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AREA OF STUDY :

This study has been carried out in the Marketing Department of ITC-PSPD( Paperboards
and Speciality Paper Division). As my elective is Marketing, I have tried to focus on the
Marketing aspects, especially International Marketing of ITC’s Paper Division.

OBJECTIVES OF THE STUDY:

The study was carried out keeping into view the following objectives :

1. To understand the Marketing aspects of ITC’s PSPD division. This includes having
better knowledge about various geographic regions and the customer segments in India
and globally.
2. To analyse the exports sales volume of VAP (Value Added Products) and Non-
VAP products.
3. To have in depth knowledge about International Marketing i.e. exports of paper
products.
4. To have a clear picture about the documentation and the entire process of exports.
5. To understand the market attractiveness features of each market vis-à-vis the
competitive advantage of ITC.
6. Measures to tackle the currency fluctuations.

SIGNIFICANCE OF THE STUDY :

With change been the only constant thing in today’s world, Marketing is the only
functional area which has to adapt to that change by formulating strategies and techniques
to face it. Though Marketing is a long term aspect but it evolves every now and then to
keep pace with volatile market where their a lot of profit and competitive repatriation. This
study basically revolves around understanding the marketing mix, strategies and pricing of
paper boards and products of ITC. It has also given me a clear picture of the product mix
and the technical specifications and nomenclature of each of the quality of products. This
study also throws light on aspects like brand management, product development and
modifications. This clearly reflects that ITC’s keeps on working to maintain it’s brand
image and provide the best quality paper that can run on any printing machine. The essence
of this study basically lies in the understanding the formulation of the strategies and the
right application of these strategies. This study has really given me the insight as to how to
apply theory into practice.

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SCOPE OF THE STUDY :

The scope of this study includes understanding the other segments of Marketing i.e.
Domestic, International(Exports), Corporate, Region Wise and Interdivisional Marketing of
paper products. More emphasis is given on International Marketing.

This study has been restricted to the understanding of the Marketing Division and to have a
general overview of how Finance as an functional area is linked to International Marketing.
This study was conducted at the exports division of ITC at Secunderabad, Andhra Pradesh.
The main focus of the study was on International Marketing. Owing to the constraints of
time and resources, this study was carried out at their export branch itself.

METHODOLOGY :

Methodology adopted to collect the data for this study can be divided into 2 parts :

• Collection of Primary Data –


Primary Data has been collected through an interview process. The sales managers of all
the marketing segments were interviewed as regards to the area or region they handle under
the Marketing Division of ITC –PSPD. As a part of this study a few Agents’ response
about the various international markets had also been taken through the telephonic
interview.

• Collection of Secondary Data :


Secondary data for the project has been collected through books. Internet was also used for
the purpose of the study.

Research Design :
Descriptive Research Design is used for the purpose of this study as this study mainly deals
with describing different markets, situations such as the market potential for a product and
other issues related to marketing.

LIMITATION OF THE STUDY :

• The only limitation of the study was that no opportunity was given to carry out any
presentation for the purpose of direct marketing and promotion to companies they
are catering to domestically.

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INTRODUCTION TO PAPER INDUSTRY :

The evolution of paper industry in India started with the setting up of the first paper mill
in West Bengal in 1832. Thereafter a number of other mills were setup namely Upper
India Ouper Mill in 1879 in Lucknow, Titagarh Mill in West Bengal, Deccan Paper
Mills in Kerala and Bengal Paper Mills in West Bengal. Due to the sluggish growth of
the paper industry in the formative 30 years which led to a paper famine in the late 1974.
Thereafter Government Of India encouraged setting up of small paper mills by relaxing
import regulations on second hand paper manufacturing machinery. Import of obsolete
second hand machines led to excess installed capacity and sharply reduced capacity
utilization. As a result of which Government invited ITC to take the charge and to
participate in core industries and develop backward areas. This led to ITC’s involvement
with manufacture of paperboards.

Paper Industry is highly fragmented with 380 units in organized sector and about 500
units in organized sector. The industry is growing at the rate of 4-6% per annum. The
growth of coated paper and board is 8-10%.

Government has completely delicensed the paper industry with effect from17th July,
1997. The entrepreneurs are now required to file an Industrial Entrepreneur
Memorandum with the Secretariat for Industrial Assistance for setting up a new paper
mill or substantial expansion of the existing mill in permissible locations.

The Indian Funnel _ Paperboard :


PAPER
55 Lacs Tons

PACKAGING GRADE
25 Lacs Tons

PAPER BOARDS
10 Lacs Tons

PREMIUM
4 Lacs Tons

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The Paperboard funnel clearly reflects the production of paper, board, packaging grade in
the paper industry in a year. The other observation is that ITC PSPD produces 2.3 lacs
tons per annum.

India's per capita consumption of paper is around 4.00 kg, which is one of the lowest in
the world. With the expected increase in literacy rate and growth of the economy, an
increase in the per capita consumption of paper is expected. Performance of the industry
has been constrained due to high cost of production caused by inadequate availability and
high cost of raw materials, power cost and concentration of mills in one particular area.
Several policy measures have been initiated in recent years to remove the bottlenecks of
availability of raw materials and infrastructure development.

The paper industry is a priority sector for foreign collaboration and foreign equity
participation upto 100% receives automatic approval by Reserve Bank of India. Several
fiscal incentives have also been provided to the paper industry, particularly to those mills
which are based on non-conventional raw material.

The country is almost self-sufficient in manufacture of most varieties of paper and


paperboards. Import, however, is confined only to certain specialty papers. To meet part
of its raw material needs the industry has to rely on imported wood pulp and waste paper.
Imports of paper and paper products was growing over the years. However, it has
increased during 2001-02 after a fall in 2000-01. About 1,40,000 tonnes of paper was
exported in 2000-01 mainly to the neighbouring countries.

The demand for upstream market of paper products, like, tissue paper, tea bags, filter
paper, light weight online coated paper, medical grade coated paper, etc., is growing up.
These developments are expected to give fillip to the industry.

The new millennium is going to be the millennium of the knowledge. So demand for
paper would go on increasing in times to come. In view of paper industry's strategic role
for the society and also for the overall industrial growth it is necessary that the paper
industry performs well. With the drastic changes taking place in the paper industry and
the growth of this industry it can be said it will definitely perform well in the years to
come.

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ITC PROFILE :

ITC is one of India's foremost private sector companies with a market capitalisation of
nearly US $ 13 billion and a turnover of US $ 3.5 billion. Rated among the World's Best
Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes
magazine, among India's Most Respected Companies by Business World and among
India's Most Valuable Companies by Business Today, ITC ranks third in pre-tax profit
among India's private sector corporations.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC
is an outstanding market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting
Cards.

As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to
create enduring value for the nation provides the motive force to sustain growing
shareholder value. ITC practices this philosophy by not only driving each of its
businesses towards international competitiveness but by also consciously contributing to
enhancing the competitiveness of the larger value chain of which it is a part."

ITC's diversified status originates from its corporate strategy aimed at creating multiple
drivers of growth anchored on its time-tested core competencies: unmatched distribution
reach, superior brand-building capabilities, effective supply chain management and
acknowledged service skills in hoteliering. Over time, the strategic forays into new
businesses are expected to garner a significant share of these emerging high-growth
markets in India.

The Members of the Company, at the AGM held on 21st July, 2006 approved payment of
dividend@ 265 % (i.e Rs. 2.65 per Ordinary Share ) for the financial year ended 31st
March, 2006. The Company's shares are listed with 3 Stock Exchanges: Kolkata Stock
Exchange, Bombay stock Exchange and National Stock Exchange.

ITC constantly endeavours to benchmark its products, services and processes to global
standards. ITC's Core Values are aimed at developing a customer-focused, high-
performance organisation which creates value for all its stakeholders The Company's
pursuit of excellence has earned it national and international honours. ITC is one of the
eight Indian companies to figure in Forbes A-List for 2004, featuring 400 of "the world's
best big companies". Forbes has also named ITC among Asia's'Fab 50' and the World's
Most Reputable Companies. The ET 500 survey by 'The Economic Times', rating
companies on the basis of market capitalisation, ranks ITC 8th among 500 listed Indian
companies.

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ITC VISION :
Sustain ITC’s position as one of the India’s most valuable corporations through world
class performance, creating growing value for the Indian economy and the Company’s
shareholders.

MISSION:
To enhance the wealth generating capability of the enterprise in a globalizing
environment, delivering superior and sustainable stakeholder value.

ACHIEVEMENTS OF ITC :

ITC has several firsts to its credit:

• ITC is the first from India and among the first 10 companies in the world to
publish its Sustainability Report in compliance (at the highest A+ level) with the
latest G3 guidelines of the Netherlands-based Global Reporting Initiative (GRI), a
UN-backed, multistakeholder international initiative to develop and disseminate
globally applicable Sustainability Reporting Guidelines.

• ITC is the first Indian company and the second in the world to win the
prestigious Development Gateway Award. It won the $100,000 Award for the
year 2005 for its trailblazing ITC e-Choupal initiative which has achieved the scale
of a movement in rural India. The Development Gateway Award recognizes ITC's
e-Choupal as the most exemplary contribution in the field of Information and
Communication Technologies (ICT) for development during the last 10 years. ITC
e-Choupal won the Award for the importance of its contribution to development
priorities like poverty reduction, its scale and
replicability, sustainability and transparency.

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• ITC has won the Golden Peacock Awards for 'Corporate Social Responsibility
(Asia)' in 2007, the Award for ‘CSR in Emerging Economies 2005’ and
‘Excellence in Corporate Governance' in the same year. These Awards have been
instituted by the Institute of Directors, New Delhi, in association with the World
Council for Corporate Governance and Centre for Corporate Governance .
• ITC has won the inaugural 'World Business Award', the worldwide business
award recognising companies who have made significant efforts to create
sustainable livelihood opportunities and enduring wealth in developing countries.
The award has been instituted jointly by the United Nations Development
Programme (UNDP), International Chamber of Commerce (ICC) and the HRH
Prince of Wales International Business Leaders Forum (IBLF).
• The Company's Green Leaf Threshing plants at Chirala and Anaparti in
Andhra Pradesh are the first units of their kind in the world to get ISO 14001
environment management systems certification.
• ITC's cigarette factory in Kolkata is the first such unit in India to get ISO 9000
quality certification and the first among cigarette factories in the world to be
awarded the ISO 14001 certification.
• ITC Hotel Maurya Sheraton in New Delhi is the first hotel in India to get the
coveted ISO 14001 Environment Management Systems certification.
• ITC Filtrona is the first cigarette filter company in the world to obtain ISO
14001.
• ITC Infotech finds pride of place among a select group of SEI CMM Level 5
companies in the world.
• ITC's Green Leaf Threshing plant in Chirala is the first in India and among the
first 10 units in the world to bag the Social Accountability (SA 8000)
certification.

ITC Chairman Y C Deveshwar has received several honours over the years.

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Notable among them are :

Year Awards

Business Person of the Year from UK Trade &


2006 Investment, the UK Government organization that
supports overseas businesses in that country.

2006 Inducted into the `Hall of Pride' by the 93rd Indian


Science Congress.

2005 Honoured with the Teacher's Lifetime Achievement


Award.
Manager Entrepreneur of the Year from Ernst & Young
2001 Retail Visionary of the Year from Images, India's only
fashion and retail trade magazine.

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ITC –PSPD (PAPER BOARDS & SPECIALITY PAPER DIVISION) :

ITC PSPD is one of the world's most modern and contemporary manufacturers of
packaging and graphic series of boards. It was incorporated on 17 July, 1975. The
commercial production started after the installation of the first machine named PM
1(Paper Machine 1) in October,1979. ITC's Paperboards business has a manufacturing
capacity of over 360,000 tonnes per year and in the second year after its incorporation the
capacity utilization was 105%. It is a market leader across all carton-consuming segments
including cigarettes, foods, beverages, pharma, personal care & toiletries, durables and
match shells.

The Bhadrachalam Paperboards Limited was incorporated in 1975. It set up an integrated


pulp and paper/board manufacturing facility in 1979 at Bhadrachalam in Andhra Pradesh
in South India, 300 kms. east of Hyderabad. Since then, the mill facilities have been
continuously upgraded to achieve internationally benchmarked quality standards and
operational efficiencies. Following the amalgamation of the erstwhile ITC with
Bhadrachalam Paperboards Limited in 2002, the Paperboards and Specialty Papers
businesses were merged to harness strategic and operational synergies.

In 1998, the Paperboards business commissioned a new production line for coated
boards. This production line incorporated Paper Machine 4, which was equipped with a
capacity of 120,000 tonnes per annum (tpa), and finishing equipment sourced from
internationally renowned suppliers. This machine has been fitted with a sophisticated
'Web Detection and Inspection system'. The PM4 board machine can deliver international
quality boards for Cigarette, Liquid, Food and Pharma Packaging by providing a flawless
surface for print reproduction.

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ITC installed the first ECF(Elemental Chlorine Free) pulp mill in India to address the
changing demands from customers and statutory authorities to have eco-friendly
processes in the operations. In September 2002, ITC's Bhadrachalam Paperboard Unit
commissioned a 100,000 tpa Elemental Chlorine Free (ECF) fibre line. This is a state-of-
the-art fibre line and the only one in India, which meets effluent norms, set by the
Ministry of Environment and Forests of the Government of India and Pollution Control
Boards. The product range has also been enhanced as ECF pulp uniquely fulfills the
demand for food-grade packaging and environment-friendly paper.

In November 2003, ITC acquired the paperboard manufacturing facility of BILT


Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. With effect from
March 19, 2004, this Unit Kovai has been integrated with the Paperboards & Specialty
Papers Division. The Kovai Unit, with a capacity of 65,000 tpa, will enable ITC to
further improve customer service and reduce the lead time for manufacturing customised
recycled boards.

The recently commissioned Paper Machine 5 at Bhadrachalam has a capacity of 75,000


tpa and will help the business offer an unbeatable value proposition in both virgin and
recycled boards. This will further strengthen ITC's leadership position in value-added
paperboards.

The Bhadrachalam Unit also produces ECF quality Writing and Printing Papers,
Bleached Kraft Papers and Photocopier paper.

ITC is the largest exporter of coated boards from India. The Company exports nearly 20
per cent of the coated boards it produces. Its coated boards fulfill exacting customer
requirements in Malaysia, Sri Lanka, Bangladesh, Iran, Australia, UAE, Saudi Arabia,
Singapore, U.K., Italy, Netherlands and China.

ITC has set up India's first world-class plant for the manufacture of premium Cast Coated
Boards that meet highly sophisticated packaging and printing requirements. The Unit at
Bollarum has been expanded further to accommodate specialized converting production
lines. ITC has added a modern poly extruded line to its production facility, to meet the
growing demand for food packaging and beverage cups. The super-calendering line
installed at Bollarum Unit near Hyderabad has also added Art Boards and Ivory Cards to
its product range. ITC has also pioneered the development of Liquid Packaging Boards
and baseboards for Plasterboards. Continuous product development has reinforced ITC's
market leadership in the Paperboards business.

In a farsighted corporate effort to continuously enhance ITC's global competitiveness


through significantly improved availability of high quality fibre, the Company launched a
major social and farm forestry programme by creating and nurturing clonal plantations.

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Under this green initiative, the Paperboard Division supplies millions of high yielding
disease-resistant clonal saplings, developed through in-house biotechnology research, to
farmers in Andhra Pradesh. The Company in turn, sources an increasing part of its raw
materials from these plantations. The programme also continuously enriches the
environment.

The Division initiated bio-technological research in 1989 to develop and propagate


genetically superior, high-yielding, disease-resistant clones. Large-scale plantations have
been raised on over 41,000 hectares of lands belonging to the farming community with
72 high yielding varieties of eucalyptus and subabul. The yield from these
'Bhadrachalam' clones is thrice that of the normal seed route plantations. The Company
disseminates its research know-how on best agricultural practices to farmers through free
consultancy services.

