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Export Import Procedures and Documentation

Assignment A

What are INCO terms? Explain all INCO terms indicating the responsibility of the buyer
and seller at various stages of the export cycle.
A.1 Inco terms or international commerce terms are a series of international sales terms,
published by International Chamber of Commerce (ICC) and widely used in international
commercial transactions. These are accepted by governments, legal authorities and
practitioners worldwide for the interpretation of most commonly used terms in international
trade. This reduces or removes altogether uncertainties arising from different interpretation of
such terms in different countries. Scope of this is limited to matters relating to right and
obligations of the parties to the contract of sale with respect to the delivery of goods sold. They
are used to divide transaction costs and responsibilities between buyer and seller and reflect
state-of-the-art transportation practices. They closely correspond to the U.N. Convention on
Contracts for the International Sale of Goods. The first version was introduced in 1936 and the
present dates from 2000.
Recently the ICC changed basic aspects of the definitions of a number of INCOTERMS, buyers
and sellers should be aware of this. Terms that have changed have a star alongside them.
EX-Works One of the simplest and most basic shipment arrangements places the minimum
responsibility on the seller with greater responsibility on the buyer. In an EX-Works transaction,
goods are basically made available for pickup at the shipper/seller's factory or warehouse and
"delivery" is accomplished when the merchandise is released to the consignee's freight
forwarder. The buyer is responsible for making arrangements with their forwarder for insurance,
export clearance and handling all other paperwork.
DES (Delivered Ex Ship) In this type of transaction, it is the seller's responsibility to get the
goods to the port of destination or to engage the forwarder to the move cargo to the port of
destination uncleared. "Delivery" occurs at this time. Any destination charges that occur after the
ship is docked are the buyer's responsibility.
DEQ (Delivered Ex Quay)* In this arrangement, the buyer/consignee is responsible for duties
and charges and the seller is responsible for delivering the goods to the quay, wharf or port of
destination. In a reversal of previous practice, the buyer must also arrange for customs
DES (Delivered Ex Ship) In this type of transaction, it is the seller's responsibility to get the
goods to the port of destination or to engage the forwarder to the move cargo to the port of
destination uncleared. "Delivery" occurs at this time. Any destination charges that occur after the
ship is docked are the buyer's responsibility.
DEQ (Delivered Ex Quay)* In this arrangement, the buyer/consignee is responsible for duties
and charges and the seller is responsible for delivering the goods to the quay, wharf or port of
destination. In a reversal of previous practice, the buyer must also arrange for customs
DDU (Delivered Duty Unpaid) This arrangement is basically the same as with DDP, except for
the fact that the buyer is responsible for the duty, fees and taxes.
DDP (Delivered Duty Paid) DDP terms tend to be used in intermodal or courier-type shipments.
Whereby, the shipper/seller is responsible for dealing with all the tasks involved in moving
goods from the manufacturing plant to the buyer/consignee's door. It is the shipper/seller's

responsibility to insure the goods and absorb all costs and risks including the payment of duty
and fees.
Examine the steps involved in processing of an export order.
A.2 Step 1
Scrutinize the order with reference to the terms and conditions of the contract.~ The
export order must specify the mode of payment in unmistakable terms such as the
Letter of Credit, Documents, on Payment, Documents against Acceptance. The most important
documents required by an importer are: a) Bill of Exchange b) Commercial Invoice c) On Board
Clean Bill of Lading d) Marine Insurance Policy e) Packing list and f) Certificate of Origin. These
should be given to the negotiating bank.
Step 2
For a manufacture-exporter, after the export order has been confirmed, a `delivery note' should
be sent to the works manager.~ This note should contain all relevant details pertaining to the
specifications/requirements of the importer. Nothing should be left at the discretion of the
works/factory manager. A merchant-exporter, who purchases the required goods from the
market or gets them produced by other manufacturers, also has to provide the necessary
specifications/requirements/instructions to the supplier of the goods to be exported.
Step 3
After the goods have been manufactured/procured, the following is to be done:~
Clearance from the Central Excise authorities by obtaining the Gate Pass (GP)-1 form if goods
are to be
removed under claim for rebate of duty, GP-2 form if goods are to be removed under a bond i.e.
as per the terms and conditions of the Collector of Customs or AR-4/AR-4A form if the exporter
wishes to avail the services of the Central Excise Officer for the purpose of having a physical
verification at the factory and thereafter sealing of packages;
The concerned Export Inspection; c) A Railway Receipt has to be obtained if the goods are
dispatched by train to the port of shipment.
Step 4
Once the goods have been dispatched to the port, the Works/Factory manager is supposed to
send a `dispatch advice' to the firm's Export Department. Then marine insurance cover is
solicited. At this stage, formalities regarding floor price regulations, canalisation,
certificate of origin, ECGC (Export Credit Guarantee Commission) cover need to be completed.
Thereafter, the Export Department sends the following documents to its Clearing & Forwarding
agent (henceforth called the agent):
Commercial Invoice
Original Export order
Original Letter of Credit
GR from showing RBI Code Number of the exporter
Excise gate pass
Packing & Weight Lists
Certificate of Inspection
Declaration form
Export License where necessary
Purchase Memo
Railway receipt.

