Apparel Merchandising and Marketing

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APPAREL MERCHANDISING AND MARKETING
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UNIT V EXPORT DOCUMENTATION AND POLICIES

Government policies a guide lines for apparel export and domestic trade, Tax structures and Government
incentives in apparel trade. Export documents and its purposes, Banking activities, Letter of credit,
Logistics and Shipping, Foreign exchange regulation, Export risk management and insurance. Export
finance, Special economic zones.
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Government Policies a Guide Lines for Apparel Export and Domestic Trade
The study concludes that Indian exports to the EU and the US are, on the whole, export competitive.
Sector-wise analysis of the export performance of Indian textile and clothing sectors to US & EU reveal
that insofar as apparel exports are concerned, quota has indeed been a constraint for most of cotton
apparels and made-ups that India exported to these two markets. However, the same cannot be said about
Indian yarn/fabric exports. Quotas appear to have protected the export of Indian yarn/ fabric to these two
markets within the limitations of a shrinking market for both yarn and fabric in US and EU. An Indian
export of made-ups has been another area where quotas- wherever they exist- have been binding, and not
protecting, the Indian exports to US & EU.
Indian textile and clothing sectors have a tremendous potential, only a portion of which has been
exploited due to policy constraints. And where exploited, Indian entrepreneurs have done the country
proud. However, there lies a considerable potential that has not been exploited primarily due to
government policy marked by adhocism, fragmented vision, and political opportunism. What are these
policy constraints?
[A] Product Specific Cost- Supply Chain Management
Typical cost structure of garments would have materials contributing about 55% of the cost, while
fabrication, overheads and finishing constitute 22%, 15% and 9% of the cost of garment. While
fabrication and overheads are a result mostly of garment industrys decentralized structure (and hence
require structural reforms to rationalize), fabric cost is a function more of the productivity at the textile
manufacturing stages. In India, one big stumbling block to higher garment productivity lies in the
structure of the Indian textile sector. With only 5% of fabric being produced in the organized mills, and
about 57% being produced in the decentralized power looms (over and above the 17% knit fabric), the
quality of fabric supply to the garment sector is poor. And since garment manufacturing is reserved for
SSI in India, most of SSI units are small; catering to small order sized seasonal demand for fashion
garments in niche products. Their demand for fabric too, therefore is in small lot, which organized mills
cannot competitively produce. Besides, with the demand for Indian garments overseas being fashion-
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driven, production flexibility of a high order is required to switch from one styles/colour to another at
short notices. Power looms again are better suited as suppliers, compared to organized mills.
1. Factor Cost: Despite technological advances, clothing sector remains labour-intensive globally, and
hence its manufacturing is secularly shifting away from developed to developing countries. Textile
production has seen considerable technology improvement, but that has only partially restored the
comparative advantage of developed countries in textile manufacture.
In the context, therefore, of garment sector, labour cost assumes great significance in production costs.
India compared very favourably across the developing countries in terms of low labour costs. Only
countries such as Bangladesh, Pakistan and Vietnams labour costs are marginally lower than Indias.
However, empirical evidence suggests that low wages are not a factor of competitiveness. High wage
levels reflect high levels of skill, productivity and automation which in turn, are important factors of
export competitiveness. A recent study on Indian garment industry shows that higher wage rates are one
of the determinants of export performance of Indian garment units. Export firms paid higher wages to
their labour than the domestic market oriented firms. The study attributed this difference in wage rates
to the unique and indispensable skills of designers, pattern makers and craftsmen, as well as to bettertrained cutters and tailors employed by exporting firms.
The reason for poor productivity in garmenting has been the extremely fragmented structure that has
arisen chiefly due to the government SSI reservation policy. This has prevented modernization, quality
investments, scale adoption, and change in product mix from exclusive reliance on cotton garments to
mass clothing items based on synthetic and manmade fibres. This has also therefore impeded the growth
in exports nonquota markets since non-quota markets like Latin America and Asia are not rich countries,
and they demand blended and synthetic garments much more than those in USA and EU. Indian fiscal and
customs policy too has discriminated against development of synthetic base in India in line with the
government belief that synthetic is for the classes and cotton is for the masses.
Since this study has also focused on inadequate development of retail industry in India as one of
principal causes of low levels of competitiveness across the entire manufacturing value chain, it would be
instructive to note the international cost differences between the most important factor inputs in modern
retailing- land. The land cost index per sq. meter as a ratio to GDP is very low in most of Asian cities
compared to Delhi and Mumbai. See fig. I. It is a result of distortions in the land market, and government
policies regarding land-use. Such high prices deter the emergence of large retail showrooms in Indian
cities, of the kind that have proliferated in Jakarta, Tokyo, Sydney, Bangkok etc.
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2. Cost of raw material (fibre): Until recently, Indian cotton prices have been lower than international
cotton prices of comparable varieties due to ban on imports and control on exports of cotton. In fact, in
the 1980s, for each of the varieties of cotton, Indian prices were lower than their international
counterpart44. This gave a cost advantage to Indian textile and garment exporters.
Cotton for the masses and synthetic for the classes was the implicit belief that underlay the government
policy in India. As a result, while cotton prices were not allowed to move up (trade control, and buffer
state operations), synthetic fibre was deliberately priced uncompetitive (it was viewed as a luxury fibre for
higher income group) against cotton. Despite years of liberalization, the excise duty, for instance, on PFY
is still 36.8% (2000-01), against 9.2% on cotton. Similarly, the raw materials for synthetic fibres have an
excise duty at 16%. This discrimination against synthetics is visible in case of customs duty rates also.
While effective import tariff on cotton import was 5.5% in 2000-01, it was 48.5% for man-mades45. It is
not surprising therefore, that the international prices of raw materials (DMT, PTA, wood pulp etc) has
been considerably lower than domestic prices. It is projected that, compared to 49% share of cotton in
world fibre consumption in 1990, it would reduce to 41.5% in 2005. Share of synthetics, on the other
hand, would increase from 39% in 1990 to 51.3% in 2005.
The entire set of issues related to direct cost of inputs and its acquisition by firms is a function of whatin modern terminology- is called as Supply Chain Management (SCM). In a dynamic environment where
demand is uncertain and significantly seasonal, where the product life cycles are short and where the
competitive intensity is high companies that organize for functional integration tend to outperform those
that are organized for functional excellence. Supply Chain Management indeed is all about functional
integration.
SCM refers to "delivery of enhanced customer and economic value through synchronized management
of the flow of physical goods and associated information from sources to points of consumption."
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The Indian textile and clothing industries have one of the longest and most complex supply chains in the
world, with as many as 15 intermediaries between the farmer and the final consumer. Each contributes not
only to lengthening of lead times, but also adding to costs. By the time cotton worth Rs 100 reaches from
farmer to the spinning unit, its cost inflated to Rs 148. By the time it reaches the final consumer, it costs
Rs 36547. This is unacceptable if India is to become competitive. The industries would need to develop
this SCM perspective and rationalize costs at every stage in the entire supply chain, and not only within
their firms, or between themselves and their vendors and suppliers. Hong Kong apparel industry did take
this initiative, and has managed to shrink the supply chain in terms of lead times, as well as costs.
The supply chain in India is extremely fragmented chiefly due to the government policies and lack of
coordination between industry and relevant trade bodies. Table 2 clearly shows the extent of
fragmentation of the Indian textile and clothing sectors.
It is noteworthy that the countries that are globally competitive are the ones who have a significantly
consolidated supply chain. It is also noteworthy that among some of the countries which are not as
fragmented -such as Korea, China, Bangladesh, Turkey, Pakistan and Mexico- are Indias close
competitors in global market for exports. Indeed, the structure of the Indian textile and clothing sectors
has been the biggest stumbling block in any effort to reform the industry in India lately. It must be
mentioned that it squarely goes to Indian government textile policys credit as to why such a
fragmentation came about in the first place.
Conversion Efficiency
This is a function of the technology employed and the organisation skills, aside from the softer areas of
strategy and knowledge management.
Level of Modernization in Indian Textile and clothing sectors
The level of technology in the spinning sector is relatively better compared to weaving sector. Still,
about 65% of installed spindles are more than 10 years old, and OE rotors account for less than 1% of
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total installed spindles. India was the worlds leading buyer of spinning equipment during 1989-98,
accounting for 28% of global shipments. Spindles purchased during this period accounted for 33% of total
installed capacity, while 68% of OE rotors were less than 10 years old.
The level of technology in the weaving sector is low compared to other countries of the world. Of the
1.6 million power looms installed, less than 1% z is shuttleless looms. In organized mills sector, only
5.8% are shuttleless looms, compared to 80% in US, Taiwan and Korea, and 62% in Pakistan. The rate of
modernization also has been very slow. See table 3. The new shuttle and shuttleless looms installed in
India during 1989-98 accounted for only 1.6% of total installed capacity in 1997, with most of
modernization occurring in organized mills. Compare this to countries such as Mexico where
modernization rate was 41%.
The levels of investment in Indian apparel sector are very low. See table 4. The average investment in a
machine in an Indian factory was $29,760 compared to $2.5 million in Hong Kong and nearly $1 million
in China. This reflects the smaller size of the Indian firm, which has an average of 119 machines
compared to 698 in Hong Kong and 605 in China. Investment per machine is very low in India at $250
compared to $3510 and $1500 in Hong Kong and China. This is due to Indian firms having a much higher
proportion of manual machines, and even the power-based machines are not as sophisticated.
Since it is the cutting operation in garmenting which is capital intensive51, it would be instructive also to
see how investment levels are at different stages of garmenting in different countries. See table 5. Most of
the Indian firms investment is in sewing machines, and that special and processing machines form a very
small part of the total number of machines, unlike other Asian countries. Countries such as Hong Kong
and China have invested significantly in such special machines that add significant value to product and
improve productivity levels for their firms as whole. That is not the case in India. And this fits in very
well also with the fact of SSI reservation of garmenting in India. Unlike other Asian countries where
average size of garment firm and hence the average level of investment is higher, typical Indian
garmenting unit is small, and hence incapable of investing big. The large-scale firms who enter into
garmenting have to undertake 50% export obligation. So the firms in garmenting are small, and hence
incapable of investing much. That affects productivity as well as competitiveness.
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Lal [1999] found that the intensity of adoption of information technology (IT) did play a significant role
in influencing the export performance of Indian garment firms. However, they are expensive, and
necessitate extensive training of people. For small size firms, it is not an optimal solution, and Indian
garment industry is a sector of infants.
Management Practices and Organizational Skills
Manufacturing management is a key link between technology adoption and competitiveness of firms.
Productivity gains are indeed achieved through better managerial practices on the existing technology.
The study by Chandra [1999] developed a framework for evaluating manufacturing management, which
included factors such as the work environment, capabilities and operational performance. Using this
framework, the study compared the primary textile industry of China, Canada and India. Of all the
parameters used in the framework, India appears to score over China only in the breadth of home market,
quality of managerial workforce, and managerial practices. In all other components, India compares
unfavourably with China. Perhaps here lies some explanation for higher competitiveness of China
compared to India in the textile industry.
Productivity in Indian apparel sector is lower compared to other countries. For instance, compared to
20.6 ladies blouses that Hong Kong manufactures per machine per day, India manufactures only 10.2.
Similar figures for trousers for Hong Kong and India are 19.3 and 6.8, or in gents shirts are 20.9 and 9.1.
Mckinsey study noted, using no of shirts produced per day as a measure, that productivity in India is 16%
of that in US, which is alarmingly low. According to the study, poor organisation of functions and tasks
(OFT) was the most important contributor to poor productivity in Indian apparel sector. Moreover, the
preliminary interviews of some garment exporters revealed their almost complete ignorance of
international issues, and even issues related to the WTO. But, there are brands and exporters- though
mostly big ones- who are preparing for the quota-free trading regime through cost rationalization attempts
on the one hand, and increasing capability on the other. Most of them have moved up market, and trying
to distance from being a low-quality, low-value Indian product.
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Scale economies are indeed significant for marketing of products, though are not significant for
manufacturing apparel (of the kind exported) in India, as it is a labour intensive sector, catering to
seasonal export demand which are small lot sizes supplies, and the extent of fabrication is very high in the
sector. However, economies of scale become extremely important once India begins to export massproduced clothing (like uniform/ factory-wear). But such assembly-line processes involve huge
investments, which are beyond the scope of SSI sector in garments in India. The large-scale companies do
not venture into this since the 50% export obligation on a continuous basis that they have to undertake as
a pre-condition is extremely risky. The disincentive to factory mode of production needs to be removed
urgently for India to diversify its product and market portfolio. And that would be critical since high
dependence on seasonal demand cotton garments, and that too being exported to countries that are
developing their own backyards for becoming self-sufficient in the entire value chain, is not a wise
strategy at all.
[B] Government Policy
There as many as 20 control orders/ notifications which are still in force despite the long years of
liberalization and deregulation of the Indian textile and clothing industry54. Some of the government
policies that have a bearing on global competitiveness of the Indian textile and clothing sectors are briefly
outlined below.
1. Excise Policy: The excise duties applicable to the textile industry are the Basic Excise Duty (BED),
Additional Excise Duty (AED) @ 15% applicable on cotton yarn and on all man-made/ blended yarn and
fibre and AED in lieu of sales tax applicable on power processed fabric. However, the duty structure is
biased since duty incidence falls disproportionately on different segments of the Indian textile and
clothing sectors. Garments and made-ups that contribute 15% of value added share only 13% of excise
burden, whereas fibre/yarn segment that contributes 39% of value added contributes 55% of the duty.
Grey fabric pays no duty at all.
The spates of broken links, exemptions available to various segments such as hand processors, SSI units
that compete with duty paying segment, and disproportionate excise duty incidence across the chain are
major impediments to developing competitiveness in the industry. It has distorted market structures,
created unhealthy competition among the segments themselves, and created a diverse variety of vested
interests who are now opposing any reform in the sector. However, government has been able to reform
the excise duties in textile and garment sector in the current Union Budget 2002-03. Most of major
lacunae have been removed.
2. Technology Up gradation Fund (TUF): Under the TUF scheme, manufacturing units are eligible for
long and medium term loan from IDBI, SIDBI and IFCI, at interest rates that are 5% lower than the
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normal lending rates of banks. However, whether specific units are credit worthy for loans or not is to be
independently evaluated by the lending institutions.
The utilization of funds under this scheme has been disappointing. As of 29th February 2000, GOI
received 304 applications and sanctioned 210 projects amounting to an outlay of $385 million. Of this,
only $115 million was disbursed to 94 applicants. Sector-wise, the largest recipients of this loan were
composite mills and spinning sector. However, the one positive observation is that processing sectorwhich is the least modernized in the entire value chain- is also among the largest recipients of the loans.
The reasons for poor utilization of funds under TUF has been that, in the very first place- in todays
situation of excess capacity built up in the Indian textile- no one is willing to invest. In apparels the SSI
reservation of garment units prevents them from making significant investments. And during times when
the garment exports have not been doing well, large-scale units are not willing to expand capacity. There
is a very high incidence of sickness and declining capacity utilization in the textile industry. Very few
firms are therefore willing to commit to the sector any more funds than they already have.
The reasons also lie in the unwillingness of the financial institutions to lend money to what they callsunset industry. Besides, until sometime back, there was an attractive investment opportunity in the
booming ICE (information, communication and entertainment) sectors. Over and above these are the
reasons associated with hidden costs of loan processing (exceeding 1% of loan amount), prepayment
penalty and higher lending rates of FIs compared to commercial banks. Some industry sources also
mention the huge amount of paperwork involved, and documents required getting a loan sanctioned.
3. Cotton technology Mission (CTM):
India is the third largest producer of raw cotton in the world. But the yield of Indian cotton (approx.
300 kg/ha) is very low compared to world average (553 kg/ha), and dismal with respect to some countries
like China (1064 kg/ha) and Turkey (1151 kg/ha). Moreover, ITMF57 surveys have repeatedly concluded
that the Indian cottons are among the most contaminated in the world. This reflects the poor storage
facilities and methods of handling cotton not only at the picking stage but also during ginning and
pressing.
Not much information is available on the utilization of funds under CTM. However, it is critical to
remember that cotton yields and quality are to be improved not for its own sake, but for finally improving
the global competitiveness of the end users of cotton, viz. fabric, made-ups and garment manufacturers.
This supply chain management perspective is very critical for R&D in cotton. Cotton Inc. of the USA
views cotton as a raw material with the end product (garment/ specialized application product) in sight.
This end-to-end sight guides all R&D. In contrast, Indian R&D in cotton views cotton as a raw material,
defining it by its technical properties, and attempting to improve those properties, irrespective of the
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utility of such enhanced technical features for the final end-product. Research institutions like
ATIRA/BITRA/SITRA/ CIRCOT etc could take up R&D in cotton along such lines, and develop newer
applications of cotton keeping the final end-use of the research product in mind.
4. Hank Yarn Obligation (HYO):
The HYO relates to the supply of yarn for the handloom sector, and is exempted from excise duty. As
per HYO, 50% of all yarn spun from not less than 90% cotton/ viscose, packed for the home market for
civil consumption, has to be packed in "hank" form. The HYO is aimed at guaranteeing an assured supply
of cheap and coarse yarn to the handloom sector, so that it can, in turn, churn out "cheaper" fabrics. In
reality, however, around 40% of hank yarn is being consumed by power looms at zero excise duty.
The HYO was tantamount to granting a subsidy to the handloom sector on the one hand, and taxing the
yarn producers on the other. But the yarn producers business suffered because they were forced to
produce a fixed proportion of their yarn of below 40s count, which fetched them a lower margin. More
importantly, the obligation prevented the yarn producers from upgrading their product portfolio. This
affected subsequent stages like fabric and garments too. The HYO thus, militated against the
competitiveness of the textile and clothing sectors.
5. Quota Entitlement Policy:
The issue relevant for competitive analysis in this policy is the fact of over-categorization that has been
practiced through these policies, and the export tax that the Indian textile and clothing exports have been
subjected to owing to the quota policy of major importing markets.
Over categorization along with quota allotment system practiced in India has acted as a restriction
intensifier61. Quotas under the aegis of MFA are broken down category wise for each exporting country,
and ceilings prescribed for each category. US have over 104 categories based on its tariff schedule. The
Indian policy further adds to this maze by splitting the national quota allotment for any category into
knitted, handloom, mill-made, or based on fibres. It may so happen that while the sub-limit of mill made
sub-category may be reached, that of knitted and handlooms may remain unfulfilled. Quotas then act as a
constraint to the mill, even though annual levels are not 100% utilized.
Moreover, by the very manner in which quota is distributed across the year can lead to a situation where
aggregate quota goes unutilized whereas, at the firm level, it may have been exhausted sometime during
that year itself. Change in market demand, and shift in consumer preferences cannot be predicted several
months in advance, and hence when the export orders for a particular style of category begins to flow,
quotas are not available in the domestic market. For instance, quota transfer rules in textile makes it
obligatory on exporters to either surrender or hold additional quotas by end March every year. This is too
early for exporters to predict the export orders for the entire year, and hence the exporters have to decide
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on hold/surrender strategy on the basis of forecast by as early as March of every year. The upshot of it all
is that underutilized aggregate annual quotas may also restrict trade, and therefore, those quotas can be
binding even if not 100% utilized.
If quotas are binding, then they command a premium. In order for a firm to be able to export therefore, it
must buy the quota from the market at the prevailing premium. This imposes a cost to the firm analogous
to export tax. This export tax is passed on to the final consumer in the importing country. For exporting
countries, Export Tax Equivalent (ETE) measures have been employed to find the degree of protection
being enjoyed by importing countries. A higher ETE, would imply a higher level of protection, ceteris
paribus.
Kathuria & Bhardwaj [1998] estimated the ETEs for Indian textile and clothing sectors, product-wise
and fibre-wise. For the years 1993 1996, while in case both of US and EU, the weighted ETEs have
declined over the period, it remains much higher in USA at 28-37% than in EU at 14%. Moreover, this
ETE in US is actually higher than the actual tariffs levied by the US on imports of textile and clothing
products. Again, predictably, ETEs on Indian cotton exports was 39% in 1996, while that for synthetics
was lower at 16%. Interestingly and predictably again the products with highest ETEs were also the
products which had highest weight in total exports to USA. In 1995, for e.g., categories 338/339 (knit
shirts and blouses) and 340 (gents woven shirts) had ETEs of 99% and 53% respectively, and they shared
31% and 27% of cotton apparel exports to USA. This behaviour is less pronounced in EU, simply because
EU imports a lot more items that are outside quotas (either non-restrained within MFA, or outside MFA
altogether). For instance, 29% of garment exports to EU were outside quotas in 1996, against only 8% in
the case of USA.
This has important implications for price-competitiveness of Indian textile and clothing exports. Post2004, ETEs would vanish, and the implicit export tax on Indian firms would also disappear. However, to
what extent this would affect the cost competitiveness of Indian textile and clothing sector firms would
depend on what are the relative levels of ETEs in other restricted countries. From the secondary sources,
it appears that the quota administration system in Asian countries is much better (less restrictive) than that
in India. If that is true, assuming that ETE levels for all categories among Indian competitors are same in
2004, India is likely to gain some relative cost competitiveness owing to the relatively extra inefficiency
(of domestic quota administration system) that would be wiped out from 2005. However, the precise
extent of this relative cost-advantage is an empirical matter, and would need further research.
6. Perhaps the most draconian of all government policies that has scuttled the growth of the garment
industry is reservation of garment manufacture for small-scale industry. It has not only prevented
expansion, but also impeded technological up gradation of the garment manufacturing units. As a result,
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the garment units could neither attain optimal economies of scale, nor produce international quality
garments.
A recent Mckinsey [2001] study, using mens shirts produced per hour, estimated the labour
productivity in Indian apparel industry to be 16% of US levels. Exporters have a better productivity at
35% of US levels. The study attributes the poor productivity to format mix67, poor organisation of
functions and task (OFT), lack of viable investments especially in technology and low scale. Average
tailoring shops in India have 3-4 sewing machines in the back room, while domestic manufacturers have
an average of 20 machines and exporters have around 50 machines. In contrast, China and Sri Lanka often
have thousands of workers working under one roof. 500 machine factories is the minimum size required
to function effectively. The decentralized nature of the sector is a remarkable entrepreneurial response to
the kind of government policies that prevailed in the sector. But that is grossly unsuited to global
competitiveness.
Strict labour laws in India make it virtually impossible for companies to shed labour. It also introduces
unfair discrimination against large companies who are forced to comply with the labour laws relating to
minimum wages, social security, contractual obligations, nature of terminations, internal transfers/ job
rotation, right to leaves and regulations regarding working hours etc., while the smaller ones (like power
looms) manage to evade compliance with such regulations. This introduces a de facto competitive edge to
power looms compared to organized mills, and has led to decline of mills and proliferation of power
looms in India, with all its attendant adverse implications for competitiveness of the textile and clothing
sector chain. Labour laws in India have raised much dust; have been the bone of contention, and
politically a sacred cow68. There are three specific provision related to labour which have attracted a lot
of attention, viz., Industrial Disputes Act 1948 (provisions governing retrenchment, layoffs and closure),
Contract Labour (Regulation and Abolition) Act 1970 (Section 10 empowers the government to prohibit
contract labour in certain situations at governments discretion) and Trade Unions Act 1926 (Any seven
persons can get together and form and register a union).
[C] Economy-Wide Costs Infrastructure
According to the World Competitiveness Report 1997, India was ranked 45th among 46 countries in
terms of competitiveness in infrastructure. In 2002, Indias rank was 42 out of 49 countries.
1. Transportation is one area where India compared very unfavourably with its competitors. For instance,
shipping a container of textile or garments from India to the USA is costlier in India than in its Asian
competitors. Despite a longer route, shipping to the US eastern seaboard out of Bangkok is almost 18%
cheaper compared to Mumbai or Chennai. If this is weighted for trade volumes, the overall cost advantage
in shipping from Bangkok to the US is almost 23%. China enjoys a 13% cost advantage in shipping
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garments from Shanghai to the US East Coast, and a staggering overall advantage of 37%. The huge
disadvantage of India is due to delays and inefficiencies in Indian ports compared to other Asian
countries.
2. India has had the unenviable reputation of suffering from high industrial energy costs. Our interviews
also showed that high energy cost is among the biggest deterrents in attaining competitiveness. Much of
this is due to cross-subsidization in different states, as well as huge transmission and distribution (T&D)
losses. All these problems show up in reduced productivity and competitiveness.
3. None of Indias international competitors have as high an interest cost as in India. Interest cost as a
percentage of sales in Indian manufacturing companies was close to 5.5% compared to less than 4% in
countries such as Indonesia, S Korea, Malaysia, Philippines and Thailand. The situation with regard to
textiles is very severe. While interest as percentage of sales was 8.58%, interest as a share of value added
was a high 12.9% for textiles. Garments is one sector which seems not be as adversely affected on this
account. Its respective ratios were 2.05% and 3.3%. One important reason for this, according to some
entrepreneurs, is the fact of predominant decentralized nature of garment sector in India.
4. During the interviews, some other infrastructure bottlenecks that were mentioned included the poor
quality of inland roads, especially state highways, large number of posts, local regulations regarding road
use during specific hours only and absence of expressways which could reduce the inland transportation
time given the sub-continental size of the country.
5. Transaction costs in India deserve a special mention since the policies and procedures involved at each
stage of exporting and importing are so cumbersome that they induce tremendous delays. For e.g. in
getting a duty free advance license for export production, the average time taken by 35 exporters was 7
months. Another two months were needed for redeeming the legal undertaking, making it a total of 9
months. However, at a cost of Rs 10,000, the exporter could get his/her license in 2.5 months, and for
another Rs 8,000, could get the legal undertaking redeemed in 15 days. Analytically, this tantamount to an
export tax, and hence any reduction in these would directly enhance price-competitiveness.
[D] Non-Price Factors
In the context of emerging global marketplace, prices are now falling in priority of list of criterion
considered important by major retailers in the export market. An Industry study by Canadian Department
of Industry rates several factors considered important by retail buyers/ private labels for choosing source
countries. Delivery and reliability, and quality scored higher with 9.2 and 9.0 grades (on a 10 point scale)
compared to price which was ranked third with a score of 8.8. Other factors in descending order of
importance were size standards, fashion and styling, fabric and fabrication, developed manufacturing
base, and exclusivity.
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While price would remain important, it would not be the sufficient factor in getting export orders. A
study on buyers perception of India as a source country showed that while India was perceived
satisfactorily on price, quality, technology, flexibility, small order quantity etc. it was perceived
unfavourably on lead times, responsiveness, communication, trust, meeting contractual obligations,
ethical standards etc.
V. Policy Recommendations
India is a land of great potential since it is perhaps the only country in the world that is self-sufficient
and complete in the cotton value chain. This strong advantage, however, has been frittered away due to
fragmented and myopic vision of the government that resulted in policies that ran counter to market
signals. The current industry structure is in a significant sense- a tribute to the Indian textile and clothing
sectors who have managed to perform despite the throttling policy constraints.
In view of the global developments in retail sector, driven by emancipated consumer, and keeping in mind
that the protection that quota afforded to Indian textile market would soon disappear, it is imperative for
the Indian textile and clothing sectors to reform, and do that quickly. As is evident by now, most of the
impediments to Indias export competitiveness lies at home. Market access conditions arise only after
India develops the competence to survive in the market.
Also, it is clear that most of the problems are structural in nature, and emerge from a lack of holistic view
about the entire value chain- from fibre to retail, which in itself is engendered by the fragmented
government policies. Needless to write, most of the reform in this industry pertains to changes in
government policies. However, before delineating the policy changes required to make the Indian textile
and clothing sectors globally competitive, it would be useful to mention a few of the guiding principles
which lay the foundation of recommendations.
1. While the role of the government in creating and sustaining national advantage is significant, it is
inevitably partial because in the absence of underlying national circumstances that support competitive
advantage in a particular industry, the best policy intentions would fail. India is endowed with these
underlying national circumstances in textile and clothing sectors in full measure.
2. Governments do not control national competitive advantage, they only influence it. The central role of
the government policy therefore, is to deploy a nations resources (labour and capital) with high and rising
levels of productivity, since productivity is the root cause of a nations standard of living.
3. Governments cannot create competitive industries. Firms must do so. Governments shape or influence
the context and institutional structure surrounding firms, as well as the inputs that firms draw from.
Based on these premises, following policy recommendations are made:
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[A] Textile Specific