ITC's Paperboards business has a strong customer focus. The Company's Paperboards
business devoutly practices a 'Total Quality Assurance' philosophy during each stage of
manufacture. Its state-of-the-art on-line process control and scanning systems deliver
internationally accepted quality standards.

ITC PSPD holds a market share of about 18% - 20% .It is responsible for 80% of
paperboard exports from India to countries like Iran, Iraq, Malaysia, Bangladesh,
Srilanka, S.Africa, USA China, Australia,Greece etc It enjoys a satisfied customer base in
India & abroad and is certified under ISO 9001 Quality Management Systems & ISO
14001 Environmental Management Systems.

In the year 1988 it recognized the need for R&D on clonal plantations. This led to
extensive R & D efforts which resulted in development of disease resistant, fast growing,
high yield oriented Eucalyptus ‘Bhadrachalam Clones’.
Pioneered the clonal plantation activity in India and helped maintaining ecological
balance.
Covered so far in 20, 000 Hectares of land and planted about 61 million sapplings.

ITC Limited - PSPD emerged as a dominant player in Paperboards industry in


India & is moving towards becoming a valued player in global Paperboards
industry. It can dominate the market because it is equipped with technological
superiority to lead the market in value added segments.

Thus, ITC and all its divisions has truly lived up to its stated vision.

ITC PSPD 1998 –2003 :


• Grown from 85,000 Tons to 210,000 Tons.
• Market share growth from 6% to 18%.
• International sale upto 34629 TPA(Tonnage Per Annum).

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• India’s only player in the value segment @ 68,000 TPA.
• Replaced most imports and grown the market.
• Nominated substrate for most of the well known FMCG brands.
• Developed board for critical applications : Aseptic.

SOCIAL DEVELOPMENT :
ITC not only developed the business but also ensured the development of nearby areas in
and around Bhadrachalam. ITC allocated Rs.2.5 millions per annum for development of
infrastructure facilities in the nearby villages and also provided drinking water supply for
the people residing in those villages. Efforts were made to provide water-sheds, rainwater
harvesting in rural areas. It has also participated in free medical / health camps and
created basic amenities at Schools in the vicinity. It also generated rural employment for
the people in Bahdrachalam. All this clearly reflects that ITC is a socially responsible
company.

AWARDS WON BY ITC PSPD :

ITC's Paperboards & Specialty Papers business has won numerous awards for quality,
environmental management systems and product excellence:

Paperboards Business :

• Paper Mill of the Year 2005-06 Award to the Bhadrachalam paperboards mill by
the Indian Paper Manufacturers Association (IPMA).
• Five Star rating from the British Safety Council to Tribeni Unit in 2006 for
excellent performance in Health & Safety management.
• Indian Manufacturing Excellence Gold Award 2006 to the Bollaram Unit from
Frost & Sullivan.This Award acknowledges the best facilities in India that have
achieved and sustained Manufacturing Excellence.
• The CII conferred the National Award for Excellence in Energy Management,
Best Innovative Project Award and National Award for Excellence in Water
Management 2006 to the Bhadrachalam Unit. The awards were given for successful
implementation of energy saving projects and for significant reduction in specific
energy and water consumption.
• The Greentech Environment Excellence Gold Award 2006 and 2004 in the
manufacturing sector, for the Bhadrachalam factory. Through these awards the
Greentech Foundation recognizes industrial and service sector organizations for their
outstanding achievements in environment protection.
• 'Top Green Rating' in 2004 by the Centre for Science & Environment (CSE). The
Bhadrachalam Unit was adjudged as India's most environment-friendly paper mill.

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• ISO 9000 certification in 2004, by Det Norske Veritas (DNV) for the paperboards
manufacturing facility at Kovai.
• The CII ENCON Award for 2002-2003, for excellence in energy management.
• ISO 14001 and 9001 Environment Management Systems certification in 2001.
• Capexil's Top Export Award 2005-06, for the 5th consecutive year in recognition
of highest exports in value terms, in the Paper and Paperboard category.
• The prestigious Indira Priyadarshini Vrikshamitra Award for outstanding
contribution to the cuse of afforestation and the development of wastelands.
• The Vantech Industry Rolling Trophy for "Research & Development" from the
Confederation of Indian Industry (Southern region).
• The Rajiv Gandhi Parti Bhoomi Mitra Award for developing non-forest
wastelands in the country from the Department of Wastelands Development,
Government of India.
• National Award for Energy Conservation 2006 to the Tribeni Unit in the Paper &
Pulp Sector from the Department of Power, Ministry of Power & Non-Conventional
Energy Sources, Government of India. The Bhadrachalam unit won the same award
in 2005.

MARKETING MIX :

Earlier marketing mix included only 4 P’s i.e Product, Place , Price and Promotion but it
has been extended to 7 P’s . The three new P’s are Process, Packaging and People. This
study would cover all the 7 P’s that comprise the Marketing Mix.

PRODUCT :

To achieve better value for the product , the product should be marketed well. For
effective marketing it is very important to understand the products and its attributes
properly.

PAPER BOARD TERMINOLOGY :

Liner Board : It is a board having at least 2 piles, the top layer being of relatively
better good quality, usually made on a fourdrinier with 100% virgin pulp furnish.

Food Board : It is a board used for food packaging having a single ply or multi-ply
construction, usually made from 100% bleached virgin pulp furnish.

Folding Box Board (Carton Board)- It is generally referred to as FBB. It is a


multi-ply board used to make folding boxes. The top ply(liner) is made from virgin pulp,
and the other plies are made from secondary fiber.

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Chip Board : It is a multi-ply board made from 100% low grade secondary fiber.

Base Board : It is a board that will ultimately be coated or covered.

Gypsum Board : It is a multi-ply board made from 100% low-grade secondary fibre
used for the outer surfaces of plaster board.

PHYSICAL PROPERTIES OF PAPER :

For a customer to choose the right kind of paper, which will suit his requirement, is an
important decision. As Paper Board & Speciality Paper is an intermediate product, which
the customer may use it for its purpose like printing, packaging, etc. To enable the
customer to buy the right product, it is very important for him or the Corporate customer
to know the physical properties of paper. Thus, the following are the physical properties
of paper :

• Mechanical & Strength


• Optical
• Printability
• Permeability

Mechanical & Strength Properties : The following are the properties :

• Caliper : It is a measurement of the paper thickness. The unit of measure for


paper is millimeters while the unit of measure for paperboard is points. A point is
a measurement of 0001 inch thick. Paper thickness is especially important for
papers that are printed on by machines, such as copiers or printer.
• Tear Factor : Internal Tear strength is a measurement of the force required to
tear a paper specimen for a fixed distance.
• Burst factor : It is also referred to as the Mullen or pop strength. It measures
the amount of hydrostatic pressure required to rupture a piece of paper. Burst
strength is especially important for paper bags and for other paper based
containers.
• Compression Tests : These tests are used to measure the compression
resistance of liner boards, corrugating medium and other paper boards. These
testspredict the resistance of boxes to buckling when they are stacked.
• Tensile Strength : It measures paper’s resistance to failure. The test is
performed by subjecting a narrow strip of paper to a constant rate of elongation
until it breaks. The unit of measurement is reported in pounds per inch, or
kilograms per metre. The tensile strength plus stretch resistance are used to
measure papers’ toughness.
• Stiffness : The stiffness test measures the amount of force required to bend a
strip through a specified angle. This testis important for paper used in wrapping,
structural uses and printing.

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• Softness : It is a subjective measurement that relates to a soothing feel(velvet
like) of paper and the yielding sensation when the paper is crumpled. It is a highly
important property of tissues and paper towels.

Optical Properties :

The following are the optical properties of paper :

• Brightness : The brightness of paper is actually a measurement of its reflectance


and does not apply to colored paper.

• Opacity : It is that property of paper which obstructs light and hides or masks a
colour or object behind. Opacity is measured by a contrast ratio. The amount of
light reflected from a single sheet of paper backed by a non-reflecting surface is
measured. Then the amount of light from a stack of the same paper is measured.
The difference of the two measurements shows the papers opacity in percent.

• Gloss : It is the light reflecting property of paper which results in the papers’
surface appearing shiny. Generally, gloss on paper is a result of an extra smooth
finish applied to paper. Gloss is measured using a glossimeter which measures the
amount of light reflected from the paper’s surface.
• Colour : It is the measurement of the hue or chroma purity verses intensity of the
colour of reflected light from paper. Color perception is based on :

 Hue : It is the visual sensation that distinguishes one colour from another.
 Saturation : It is the presence or absence of gray.

Printability Properties :

The following properties of paper reflects its printing capabilities :

• Smoothness : It is the measurement of the surface contour of the paper.


Smoothness is measured by measuring air flow over the paper using a device. The
smoothness of the paper affects how well the paper will display printing. Rough
paper does not display printing as good as smooth paper.

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• Surface Strength : The surface strength of paper is measured in several ways,
including the Scott Bond Length. Paper surface strength is based on the type of
fibers, bonding & surface treatments. Paper strength is especially important in
mechanically printed paper. Another important factor is erasability. It is the
property of paper to resist surface disruption by eraser. It is measured by abrasion
testing.
• Ink Receptivity : It is a measurement of the amount of ink transferred from a
printing plate to the paper and part of the printability test for paper. Ink
Receptivity must be high enough to leave a clear even print thatis easily legible.
The finishing of the paper, paper smoothness, porosity and paper compressibility
all effect the ink receptivity.
• Curl Resistance : Due to the alignment of the fibers in the paper, paper will tend
to curl when absorbing moisture. The resistance to expansion and curling
becomes very important for paper that is wetted during the printing process and to
paper used in high speed copiers.

Permeability Property : It refers to the ability of paper to accept or reject the absorption
of an outside substance. The printability properties are sizing, water absorbency, oil
resistance and grease resistance.

There are 5 machines at Bhadrachalam, 1 at Kovai and 3 at Tribeni which produces both
VAP(Value added Products) and Non-VAP (Recycled). Different machines are
specialized to produce these products. VAP Products really adds value as it helps the
company to derive better realizations. Some of the brands under the VAP category are
Pearl Graphik, Safire Graphik, Art Maestro, Carte Lumina etc. A few brands under Non-
VAP or Recycled Board are Ecoviron( known as Coated Board Grey Back), Ecoviron
Blanca(known as Coated Board White Back), Econatura etc. The VAP products are made
of the virgin pulp i.e softwood pulp while the Non-VAP products are made out of the
recycled fibre or waste paper. The following symbol is been given for recycled paper.

The three arrows of the recycling symbol represent the three


phases of any recycling program:

• Collection
• Processing &

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• Manufacture of recovered materials into new products.

The symbol inside indicates that the product has been


recycled.

Waste paper as a recycling material can be divided into two categories. First, paper which
has actually reached consumers (eg offices or households), been used and then collected
by them (“post-consumer”). Second, spoil paper arising during the utilization or printing
of other paper on its way to the consumer (“pre-consumer”). While this spoil paper,
which includes cutting waste or edge trimmings arising during printing, is always
perfectly sorted and completely recycled, much of the paper used in offices and
households (category one) ends up on rubbish tips. Newsprint contains a high proportion
of fibre, which makes separate collection and recycling economically worthwhile. Some
large European dailies are already 70% recycled.

This “recycling” is a good way of keeping down the mountains of waste paper and the
rate at which wood is consumed. According to the North American Environmental
Organization Earth Care, producing a ton of paper from waste paper costs half as much in
energy and water as making it from chemical pulp. It also creates 74% less air pollution,
34% less water pollution, conserves 17 trees and creates five more jobs. Recycled paper
is the least environmentally damaging of all paper products. Countries such as Sweden
and Germany are above the world recycling average at around 40%; the furthest forward
are The Netherlands, Austria and Japan, who recycle around half their used paper.

As per the company policy every year two new products are introduced. Last year the two
new products were introduced in the VAP category and they are branded as Art Maestro
and Carte Persona.

ART MAESTRO :

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The Art Maestro is a typical art board, having similar clay coating on both the sides and
finish thereafter through super calendar. The critical quality of this variety is high
smoothness, gloss, whiteness and printability, equal on both the sides. This board is
generally used for high quality print publication, POP materials, greeting cards, table
calendars, etc etc. They are generally marketed through retail segment, however, can
also be sold directly to some large print publication houses. The most interesting thing is
that, a market of approximately 4000 tonnes throughout the country is available which is
currently enjoyed by only one large organised sector.

CARTE PERSONA :

The CARTE PERSONA is a typical ivory board, which is usually an uncoated super
calendared board with high level of smoothness, whiteness and lowest two sidedness.
The general usage of this variety is for visiting cards, invitation cards, garment tags, etc
etc. The market size of this product is not more than 1000 tonnes in the country, which is
again enjoyed by only one large organised sector.

A few brands under coated recycled boards are as follows :

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ECO NATURA :
(Coated Grey back / Duplex board)

Eco Natura is a white lined chip board of medium density, designed to perform at high
efficiencies through printing & converting process with minimum wastage/losses.
Versatile board to deliver optimum impact and protection.

Features

• Double coated on top with high smoothness level


• Middle & bottom layers are recycled waste pulp – hot dispersion processed, &
sterilized.
• Superior performance on contemporary printing, packaging & filling machines.
• Low aspect ratio on stiffness & tensile for best carton performance.
• Suits all post print operations- varnishing, lamination,foil stamping & embossing.
• Recyclable: eco-friendly, widely used in general packaging.

Uses of this Board :

• FMCG & Industrial packaging


• Hosiery & Garments
• Match Shells
• Top liners for corrugated boxes
• Toys & Games
• Cereals
• Appliances

Other Coated Recycled Boards :

The recycled boards are as follows :

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• Ecoviron
• Ecoviron Blanca
• Ecoviron -Unit Kovia
• Ecoviron High Stiffness

Speciality Boards :

Indobev :
(Cupstock Boards)

These are single or both sides PE coated boards developed on a special cupstock base
with adequate internal sizing, to perform faultlessly on beverage cup forming lines. The
poly-extrusion coating is done on Egan laminators with the requisite process control and
in a controlled environment. Approved by Coca-Cola, Pepsi and Mc Donalds.

Uses :

• Hot beverage cups


• Cold beverage cups
• Part line disposables
• Food catering
• Chocolate / Confectionary containers

Other Speciality Boards are as follows :

• Indobarr
• Indolux Safire

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• Indolux Labelbase

SPECIALITY PAPER :

ITC is the premier manufacturer of Speciality Papers in India, with a diversified product
portfolio. ITC’s Speciality Papers are used in the manufacture of cigarettes, decorative
laminates, electrical equipment, fireworks and automotive filters. They also used for fine
printing, packaging and carbonizing. It is been manufactured at the Kovai unit located at
Coimbatore.

The product guide of various recycled & VAP products produced on various
machines located at various units with their GSM(Grammage Square Metre) and Grade
Specifications have been enclosed in the ANNEXURE 1 . Technical Specifications
for Caoted board Grey Back, Cyber XL Pac and Product wise Specifications for Cyber
Plus has also been duly enclosed in the ANNEXURE 1.

PLACE :

Place generally refers to the units or locations of the Company as well as its channels of
distribution. The company has 4 units in Kovai, Bhadrachalam, Tribeni & Bollaram. The
product is marketed through the dealers in case of domestic market. There is an
exception i.e. the division will continue with the tradition of having direct customers for
the Speciality Paper. This division of ITC encourages financially secure Corporate
Customers to become direct buyers of the Company’s Products. Direct Buyer is an entity
with whom the division conducts business, without the involvement of the services of a
dealer, directly or indirectly.

In case of Exports Market, the division may sell directly to the customers /merchants or
appoint agents on commission basis for procuring orders and servicing customers. The
appointment of agents will be done based on the recommendations of Exports Manger
forwarded to the Divisional Management Committee(DMC) by Head of Marketing.