Step 5
After the agent has taken control of the consignment, a shipping bill is prepared by him.~ Three
kinds of shipping bills are to be prepared depending on the category of export goods. These are
Free, Dutiable and Drawback shipping bills.
Step 6
Once the shipping bill has been cleared by Customs, the agent forwards a copy of the shipping
bill to the Shed Superintendent of the concerned Port Trust and therafter a Dock Challan is
made, which is then released to the agent after debiting the exporter's account with the
concerned Port Commissioners.
Step 7
A Mate's Receipt is prepared by the ship's export clerk and is given to the agent once port
charges have been paid. The agent then forwards the relevant documents to the exporter.
Step 8
After receiving the above documents from the agent, the exporter files a claim with the Maritime
Collector of Central Excise forbade of excise duty.~ In the meantime, a shipment advice should
be sent to the importer. Documents are then presented to the negotiating bank. Thereafter the
documents are transmitted to the banker of the importer, after which the importer would take
custody of the consignment once the goods reach their destination and other relevant
formalities are completed are completed at that end.
Q.3 (a) Briefly explain the difference between
1. D/P and D/A
DOCUMENTS AGAINST PAYMENT: In the documents against payment (D/P) documents on
payment (DOP or D/P) the documents attached to the draft (bill) drawn by the exporter and
needed to obtain goods are deliverable to the importer only after he/she has paid the draft. The
documents against payment (D/P) applies to a sight draft.
DOCUMENTS AGAINST ACCEPTANCE: In the documents against acceptance (D/A)
documents on acceptance (DOA or D/A) the documents attached to the draft (bill) drawn by the
exporter and needed to obtain goods are deliverable to the importer only after he/she has
accepted the draft for payment later. The documents against acceptance (D/A) applies to a term
2. DDU and DDP:
DDU Delivered Duty Unpaid: The delivery of goods and the cargo insurance to the final point
at destination, which is often the project site or buyer's premises, at seller's expense. Buyer
assumes the import customs clearance and payment of customs duties and taxes. The seller
may opt not to insure the goods at his/her own risks.
In the export quotation, indicate the point of destination (discharge).
DDP: Delivered Duty Paid: The seller is responsible for most of the expenses, which include
the cargo insurance, import customs clearance, and payment of customs duties and taxes at the
buyer's end, and the delivery of goods to the final point at destination, which is often the project
site or buyer's premises. The seller may opt not to insure the goods at his/her own risks.

In the export quotation, indicate the point of destination (discharge) after the
acronym DDP.

Principal and Regulatory Documents

Principle Documents: These documents need to be prepared in order to help export-import

trade. Out of 16 commercial documents, 14 documents have been standardized and aligned
with one another. Principle documents have the following objectives:
A) To facilitate transfer of title of goods and property from the exporter to the importer.
B) To ensure safe transfer of goods from the country of the exporter to the country of the
C) To help the exporters to realize payments without problem & delay.
Commercial documents include commercial invoice, certificate of origin, bill of lading,
certificate of inspection, etc.
Regulatory Documents: Regulatory documents are needed under the law as they are
prescribed by various government departments and bodies covering foreign exchange
regulations, export inspection, custom formalities etc. Out of regulatory documents 4 have been

Custom Invoice and Consular Invoice:

Custom Invoice: Extended form of commercial invoice required by customs (often in a
specified format) in which the exporter states the description, quantity and selling
price, freight, insurance,
and packing costs, terms of delivery and payment, weight and/or volume of the goods for
the purpose of determining customs import value at the port of destination.
Consular Invoice: A document certifying a shipment of goods and shows information
such as the consignor, consignee and value of the shipment. A consular invoice can be
obtained through a consular representative of the country you're shipping to. The
consular invoice is required by some countries to facilitate customs and collection of
Revocable and Irrevocable letter of credit:
Revocable letter of credit: L/C that may be amended or canceled any time by
the buyer (the account party) without the approval of the seller (the beneficiary). Since it
does not provide any protection to the seller, it is rarely used. Some banks even refuse
to issue such L/Cs because of the fear of getting involved in the possible litigation between
the buyer and the seller.
Irrevocable Letter Of Credit: A letter of credit that can't be canceled. This guarantees that
a buyer's payment to a seller will be received on time and for the correct amount. Firm
commitment by an issuing bank to pay an accepting bank a specified sum in a
specified currency, provided the conditions included in the L/C document are met within a

specified timeframe. This L/C cannot be canceled (or its terms amended) without
the seller's (beneficiary's) prior written approval, and comes usually as a confirmed
irrevocable letter of credit.

b) Write a short note

1. Bill of lading: A bill of lading (sometimes referred to as a 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 thorough 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. The standard short form bill of lading is evidence
of the contract of carriage of goods and it serves a number of purposes:
It is evidence that a valid contract of carriage, or a chartering contract, exists, and it may
incorporate the full terms of the contract between the consignor and the carrier by reference (i.e.
the short form simply refers to the main contract as an existing document, whereas the long
form of a bill of lading (connaissement intgral) issued by the carrier sets out all the terms of the
contract of carriage);


