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 ASSIGNMENT SOLUTIONS GUIDE (2017-2018)
A.E.D.-1
Export Procedures and
Documentation
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the

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Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance
of the student to get an idea of how he/she can answer the Questions given the Assignments. We do not claim 100%
accuracy of these sample answers as these are based on the knowledge and capability of Private Teacher/Tutor. Sample
answers may be seen as the Guide/Help for the reference to prepare the answers of the Questions given in the assignment.

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As these solutions and answers are prepared by the private teacher/tutor so the chances of error or mistake cannot be

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denied. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample Answers/

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Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer and for up-to-date and exact
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Answer all questions.
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information, data and solution. Student should must read and refer the official study material provided by the university.

Q. 1. Explain various steps involved in the processing of an export order with suitable examples. i n
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Ans. Processing of an export order needs a lot of effort and attention as to products to be exported, the capacity

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of production available with the producer, availability of raw material, machine time, labour time and the required

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amount of finance the export order. The process involves lot of preparation and lot of government approvals and
help.
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The most common form of export order is the performa invoice which is sent by the exporter who accepts it,

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signs it and send it back to exporter for its processing and send a Letter of Credit when gives all the details of the
purchase order. Once, the Letter of Credit is established by the importer the supplier is ready to process the order and
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can also get bank credit on the basis of letter of credit.

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These are three schemes of inspection for export goods as under:
(i) Consignment-wise Inspection
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(ii) In-process quality control by export worth units
(iii) Self-certification by approved export houses.
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Receipt of an export involves the following steps:
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(a) Receipt of Performa Invoice duly accepted by the importer and signed with stamp.
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(b) Purchase order accepted and signed by the exporter.

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(c) Letter of Credit opened by the importer in favour of the exporter.
The export order or the sales contract has to have complete details.

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Examination of the Export order
An export order will not be deemed to be complete unless it has the following details:
(a) Product description, specifications style, colour and packing conditions governing the order.
(b) Marking and Labelling requirements.
(c) Terms of payment including currency, nature of Letter of Credit. (only Irrevocable preferred)
(d) Terms of Shipment including choice of carrier place of delivery, date of Shipment/delivery port of Shipment
and Trans-Shipment, if any.
(e) Inspection requirement, type of inspection, the inspection agency.
(f) Insurance requirement including risk to be covered and insurable value (Applicable only in case of FOB
terms and in the case of CIF terms the cost of freight and insurance shall be born by the exporter)

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 (g) Details of documents required for release of payments and the number of copies of each document required.
(h) Last date of negotiation of document with the bank.
Examination of the export order is very necessary for fulfilment of all contractual obligations.
Confirmation of the receipt of export order can be made by letter, fax, telex, e-mail or even telephone if not
specified in the contract.
When an exporter receives an export order he has to make a lot of efforts to organise the activity if he is a
manufacturer exporter he sends a delivery note along with the copy of export order which give the quality, quantity,
specifications, marking, labeling, inspection details to the production department simultaneously ties up the raw
materials practising materials. A merchant exporter starts procurring the goods through reliable vendors as per the
given specifications.
Then the goods are ready for packing a pre-shipment inspection is carried out by the Export Inspection Agency
on receipt of notice along with technical specification, which in turn issues a certificate of Inspection in triplicate,

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and then the goods needs to be cleared by the Central Excise Authorities, who on receiving the application for excise
inspection and issue certificate on form AR4/AR5 in six copies, then the goods are packed and sealed before

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removal of goods, after this the goods are handed over to the carrier either a road transport or Railways, and the

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relevant receipts along with other documents are sent to the clearing and forwarding agent for onward shipment.

Receipt of the Export order

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Examination and Conformation

Advice to Production Department

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with complete details
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Procurement of Raw Material
Packing Material
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Request to Inspection Agency for
Goods Ready for packing

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pre shipment Inspection

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Central Excise Inspection

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Appointment of Clearing Agent
Goods sent by CFA at port

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sealing of the goods

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Receipt of Goods by CFA

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storage in Warehouse

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Submission of documents to the
Custom House and Clearance

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u a Port Trust Permission to Cost
Goods to the Shipping shed

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by Customs

Receipt of Shipping Bill Presentation of Shipping

Bill to Port

‘Let Export’ Endorsement

‘Let Ship’ Endorsement Loading on Ship-Mate’s Receipt

Payment Port Charges Issue of Bill of Lading.