PRICE :

As per the marketing policy, pricing of products shall be market driven, having regard to
the value created for the customer. However , all efforts will be to ensure that price
should be “contribution positive”.In the fast changing and complex market scenario, it

21
has become virtually impossible to operate with standard prices with all customers and
markets. Prices vary among customers based on a combination of factors like volumes,
potential of VAP, breakthrough opportunities, criticality of end-use brand, etc. Such
selective variation in prices for specific customers also helps in avoiding the entire price
table from being brought down to the lowest prices. Such contractual prices will by the
Head of Marketing.For Exports, the Head of Marketing, will seek a minimum floor price
in advance once in every quarter.

Pricing in case of Exports :


NSR (NeT Sales Realisations) = Net income of the company after reducing duties and
taxes.

Product Price/FOB = NSR + Internal Handling(Mill to Port) + Commission to the


Agent

CIF(Cost, Insurance & Freight) = NSR + Internal Handling(Mill to Port) +


Commission + Ocean Freight + Insurance Premium

CFR(Cost & Freight) = NSR + Internal Handling(Mill to Port) + Commission + Ocean


Freight

DDU(DELIVERY DUTY UNPAID) = CIF/CFR + Port to Port charges + Local


Transport in the destination country except local duties and taxes.

PROMOTION :

ITC PSPD adopts a Direct Marketing approach to reach out and attract the corporate
customers/merchants. As paper is an intermediate product, so direct marketing is the best
way to get new business and retain the old ones. The company initially identifies those
companies for whom paper will serve as a raw-material, or who requires paper and board
for printing, packaging and various other purposes. The company then through its direct
marketing strategies tries to promote its brands in various corporate customers by making
presentations. This is done to explain the customers about their products, its quality,
stiffness and how it can fit for their purpose. Thus, it targets those customers who can
convert its intermediate product into a useful finished product. This leads to better Net
Sales Realizations both for the company as well as the customer. For Example: the
Company has cashed in on the board used for making cup stock, as the demand for cup
stocks is very high in the market. This increase in demand for cup stocks is from the
BPO’s industry, Malls, food joints, cafes etc. This is made the company to invest more
on that board, as it will ensure better returns. As of today, ITC dominates the cup stock
market and they are the leaders in this segment. This is mainly because they provide the
right kind of board for manufacturing the cup stock.

To retain the existing customers, ever month the Company sends an ‘On Board’ brochure
which mainly comprises of the recent happenings, innovation, takeovers done by the

22
company and the recent trends in the paper industry. To attract the new customers a
flamboyant looking box is being sent to them, containing the samples of various types of
paper, the company produces.

Apart from direct marketing, the company has also conducted many promotional
campaigns and has advertised in newspapers. This is done to make the company’s
presence felt in the market and also creates awareness of various brands of ITC.

ECF(ELEMENTAL CHLORINE FREE) Paper Board concept gives ITC an edge


over the others as they have pioneered this concept in India. Though this concept is
popular in USA and UK, ITC has taken the initiative to introduce this concept in India to
provide better quality products to its customers. This reflects the company’s concern for
their customers by providing them products that are hygienic, thereby offering the same
quality product to the end user. To promote this ECF concept ITC-PSPD Division has
also conducted seminars and road shows in Mumbai & Pune. They had also arranged for
a conference at Pune by inviting the top mittiahwallas. This was done mainly because
generally all sweets which are sold in folding boxes and the paper board which is used for
those boxes must be Elemental Chlorine Free. This is because these boxes come in direct
contact with the sweets, so if proper board is not used it would affect the health of the end
users. So, this conference was mainly carried out to explain the mittiahwallas about the
ECF concept and how it will be beneficial for them. This concept was very effective in
Mumbai and Pune. They have done the same in Hyderabad, but the response here is not
upto the mark. Efforts are made to get a better feedback from Hyderabad and also
promote this concept in other parts of India. They have also identified a channel partner
who could seed this concept in the market. For effective promotion and publicity
purposes of this ECF concept, the company has also prepared a jingle, which is aired on
Radio Mirchi. This is done to gain more popularity and reach out to the mass customers.

As ITC-PSPD Division is mainly an B2B business so generally loyalty programs &


Customer Relationship Management Strategies are implemented to retain the valuable
customers. They have also carried out media campaigns and had a press conference with
the A. Ramdoss, the Health Minister. This was done to make the end users aware of this
conept and to attract new customers.

PACKAGING :

With the changing market dynamics, the role of packaging is growing multi-fold.
Customer is the king and to meet his changing needs business models are offering better
service in terms of quality, packaging, supply chain & logistics management.

Packaging is required because :

• To protect the Product as factory fresh till it reaches to the end users.

23

To promote the product.
• To add value to the product.
• To consumerise the product.

ITC's Packaging & Printing Business is the country's largest convertor of paperboard
into packaging. It converts over 35,000 tonnes of paper and paperboard per annum into a
variety of value-added packaging solutions for the food & beverage, personal products,
cigarette, liquor, cellular phone and IT packaging industries. It has also entered the
Flexibles and Corrugated Cartons business.

The Division, which was set up in 1925 as a strategic backward integration for ITC's
Cigarettes business, is today India's most sophisticated packaging house. State-of-the-art
technology, world-class quality and a highly skilled and dedicated team have combined
to position ITC as the first-choice supplier of high value added packaging.

The Division supplies value-added packaging to the Company's Cigarettes business. Its
client list includes several well-known national and international companies like British
American Tobacco, Surya Nepal Private Limited, VST Industries, , UB Group, Shaw
Wallace, Seagrams, Allied Domecq, Whyte & Mackay, Hindustan Lever, Tata Tetley and
Nestle, Reckitt Benkiser India Limited, etc.

With two ISO 9000:2000 certified & ISO 14001 certified packaging factories at
Tiruvottiyur near Chennai and Munger in Bihar, and a third factory coming up at
Uttaranchal, the Company offers a comprehensive product range in packaging:

flip-top boxes display outers shells and slides softcup and strap labels
bundle wraps flap boxes inner frames coupon inserts folding cartons
shoulder boxes pre-printed cork tipping Flexible packaging.

ITC occupies a leadership position in cigarette and liquor packaging in India. It supplies
packaging to cover 70 billion cigarettes a year domestically, and supplies packaging for
15 billion cigarette sticks a year for the export market. It is the largest supplier of liquor
mono cartons in the country.

ITC has enhanced the value of some of the most favoured brands with superior look-and-
feel packaging, using the best raw materials and process combinations, and an in-house
pre-press Design Centre.

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A Product Introduction Process team pioneers packaging innovations. The team uses a
unique process to pilot the client's packaging through its manufacturing system.
Specifications are evolved based on clients' needs. Corresponding to the specifications, a
variety of packaging solutions is then generated. The efficacy of the packaging is tested
simulating the client's factory conditions. Thus, it can be said that ITC also changes with
the changing market scenario which demands good packaging.

ROLE OF PAPERBOARD (CARTON BOARD) IN PACKAGING :

Cartons have 5 main advantages :

• Cartons are fit – for – purpose


• Cartons have consumer appeal
• Cartons are cost effective
• Cartons are eco-friendly
• Cartons are easy to pack, fill and transport.

Cartons are Cost effective because :


• Cheaper than other contemporary raw material especially while comparing with
Glass, Hard plastic and metals.
• Lower manufacturing cost as it is easy to convert to any creative design.
• Low transportation cost because of its light weight and efficient stack ability.
• Easy and cheaper to Recycle as it can be converted to carton board again and
again.

PACKAGING AND GRAPHIC BOARDS :

Coated Virgin Boards :

Cyber XLPac :

This product is a 3 - ply board with chemical pulp in outer plies and bleached mechanical pulp in middle ply
resulting in a board with high bulk (low density) and superior stiffness & smoothness levels. Designed to be
the ideal substrate for all Food and FMCG brands and available as cream back (GC2)and white back (GC1)
variants.

FEATURES :

• High stiffness and smoothness


• Optimum performance in printing and conversion process
• High color fidelity and print resolution
• High ink and varnish holdout
• Food grade (meets FDA 176.120 requirements)

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• Free from any flavor and odour.
• Low levels of heavy metals content ( Each < 20 PPM).
• Suitable for high definition offset & gravure printing.
• Suitable for high quality embossing and foil stamping.

USES :

• Food and beverages


• Cigarettes
• Pharmaceutical
• Personal & Health care products
• Cosmetics & Toiletries
• CD/Floppy Covers
• Electronic & Entertainment Products
• Litho liners

SAFIRE GRAPHIK :

Safire Graphik is an eye catching premium quality virgin fiber based fully coated Solid Bleached Sulphate
board of medium density, with a unique high whiteness shade with outstanding throw on a print product or

26
on a retail shelf. Fiber, pigments, shade and quality perfectly matched to create a surface with unparalleled
definition and depth.

FEATURES :

• Brilliant white
• Silky texture
• High level of print contrast and colour fidelity
• No detectable levels of Dioxins ( < 1 parts per trillion).
• Free from any flavor and dour.
• Low levels of heavy metals content ( Each < 20 PPM).
• Suitable for high definition offset printing.
• Suitable for high quality embossing and foil stamping.

USES :

• Advertising of promotional material


• Publication Covers
• Tags and Inserts
• Personal & Health Care products
• Cosmetics & Toiletries
• Greeting cards and Posters
• Danglers (POP) & Folders
• Lottery Tickets

PEARL GRAPHIK :

Pearl Graphik is a premium quality virgin, fiber based fully coated solid bleached sulphate board of medium
density. Designed for purity and true reproduction of images with exceptional print quality and appeal.

27
FEATURES :

• Cream white shade


• Faithful reproduction of hues
• High ink and varnish holdout
• High color fidelity and print resolution
• Food grade (meets FDA 176.120 requirements)
• Free from any flavor and odour.
• Low levels of heavy metals content ( Each < 20 PPM).
• Suitable for high definition offset printing.
• Suitable for high quality embossing and foil stamping.

USES :

• Advertising material
• Blister Packs
• Book covers
• Tags & Inserts
• Personal & Health Care Product, Pharmaceuticals
• Cosmetics & Toiletries
• Cigarettes
• Food & Confectioneries
• Greeting Cards
• Promotional Folders & Danglers (POP)
• Lottery Tickets
• Smart Cards

Cyber Cypak (Folding Box Board ) :

Cyber Cypak is a FBB board designed and made to very close tolerances, specially for cigarette packaging
requirements. Apart from superior smoothness levels of 0.8-1 mic (PPS), the board is designed to meet the
demanding requirements faced in printing eight or more colors at speed of 300 mtr/min, in-line rotary die-
cutting and embossing operations and meets the approval code of cigarette majors.

FEATURES :

• Designed for Rotogravure and inline die-cutting


• High stiffness and smoothness
• Optimum performance in printing and conversion process
• High color fidelity and print resolution
• High ink and varnish holdout
• Food grade (meets FDA 176.120 requirements)

28
• Low levels of heavy metals content (each <20 PPM)
• Meets sensory requirements
• Suitable for high quality embossing and foil stamping

USES :

• Cigarette Hinge-Lid Packs (HLPs) & outers and inner frames

Thus, the above were the packaging and the graphic boards made of virgin pulp. So, these
brands come under the VAP category that derives better realizations for the company.

PEOPLE :

At ITC they believe that their mission to enhance value creation for the stakeholder can
only be achieved through the quality and commitment of their people. Towards this end,
they continuously strive to unleash the potential of each individual.

At ITC, they build business leaders who create value, who believe that the future belongs
to those who are able to create it and which is why they value integrity, creativity,
passion, a 'will do' attitude and the will to succeed above all else.

Together, these empower their people to take risks, to experiment, to set their own goals
and win in the market place. In turn, the employees are encouraged to take the initiative

29
to continuously learn and experiment. These are the qualities which will help the
Company as well the employees to remain contemporary and relevant at all times. They
believe that the most enduring way to retain talent is to enable our people to continuously
add value to themselves.

ITC leverages human capital for competitiveness by nurturing knowledge,


entrepreneurship and creativity. It is these strengths that will help ITC successfully
compete in a globalised environment and exploit emerging opportunities

At ITC, they take an integrated view of structures, competencies, tasks and processes and
link all these to our long-term goals. The performance management systems at ITC focus
on performance, meritocracy, equity and the upholding of company values. Employees’
ideas are valued and people are given the space to execute them.

ITC has remained a vibrant company for nearly ten decades now because of its ability to
manage change proactively and to reinvent itself continuously without compromising the
ideals and values that have sustained the company over the years.

PROCESS :

As manufacturers in a highly competitive market place the Company have to ensure that
the products they sell meets the customers' expectations in terms of high quality, total
reliability, low cost and quick/timely delivery. All the above expectations can be fulfilled
by adopting Total Quality Control process in all the organisational activities. Costs are
rising, but all these cannot be passed on to the customers. Improving internal efficiency
and raising productivity levels is the only alternative to absorb the increasing costs. The
need of the hour is to adhere to the Total Quality Process & Principles and continuously
aim for improvements in all aspects of worklife, so as to ensure that our products are
internationally competitive in terms of Quality and Cost. It becomes imperative, therefore
that the Company achieve ISO 9002 certification at the earliest in order to realise their
Vision of "Leadership in Quality".

Advantages of being ISO 9002 certified :

• A passport to European and other markets.


• Motivates exporters through marketing advantage.
• Sets a base line for ultimate TQM
• Establishes ground for possible future Government mandate.
• Reduces time consuming audits by customers and regulators.
• Raises quality awareness among employees.
• The work force is involved in establishing procedures and hence their
commitment is assured.
• Improves efficiency, reduces scrap and rework. Hence the profitability is higher.

30
• Increased profitability if conducive to job security.

ISO 9002 IS IMPORTANT FOR BCM :

This certification will yield internal benefits in terms of :

• Streamlining the systems and procedures, which have bearing on the quality of
the product.
• Rationalizing and consolidating the many 'loose-loose' policies and procedures
into a co-ordinated 'whole'.
• Improving responsibility and accountability.
• Bringing training into sharp focus.
• Bringing about consistency in product quality.
• Improve work environment and employee morale.
• Encourage continuous improvement.
• Infuse greater order of discipline in the operations.
• Place BCM in the ISO 9000 league which could be an added advantage for
exports.
• An opportunity which is synergistic to other steps of TQM that BCM may be
taking to become a world class organisation.

At the Bollaram Plant it has adopted Lean Manufacturing Process for better efficient
usage of resources in terms of time, material, manpower and helps to minimize wastage.

31
UNITS OF ITC PSPD :
ITC PSPD has 4 units and they are Bhadrachalam, Kovai, Tribeni and Bollaram.

BHADRACHALAM :
It is the mother facility of the business and is equipped with five paper/board lines. There
are 5 paper machines at Bhadrachalam i.e named as PM 1(Paper Machine 1), PM2, PM3,
PM4 and PM5. The PM 4 and PM5 board lines are truly world class and complemented
by state-of-the-art finishing facilities capable of delivering rolls upto 1800 mm diameter
and sheets as Bulk or Ream Wrapped pallets with accuracy of 0, +1mm.

It has a production capacity of 3000 TPA(Tonnage Per Annum) of Virgin and Recycled
Boards. It has also commissioned India’s first Elemental Chlorine Free(ECF) Fibre Line,
with a capacity of 110000 TPA. It is accredited to ISO 14001 and OHSAS 18001
standards.

New capacities being added includes a new ECF Line which is under construction for
producing Virgin Pulp. This will be commissioned by October 2007 and will enable ITC
PSPD to expand its sale of Virgin and Food Grade Boards and Papers.

DESCRITION OF THE PAPER MACHINES AT BHADRACHALAM :

The following is the description of Paper Machine 1-5 at Bhadrachalam, and their
capacities, and the paper products and boards manufactured on those machines.