Home demand creation
1. Allow Foreign Direct Investment (FDI) in garment retailing to enable large, modern retail showrooms
to set up shops in India. Owing to comparative advantages in clothing manufacture that would be
available indigenously, the government need not worry if these large retailers would begin to outsource
their clothing requirements. Presence of large retailers would create domestic demand for ready-to-wear
garments, and also push for higher productivity in garment manufacturing through bulk orders. This
would also help promote large-scale manufacturing facilities for garmenting, and help Indian exports
diversify into standardized, mass-clothing items.
2. Reduce the import duty on textile and apparel to infuse competition in the domestic market, which
would, inter alia, drive up demand for higher and better clothing. The Indian import tariffs in this industry
are among the highest in the world, ranging between 25-40%75. And with quota to be abolished in 2004,
the global attention would distinctly turn towards tariffs in this industry. There already is tremendous
pressure on India to improve market access by reducing the high import tariff rates. India can use this as
an opportunity to minimize the threat from proliferating regional trading arrangements. GOI can use
reduction in import tariffs as a bargaining tool to get MFN tariff rates (especially peak rates) in US and
EU negotiated downwards as a reciprocal measure. That would significantly reduce the adverse tariff
impact of PTAs on India vis--vis the PTA countries of US/EU.
Promote fair competition
3. Rationalize excise duty structure across the entire value chain from fibre to garment retailing. Levying
of moderate, uniform VAT should be the long-term objective.
Do away with exemptions on ginned cotton, hank yarn, grey fabric, hand processors (and a few
specified processes), knitwear and hosiery and SSI units in garments.
Rationalize excise duty incidence at spinning stage. Spinning bears almost 55% of total excise revenue
collections from this industry, but contributes only 39% to value addition.
Abolish Additional Excise Duty (Textile and Textile Articles)- AED (T&TA) on mmf/yarn and cotton
yarn.
These would go a long way in realignment of the industry structure at all stages, since the structure of the
textile sector particularly has been the result of distortionary and discriminatory excise policy, replete
with exemptions. New industry structure based on market forces would be more attractive for productive
investments, thereby raising the technological standards and quality levels of the entire industry.
4. Remove policy-bias against synthetic fibre/yarn.
Rationalize excise duties on synthetic fibre to bring it in line with cotton fibre
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Lower customs duty on raw materials used in manufacture of synthetic fibre/yarn

This would enable the development of a vibrant synthetic fibre base in India, which is critical to correct
the predominance of cotton in Indian exports and consumption. Global consumption of synthetic is
growing faster than that of cotton, and share of cotton is expected to decline to less than that of synthetic
fibre. India has virtually no presence in this area.
This is also essential to grow into the vast area of technical textiles that is emerging as a special-use
textile in the world. India is just not present in the huge and growing area of non-apparel textile
applications. Most of standardized items of clothing too require some form of blend. Moreover, that
would enable Indian exports to diversify into nonquota markets where the demand for synthetic apparel is
much higher compared to quota-markets. And finally, that would take off some pressure on cotton to
clothe the domestic market (due to which cotton prices have been subsidized in India). Cotton then, can
concentrate on higher value addition.
5. Abolish Hank Yarn Obligation
It is the power looms that have been benefiting mostly through this regulation, and gain unfair
competitive edge over organized mills. This has been a yet another contributory factor to organized mills
sickness. And decline in share of organized mills due to unfair competition from power loom has been
detrimental to competitiveness of the supply chain. Assistance to handlooms, until such time as it might
be required, can be provided through existing market assistance schemes.
6. Remove manufacturing of knit garment and fabric from SSI reservation list.
One of the chief reasons for the current fragmented, decentralized garment sector in India is that it is
reserved for SSI. De-reservation would attract large-scale firms into manufacturing of mass-items of
clothing, which reap scale economies. Large-scale firms would not in any case enter the product lines,
where order size is small, and considerable manufacturing flexibility is required. So SSIs would not be
wiped out. Dereservation would allow India to enter into markets segments, which are among the fastest
growing and are factory-based. Besides, ceiling on scale has prevented modernization and investment in
the sector. That would also eliminate the peculiar dichotomy whereby the Indian garment units were
protected from Indian large-scale manufacturers, but had to compete with foreign large-scale units in the
domestic turf following removal of quantitative restrictions on imports. De-reservation would allow
processing of bulk orders from large retailers overseas as well as at home (after FDI in retailing is
allowed). This would make the sector attractive for quality investment through technological up
gradation. Very importantly, this would also enable the sector to invest in products not on the basis of SSI
constraints, but on the basis of composition of demand. Finally, since building non-price competitive
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competencies are crucial for export growth, the sector would begin to invest in brands, designs, IT driven
superior customer services, unique style and patterns etc.
7. Promptly close down sick units in NTC mills those are not capable of being revived, sell their surplus
land and use that to pay the employees through a generous VRS package. That would release land in
prime centers of cities, prompt more realistic land prices (which may positively affect retail sector), and
also cut down the annual losses being incurred due to non-viable operations.
In those NTC mills that can be revived, close the weaving units, and modernize and upgrade the viable
spinning and processing units. The space created by the closure of weaving units can profitably be used
for garment-making. The upgraded processing units, together with garment conversion units could then
cater to the domestic market. The labour displaced as a result of closing down of weaving units should be
redeployed in a more labour-intensive garment conversion units. Such a step would actually be
employment generating! That would also release some surplus capacity in the weaving sector.
Regulations and Controls
8. There exists a plethora of regulations like Cotton Control Order, Essential Commodities Act, which
need to be critically reviewed in view of their limited usefulness. They are products of an era of shortages,
and a drag in the era of surpluses that characterises the Indian textile and clothing sectors currently.
[B] Textile Non-Specific Infrastructure
9. This relates to the building of world class infrastructure- port, inland transportation, power, and
communication etc- facilities within the country. Owing to resource constraints, and gestation lag, it may
not be possible to develop such structure for the entire country at once. As a first step, such infrastructure
must be made available to units in Special Economic Zones, and extended to rest of the country. Specific
recommendation on each of these economy-wide factors is beyond the scope of this study. Nevertheless,
this must not belittle the very high degree of adverse impact that the poor quality of Indian infrastructure
has had on Indian exports of textile and clothing. For instance, China enjoys an overall 37% advantage (of
which 13% is cost advantage) over India in shipping garments due to delays and inefficiencies at the
Indian ports. 25% of production cycle time in Indian exports of apparel is owing to delays at customs.
Quick response and just-in-time delivery is virtually impossible.
Modify Labour related Provisions
10. Modify the labour related provisions in Industrial Disputes Act 1948 (Ch V-B), Contract Labour
(Regulation and Abolition) Act 1970 (Section 10) and Trade Union Act 1926, to bring them in line with
current realities and market requirements.
That fabricators are today the backbone of the garment industry is chiefly due to the outdated labour
laws in India. That has created fragmentation especially in the garment industry (since it is more labour
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intensive). Outmoded laws related to retrenchment, transfers, dismissals and job rotations have adversely
affected organized mills too. This has given rise to an industry structure that is completely incapable of
becoming globally competitive. It has prevented modernization, scale economies in bulk purchases,
production and marketing, and product-diversification into assembly-line produced items.
Clusters for Competitiveness-Supply Chain Perspective
11. For higher value added exports, conglomeration approach is one technique for acquiring sustainable
and global competitiveness. Right from availability of primary raw material, to spinning, weaving,
processing and garment-converting units, along with the testing labs, etc. should be developed in a
compact geographical area, for which a demarcation of some form and substance already exists. Govt.
policies must be industry-friendly, and infrastructure in such areas should be world class. In developing
such conglomerations, locational factors, particularly pertaining to raw material availability, should also
be considered. These conglomerations should be promoted to evolve as Centers of Excellence86, very
similar to Hollywood for entertainment and Silicon Valley for software. Tirupur today is very akin to a
conglomeration in knitting/hosiery sector. These clusters could also be very much focused on product(s)
that India has revealed a competitive advantage in. This develops the supply chain approach and
optimizes the synergy between textile and clothing sectors. Such restructuring of the industry could be
facilitated greatly through the nodal finance agencies (IDBI and SIDBI) under the TUFS. Project
appraisal techniques by bankers should participate in the responsibility of creating globally competitive
textile and clothing industry in India.
Collaborating to Compete- Policies on Investing Abroad
12. Strategic alliances have become crucial in the textile and clothing sectors in view of the growing
number and scope of PTAs. Government needs to design its policies for Indian companies investing
abroad in consonance with this reality. Access to markets like EU and US might increasingly be mostly
via those developing countries that have a PTA with worlds big markets.
Indian textile and clothing industry has a great potential, which has not been cultivated for global
performance. The above set of recommendations would provide the right kind of institutional context and
investment climate for the Indian firms engaged in these sectors to rise to the occasion. As for making the
Indian textile and clothing industry globally competitive, the government can trust the ingenuity of the
Indian entrepreneurs.
Tax Structures and Government Incentives in Apparel Trade
Tax incentives: issues and trends
Over the past two decades, most Governments have been actively promoting their countries as
investment locations to attract scarce private capital and associated technology and managerial skills in
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order to help achieve their development goals. They have increasingly adopted measures to facilitate the
entry of foreign direct investment (FDI). Examples of such measures include liberalizing the laws and
regulations for the admission and establishment of foreign investment projects; providing guarantees for
repatriation of investment and profits; and establishing mechanisms for the settlement of investment
disputes. Tax incentives are also part of these promotional efforts.
The role of incentives in promoting FDI has been the subject of many studies, but their relative
advantages and disadvantages have never been clearly established. There have been some spectacular
successes as well as notable failures in their role as facilitators of FDI. As a factor in attracting FDI,
incentives are secondary to more fundamental determinants, such as market size, access to raw materials
and availability of skilled labour. Investors generally tend to adopt a two-stage process when evaluating
countries as investment locations. In the first stage, they screen countries based on their fundamental
determinants. Only those countries that pass these criteria go on to the next stage of evaluation where tax
rates, grants and other incentives may become important. Thus, it is generally recognized that investment
incentives have only moderate importance in attracting FDI.
In some cases, and with some types of investment, however, their impact may be more pronounced. For
some foreign investors, such as footloose, export-oriented investors, tax incentives can be a major factor
in their investment location decision. Also, among countries with similarly attractive features the
importance of tax incentives may be more pronounced. In addition, Governments can quickly and easily
change the range and extent of the tax incentives they offer. However, changing other factors that
influence the foreign investment location decision may be more difficult and time consuming, or even
outside government control entirely. For these reasons, investment experts, particularly from investment
promotion agencies, view incentives as an important policy variable in their strategies to attract FDI for
economic development.
Basically, FDI incentives may be defined as any measurable advantages accorded to specific enterprises
or categories of enterprises by (or at the direction of) a Government, in order to encourage them to behave
in a certain manner. They include measures specifically designed either to increase the rate of return of a
particular FDI undertaking, or to reduce (or redistribute) its costs or risks. They do not include broader
non-discriminatory policies, such as infrastructure, the general legal regime for FDI, the general
regulatory and fiscal regime for business operations, free repatriation of profits or national treatment.
While these policies certainly bear on the locational decision of transnational corporations (TNCs), they
are not FDI incentives.
Most countries, irrespective of their stage of development, employ a wide variety of incentives to realize
their investment objectives. Developed countries, however, more frequently employ financial incentives
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such as grants, subsidized loans or loan guarantees. It is generally recognized that financial incentives are
a direct drain on the government budget, and as such, they are not generally offered by developing
countries to foreign investors. Instead, these countries tend to use fiscal incentives that do not require
upfront use of government funds.
Tax incentives, the subject of this survey, can be defined as any incentives that reduce the tax burden of
enterprises in order to induce them to invest in particular projects or sectors. They are exceptions to the
general tax regime. Tax incentives would include, for example, reduced tax rates on profits, tax holidays,
accounting rules that allow accelerated depreciation and loss carry forwards for tax purposes, and reduced
tariffs on imported equipment, components, and raw materials, or increased tariffs to protect the domestic
market for import substituting investment projects.
Because tax incentives are intended to encourage investment in certain sectors or geographic areas, they
are rarely provided without conditions attached. Very often countries design special incentive regimes that
detail the tax benefits as well as the key restrictions. For instance, these regimes may require that a facility
be established in a certain region(s), have a certain turnover, require the transfer of technology from
abroad or employ a certain number of individuals. For example, China offers foreign-invested firms a tax
refund of 40 per cent on profits that are reinvested to increase the capital of the firm or launch another
firm. The profits must be reinvested for at least five years. If the reinvested amounts are withdrawn within
five years, the firm has to pay the taxes. India, similarly, offers a tax exemption on profits of firms
engaged in tourism or travel, provided their earnings are received in convertible foreign currency.
The current survey finds that reductions in the standard rates of corporate income tax and tax holidays
are the most widely used fiscal incentives. These are followed by exemptions from import duties on
capital equipment, raw materials and semi-finished components, duty drawbacks, accelerated
depreciation, specific deductions from gross earnings for income-tax purposes, investment and
reinvestment allowances and deductions from social security contributions.
A. Objectives of tax incentives
Regional Investment
Countries often employ a mix of incentives to channel investment for development of a particular area or
region. Regional development objectives include support for rural development, building industrial
centers away from major cities and reducing environmental hazards, over-urbanization and concentration
of population. Angola, Brazil, Ecuador, Ghana, India, Pakistan and Thailand are some of the countries
that use such incentives. In Egypt, incentive schemes for the reclamation and cultivation of barren and
desert land also fall in this category. Some of those incentives integrate regional development and sectorspecific objectives. For instance, Egypts tax exemption schemes for poultry and animal husbandry have a
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longer exemption period if they contribute to decentralization and are set up in new industrial zones and
new urban communities. Such exemption schemes are common in other developing countries as well.
Colombia, for example, has a special incentives regime for the Rio Paez region, in the south of the
country. Tax incentives include a 10-year tax holiday from profits tax, income tax, remittance tax and
customs duties, and tax reduction for shareholders. Nigeria also has a regional incentives system that
gives allowances ranging from 100 per cent to 5 per cent to companies that establish operations in rural
areas where there are no facilities such as electricity, tarred roads, telephones and water supply
Sectoral Investment -Countries employ tax incentives in order to promote sectors of industry or
activities considered crucial for development. These may be targeted at mining and industrial parks,
export-led activities, the film industry and businesses with new technologies. Singapore, for example,
provides exemption from income tax for 5 years to pioneer companies involved in industries that are not
adequately developed in the country. Costa Rica has special incentives for tourism applicable to hotel
services, air and water transportation of tourists, travel agencies and car rentals. In Pakistan, hi-tech
industries, which include power tools, information technology and solar energy utilization, benefit from a
wide range of fiscal incentives.
The majority of tax incentives granted by developing countries relate to investment in manufacture,
exploration and extraction of mineral reserves, promotion of export and, increasingly, the tourism and
leisure sectors. Developing countries generally do not attract headquarters of companies and service
activities and therefore few countries have incentives aimed at the service sectors. Some exceptions are
Malaysia, Singapore and the Philippines, which employ incentives primarily, reduced corporate tax rates
to attract headquarters of companies.
Performance enhancement -As noted earlier, incentives can be targeted at many types of activities, such
as export promotion, employment/skills training, domestic value added and headquarters location. Free
trade zones (FTZs) typically cover incentives for export-oriented manufacturing. Panama, for example,
has an export processing zone regime to promote the export of goods that are manufactured, assembled or
processed in Panama. Qualifying enterprises in the zone are exempt from direct and indirect income taxes,
import duties and value added taxes. Ghana taxes companies engaged in the export of non-traditional
products at a reduced rate of 8 per cent instead of the standard 35 per cent.
Transfer of technology -An important objective of using incentives to attract investment to developing
countries is the transfer of technology. Certain types of tax incentives are designed specifically for this
purpose. Some countries, such as Singapore and Malaysia, have introduced a specific set of incentives
directed towards research and development (R&D) activities and technology projects (pioneer industries).
They include tax-exempt technology development funds and tax credit for expenditures on R&D, and for
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upgrading human resources related to R&D. In particular, deduction is allowed for certain types of
expenditure, and income tax exemption is offered for a period of time, while machinery, equipment and
raw materials are exempt from import duty and sales tax. For import of technology, tax incentives
provided may take the form of deductions allowed for transfer costs of patent rights and import fees,
exemption of income from consulting and the granting of tax privileges to R&D projects. Similarly,
cooperation and partnership agreements among firms for R&D are often exempt under competition laws,
particularly in developed countries such as the United States and member States of the European Union.
By different competition regulation exemptions, it is possible to grant increasing legal certainty to
technology holders and licensees willing to invest in new projects using new technologies within a
country.
B. Issues relating to tax incentives
Institutional issues -The offer of incentives can be justified on the grounds of the positive externalities,
or spillovers resulting from an investment, such as the diffusion of new knowledge (technology),
upgrading of the skills of the workforce or investment in R&D. In these cases, the investor does not
capture the full value of the investment for the economy. For example, the investor may train workers or
impart managerial or marketing skills, where the benefit to society far outweighs the benefit to the
investor. Employees receiving such training may then leave the project and work elsewhere in the
country. Without corrective public measures, such activities would operate below their optimum levels.
Some experts have argued, on this basis alone, for allowing tax incentives on investment in equipment,
which, they find, have strong growth effects. Furthermore, individual investments can lead to additional
investments by the same investor or associated investment by other TNCs.
The fundamental premise in offering incentives to FDI is that foreign investment creates more value for
the host country than for the foreign investor. FDI involves more than the flow of capital. It also involves
the internal utilization of intangible assets such as technology and managerial expertise that are specific to
a given firm. Thus, a major effect of FDI can be the transfer of technology, managerial expertise, skills
and other intangible assets from one country to another. If these intangibles are completely internalized,
the rate of return will fully capture the net benefits of an investment, and incentives are not justified. To
the extent that these intangibles create major beneficial effects for other sectors of the host economy that
are not internalized by the transnationals, incentives may be justified. This conclusion raises an important
question in designing an incentives system: how responsive is foreign investment to incentives? A
simplistic case that can be considered is where the only value for the host country of an investment project
is the tax revenues that accrue to the Government. For a tax incentive to be beneficial to the host country,
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the decrease in government revenues resulting from the incentive would have to be more than offset by
the increase in tax revenues resulting from increased foreign investment flows.
Governments also use incentives based on another rationale: institutional failure. When there is
institutional failure, the value of the project for the investor (the return to the investor) differs from its
value for the economy. There can be many causes of institutional failure, some natural, and some
caused by government policies. Among natural causes are externalities due to a spillover effect; for
example, the introduction of technology (whereby the return to the investor is less than the return to the
economy), pollution and congestion caused by the project (in which the cost to the economy is greater
than the cost to the investor), and social costs and benefits, in which the return to the investor differs from
the cost to the economy.
In addressing institutional failure, the first best solution for the Government is to remove the failure.
For example, if the Government sets the minimum wage above the market wage (and there is consequent
unemployment), the resource cost of labour is greater for the investor than it is for the economy. Hence
investment in labour-intensive projects will remain below its optimal level. The first best solution is to
reduce the minimum wage. Doing so, however, may not be possible politically. The second best
solution is for the Government to reduce the cost of labour to the investor via a direct subsidy to labour or
by allowing the investor to deduct labour costs for tax purposes. Doing so, however, may place
Governments in developing countries in the peculiar position of subsidizing labour in low wage countries.
The more usual response by developing country Governments is to extend tax holidays to investors in
labour-intensive projects (i.e. they subsidize capital in trying to increase labour absorption).
Similarly, tariffs and non-tariff barriers to trade are a cost to the investor (by increasing the cost of
capital equipment and inputs), but not to the country. They raise the cost of production and inhibit exportoriented production. The first best solution would be to remove these trade barriers. Doing so on a
general basis, however, would remove protection for domestic (local and foreign) producers and reduce
government revenues. Governments can also selectively employ the incentives of tariff reduction for
export-oriented producers.
When the value of tax incentives to the investor exceeds the benefits accruing to the economy, they
become a windfall for the investor. However, calculating how far investors should be compensated is not
simple and straightforward. This lack of certainty may lead a Government to grant overly generous
incentives, for example, in order to attract high-tech projects, particularly in hot industries, such as
computer components, biotechnology and telecommunications.
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Infant industry issues