FEMA: The Foreign Exchange Management Act (1999) or in short FEMA has been
introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA
came into act on the 1st day of June, 2000.
The main objective behind the Foreign Exchange Management Act (1999) is to
consolidate and amend the law relating to foreign exchange with objective of facilitating
external trade and payments and for promoting the orderly development and
maintenance of foreign exchange market in India.
FEMA is applicable to the all parts of India. The act is also applicable to all branches,
offices and agencies outside India owned or controlled by a person who is resident of
FEMA head-office also known as Enforcement Directorate is situated in New Delhi and
is headed by a Director. The Directorate is further divided into 5 zonal offices at Delhi,
Bombay, Calcutta, Madras and Jalandhar and each office is headed by a Deputy
Directors. Each zone is further divided into 7 sub-zonal offices headed by the Assistant
Directors and 5 field units headed by the Chief Enforcement Officers

3. EPCG scheme: The scheme allows import of capital goods for pre production, production
and post production (including CKD/SKD thereof as well as computer software systems) at 5%

Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital
goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the
date of issuance of licence. Capital goods would be allowed at 0% duty for exports of
agricultural products and their value added variants.
However, in respect of EPCG licenses with a duty saved of Rs.100 crore or more, the same
export obligation shall be required to be fulfilled over a period of 12 years.
In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken
for computation of net duty saved provided the same is not Cenvated .
The capital goods shall include spares (including refurbished/ reconditioned spares) , tools, jigs,
fixtures, dies and moulds. EPCG licence may also be issued for import of components of such
capital goods required for assembly or manufacturer of capital goods by the licence holder.
Second hand capital goods without any restriction on age may also be imported under the
EPCG scheme.
Spares (including refurbished/ reconditioned spares), tools, refractories, catalyst and
consumable for the existing and new plant and machinery may also be imported under the
EPCG scheme.
4. Types of Shipping Bill: The various types of shipping bills are
Duty free shipping bill This type of shipping bill is printed on white paper and used for the
goods for which neither duty nor cess is applicable. It is also used for the goods manufactured
out of material imported under the duty free import
Dutiable Shipping bill - This type of shipping bill is used for the goods subject to export
duty/cess on which duty drawback will be either allowed or not allowed. This is to be printed on
yellow paper.
Drawback Shipping Bill This type of shipping bill is to be used for the export of goods on
which Duty Drawback is available or to be made available for fixation. It is to be printed on
green paper.
Shipping Bill for Shipment of Excise Bond- This type of shipping bill is used when goods are
imported for re-export and kept in bond. This is to be printed on blue paper.
Coastal Shipping Bill Export Coastal shipping Bill This is used for shipment of goods from
one port to another by sea within India
5. Role of Clearing and Forwarding Agent: Their main job is doing the documentation work with the
procedural approach to the concerned for any import or export. It depends upon their
influences & experiences things will be get done with their own service charges
Q.4 Discuss various methods that are used for making payment in International Trade.
A.4 Popular Payment Methods
There are many ways in which an importer can pay to the exporter. But the four basic mode of
payments, which takes various shapes of payments, are Payment in Advance, Open Account

Payment, Documentary Collections and Documentary Credits / Letter of Credit. Each method is
explained below:
Payment in Advance
In 'payment in advance' method, the entire risk is put on the importer. Under this term of
purchase, the importer makes full payment to the supplier before the shipment of goods is done.
The importer trusts the supplier that the shipment of the product will be on time and the goods
will be as advertised. This method of payment generally takes place under the following

If the importer has not been long established.

If the credit status of the importer is doubtful, unsatisfactory and/or the political and
economic risks of the country are very high.
If the product is in high demand and the seller does not have to accommodate the
importer's financing request in order to sell the product.

This method of payment do not involve any commercial bank and is therefore inexpensive. But,
the buyer faces a high degree of payment risk as he can do nothing if the seller sends poor
quality goods or incorrect or incomplete documentation.
Open Account Payment
This method allows the importer to make payments to the exporter at some specific date in the
future without issuing any negotiable instrument, only evidencing his legal commitment to pay at
the committed time. Usually, this method takes place when either the importer has a strong
credit history or is well-known to the seller.
This mechanism do not offers the seller any protection in case of non-payment. However, the
exporter can structure this sale to minimize the risk of non-payment. He can reduce the
repayment period and can retain title to the goods until the payment is made.
Though all the risks but still open account payment is more prevailing in the international trade.
Those exporters who offer such terms are increasingly obtaining credit insurance to mitigate the
potential open account credit risks.
Documentary Collections
This term of payment offers an important bank payment mechanism. It serves the need of both,
the exporter as well as the importer. In this mode of payment, the sale transaction is settled by
the bank through an exchange of documents. Hence, it enables the payment and transfer of title
Documentary Credits / Letter of Credit
It is a credit instrument like letter of credit or back-to-back letter of credit. In this mode of
payment, the buyer's bank undertakes to pay the seller when the terms and conditions have
been met. The bank issues documentary credits to a customer according to his
Letters of credit are used primarily in international trade transactions of significant value, for
deals between a supplier in one country and a customer in another. They are also used in the
land development process to ensure that approved public facilities (streets, sidewalks, storm
water ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to
receive the money, the issuing bank of whom the applicant is a client, and the advising bank of

whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be
amended or cancelled without prior agreement of the beneficiary, the issuing bank and the
confirming bank, if any. In executing a transaction, letters of credit incorporate functions
common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present
in order to receive payment include a commercial invoice, bill of lading, and documents proving
the shipment was insured against loss or damage in transit.
Q.5 Examine the steps involved in Custom Clearance of Export Cargo.
A.5 In India custom clearance is a complex and time taking procedure that every export face in
his export business. Physical control is still the basis of custom clearance in India where each
consignment is manually examined in order to impose various types of export duties. High
import tariffs and multiplicity of exemptions and export promotion schemes also contribute in
complicating the documentation and procedures. So, a proper knowledge of the custom rules
and regulation becomes important for the exporter. For clearance of export goods, the exporter
or export agent has to undertake the following formalities:
Any exporter who wants to export his good need to obtain PAN based Business Identification
Number (BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for
clearance of export goods. The exporters must also register themselves to the authorised
foreign exchange dealer code and open a current account in the designated bank for credit of
any drawback incentive.
Registration in the case of export under export promotion schemes:
All the exporters intending to export under the export promotion scheme need to get their
licences / DEEC book etc.
Processing of Shipping Bill - Non-EDI:
In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format as
prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter need to
apply different forms of shipping bill/ bill of export for export of duty free goods, export of
dutiable goods and export under drawback etc.
Processing of Shipping Bill - EDI:
Under EDI System, declarations in prescribed format are to be filed through the Service Centers
of Customs. A checklist is generated for verification of data by the exporter/CHA. After
verification, the data is submitted to the System by the Service Center operator and the System
generates a Shipping Bill Number, which is endorsed on the printed checklist and returned to
the exporter/CHA. For export items which are subject to export cess, the TR-6 challans for cess
is printed and given by the Service Center to the exporter/CHA immediately after submission of
shipping bill. The cess can be paid on the strength of the challan at the designated bank. No
copy of shipping bill is made available to exporter/CHA at this stage.
Quota Allocation
The quota allocation label is required to be pasted on the export invoice. The allocation number
of AEPC (Apparel Export Promotion Council) is to be entered in the system at the time of
shipping bill entry. The quota certification of export invoice needs to be submitted to Customs
along-with other original documents at the time of examination of the export cargo. For
determining the validity date of the quota, the relevant date needs to be the date on which the

full consignment is presented to the Customs for examination and duly recorded in the
Computer System.
Arrival of Goods at Docks:
On the basis of examination and inspection goods are allowed enter into the Dock. At this stage
the port authorities check the quantity of the goods with the documents.
System Appraisal of Shipping Bills:
In most of the cases, a Shipping Bill is processed by the system on the basis of declarations
made by the exporters without any human intervention. Sometimes the Shipping Bill is also
processed on screen by the Customs Officer.
Customs Examination of Export Cargo:
Customs Officer may verify the quantity of the goods actually received and enter into the system
and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the
Dock Appraiser of the Dock who many assign a Customs Officer for the examination and
intimate the officers name and the packages to be examined, if any, on the check list and return
it to the exporter or his agent.
The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The
Customs Officer enters the examination report in the system. He then marks the Electronic Bill
along with all original documents and check list to the Dock Appraiser. If the Dock Appraiser is
satisfied that the particulars entered in the system conform to the description given in the
original documents and as seen in the physical examination, he may proceed to allow "let
export" for the shipment and inform the exporter or his agent.
Stuffing / Loading of Goods in Containers
The exporter or export agent hand over the exporters copy of the shipping bill signed by the
Appraiser Let Export" to the steamer agent. The agent then approaches the proper officer for
allowing the shipment. The Customs Preventive Officer supervising the loading of container and
general cargo in to the vessel may give "Shipped on Board" approval on the exporters copy of
the shipping bill.
Drawal of Samples:
Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs
Officer may proceed to draw two samples from the consignment and enter the particulars
thereof along with details of the testing agency in the ICES/E system. There is no separate
register for recording dates of samples drawn. Three copies of the test memo are prepared by
the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of
Customs and the exporter or his agent. The disposal of the three copies of the test memo is as
follows:Original to be sent along with the sample to the test agency.
Duplicate Customs copy to be retained with the 2nd sample.
Triplicate Exporters copy.
The Assistant Commissioner/Deputy Commissioner if he considers necessary, may also order
for sample to be drawn for purpose other than testing such as visual inspection and verification
of description, market value inquiry, etc.

Any correction/amendments in the check list generated after filing of declaration can be made at
the service center, if the documents have not yet been submitted in the system and the shipping
bill number has not been generated. In situations, where corrections are required to be made
after the generation of the shipping bill number or after the goods have been brought into the
Export Dock, amendments is carried out in the following manners.
The goods have not yet been allowed "let export" amendments may be permitted by the
Assistant Commissioner (Exports).
Where the "Let Export" order has already been given, amendments may be permitted only
by the Additional/Joint Commissioner, Custom House, in charge of export section.
In both the cases, after the permission for amendments has been granted, the Assistant
Commissioner / Deputy Commissioner (Export) may approve the amendments on the system
on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has
already been generated, the exporter may first surrender all copies of the shipping bill to the
Dock Appraiser for cancellation before amendment is approved on the system.
Export of Goods under Claim for Drawback:
After actual export of the goods, the Drawback claim is processed through EDI system by the
officers of Drawback Branch on first come first served basis without feeling any separate form.
Generation of Shipping Bills:
The Shipping Bill is generated by the system in two copies- one as Custom copy and one as
exporter copy. Both the copies are then signed by the Custom officer and the Custom House