Paper Machine – 1

It is a paperboard machine and was the first machine installed at bharachalam in 1979
and was best of its kind during that time. It has a production capacity of 72,000 Tons per
Annum. The machine can produce paperboard with GSM range of 180 – 360.
The deckle size of the machine is 3.6 mts. It can produce 6 layer paperboard.

The machine speed is 360 meters / min.

The product range that can be manufactured is


Grey Back Board
Gypsum Board
Corrugated Board
Craft Paper

32
Paper Machine – 2 :

It is a paper machine and was installed in the year 1987 and was installed to cater to the
growing paper market in India. It has a production capacity of 36,000 Tons per Annum,
but the average production per day is around 70 – 85 tons. The machine can produce
paper with GSM range of 45 – 140. The deckle size of the machine is 3.1 mts.
The machine speed is 210 meters / min.

The product range that can be manufactured is


Alpha Plus
Hi-Brite paper

Paper Machine – 3

It is a second paper machine that was installed at bharachalam in 1987 and was an
outcome of PM-2, the MG cylinder is separated to make another machine. It has a
production capacity of 9,000 Tons per Annum. The machine can produce paperboard
with GSM range of 40 – 60. The deckle size of the machine is 3.1 mts. The machine
speed is 360 meters / min. The product that can be manufactured is MG Poster Paper

Paper Machine – 4

This paperboard machine and was installed in the year 1997 to cater to the Value added
segment of the coated paperboard market. As Paper machine -1this machine was the best
of its king in automation and technology. It has 4 wires and a MG Cylinder. It also has 4
scanners to monitor the paperboard quality during production itself. It has 3 coaters to
produce coated paperboard. It has a production capacity of 1,73,000 Tons per Annum.
The machine can produce paperboard with GSM range of 180 – 450. The deckle size of
the machine is 3.72 mts. It can produce 3 layer paperboard. The machine speed ranges
from 185 - 425 meters / min depending on the product.

The product range that can be manufactured is


 Cyber Family paperboard
 Coated Folding Box
 SBS Boards
 Liquid Packaging Board.
 VAP Products

33
Paper Machine – 5

This paperboard machine and was installed in the year 2004 as by stand to PM – 4 to
cater to the Value added segment of the coated paperboard market. In the year 2005 they
did a trial to make VAP products on this machine and it was a success. Since then VAP
products are also manufactured on this machine.
It has 4 wires and a MG Cylinder. It also has 4 scanners to monitor the paperboard
quality during production itself. It has 3 coaters to produce coated paperboard.
It has a production capacity of 1,08,000 Tons per Annum. The machine can produce
paperboard with GSM range of 180 – 450. The deckle size of the machine is 3.3 mts.
It can produce 3 layer paperboard. The machine speed ranges from 294 meters / min.

The product range that can be manufactured is


 Cyber Family paperboard
 Coated Folding Box
 SBS Boards
 Liquid Packaging Board.
 VAP Products

FINISHING HOUSE

The main objective of the finishing house is to convert the Jumbo pope roll into smaller
reels or sheets as required by the customer.

At our Bhadrachalam unit the company has 3 Finishing houses :

Finishing House -1: It caters to the need of PM- 1, PM- 2 and PM- 3.
It has 2 re-winders and 5 Sheeters

Re-winders: These re-winders convert the jumbo pope roll into smaller reels with the
required deckle.

Sheeters: These Sheeters cut the smaller reels into sheets of required dimension.

For all these operations Trim Combination is given by mixing the various requirements
of different customers so as to minimize the deckle loss.

After the Re-winding of the pope roll into smaller reels then they are packed according to
the requirements.

Reel Packing:
If the requirement is for reel packing then the reels are weighed and sent to reel packing
machine where they are wrapped with craft paper then they are weighed and labeled with
details like Order-Id, Net Weight, Gross Weight, GSM, Date, Core Id etc. If Customer
insists on a barcode then it is also printed on the label.

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Sheet Packing:
If the customer requirement is for sheets then the child reels are sent for sheeting
machines where they are cut into required sizes. For sheeting in order to minimize the
loss the width of the reel is decided in the Trim combination.

Paper Board Sheet can be packed in 4 types. They are :

Bulk Pallets:

In this the sheets after cutting are automatically counted and placed on the pallet at the
machine end. Then they are sent for Shrink wrapping along with the label with complete
details like Order-Id, Net Weight, Gross Weight, GSM, Date, Core Id etc. If Customer
insists on a barcode then it is also printed on the label.

Ream Palleting (RPT):

In Ream palleting first the sheets are packed in ream of 100 sheets each called Ream.
This packing is one both manually and by machine. For each ream a label is attached
giving details of the Order and the paperboard quality and GSM. These reams are then
kept on a pallet and strapped with plastic rope.

Bundles:

In this type packing first the sheets are packed in bunch of 100 sheets called Ream. This
packing is one both manually and by machine. For each ream a label is attached giving
details of the Order and the paperboard quality and GSM. These 5 – 6 reams are shrunk
wrapped into a bundle depending on the weight that should not exceed 70 kg; the bundle
is also made by wrapping a HDPE woven sheet and manually stitching it and then kept
on a pallet and strapped with plastic rope.

Finishing House -IV: It caters to the need of PM- 4

It has 1 re-winder and 2 Sheeters.

Re-winders: These re-winders convert the jumbo pope roll into smaller reels with the
required deckle.
Sheeters: These Sheeters cut the smaller reels into sheets of required dimension.

Shrink Wrapping: We have a Shrink Wrapping machine to pack reams into bundles.

We have a temporary storage to store reels that are to be sheeted through sheeters. This
storage is operated through one crane which handles only reels. This storage is between
Trimmer and the Sheeting process and is known as RSM (Reel Storage Manager). It
directs appropriate reel for sheeting when required.

35
Finishing House -V: It caters to the need of PM- 5

It has 1 re-winder and 3 Sheeters

Re-winders: These re-winders convert the jumbo pope roll into smaller reels with the
required deckle.

Sheeters: These Sheeters cut the smaller reels into sheets of required dimension.

Shrink Wrapping: We have a Shrink Wrapping machine to pack bulk pallets.

BOLLARAM :
This unit was setup as a downstream facility to make speciality boards and paper. It has a
production capacity of 5000 TPA of Cast Coated Papers & Boards, 20000 TPA of Poly
Extruded Coated Boards, 12000 TPA of C2S Art Boards and Ivory Coated Boards. It is
accredited to ISO 9001 and ISO 14001 standards. A new poly extruder for lamination
will be added this unit with a capacity of 15000 TPA. This machine will start production
by January 2008.

KOVAI :
This unit is specialized in production of Recycled Boards. It has a production capacity of
80000 TPA. It has increased flexibility manufacturing range of board grammage and
lower lead time in order deliveries. It is accredited to ISO 9001 and ISO 14001 and
OHSAS 18001 standards.

TRIBENI :
This unit has a history and tradition of over 50 years in speciality paper making with a
diverse range of Industrial and Fine Papers. Its unmatched expertise and focus on
innovation have seen it pioneer the development of several breakthrough products. Its
rated production capacity is 25000 TPA. This unit is accredited to ISO 9001, ISO 14001
and OHSAS 18001 standards. The production lines will be modernized in 2007-08 to
meet the demanding needs of Tobacco customers and Commercial Book publishers and
printers.

36
CONVERTING AND SHEETING UNITS :

Paras is an converting unit located in Ahmedabad. To serve the customers in the Gujarat
Region, ITC has outsourced the converting process. It is a Poly Extruded Plant which
makes cup stock for which the board is supplied by ITC.

Silvasa is a sheeting unit which is based in Mumbai. The main reason of the company
having their unit there is to be closer to the market. West Mumbai is a large market and
has lot of potential to grow. This helps the company to grow in a dynamically changing
market situations.

Wazirabad is a converting unit located in Uttar Pardesh. This unit was started with the
intention to meet any emergency in demand. As most of the units of ITC PSPD are
located in the southern region, due to certain contingency the company may not be able to
deliver on time. So, this converting unit helps the Company to cater to the demand of
that region and also ensuring that the delivery is done on time.

It has around 43 sheeting units in and around Burgampahad in Andhra Pradesh. These
sheeting units were already well established and now ITC has taken over these units. It
just an short come arrangement done by the company to meet the surge in demand. These
are small investments done by ITC mainly to increase its capacity. As each of these
sheeting units produces only 4 tons per day.

37
MARKETING POLICY :

TRADE DEPOSITS :

All dealers in the domestic market are required to maintain a trade deposit with the
company. Agents in export market are not required to maintain trade deposits. Similarly,
direct and corporate customers in the domestic market are not required to maintain trade
deposits. Such deposits will be ‘cash deposits’ with the company.

CASH DISCOUNTS :

Cash discounts {CD} , currently at 1.5% on NSRs are offered to all customers and
dealers {of units : Bhadrachalam and Bollaram} who pay within 15 days of invoicing.

The quality rebate allowed to a customer on account of supply of defective material will
be determined by the sales / manufacturing team attending the claim.

All quality claims of domestic customers put up , are revived / approved first by
‘National Sales Manager’ and then by ‘Head Marketing’.

Complaint / quality claim redressal system is followed for export related claims as well.
In the approval process 1st approval is done by Export Manager followed by Head
Marketing.

DISCOUNTS ALLOWED ON STOCK LOT SALE :

Any material more than 90 days old , or Is identified as defective , or is excess generated
in quantities less than two tons can be sold as stock lots.

If material does not meet the criteria and still needs to be disposed as stock lots , the
clearance for the same is required from the “stock lot committee” appointed by the DMC.

Floor prices for the stock lots will be cleared by DMC from, time to time.

Disposal of all stock lots including sale belos floor prices , will be done with the
documented prior approval of sales manager.

Our board is nominated for several leading national and regional brands and as such
converters have little choice in the matter of board selection in case delivery of our board
gets delayed. Sometimes due to sudden requirements from end users , converyers may
come up with unexpected / unplanned orders which we may not be able to service in the
time frame required by them. There are also occasions when customers press for
immediate replacement of a rejected lot.

In such cases , we may allow the customer to use alternate board in their stock and
compensate for size loss or supply an alternate board from our end and absorb the losses.

38
COLLECTIONS:

Payment Terms :

Cash Payments : Payment terms qualifying for cash.

Credit Payment : Interest bearing Credit terms are denoted as ‘U’ and interest free
credit terms are denoted as ‘C’. The usual interest bearing credit terms are 30 days , 45
days and 60 days. The usual interest free credit terms are 15 days , 30 days and 45 days.
Interest , where chargeable at 15% p.a. for the credit period allowed. Any other special
terms other than the above should have the approval of Head Marketing and ratified by
DMC.

Overdue Invoices :

a} Delayed payments attract penal rates of interest @ 18 % p.a. and would be payable
from the date the invoice becomes overdue. There would be no overdue interest charged
on Corporate customers . All cases of waiver of recovery of debit notes for overdue
interest or any deviation to the rates and methodology will be with the approval of Head
Marketing. No overdue interest will however be charged on debit notes.

b} All decisions of not charging overdue interest on any cases of delayed payments { i.e.
not raising debit notes for overdue shall be based on the documented recommendations of
the Regional Manager and as approved by the Sales Manager).

Interest Rates :

The rate of interest for credit payment and overdues will be reviewed from time to time
and any change required will be with the approval of DMC.

Recovery Of O.D. Interest :

Since recovery of overdue interest is always debated { due to stiff penal rates } , as a
matter of prudence, the claim made through a Debit Note will be provided for , till
realization in the Accounts.

39
Export Receivables :

Export sales will be made against Letters of Credit or advance payment before shipment.

Any transaction initially covered under the following but subsequently sent on collection
basis shall be with the approval of Head Marketing . A list of such approvals shall be put
up to DMC on a quarterly basis .

All Letters of Credit shall either be confirmed / confirmable by a Bank or shall be


covered under ECGC.

If , in case of exports transactions done on Direct Payment or Collection Basis , there is a


dishonour of the invoices and payment does `not come from the customer, the same shall
be recovered from the agent who has generated the business. More over, all further
business with such customer shall be conducted only with the prior approval of DMC
member concerned.

Policy related to Export Benefits :

The division will attempt to maximize export benefits.

If for a product category , more than one scheme of expert benefits are available , a
formal comparative evaluation will be done and the most beneficial schemes will be
choosen. This evaluation and consequent choice of scheme{s} shall nbe done annually
there are significant amendments to the Exim Plicy impacting the divisions business.

If due to commercial exigencies , it becomes imperative to conduct export transactions


without availing any export benefit, the same shall require prior approval of Export
Manager. A quarterly report of such instances shall be put up to Head-Marketing for
ratification.

Powers for approval for acceptance of disallowance / reduction of export benefits by the
designated Government authority to the division shall rest with the Export Manager . a
quarterly report of such instances shall be put up to Head of Marketing for ratification.

40
PLANNING :

Every year at ITC PSPD , the planning department prepares a 5 year rolling plan. This
plan basically reflects the company strategies and approach to the dynamics of market in
the years to come. Before the actual plan is laid out, the planning department takes into
consideration the following aspects :

• Growth of the Paper Industry vis-à-vis the growth of ITC. This is to ensure
whether ITC is growing in lines with the growth of the paper industry. This
analysis will reflect where ITC is currently stands. Liquid Packaging is growing
at the rate of 35% year after year. This information tells that ITC can grow in this
segment as there is a lot of demand for this liquid packaging board.
• They forecast the demand for the forthcoming years. Demand Forecasting will
enable the company to decide on which products they should make more
investment.
• They study all segments of marketing i.e. domestic, region-wise, inter-divisional,
corporate and an international marketing.
• The planning department also studies the economic situation of India vis-à-vis
the other countries.
• They keep upgrading their knowledge about the printing and packaging standards
on the national and international level. For example : With the changing times,
packaging has gained more importance. So, to capture the packaging market the
company conducted a seminar with the exporters of garments. The sales mangers
of the company explained them about the quality of the products ITC offers and
various benefits. This seminar has helped ITC gain more orders for the packaging
board produced by the company.
• They keep a constant watch on the industry dynamics, to identify those areas
where paper products may be used, to increase the sales of the company.
• The planning personnel keep updating themselves about the latest developments,
trends and fashion in the market.
• They also study the government policies, budgets to know the duty and tax
structure in India. This information will help the company to effectively frame
their pricing strategies.
• Industry Saturation, performance of ITC over the years, inflation rate are the
other factors.

Thus, after the above analysis is done by the planning department they have a brain-
storming session and all these points are evaluated, analysed and interpreted. Then the
final plan is laid out. This plan has to be approved by the DMC(Divisional Management
Committee) and confirmation has to be given by the planning head at the corporate
office. The planning head at the corporate office again analyses the plan to ensure
whether it is made in line with the corporate strategy.

41
Once the plan is approved and confirmed, it is broken up by the divisional head into
month-wise plan and then circulated to various departments and units of PSPD. This
enables all the departments to align their strategies with the plan so laid out.

PRODUCTION PLANNING:

Production Planning is the most critical aspect for any manufacturing concern. This is
because entire scheduling of all the functional areas in dependant on this production plan.
Before a production plan is laid out, it is essential for the production planning manager to
take into consideration the order requirements from the various marketing segments i.e
region-wise, domestic, inter-divisional , corporate and exports(international). After
reckoning the order requirements, the planner has to consult with the manufacturing
people at various mills, converting and sheeting units. This to ensure whether the order
requirement matches with the capacity of the machines to produce those orders. The
planner also has to understand the technical points of the machines, that has a significant
impact on the plan to be laid out. He has know the technicalities like the machine requires
to be cooled down on a timely basis, it needs to be washed to start the run for the next
product, capacity, efficiency of the machine etc. This will help him formulate a plan that
is effective.