Fig. : Flow Chart of Processing of an Export Order unto the Shipment of Cargo

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 Q. 2. What are the basic principles of ECGC Operations? Explain the procedure for making a claim from
ECGC. Also discuss the obligations of the policy holders.
Ans. Basic Principles of ECGC Operations: Export Credit Guarantee Corporation of India works on two basic principles
as detailed below:
1. Spread of Risk
2. An exporter is a Co-insurer
1. Spread of Risk: All exporters are required to insure all the shipments that are likely to be done by loan during
the next two years. To avoid undue difficulty to the exporters certain exceptions as under have been made against.
(i) advance payment
(ii) irrevocable letter of credit confirmed by banks in India.
Shipments made to agents and associates may also be excluded.

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When an exporter handles and deals in different catagories and types of goods he may exclude those items that
are not allied to the main export items. The idea is not to allow an exporter to pick and choose only the bad risks for

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reduction of the permium he has to pay to obtain the policy. When everything is in general way than the premium is

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little low. However, the exporter is take political cover for transactions to under this clause.
An Exporter is a Co-insurer

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Export Credit Guarantee Corporations only reimbuses losses suffered by an exporter who has obtained its policy

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maximum upto 90% of the losses on account of political or commercial risk. In the event of loss due to repudition of

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contractual obligation by the buyer ECGC indemnifies the exporter upto 90 percent of the loss. In such situations a
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final and enforceable degree against the overseas buyer is obtained in a competent court of law in the buyer’s
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country. The corporation at its discretion may waive such legal action worthwile against the buyer if that thinks that
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such a costly action is not exporter and in such cases losses to the exportr are indeminified upto 90 percent, the

prudently as under:

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balance loss will have to be born by the insurer exporter. This is necessary to ensure that the exporter acts more

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(i) The exporter also takes necessary precaution in selecting the parties to which he may decide to export.
(ii) He may not over extend the credit.

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(iii) He may take all possible care to minimise the risk involved.

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Apart from these two basic principles, ECGC being a insurer in insurance business, also follows three basic
principles of insurance as under:
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(i) Export Guarantee Corporation Contracts are contracts of good faith which means that non-disclosure of a
material fact will render the contract void. In other words the exporter is bound to disclose every material

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fact within his knowledge to the ECGC which may adversly affect the ECGC. Again any material alteration
of the risk arising between the date of the proposal and the issue of the policy must be disclosed to the
ECGC.
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(ii) The insurer is duty bound to minimise the loss. He should conduct his business with ordinary prudence and

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deligence and act as uninsured. The action that needs to be taken depend on the facts and circumstances of

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the case.
(iii) Under the principles of subrogation ECGC steps into the shoes of the exporter. If recoveries are made after

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the payment of claim by ECGC, they are shared with the ECGC in the same propartion in which the loss
was borne.
Procedure for Making a Claim
All claims arrising out of loss, or non-payment have to lodged with the ECGC for payment of the claim amount
as per the terms of the insurance policy. A claim will arise when any of the risks insured under the policy materialises.
If an overseas buyer goes insolvent the exporter becomes eligible to lodge a claim with ECGC after one month and
if his claim is admitted by ECGC to rank against the insolvent’s estate it will be paid after one month or after four
months of the due date of payment whichever is earlier.
Claims in respect of additional handling, transport or insurance charges incurred by the exporter because of
interruption or diversion of voyage outside India are payable after the proof of loss or submitted to the ECGC with
supporting documents, it shall be paid on verification after four months from the date of the event causing loss.