Assignment B

What are the features of Export Processing Zones / Special Economic Zones? How are
they helpful in promoting export from India?
A.1 The Features of Export Processing Zones exhibits the reason behind the setting up of
more EPZs in India and the development they have brought within the country. In general,
Export Processing Zones (EPZ) can be defined as the labor-intensive and export-oriented
production centers of a country. The government of India converted all the Export Processing
Zones in the country to Special Economic Zones according to a new scheme in the EXIM Policy,
The Indian government since the 1960s has encouraged the setting up of Export Processing
Zones in India. The main objectives of setting up Export Processing Zones in India are to
promote foreign exchange earnings and exports.
EPZs in India are supported by world-class efficient and modern infrastructure, non-fiscal and
fiscal concessions, and a business environment that is free from corruption. The various
Features of Export Processing Zones are that they are exempted from paying duties on all
imports that are made for the purpose of project development, like exemption from VAT, import
duty, and also various other taxes.
Further the other Features of Export Processing Zones includes, income tax holidays on the
business income, facilities for in house Customs clearance, and exemption from paying VAT/
excise duty on the capital goods that are sourced for project development. Also the various
Features of Export Processing Zones comprise of markets, clubs, recreation centers,
playgrounds, and residential areas within the premises of the Zone. The various other Features
of EPZs are like, foreign direct investment up to 100% is allowed through the automatic route for
the activities that are related to the manufacturing sector, tax holiday for a period of 10 years,
and abundant supply of manpower.
Features of Export Processing Zones includes easy access to railway station and airport, an
environment that is pollution free with proper sewerage and drainage systems, and selfcertification and simplification of procedures in the labor acts. Further the various Features of
EPZs are efficiency and procedural ease that lead to speedy clearances, approvals, dispute
resolution, and customs procedures. Also the various Features of Export Processing Zones are
that a number of private and public bank chains set up their branches in the EPZs in order to
provide financial assistance to the business houses. The various Export Processing Zones in
India are:
Cochin Export Processing Zone (CEPZ), Cochin, Kerala
Visakhapatnam Export Processing Zone (VEPZ), Visakhapatnam, Andhra Pradesh
Falta Export Processing Zone (FEPZ), Falta,West Bengal
Santa Cruz Electronic Export Processing Zone (SEEPZ), S. Cruz, Maharashtra
Kandla Free Trade Zone (KAFTZ), Kandla, Gujarat
Madras Export Processing Zone (MEPZ), Madras, Tamil Nadu
Noida Export Processing Zone (NEPZ), Noida, Uttar Pradesh
Features of Export Processing Zones thus show the various incentives that the government
of India has been providing to these Zones. The Indian government must continue to provide
the best facilities to the Export Processing Zones for this will give a major boost to the Indian
economy in the coming days.

The Special Economic Zone in India was launched in April 2000 .Section 9-A of the Exim policy
defines policies related to setting up SEZs in India. The main features of SEZS India are:
1. The Special Economic Zone would be a specifically delineated duty free enclave and shall be
deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
2. Goods going into the SEZ area from DTA shall be treated as deemed exports and goods
coming from the SEZ area into DTA shall be treated as if the goods are being imported.
3. SEZ units can be set up for manufacture of goods and rendering of services, production,
processing, assembling, trading, repair, remaking, reconditioning, and re-engineering including
making of gold / silver/platinum jewellery and articles thereof or in connection therewith.
4. SEZs may be set up in the public, private or joint sector or by State Governments
5. SEZ should have an area preferably of 1000 hectares
6. SEZ units would have to be positive Net Foreign Exchange Earners and would not be
subject to any minimum value addition norms or export obligations.
7. 100% FDI would be permitted for all investments in SEZs except for activities under the
negative list
8. The Ministry of Commerce and Industry through issue of a notification can also convert
the existing Export Processing Zones (EPZs) into SEZ.
9. The Development Commissioner would be responsible for administrative control of the
India has over 1022 SEZ units currently under the structural formatting. It has more than 9
fully functional SEZs and over 7 Export Processing Zones (EPZs) which have been
transformed into SEZs. Each entirely functional SEZs has a standard dimension of 200
acres and are spread in different parts of India.
The need for a Special Economic Zone was realized by India in April 2000 in order to
augment the foreign direct investment in the nation, to trigger its exports revenues and to
provide a global platform to local firms and manufacturers. Indian government has always
been upbeat about the expansion of SEZs and to supplement their plans it has also
introduced policies which are assessed on quarterly basis. This ensures the supply of
enough facilities to the SEZ developers along with the firms establishing their business units
in it.

What is EPCG scheme? What are the main provisions in the scheme? How has the scheme
helped in promoting export from our country?
A.6 Export Promotion Capital Goods Scheme (EPCG)
According to this scheme, a domestic manufacturer can import machinery and plant without
paying customs duty or settling at a concessional rate of customs duty. But his undertakings
should be as mentioned below
Export Obligation
Customs Duty Rate



4 times exports (on FOB basis) of 5

CIF value of machinery.

Nil in case CIF value is Rs200mn or


6 times exports (on FOB basis) of 8

CIF value of machinery or 5 times years
exports on (NFE) basis of CIF
value of machinery.

Nil in case CIF value is Rs50mn or

more for agriculture, aquaculture,
animal husbandry, floriculture,
horticulture, poultry and sericulture.