If the demand is greater than the supply, which is known by the planner after sketching
out a rough outlook of the plan, then to meet the gap he checks up whether there is
sufficient buffer stock to cover that gap and reach the equilibrium point.

Once this production plan or schedule is prepared after taking into consideration all the
related aspects, then it is circulated among various departments. They in turn pass it on to
the customer, dealer or the agent. This is done so that the customer can plan there
production accordingly. This is because paper is an intermediate product which serves as
the raw material for the customer.

Once the plan is circulated, the production planning manager or the planner has to
continuously track as to whether everything is going as per the schedule so sketched out.
At the end of every month, the planner checks whether the paper boards are delivered on
time. Due to certain problem in a particular machine, the order as demanded may not be
fulfilled they intimate the customer before time of such discrepancy. In case of
seasonality of orders , due to lack of higher capacities, they try to meet the commitments
given to the big corporate customers like Hindustan Lever, etc

Every month’s plan is reviewed against the annual plan so laid out by the production
planning head of the company. This will reflect whether the company will achieve its
targets so planned at the beginning of the year.

Thus, a proper production plan would be effective if it is prepared taking into


consideration all the aspects and also by timely reviewing it.

42
The production plan for the month of May , 2007 as laid down by the planning manager
is attached here with.

PRODUCT DEVELOPMENT & MODIFICATION :

Product introduction, development and modification are very important to sustain in a


business. Product development manager has to be well versed with its existing products
and their technical specifications. He also has to stay in constant touch with clients,
customers, dealers to know their requirements. If all the conditions permit, and such
development adds value to the product and helps the company derive better NSR, then
they go for product development.The process which is followed for introducing a product
in the market, is described as follows:

1. First, the product idea is identified which emanates from the market demand.
2. This idea is evaluated by the Product Manager on various parameters, such as
whether that type of product could be produced on the existing machine base,
sales realizations derived from the product.
3. Then proper screening of the idea is done as to whether it can meet the technical
specifications of the existing machine. The impact it has on the cost, volume and
realization is also evaluated. Most importantly, the product manager checks
whether it will add value and can properly fit in the existing product line.
4. Then a protocol note is sent to the concerned unit, where the idea is actually tested
by taking a sample and running it on the machine.
5. Once the expert team has studied the idea and they are convinced, then the
approval is granted.
6. Thereafter, the customer gives a trial order and then the product is manufactured
at the appropriate unit.
7. Once the run is completed and the product is produced, then the technical team at
the mill studies the other properties / technical aspects of this new product and
checks for any defects, and weaknesses in the profile of the product. Thereafter, it
tries to improvise on those aspects, thereby delivering quality products to the
customer and ensuring production efficiency too.

Thus, in this way, a product is introduced and based on the feedback given by the
technical team – the bottlenecks in the product are removed so that it fetches a better
price for the Company.

Product modifications may be done on certain bases like stiffness, meterage, packaging,
etc. This is done mainly to satisfy the customers, dealers and agents, so that the product
fits their purpose.

On an international level, where the Company has to compete globally, it has to meet
certain international standards. This is required for the Company to sustain in the market

43
and gain recognition for its product. For example, to meet the order requirements of the
Korean customers, the Company had undergone an FDA (Food and Drug Administration)
test and OBA Free (Optical Brightening Agent) test, for food packaging. Even at
international level, ITC leverages on VAP Products vis-à-vis recycled boards, as they
give better realizations to the Company.

BRAND MANAGEMENT:

Branding is done for both recycled boards and Value Added Products. As VAP products
give higher contribution, more emphasis is given for branding of VAP products. As
branding attaches a certain value to a product, the Company formulates branding
strategies, so that the Company can command a premium for its products. Among the
VAP products, the most popular brands are SAFIRE GRAPHIK, PEARL GRAPHIK and
CYBER EXCEL. As per the market demand and changing needs of the clients and
customers, every year, the Company introduces two new products by effectively branding
them. Last year, Carte Persona and Art Maestro brands were launched in the market.
These brands are superior in quality, with better gloss and finishing specifications.

Thus, brand management also has a significant place in the marketing strategy for a
product.

Types Of Market Segments:

There are four types of marketing segments:

• Domestic
• Interdivisional
• Corporate
• International

Domestic Marketing:

It refers to marketing of products in the domestic market i.e. India sales starts by creating
the markets and serving the market through the dealers. The dealers in the AP market are
Laxmi Ganapati {in AP} Pandiyan Meena Paper Company {Coimbatore} , Mittal Paper
Company {Banglore} etc.

Domestic markets show phenomenal growth prospects of 35% year after year. In
domestic markets, ITC is the leader and with ECF concept and VAP products it has
dominated the market. I t faces competition only in recycled boards category, from T.K.
Paper mills, Andhra Paper Mills, N.R. Agarwal Paper Mills, Khanna Paper Boards,
Gayatri Shakti Paper etc.

44
Their only USP/ unique selling proportion is that they sell quality products at competitive
prices. In case of seasonality in demand in the domestic and international markets, the
company may not be all to satisfy all customers. In such a situation it tries to retain the
customers through which the company gets maximum profits. This is because at the peak
time, it is difficult to meet all demands, considering that capacity in the constraint. ITC
has always kept moving ahead and is constantly trying to overcome its in capabilities
especially in capacity building. Two new machineries will be installed to serve their
purpose.

In Domestic Markets, they are able to command a good premium because they offer
paperboards and products in various combinations. This aspect has its own pros and cons.
The advantage here is by customization it can serve variegated combination of demand
for paper products. The disadvantage is due to the various combinations; there is a lot of
wastages efficiency of the machine also goes down.

With growing demand in the Northern hemisphere of India, the company is going to start
its own converting unit in Delhi to serve the customers. This will reduce the freight
charges; thereby the company would gain in terms of profit.

On an all, Domestic Market is doing quite well and they have planned to expand their
capacity to meet the demands of the customers even during the peak seasons. This will
help the company to become leaders in both recycled and VAP products.

Inter Divisional Marketing:

This marketing is to serve the needs of paperboards, packaging boards and other products
of the other division of ITC like PRB {Printing And Packaging Boards}.

Apart from that this type of marketing is also targeted towards the foods division of ITC,
for their requirements of packaging boards.

In case of inter divisional marketing, no dealers are appointed. It is just a transaction


between two divisions of the same company. The paper division sells to other divisions at
a transfer price. This is an negotiated price decided upon between the divisions.
Generally this price is nothing but the cost to the company plus a meager % of margin.
As the other divisions do a good business, on an overall basis ITC is going to be
benefited as a company. The invoice rose for this purpose. The format of the invoice for
various marketing segments accept international will still remain the same. A sample of
the invoice is attached here with:

45
Thus, the inter divisional marketing ITC satisfies the needs of other divisions.

Corporate Marketing:

Corporate marketing refers to the market of paper products to there co-operate customers
like Hindustan Unilever Lmt, Nestle, Tetrapak {Pune}, Godfrey Phillips {Delhi}, India
Gypson {Chennai}, and Paper Products {Hyderabad}. They are the big time cooperate
clients of ITC through which they get good bonus at a good price expected by ITC.

In case of cooperate marketing, no dealer is involved. Marketing approach is used to


serve the cooperate customers.

The credit then allowed to various cooperate customers are Paper Products { C45 i.e.
credit of45 days} Tetrapak {credit of 30 days}. Average days of debtors is a little high
i.e. 45 days but the company is trying to reduce the members of days by understanding
the business of the cooperate clients. This means that the Sales Manager tries to
understand the product, the production schedule of its clients and then with a mutual
agreement they come to a consensus. In this way, both the parties are benefited.

As the packaging requirements from different cooperate customers is different, the


company has to constantly develop and modify its products.

The sales turnover is around 6-7 corers per month from the cooperate clients. So with
increase in the capacity in the coming years, company plans to catch to the increasing
needs of various cooperate customers, as they are the profit-giving customers.

International Marketing at ITC:

International marketing occupies a significant place in the entire marketing pie of ITC
PSPD. The company offers quality products at competitive prices, which helps them to
survive in the global markets.

46
One of the specific reasons for the company to center international markets are to
harness the available capacity. As the domestic market is not able to absorb the entire
capacity, the utilized capacity is used for sale in the international markets. Thus, it
ensures optimum utilization of resources. Due to increase in the demand from both the
domestic and the international markets, the capacity has become a limitation.

ITC has gained many capabilities in the domestic market that it has leveraged it to market
there their products on an international level.

The company has made a name for itself by meeting global standards and by competing
at a international level. This name and recognition does not come so easy, the sales
manager who with the help of their agents continuously track the markets has undergone
a lot of effort. There are some markets which are not at all matured i.e. the matured
markets lack the awareness of the company’s products. In such markets the sales
managers have to really work hard to serve their purpose of selling their products. If the
markets were returned, it would be an added advantage for the company on it can now
focus more on marketing and gain better realization. UK is a matured market with paper
distribution channels.

In certain countries, where utilization and the cost of delivery both are high, in such
cases, higher freights cut into the profits of the company, so in the net effect the company
can only break even.

Thus, on an overall basis, it can be said that ITC has changed with the changing market
scenarios and tried to occupy a significant place in the global markets as well.

47
TARIFF AND NON-TARIFF BARRIERS TO TRADE OF PAPER
INDUSTRY :

Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can
either be tariff barriers, that is a levy of ordinary customs duties or non-tariff barriers,
that is any trade barriers other than tariff barriers. Tariffs act as a direct tax on trade,
while non-tariff barriers restrict trade and market access through other non-tax means
such as quotas, quality and product standards etc. Trade restrictions are legal if they cause
material damage to domestic industry. Non-tariff barriers can take many forms. Health
concerns can be raised to block entry; customs procedures can be made more stringent;
country-specific standards can differ (in terms of stringency) for domestic and non-
domestic products; certification procedures can be made more cumbersome and
expensive.

Additional effects of trade barriers: when there are fixed costs of selling in a country,
goods will be imported only if profits are large enough to cover these fixed costs. While
tariffs, by themselves, reduce the profitability of importing, the presence of fixed costs of
trading compounds the effect of tariffs, and could result in substantially reduced or
virtually no imports from some countries.

Non-tariff Barriers (NTBs) are obstacles to exports. Examples of NTBs include import
quotas, government subsidies for domestic forest products industries; building codes;
discriminatory technical standards; licensing restrictions; tax policies; discriminatory
packaging or use standards; import policy barriers; Standards, Testing, Labeling and
Certification requirements; Anti-dumping & Countervailing Measures; Export Subsidies
and Domestic Support; Government procurement; Services barriers; Lack of adequate
protection to Intellectual Property Rights. Non-Tariff Barriers are also known as
Technical Barriers to trade. International trade in forest products is adversely affected by
non-tariff barriers (NTBs). NTBs severely hinder trade and erode the benefits of tariff
elimination. Removing unwarranted NTBs, particularly in the broader use of wood
products in building and construction, will help stimulate economic activity in a range of
associated industries and better ensure forest products have equitable access to
international markets.

The following are the Non-Tariff barriers related to paper industry :

• Rules Of Origin
• Customs Valuation
• Pre shipment Inspection

48
• Transparency
• Import Policy Barriers.
• Standards, Testing, Labelling & Certification Requirements

Rules of Origin:

For a trading country like New Zealand, figuring out where a product is "from" can be
important. It can determine, for example, whether the product can be imported duty-free
because it is 'made' in a developing country, or whether it is subject to import quotas
when it is exported. The World Trade Organisation and the World Customs Organisation
are working with countries around the world to develop worldwide 'Rules of Origin' -
criteria that countries can use to determine where a product is made.

Overview :

Many products moving around the world in international trade include materials or
components from more than one country, and may also have been manufactured or
processed in more than one country. This mixture of origins can raise difficulties for
importing countries. Determining a product's origin can matter for a number of reasons,
for example:

• the product may be subject to anti-dumping or countervailing duties or safeguard


measures if it comes from a certain country
• the type of product may be subject to an import quota, so the importers need to
know which country's quota allowance the product should be marked against
(some countries may have already filled their quota allowance)
• for statistical reasons
• a product may be eligible for preferential or duty-free access if it comes from a
developing country or a country with whom the importing country has a trading
agreement with.

Rules of origin (ROOs) are the criteria by which a product's country of origin can be
determined.

Currently there is no system of ROOs that are recognised worldwide. Uncertainty about
whether products will meet origin requirements can be a serious obstacle to trade. There
is also the possibility that rules may be altered or manipulated and used as a protectionist
measure.

The Agreement on Rules of Origin [Agreement text on the WTO website] was negotiated
during the Uruguay Round, with the intention of creating a harmonised ROO system to
remedy this situation. The Harmonisation Work Programme (HWP) to determine
international ROOs is being carried out by the WTO and the World Customs
Organisation [external link] in a joint effort The HWP is guided by article 9 of the ROO

49
agreement, which sets out the criteria for establishing rules on the country of origin for
any product. It provides that the country of origin is the "either the country where the
good has been wholly obtained or when more than one country is concerned in the
production of the good, the country where the last substantial transformation has been
carried out." Thus, harmonised rules of origin should also be objective, predictable,
consistent and not trade restrictive.

Rules of Origin are apply to those countries which have bilateral agreements. Rules of
Origin ensure that the third country involved in the making of a product, may not take the
benefit of the country from their the product is actually manufactured. The same rule
applies to paper products. This is because to prepare paper and boards, certain raw-
material are imported from other countries with which the country has bilateral
agreement. This implies that according to the rules of origin, the actual benefit should go
the manufacturer of paper board i.e ITC PSPD.

Customs Valuation :

If the wrong value is applied, exporters could be overcharged duty. If exporters are
unsure how the value will be calculated, the business of exporting becomes
unpredictable. Poor customs valuation procedures can act as a barrier to trade, since
exporters need to be sure how much duty their goods will attract in order to decide
whether or not a profit could be made by exporting goods to certain markets.

Proper Custom Valuation ensures that the company gets the right price for the quality of
product it sells to the customer.

Pre-shipment Inspection :

Importing goods from some countries is potentially a risky business for all parties
concerned. To prevent fraud and to protect importers and exporters, some developing
countries use pre-shipment inspection by independent agencies to make sure that the
price, quality and quantity are correctly specified on shipment details.

Pre-shipment inspection is the practice by governments of employing independent private


companies to inspect goods before these are exported to other countries. The goods are
checked to ensure that the price, quality and quantity are correctly specified on the
shipment details. Some developing countries have made presentation of a clean report by
a pre-shipment inspection agency a condition for clearing imports through customs.

Pre-shipment inspection is important in two ways. Firstly, it is used by governments of


developing countries to compensate for any inadequacies in the administrative
infrastructures. Pre-shipment inspection is a way to prevent commercial fraud as well as
customs duty evasion. Secondly, pre-shipment inspection provides exporters and

50
importers with extra confidence that the goods match what is specified in the sales
contract. This in turn inspires greater confidence in trading with developing countries.

For the export of paper products to Kenya, pre-shipment inspection is done as Kenya’s
foreign exchange reserves are quite low, so to ensure that funds do not flow out easily
from the country this inspection is carried out. They want to make sure that the foreign
exchange used for imports is for the quality products.

Transparency :

Transparency plays a significant role in the agreement. There are specific obligations on
members to ensure that information is available to interested parties so that they can
comply with inspection requirements. For instance, the agreement states that members
shall ensure that when initially contacted by exporters, pre-shipment inspection entities
provide to the exporters a list of all the information necessary for the exporters to comply
with inspection requirements. Confidentiality rules do apply however, preventing
inspection agencies from asking details of patented processes, internal costs, profit levels
and contracts between exporters and their suppliers.

Transparency of all transactions ensures better value for the products and does not lead to
any legal obligation.