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 In exports to countries where long delays are experienced ECGC may extend the waiting period and the claims
for such losses due to shipment of goods shall be payable only after the extended period is over.
When a buyer refuses to accept goods shipped to or refuses payment because of differences over fulfilment of
the terms of contract by the exporter, counter claims or set of. In such cases ECGC considers the claim preferred on
it but considers these claims after the dispute between the parties is resolved and the amount payable is established
by obtaining a case in a court of law in the country of the buyer.
This condition is waived off in cases where the corporation is satisfied that the exporter is not at fault and that no
useful purpose would be served by proceeding against the buyer.
Procedural Formalities: The ECGC has preseribed three types of claim forms as given under:
Form No. 501 for claims arising out due to non-payment of goods accepted by the buyer.
Form No. 502 for claims arising because of the non-acceptance of goods/document by the buyer.
Form No. 503 for claims on account of delay in transfer of funds to India.

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Other kind of claims can be fitted by means of a letter giving full particulars of the cause and extent of loss.
The claim forms have to be sent through the bank and only to the ECGC office which issued the policy. No claim
will be entertained by the ECGC if it is not filed with in a period of 24 months from the date of the concerned bills.
Documents in Support of Claims

(a) Certified copy of the export order.

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Every claim has to be filed in the prescribed appropriate form and supported by documents as listed below:

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(b) Certified copies of Invoices.
(c) Certified copies of bills of lading.

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(d) Copies of the correspondence with the buyer.
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claim.
(f) In case of protracted default.
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(e) In case of insolvency of the buyer copy of the letter from the official receiver/liquidator admitting the

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(i) Protest note
(ii) Original unpaid bills

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(iii) advice of non-payment received from the bank. A copy of the plaintiff if a such has been files.

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(g) In case of transfer delays, certified copy payment advice received from the collecting bankers indicating
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the date on which payment was made by the buyer.
Obligation of the Policy Holder of ECGC Policy r - b
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ECGC policy holder of ECGC insurance policies are under obligation to the ECGC on the following:

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1. Declaration of Shipment: An exporter who has taken a shipment policy has to send till the fifteenth of every

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month a declaration of shipments in the previous month in the prescribed form No.203. An exporter who obtains a
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contract policy has to send a declaration of all outstanding contract immediately after the policy is issued. Thereafter
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he shall send a monthly declaration of contracts concluded and shipments made by him during the previous month.

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Premium has to be paid along with the declaration at rates shown in the schedule attached to the policy.
2. Fixation of Credit Limit to Each Buyer: Under the ECGC policy the commercial risks are covered subject

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to a limit of a buyer as fixed by ECGC credit limit is the limit up to which a claim can be made or paid under the
policy for losses on account of commercial risks, in the absence of credit limit such claims are not covered by the
ECGC. A policy holder for sanction of credit limit in case of each individual buyer separately in form No. 144,
before making shipments to the buyer. If necessary information requiring the buyer and the forms of contract are
provided it will be easier for the ECGC to fix the credit limit for a buyer in time. ECGC obtains credit worthiness
information about the buyers through banks and credit rating agencies. If the policy holder has credit raiting information
about the buyer, he should pass on this information to ECGC so as to have an early fixation of credit limit of the
buyer. If for some reasons the exporter requires an enhancement in buyer’s credit limit he should provid necessary
information in form 144A.

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 (iii) Recording Default: A Policy holder needs take to a very prompt action in case non-payment by a buyer on
due date or on presentation of Bill of Exchange. He has to submitt a monthly declaration of all bills which remain
unpaid for more than 30 days in the prescribed form No. 205, indicating action taken by the policy holder in regard
to collecting the payment. The policy holder with the prior approval of ECGC can grant extension of time for
payment or converting bills from Drawn Against Payment (DP) to Drawn Against Acceptance (DA).
Q. 3. Distinguish between.
1. Spot rate and Forward rate.
Ans. The forward rate and spot rate are different prices, or quotes, for different contracts. The forward rate is the
settlement price of a forward contract, while the spot rate is the settlement price of a spot contract.
A spot contract is a contract that involves the purchase or sale of a commodity, security, or currency for immediate
delivery and payment on the spot date, which is normally two business days after the trade date. The spot rate, or
spot price, is the current price of the asset quoted for the immediate settlement of the spot contract. For example, say

price to the seller and have orange juice delivered within 2 days.