The rationale for incentives may be argued on the basis of correcting for the failure of markets to reflect
the gains that can accrue over time from declining unit costs and learning by doing. Over time, as unit
costs decline with increased output, a country could acquire a comparative advantage in an expanding
industry. This is the classic infant industry argument for protection.
Thus, temporary incentives may be justified on the grounds of protecting and promoting infant
industries. To be effective, incentives should be directed to small and growing firms. Start-up firms are
often short of funds because of their inability to borrow from capital markets. Also, such firms are in a
non-taxpaying situation in the initial years. The types of incentives employed will determine their
effectiveness. For example, reduced tax rates or tax holidays may not produce the required results.
Measures such as investment tax credits that provide upfront funding might be more effective.
Tax incentives may be targeted at investment in regions that are disadvantaged due to their remoteness
from major urban centres. Operating in a remote area may entail significantly higher transportation and
communications costs in accessing materials used in production, and in delivering end products to
markets. These higher costs place the location at a competitive disadvantage relative to other possible
sites. Moreover, firms may find it difficult to encourage skilled labour to relocate and work in remote
areas that do not offer the services and conveniences available in other centres. Workers may demand
higher wages to compensate for this, which again implies higher costs for prospective investors.
Tax incentives may be provided in such cases to compensate investors for these additional business
costs. Again in this situation, the first best solution would be for Government to develop the
infrastructure so as to reduce these costs. As a second best solution, the Government could compensate
the investor for the cost of constructing shared infrastructure and in training workers in the region. To the
extent that these incentives attract new investments, and/or forestall the outmigration of capital and labour
from these regions, they may contribute to improving income distribution through subsidizing
employment via investment initiatives, rather than through direct income supplementing programmes.
Although intended to redress institutional failure, incentives have the potential to introduce distortions in
the economy by their impact on the economic and tax environment. They can influence fiscal and
monetary policies, but at the same time, can create a requirement for effective management and
administration of the incentives.
Advocates of tax incentives point to their extensive use in some high-growth Asian economies as positive
evidence of their effectiveness. However, it has been suggested that this positive association probably has
less to do with the nature of the incentives themselves than with the characteristics of the countries where
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they are used, such as the quality of the civil servants and the efficiency of public bureaucracy. Such
characteristics tend to minimize the political-economy costs of providing the incentives.
Assessing the relative advantages and disadvantages of tax incentives is a complicated and controversial
issue. The main difficulty in assessing their benefits is in determining if incremental investment is indeed
the result of incentives. As noted earlier, it is generally recognized that incentives are not the prime
determinant of investment decisions. If investment is in fact the result of incentives, difficulties arise in
quantifying the positive effects, such as technology transfer or creation of employment, and possible
negative effects, such as economic distortions or potential for corruption. Nonetheless, in spite of these
problems, assessment of incentives is a useful, even necessary, exercise. If nothing else, this assessment
may place bounds on the extent of the incentives offered. For example, one developing country recently
rejected an investment project for which incentives (grants and low interest rate loans) totally over 30
percent of the investment capital in the project. Tax incentives in another developing country in 1999
included: (i) a 9 percent basic tax; (ii) tax holidays of up to eight years from the date of first profitability;
(iii) accelerated depreciation and a five-year loss carry-forward provision; and (iv) zero taxes on
reinvested profits. The Government is currently reviewing these generous tax incentives.
India
(a) Regional Incentives- An industrial undertaking set up in a specified underdeveloped state or union
territory or in a specified industrially underdeveloped district, and which commenced manufacturing or
production before 31 March 1995, is eligible for a 30 per cent tax exemption on its profits for the 10 years
beginning with the year in which manufacturing or production takes place. Similar benefits are available
to small-scale industrial undertakings that began manufacturing or producing articles or operating cold
storage plants before 31 March 2000.
An industrial undertaking set up before March 2000 in a particular class of backward state specified in the
Eighth Schedule of the Constitution backward areas stipulated by the central Government as Category. A
is eligible for 100 per cent tax exemption on its profits for the first five years and 30 per cent for the next
five years. Similar benefits are available for an industrial undertaking set up in an industrially backward
district stipulated by the central Government as Category B. The exemption for such undertakings is 100
per cent on profits for the first five years and 30 per cent for the next three years.
(b) Sectoral incentives - An industrial undertaking set up in any part of India for the generation of power,
or its generation and distribution, before 31 March 2003, is eligible for 100 per cent tax exemption on its
profits for the first five years and for 30 per cent for the next five years.
All the profits of an undertaking that begins commercial oil production in any part of India after 1 October
1998 are exempt from tax for the first seven years.
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A specified enterprise that develops maintains and operates new infrastructure facilities set up on or after
1 April 1995 is entitled to tax exemption of 100 per cent on profits for the first five years of operation and
30 per cent for the subsequent five years. Such facilities include roads, highways, bridges, airports, ports,
rail systems, activities related to irrigation, sanitation or water supply or any other public facility of a
similar nature notified in the Official Gazette. The exemption is available for any 10 consecutive years of
the first 12 years of developing, maintaining and operating such infrastructure facilities. The limit for
claiming the exemption increases from 10 consecutive years out of 20 years in the case of operating and
maintaining a highway project.
An enterprise set up before 31 March 2000 and engaged in the business of providing basic or cellular
telecommunications services, including radio paging, domestic satellite service or network and electronic
data interchange services is entitled to 100 per cent tax exemption on profits for the first five years. The
exemption is 30 per cent for the subsequent five years. A similar exemption is available for operating
industrial parks set up and operating before 31 March 2002.
An approved company set up before 1 April 1999, and engaged in scientific and industrial R&D, is
eligible for 100 per cent tax exemption on its profits for five years.
An approved undertaking engaged in developing and building housing projects that commenced
development and construction on or after 1 October 1998, and completes them before 31 March 2001, are
entitled to 100 per cent tax exemption on the profits.
Tax Incentives and Foreign Direct Investment: A Global Survey 84 An enterprise that begins operating a
hotel before 31 March 2001 in a hilly or rural area, place of pilgrimage or other such place earmarked by
the central Government for development of tourism infrastructure, is entitled to a 50 per cent exemption
on profits for the first 10 years. And for a hotel which commences functioning before 31 March 2001 in
any place other than metropolitan cities, the exemption is 30 per cent on profits for the first 10 years. In
addition, 30 per cent tax exemption is available on profits for the first 10 years of an enterprise that begins
operating ships before 31 March 1995.
(c) Export incentives and free trade zones -A complete tax holiday is provided to companies that are set
up in FTZs for the first 10 years of operation. These FTZs are Kandla Free Trade Zone (KAFTZ),
Gujarat; Santa Cruz Electronics Export Processing Zone (SEEPZ), Mumbai; Madras Export Processing
Zone (MEPZ), Tamil Nadu; Cochin Export Processing Zone (CEPZ), Kerala; Noida Export Processing
Zone (NEPZ), Uttar Pradesh; and Falta Export Processing Zone (FEPZ), West Bengal. Approved, newly
established 100 per cent export-oriented industrial undertakings and units in electronic hardware and
software technology parks are entitled to a similar tax holiday.
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A domestic company or a resident non-corporate assesses engaged in the hotel or travel agency business
can enjoy an exemption of 50 per cent on the profits derived from services provided to foreign tourists,
plus any portion of the remaining profits that are transferred to a reserve account from the profit and loss
account. Profit must be received in convertible foreign exchange.
A 50 per cent tax exemption is available on profits from projects such as construction of any building,
road, dam, bridge, assembly or installation of any machinery or plant, or construction of any structure
executed outside India. The said exemption should be credited to a Foreign Project Reserve Account and
utilized for the purpose of business within the next five years, and not be used for distribution by way of
dividends or profits. A similar tax exemption benefit is available on profits from housing projects
awarded on the basis of a global tender and aided by the World Bank. The amount of tax exemption
should be transferred to a Housing Projects Reserve Account and utilized for the purpose of business
within five years.
A resident tax payer engaged in the export of manufactured goods or computer software is allowed a
deduction from profits on the basis of the ratio of export turnover to total turnover. The proceeds must be
received in convertible foreign exchange.
(d) Other incentives-A foreign institutional investor investing in shares and securities in India would be
liable to tax at 10 per cent on its long-term capital gains and 30 per cent on short-term capital gains. The
minimum period of holding in the case of equity shares would be more than one year to be considered
long term, and three years in the case of other securities.
Dividends, interest or long-term capital gains of an infrastructure capital fund or infrastructure capital
company that earns from investments made on or after 1 June 1998 in any enterprise engaged in the
business of developing, maintaining and operating any infrastructure facility, and which has been
approved by the central Government, is exempt from tax.
Dividends paid by domestic companies to their shareholders are exempt from tax. However, the domestic
company would have to pay an additional tax termed as tax on distributed Tax Incentives and Foreign
Direct Investment: A Global Survey 85 profits which is computed at the rate of 10 per cent of the
amounts distributed as dividends by the domestic company.
(e) Tax incentives legislation highlights
Income Tax Act, 1961
Wealth Tax Act, 1957;
Gift Tax Act, 1958 (abolished from 1 October 1998);
Central Excise Act, 1944 (including Service Tax on specified services);
Customs Act, 1962; Interest Tax Act, 1974;
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Expenditure Tax Act, 1987.

(f) Statutory tax rate- The national corporate tax rate is 35 per cent and the tax rate for foreign
companies is 48 per cent. The 1999/2000 budget announced a surcharge of 10 per cent, making the
effective rate 38.5 per cent.
Dividends declared, distributed or paid after 1 June 1997 are not subject to withholding tax. However,
companies making distributions are subject to a 10 per cent additional tax on the dividend amount.
Dividends paid to a foreign company are subject to a withholding tax of 20 per cent.
Under domestic law, the withholding rates on interest paid to companies vary with the type of loan or
security. The rate most likely to apply to foreign investors, in the absence of a free rupee market, is that
applied to foreign currency loans:
Type of loan or security Rate of withholding tax
On foreign currency loans, foreign currency Non-resident accounts, and foreign currency deposits with
public limited companies -20 per cent
Bonds of an Indian company purchased with foreign currency- 10 per cent
General rate -48 per cent.
The rate of withholding tax on royalties is 20 per cent. This rate applies to agreements entered into after
31 May 1997 regarding royalties, as defined under domestic law and approved by the central
Government, or where it is in accordance with the industrial policy in force. A 30 per cent rate applies to
agreements concluded on or after 1 April 1976 as approved by the Central Government or where it is in
accordance with the industrial policy in force. For approved agreements concluded before 1 April 1976,
the rate is 50 per cent of the net amount after deduction for expenses. If an agreement has not been
approved by the Indian Government, the rate is 55 per cent with effect from 1 April 1994, and 48 per cent
from 1 April 1997.
Export Documents and its purposes
Any export shipment involved various documents required by various authorities such as customs;
excise, RBI, Inspection and according depending upon the requirements, there are categorized into 2
categories, namely commercial documents and regulatory documents.
A. Commercial Documents. : - Commercial documents are required for effecting physical transfer of
goods and their title from the exporter to the importer and the realisation of export sale proceeds. Out of
the 16 commercial documents in the export documentation framework as many as 14 have been
standardised and aligned to one another. These are proforma invoice, commercial invoice, packing list,
shipping instructions, intimation for inspection, certificate, of inspection of quality control, insurance
declaration, certificate' of insurance, mate's receipt, bill of lading or combined transport document,
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application for certificate origin, certificate of origin, shipment advice and letter to the bank for collection
or negotiation of documents. However, shipping order and bill of exchange could not be brought within
the fold of the Aligned Documentation System,
1. Commercial Invoice: Commercial invoice is an important and basic export document. It is also known
as a 'Document of Contents' as it contains all the information required for the preparation of other
documents. It is actually a seller's bill of merchandise. It is prepared by the exporter after the execution of
export order giving details about the goods shipped. It is essential that the invoice is prepared in the name
of the buyer or the consignee mentioned in the letter of credit. It is a prima facie evidence of the contract
of sale or purchase and therefore, must be prepared strictly in accordance with the contract of sale.
Contents of Commercial Invoice
Name and address of the exporter.
Name and address of the consignee.
Name and the number of Vessel or Flight.
Name of the port of loading.
Name of the port of discharge and final destination.
Invoice number and date.
Exporter's reference number.
Buyer's reference number and date.
Name of the country of origin of goods.
Name of the country of final destination.
Terms of delivery and payment.
Marks and container number.
Number and packing description.
Description of goods giving details of quantity, rate and total amount in terms of internationally
accepted price quotation.
Signature of the exporter with date.
Significance of Commercial Invoice
It is the basic document useful in preparation of various other shipping documents.
It is used in various export formalities such as quality and pre-Shipment inspection excise and customs
procedures etc.
It is also useful in negotiation of documents for collection and claim of incentives.
It is useful for accounting purposes to both exporters as well as importers.
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2 Inspection Certificate: The certificate is issued by the inspection authority such as the export
inspection agency. This certificate states that the goods have been inspected before shipment, and that
they confirm to accepted quality standards.
3 Marine insurance policy: Goods in transit are subject to risk of loss of goods arising due to fire on
ship, perils of sea, theft etc. marine insurance protects losses incidental to voyages and in land
transportation. Marine insurance policy is one of the most important document used as collateral security
because it protects the interest of all those who have insurable interest at the time of loss. The exporter is
bound to insure the goods in case of CIF quotation, but he can also insure the goods in case of FOB
contract, at the request of the importer, but the premium payment will be made by the exporter. There are
different types of policies such as
SPECIFIC POLICY: This policy is taken to cover different risks for a single shipment. For a regular
exporter, this policy is not advisable as he will have to take a separate policy every time a shipment is
made, so this policy is taken when exports are in frequent.
Floating Policy: This is taken to cover all shipments for some months. There is no time limit, but there
is a limit on the value of goods and once this value is crossed by several shipments, then it has to be
renewed.
Open Policy: This policy remains in force until cancelled by either party i.e. insurance company or the
exporter.
Open Cover Policy: This policy is generally issued for 12 months period, for all shipments to one or
more destinations. The open cover may specify the maximum value of consignment that may be sent per
ship and if the value exceeded, the insurance company must be informed by the exporter.
Insurance Premium: Differs upon product to product and a number of such other factors, such as,
distance of voyage, type and condition of packing, etc. Premium for air consignments are lowered as
compared to consignments by sea.
4. Consular Invoice: Consular invoice is a document required mainly by the Latin American countries
like Kenya, Uganda, Tanzania, Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria,
Ghana, Guinea, Zanzibar, etc. This invoice is the most important document, which needs to be submitted
for certification to the Embassy of the importing country concerned. The main purpose of the consular
invoice is to enable the authorities of the importing country to collect accurate information about the
volume, value, quality, grade, source, etc., of the goods imported for the purpose of assessing import
duties and also for statistical purposes. In order to obtain consular invoice, the exporter is required to
submit three copies of invoice to the Consulate of the importing country concerned. The Consulate of the
importing country certifies them in return for fees. One copy of the invoice is given to the exporter while
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the other two are dispatched to the customs office of the importer's country for the calculation of the
import duty. The exporter negotiates a copy of the consular invoice to the importer along with other
shipping documents.
Significance of Consular Invoice for the Exporter
It facilitates quick clearance of goods from the customs in exporter's as well as importer's country.
Certification' of goods by the Consulate of the importing country indicate that the importer has
fulfilled all procedural and licensing formalities for import of goods.
It also assures the exporter of the payment from the importing country.
Significance of Consular Invoice for the Importer
It facilitates quick clearance of goods from the customs at the port destination and therefore, the
importer gets quick delivery of goods.
The importer is assured that the goods imported are not banned for imported in his country.
Significance of Consular Invoice for the Customs Office
It makes the task of the customs authorities easy.
It facilitates quick calculation of duties as the value of goods as determine by the Consulate is
considered for the purpose.
5. Certificate of Origin: The importers in several countries require a certificate of origin without which
clearance to import is refused. The certificate of origin states that the goods exported are originally
manufactured in the country whose name is mentioned in the certificate. Certificate of origin is required
when: The goods produced in a particular country are subject to preferential tariff rates in the foreign market
at the time importation.
The goods produced in a particular country are banned for import in the foreign market.
Types of the Certificate of Origin
(a) Non-preferential Certificate, of Origin: - Non-preferential certificate of origin is required in general
by all countries for clearance of goods by the importer, on which no preferential tariff is given. It is issued
by:
The authorised Chamber of Commerce of the exporting country.
Trade Association. Of the exporting country.
(b) Certificate of Origin for availing Concessions under GSP :- Certificate of origin required for
availing of concessions under Generalised System of Preferences (GSP) extended by certain, countries
such as France, Germany, Italy, BENELUX countries, UK, Australia; Japan, USA, etc. This certificate
can be obtained from specialised agencies, namely;
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Export Inspection Agencies.