Import Policy Barriers :

One of the most commonly known non-tariff barriers is the prohibition or restrictions on
imports maintained through the import licensing requirements. ArticleXI of the GATT
Agreement requires Members not to impose any prohibitions or restrictions other than
duties, taxes or other charges, whether made effective through quotas, import or export
licences or other measures. Any form of import licensing (other than an automatic
license) is, therefore, to be considered as an import restriction.

In case of exports to Iran, there is a foreign exchange regulation. As per this regulation,
forex is not available for imports of all products by the country. So, any company in Iran
needs to import paper products, it has to first get the confirmation from the ministry to do
so.

Standards, Testing, Labelling & Certification Requirements :

Prima-facie Standards, Testing, Labelling and Certification requirements are insisted


upon for ensuring quality of goods seeking an access into the domestic markets but many
countries use them as protectionist measures. The impact of these requirements is felt
more by the purpose and the way in which these are used to regulate trade.

To summarise, globalization of the paper industry, increase in regional imbalances in


demand and supply, and the emphasis on reducing of tariff, non-tariff and other market
access restrictions all provide additional opportunities for the paper industry. The Asian

51
economies are growing and facing increased demand for paper and paper products;
however, it is unlikely that they will be able to meet this demand from their increased
capacity, and in any case, they are also constrained by their domestic timber supplies.
This will lead to greater Asian imports and the recycling of waste paper. The US and
Canada will be able to exploit the opportunity to supply the Asian market because of their
large supply of fiber.The identification of the critical factors, goals and constraints in
their supply chains will enable corporations in the paper and pulp industry to improve
their competitive position and financial results.

TYPES OF NON TARIFF CONTROL MEASURES :

As a part of the study, I had been given an assignment to fill a questionnaire that
covers the types of non-tariff control measures and how non –tariff barriers affect
trade. The filled in questionnaire is being duly enclosed in the ANNEXURE 2 . From
my learnings, after filling up of this questionnaire regarding non-tariff measures are
explained below :

FINANCE MEASURES :
Measures that regulate the access to and cost of foreign exchange for imports and define
the terms of payment. They may increase the import cost in a fashion similar to tariff
measures.
Advance payment requirements(4100)
Advance payment of the value of the import transaction and/or related import taxes,
which is required at the moment of the application for, or the issuance of, the import
licence.

Advance import deposits(4110)


Obligation to deposit a percentage of the value of the import transaction for a given time
period in advance of the imports, with no allowance for interest to be accrued on the
deposit.

Cash margin requirement(4120)


Obligation to deposit the total amount corresponding to the transaction value, or a
specified part of it, in a commercial bank, before the opening of a letter of credit;
payment pay be required in foreign currency.

Advance payment of customs duties(4130)


Advance payment of the totality or a part of customs duties, with no allowance for
interest to be accrued.

Refundable deposits for sensitive product categories(4170)


The deposit refunds are charges which are refunded when the used products or its
containers are returned to a collection system.

Multiple exchange rates(4200)

52
Varying exchange rates for imports, depending on the product category. Usually, the
official rate is reserved for essential commodities while the other goods must be paid at
commercial rates or occasionally by buying foreign exchange through auctions.

Restrictive official foreign exchange allocation(4300)


Restrictive allocation of foreign exchange intended to control import flows, usually
executed by the central bank in the form of permits, visas, authorizations, etc. Sometimes
takes the form of prohibition of foreign exchange allocation.
Regulations concerning terms of payment for imports
Special regulations regarding the terms of payment of imports and the obtaining and use
of credit (foreign or domestic) to finance imports.

Transfer delays, queuing(4600)


Minimum permitted delays between the date of delivery of goods and that of final
settlement of the import transaction (usually 90, 180 or 360 days for consumer goods and
industrial inputs and two to five years for capital goods). Queuing takes place when the
prescribed delays cannot be observed because of foreign exchange shortage, and
transactions are settled successively after a longer waiting period.

Restrictive allocation of foreign exchange intended to control import flows, usually


executed by the central bank in the form of permits, visas, authorizations, etc. Sometimes
takes the form of prohibition of foreign exchange allocation.

PRICE CONTROL MEASURES :

Measures intended to control the prices of imported articles for the following reasons:
(i) to sustain domestic prices of certain products when the import price is inferior to the
sustained price;
(ii) to establish the domestic price of certain products because of price fluctuation in the
domestic market or price instability in the foreign market; and
(iii) to counteract the damage caused by the application of unfair practices of foreign
trade.
Most of these measures affect the cost of imports in a variable amount calculated on the
basis of the existing difference between two prices of the same product, compared for
control purposes. The measures initially adopted can be administrative fixing of prices
and voluntary restriction of the minimum price level of exports or investigation of prices,
to subsequently arrive at one of the following adjustment mechanisms: suspension of
import licences; application of variable charges, antidumping measures or countervailing
duties.

Administrative price fixing(3100)


By administrative price fixing, the authorities of the importing country take into account
the domestic prices of the producer or consumer; establish floor and ceiling price limits;

53
or revert to determined international market values. Various terms are used, depending on
the country or sector, to denominate the different administrative price fixing methods,
such as official prices, minimum import prices or basic import prices.

Voluntary export price restraint(3200)


A restraint arrangement in which the exporter agrees to keep the price of his goods above
a certain level.

Variable charges(3300)
Variable charges bring the market prices of imported agricultural and food products close
to those of corresponding domestic products, in advance, for a given period of time, and
for a pre-established price. These prices are known as reference prices, threshold prices
or trigger prices. Primary commodities may be charged per total weight, while charges on
processed foodstuffs can be levied in proportion to the primary product contents in the
final product. In the case of the European Union, the charges applied to primary products
as such are called variable levies and those as part of a processed product, variable
components.

Antidumping measures(3400)
Antidumping measures may be taken after an investigation by the investigating authority
of the importing country has led to a determination of dumping and material injury
resulting therefrom. It is considered that dumping takes place when a product is
introduced into the commerce of an importing country at less than its normal value, i.e. if
the export price of the product exported is less than the comparable price, in the ordinary
course of trade, for the like product when destined for consumption in the exporting
country. Antidumping measures may take the form of antidumping duties or of price
undertakings.

Antidumping investigations(3410)
Antidumping investigations into dumping and injury are conducted by the investigating
authority of the importing country in accordance with the provisions of Article VI of the
GATT Antidumping Code. During the period of investigations, provisional antidumping
measures may be applied.

Antidumping duties(3420)
Duties levied on certain goods originating from (a) specific trading partners(s) to offset
the dumping margin. Duty rates are generally enterprise-specific.

Antidumping price undertakings(3430)


Undertakings may be offered by exporters to avoid the imposition of antidumping duties.
They may be accepted by the investigating authority of the importing country if the
exporter is prepared to revise his prices or ceases to export at dumped prices so that the

54
injurious effect of the dumping is eliminated.

Countervailing measures(3500)
Countervailing measures may be taken after an investigation by the investigating
authority of the importing country has led to a determination that the imported goods are
benefiting from subsidies, and that they result in injury. Countervailing measures may
take the form of countervailing duties or undertakings by the exporting firms or by the
authorities of the subsidizing country.
Countervailing investigations(3510)
Countervailing investigations on subsidization and injury are conducted by the
investigating authority of the importing country in accordance with the provisions of
Article VI of GATT and the GATT Subsidies Code.

Countervailing duties
Duties levied on certain goods originating from (a) specific trading partner(s) to offset the
amount of subsidization granted on the production or export of these goods.

Countervailing undertakings
Undertakings may be offered by exporters or by the authorities of the exporting country
to avoid the imposition of countervailing duties. Undertakings by the exporters may be
accepted by the investigating authority of the importing country if the exporter is
prepared to revise his prices or renounces the benefit of the subsidies so that the injurious
effect of the subsidies is eliminated. Undertakings by the authorities of the exporting
subsidizing country may be accepted by the investigating authority if the subsidizing
country is prepared to eliminate or modify its subsidy practices so as to eliminate their
injurious effect, or otherwise act to eliminate such injurious effect.

AUTOMATIC LICENSING MEASURES:


These are measures of a formal character only, which do not involve any restriction.

Automatic licence(5100)
Freely-granted approval of the application for imports. Sometimes also referred to as the
open general or liberal licence.

Import monitoring(5200)
Monitoring of the import trends of specified products, sometimes through inscription in a
register. It may be applied with the purpose of signalling concern over import surges and
to persuade trading partners to reduce export growth. It may also be applied for
environmental purposes. Sometimes it is a precursor to import restraints.

QUALITY CONTROL MEASURES :


These measures restrict the imports. These are measures intended to restrain the quantity
of imports of any particular good, from all sources or from specified sources of supply,
either through restrictive licensing, fixing of a predetermined quota or through

55
prohibitions.

Non-automatic licensing(6100)
The practice to require, as a prior condition to importation, an import licence which is
not granted automatically. The licence may either be issued on a discretionary basis or
may depend on specific criteria.

Licence with no specific ex-ante criteria(6110)


Licence depending on the judgement of the issuing authority, sometimes also. It is
to referred as a discretionary licence.

Licence for selected purchasers(6120)


Licence issued on certain goods only to specific categories of importers, e.g.
manufacturers, service industry, governmental departments, etc. The purpose is to limit
imports by restraining direct consumption, while providing the local processing industry
with the necessary inputs.

Licence for specific use(6130)


Licence limited to operations generating anticipated benefit in important domains of the
economy, such as export production, investment projects, etc.

Licence linked with local production(6140)


Compulsory linkage of imports with local market outputs.

Purchase of local goods(6141)


Licence granted under the condition of the purchase of a share of locally produced goods
which are similar to the imported goods.

Local content requirement(6142)


Licence granted under the condition that a certain product will include a specific
percentage of local inputs.

Barter or counter trade

Swap of goods in kind.

Licence linked with non-official foreign exchange.

Licence granted if official foreign exchange is not required. This case includes
imports under technical assistance projects and other sources of external foreign
exchange, as well as imports paid from the importer´s own foreign exchange
holdings.

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Licence combined with or replaced by special import authorization(6160)
In addition to or instead of a licence issued by the main licensing body (usually the
ministry of trade) according to the above specified criteria (see 6110-6150), a special
import authorization or an inscription in a register is required by a specialized authority
which is coordinating a sector of the domestic economy (ministry of industry, ministry of
agriculture, etc).

Prior authorization for sensitive product categories(6170)


Prior authorization subject to registered inscription, provision of information or other
admission procedures required as a condition for undertaking imports of goods subject to
health and safety regulations, provisions of international treaties on environmental and
wildlife protection, etc.

Quotas(6200)
Restriction of imports of specified products by setting a maximum quantity or value of
goods authorized for import.

Global quotas(6210)
Quotas of imports of specific products set as a total quantity or value. The quotas can be
either unallocated, i.e. goods may be imported from all origins; or allocated by individual
exporting countries. The global quotas may either be distributed among individual
importers on a first-come, first-served basis or be allocated in advance to determined
importers, often in proportion to their former performance.

Bilateral quotas(6220)
Quotas of imports reserved for a specific country.

Seasonal quotas(6230)
Quotas of imports for a given period of the year, usually set for certain agricultural
goods.

Quotas linked with export performance(6240)


Quotas of imports defined as a percentage of the value of exported goods.

Quotas linked with the purchase of local goods(6250)


Quotas defined as a percentage of the value of locally purchased goods similar to the
imported articles.

Quotas for sensitive product categories(6270)


Quotas determined for reasons of protection of human health, animal health and life or
plant health, the environment, wildlife and to ensure human safety and to control drug
abuse.

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Prohibitions(6300)
Unconditional interdiction to import. The so-called "prohibition with exceptions" is
incorporated in the category of licensing which is relevant to the nature of the exception.

Total prohibition(6310)
Prohibition without further qualifications. This measure may be applied in order to utilize
scarce foreign exchange resources exclusively for imports of essential goods or to protect
domestic industry completely from foreign competition.
Suspension of issuance of licences(6320)
A form of de facto prohibition, usually applied for balance-of-payments problems which
are expected to be of a short-term character.

Seasonal prohibition(6330)
Prohibition of imports for a given period of the year, usually applied to certain
agricultural products.

Temporary prohibition(6340)
Prohibition with decreed limited duration.

Import diversification(6350)
Prohibition of imports of certain goods from countries with which the importing country
remains in a significant trade deficit.

Prohibition for sensitive product categories


Product or country-oriented prohibition for reasons of protecting human health, animal
health and life or plant health, the environment and wildlife, to control drug abuse or
ensure human safety.

Prohibition for political reasons (embargo)( 6380)


Prohibition of imports from a country or group of countries, applied for political reasons.

Export restraint arrangements(6600)


By virtue of an export restraint arrangement between an importer and an exporter, the
latter agrees to limit exports in order to avoid imposition of mandatory restrictions by the
importing country. The arrangement may be concluded at either government or industry
level. These arrangements are known as voluntary export restraint arrangements (VERs),
orderly marketing arrangements, etc. They are generally concluded on goods such as iron
and steel, machine tools, automobiles, road transport equipment, electronics, footwear,
textiles and clothing as well as agricultural and food products. In addition to bilateral
arrangements, there is also the Multilateral Multifibre Arrangement (MFA), officially
known as "Arrangement Regarding International Trade in Textiles or Multifibre
Arrangement", which was negotiated as a temporary exception to GATT, so as to
regulate trade in textile products.

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Enterprise-specific restrictions(6700)
These restrictions may replace the quantitative restrictions of a general character or may
be applied parallel to them. They include such restrictions as selective approval of
importers, limitations at the enterprise level resulting from the national import
programme. Value or quantity quotas for individual enterprises, etc.

MONOPOLISTIC MEASURES :
Measures which create a monopolistic situation, by giving exclusive rights to one or a
limited group of economic operators, for either social, fiscal or economic reasons.

Single channel for imports(7100)


All imports or imports of selected commodities have to be channelled through state-
owned agencies or state-controlled enterprises. Sometimes the private sector may also be
granted exclusive import rights.

Compulsory national services(7200)


Government-sanctioned exclusive rights of national insurance and shipping companies on
all or a specified share of imports.

TECHNICAL MEASURES :
Measures referring to product characteristics such as quality, safety or dimensions,
including the applicable administrative provisions, terminology, symbols, testing and test
methods, packaging, marking and labelling requirements as they apply to a product. The
technical regulations are subdivided according to specific purposes, likewise as the
measures for sensitive product categories: 8111, 8121, etc. for protection of human
health: 8112, 8122, etc. for protection of animal health and life, etc.

Technical regulations(8100)
Regulations that provide technical requirements, either directly or by referring to or
incorporating the content of a standard, technical specification or code of practice, in
order to protect human life or health or to protect animal life or health (sanitary
regulation); to protect plant health (phytosanitary regulation); to protect the environment
and to protect wildlife; to ensure human safety; to ensure national security; to prevent
deceptive practice.

The regulation may be supplemented by technical guidance that outlines some means of
compliance with the requirements of the regulation, including administrative provisions
for customs clearance, such as prior registration of the importer or obligation to present a
certificate issued by relevant governmental services in the country of origin of the goods.
In certain cases, a prior recognition of the exporter or certificate issuing service by the
importing country is also required.

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Marking requirements(8120)
Measures defining the information for transport and customs, that the packaging of goods
should carry country of origin, weight, special symbols for dangerous substances, etc.

Labelling requirements(8130)
Measures regulating the king and size of printing on packages and labels and defining the
information that may or should be provided to the consumer.
Packaging requirements
Measures regulating the mode in which goods must be or cannot be packed, in
conformity with the importing country handling equipment or for other reasons, and
defining the packaging materials to be used.

Testing, inspection and quarantine requirements(8150)


Compulsory testing of product samples by a designated laboratory in the importing
country, inspection of goods by health authorities prior to release from customs or a
quarantine requirement in respect of live animals and plants.

Information requirements(8160)
A measure that obliges detailed information to be provided on the product, such as
enumeration of the contents or advisory notes for use and disposal.