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it’s the month of August and a wholesale company wanted immediate delivery of orange juice, it will pay the spot

Unlike a spot contract, a forward contract is a contract that involves an agreement of contract terms on the

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current date with the delivery and payment at a specified future date. Contrary to a spot rate, a forward rate is used

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to quote a financial transaction that takes place on a future date and is the settlement price of a forward contract.

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However, depending on the security being traded, the forward rate can be calculated using the spot rate. For example,

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say a Chinese electronic manufacturer has a large order to be shipped to America in one year. The Chinese manufacturer

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engages in a currency forward and sells $20 million in exchange for Chinese yuan at a forward rate of $0.80 per

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Chinese yuan. Therefore, the Chinese electronic manufacturer is obligated to deliver 20 million dollars at the specified

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rate on the specified date, six months from the current date, regardless of fluctuating currency spot rates.
2. Forward contarcts and Currency options.
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Ans. Forward contracts are binding agreements to buy or sell an asset at a specific price on a specific date. For

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example, two parties may agree to trade 1,000 ounces of gold at $1,200 per ounce on Sept. 1. One party to such an

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agreement will have an obligation to buy, and the other will have an obligation to sell. Such contracts can involve

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practically anything of value, including stocks, bonds, foreign currencies, agricultural commodities such as corn or

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soybeans, and valuable metals, including gold and silver. The asset that changes hands is referred to as the underlying
asset, or simply “the underlying.” Forwards are traded over the counter.

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A currency option gives the holder the right-but not the obligation -- to buy or sell an asset at a specific price on
a specific date. A curreny option represents the right to buy, while a put option represents the right to sell. A currency
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option on 1,000 shares with a strike price of $100 and an expiration date of Aug. 27 allows the option holder to buy
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1,000 shares at $100 each on Aug. 27. If the market price of the stock is $110 per share, it makes sense to exercise

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this privilege, because you can then sell the same shares at $110 for an immediate profit. If the stock can otherwise
be purchased for $90, however, the holder would not exercise the call -- hence the name currency “option.”

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Q. 4. (a) Discuss the customs clearance procedures alongwith the documentation formalities.
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Ans. Procedure of Custom Clearance: Section 45-49 of the Customs Act,1962, lays down a specified procedure and

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formalities to be followed for getting customers clearance.

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Unloading of Imported Goods
The Customs Act, 1962 provides that the incharge of the carrier having custody over imported goods is under
obligation to unload the goods in a custom approved area.

wThe goods after unloading cannot be handed over to the actual owner of the goods but are transfered into the
custody of the Port Trust Authority or any other Competent agency/person as approved by the Commissioner. The
goods listed in the IGM are allowed to be unloaded in the presence of officer of customs. The custodian of the
imported goods is under obligation to.
(i) keep a record of imported goods and also send a copy of the list of goods to the Proper officer of Customs.
(ii) handover the goods to the actual claimant of presentation of documents granting permission by the customs.
Presentation and Noting of Bill of Entry (B/E)
The Bill of Entry can be presented by the importer in prescribed form to the competent and proper officer in the
import department either for its clearance for home consumption i.e. to take the goods where they are needed or can
transfer them to an approved public warehouse.

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 Capital Goods intended for use in any hundred per cent (EOU) export oriented unit can be deposited in a
warehouse for a period of 5 years. The period for purpose of warehousing for other categories of goods is one year.
The Bill of Entry (B/E) must contain all goods mentioned in the Bill of Lading (B/L) or any other document as
issued by the carrier to the consignr of goods on board the carrier.
The Bill of Entry can be presented after the delivery of the IGM / IR by the incharge of the carrier. However it
can be submitted before the submission of IGM provided the carrier by which the imported goods have been shipped
for importation into India is expected to arrive within 30 days from the date of presentation of IGM/IR.
Processing of Bill of Entry
1. As soon as Bill of Entry is presented along with other documents and the same is notified by the customs
with reference to the IGM, the custom is under obligation to process it, make scrutiny of the documents
information and declaration given by the importer and appraise the goods to duty. For this purpose, There
are different group appraisers supported by their staff.
2. The documents pass through different group hands for necessary action / endorsements / record.