Jt. Director General of Foreign Trade..
Commodity Boards and their regional offices.
Development Commissioner, Handicrafts.
Textile Committees for textile products.
Marine Products Export Development Authority for marine products.
Development Commissioners of EPZs
(c) Certificate for availing Concessions under Commonwealth Preferences (CWP): Certificate of
origin for the purpose of Commonwealth Preference is also known as 'Combined Certificate of Origin and
Value'. It is required by two member countries, i.e. Canada and New Zealand of the Commonwealth. For
concession under Commonwealth preferences, the certificates or origin have to be submitted in special
forms obtainable, from the High Commission of the country concerned.
(d) Certificate for availing Concessions under other Systems of Preference:- Certificate of origin is
also required for tariff concessions. under the Global System of Trade Preferences (GSTP), Bangkok
Agreement(BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and
receives tariff concessions On imports and exports. Export Inspection Council (EIC) is the sole authority
to print blank Certificates of Origin under BA, SAARC and SAPTA which can be issued by such
agencies as EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc...
Contents of Certificate of Origin
Name and logo of chamber of commerce.
Name and address of the consignee.
Name and the number of Vessel of Flight
Name of the port of discharge and place of delivery.
Packing and container description.
Total number of containers and packages.
Description of goods in terms of quantity.
Signature and initials of the concerned officer of the issuing authority.
Seal of the issuing authority.
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Significance of the Certificate of Origin
Certificate of origin is required for availing of concessions under Generalised System of Preferences
(GSP) as well as under Commonwealth Preferences (CWP).

It is to be submitted to the customs for the assessment of duty clearance of goods with concessional
duty.
It is required when the goods produced in a particular country are banned for import in the foreign
market.
It helps the buyer in adhering to the import regulations of the country.
Sometimes, in order to ensure that goods bought from some other country have not been reshipped by
a seller, a certificate of origin IS required.

6. Bill of Lading: The bill of lading is a document issued by the shipping company or its agent
acknowledging the receipt of goods on board the vessel, and undertaking to deliver the goods in the like
order and condition as received, to the consignee or his order, provided the freight and other charges as
specified in the bill have been duly paid. It is also a document of title to the goods and as such, is freely
transferable by endorsement and delivery.
Bill of Lading serves three main purposes:
As a document of title to the goods;
As a receipt from the shipping company; and
As a contract for the transportation of goods.
Types of Bill of Lading
Clean Bill of Lading: - A bill of lading acknowledging receipt of the goods apparently in good order
and condition and without any qualification is termed as a clean bill of lading.
Claused Bill of Lading: - A bill of lading qualified with certain adversary marks such as, "goods
insufficiently packed in accordance with the Carriage of Goods by Sea Act," is termed as a claused bill of
lading.
Transhipment or Through Bill of Lading: - When the carrier uses other transport facilities, such as
rail, road, or another steamship company in addition to his own, the carrier issues a through or
transhipment bill of lading.
Stale Bill of Lading: - A bill of lading that has been held too long before it is passed on to a bank for
negotiation or to the consignee is called a stale bill of lading.
Freight Paid Bill of Lading: - When freight is paid at the time of shipment or in advance, the bill of
landing is marked, freight paid. Such bill of lading is known as freight bill of lading.
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Freight Collect Bill of lading :- When the freight is not paid and is to be collected from the consignee
on the arrival of the goods, the bill of lading is marked, freight collect and is known as freight collect bill
of lading
Contents of Bill of Lading
Name and logo of the shipping line.
Name and address of the shipper.
Name and the number of vessel.
Total number of containers and packages,
Container status and seal number.
Gross weight in kg and volume in terms of cubic meters.
Amount of freight paid or payable.
Shipping bill number and date.
Signature and initials of the Chief Officer. .
Significance of Bill of Lading for Exporters
It is a contract between the shipper and the shipping company for carriage of the goods to the port of
destination.
It is an acknowledgement indicating that the goods mentioned in the document have been received on
board for the Purpose of shipment.
A clean bill of lading certifies that the goods received on board the ship are in order and good
condition.
It is useful for claiming incentives offered by the government to exporters
The exporter can claim damages from the shipping company if the goods are lost or damaged after the
issue of a clean bill of lading.
Significance of Bill of Lading for Importers
It acts as a document of title to goods, which is transferable endorsement and delivery.
The exporter sends the bill of lading to the bank of the importer so as to enable him to take the delivery
of goods.
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The exporter can give an advance intimation to the foreign buyer about the shipment of goods by
sending him a non-negotiable copy of bill of lading
Significance of Bill of Lading for Shipping Company
It is useful to the shipping company for collection of transport charges from the importer, if not
collected from the exporter.
7. Airway Bill: An airway bill, also called an air consignment note, is a receipt issued by an airline for
the carriage of goods. As each shipping company has its own bill of lading, so each airline has its own
airway bill. Airway Bill or Air Consignment Note is not treated as a document of title and is not issued in
negotiable form.
Contents of Airway Bill
Name of the airport of departure and destination.
The names and addresses of the consignor, consignee and the first carrier.
Amount of freight paid or payable.
Signature and initials of the issuing carrier or his agent.
Importance of Airway Bill: It is a contract between the airlines or his agent to carry goods to the
destination. It is the document of instructions for the airline handling staff. It acts as a customs declaration
form. Since, it contains details about freight it also represents freight bill.
7. Shipment Advice to Importer:- After the shipment of goods, the exporter intimates the importer
about the shipment of goods giving him details about the date of shipment, the name of the vessel, the
destination, etc. He should also send one copy of non-negotiable bill of lading to the importer.
8. Packing List: The exporter prepares the packing list to facilitate the buyer to check the shipment. It
contains the detailed description of the goods packed in each case, their gross and net weight, etc. The
difference between a packing note and a packing list is that the packing note contains the particulars of the
contents of an individual pack, while the packing list is a consolidated statement of the contents of a
number of cases or packs.
9. Bill of exchange: The instrument is used in receiving payment from the importer. The importer may
prefer bill of exchange to LC as it does not involve blocking of funds. A bill of exchange is drawn by the
exporter on the importer, to make payment on demand at sight or after a certain period of time.
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B/E is a means to collect payment.

B/E is a means to demand payment.
B/E is a means to extent the credit.
B/E is a means to promise the payment.
B/E is an official acknowledgement of receipt of payment.
Financial documents perform the function of obtaining the finance collection of payment etc.
2 sets. Each one bearing the exclusion clause making the other part of the draft invalid.
Sight B/E.
Usance B/E.
It is known as draft.
Immediate payment Sight draft.
There are two copies of draft. Each one bears reference to the other part A&B. when any one of the
draft is paid, the second draft becomes null and void.
Parties to bill of exchange.
1. The drawer: The exporter / person who draws the bill.
2. The drawee: The importer / person on whom the bill is drawn for payment.
3. The payee: The person to whom payment is made, generally, the exporter / supplier of the goods.
B Auxiliary Documents: These documents generally form the basic documents based on which the
commercial and or regulatory documents are prepared. These documents also do not have any fixed
formats and the number of such documents will wary according to individual requirements.
1. Proforma Invoice: The starting point of the export contract is in the form of offer made by the exporter
to the foreign customer. The offer made by the exporter is in the form of a proforma invoice. It is a
quotation given as a reply to an inquiry. It normally forms the basis of all trade transactions.
Contents of Proforma Invoice
Name and address of the importer.
Mode of transportation, such as Sea or Air or Multimodal transport.
Name of the port of discharge and final destination.
Provisional invoice number and date.
Exporter's reference number.
Buyer's reference number and date.
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Name of the country of origin of goods.

Name of the country of final destination.
Number and packing description.

Description of goods giving details of quantity, rate and total amount in terms of internationally
accepted price quotation.
Signature of the exporter with date.
Importance of Proforma Invoice
It forms the basis of all trade transactions.
It may be useful for the importer in obtaining import licence or foreign exchange.
2. Intimation for Inspection: Whenever the consignment requires the pre-shipment inspection, necessary
application is to be made to the concerned inspection agency for conducting the inspection and issue of
certificate thereof.
3. Declaration of Insurance: Where the contract terms require that the insurance to be covered by the
exporter, the shipper has to give details of the shipment to the insurance company for necessary insurance
cover. The detailed declaration will cover:
Name of the shipper \ exporter.
Name & address of buyer.
Details of goods such as packages, quantity, value in foreign currency as well as in Indian Rs. Etc.
Name of the Vessel \ Aircraft.
Value for which insurance to be covered.
4.Application of the Certificate Origin: In case the exporter has to obtain Certificate of Origin from the
concerned authorities, an application has to be made to the concerned authority with required documents.
While the simple invoice copy will do for getting C\O from the chamber of commerce, in respect of
obtained the same from the office of the Textile Committee or Export Promotion Council, the documents
requirement are different.
5.Mate's Receipt: Mate's receipt is a receipt issued by the Commanding Officer of the ship when the
cargo is loaded on the ship. The mate's receipt is a prima facie evidence that goods are loaded in the
vessel. The mate's receipt is first handed over to the Port Trust Authorities. After making payment of all
port dues, the exporter or his agent collects the mate's receipt from the Port Trust Authorities. The mate's
receipt is freely transferable. It must be handed over to the shipping company in order to get the bill of
lading. Bill of lading is prepared on the basis of the mate's receipt.
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Types of Mate's Receipts

Clean Mate's Receipt: - The Commanding Officer of the ship issues a clean mate's receipt, if he is
satisfied that the goods are packed properly and there is no defect in the packing of the cargo or package.
Qualified Mate's Receipt: - The Commanding Officer of the ship issues qualified mate's receipt, when
the goods are not packed properly and the shipping company does not take any responsibility of damage
to the goods during transit.
Contents of Mate's Receipt
Name and logo of the shipping line.
Name and address of the shipper.
Name and the number of vessel.
Gross weight in kg. and volume in terms of cubic meters.
Shipping bill number and date.
Signature and initials of the Chief Officer.
Significance of Mate's Receipt
It is an acknowledgement of goods received for export on board the ship.
It is a transferable document. It must be handed over to the shipping company in order to get the bill of
lading.
Bill of lading, which is the title of goods, is prepared on the basis of the mate's receipt.
It enables the exporter to clear port trust dues to the Port Trust Authorities
Obtaining Mate's Receipt
The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's
Receipt to the Port Superintendent.
6.Shipping order: it is issued by the Shipping/Conference Line intimating the exporter about the
reservation of space for shipment of cargo which the exporter intends to ship. Details of the vessel, poet of
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the shipment, and the date on which the goods are to be shipped are mentioned. This order enables the
exporter to make necessary arrangements for customs clearance and loading of the goods.
7.Shipping Instructions: at the pre-shipment stage, when the documents are to sent to the CHA for
customs clearance, necessary instructions are to be give with relevance to
The export promotion scheme under which goods are to be exported.
Name of the specific vessel on which the goods are to be loaded.
If goods are to be FCL or LCL.
If freight amount are to be paid / collected.
If shipment are covered under A.R.E.-1 procedure.
Instructions for obtaining Bill of Lading etc.
8. Bank letter for negotiation of documents: at the post shipment stage, the exporter has to submit the
documents to a bank for negotiation or discounting or collection for forwarding the same to the customer
and also for realization of export proceeds. The bank letter is the set of instruction for the bank as to how
to handle the documents by them and by the bank at the buyers country which may include
Name and address of the buyer.
Details of various documents being sent and the number of the copies thereof.
Name and address of the buyers bank if available.
If the documents are sent L/C or on open terms.
If the proceeds are to adjusted against any pre-shipment packing credit loan.
If the bill amount is to be adjusted against any forward exchange cover.
In case of credit bill who has to bear the interest, either exporter or if the same is to be collected from
the buyer.
Instructions in case non-acceptance/non-payment by the buyer.
C. Regulatory Document: Regulatory pre-shipment export documents are prescribed by the different
government departments and bodies in order to comply with various rules and regulations under the
relevant laws governing export trade such as export inspection, foreign exchange regulation, ex port trade
control, customs, etc. Out of 9 regulatory documents four have been standardised and aligned. These are
shipping bill or bill of export, exchange control declaration (GR from), export application dock challan or
port trust copy of shipping bill and receipt for payment of port charges.
1. Shipping Bill: Shipping bill is the main customs document, required by the customs authorities for
granting permission for the shipment of goods. The cargo is moved inside the dock area only after the
shipping bill is duly stamped, i.e. certified by the customs. Shipping bill is normally prepared in five
copies :411
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Customs copy.
Drawback copy.
Export promotion copy.
Port trust copy.
Exporter's copy.
Types of Shipping Bill
Based on the incentives offered by the government, customs authorities have introduced three types of
shipping bills: Drawback Shipping Bill: - Drawback shipping bill is useful for claiming the customs drawback
against goods exported.
Dutiable Shipping Bill: - Dutiable shipping bill is required for goods which are subject to export duty.
Duty-free Shipping Bill: - Duty-free shipping bill is useful for exporting goods on which there is no
export duty.
In order to facilitate easy recognition and quick processing, following colours have been provided to
different kinds of shipping bills:
Types of goods
By Sea
By Air
Drawback shipping bill
Green
Green
Dutiable shipping bill
Yellow
Pink
Duty-Free shipping bill
White
Pink
Contents of Shipping Bill

Name and address of the importer.
Name of the vessel, master or agents and flag.
Name of the port at which goods are to be discharged.
Country of final destination.
Details about packages, description of goods, marks and numbers, quantity and details of each case.
FOB price and real value of goods as defined in the Sea Customs Act.
Whether Indian or foreign merchandise to be re-exported
Total number of packages with total weight and value.
Significance of Shipping Bill
a) Shipping bill is the main customs document, required by the customs authorities for granting
permission for the shipment of goods.
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b) The cargo is moved inside the dock area only after the shipping bill is duly stamped, i.e. certified by
the customs.
c) Duly endorsed shipping bill is also necessary for the collection of export incentives offered by the
government.
d) It is useful to the Customs Appraiser while determining the actual value of goods exported.
2. A.R.E. 1 form (Central excise): this form ARE-1 is prescribed under Central Excise rules for export of
goods. In case goods meant for export are cleared directly from the premises of a manufacturer, the
exporter can avail the facility of exemption from payment of terminal excise duty. The goods may be
cleared for export either under claim for rebate of duty paid or under bond without payment of duty. In
both the events the goods are to be cleared under form A.R.E-1 which will show the details of the goods
being exported, the relevant duty involved and if the duty is paid or goods being cleared under bond,
details of goods being sealed either by the exporter or Central Excise officials etc.
3. Exchange Control declaration Form (GR/PP/SOFTEX): under the exchange control regulations all
exporters must declare the details of shipment for monitoring by the Reserve Bank of India. For this
purpose, RBI has prescribed different forms for different types of shipments like GRI, PP forms etc.
These declaration forms must be presented to the customs officials at the time of passing of export
documentation. Under the EDI processing of shipping bill in the customs, these forms have been
dispensed with and a new form SDF has to be submitted to the customs in the place of above forms.
4. Export Application: this is the application to be made to the customs officials before shipment of
goods. The prescribed form of the application is the Shipping Bill/Bill of Export. Different types are
required for shipment like ex-bond, duty free goods, and dutiable goods and for export under different
export promotion schemes such as claims for duty drawback etc.
5. Vehicle Ticket/Cart Ticket/Gate Pass etc.: before the goods are being taken inside the port for loading,
necessary permission has to be obtained for moving the vehicle into the customs area. This permission is
granted by the Port Trust Authority. This document will contain the detail of the export cargo, name and
address of the shippers, lorry number, marks and number of the packages, drivers licence details etc.
6. Bank Certificate of Realisation: this is the form prescribed under the Foreign Trade Policy, wherein
the negotiating bank declares the fob value of exports and for the date of realisation of the export
proceeds. This certificate is required fore obtaining the benefit under various schemes and this value of
fob is reckoned as fob value of exports.
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D. Other Document:
Black List Certificate: it certifies that the ship/aircraft carrying the cargo has not touched the particular
country on its journey or that the goods are not from the particular country. This is required by certain
nations who have strained political and economical relations with the so called Black Listed Countries.
Language Certificate: Importers in the European Community require a language certificate along with
the GSP certificate in respect of handloom cotton fabrics classifiable under NAMEX code 55.09.
Generally four copies of language certificate are prepared by the concerned authority who issues GSP
certificate. Three copies are handed over to the exporter. A copy is sent along with the other documents
for realisation of export proceeds.
Freight Payment Certificate: in most of the cases, the B/L or AWB will mention the transportation
and other related charges. However if the exporter does not want these details to be disclosed to the buyer,
the shipping company may issue a separate certificate for payment of the freight charges instead of
declaring on the main transport documents. This document showing the freight payment is called the
freight certificate.
Insurance Premium Certificate: this is the certificate issued by the Insurance Company as
acknowledgement of the amount of premium paid for the insurance cover. This certificate is required by
the bank for arriving at the fob value of the goods to be declared in the bank certificate of realisation.
Combined Certificate of Origin and Value: this certificate is required by the Commonwealth
Countries. This certificate is printed in a special way by the Commonwealth Countries. This certificate
should contain special details as to the origin and value of goods, which are useful for determining import
duty. All other details are generally the same as that of Commercial Invoice, such as name of the exporter
and the importer, quality and quantity of the goods etc.
Customs Invoice: this is required by the countries like Canada, USA for imposing preferential tariff
rates.
Legalized Invoice: this is required by the certain Latin American Countries like Mexico. It is just like
consular invoice, which requires certification from Consulate or authorised mission, stationed in the
exporters country.
Special Provision under Uniform Customs and practice for Documentary Credit UCP-500, for
Commercial Invoice.
Article-37: Commercial Invoice
o Must appear on their face to be issued by the beneficiary named in the credit.
o Must be made out in the name of the applicant.
o Need not be signed
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Banks may refuse Commercial Invoice issued for amounts in excess of the amount permitted by the
credit except otherwise stated.
The description of the goods in the commercial invoice must correspond with the description of the
credit. In all other documents the goods may be described in the General in general terms not inconsistent
with description in the credit. In all documents goods may be described in general terms not inconsistent
with the Description of the goods in the credit.
Pre-Shipment Documents:
Shipping bill.
Export order/Sales contract/Purchase order.
Letter of Credit
Commercial invoice.
Packing list.
Certificate of origin.
Guaranteed Remittance (G.R/SDF/PP/SOFTEX), or SDF.
Certificate of Inspection.
Various declarations required as per custom procedure.
Exchange Control Declaration Form: all exports to which the requirement of declaration apply must be
declared on appropriate forms as indicated below unless the consignment is of samples and of No
Commercial Value
GR FORM: to be completed in duplicate for exports otherwise than by post including export of
software in physical form i.e. magnetic tape/discs and paper media.
SDF FORM: to be completed in duplicate and appended to the Shipping Bill for export declare to the
customs offices notified by the Central Government which have introduced EDI system for processing
Shipping Bill.
PP FORM: to be completed in duplicate for export by post.
SOFTX: to be completed in triplicate for export of software otherwise than in the physical form i.e.
magnetic tapes/discs and paper media.
These forms are available for sale in Reserve Bank of India
Export declaration forms have utmost importance and are binding on the exporters. It is, therefore,
necessary that enough care is taken while declaring exports on these forms, with special reference on the
following points.
Name and address of the authorised dealer through whom proceeds of exports have been or will be
realized should be specified in the relevant column of the form.
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Details of commission and discount due to foreign agent or buyer should be correctly declared
otherwise difficulties may arise at the time of remittance of such commission.
It should be clearly indicated in the form whether the export is on outright sale basis or on
consignment basis and irrelevant clauses must be stuck out
Under the term analysis of full export value a break up of full export value of goods under F.O.B
value, freight and insurance should be furnished in all cases, irrespective of the terms of contract.
All documents relating to the export of goods from India must pass through the medium of an
authorised dealer in foreign exchange in India within 21 days of shipment.
The amount representing the full export value of goods must be realized within six months from date of
shipment.
Disposal of Copies of Export Documentation Form
GR forms covering export of goods other than jewellery should be completed by the exporter in
duplicate and both the copies should be submitted to customs at the port of Shipment. Customs will give
their running serial number on both the copies of the GR forms after verifying the particulars and
admitting the corresponding shipping bill. The value declared by the exporter will also be verified by the
customs and they will also record the assessed value. Duplicate copy will be returned to the exporter and
the original will be remained by the customs for onward submission to the Reserve Bank. Duplicate form
of the GR form will again be presented to the customs at the time of actual shipment. After examination
of goods and certifying the quantity passed for shipment the duplicate copy will again be returned to
exporter for submission to an authorised dealer. However, an exception to submission of GR forms to the
Customs authorities have been made in case of deep sea fishing.
(a) PP forms are to be first presented to an authorised dealer for countersignature. The form will be
countersigned by the authorised dealer only if the post parcel is addressed to his branch or correspondent
bank in the country or import. The concerned overseas branch or correspondent is to be instructed to
deliver the post parcel against payment or acceptance of relevant bill, as the case may be.
(b) For post parcel addressed directly to the consignee, the authorised dealer will countersign the form,
provided.
(i) an irrevocable letter of credit for the full value of export has been opened in favour of exporter and has
been advised through authorised dealer concerned; or
(ii) the full value of shipment has been received in advance by the exporter through an authorised dealer;
or
(iii)On receipt of full value of shipment declared on this form the authorised dealer will forward to RBI
the duplicate copy along with the certified copy of shippers invoice.
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(iv) The authorised is satisfied on the basis of standing and track record of the exporter and arrangements
made for realisation of the export proceeds that he could do so. If the authorised dealer is not satisfied
about standing etc. of the exporter, the application is rejected. No reference is entertained by the Reserve
Bank in such cases.
(c)The original PP form countersignature will be returned to the exporter by the authorised dealer and the
duplicate will be retained by him. Original PP form should then be submitted to the post office along with
the parcel. The post office through the goods have been dispatched will forward the original to RBI.
The export of computer software may be undertaken in physical form i.e. software prepared on magnetic
tape and paper media as well as in non-physical form by direct data transmission through dedicated earth
stations/satellite links. The export of computer software in physical form is subject to normal declaration
on GR/PP form and regulations applicable there to will also be applicable to such exports. However,
export of non-physical form should be declared on SOFTEX Form. Besides computer software, export of
video / T.V. Software and all other types of software products / packages should also be declared on the
SOFTEX forms. Since export of software is fraught with many risks and special guidelines have been
framed for handling such exports.
Export-Import Banking Activities
Export-Import Bank of India Role, Functions and Facilities
1.1.1 Export-Import Bank of India (Exim Bank) was set up by an Act of the Parliament THE
EXPORT-IMPORT BANK OF INDIA ACT, 1981 for providing financial assistance to exporters and
importers, and for functioning as the principal financial institution for co-ordinating the working of
institutions engaged in financing export and import of goods and services with a view to promoting the
countrys international trade and for matters connected therewith or incidental thereto.
1.1.2 Exim Bank has two broad business streams: one, the traditional export finance typical of export
credit agencies around the world and two, financing of export oriented units (export capability creation),
which are non-traditional for export credit agencies. Since inception, Exim Bank has been the principal
financial institution in the country for financing project exports and exports on deferred credit terms. As
per Memorandum PEM (MEMORANDUM OF INSTRUCTIONS ON PROJECT EXPORTS AND
SERVICE EXPORTS) of Reserve Bank of India, the following constitute project exports:
i. Supply of goods / equipment on deferred payment terms
ii. Civil construction contracts
iii. Industrial turnkey projects
iv. Consultancy / services contracts
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Exim Bank extends funded and non-funded facilities for overseas turnkey projects, civil construction
contracts, technical and consultancy service contracts as well as supplies.
Turnkey Projects are those which involve supply of equipment along with related services, like design,
detailed engineering, civil construction, erection and commissioning of plants and power transmission &
distribution
Construction Projects involve civil works, steel structural works, as well as associated supply of
construction material and equipment for various infrastructure projects.

