-Products and Perishable Products, local transportation charges can
be claimed
1.2.2 Technology Upgradation Fund Scheme (TUFS) Applicable to garments /
textiles industry only
1.2.3 Spices for preparation of product catalogue and websites etc can be claimed
2 Indirect Incentives
2.1 Excise Rebate
2.2 Sales Tax Exemption
2.3 Subsidised Bank Finance
2.4 EOU / EPZ / SEZ (Export Oriented Units can take EOU license and run factory
just for export purpose only) (Export Processing Zone, Special Economic Zone)
2.5 Deemed Export Selling goods to Exporters with its incentives by local supplier

Forward Contract Booking and Forward Contract Options

To avoid problems relating to currency conversion. To avoid conversion loss, you can opt forward
contract booking and to take advantage in currency conversion, you can opt forward contract
options.
(Plan & Prepare) (Bagging Order) (Executing Order) (Receiving Payment)
Stage I Stage II Stage III Stage IV Stage II