6 times exports (on FOB basis) of 8

CIF value of machinery or 5 times years
exports on (NFE) basis of CIF
value of machinery.


NFE stands for net foreign earnings.

CIF stands for cost plus insurance plus freight cost of the machinery.
FOB stands for Free on Board i.e. export value excluding cost of freight and insurance.

The scheme allows import of capital goods for pre production, production and post production
(including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject
to an export obligation equivalent to 8 times of duty saved on capital goods imported under
EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of
licence. Capital goods would be allowed at 0% duty for exports of agricultural products and their
value added variants.
However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same
export obligation shall be required to be fulfilled over a period of 12 years.
In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken
for computation of net duty saved provided the same is not converted.
The capital goods shall include spares (including refurbished/ reconditioned spares) , tools, jigs,
fixtures, dies and moulds. EPCG license may also be issued for import of components of such
capital goods required for assembly or manufacturer of capital goods by the licence holder.
Second hand capital goods without any restriction on age may also be imported under the
EPCG scheme.
Spares (including refurbished/ reconditioned spares), tools, refractories, catalyst and
consumable for the existing and new plant and machinery may also be imported under the
EPCG scheme.
The following conditions shall apply to the fulfillment of the export obligation:1. The export obligation shall be fulfilled by the export of goods capable of being manufactured
or produced by the use of the capital goods imported under the scheme.
The export obligation may also be fulfilled by the export of same goods, for which EPCG license
has been obtained, manufactured or produced in different manufacturing units of the license
holder/specified supporting manufacturer (s).

When Capital Goods are imported for pre/ post- production or license is taken for import of
spares, the license holder shall fulfill the export obligation by export of products manufactured
from the plant / project to which the pre/ post- production capital goods/ spares are related.
The import of capital goods for creating storage and distribution facilities for products
manufactured or services rendered by the EPCG license holder would be permitted under the
EPCG Scheme.
The export obligation under the scheme shall be, over and above, the average level of exports
achieved by him in the preceding three licensing years for same and similar products except for
categories mentioned in Handbook (Vol.1).
Alternatively, export obligation may also be fulfilled by exports of other good(s) manufactured or
service(s) provided by the same firm/company or group company/ managed hotel which has the
EPCG license.
However, in such cases, the additional export obligation imposed under EPCG scheme shall be
over and above the average exports achieved by the unit/company/group company/ managed
hotel in preceding three years for both the original and the substitute product(s) /service (s)
even in cases where the average is exempt for the substitute product (s)/ service (s) as given in
para 5.7.6 of the Handbook (Vol 1).
The incremental exports to be fulfilled by the license holder for fulfilling the remaining export
obligation can include any combination of exports of the original product/ service and the
substitute product (s)/ service (s). The exporter of goods can opt to get the export obligation
refixed for the export of services and vice versa.
The aforesaid facilities shall only be available to manufacturer exporters/ service provider on all
the licences where export obligation period including extended export obligation period is valid
on the date of application. In this regard, exports made only on or after submission of
application for alternate item and/ or re-fixation of the export obligation based on duty saved
amount will be taken into account for fulfillment of export obligation.
2. The export obligation under the scheme shall be, in addition to any other export obligation
undertaken by the importer, except the export obligation for the same product under Advance
License, DFRC, DEPB or Drawback scheme.
3. The export obligation can also be fulfilled by the supply of ITA-1 items to the DTA provided the
realization is in free foreign exchange.
4. Exports shall be physical exports. However, deemed exports as specified in paragraph 8.2
(a), (b), (d), (f), (g) & (j) of Policy shall also be counted towards fulfillment of export obligation
along with the usual benefits available under paragraph 8.3 of the Policy.
Royalty payments received in freely convertible currency and foreign exchange received for R&
D services shall also be counted for discharge under the EPCG scheme. Payment received in
rupee terms for the port handling services, in terms of Chapter 9 of the Foreign Trade Policy
shall also be counted for export obligation discharge under the Scheme.
Q.3 Describe various principal and auxiliary documents used in International trade.

A.3 Principal Documents:

1. The Commercial Invoice:
Shows Value of goods exported
Customs Invoice: Format prescribed by customs authorities of importers country.
Consular invoice: Commercial invoice duly verified by embassy / consulate of importers

Legalized Invoice: Same as consular invoice- used in Turkey, Liberia, Taiwan etc

2. Packing List:
Describes various boxes in which goods have been exported.
Informs buyer regarding contents of various boxes.
Weight & Dimension
3. Bill of Lading/Air Waybill
Air way bill: for goods received by air.
Bill of lading: - indicates title of goods shipped, receipt, and evidence of contract of
Soiled, fouled, clean, straight, to order, Uniform, Inter modal.
Combined Transport documents : both by air and ship
Multi modal transport document
4. Certificate of Inspection/Quality control
Export inspection agency conducts pre-shipment inspection of goods.
In case exporters do not need inspection, exporter has to get inspection through private
inspection agency or any other arrangement agreed between exporter and importer.
5. Insurance Certificate/Policy
Insurance of cargo
Insurance Certificate evidence of insurance
Insurance Policy terms and condition of insurance of goods
Open policy
Risk covered
6. Certificate of origin
Importers required submitting COO for customs clearance
G.S.P: Generalized Systems of Preference: - Issued by Developed countries Non
7. Bill of Exchange
Unconditional written order requesting buyer (drawee) to pay a specified sum of money
to a specified person at a specified rate.