Technical and Consultancy Service contracts, involving provision of know-how, skills, personnel and
training are categorised as consultancy projects. Typical examples of services contracts are: project
implementation services, management contracts, supervision of erection of plants, CAD/ CAM solutions
in software exports, finance and accounting systems.
Supplies: Supply contracts involve primarily export of capital goods and industrial manufactures.
Typical examples of supply contracts are: supply of stainless steel slabs and ferro-chrome manufacturing
equipments, diesel generators, pumps and compressors.
1.1.3 Exim Bank, under powers delegated vide the PEM, provides post-award clearance for project
export contracts valued up to USD 100 million. Project export contracts valued above USD 100 million
need to be provided post-award clearance by the inter-institutional Working Group. The Working Group
is a single-window clearance mechanism, comprising Exim Bank as the convener and nodal agency, RBI
Foreign Exchange Department and Export Credit Guarantee Corporation of India Ltd. [ECGC]. In the
case of very large value projects, officials of Ministry of Finance, Ministry of Commerce and Industry and
Ministry of External Affairs, Government of India, are invited to participate in the Working Group
Meetings. In order to obtain immediate clarifications for speedy clearance of proposals by the Working
Group, the exporters concerned and their bankers are also associated with the meetings. With the same
objective, participation of the main sub-suppliers, sub-contractors or other associates and their bankers in
such meetings is also encouraged, particularly in respect of proposals for high value contracts. Exim
Bank also plays the role of a financier and provides funded and non-funded support for project export
contracts of Indian Entities.
1.1.4 In addition to project exports, Exim Bank also extends fund-based and non-fund-based facilities
to deemed export contracts as defined in Foreign Trade Policy of GOI, e.g.,
- secured under funding from Multilateral Funding Agencies like the World Bank, Asian Development
Bank, etc.;
- contracts secured under International Competitive Bidding;
- Contracts under which payments are received in foreign currency.
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1.2.1 Exim Bank offers the following Export Credit facilities, which can be availed of by Indian
companies, commercial banks and overseas entities.
1.2.2 For Indian Companies executing contracts overseas
Pre-shipment credit
Exim Bank's Pre-shipment Credit facility, in Indian Rupees and foreign currency, provides access to
finance at the manufacturing stage - enabling exporters to purchase raw materials and other inputs.
Pre-shipment credits are usually extended by exporters commercial banks for period upto 180 days. Exim
Bank extends pre-shipment / post-shipment credit either directly or in participation with commercial
banks. In order to offer one-stop banking products to export clients, the Bank has also been offering shortterm pre / post shipment credit either directly or through exporters bankers. Exim Bank may consider
extending pre-shipment credit and post-shipment credit for periods exceeding 180 days, on case-to-case
basis and subject to the merits of the case.
Supplier's Credit
This facility enables Indian exporters to extend term credit to importers (overseas) of eligible goods at the
post-shipment stage.
Post-shipment Suppliers Credit can be extended to Indian exporters up to the extent of the deferred credit
portion of the export contract, either in Rupees or in foreign currency. The period of deferred credit and
moratorium will generally depend on the nature of goods [List A and List B of Memorandum PEM] or
nature of projects, as per guidelines contained in the Memorandum PEM of RBI.
1.2.3 for Project Exporters
Export Project Cash-Flow Deficit Financing Programme [EPCDF]
Indian project exporters (including those under Deemed Exports category) incur expenditure in rupee or
foreign currency while executing contracts i.e. costs of mobilisation/acquisition of materials, personnel
and equipment etc. Exim Bank's facility helps them meet these expenses for a) Project Export Contracts;
b) Contracts in India categorized as Deemed Exports in the Foreign Trade Policy of India.
Capital Equipment Finance Programme (CEFP)
Capital Equipment Finance Programme [CEFP] has been conceived to cater to capital expenditure for
procurement of capital equipment to be utilized across multiple contracts. CEFP provides direct access to
Exim Banks finance for eligible Indian companies for procurement of indigenous and imported capital
equipment for executing overseas projects / deemed export projects.
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1.2.4 for Exporters of Consultancy and Technological Services

Exim Bank offers a special credit facility to Indian exporters of consultancy and technology services, so
that they can, in turn, extend term credit to overseas importers.
1.2.5 Guarantee Facilities
Indian companies can avail of guarantee facilities of different types to furnish requisite guarantees to
facilitate execution of export contracts (including deemed export contracts) and import transactions.
Advance Payment Guarantee (APG): Issued to project exporters to secure a project mobilization
advance as a percentage (10-20%) of the contract value, which is generally recovered on a pro-rata basis
from the progress payment during project execution.
Performance Guarantee (PG): PG for up to 5-10% of contract value is issued valid until completion of
maintenance period and/or grant of Final Acceptance Certificate (FAC) by the overseas employer/client.
Retention Money Guarantee (RMG): This enables the exporter to obtain the release of retained
payments from the client prior to issuance of Project Acceptance Certificate (PAC)/ Final Acceptance
Certificate (FAC).
Other Guarantees: e.g. in lieu of customs duty or security deposit for expatriate labour, equipment etc.
Eligibility: Indian project exporters securing overseas or deemed export contracts.
1.2.6 for Overseas Entities
Buyer's Credit
Overseas buyers can avail of Buyer's Credit from Exim Bank, for import of eligible goods from India on
deferred payment terms. As per Memorandum PEM guidelines, RBI has authorised Exim Bank to extend
overseas buyers credits up to USD 20 mn for project exports without seeking approval of RBI.
The facility enables exporters/contractors to expand abroad and into non-traditional markets. It also
enables exporters/contractors to be competitive when bidding or negotiating for overseas jobs.
Benefits to Foreign Customers
Enables overseas buyers to obtain medium-and long-term financing
Competitive interest rate against host country's high cost of borrowing.
Eligibility:
Buyer's Credit is extended to a foreign project company that intends to award the project execution to an
Indian project exporter. The financing will be available to all kinds of projects and service exports from
India. Facility is available for development, upgrading or expansion of infrastructure facilities; financing
of public or private projects such as plants and buildings; professional services such as surveyors,
architecture, consultations, etc.
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Buyers Credit under NEIA

Buyers Credit NEIA is a unique financing mechanism that provides a safe mode of non-recourse
financing option to Indian exporters and serves as an effective market entry tool to traditional as well as
new markets in developing countries, which need deferred credit on medium or long-term basis.
Under this facility, Exim Bank facilitates project exports from India by way of extending credit to
overseas sovereign governments and government owned entities for import of Indian goods and services
from India on deferred credit terms. Exim Bank will obtain credit insurance cover under NEIA through
ECGC. NEIA is a trust set up by the Ministry of Commerce and administered by Export Credit &
Guarantee Corporation of India (ECGC).Facility is available for project exports requiring medium or long
term deferred credit.
Eligibility:
Exim Bank extends the credit directly to overseas buyer of projects from India without recourse to Indian
exporter. Borrower should be overseas sovereign governments or government owned entities. Amount of
Loan should generally not be more than 85% of the contract value. Sovereign guarantee is needed where
the borrower is other than the foreign government. Any other security may be stipulated on a case-to-case
basis.
1.2.7 The Project Finance menu of funded and non-funded facilities to Indian exporters, commercial
banks in India and overseas entities is given below:
For Indian Exporters
For Commercial Banks in India
Post-shipment Suppliers Credit
Risk participation in funded /
Export
Project
Cash
flow
Deficit non-funded facilities extended to
Financing Program
Indian exporters.
Pre-shipment Credit in Rupee and Refinance of Export Credit
Foreign Currency
Finance for Export of Consultancy and For Overseas Entities
Technology Services
Finance for Deemed Export contracts
Buyers Credit
Capital Equipment Finance
Buyers Credit under NEIA
Financing Deemed Export contracts
secured via structures including but not

restricted to BOT / BOO / BOOT / BOLT
Letters of Credit / Guarantees
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1.2.8 RBIs Memorandum PEM has to be referred for Project and Service Exports.
1.3.1 Export Capability
Creation loans extended by the Bank may be classified into three broad categories viz. finance for
overseas investment, finance for export oriented units and finance for financial intermediaries. Besides
loans, the Bank also extends non-fund based assistance by way of guarantees and Letters of Credit (L/Cs).
The three categories are discussed as under:
1. Overseas
Term Financing to overseas Joint Ventures/ Wholly Owned Subsidiaries
Investment
as well as to Indian companies towards part financing their equity investment in

overseas JV/ WOS.
Equity Investment Participation in equity of overseas ventures of Indian
companies.
Working Capital Loans to JVs/WOSs
Guarantees to JVs/WOSs
2. ExportUnits
Oriented Asset Creation

o Equipment Finance
o Project Finance
Working Capital
o Medium Term (LTWC, WCTL)
o Short Term Finance
Special Products
o Export Marketing Finance
o Export Product Development Finance
o Export Vendor Development Finance
o Research & Development (R&D) Finance
o Finance for Indian Educational Institutions and setting up institutions abroad
o Finance for Software Technology Parks
o Finance for Development of Minor Ports / Jetties
o Creative Industry Financing
o Project-related non-fund based guarantees
o Guarantees and stand-by LCs (SBLCs)
o Letters of Credit (LCs)
3. Financial
Refinance to Commercial Banks
Intermediaries (banks) Export Bills Rediscounting for commercial banks.

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1.3.2 The primary objective of providing Export Capability Creation loans is to facilitate export
production and international competitiveness of borrower companies. Exim Bank provides a
comprehensive range of products and services covering financial needs of the borrower companies at all
stages of their business cycle. The Banks vision is to develop commercially viable relationships with a
target set of externally oriented companies by offering them a comprehensive range of products and
services aimed at enhancing their internationalisation efforts.
1.3.3 Overseas Investment Finance Programme
Exim Bank encourages Indian companies to invest abroad for, inter alia, setting up manufacturing units
and for acquiring overseas companies to get access to the foreign market, technology, raw material, brand,
IPR etc. For financing such overseas investments, Exim Bank provides:
a) Term loans to Indian companies up to 80% of their equity investment in overseas JV/ WOS.
b) Term loans to Indian companies towards up to 80% of loan extended by them to the overseas
JV/ WOS.
c) Term loans to overseas JV/ WOS towards part financing
(i) capital
expenditure
towards
acquisition
of
(ii) working
capital,
(iii) equity
(iv) acquisition
(v) acquisition
assets,
investment
of
in
brands/
of
patents/
another
rights/
another
company,
other
IPR,
company,
(vi) any other activity that would otherwise be eligible for finance from Exim Bank had it been an Indian
entity.
d) Guarantee facility to the overseas JV/ WOS for raising term loan/ working capital.
Eligibility to avail finance or services:
Exim Bank's funded/ non-funded assistance is generally with recourse to the Indian promoter Company.
Exim Bank financing is available in Indian Rupees (to the Indian borrower) and in foreign currency [as
per extant RBI guidelines]. The tenor range is usually 5-7 years with a suitable moratorium, and
repayments in suitable monthly/ quarterly installments. Promoter margin is minimum 20% and security
will include inter alia appropriate charge on the assets of the overseas entity, Corporate Guarantee of the
Indian promoter backed by appropriate charge on its assets, Political and/ or commercial risk cover,
Pledge of shares held by the Indian promoter in the overseas venture etc.
1.3.4 Export- Oriented Units, Corporate Banking
The Bank offers a number of financing programmes for Export Oriented Units (EOUs), importers and
for companies making overseas investments. The financing programmes cater to the term loan
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requirements of Indian exporters for financing their new project, expansion, modernization, and purchase
of equipment, R&D, overseas investments and also the working capital requirements.
Finance for Corporates
Research & Development Finance for Export Oriented Units:
Exim Bank encourages Indian exporters to invest more in their R&D spending in order to develop new
products/processes/ IPRs for enhancing export capabilities. Considering the need to bridge the funding
gap of Indian exporters in R&D space, the Bank has a dedicated R&D Financing Programme. Under the
said Programme, financing for R&D can be extended to any export oriented company/ SPV promoted by
companies, irrespective of the nature of industry. The financing covers both capital and revenue
expenditure including inter alia:
Land and building, civil works for housing eligible R&D activities;
Equipments, tools, computer hardware/ software, miscellaneous fixed assets used in eligible R&D
activities;
Acquisition of technology from India or overseas at the proof of concept or design stage, which will
be used to develop new product/ process.

Salaries of R&D personnel, support staff during the R&D project phase including training costs;
Cost of regulatory approvals, filing and maintenance of patent registration;
Product documentation and allied costs during the R&D project phase.
Costs of materials, surveys, technology demonstration studies and field trial
Any other costs to enhance R&D capability.
Eligibility:
Export oriented firms with exports (actual/projected) of at least `5 crores or 10% of annual turnover.
R&D finance is generally extended up to 7 years. However, longer tenors with suitable interest resets
would be permissible. Structured repayment can be considered to match the cash flow.
Up to 80% of the total project cost can be funded.
Security to include, inter alia, appropriate charge on the assets, Corporate Guarantee, charge/
assignment on the regulatory approval/ IPR, personal guarantee etc.

Pre-shipment/Post-shipment Credit Programme:
Exim Bank extends export credit to Indian exporters to meet a wide range of trade financing
requirements for execution of an export transaction. The Bank provides working capital finance by way
pre-shipment credit and post-shipment credit. Bank also extends as part of export credit assistance, nonfund based limits inter alia including issuance of Letters of Credit (both Foreign & inland) and Bank
Guarantees (both Foreign & inland) for its clients. The credit limits are generally extended as part of
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Borrowers consortium limit and are operated as a running account facility. The limits may be renewed
for further period subject to satisfactory review of account and depending on the Borrowers export credit
requirement. The facilities can be drawn in either Indian Rupee or Foreign Currency.
Eligibility:
Indian exporters with a track record.
The limit should be within the MPBF of Borrowers assessed bank finance.
Margin of 15-20% under pre-shipment and 0-10% under post-shipment.
Adequate security to be provided. Typical security includes appropriate charge on the current assets
including export receivables, ECGC cover etc.

Lending Programme for Export Oriented Units:
Exim Bank provides term loans to export oriented Indian companies to finance various capital
expenditures including certain soft expenditures in order to improve their export capability and to enhance
their international competitiveness. Loans/Guarantees are extended for the following purposes:
Expansion, modernization, up gradation or diversification projects including acquisition of equipment,
technology etc.; export marketing; export product development; setting up of Software Technology Parks;
Eligibility:
Manufacturing/trading/services companies with a minimum export orientation (actual/projected) of 10%
of their annual turnover, or exports of 5 crores p.a., whichever is lower [inclusive of exports through
Export/Trading Houses], are eligible to avail finance from Exim Bank. Exim Bank financing is available
in Indian Rupees and in foreign currency [as per extant RBI guidelines]. The tenor range is usually 7-10
years with a suitable moratorium, and repayments in suitable monthly/ quarterly installments. Promoter
margin is minimum 20% and appropriate charge on the fixed assets of the company/project plus any other
acceptable security including personal guarantees may be stipulated.
1.3.5 Finance for MSMEs
Apart from the Corporate Banking facilities, there are additional services that Exim Bank offers to support
Small and Medium Enterprises.
SME-ADB Line:
Exim Bank has arranged for a credit line from the Asian Development Bank (ADB) for providing foreign
currency term loans to the MSME borrowers in certain specific lagging states of India, viz. Assam,
Madhya Pradesh, Orissa, Uttar Pradesh, Chhattisgarh, Jharkhand, Rajasthan and Uttarakhand. These
foreign currency term loans can also finance domestic capital expenditure of the borrowers in Indian
Rupees, besides meeting their foreign currency capital expenditure requirements. The assistance to these
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MSMEs will help in increasing competitiveness in the relatively backward states and help in integrating
them into the mainstream economy.
Eligibility:
Export oriented MSMEs (as defined in MSMED Act, 2006) incorporated in the above mentioned lagging
states
Purpose: To meet long term foreign currency loan requirements of Indian exporting entities in the
MSME sector for financing their eligible capital expenditure. pertaining to inter alia setting up of new
facilities, expansion/modernization of existing facilities, acquisition of equipment and plant & machinery,
setting up of testing/R&D facilities, setting up of captive power plants/co-generation plant, setting up of
infrastructure facilities like effluent treatment plants, storages/warehouses, etc. The Tenor of the loan will
be up to 7 years including suitable moratorium.
For cluster of Indian MSME EOUs
Exim Bank, besides providing financial assistance to individual MSME EOUs, also provides financial
assistance to Special Purpose Vehicles (SPVs) of a cluster of MSMEs. Term loans are provided to such
clusters of MSME units for the following activities:
Development of new geographically contiguous cluster/industrial park, involving creation &
maintenance of common infrastructure and common facilities, including inter alia construction of
buildings and civil works, acquisition of assets/technology, for the benefit of industrial units within the
cluster/industrial park.
Development of an industrial estate, by industrial users, industry associations and/or Government
bodies.
Up-gradation of an existing industrial cluster or industrial estate.
Development of specific infrastructure, including common effluent treatment plant, captive power plant,
transportation linkages, hazardous waste disposal.

Development of Common Facilities Centres like testing centres, cold storages, for industrial clusters,
industrial estates, or a group of industries with common interests.