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3. The concerned appraiser has to ensure that goods are not prohibited goods, the classification and valuation
is correct.

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4. The transaction is in accordance with their equirements of the provisions of different Acts, the party is not

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on the caution list and the documentary and other requirements have been complied with. He makes an
assessment appraisement of goods for the purpose of levy of duty.

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made by the internal audit department.

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5. The duty amount is pin pointed in the bill of entry with the help of a typewriter after proper scrutiny/check

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6. Import licence, debit formalities if necessary have to be completed by the concerned customs official.

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7. The Examination order is also recorded in the Bill of Entry to be followed by the Examiner/Inspector who
physically checks the goods in the dock.

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8. The customs assessed Bill of Entry indicating the amount of duty to be deposited in the dock.
9. The Custom assessed Bill of Entry indicating the amount of duty to be deposited by the importer is returned
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to the importer without any delay the maximum limit is 3-4 days.
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10. The importer after the receipt of customs assessed Bill of Entry is under obligation to deposit the amount

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of duty in the treasury/bank within a stipulated period of 7 days. In case duty is deposited after the expiry

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of the stipulated period the importer is liable to pay additional amount of interest on amount of duty till the
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date of its deposit as decided by competent authority. This information is indicated on the Bill of Entry
itself when sent to the importer.
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12. On payment of duty, the original copy of the Bill of Entry is detached and sent for the purpose of record to
the manifest department by the cash branch.
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13. The documents are given back to the importer for handling them over to the Dock Superintendent to
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examine appraise or inspect the goods physically as per Examination order given by the appraising officer.
Physical Examination of Goods
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(a) The Dock Superintendent marks the paper to one of the Inspector for physical examination of goods on a
random basis, as per Examination order is given by the Appraising Officer (A/O).

w (b) The contents of the package are checked as per description and information given in the Bill of Entry. The
classification, value, composition and functional aspect of the item is also checked. If need be the samples
are also drawn and sent to the laboratory for the check and report.
(c) The quantity as per packing list is also checked and the excess or deficiency if any is recorded.
(d) The examiner writes his report on the Bill of Entry and it is also countersigned by the Dock Superintendent
who makes “Out of Charge order” endorsement.
(e) The documents are handed over to the Manager/Security officer inchargs of the Port authority in whose
custody the goods were kept after their unloading. He ensures on scrutiny of documents about any changes/
demurrages, if any to be paid by the importer.

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 (f) The Importer/CHA deposits the same with cash department and same is recorded on the bill of entry as a
proof of payment.
(g) The Manager/security officer after seeing the fact of payment makes an endorement ‘goods released’. This
is also known as Release order.
(h) Against the “Out of Charge” order given by the customs and “Release order” given by the Port authority
goods are cleared out of the customs area.
Check Second
The above procedure is known as check second i.e. documents are first examined, goods are appraised to duty
and physical examination is done, thereafter over 95% of the consignments are subject to check second system.
Check First
Where Appraising officer is not able to identify the goods properly or there is not sufficient information about

for their physical examination. This is known as check first system.

Confiscation of Goods
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the composition/functions/classification of the goods in question the A/O marks the papers to Dock Superintendent

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At any of the stage mentioned above, it is notified that the goods are prohibited goods or the importer has

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intended to import in violation and contravention of the provisions of the relevant Acts in operation, penal procedings

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may have to be initiated and the goods are liable to confiscation in terms of section 111(d). The discretion lies with
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the adjudication authority to allow their release to the importer on payment of a fine or to confiscate them.
(b) Explain the procedure of Duty Drawback Scheme alongwith the documentation formalities.

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Ans. The drawback scheme refers to the rebate/refund of duty charged on any imported excisable material used

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in the manufacturing of goods being exported from India. According to the Drawback Rules, 1995 drawback has

operation for export of goods from India. e

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been permitted not only on material/inputs used in the manufacture, but also processed or subjected to any other

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The Duty Drawback Scheme of the Government of India is administered by the appropriate authority and is
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governed by the ‘Customs and Central Excise Duties Drawback Rules’ 1995 as compiled and notified by ‘Drawback

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Directorate’ of the Department of Revenue, Ministry of Finance.
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As per the Duty Drawback Rules the following duties can be refunded or rebate given:
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1. Customs and Central Excise Duties on Raw material.
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2. Components used in completing the unit of export.
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3. Packing material used for export packaging.