Requirement relative to transit(8170)


A measure that obliges shipment to be made directly to from the country of origin to that
of destination without passing through a third country

Requirement to pass through specified customs(8180)


A measure that obliges shipment to pass through a designated customs office

Pre-shipment inspection(8200)
Compulsory quality, quantity and price control of goods prior to shipment from the
exporting country, effected by an inspecting agency mandated by the authorities of the
importing country. Price control is intended to avoid underinvoicing and overinvoicing,
so that customs duties are not evaded or foreign exchange is not being drained.

Special customs formalities(8300)

Formalities which are not clearly related to the administration of any measure applied by
the given importing country such as the obligation to submit more detailed product
information than normally required on the basis of a customs declarations, the
requirement to use specific points of entry, etc.

ANTI DUMPING AGREEMENT:

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The Anti-Dumping Agreement of the World Trade Organization (WTO), commonly
known as the AD Agreement, governs the application of anti-dumping measures by WTO
member countries.

A product is considered to be "dumped" if it is exported to another country at a price


below the normal price of a like product in the exporting country. Anti-dumping
measures are unilateral remedies (the imposition of anti-dumping duties on the product in
question) that the government of the importing country may apply after a thorough
investigation has determined that the product is, in fact, being dumped, and that sales of
the dumped product are causing material injury to a domestic industry that produces a
like product.

Members of the WTO are parties to this Agreement, whose full name is the "Agreement
on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994". It
went into effect on January 1, 1995. Pursuant to the Doha Ministerial Declaration,
negotiations for the Anti-Dumping Agreement are currently underway. The agreement
has no expiration date. The negotiations are scheduled to be completed by January 1,
2005.

Benefits from this Agreement

Any company involved in international trade can benefit from clear and predictable rules
for the application of anti-dumping measures.

Investigations:

A government normally initiates an anti-dumping investigation on the basis of a written


application by a domestic industry, although in special circumstances the government
itself can initiate the investigation on the industry's behalf. The application must provide
evidence of dumping, injury and a causal link between the two. It must include a
complete description of the allegedly dumped product, information on the like product
produced by the applicant, evidence regarding export price and normal value, an
assessment of the impact of the imports on the domestic industry and information
concerning industry support for the application.

The rules set forth in the Agreement for the collection of evidence state that as soon as
government authorities initiate an investigation, they must provide the full text of the
written application to all known exporters. All interested parties are given access to non-
confidential information and the opportunity to meet with the parties that have adverse
interests, so that opposing views can be presented and rebuttal arguments offered. Before
they make a final determination of whether dumping has occurred, the government
authorities must inform all interested parties of the essential facts under consideration,
giving them sufficient time to defend their interests.

An application will be rejected, according to the Agreement, and an investigation


promptly terminated if the government authorities conclude that there is insufficient

61
evidence of either dumping or injury. The Agreement provides that unless there are
special circumstances, investigations will be concluded within one year and will continue
in no case more than 18 months after their initiation.

Price Undertakings :

The Agreement provides that government authorities can suspend or terminate an anti-
dumping proceeding if they receive voluntary undertakings from an exporter that it will
revise its prices or cease exporting to the area in question at dumped prices. Investigating
authorities have the option of accepting price increases that are less than the margin of
dumping if they are adequate to remove the injury to the domestic industry.

Imposition of Anti-dumping Duties :

Under the Agreement, it is up to the government of the importing country to decide


whether or not to impose anti-dumping duties. (The Agreement provides an option of not
imposing duties in cases where all requirements for imposing such duties have been
fulfilled, but not all authorities allow such an option.) The amount of the duty set by the
government cannot exceed the margin of dumping, but the Agreement permits it to be
lower if it is adequate to remove the injury to the domestic industry.

Normally anti-dumping duties are applied to all imports of the subject merchandise made
on or after the date on which there is a preliminary determination of dumping, injury and
causality.

The Agreement states that an anti-dumping duty shall remain in force as long as
necessary to counteract dumping that is causing injury. It contains a "sunset" provision
that provides that the duty will be terminated five years from the date of its imposition
unless the government authorities determine in a review that termination of the duty
would lead to continuation or recurrence of dumping and injury.

India’s Recent Regional Economic Engagements & Bilateral Agreements :

Preferential trade agreements (PTAs), Free Trade Agreements (FTAs) and in the Asia-
Pacific region have proliferated rapidly for the past five years. The following Bilateral
agreements helps the company to get a preferential treatment vis-à-vis the other countries
and the company can save on the duty as well.

BILATERAL AGREEMENTS :

India has bilateral agreements with the following countries :

 Indo-Bhutan
 Indo-Nepal

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 Indo-Sri Lanka generally known as ISFTA(India Sri Lanka Free Trade
Agreement).
 India-Thailand
 India-Singapore
 India-ASEAN
 India-China
 India-MERCOSUR

REGIONAL AGREEMENTS :

India is a part of the following regional agreements:

 SAARC (South Asian Association for Regional Cooperation)


 BIMSTEC (Bangladesh India Myanmar Sri Lanka and Thailand Technical and
Economic Cooperation)
 SAFTA (The South Asia Free Trade Agreement)

TRILATERAL GROUP :

 IBSA (India, Brasil and South Africa)

Thus, a preferential trading agreement that sought to reduce tariff and non-tariff barriers
on a product by product basis would undoubtedly benefit consumers in the region who
would gain from a cheaper and wider variety of imports. In Bangladesh and Sri Lanka,
consumers could gain from cheaper consumer goods. Protected domestic industries and
sectors would have to restructure in the face of greater competition. In Sri Lanka, tariff
concessions granted under SAPTA will hurt domestic textile manufacturers, but benefit
garment manufacturers who would gain from cheaper imported inputs. Thus, preferential,
regional and trilateral agreements will benefit India for the trade purposes.

Strengthening Rules for International Trade :

Trade Facilitation

Trade facilitation can be defined as the simplification of trade procedures, or “cutting out
the red tape” at the border. The aim is to make trade flow more smoothly and thereby cut
costs through means other than the removal of tariff and “traditional” non-tariff barriers.

In a study conducted in New Zealand by AC Nielsen (2001), exporters identified customs


procedures as the second most common non-tariff barrier. Other countries’ importing
and exporting regulations and customs procedures need to be more transparent,
predictable, and simplified where feasible. This would be particularly beneficial for
countries with a large number of small and medium enterprises (SMEs).

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Importance of Trade Facilitation:

Trade Facilitation simplifies and standardizes customs procedures and documentary


requirements; providing non-discriminatory treatment between the modes of transit,
individual carriers and types of consignment; and implementing existing international and
regional transit instruments and arrangements.

Existing international standards should be used to simplify border-related documentation


and procedures.

Trade Remedies :

Trade remedies allow governments to provide temporary relief to domestic industry from
unfair competition from abroad or an unexpected surge in imports.

Governments have three types of trade remedy available to them:

• Anti-Dumping Duties
• Counter Vailing Duties
• Safeguard Action

ANTI DUMPING DUTIES :

What is dumping?

Dumping is the export of a product at a lower price than the product’s “normal value”,
i.e. the price normally charged on the producing country’s market.

How is antidumping regulated?

The WTO’s Agreement on Antidumping provides for the application of antidumping


duties when an investigation has established that goods are being dumped and that they
are causing or threaten to cause material injury to a domestic industry. The duty is
designed to offset the advantage afforded through dumping.

The Antidumping Agreement provides detailed rules on the standards WTO Members
must meet in making a dumping determination, as well as determining injury. It sets
down rules on how investigations should be carried out, how evidence is to be gathered,
as well as how and for how long antidumping duties should be applied. The Agreement is
designed to avoid the abuse of antidumping for protectionist purposes.

Subsidies and Countervailing Measures

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What are subsidies?

Governments worldwide provide economic support and assistance to support business


and industry. By covering some of a producer’s costs, a subsidy can provide an artificial
competitive advantage.

In international trade, subsidies can give producers from one country an unfair advantage
over those from another. This not only distorts trade, but also means that subsidies
provided by one country can injure the industry of another.

Subsidies have been the source of international trade friction for many years. In recent
years, we have seen a number of cases where the magnitude of government financial
support to industry has lead to disputes, including in the agriculture, steel, shipbuilding
and aircraft manufacturing sectors.

What can be done to counter the effects of subsidies?

Governments can resort to countervailing duties to offset the benefit provided by


subsidies to producers in the exporting country. Countervailing duties can only be applied
when an imported product benefits from a subsidy and the advantage afforded to imports
of that product by the subsidy can be shown to be causing injury to the domestic industry.

Countervailing duties are intended to counteract the unfair advantage that a subsidy might
provide another country’s industry. However, they do not address the deleterious effect
subsidies can have where one country’s exports to a third market are replaced by those of
another subsidising country’s.

How are these measures regulated?

In order to manage the trade distorting impact of subsidies, WTO Members concluded the
Agreement on Subsidies and Countervailing Measures , which applies to all goods
(although there are additional rules governing agricultural products in the Agreement on
Agriculture ). The Agreement establishes a set of disciplines that constrain the use of
trade distorting subsidies, as well as establishing a common set of standards for
investigating subsidised imports and then applying countervailing duties.

Safeguards :

On occasion, sudden surges in imports can significantly strain domestic industries. In


such cases, governments may apply temporary safeguards as a safety-valve to protect
domestic producers from injury. Safeguards usually take the form of duty increases to
higher than bound rates or quantitative restrictions. They give domestic producers a grace
period for adjustment.

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The WTO’s Agreement on Safeguards sets out rules for the application of safeguard
measures. Safeguards may only be applied when there is an increased level of imports
and there is serious injury (or the threat of) to the position of domestic industry caused by
those imports.

Safeguards must be applied on a non-selective (most favoured nation) basis and be


progressively liberalised while in effect. WTO Members applying safeguards have a duty
to compensate other Members whose trade is affected.

The Safeguards Agreement is not the subject of negotiations in the current Doha Round.

Export and Import Benefits:

A company can avail Export and Import benefits, if it follows the policy guidelines as
given in the handbook of procedures. Import benefits would be useful at that time when
the company has to import certain inputs for the manufacture of paper products. On the
other side, the company can avail the export benefits for the paper boards exported by
them.

ITC PSPD as a part of the Paper Boards industry can avail export and import benefits
under three schemes:

1. EPCG {Export Promotion Capital Goods Scheme}


2. Duty Exception Scheme {DES}
• Advanced Authorisation
• DFIA {Duty Free Import Authorisation}
• DEPB {Duty Entitlement Passbook Scheme}

3. Vishesh Krishi and Gram Udyog Yojana (VKGUY)


4. Focus Market Scheme
5. Focus Product Scheme

1. EPCG Scheme:

This scheme is for the import of capital goods for pre-production , production and post
production at 5% customs duty subject to an export obligation equivalent to 8 times of
duty saved on capital goods imported under EPCG scheme to be fulfilled in 8 years from
authorization issue-date.

In case CVD{Counter Vailing Duty} is paid in cash on imports under EPCG ,incidence
of CVD would not be taken for computation of net duty saved provided the same is not

66
cenvated seemed hand capital goods without any restriction on age may also be imported
under EPCG scheme.

To incentivise part track companies with a view to accelerate exports, in cases where
authorization holder has fulfilled 75% or more of export obligation in half or less than
half the original export obligation period specified, remaining export obligation shall be
condoned.

2. Duty Exemption Scheme {DES} :


This scheme enables duty free import of inputs required for export production for
the paper boards industry , the following three types of duty exemption scheme
apply:

• Advance Authorisation Scheme :

An advance Authorisation is issued to allow industry free import of inputs which are
physically incorporated in export product . In addition fuel, oil, energy, catalyst which
are consumed utilized to obtain export product , may also be allowed. Advance
Authorization are issued for input and export items given under SION {Standard
Input Output Norms}.

It can be issued either to a manufacturer –exporter or merchant-exporter tied to


supporting manufacturer{s} for physical exports.

Advance Authorization are exempted from payment of basis customs duty, additional
customs duty , education cess, antidumping duty and safeguard duty if any.

There should be positive valuation,


Positive Valuation ={FOB-CIF} / CIF *100
This license is issued for 24 months . This license can be extended upto 6 months.

• Duty Free Import Authorization {DFIA} Scheme :

DFIA is issued to allow duty free import of inputs , fuel, oil, energy sources, catalyst
which are required for production of export product. This scheme is in force from
1st May, 2006.

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Pre export Authorization shall be issued with actual user condition and shall be
exempted from payment of basic customs duty, additional customs duty, education
cess, anti dumping duty and safeguard duty if any.

A minimum 20% value addition shall be required for issuance of such authorization.
CENVAT credit facility shall be available for inputs either imported or proceed
indigenously.

• DEPB Scheme {Duty Entitlement Pass Book Scheme} :

The objective of DEPB is to neutralize incidence of customs duty on import content of


export product. Component of special additional duty and customs duty on fuel shall also
be allowed under DEPB in case of non- availment of CENVAT credit. Neutralization
shall be provided by way of grant of duty credit against expert product. An exporter may
apply for credit , at specified percentage of FOB value of exports made in freely
convertible currency or payment made from foreign currency account of SEZ.

PEPB holdershall have option to pay additional custom duty in cash as well.

DEPB and /or items importedagainst it are freely transferable.

Additional Customs duty /Excise duty and special Additional Duty paid in cash or
through debit under DEPB may also be adjusted as CENVAT credit or Duty Drawback.

DUTY STRUCTURE:

The following is the duty structure for the import of inputs for the manufacture of paper
boards and paper products in India :

Total Duty = Basic Custom Duty + Additional Custom Duty or CVD + Special CVD +
2% on CVD + Education Cess + Special Education Cess.

Points to be noted for calculation of the total duty are as follows :

• Basic Custom Duty is calculated at 10%.


• Additional Custom Duty or Counter Vailing Duty =
(CIF value + Basic Custom Duty )* 16% .

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• Special CVD = (CIF + Basic Custom Duty + Additional Custom Duty) * 4%.
• 2% on CVD or Additional Custom Duty
• Education Cess = (Basic Duty + Additional Custom Duty + Special CVD)*
2%.
• Special Education = (Basic Duty + Additional Custom Duty + Special CVD
+ 2% on CVD + Education Cess @ 2%) * 1%

Additional Custom Duty, Special CVD, and Education cess is CENVATABLE.

VISHESH KRISHI AND GRAM UDYOG YOJANA {VKGUY} :

Policy pertaining to VKGUY is given as follows :

Promotional Measures :

Application for grant of Duty Credits scrip under VKGUY for export made from
1-4-2007 onwards shall be made to RA concerned in ANF 3C along with documents
prescribed there in.

Applicant may file one or more applications subject to condition that each application
may contain not more than 50 shipping bills. All shipping bills in any one application
must relate to exports made from one Customs House only, which shall be the port of
registration for Duty Credit Scrip.

Application for obtaining Duty Credit Scrip shall be filed within a period of twelve
months from date of exports or within six months from date of printing/ release of
shipping bill, whichever is later ,in respect of shipments for which claim is being filed.

For direct as well as third party exports, the export documents viz Export Order,Invoice ,
GR form, Bank Realization Certificate should be in the name of applicant only.

FOCUS MARKET SCHEME {FMS} :

A single consolidated application for all exports through EDI enabled ports shall be filed
with RA concerned in ANF 3D along with documents prescribed there in . A single
consolidated application for all exports through EDI enabled ports shall be filed on a six
monthly basis, i.e. April-September period and October-March period where realization

69
has been mde during period of application . In case of Advance Payment, date of exports
shall be taken into account for inclusion in period of application.