Technology & Innovation Enhancement and Infrastructure Development Fund (TIEID):
With a view to facilitate credit flow to the MSME sector at competitive rates, Exim Bank has set up a
Technology and Innovation Enhancement and Infrastructure Development (TIEID) fund of USD 500 mn
exclusively for MSMEs, to augment their export competitiveness and internationalisation efforts, by
partnering with banks / FIs. TIEID seeks to meet long term foreign currency loan requirements of Indian
exporting entities in the MSME sector for meeting capital expenditure, through refinancing of Banks / FIs
against their eligible SME financing portfolio.
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Eligibility:
Scheduled Commercial Banks / Financial institutions in India having acceptable credit risk for on-lending
to MSME units.
Eligible Beneficiary:
Ultimate Beneficiary of the Foreign Currency funds provided to eligible Banks/FIs shall be MSME units
in India having a minimum export orientation of 10% of annual turnover or exports of ` 5 crores p.a in
absolute terms, whichever is lower. The loan should be used to meet long term foreign currency loan
requirements of Indian exporting entities in the MSME sector for meeting eligible capital expenditure.
Eligible capital expenditure include technology up gradation, capacity creation, common infrastructure
development like captive power plant, common effluent treatment plant, hazardous waste disposal
facility, testing facilities etc.
Lending Programme for Financing Creative Economy:
The Creative Industries are those industries which have their origin in individual creativity, skill and
talent and which have a potential for wealth and Job creation through the generation and exploitation of
intellectual property viz., Advertising, Architecture, Art and Antiques Market, Crafts, Design, Designer
Fashion, Film and Video, Interactive Leisure Software, Music, Performing Arts, Publishing, Software and
Computer Services, Television and Radio etc. In view of the large untapped potential for increasing
exports by the creative industries and in order to provide a strategic focus to this sector and enhance Exim
Banks presence in the creative economy space, and as a corollary, in the MSME segment, Exim Bank has
introduced a Programme specifically for financing the Creative Economy.
Eligibility:
The illustrative list of industry sectors include Heritage {Traditional Cultural Expressions (Art & Crafts,
Festivals, Celebrations etc), Cultural Sites (Historical Monuments, Museums, Libraries, Archives etc)};
Arts {Visual Arts (Painting, Sculpture, Antique, Photography etc), Performing Arts (Live Music, Theatre,
Dance, Opera, Puppetry etc)}; Media { Publishing & Printed Media (Books, Newspapers, Press & other
Publications), Audio Visuals (Film, TV & Radio, Broadcasting etc), New Media (Digitised Content,
Software, Video Games, Animations etc); Functional Creations { Design (Interior, Graphic, Fashion,
Jewellery, Toys etc), Creative Services (Architecture, Advertising, Creative R & D, Cultural Services,
Digital Services etc)}
1.3.6 Finance for Grassroots Enterprises
The Bank supports globalisation of enterprises based out of rural areas of the country through its
GRID programme. Through this initiative, the Bank extends financial support to promote grassroots
initiatives/technologies, particularly those having export potential. The objective of the programme is to
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help artisans/producer groups/clusters/small enterprises across the country realize remunerative return on
their produce essentially through facilitating exports from these units. The group handles credit proposals
from such organizations working at the rural /grassroots level and offers tailor-made financial products to
cater to their needs. The group is mandated to work towards developing a robust, vibrant and holistic
approach in its intervention by providing assistance at various stages of product development / business
cycle including capacity building, export capability creation, expansion/diversification and finally
exports. The broad areas of support extended by the Bank through its grassroots initiatives inter alia,
include capacity building, development of common facility centres, construction of raw material bank,
technology up gradation and creation of export capability.
Eligibility:
The organisations eligible for support should meet various criteria including, but not limited to the
following:
Should be a legal entity registered under respective State/Central Govt. Act as a Society, Trust, Cooperative, Private Limited Company, Producer Company, or NGO etc;
Should be working with communities at grassroots level for promoting income generating activities
(IGAs) based on the traditional skills using indigenous or locally available materials in the areas of
product development & design, capacity building, market development etc.;
Should have proven track record of creating /adopting sustainable livelihood model which could be up
scaled and replicated across the geographies sharing similar characteristics (demographic, cultural, socioeconomic similarities, etc
Should be exporting, directly or indirectly
1.4.1 A Line of Credit (LOC) is a financing mechanism through which Exim Bank extends support for
export of projects, equipment, goods and services from India. Exim Bank extends LOCs on its own and
also at the behest and with the support of Government of India. Exim Bank extends Lines of Credit to:
a) Foreign Governments or their nominated agencies such as central banks, state owned commercial
banks and para-statal organizations;
b) National or regional development banks;
c) Overseas financial institutions;
d) Commercial banks abroad;
e) Other suitable overseas entities.
The above mentioned recipients of LOCs act as intermediaries and on lend to overseas buyers for import
of Indian equipment, goods and services. LOC is a financing mechanism that provides a safe mode of
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non-recourse financing option to Indian exporters to enter new export markets or expand business in
existing export markets without any payment risk from the overseas importers.
1.4.2 Broad Guidelines and Procedure for Government of India Supported Lines of Credit
The Government of India (GOI), in 2003-04, formulated the Indian Development Initiative (IDI), now
known as Indian Development and Economic Assistance Scheme [IDEAS] with the objective of sharing
Indias
development
(a)
Capacity
experience
building
(b)
and
through
skills
transfer,
trade,
and
(c) infrastructure development,

by extending concessional Lines of Credit (LOCs) routed through Exim Bank, to developing partner
countries, towards creating socio-economic benefits in the partner country. Recently, the Ministry of
External Affairs (MEA) has set up the Development Partnership Administration (DPA) Division to deal
with Indias development assistance programmes abroad, including LOCs routed through Exim Bank.
These LOCs are now increasingly being extended to partner countries for large-scale and complex
projects (project exports from India).
Bilateral or multilateral assistance, through lines of credit, typically follows a sequence of standard
procedures, viz.
a)
b)
c)
d)
project
review
offer
of
project
identification
and
the
approval
loan,
acceptance
implementation,
and
of
the
and
execution
monitoring
and
preparation,
project
of
loan
supervision,
proposal,
agreement,
and
e) socio-economic impact assessment after project completion.

The lessons learned from the impact assessment / evaluation act as a feedback to the preparation, review
and implementation of future projects. This process forms the 'project cycle.'
1.4.3 Broad Guidelines and Procedure EXIM Banks Own Commercial Lines Of Credit.
Exim Bank, since its inception, has been extending LOCs to various countries to promote export of
Indian projects, products and services. Under the LOCs extended by Exim Bank to overseas financial
institutions, foreign governments, regional and national development banks and commercial banks, Exim
Bank finances all items eligible for being exported under the 'Foreign Trade Policy' of Government of
India. The credit periods for these LOCs are generally up to 7 years and the LOCs typically carry LIBORlinked interest rates.
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1.5.1 Research & Analysis

Exim Banks Research & Analysis Group (RAG) offers a vast range of research products. The Banks
team of experienced economists and strategists provide insights on aspects of international economics,
trade and investment through qualitative and quantitative research techniques. RAG monitors the global
trends in the world and domestic economies and the impact of these trends, especially on India and other
developing economies. RAG caters to the constituents within the Bank, as well as to those external to the
Bank such as Government, RBI, exporters/importers, trade & industry associations, external credit
agencies, academic institutions and researchers.
1.5.2 The research work carried out in the Group under the broad classification of regional, sectoral and
policy related studies, are published in the form of Occasional Papers, Working Papers, Books, etc. These
research studies primarily envisage identifying avenues for enhancing India's international engagement.
1.5.3 The group also undertakes country profiles, which assess the economic, political, currency and
credit risks involved, along with the export opportunities in the country concerned. Further the profiles
provide short-to-medium term economic outlook of a country, indicating the economic risk involved in
doing business with country.
1.5.4 As a part of the support services and with an objective to provide contemporary information to
Indian traders and investors, the group disseminates information on export opportunities and highlights
developments that have a bearing on Indian exports, through its quarterly bulletin, Eximius: Export
Advantage. The newsletter comprises of regional and industry outlooks, Banks activities, opportunities in
multilateral funded projects and contract awards, review on select traded currencies and countries, and a
section on the happenings during the quarter. The newsletter is a free publication, effectively distributed
to a wide network of scholars, economists, institutions, Government of India offices, and export
promoting organisations.
1.5.5 The Bank also brings out a bi-monthly publication titled Agri Export Advantage in English, Hindi
and 10 regional languages (Assamese, Bengali, Gujarati, Kannada, Marathi, Malayalam, Oriya, Punjabi,
Tamil, and Telugu). The newsletter provides stakeholders of Indian agribusiness with updates on global
agri-environment and markets, research reports on agri-commodities, international issues related to agribusiness, prospective areas of agribusiness, agricultural trade and trade policies, regulatory issues in
international trade, WTO Government schemes and assistance, latest international news brief and Bank's
activities to promote agri-export from India. The Bank Brings out a bilingual Indo-China Newsletter
featuring areas of cooperation between India and China.
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1.6.1 Marketing Advisory Services

Exim Bank plays a promotional role and seeks to create and enhance export capabilities and
international competitiveness of Indian companies. Exim Bank through its Marketing Advisory Services
helps Indian exporting firms in their globalisation efforts by proactively assisting in locating overseas
distributor(s)/buyer(s)/partner(s) for their products and services. The Bank assists in identification of
opportunities overseas for setting up plants or projects or for acquisition of companies overseas. MAS
Group leverages the Bank's high international standing, in-depth knowledge and understanding of the
international markets and well established institutional linkages, coupled with its physical presence, to
support Indian companies in their overseas marketing initiatives on a success fee basis. Exim Bank has
been able to successfully place a range of products in overseas as well as domestic markets.
Eligibility:
Any company/firm wanting to export its quality products/services is eligible to avail this benefit as long
as it does not fall in the negative list of India's Foreign Trade Policy and International Conventions.
Marketing Advisory Services are provided across all the sectors. Information required from the company
is as under: Company profile
Product Brochures
Printed material
Prices
Existing export markets & target markets
Minimum order quantity
Quality certifications
Samples, as and when required
1.7.1 Export Advisory Services Group (EAS)

The Export Advisory Services Group [EAS] offers a diverse range of information, advisory and support
services, which enable exporters to evaluate international risks, exploit export opportunities and improve
competitiveness. Value added information and support services are provided to Indian projects exporters
on the projects funded by multilateral agencies.
The Group undertakes customised research on behalf of interested companies in the areas such as
establishing market potential, defining marketing arrangements, and specifying market distribution
channels. Developing export market entry plans, facilitating accomplishment of international quality
certification and display of products in trade fairs and exhibitions are other services provided.
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The Bank provides a wide range of information, advisory and support services, which complement its
financing programmes. These services are provided on a fee basis to Indian companies and overseas
entities. The scope of services includes market-related information, sector and feasibility studies,
technology supplier identification, partner search, investment facilitation and development of joint
ventures both in India and abroad.
1.7.2 Multilateral Funded Projects Overseas (MFPO)
The Bank provides a package of information and support services to Indian companies to help improve
their prospects for securing business in projects funded by the World Bank, Asian Development Bank,
African Development Bank, and European Bank for Reconstruction and Development.
1.7.3 Exim Bank as a Consultant
The Banks experience in evolving as an institution supporting international trade and investment, in
addition to functioning as an export credit agency in a developing country context, is of particular
relevance in other developing countries. The Bank has been sharing its experience and expertise by
undertaking consultancy assignments. Exim Bank also shares its experience and expertise through
provision of on-site exchange of personnel programmes aimed at providing a first-hands experience to the
employees of its institutional partners.
1.7.4 Institutional Linkages
The Bank has fostered a network of alliances and institutional linkages with multilateral agencies,
export credit agencies, banks and financial institutions, trade promotion bodies, and investment promotion
boards to help create an enabling environment for supporting trade and investment. The Global Network
of Exim Banks and Development Finance Institutions (G-NEXID) was set up in Geneva in March 2006
through the Banks initiative, under the auspices of UNCTAD. With the active support of a number of
other Exim Banks and Development Finance Institutions from various developing countries, the network
has endeavoured to foster enhanced South-South trade and investment cooperation. Observer Status in
UNCTAD underscores support for the Forum.
1.7.5 Award for Excellence
The Bank, in association with CII, has instituted an Annual Award for Business Excellence for best
Total Quality Management (TQM) practices adopted by an Indian company. The Award is based on the
European Foundation for Quality Management (EFQM) model.
Letter of Credit
When the buyer has agreed to provide a letter of credit as part of the payment terms, the buyer will apply
to its local bank in its home country and a letter of credit will be issued. The seller should send
instructions to the buyer before the letter of credit is opened, advising the seller as to the terms and
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conditions it desires. The seller should always specify that the letter of credit must be irrevocable. The
bank in the buyers country is called the issuing bank. The buyers bank will contact a correspondent bank
near the seller in the United States, and the U.S. bank will send a notice or advice to the exporter that the
letter of credit has been opened.
If the letter of credit is a confirmed letter of credit, the U.S. bank is called the confirming bank;
otherwise, it is called the advising bank. The advice will specify the exact documents that the exporter
must provide to the bank in order to receive payment. Since the foreign and U.S. banks are acting as agent
and subagent, respectively, for the buyer, the U.S. bank will refuse to pay unless the exact documents
specified in the letter of credit are provided. The banks never see the actual shipment or inspect the goods;
therefore, they are extremely meticulous about not releasing payment unless the documents required have
been provided.
The issuing bank and advising bank each have up to seven banking days to review the documents
presented before making payment. When the exporter receives the advice of the opening of a letter of
credit, the exporter should review in detail the exact documents required in order to be paid under the
letter of credit.
Introduction to Letters of Credit
Letters of credit are a payment mechanism, particularly used in international trade. The Seller gets paid,
not after the Buyer has inspected the goods and approved them, but when the Seller presents certain
documents (typically a bill of lading evidencing shipment of the goods, an insurance policy for the goods,
commercial invoice, etc.) to his bank. The bank does not verify that the documents presented are true, but
only whether they on their face appear to be consistent with each other and comply with the terms of
the credit. After examination the bank will pay the Seller (or in LC terms the beneficiary of the letter of
credit).
Example:
1) Buyer and Seller sign a purchase contract that stipulates payment by letter of credit. It is good practice
to agree already in the purchase contract which documents the Seller/Beneficiary has to present.
2) The Buyer goes to his bank (so called issuing bank) opening the credit to the benefit of the Seller, in
particular the Buyer tells his bank which documents the Beneficiary has to present, where and how, and
the amount of the credit and details of payment (by sight, deferred sight payment, against acceptance or
negotiation of drafts).
3) The Issuing Bank, which is normally located in a foreign country, advises the Beneficiary through a
correspondence bank located in the country of the Beneficiary of the credit.
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4) The Buyer ships the goods and presents the necessary documents to his local bank which pays him
after examining them.
The obligation of the bank is independent of the rights of the parties under the purchase/service contract.
This means that, absent fraud, the bank has to pay when conforming documents are presented, even
though the goods are not of the contractually agreed quality or quantity.
The Seller can strengthen his position by requesting a confirmed letter of credit. The confirmation of a
bank in the Sellers country means that the payment obligation of the confirming bank is independent of
the issuing bank. If the issuing bank cannot wire funds outside the country due to governmental
restrictions, the confirming bank still has to pay, even though it will not be reimbursed by the issuing
bank. The Seller thus can avoid currency transfer restrictions which are sometimes found in developing
countries.
A standby letter of credit is basically a bank guarantee. Previously US banks were not allowed to issue
guarantees and circumvented this limitation by issuing standby letters of credit where the beneficiary
basically has to present his face to get paid. Most letters of credit, particularly in international
transactions, are subject to the Uniform Customs and Practices (UCP) issued and published by the
International Chamber of Commerce (ICC). The current revision UCP 600 is publication No. 600 of the
ICC and takes effect as of July 1, 2007. Since the ICC lacks legislative authority, meaning it is not the
arm of or authorized by any government but rather a trade association, the UCP are no laws and have to
be explicitly incorporated into individual transaction. Some countries and states have enacted statutes
regarding letters of credit (see e.g. Article 5 US Uniform Commercial Code). In international trade
however, most parties choose to use the UCP.
The Letter of Credit
A letter of credit is a document typically issued by a bank or financial institution, which authorizes the
recipient of the letter (the "customer" of the bank) to draw amounts of money up to a specified total,
consistent with any terms and conditions set forth in the letter. This usually occurs where the bank's
customer seeks to assure a seller (the "beneficiary") that it will receive payment for any goods it sells to
the customer.
For example, the bank might extend the letter of credit conditioned upon the beneficiary's providing
documentation that the goods purchased with the line of credit have been shipped to the customer. The
customer may use the letter of credit to assure the beneficiary that, if it satisfies the conditions set forth in
the letter, it will be paid for any goods it sells and ships to the customer.
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In simple terms, a letter of credit could be said to document a bank customer's line of credit, and any
terms associated with its use of that line of credit. Letters of credit are most commonly used in association
with long-distance and international commercial transactions.
Confirmed Letter of Credit
A letter of credit, issued by a foreign bank, which has been verified and guaranteed by a domestic bank in
the event of default by the foreign bank or buyer. Typically, this form of letter of credit will be sought
when a domestic exporter seeks assurance of payment from a foreign importer.
Commercial Letter of Credit
A commercial letter of credit assures the seller that the bank will provide payment for any goods or
merchandise shipped to the bank's customer, assuming the seller provides any required documentation of
the transaction and its shipment of the purchased goods.
Irrevocable Letter of Credit
An irrevocable letter of credit includes a guarantee by the issuing bank that if all of the terms and
conditions set forth in the letter are satisfied by the beneficiary, the letter of credit will be honored.
Revocable Letter of Credit
A revocable letter of credit may be cancelled or modified after its date of issue, by the issuing bank.
Standby Letter of Credit
In the event that the bank's customer defaults on a payment to the beneficiary, and the beneficiary
documents proof of its loss consistent with any terms set forth in the letter, a standby letter of credit may
be used by the beneficiary to secure payment from the issuing bank.
Exports Logistics and Shipping
When preparing to ship a product overseas, the exporter needs to be aware of packing, labeling,
documentation, and insurance requirements. Because the goods are being shipped by unknown carriers to
distant customers, the new exporter must be sure to follow all shipping requirements to help ensure that
the merchandise is
Packed correctly so that it arrives in good condition;
Labeled correctly to ensure that the goods are handled properly and arrive on time and at the right
place;
Documented correctly to meet local and foreign government requirements as well as proper
collection standards; and
Insured against damage, loss, and pilferage and, in some cases, delay.
Because of the variety of considerations involved in the physical export process, most exporters, both new
and experienced, rely on an international freight forwarder to perform these services.
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Freight Forwarders
The international freight forwarder acts as an agent for the exporter in moving cargo to the overseas
destination. These agents are familiar with the import rules and regulations of foreign countries, methods
of shipping, government export regulations, and the documents connected with foreign trade.
Freight forwarders can assist with an order from the start by advising the exporter of the freight costs,
port charges, consular fees, cost of special documentation, and insurance costs as well as their handling
fees - all of which help in preparing price quotations. Freight forwarders may also recommend the type of
packing for best protecting the merchandise in transit; they can arrange to have the merchandise packed at
the port or containerized. The cost for their services is a legitimate export cost that should be figured into
the price charged to the customer.
When the order is ready to ship, freight forwarders should be able to review the letter of credit,
commercial invoices, packing list, and so on to ensure that everything is in order. They can also reserve
the necessary space on board an ocean vessel, if the exporter desires.
If the cargo arrives at the port of export and the exporter has not already done so, freight forwarders
may make the necessary arrangements with customs brokers to ensure that the goods comply with
customs export documentation regulations. In addition, they may have the goods delivered to the carrier
in time for loading. They may also prepare the bill of lading and any special required documentation.
After shipment, they forward all documents directly to the customer or to the paying bank if desired.
Packing
In packing an item for export, the shipper should be aware of the demands that exporting puts on a
package. Four problems must be kept in mind when an export shipping crate is being designed: breakage,
weight, moisture, and pilferage.
Most general cargo is carried in containers, but some is still shipped as break bulk cargo. Besides the
normal handling encountered in domestic transportation, a break bulk shipment moving by ocean freight
may be loaded aboard vessels in a net or by a sling, conveyor, chute, or other method, putting added strain
on the package. In the ship's hold, goods may be stacked on top of one another or come into violent
contact with other goods during the voyage. Overseas, handling facilities may be less sophisticated than in
your country and the cargo may be dragged, pushed, rolled, or dropped during unloading, while moving
through customs, or in transit to the final destination.
Moisture is a constant problem because cargo is subject to condensation even in the hold of a ship
equipped with air conditioning and a dehumidifier. The cargo may also be unloaded in the rain, and some
foreign ports do not have covered storage facilities. In addition, unless the cargo is adequately protected,
theft and pilferage are constant threats.
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Since proper packing is essential in exporting, often the buyer specifies packing requirements. If the buyer
does not so specify, be sure the goods are prepared with the following considerations in mind:
Pack in strong containers, adequately sealed and filled when possible.
To provide proper bracing in the container, regardless of size, make sure the weight is evenly
distributed.
Goods should be packed in oceangoing containers, if possible, or on pallets to ensure greater ease
in handling. Packages and packing filler should be made of moisture-resistant material.
To avoid pilferage, avoid mentioning contents or brand names on packages. In addition, strapping,
seals, and shrink wrapping are effective means of deterring theft.
One popular method of shipment is the use of containers obtained from carriers or private leasing
concerns. These containers vary in size, material, and construction and can accommodate most cargo, but
they are best suited for standard package sizes and shapes. Some containers are no more than semi-truck
trailers lifted off their wheels and placed on a vessel at the port of export. They are then transferred to
another set of wheels at the port of import for movement to an inland destination. Refrigerated and liquid
bulk containers are readily available.
Normally, air shipments require less heavy packing than ocean shipments, but they must still be
adequately protected, especially if highly preferable items are packed in domestic containers. In many
instances, standard domestic packing is acceptable, especially if the product is durable and there is no
concern for display packaging. In other instances, high-test (at least 250 pounds per square inch)
cardboard or tri-wall construction boxes are more than adequate.
For both ocean and air shipments, freight forwarders and carriers can advise on the best packaging.
Marine insurance companies are also available for consultation. It is recommended that a professional
firm be hired to package for export if the exporter is not equipped for the task. This service is usually
provided at a moderate cost.
Finally, because of transportation costs are determined by volume and weight, special reinforced and
lightweight packing materials have been devised for exporting. Care in packing goods to minimize
volume and weight while giving strength may well save money while ensuring that goods are properly
packed.
Labeling
Specific marking and labeling is used on export shipping cartons and containers to
meet shipping regulations,
ensure proper handling,
conceal the identity of the contents, and