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4. The duty drawback is available both to the manufacturer exporter and the merchant exporter.

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The duty drawback has to be claimed in specified time period after the completion of physical shipment of

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The department is liable to pay interest on delayed refund of the amount of duty.
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Drawback is not allowed if the total foreign exchange spent on inputs used in the goods exported is more than

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the FOB value realised or the value addition is negative. If the payment of the goods exported is not received in the
prescribed period, no duty drawback is allowed. No drawback will be allowed if the manufacturer of the export

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goods has availted the MODVAT for the raw material or inputs.
The following documents need to be submitted with the drawback application:
1. Copy of Export Contract or Letter of Credit
2. Copy of the packing list
3. Copy of AR4 form, if applicable
4. Insurance certificate, if applicable
5. Copy of communication regarding rate of drawback
6. Copy of Test Report, if applicable
7. Declarations, as required

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 8. Certificate from the jurisdictional Excise Superintendent
9. Declaration regarding not availing MODVAT
10. Any other document, if necessary
11. Exporters can get Drawback benefits provisionally by making an application to this effect to the Drawback
Directorate. He may request that provisional amount be granted to him towards exports of goods pending
ending determination is the amount of rate of draw back. He will be required to execute a general bond for
the drawback claim amount.
12. If the rate of drawback is less than three fourth of the duties paid on the materials or components used in
the production of manufacture of the said goods, he may within sixty days from the date of exports, make
an application in writing to the Drawback Directorate for fixation of appropriate amount or rate of drawback
with all necessary documents.
Q. 5. Write short notes on of the following:
(i) International Contract Terms.

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Ans. International Contract Terms: International Trade is an international transaction and needs a contract

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which is easily enforceable and is recognised the worldover, because every nation has its own laws, keeping this in

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view the International Chamber of Commerce (ICC) Paris, developed ‘Incoterms’ which are accepted and honoured

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globally, though the same has not be made by any government. These Incoterms issued in 1990 have the following
provisions.
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transport them at his cost to his place.
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1. Ex-Works (Ex-W): Ex-Work’s means that the goods will be delivered at the works-meaning the place of
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manufacture. In this case the buyers bears all the costs and risks involved in taking the goods and he will have to
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2. Free Carrier (FCA): It means that the seller will hand over the goods to designated carrier at named place. If
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the place is not named then the seller may deliver the goods to a carrier at place of his choice and convenience.
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3. Free Alongside Ship (FAS): Seller will place the goods alongside the ship/vessel on the quay or in lighters at
the named port of shipment, and it will imply that the goods have been delivered to the buyer. At the costs, risks, loss

inland waterway transport.

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or damages from that point onward shall be born by the buyer. This term is applicable to shipment through sea or
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4. Free on Board (FOB): This is most common terms used in most of the exports and it means that once the

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goods have passed over the ship rail at the named port of shipment, the exporter or sellers obligations are over and all

waterways.
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future risks, costs, loss, damages shall be born by the buyer. This applies only to transportation by sea or inland

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5. Cost and Freight (CF): It implies that the seller shall bear all the costs and freight necessary to bring the

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goods to named port of destination. The risk of loss or damage to goods after the goods have been delivered on board
the vessel is transferred to the buyer. The term is applicable only to sea and inland waterways.
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6. Cost Insurance and Freight (CIF): This is most widely used intercom term applicable in case of all imports
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and exports. It means that apart from the obligations in the case of cost and freight the seller will buy a marine

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insurance policy against the buyers risk of loss or damage to the goods during the carriage. This term applies only to
transport by sea or inland waterways.