Also known as Draft which may be Sight draft or Usance draft

8. Shipment Advice
Informs the exporter details of shipment in advance
Insurance Certificate
Insurance of cargo
Insurance Certificate evidence of insurance
Insurance Policy terms and condition of insurance of goods
Open policy
Risk covered
Auxiliary documents:
1. Performa Invoice
Indicates details of documents to be exported.
Offer to sell made by an exporter to importer.
Becomes an export order once the offer is accepted by importer.
Prepared after negotiation between exporter and importer
2. Intimation for inspection
Prescribed form of notice by export inspection agency
Notice for inspection in prescribed form for inspection of export shipment
3. Shipping instructions
Checklist of various instructions an exporter gives to shipping agent.
Exporter can use this document to convey desired shipping instruction to the agent
4. Insurance Declaration
Prescribed by the insurance companies
Exporter insurance on the goods with regard to insurance policy and nature of goods
5. Application for certificate of origin.
Application form submitted to Chamber of Commerce /authorized agency for issue of
6. Mate's Receipt
Shipping order: Reservation slip issued by shipping line at time of reservation of

shipping space in particular export shipment.

Mates receipt: Receipt issued by Mate ( Chief Officer) of ship acknowledging loading of
cargo in ship

7. Letter to bank of collection/negotiation of documents

Standard letter which gives all details that can possibly be given to bank at time of
negotiation/ collection of shipping documents

Case Study
You are an exporter of Gold and Diamond Jewellery in India. Approximately 85% of your product
is sold in the domestic market and 15% is being exported. You are not availing any kind of
incentive for your exports.
Now you want to upgrade your production facility and also wish to avail the incentives given to
the exporter under FTP.
Prepare a feasibility report to make your products more competitive in the export market by
availing the provisions in the Foreign Trade Policy
Answer. A comprehensive Foreign Trade Policy (FTP) for 2004-09 was announced on 31st
August, 2004 and its Annual Supplement for the year 2007-08 was released on
19th April, 2007. The basic objective of this policy is to double the merchandise
exports by 2009 and to make exports an effective instrument of economic
growth by giving thrust to employment generation particularly in semi urban
and rural areas through a number of policy initiatives. These include
simplification of procedures, reduction in transaction cost, neutralization of
incidence of levies and duties on inputs used for exports and development of
global hubs for manufacturing, trading and services. Keeping in view the
interests of the domestic entrepreneur, farmers, traders as well as India's
international commitments and bilateral treaties, amendments/changes in
policy are made from time to time as and when these become necessary in
public interest.
It is important to take an initiative to diversify our 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.
We have endeavored 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 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.
On basis of above policy we have to increase the export of out product according to it to avail
more benefit.

1. Export to emerging markets of Africa, Latin America, and Oceania: According to FTP
there is more incentive to export in these countries.

2. Manufacturing Unit in semi urban and rural areas: By generating employment in these
areas by having manufacturing unit we can avail more benefits.
3. To get the benefit from Market Development Assistance Scheme: We can have more
benefits under this scheme if we will export more products.

4. Market Access Initiative Scheme: This is the scheme for the initiative taker and we can
get more benefits and incentive under this scheme.

Assignment C
1. Special Economic Zones were created to:a) Boost manufacturing , Augment exports & Generate employment
b) Promote production for consumption in the domestic market
c) Promote import into the country
d) Promote imports from some special zones
2. Under Advance License goods imported cannot be used in the unit of:a) License Holder
b) Jobber
c) Supporting manufacturer
3. Which of the following is not a major function of Export Promotion Council (EPC)
a) Provide commercial information
b) Organize trade fairs, exhibitions
c) Promote interaction between trade and Government
Determine Import duty
d) Provide pre shipment finance
4. Documents required for supplies made against Advance License are:a)

Xerox copy of Purchase order /Contract

Letter of Credit
Shipping Advice
Bill of Lading

5. According to the Foreign Trade Policy of 2009-2014 Advance Authorizations necessitate

exports with a minimum value addition
a) 15 %,
b) 20%
c) 25%
d) 10%
4. Sale by EOU to SEZ units is treated as :a)

Physical Export
Deemed Export

7. Which of the following is not a duty exemption / remission scheme?

a) Advance Authorization

d) Duty Drawback

8. Foreign Trade Policy aims to act as an effective instrument of economic growth by giving
thrust to ________.

Enhance Trade
Employment Generation

9. Special Economic Zones will locate in areas which will be technically treated as ________.

Foreign Territory for applicability of domestic legislations

Financially independent
Custom Bonded Warehouse

10. What does FOB stand for?


free on board
for billing
free original barbecue
For on board

11. Free alongside ship (FAS) means that...


... the goods have to be delivered by sailboat.

... the seller has to pay for the transport until the goods are being unloaded
at the port of destination.
... the goods don't belong to anybody as long as they are alongside the
... the buyer is responsible for the transportation of his goods as soon as
they are being loaded aboard.
12. Which terms apply to DDP?
a) The seller pays all costs, including customs duty.
b) The seller pays all the costs and bears the risk until the goods have been delivered
on his side of the border.
c) The buyer has to cover all the costs, including marine insurance and customs duty.
d) The seller pays insurance and transport costs up to the port of destination.
13. Match the definition with the INCO terms:
"The seller pays the transport costs up to the port of shipment. He bears the risk until the goods
have passed the ship's rail at the port of shipment."


c) DDP
d) FAS
e) CIF
14. Which terms are cheapest for the seller?