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Help receivers identify shipments.
The overseas buyer usually specifies export marks that should appear on the cargo for easy identification
by receivers. Many markings may be needed for shipment. Exporters need to put the following markings
on cartons to be shipped:
Shipper's mark.
Country of origin (exporters' country).
Weight marking (in pounds and in kilograms).
Number of packages and size of cases (in inches and centimeters).
Handling marks (international pictorial symbols).
Cautionary markings, such as "This Side Up" or "Use No Hooks" (in English and in the language
of the country of destination).
Port of entry.
Labels for hazardous materials (universal symbols adapted by the International Maritime
Organization).
Legibility is extremely important to prevent misunderstandings and delays in shipping. Letters are
generally stenciled onto packages and containers in waterproof ink. Markings should appear on three
faces of the container, preferably on the top and on the two ends or the two sides. Old markings must be
completely removed.
In addition to port marks, customer identification code, and indication of origin, the marks should
include the package number, gross and net weights, and dimensions. If more than one package is being
shipped, the total number of packages in the shipment should be included in the markings. The exporter
should also include any special handling instructions on the package. It is a good idea to repeat these
instructions in the language of the country of destination. Standard international shipping and handling
symbols should also be used.
Exporters may find that customs regulations regarding freight labeling are strictly enforced; for
example, most countries require that the country of origin be clearly labeled on each imported package.
Most freight forwarders and export packing specialists can supply necessary information regarding
specific regulations.
Documentation
Exporters should seriously consider having the freight forwarder handle the formidable amount of
documentation that exporting requires; freight forwarders are specialists in this process. The following
documents are commonly used in exporting; which of them are actually used in each case depends on the
requirements of both our government and the government of the importing country.
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* Commercial invoice. As in a domestic transaction, the commercial invoice is a bill for the goods from
the buyer to the seller. A commercial invoice should include basic information about the transaction,
including a description of the goods, the address of the shipper and seller, and the delivery and payment
terms. The buyer needs the invoice to prove ownership and to arrange payment. Some governments use
the commercial invoice to assess customs duties.
* Bill of lading. Bills of lading are contracts between the owner of the goods and the carrier (as with
domestic shipments). There are two types. A straight bill of lading is nonnegotiable. A negotiable or
shipper's order bill of lading can be bought, sold, or traded while goods are in transit and is used for letterof-credit transactions. The customer usually needs the original or a copy as proof of ownership to take
possession of the goods.
* Consular invoice. Certain nations require a consular invoice, which is used to control and identify
goods. The invoice must be purchased from the consulate of the country to which the goods are being
shipped and usually must be prepared in the language of that country.
* Certificate of origin. Certain nations require a signed statement as to the origin of the export item. Such
certificates are usually obtained through a semiofficial organization such as a local chamber of commerce.
A certificate may be required even though the commercial invoice contains the information.
* Inspection certification. Some purchasers and countries may require a certificate of inspection attesting
to the specifications of the goods shipped, usually performed by a third party. Inspection certificates are
often obtained from independent testing organizations.
* Dock receipt and warehouse receipt. These receipts are used to transfer accountability when the
export item is moved by the domestic carrier to the port of embarkation and left with the international
carrier for export.
* Destination control statement. This statement appears on the commercial invoice, ocean or air waybill
of lading, and SED to notify the carrier and all foreign parties that the item may be exported only to
certain destinations.
* Insurance certificate. If the seller provides insurance, the insurance certificate states the type and
amount of coverage. This instrument is negotiable.
* Export license. (When it is needed it should be used).
* Export packing list. Considerably more detailed and informative than a standard domestic packing list,
an export packing list itemizes the material in each individual package and indicates the type of package:
box, crate, drum, carton, and so on. It shows the individual net, legal, tare, and gross weights and
measurements for each package. Package markings should be shown along with the shipper's and buyer's
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references. The packing list should be attached to the outside of a package in a waterproof envelope
marked "packing list enclosed." The list is used by the shipper or forwarding agent to determine
(1) the total shipment weight and volume and
(2) whether the correct cargo is being shipped. In addition, customs officials (both local and foreign) may
use the list to check the cargo.
Documentation must be precise. Slight discrepancies or omissions may prevent merchandise from being
exported, result in exporting firms not getting paid, or even result in the seizure of the exporter's goods by
local or foreign government customs. Collection documents are subject to precise time limits and may not
be honored by a bank if out of date. Much of the documentation is routine for freight forwarders or
customs brokers acting on the firm's behalf, but the exporter is ultimately responsible for the accuracy of
the documentation.
The number of documents the exporter must deal with varies depending on the destination of the
shipment. Because each country has different import regulations, the exporter must be careful to provide
proper documentation. If the exporter does not rely on the services of a freight forwarder, there are several
methods of obtaining information on foreign import restrictions:
Foreign government embassies and consulates can often provide information on import
regulations.
The Air Cargo Tariff Guidebook lists country-by-country regulations affecting air shipments.
Other information includes tariff rules and rates, transportation charges, air waybill information,
and special carrier regulations.
The National Council on International Trade Documentation (NCITD) provides several low-cost
publications that contain information on specific documentation commonly used in international
trade. NCITD provides a free listing of its publications.
Shipping
The handling of transportation is similar for domestic orders and export orders. The export marks
should be added to the standard information shown on a domestic bill of lading and should show the name
of the exporting carrier and the latest allowed arrival date at the port of export. The exporter should also
include instructions for the inland carrier to notify the international freight forwarder by telephone on
arrival.
International shipments are increasingly being made on a through bill of lading under a multimodal
contract. The multimodal transport operator (frequently one of the modal carriers) takes charge of and
responsibility for the entire movement from factory to the final destination.
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When determining the method of international shipping, the exporter may find it useful to consult with
a freight forwarder. Since carriers are often used for large and bulky shipments, the exporter should
reserve space on the carrier well before actual shipment date (this reservation is called the booking
contract).
The exporter should consider the cost of shipment, delivery schedule, and accessibility to the shipped
product by the foreign buyer when determining the method of international shipping. Although air carriers
are more expensive, their cost may be offset by lower domestic shipping costs (because they may use a
local airport instead of a coastal seaport) and quicker delivery times. These factors may give the exporter
an edge over other competitors, whose service to their accounts may be less timely.
Before shipping, the firm should be sure to check with the foreign buyer about the destination of the
goods. Buyers often wish the goods to be shipped to a free-trade zone or a free port where goods are
exempt from import duties.
Insurance
Export shipments are usually insured against loss, damage, and delay in transit by cargo insurance. For
international shipments, the carrier's liability is frequently limited by international agreements and the
coverage is substantially different from domestic coverage. Arrangements for cargo insurance may be
made by either the buyer or the seller, depending on the terms of sale. Exporters are advised to consult
with international insurance carriers or freight forwarders for more information.
Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make
marine insurance important protection for exporters. If the terms of sale make the firm responsible for
insurance, it should either obtain its own policy or insure cargo under a freight forwarders policy for a fee.
If the terms of sale make the foreign buyer responsible, the exporter should not assume (or even take the
buyer's word) that adequate insurance has been obtained. If the buyer neglects to obtain coverage or
obtains too little, damage to the cargo may cause a major financial loss to the exporter.
Exports Risk Management
Risk management is activity directed towards the assessing, mitigating (to an acceptable level) and
monitoring of risks. In some cases the acceptable risk may be near zero. Risks can come from accidents,
natural causes and disasters as well as deliberate attacks from an adversary.
In businesses, risk management entails organized activity to manage uncertainty and threats and involves
people following procedures and using tools in order to ensure conformance with risk-management
policies.
The strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect
of the risk, and accepting some or all of the consequences of a particular risk. Some traditional risk
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management programs (e.g., health risk assessment) are focused on risks stemming from physical or legal
causes (e.g. natural disasters or fires, accidents, ergonomics, death and lawsuits). Financial risk
management, on the other hand, focuses on risks that can be managed using traded financial instruments.
(A) Introduction
In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss
and the greatest probability of occurring are handled first, and risks with lower probability of occurrence
and lower loss are handled in descending order. In practice the process can be very difficult, and
balancing between risks with a high probability of occurrence but lower loss versus a risk with high loss
but lower probability of occurrence can often be mishandled.
Intangible risk management identifies a new type of risk - a risk that has a 100% probability of
occurring but is ignored by the organization due to a lack of identification ability. For example, when
deficient knowledge is applied to a situation, a knowledge risk materializes. Relationship risk appears
when ineffective collaboration occurs. Process-engagement risk may be an issue when ineffective
operational procedures are applied. These risks directly reduce the productivity of knowledge workers,
decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality.
Intangible risk management allows risk management to create immediate value from the identification
and reduction of risks that reduce productivity.
Risk management also faces difficulties allocating resources. This is the idea of opportunity cost.
Resources spent on risk management could have been spent on more profitable activities. Again, ideal
risk management minimizes spending while maximizing the reduction of the negative effects of risks.
(B) Principles of risk management
The International Organization for Standardization identifies the following principles of risk
management:
Risk management should create value.
Risk management should be an integral part of organizational processes.
Risk management should be part of decision making.
Risk management should explicitly address uncertainty.
Risk management should be systematic and structured.
Risk management should be based on the best available information.
Risk management should be tailored.
Risk management should take into account human factors.
Risk management should be transparent and inclusive.
Risk management should be dynamic, iterative and responsive to change.
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Risk management should be capable of continual improvement and enhancement.

(C) Process
According to the standard ISO/DIS 31000 "Risk management- Principles and guidelines on
implementation" the process of risk management consists of several steps as follows:
Establishing the context
Establishing the context involves
1. Identification of risk in a selected domain of interest
2. Planning the remainder of the process.
3. Mapping out the following:
-The social scope of risk management
-The identity and objectives of stakeholders
-The basis upon which risks will be evaluated, constraints.
4. Defining a framework for the activity and an agenda for identification.
5. Developing an analysis of risks involved in the process.
6. Mitigation of risks using available technological, human and organizational resources.
(a) Identification
After establishing the context, the next step in the process of managing risk is to identify potential
risks. Risks are about events that, when triggered, cause problems. Hence, risk identification can start with
the source of problems, or with the problem itself.
Source analysis Risk sources may be internal or external to the system that is the target of risk
management. Examples of risk sources are: stakeholders of a project, employees of a company or the
weather over an airport.
Problem analysis Risks are related to identified threats. For example: the threat of losing money, the
threat of abuse of privacy information or the threat of accidents and casualties. The threats may exist with
various entities, most important with shareholders, customers and legislative bodies such as the
government.
When either source or problem is known, the events that a source may trigger or the events that can lead
to a problem can be investigated. For example: stakeholders withdrawing during a project may endanger
funding of the project; privacy information may be stolen by employees even within a closed network;
lightning striking a Boeing 747 during takeoff may make all people onboard immediate casualties.
The chosen method of identifying risks may depend on culture, industry practice and compliance.
Templates or the development of templates for identifying source, problem or event forms the
identification methods. Common risk identification methods are:
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Objectives-based risk identification Organizations and project teams have objectives. Any event that
may endanger achieving an objective partly or completely is identified as risk.
Scenario-based risk identification in scenario analysis different scenarios is created. The scenarios may
be the alternative ways to achieve an objective, or an analysis of the interaction of forces in, for example,
a market or battle. Any event that triggers an undesired scenario alternative is identified as risk - see
Futures Studies for methodology used by Futurists.
Taxonomy-based risk identification the taxonomy in taxonomy-based risk identification is a breakdown
of possible risk sources. Based on the taxonomy and knowledge of best practices, a questionnaire is
compiled. The answers to the questions reveal risks. Taxonomy-based risk identification in software
industry can be found in CMU/SEI-93-TR-6.
Common-risk checking in several industries lists with known risks is available. Each risk in the list can
be checked for application to a particular situation. An example of known risks in the software industry is
the Common Vulnerability and Exposures list found at http://cve.mitre.org.
Risk charting (risk mapping) this method combines the above approaches by listing Resources at risk,
Threats to those resources Modifying Factors, which may increase or decrease the risk and Consequences
it is wished to avoid. Creating a matrix under these headings enables a variety of approaches. One can
begin with resources and consider the threats they are exposed to and the consequences of each.
Alternatively one can start with the threats and examine which resources they would affect, or one can
begin with the consequences and determine which combination of threats and resources would be
involved to bring them about.
(e) Assessment
Once risks have been identified, they must then be assessed as to their potential severity of loss and to
the probability of occurrence. These quantities can be either simple to measure, in the case of the value of
a lost building, or impossible to know for sure in the case of the probability of an unlikely event
occurring. Therefore, in the assessment process it is critical to make the best educated guesses possible in
order to properly prioritize the implementation of the risk management plan.
The fundamental difficulty in risk assessment is determining the rate of occurrence since statistical
information is not available on all kinds of past incidents. Furthermore, evaluating the severity of the
consequences (impact) is often quite difficult for immaterial assets. Asset valuation is another question
that needs to be addressed. Thus, best educated opinions and available statistics are the primary sources of
information. Nevertheless, risk assessment should produce such information for the management of the
organization that the primary risks are easy to understand and that the risk management decisions may be
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prioritized. Thus, there have been several theories and attempts to quantify risks. Numerous different risk
formulae exist, but perhaps the most widely accepted formula for risk quantification is:
Rate of occurrence multiplied by the impact of the event equals risk
Later research has shown that the financial benefits of risk management are less dependent on the formula
used but are more dependent on the frequency and how risk assessment is performed.
In business it is imperative to be able to present the findings of risk assessments in financial terms. Robert
Courtney Jr. (IBM, 1970) proposed a formula for presenting risks in financial terms. The Courtney
formula was accepted as the official risk analysis method for the US governmental agencies. The formula
proposes calculation of ALE (annualized loss expectancy) and compares the expected loss value to the
security control implementation costs (cost-benefit analysis).
(f) Potential risk treatments
Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of
these four major categories.
Avoidance (eliminate)
Reduction (mitigate)
Transfer (outsources or insure)
Retention (accepts and budget)
Ideal use of these strategies may not be possible. Some of them may involve trade-offs that are not
acceptable to the organization or person making the risk management decisions.
Another source, from the US Department of Defense, Defense Acquisition University, calls these
categories ACAT, for Avoid, Control, Accept, or Transfer. This use of the ACAT acronym is reminiscent
of another ACAT (for Acquisition Category) used in US Defense industry procurements, in which Risk
Management figures prominently in decision-making and plan.
(i) Risk avoidance
It includes not performing an activity that could carry risk. An example would be not buying a
property or business in order to not take on the liability that comes with it. Another would be not flying in
order to not take the risk that the airplane was to be hijacked. Avoidance may seem the answer to all risks,
but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have
allowed. Not entering a business to avoid the risk of loss also avoids the possibility of earning profits.
(ii) Risk reduction
It involves methods to reduce the severity of the loss or the likelihood of the loss from occurring the
effects. For example, sprinklers are designed to put out a fire to reduce the risk of loss by fire. This
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method may cause a greater loss by water damage and therefore may not be suitable. Halon fire
suppression systems may mitigate that risk, but the cost may be prohibitive as a strategy.
Modern software development methodologies reduce risk by developing and delivering software
incrementally. Early methodologies suffered from the fact that they only delivered software in the final
phase of development; any problems encountered in earlier phases meant costly rework and often
jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a
single iteration.
Outsourcing could be an example of risk reduction if the outsourcer can demonstrate higher capability at
managing or reducing risks. In this case companies outsource only some of their departmental needs. For
example, a company may outsource only its software development, the manufacturing of hard goods, or
customer support needs to another company, while handling the business management itself. This way,
the company can concentrate more on business development without having to worry as much about the
manufacturing process, managing the development team, or finding a physical location for a call center.
(iii) Risk retention
It involves accepting the loss when it occurs. True self insurance falls in this category. Risk retention
is a viable strategy for small risks where the cost of insuring against the risk would be greater over time
than the total losses sustained. All risks that are not avoided or transferred are retained by default. This
includes risks that are so large or catastrophic that they either cannot be insured against or the premiums
would be infeasible. War is an example since most property and risks are not insured against war, so the
loss attributed by war is retained by the insured. Also any amounts of potential loss (risk) over the amount
insured are retained risk. This may also be acceptable if the chance of a very large loss is small or if the
cost to insure for greater coverage amounts is so great it would hinder the goals of the organization too
much.
(iv) Risk transfer
In the terminology of practitioners and scholars alike, the purchase of an insurance contract is often
described as a "transfer of risk." However, technically speaking, the buyer of the contract generally retains
legal responsibility for the losses "transferred", meaning that insurance may be described more accurately
as a post-event compensatory mechanism. For example, a personal injuries insurance policy does not
transfer the risk of a car accident to the insurance company. The risk still lies with the policy holder
namely the person who has been in the accident. The insurance policy simply provides that if an accident
(the event) occurs involving the policy holder then some compensation may be payable to the policy
holder that is commensurate to the suffering/damage.
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Some ways of managing risk fall into multiple categories. Risk retention pools are technically retaining
the risk for the group, but spreading it over the whole group involves transfer among individual members
of the group. This is different from traditional insurance, in that no premium is exchanged between
members of the group up front, but instead losses are assessed to all members of the group.
(D) Create a risk-management plan
Select appropriate controls or countermeasures to measure each risk. Risk mitigation needs to be
approved by the appropriate level of management. For example, a risk concerning the image of the
organization should have top management decision behind it whereas IT management would have the
authority to decide on computer virus risks.
The risk management plan should propose applicable and effective security controls for managing the
risks. For example, an observed high risk of computer viruses could be mitigated by acquiring and
implementing antivirus software. A good risk management plan should contain a schedule for control
implementation and responsible persons for those actions.
According to ISO/IEC 27001, the stage immediately after completion of the Risk Assessment phase
consists of preparing a Risk Treatment Plan, which should document the decisions about how each of the
identified risks should be handled. Mitigation of risks often means selection of security controls, which
should be documented in a Statement of Applicability, which identifies which particular control
objectives and controls from the standard have been selected, and why.
(E) Implementation
Follow all of the planned methods for mitigating the effect of the risks. Purchase insurance policies
for the risks that have been decided to be transferred to an insurer, avoid all risks that can be avoided
without sacrificing the entity's goals, reduce others, and retain the rest.
(F) Review and evaluation of the plan
Initial risk management plans will never be perfect. Practice, experience, and actual loss results will
necessitate changes in the plan and contribute information to allow possible different decisions to be made
in dealing with the risks being faced.
Risk analysis results and management plans should be updated periodically. There are two primary
reasons for this:
1. To evaluate whether the previously selected security controls are still applicable and effective, and
2. To evaluate the possible risk level changes in the business environment. For example, information risks
are a good example of rapidly changing business environment.
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Limitations
If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are
not likely to occur. Spending too much time assessing and managing unlikely risks can divert resources
that could be used more profitably. Unlikely events do occur but if the risk is unlikely enough to occur it
may be better to simply retain the risk and deal with the result if the loss does in fact occur.
Prioritizing too highly the risk management processes could keep an organization from ever completing
a project or even getting started. This is especially true if other work is suspended until the risk
management process is considered complete. It is also important to keep in mind the distinction between
risk and uncertainty. Risk can be measured by impacts x probability.
(G) Areas of risk management
As applied to corporate finance, risk management is the technique for measuring, monitoring and
controlling the financial or operational risk on a firm's balance sheet. See value at risk. The Basel II
framework breaks risks into market risk (price risk), credit risk and operational risk and also specifies
methods for calculating capital requirements for each of these components.
(H) Enterprise risk management
In enterprise risk management, a risk is defined as a possible event or circumstance that can have
negative influences on the enterprise in question. Its impact can be on the very existence, the resources
(human and capital), the products and services, or the customers of the enterprise, as well as external
impacts on society, markets, or the environment. In a financial institution, enterprise risk management is
normally thought of as the combination of credit risk, interest rate risk or asset liability management,
market risk, and operational risk.
In the more general case, every probable risk can have a pre-formulated plan to deal with its possible
consequences (to ensure contingency if the risk becomes a liability). From the information above and the
average cost per employee over time, or cost accrual ratio, a project manager can estimate:
The cost associated with the risk if it arises, estimated by multiplying employee costs per unit time by
the estimated time lost.
The probable increase in time associated with a risk Sorting on this value puts the highest risks to the
schedule first. This is intended to cause the greatest risks to the project to be attempted first so that risk is
minimized as quickly as possible.
This is slightly misleading as schedule variances with a large P and small S and vice versa is not
equivalent.
The probable increase in cost associated with a risk (cost variance due to risk, Rc)
Where Rc = P*C = P*CAR*S = P*S*CAR)
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o Sorting on this value puts the highest risks to the budget first.
o See concerns about schedule variance as this is a function of it, as illustrated in the equation above.
Risk in a project or process can be due either to Special Cause Variation or Common Cause Variation and
requires appropriate treatment. That is to re-iterate the concern about extreme cases not being equivalent
in the list immediately above.
Risk-management activities as applied to project management In project management, risk management
includes the following activities:
-Planning how risk will be managed in the particular project. Plan should include risk management tasks,
responsibilities, activities and budget.
-Assigning a risk officer - a team member other than a project manager who is responsible for foreseeing
potential project problems. Typical characteristic of risk officer is a healthy skepticism.
-Maintaining live project risk database. Each risk should have the following attributes: opening date, title,
short description, probability and importance. Optionally a risk may have an assigned person responsible
for its resolution and a date by which the risk must be resolved.
-Creating anonymous risk reporting channel. Each team member should have possibility to report risk that
he foresees in the project.
-Preparing mitigation plans for risks that are chosen to be mitigated. The purpose of the mitigation plan is
to describe how this particular risk will be handled what, when, by who and how will it be done to avoid
it or minimize consequences if it becomes a liability.
-Summarizing planned and faced risks, effectiveness of mitigation activities, and effort spent for the risk
management.
(I) Risk management and business continuity
Risk management is simply a practice of systematically selecting cost effective approaches for
minimizing the effect of threat realization to the organization. All risks can never be fully avoided or
mitigated simply because of financial and practical limitations. Therefore all organizations have to accept
some level of residual risks.
Whereas risk management tends to be preemptive, business continuity planning (BCP) was invented to
deal with the consequences of realized residual risks. The necessity to have BCP in place arises because
even very unlikely events will occur if given enough time. Risk management and BCP are often
mistakenly seen as rivals or overlapping practices. In fact these processes are so tightly tied together that
such separation seems artificial. For example, the risk management process creates important inputs for
the BCP (assets, impact assessments, cost estimates etc). Risk management also proposes applicable
controls for the observed risks. Therefore, risk management covers several areas that are vital for the BCP
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process. However, the BCP process goes beyond risk management's preemptive approach and moves on
from the assumption that the disaster will realize at some point.
(J) UCP600: Opportunities or Challenges?
The UCP is a set of rules on the issuance and use of letters of credit that is Contemporaneously utilized
by bankers and commercial parties in international sale and purchase transactions in more than 175
countries Historically letters of credit were so often used in international trade that commercial parties,
particularly banks, and had developed their own varied and diverse techniques and methods for handling
letters of credit in international trade finance. Faced with uncertain trade practices in different quarters,
these differing practices were standardized by the International Chamber of Commerce (ICC) by first
publishing the Uniform Customs and Practice for Documentary Credits (UCP) in 1933. Subsequently
through the years, the ICC have taken upon themselves the arduous task of updating the same to best
reflect the contemporaneous reality of international trade in these documents of finance and credit.
The UCP is a set of norms and formalities and interestingly for the first time in the history of the UCP
in their latest revision of the same, they term themselves as Rules on the issuance and usage of letters
of credit that is contemporaneously incorporated by bankers and commercial parties alike in international
sale and purchase transactions in more than 175 countries. Recent surveys show that about 11-15% of
international trade utilizes letters of credit, totaling more than a trillion US dollars per annum.
At the outset, it is worth reminding the reader that as much as they are universally applied, the UCP are
not automatically incorporated into every letter of credit. Article 1 clearly states that the Rules will only
apply when the text of the credit expressly indicates that it is subject to these rules. The advantage in
incorporating such provisions is quite clear: i) the seller will know in advance the criteria against which
he will be paid and ii) the buyer will know the criteria against which the price will be paid. However, no
authority or conflicting opinions in the commentaries can be found to impose a duty on the buyer to
necessarily open a letter of credit subject to the UCP600. In this scenario it is thus in the best interest of
the party who wish to incorporate the Rules to expressly stipulate in the sale contract for the application of
the UCP600 to the letter of credit. De Plano, incorporation leads to the point of derogation.
As the Rules can only apply if they are incorporated into the letter of credit, it must follow as a corollary
that the parties can choose to derogate from any part of them as well. And again they can do so by
agreement unless expressly modified or excluded by the credit and again they must so agree in the
sale contract. The draftsmen of the ICC have in their revision paid attention to clarify the default position
of the credit as a revocable or irrevocable one. By assuming a credit was irrevocable if it failed to describe
itself, the previous UCP500 favored irrevocable over revocable credits, but still expressly contemplated
their application to revocable letters of credit.
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By mean of article 2 instead, the UCP600 define the Credit as any arrangements, howsoever named
or described, that is irrevocable and art. 3 state that a credit is irrevocable even if there is no indication
to that effect. The default type of credit in the new Rules is thus now an irrevocable credit, and only an
implicit possibility for the opening of revocable credits is left. Under this new provision, the advantages
for sellers are quite obvious: because of the new default position, a buyer cannot be tempted to open a
revocable letter of credit, even in the silence of the sale contract on the point.
This latest UCP revision has had the general aim of addressing developments in the banking, transport
and insurance industries. However, the main reason for this review can be seen as a general improvement
of the language and style so as to propagate and increase the consistent application and interpretation of
the Rules in an attempt to stem the rate of unnecessary rejections of documentary tenders by financial
institutions.
In fact, under the present UCP500 regime, the best way for banks to avoid further risk is to reject the
presented documents and refuse the payment. Surveys have shown that as much as 70% of the documents
tendered at first presentation were rejected. And this is because avoidance of risks is the first priority for
the issuing bank. But, is avoidance of risk a priority for traders as well? It seems not, as closing the deal is
the real purpose and function of the letter of credit itself and the letter of credit is an instrument of
payment. Buyers are absolutely in need of the shipment, and the moment the issuing bank issues the letter
of credit, it signifies the intention of the buyer to purchase and to pay. Likewise, when the seller tenders
the required document, he agrees to accept the payment from the buyer.
Article 14 is particularly of interest to banks as it establishes the basic responsibility of the banks to
examine the documents tendered under the letter of credit. Article 14(a) imposes the duty to examine the
documents in order to determine, on the basis of the documents alone, whether or not the documents
appear on their face to constitute a complying presentation. It is worth noting that the reasonable care
to be exercised under the UCP500 regime has now been omitted. However, it is still too early to predict
whether such an omission will lead to any substantial difference in the way this duty will be construed by
the banks.
This being in fact the duty to ascertain whether the documents appear to conform, such a duty should
not be construed to be any more stringent than the exercise of reasonable care previously imposed. It
therefore seems to be plausible that the banks will continue to exercise reasonable care rather than any
more rigid duty of examination. A possible major change is instead inherent in article 14(b). This new
article defines the number of days required to hold the documents for processing or examining by banks.
The reasonable time in article 13(b) of UCP500 that led to a number of disputes and hence
uncertainty has been eliminated and a more welcome, even if not very precise, five banking days will be
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used under the UCP600. Further the stipulated time will now begin to count from the day of presentation,
and hence the day of receipt of the documents will no longer be the starting point of the period.
The definition of banking days though is not extremely accurate as art. 2 defines it as a day on which a
bank is regularly open at the place at which an act subject to those rules is to be performed and even if
the omission of the phrase reasonable time may have resolved differences in interpretation between
different Courts, at this point we cannot be sure whether a new problem may arise.
But one of the most important issues is the linkage between the documents tendered, i.e. the Provisions
of art. 14(d) and (e) and the degree to which inconsistencies between the documents tendered are to
constitute a discrepancy preventing payment, as under the UCP500 a large number of rejection was based
on inconsistencies between documents. It will be interesting to see if the new wording will be interpreted
as a mere explanation of the old art. 13, or if a purpose for such a detailed change will be looked for and
banks will accordingly be obliged to be far more rigorous in scrutinizing the data in each document
tendered. As the aim of the revision is to curtail the rate of rejection, it is hoped this article will be read as
an explanation rather than an extension.
Another interesting decision that has been incorporated under the new UCP 600 and that better clarifies
the duties of a bank in screening the documents is that with regard to non-documentary requirements.
Under the regime of the UCP500 in fact, the rule that the bank would ignore such requirements was in
some way mitigated by Position Paper No.3 by means of which only those no documentary conditions
which could not be implicitly connected to a document listed for tender were to be disregarded by the
bank. It is clear from the above that the position was unnecessarily complicated, and also because the
Position Papers issued under the UCP500 will not be applicable under the UCP600, it seems clear that
since July the banks will disregard all non documentary requirements (cfr. art. 14(h): banks will deem
such conditions as not stated and will disregard them). The practical consequence is that where a buyer is
particularly keen on a condition (i.e., age or class of carrying vessel), he must exercise greater care in
formulating the documentary requirement. Undoubtedly, this revision will make it easier for bankers and
traders to incorporate the UCP in their business transactions.
As in any contract, the Definitions and Interpretations are helpful, and the changes highlighted above
are of course welcome and will contribute in making letters of credit an even safer and standardized
payment term for contract between buyers and sellers. Traders are still to be aware though that the main
contract is and remain the sale contract, hence it has to be clear and specific in relation to the letter of
credit requirements as this is the first and most important step to reduce the possibilities of rejection.
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Export Risk Management