Application for claiming Duty Credit scrip shall be submitted within a period of six
months from last date of period of application { i.e. for April-September 2007 period, last
date shall be march 2008 and for October –March 2008 period , last date shall be
September 2008.}

As FMS launched for exports w.e.f 1-4-2006 , applications for grant of benefits for
exports w.e.f 1-4-2006 shall be considered as under. :

• In respect of application for April-September 2006 period, last date for filling
application shall be 31st March 2008. This shall include only those shipments
exported on or after 1-4-2006 but for which realization has been received till 30-
9-2006.
• In respect of application for October-March 2007 period, last date for filling
application shall be 31st March 2008. This shall include all shipments exported on
or after 1-4-2006, but for which realization has been received till 31-302007.

Exporters can file only one supplementary claim each in case some shipments have not
been included in original claim for April-September and October-March periods. This
shall attract supplementary cut on claim amount, after ensuring that shipment has not
been included in the earlier claim. In case supplementary claim is filed late , late cut shall
also be imposed. This shall apply even to exports made w.e.f 1-4-2006.

For direct as well as third party exports ,the export documents viz Export Order ,
Invoice, GR form, Bank Realization Certificate should be in the name of applicant only.

Applicant shall be required to submit proof of landing of export consignment in specified


market. Duty Credit scrip shall be granted on FOB value realized as per BRC/FIRC.

FOCUS PRODUCT SCHEME {FPS} :

A single consolidated application for all exports through EDI enabled ports shall be
filed with RA concerned in ANF 3E along with documents prescribedthere in.
Application shall be filed on a six monthly basis , i.e. for April-September and
October-March periods where realization has been made during period of application. In
case of Advance Payment , date of exports shall be taken into account for inclusion in
period of application.

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Application for claiming Duty Credit scrip shall be submitted within a period of six
months from last date of period of application { i.e. for April-September 2007 period,
lastdateshall be march 2008 and for October –March 2008 period , last date shall be
September 2008.}

As FPS has been launched for exports w.e.f 1-4-2006 , applications for grant of benefits
for exports viz Export Order , Invoice, GR form, Bank Realization Certificate should be
in the name of applicant only.

Duty Credit scrip shall be granted on FOB value realized as per BRC/FIRC.

LOGISTICS MANAGEMENT:

Logistics Management has an vital role in the entire value chain of Marketing. Logistics
Management is required at 2 points , one at the time of procurement of raw material and
the other at the time of dispatch of products. Effective Logistics and Supply Chain
Management is very important because the production of the customer is dependant on
the timely delivery from the Company’s end to the customer.

To reduce the transit time the manager has to plan well in advance and has to keep track
of the production schedule and delivery dates. The logistics manager should have good
knowledge about the geographically distances and the routes. This is to ensure that the
goods are reached on time by suggesting the drivers to take the shortest route possible.
This has two-fold benefit : one to the company as raw-material required by the company
is reached on time and the delivery is also done on time. Proper understanding and
knowledge of the routes will help the company save extra charges on freight, toll taxes
etc.

ITC uses road transport system, for the procurement of raw material and despatch of
paperboards within India. For this purpose, it has owned a few trucks, which carries the
pallets or the reels of paper from various units of ITC to the customer’s end. The
company owns around 10 trucks, which may not be sufficient to meet the increasing
demand for paper products. So, the company is using the services of various transport-
outsourcing companies who allot trucks based on the company’s requirements. Some of
those transport companies are Sri Pragati Transport, Chennai; Sri Nagakrishna Transport,
Chennai; Deepak Road Linex etc. Some are operating on the Domestic level while the
others are operating on an National level.

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Freight charges fixed by these transport companies are pre-determined at the beginning of
the year. Freight Originator i.e ITC is in direct contact with the transporter or the
transport company for their requirement of trucks. On the receipt of such requirement, the
transporter then deals with the truck broker, who in turn contacts the truck owner for the
requirement of trucks. Thereafter, the Truck owner will have a talk with the truck driver
and then the final confirmation is given to the Transporter who in turn confirms it to ITC.
The actual interaction of the Company is with the Transporter. Though the truck driver
does not have a say in the entire process but he is the most important person, because if
he does deliver the material on time, then the entire production will be held up, which in
turn will delay the delivery process.

On an international level, where exports and imports are involved, the company has
contacts with various shipping lines for the purpose of delivery of products on time to the
vessel. In this case, also the freight charges are pre-determined by the shipping line.
These charges vary from country to country and from one shipping line to another. Not
only this, freight charges are different for 20 footer container & 40 footer container. So,
in case the pricing for exports is decided on CIF(Cost, Insurance & Freight) or CFR(Cost
& Freight) basis, where ITC has to bare the freight charges on behalf of the customer, the
export and logistics managers have to be well-versed with the freight charges of various
shipping lines. This information would benefit both the company as well as the customer.
This is because if CIF OR CFR is less, the final price at which the goods are sold will
also be proportionately reduced. As freight is the only biggest parameter that cuts into the
profits of the Company while dealing on an international basis.

FOREX EXPOSURES:

Forex Exposure is any outstanding payment or receipt denominated in a foreign currency,


the rupee equivalent of which is exposed to forex risk. For example : if a party is to be
paid in rupees but the exact amount is determinable on the basis of a currency exchange
rate, such exposure will also be treated as a forex exposure.

Forex Risk is the uncertainity arising out of volatility in the exchange rates between
currencies, such as between Rupee and the US Dollar. As the Rupee is directly quoted
only against the US Dollar, in case of foreign currencies other than the US Dollar, there is
an “additional” forex risk arising out of the volatility between the US Dollar and such
other currencies.

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ITC books for the exposure by giving the details of each export transaction in the
software prepared by the company for this purpose. Once the details are entered in the
software, it is being viewed at the corporate office. There is a foreign exchange team in
the corporate office that looks after the exposures transactions and other export and
import related matters. Then booking of the exposure with the foreign exchange
department is done by the corporate office people after checking the details received from
the PSPD Division. The exposure for an export or import transaction has to be booked
because to hedge the risk arising from the currency fluctuations.

OBJECTIVES TO BOOK AN EXPOSURE:

The following are the objectives of the company to book an exposure :

• To add value by centrally managing the company’s forex exposures within


acceptable risk parameters by leveraging expertise and exposure volumes.
• To adopt the profit –centre concept to ensure accountability of forex treasury in
creating value and providing services to the Division.

STRATEGIES OF THE COMPANY AS REGARDS FOREX


EXPOSURES:

The company as regards forex exposures adopts the following strategies:

• It ensures discipline and consistency in decision making in treasury operations


through clearly defined risk management procedures.
• Treats each division as a valued internal client whose expectations must be met by
ensuring absolute transparency and fairness in the transfer price mechanism.
• It keeps track of new products and techniques in risk management and apply them
in Forex Treasury.
• It ensures that all operations are carried out within the ambit of RBI guidelines
and relevant statutes.

LATEST DEVELOPMENTS IN ITC (PSPD) :

• The company has installed another machine at the Kovai unit which is named as
K2, which will produce only recycled boards.

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• The company intends to buy a converting unit at Delhi for the customers in the
Northern hemisphere. As, most of the units of ITC are in the southern region, it is
quite difficult to transport the paper to the northern region as the transit time is
long and the freight charges are high. So, this unit will help the company to
overcome these inefficiencies.
• The company has made a major investment on Paper Machine 4(PM 4) for the
production of specific type of product which in demand in the market.
• The company has installed Paper Machine 6 (PM 6) at Bhadrachalam unit which
will produce only VAP products. This paper machine which is in pipeline with a
capacity of 100000 TPA. This will be installed by March, 2008. This line will
produce coated and uncoated papers including cut-size papers for the growing
Indian market.

PROCESS :

In case of exports of paper and boards to other countries, certain process is followed from
the receipt of order till the payment is received. This process is split into parts :

Pre shipment Process


Post Shipment Process.

PRE SHIPMENT PROCESS :

 Intially, a purchase order or an enquiry for the purchase of a particular paper


product is received from the agent on behalf of the customer or it may received
directly from the customer itself.
 Once the company decides to carry out the export order, then the documentation
is done. It is the most critical aspect as far as exports are concerned.
Documentation for exports include checking and submission of many documents
such as Letter of Credit, Bill of Lading, Certificate of Origin, etc.
 Then, the exporter and the importer decide the pricing of the export order
mutually.
 Once the price is decided, Proforma Invoice is raised at the exporter’s end.
Consignment for export order of the required product is pre-determined at the
time of making the order.
 Once the production of that particular order is complete and the consigment is
ready for dispatch, at that time ARE 1 form is issued. It is the Application For
Removal of Excisable goods (ARE 1) from factory which is issued under a bond
without the payment of excise duty. The bond is prepared on the volume and
value of the good so exported. The bond is prepared and endorsed by customs. As
an incentive for exports , excise duty is not levied by the Government Of India.

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 For the fulfillment of the export order, tentative shipment schedule is prepared.
 Then the shipping bill is prepared by the CNF on behalf of ITC.
 The customs officer assesses the shipping bill and the funds and finds everything
is appropriate then he gives the approval to go ahead with the shipping process.
 Once the consignment is ready for shipment at the mill, containers are called from
the shipping line.
 Once the containers are available, then stuffing of the product in the container is
done in presence of CNF Agent at the mill.
 Depending on the slot of the arrival of the vessel at the port, the containers are
scaled and are taken to the Indian Port. The despatch from the mill to the port is
done against an export challan (it is also referred to as the gate pass).
 When the container goes on board, mates receipt is signed by the captain of the
ship.

 Once the mates receipt is cleared, then it is handed over to the shipping line. On
the basis of clearance of mates receipt, then a clean bill of lading is prepared. If
the mates receipt is not cleared, then the company has to pay the discrepancy
charges but the shipment is not stopped for that purpose.
 The company also arranges for an insurance policy, if the export order is on CIF
basis.

The above steps are related to the pre shipment process.

POST SHIPMENT PROCESS :

 On the basis of the proforma invoice so raised, the rate at which agreement is
decided is booked with the forex exposure department at the corporate office. The
team at the corporate office will in turn book it with the Foreign exchange
department of India, to hedge the risk in case of currency fluctuation.
 Once again, all the documents are checked by the finance department. The
document that is the most important is the Letter of Credit. This is because the
payment is received on the basis of the L/C. For the purpose of checking all the
documents, the finance department prepares a checklist. The checklist is attached
here with.

In short, it can be said if the Marketing people market their product, finance personnel
review, record, and demand it.

Thus, the above is the pre shipment and post shipment process for an export

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transaction.

TYPES OF PORTS :

The following are the ports from where the paper products and boards are imported and
exported.

• Chennai Sea Port


• Vishakapatnam Sea Port
• Inland Container Depo, Hyderabad
• Nhava Sheva International Container Terminal (NSICT)
• Tuticorin
• Cochin Sea Port
DOCUMENTATION :

Documentation is the most essential part in the entire export process. Each and every
document needs to be properly checked and verified. If any important point remains
unchecked or there are any minute errors, the document holds back and the entire export
process gets delayed. Therefore, 4 people are been appointed for the purpose of checking
the documents in the exports division. Both the pre-shipment and post shipment
documents must be duly checked. The following are the various documents to be
checked :

• Letter Of Credit : A letter of credit is a document issued mostly by a financial


institution which usually provides an irrevocable payment undertaking (it can also
be revocable, confirmed, unconfirmed, transferable or others e.g. back to back:
revolving but is most commonly irrevocable/confirmed) to a beneficiary against
complying documents as stated in the credit. Letter of Credit is abbreviated as an
LC or L/C, and often is referred to as a documentary credit, abbreviated as DC
or D/C, documentary letter of credit, or simply as credit. Once the beneficiary
or a presenting bank acting on its behalf, makes a presentation to the issuing bank
or confirming bank, if any, within the expiry date of the LC, comprising
documents complying with the terms and conditions of the LC, then the issuing
bank or confirming bank, if any, is obliged to honour irrespective of any
instructions from the applicant to the contrary. In other words, the obligation to
honour (usually payment) is shifted from the applicant to the issuing bank or
confirming bank, if any. Non-banks can also issue letters of credit however parties
must balance potential risks.

The LC can also be the source of payment for a transaction, meaning that an
exporter will get paid by redeeming the letter of credit. Letters of credit are used
nowadays primarily in international trade transactions of significant value, for
deals between a supplier in one country and a wholesale customer in another. The
parties to a letter of credit are usually a beneficiary who is to receive the money,

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the issuing bank of whom the applicant is a client, and the advising bank of
whom the beneficiary is a client. The credit term for the payement in case of an
export transaction done by ITC PSPD is 30, 60 or 90 days.

• Invoice Packing List : The packing list indicates the number of packs involved,
the contents of each pack and the individual weights and dimensions. This list
enables the company to check that the correct number of units has been exported.
Customs authorities can also easily identify a specific pack they wish to inspect.

• Proforma Invoice : After receiving a quotation from us, the importer (you) may
request a proforma invoice which is a preliminary invoice and is prepared prior to
shipment or even before a firm order has been received. The purpose is to enable
you to obtain an import license (if required) or a letter of credit. In some
countries, proforma invoice is a required document for customs clearance.

• Shipping Bill : It is issued by the shipping line.

• SDF Form : Where customs authorities have introduced Electronic Data


Interchange system (EDI) for processing shipping bills. The form issued is called
SDF (Statutory Declaration Form).

• ARE 1 : At the time of despatch, ARE 1 Form is issued i.e Application for
removal of excisable goods from factory under a bond without the payment of
excise duty.

• Commercial invoice : The commercial invoice indicates the quantity and


description of the goods, the loading port and destination port, the mode of
transportation, the country of origin, the price per unit and total cost of the goods.

• Certificate Of Origin : In some countries, optical instruments claiming


preferential treatment in respect of tariffs require proof of origin. Certificate of
origin is provided by CCIB or CCPIT, GSP certificate of origin is provided by
CCIB.

• Fumigation Certificate : Fumigation certificate is required as proof that the


packing materials e.g. wooden crates, wood, wool etc), have been fumigated or
sterilized. Certificates contain details such as purpose of treatment, articles
concerned, temperature range used, chemicals and concentration used etc.

Please note that in some countries like Australia, fumigation treatment is not
required for air shipment, but required for sea shipment.

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• Bill Of Lading : A bill of lading is used for the sea shipment. It is a certificate of
ownership to the goods.

As such, it must be produced at the port of final destination by the importer (you)
in order to claim the goods. As a document of title, the bill of lading is also a
negotiable document and it may be used to sell the goods by endorsing or handing
over the bill of lading to another authorized party, even while the goods are still at
sea. Although negotiable bills of lading are in common use, some countries do not
allow them or make it difficult to be used. So, you have to be sure that negotiable
B/L is accepted in your country. Otherwise, non-negotiable B/L is issued.

A contract between the shipper and the shipping line which defines in detail the
terms for the carriage of goods from the sea port to the destination sea port.

A formal, signed receipt for a specified number of packs which is given to the
export agent by the shipping line when the shipping line receives the
consignment. If the cargo is apparently in good order and properly packed when
received by the shipping line, the bill of lading which the shipping line issues, is
termed 'clean'. The ship-owner thus admits full liability for the cargo described in
the bill. In most cases, clean bill of lading is required.

Clean bill of lading is usually associated with letter of credit transaction. With the
B/L number or container number given, you can track the shipment online.

• Insurance Certificate :

Insurance certificate is issued as evidence of the existence of the marine insurance


policy. The marine insurance policy is a contract between the assured and the
insurer, and its principal purpose is to define the terms of the agreement between
the assured and the insurer.

Based on the CIF price term, insurance certificate is required for customs
clearance in some countries. The company has tied up with United India
Insurance Company Ltd for the purpose of providing marine insurance policy to
the importer, if the price term is on CIF basis ( i.e. Cost, Insurance and Frieght).

• Bill Of Exchange

• Shipment Advice

The documentation required for customs clearance in India are :

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In all countries, three documents are required in India :

• Billing lading (air waybill)


• Commercial invoice
• Packing list

A SAMPLE FO A FEW DOCUMENTS IS ATTACHED HERE WITH.

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