15. Which of the statement(s) about EXW is (are) true?



The buyer pays transport costs from the seller's premises on.
The seller makes the goods available at his premises.
The buyer makes the goods available at his premises.
The seller pays the transport costs up to the port of shipment.

16. Which of the following is a regulatory Document?

a) Packing List
b) Shipping Instructions
c) Insurance Declaration
d) GR Form
17. In case of payment through open account, payment is made
a) Immediately on delivery of goods
b) In advance before delivery of goods
c) At a future date
d) Through barter system
18. When payment is made through Letter of credit
a) Exporter has minimum risk
b) Exporter has maximum risk
c) Importer has minimum risk
d) Importer has maximum risk
19. In case of payment under D/A goods are delivered
a) Before payment is made
b) After payment is made
c) On maturity of draft
20. Which of the following document is issued by the Mate Chief Officer of the ship to
acknowledge the loading of cargo on the ship?
a) Mates Receipt
b) Shipping Instruction
c) Shipping Order
d) Shipping Advice
21. As per the provisions in the Foreign Trade Policy of India Minimum size of the SEZ shall not
be less than 1000 hectares expect


existing EPZs converted into SEZs

product specific SEZs or
port/airport based SEZs, on a case to case basis
SEZ set up by state government

22. Unless other wise specified in a Letter of Credit which is issued subject to UCPDC 500 and
also UCPDC 600, documents must be presented for negotiation within ------ days from the date
of shipment:

10 days
7 days
15 days
21 days

23. Which of the following is not true regarding an AWB?

a) It is prima facie evidence of receipt of cargo.
b) It is a document of title to goods.
c) The date of dispatch indicated on the AWB will be deemed to be the date of
d) AWB serves as an instruction sheet giving all the instruction needed for moving the
e) AWB is made out in three originals
24. Premier Trading House should have minimum export performance of Rs.________.

10000 Crs
7500 Crs
5000 Crs
9000 Crs

25. Under Market Development Assistance Government does not provides


Expenses for participation in trade fairs abroad

Expenses for participation in buyer /sellers meet
Foreign travel
Importing Capital Goods

26. Which of the following benefits are not given to Star Export Houses are

Custom clearances on Self Declaration basis

Fixation of Input-Output norms on priority within 60 days
100% retention of foreign exchange in EEFC account
Import of prohibited Items

27. Which of the following is not a type of letter of credit

a) Revocable Letter of Credit
b) Standby Letter of Credit
c) Moving Letter of Credit
d) Back-to-back Letters of Credit

28. Exports and Imports come under the purview of:


Ministry of Finance
Ministry of Commerce
Ministry of External Affairs
Ministry of Home Affairs
Ministry of SSI

29. Export Promotion Capital Goods scheme helps in promoting through

a) Import of Capital Goods
b) Import of raw material
c) Participation in trade fairs
d) Export of capital goods
30. Objective of DEPB is to
a) Allow duty free import of inputs which are physically incorporated in export product
b) Neutralize incidence of customs duty on import content of export product
c) Provide assistance to states for export promotion activities
d) Control dumping in the India
31 Tripur in Tamil Nadu is Town of Export Excellence for
a) Hosiery Products
b) Sea food
c) Handicrafts
d) Coir Products
32. Main objective of Served from India Scheme is to promote export of
a) Services
b) Tea
c) Coffee
d) Handicrafts
33. Objective of VKGUY is to promote exports of
a) Engineering Products
b) Minor Forest Produce and their value added variants;
c) Chemical Products
d) Marine Products
34. DGFT helps in promoting export from India by
a) Implementing the Foreign Trade Policy/Exim Policy
b) Collects foreign Trade statistics
c) Issues licenses to exporters and monitors their corresponding obligations
d) Facilitating exporters in regard to developments in international trade i.e. WTO
agreements, Rules of Origin and SPS requirements, anti-dumping issues, etc
35. Pro forma invoice describes


the type and quantity of the goods to be shipped

value of the goods
total cost of the transaction based on the terms of sale
details that are required for negotiation / collection of the shipping documents

36. Consular Invoice is

a) verified by Embassy
b) Prepared as per the format of the customs authority of the importing country
c) Prepared in consultation with the bank
d) Prepared for the Ministry of commerce
37. An EOU may opt out of the scheme with approval of
a) Development Commissioner
b) Commerce Minister
c) Directorate General of Foreign Trade
d) Governor, RBI
38. Market Development Assistance is given to Exporters having annual Export turnover up to

5 Crs
15 Crs
10 Crs
25 Crs

39. A whole range of activities that can be funded under MAI scheme includes:
a) Setting up of showroom / warehouse
b) Sales promotion campaigns
c) Import of capital goods
d) International departmental stores
40. To encourage State Governments to participate in promoting exports financial assistance is
administered by Department of Commerce (DoC) to
a) Developing infrastructure such as roads connecting production centers with
b) Facilitate import from China
c) Setting up of Inland Container Depots (ICD) and Freight Stations (CFS),
d) Creation of new State level export promotion industrial / zones,