Export pricing is the most important factor in for promoting export and facing international trade
competition. It is important for the exporter to keep the prices down keeping in mind all export benefits
and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter
to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or
exporting through a canalizing agency.
Like any business transaction, risk is also associated with good to be exported in an overseas market.
Export is risk in international trade is quite different from risks involved in domestic trade. So, it becomes
important to all the risks related to export in international trade with an extra measure and with a proper
risk management.
The various types of export risks involved in an international trade are as follow:
Credit Risk
Sometimes because of large distance, it becomes difficult for an exporter to verify the creditworthiness
and reputation of an importer or buyer. Any false buyer can increase the risk of non-payment, late
payment or even straightforward fraud. So, it is necessary for an exporter to determine the
creditworthiness of the foreign buyer. An exporter can seek the help of commercial firms that can provide
assistance in credit-checking of foreign companies.
Poor Quality Risk
Exported goods can be rejected by an importer on the basis of poor quality. So it is always
recommended to properly check the goods to be exported. Sometimes buyer or importer raises the quality
issue just to put pressure on an exporter in order to try and negotiate a lower price. So, it is better to allow
an inspection procedure by an independent inspection company before shipment. Such an inspection
protects both the importer and the exporter. Inspection is normally done at the request of importer and the
costs for the inspection are borne by the importer or it may be negotiated that they be included in the
contract price.
Alternatively, it may be a good idea to ship one or two samples of the goods being produced to the
importer by an international courier company. The final product produced to the same standards is always
difficult to reduce.
Transportation Risks
With the movement of goods from one continent to another, or even within the same continent, goods
face many hazards. There is the risk of theft, damage and possibly the goods not even arriving at all.
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Logistic Risk
The exporter must understand all aspects of international logistics, in particular the contract of carriage.
This contract is drawn up between a shipper and a carrier (transport operator). For this an exporter may
refer to Inco terms 2000, ICC publication.
Legal Risks
International laws and regulations change frequently. Therefore, it is important for an exporter to drafts
a contract in conjunction with a legal firm, thereby ensuring that the exporter's interests are taken care of.
Political Risk
Political risk arises due to the changes in the government policies or instability in the government
sector. So it is important for an exporter to be constantly aware of the policies of foreign governments so
that they can change their marketing tactics accordingly and take the necessary steps to prevent loss of
business and investment.
Unforeseen Risks
Unforeseen risk such as terrorist attack or a natural disaster like an earthquake may cause damage to
exported products. It is therefore important that an exporter ensures a force majeure clause in the export
contract.
Exchange Rate Risks
Exchange rate risk is occurs due to the uncertainty in the future value of a currency. Exchange risk can
be avoided by adopting Hedging scheme.
Export Insurance
Export credit insurance (ECI) protects an exporter of products and services against the risk of nonpayment by a foreign buyer. In other words, ECI significantly reduces the payment risks associated with
doing international business by giving the exporter conditional assurance that payment will be made if the
foreign buyer is unable to pay. Simply put, exporters can protect their foreign receivables against a variety
of risks that could result in non-payment by foreign buyers. ECI generally covers commercial risks, such
as insolvency of the buyer, bankruptcy, or protracted defaults (slow payment), and certain political risks
such as war, terrorism, riots, and revolution. ECI also covers currency inconvertibility, expropriation, and
changes in import or export regulations. ECI is offered either on a single-buyer basis or on a portfolio
multi-buyer basis for short-term (up to one year) and medium-term (one to five years) repayment periods.
Key Points
ECI allows exporters to offer competitive open account terms to foreign buyers while minimizing the
risk of non-payment.
Even creditworthy buyers could default on payment due to circumstances beyond their control.
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With reduced non-payment risk, exporters can increase export sales, establish market share in emerging
and developing countries, and compete more vigorously in the global market.
When foreign accounts receivables are insured, lenders are more willing to increase the exporters
borrowing capacity and to offer attractive financing terms.
Coverage
Short-term ECI, which provides 90 to 95 percent coverage against commercial and political risks that
result in buyer payment defaults, typically covers (a) consumer goods, materials, and services up to 180
days, and (b) small capital goods, consumer durables, and bulk commodities up to 360 days. Mediumterm ECI, which provides 85 percent coverage of the net contract value, usually covers large capital
equipment up to five years. ECI, which is often incorporated into the selling price, should be a proactive
purchase exporters already have coverage before a customer becomes a problem.
Where Can I Get Export Credit Insurance?
ECI policies are offered by many private commercial risk insurance companies as well as the ExIm
Bank, which is the government agency that assists in financing the export of U.S. goods and services to
international markets. U.S. exporters are strongly encouraged to shop for a good specialty insurance
broker who can help them select the most cost-effective solution for their needs. Reputable, wellestablished companies that sell commercial ECI policies are easily found on the Internet. You may also
buy ECI policies directly from ExIm Bank.
Private-Sector Export Credit Insurance
Premiums are individually determined on the basis of risk factors and may be reduced for established
and experienced exporters.
Most multi-buyer policies cost less than 1 percent of insured sales, whereas the prices of single-buyer
policies vary widely due to presumed higher risk.
The cost in most cases is significantly less than the fees charged for letters of credit.
There are no restrictions regarding foreign content or military sales. ExIm Banks Export Credit
Insurance
ExIm Bank customers are advised to refer to the Exposure Fee Advice Tables (which are posted on the
banks Web site www.exim.gov under the Tools section) to determine exposure fees (premiums).
Coverage is available in riskier emerging foreign markets where private insurers may not operate.
Exporters electing an ExIm Bank working capital guarantee may receive a 25 percent premium
discount on multi-buyer insurance policies. Enhanced support is offered for environmentally beneficial
exports.
Products must be shipped from the United States and have at least 50 percent U.S. content.
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ExIm Bank is unable to support military products or purchases made by foreign military entities.
Support for exports may be closed or restricted in certain countries for U.S. government policy reasons
(for more information, see the Country Limitation Schedule posted on the banks Web site under the
Tools section).
Characteristics of export credit insurance
Applicability
Recommended for use in conjunction with open account terms and export working capital financing.
Risk
Risk of uncovered portion of the loss shared by exporters, and their claims may be denied in case of noncompliance with requirements specified in the policy.
Pros
Reduces the risk of non-payment by foreign buyers
Offer open account terms safely in the global market
Cons
Cost of obtaining and maintaining an insurance policy
Risk sharing in the form of a deductible (coverage is usually below 100 percent)
Export Credit Insurance The International Experience
Export Credit Insurance is used in all countries with substantial worldwide commerce. The systems of
these countries present distinct characteristics that reflect the legal form of the agency insurer, the
operational system, the modalities of coverage offered, and the tariffs charged.
On the other hand, such systems have a relative homogeneity with regards to the percentage of covered
risks and participation of the insured (which can be an exporter or a financing bank). Such criteria would
have some international standardization because the majority of the insurance companies in the main
trading countries are associated with the International Union of Credit Insurance and Investments - Bern
Union.
The insurance companies form of organization in the majority of countries shows that the State is
responsible for driving the business in this type of activity. The forms can be of governmental companies,
mixed companies, or private companies acting in partnership with governments. The last is the case in
Brazil nowadays.
The forms of coverage are basically the same: The global policy, which means that all the exports of one
exporter can be covered inside of a limit of credit defined for the Insurer, and The Specific policy, which
provides coverage for one specific operation.
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Normally, exports with short-term financing are covered by global policies while exports with medium
and long term financing are covered by specific policies. Beyond these modalities, some countries with a
better developed system have coverage for investments abroad and for performance risk, among others.
The percentage of coverage also is, in certain form, homogeneous, ranging between 85% and 90% for
commercial risks, and between 90% and 95% for political and other risks. Actually, in most of the
systems, the governments take all of the political risks and the commercial risks in the operations with
medium and long-term financing (up to 2 or 3 years), which is the case in Brazil. There is no obligation in
the countries observed to contract the Export Credit Insurance. Exporters and banks are free to contract
the insurance, as one of the guarantees that can be presented to ensure the loans.
1. The New Model of the Brazilian Export Credit Insurance
1.1 The creation of the Exports Guarantee Fund
The current model of Export Credit Insurance was designed and implemented in 1998 as a way to
correct the failures of the old Brazilian model that was operated by The Brazilian Reinsurance Institute
(IRB), as an agent of the government.
The current Export Credit Insurance model has four important players:
- The Chamber of Foreign Trade (CAMEX) - The coordinating board responsible for defining all of the
Brazilian foreign trade policies;
- The Council of Financing and Guarantee (COFIG) responsible for managing the activities of financing
and export credit insurance;
- The Exports Guarantee Fund (FGE) covers the guarantees given by the Union to improve the Brazilian
exports of goods and services; and
- The Brazilian Export Credit Insurance Agency (SBCE) - a private company that acts, on one side,
covering operations with its own resources, and, on the other side, analyzing and contracting operations as
an agent of the federal government.
The Exports Guarantee Fund FGE was created by Law 9.818, of 08.23.1999, with the objective to cover
the guarantees given by the Brazilian government in operations of Export Credit Insurance. The main
purpose of the FGE is to provide resources for covering those guarantees against commercial risks and
political and others risks.
1.2. The Chamber of Foreign Trade Main functions The Chamber of Foreign Trade, board of the
Presidency of the Republic, composed of the Ministers of the Development, Industry and Foreign Trade,
who is its President, Finance, Planning and Budget, Foreign affairs, Agriculture, and Civil House of the
Presidency of the Republic, is responsible for the creation, implementation and coordination of the policy
related to the Brazilian foreign trade.
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The Chamber has the responsibility, in terms of Export Credit Insurance, of defining, based in proposal
presented by the Council of Financing and Guarantee, the guidelines, criteria, parameters and conditions,
as well as the countries and global limits for concession of guarantee.
1.3 The Council of Financing and Guarantee (COFIG) Representatives and Responsibilities
The COFIG was created by the Government through Decree 4,933 of 02.18.2004, in order to regulate
the activities of financing and guarantees and to put together the functions of the Council of the Export
Guarantee Fund (CFGE) and Committee of Export Financing (CCEX).
The board is composed by one representative and one substitute of the Ministries of Development,
Industry and Foreign Trade, Finance, Planning and Budget, Foreign affairs, Agriculture, Civil House of
the Presidency of the Republic and National Treasury.
The COFIG has, among others, the following tasks:
a) To establish the operational competences for the agent;
b) To present proposals to improve the system, as a whole, for the Chamber of Foreign Trade;
c) To decide the coverage by the government in situations, events and unforeseen risks;
d) To establish the criteria for the constitution of the liquidity reserve of the FGE;
e) To approve operations that exceed the operational competence of the agent SBCE; and
f) To define the percentages of commissions charged for guarantees given by the Union;
1.4 The Brazilian Export Credit Insurance Agency SBCE
The SBCE is a private company that was created in June of 1997. The major shareholders are Bank of
Brazil, BNDES, Bradesco , Sul Amrica Seguros, Minas Brasil, UniBanco Seguros, and the Compagnie
Franaise d'Assurance pour le Commerce Extrieur (COFACE).
Its objective is to offer the market an instrument of guarantee to the Brazilian exports against commercial
risks of up to 2 years (short term operations), acting with its own resources. Also, acting as an agent of the
Brazilian government, it covers exports against political and other risks and commercial risks in periods
that exceed 2 years (Medium and Long Term Operations), by analyzing, issuing policies and
accompanying the operations.
Utilizing the COFACE framework, the SBCE has at its own disposal an international network of
agencies, on-line, with financial and commercial information about more than 35 million registered
purchasers. The SBCE also can use COFACEs vast worldwide network of credit recovery, with more
than 170 law offices around the world seeking to recover credits in both administrative and judicial ways.
1.4.1 Risks Covered
Commercial Risks - Characterized by the default of the importer due to bankruptcy, concordat or another
commercial reason.
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Political and Other Risks - Characterized by the default of the export operation, due to specific events
obstructing the transfer of the payment to the exporter, including moratorium, war, confiscation,
catastrophes and others.
1.4.2 Characterization of the Risks
Pre-credit Risk (Manufacturing) A manufacturing risk is the inability of the insured to manufacture
the goods or execute the services contracted by the importer, as a result of facts that are caused by the
importer or by the countries. Coverage given during this period is related to the costs incurred by the
exporter up until the contractual breakdown.
Credit Risk (Post-shipment) A credit risk is characterized after the shipment of the merchandise or
after the fulfillment of the exporter's contractual obligations (services).
1.4.3 Types of Policy
Multi-Buyer Policy - provides consolidated coverage for all exports of the insured where payment risks
may be involved. The coverage of all of the buyers of the insured under an annual multi-buyer policy with
rotating credit, benefits the exporter at a cost which is inversely proportional to the volume insured. The
greater the volume involved, the further the risk is diluted and, consequently, the cheaper the premium.
Individual Policy Short term operation (up to 2 years) - This is a policy that provides a cover to one
specific operation, against commercial, political and other risks. The coverage against commercial risk is
supported by SBCE, with its own resources while coverage against political risk is supported by FGE.
Individual Policy - Medium and Long Term Operations (2 Years and Longer) - This is a policy that
provides coverage to one specific operation, against commercial, political and other risks. The coverage
against commercial risks and against political risks is supported by the FGE. SBCE acts as a government
agent for these operations that are generally related to projects and businesses involving capital goods,
studies and services or contracts with special characteristics.
According to the beneficiary the policy can be,
Suppliers Credit- The policy is issued with the exporter as the named beneficiary. The exporter may
request refinancing transferring the right to the coverage by the insurance policy to the financing bank.
Buyers Credit - The policy is issued with the banks as the named beneficiaries. The exporters receive
the payment for the export from their buyers, who obtain financing from the financing banks
1.4.4 Guaranteed percentage
The guaranteed percentage varies depending on the risks involved and can be:
- Commercial Risks
- up to 90%;
- Commercial Risks with bank guarantee up to 95%; and
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- Political Risks up to 95%

1.4.6 Premium
Premiums are calculated on a case-by-case basis depending on:
- The amount of the principal financed under the operation;
- The financial capacity of the debtor;
- The country of the debtor;
- The type of risk (commercial, political, manufacturing or post-shipment); and
- The duration of the risk.
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FT6606

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UNIT V EXPORT DOCUMENTATION AND POLICIES

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APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

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APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

[A] Textile Specific

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Lower customs duty on raw materials used in manufacture of synthetic fibre/yarn

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APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

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Infant industry issues

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

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Expenditure Tax Act, 1987.

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Export Inspection Agencies.

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Significance of the Certificate of Origin

(GSP) as well as under Commonwealth Preferences (CWP).

It helps the buyer in adhering to the import regulations of the country.

a seller, a certificate of origin IS required.

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B/E is a means to collect payment.

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Name of the country of origin of goods.

Number and packing description.

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Types of Mate's Receipts

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Drawback shipping bill

Dutiable shipping bill

Duty-Free shipping bill

Contents of Shipping Bill

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APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

APPAREL MERCHANDISING AND MARKETING

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