w 7. Carriage Paid to (CPT): It implies that the seller will pay the freight for the carriage of goods to the named
destination. The risk of loss or damage to the goods is transferred to the buyer once the goods have been handed over
to the designated carrier.
8. Carriage and Insurance Paid to (CIP): It implies that the seller shall bear the freight of carriage and also
insure the buyers risk of loss or damage during carriage. The term can be used for all modes of transport.
9. Delivered at Frontier (DAF): This implies that the seller will fulfil his obligation by making the goods
available, cleared for export at the named point and place at the frontier, before the customs border of the adjoining
country. This term is mainly employed when goods are carried by Rail or Road transport.
10. Delivered Ex-Ship (DES): This term implies that the seller fulfils his obligation to deliver when the goods
have been made available to the buyer on board ship cleared for export (import) at named port of destination. The

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seller bears all the cost and risks involved in bringing the goods to the named port. This term can only be used for sea
or inland waterways.
11. Delivered Ex-Quay (Duty Paid) DEQ: It implies that the seller fulfils his obligation to deliver when he has
made the goods available to the buyer on the Quay the named port of destination. The seller bears all risks and costs
of delivering the goods thereto. This term is applied only to sea or inland waterways.
12. Delivered Duty Unpaid (DDU): This implies that the seller fulfil his obligations to deliver when the goods
have been made available at the named place in the country of importation. The seller bears all costs and risks
involved intringing the goods to the named destination point but does not bear duties, taxes and other official charges
payable on importation, but the seller bears the costs and risks of carrying out customs formalities.
13. Delivered Duty Paid (DDP): It implies that the seller delivers the goods at the port of importation and bear
all costs and also bears the duties at port of destination.
(ii) Standardized Pre-shipment Export Documents.

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Ans. Standardised Pre-shipment Export Document: Exports are carried out only with the help of documents which are
many in number and many of them are overlaping and have the same information for a different purpose. These documents are to
be prerpared individually and add to cost and investment of time and require specialised knowledge.

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Many countries are following a system of Aligned Documentation System. The system is based on the UN
Layout key and is in use in many countries and helped in speed accuracy and convienence in documentation work.

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By adopting the similar system Government of India has developed standard Preshipment Export Documents, with
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Document 1 and Master Document 2.

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help of this systems as many as 17 of 25 documents can be prepared from only 2 Master Documents, Master

The effort has been made to standardise both the Commercial and Regulatory documents.
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1. Commercial Documents: These documents are required for effecting physical transfer of goods and their

1. Principal Export Documents

2. Auxiliary Export Documents.
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title from exporter to the importer. There are two types of documents.
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Principal Export Documents are:
(a) Commercial Invoice

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(b) Packing List

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(c) Bill of Lading/Combined Transport document

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(d) Certificate of Inspection/Quality Control
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(e) Insurance Certificate of Policy
(f) Certificate of Origin
(g) Bill of Exchange b n d
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(h) Shipment Advice
Auxilliary Export Documents are: H
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(a) Performa Invoice
(b) Intimation for Inspection

w (c) Shipping instructions

(d) Insurance declaration
(e) Shipping order
(f) Mate Receipt
(g) Application for Certificate of origin
(h) Letters to the bank for collection/negotiation of documents.
Out of the above 16 documents 14 documents have been standardised. The Shipping order and Bill of Exchange
have not been Standardised. These standardised documents are prepared on the same size of paper having the same
sequence of information which is alligned in all the documents.

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 (iii) Letters of Credit
Ans. Details included in Letter of Credit: Letter of Credit is very important document and must have certain binding
clauses in it and the stipulations on which the Letter of Credit is being opned. It must include the following:
1. Name of the bank issuing the Letter of Credit and its number.
2. Type of credit being extended.
3. Name of the applicant Importer on whose behalf the Letter of Credit has been issued
4. The amount in the currency of payment.
5. The expiry date of the Letter of Credit and the date upto which the Letter of Credit is valid.
6. The Last date for shipping of the goods.
7. The Terms of Bill of Exchange i.e. on demand or sight.
(a) An usance. (defered payment upto a fixed date)

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(b) The name of the banker on which the draft is to be drawn or it is to be drawn on the buyer-importer.
8. Details of goods as per the sales contract
9. Documents required:
(a) Commercial Invoice-original

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(b) Packing List-original
(c) Insurance Policy or Certificate-original

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(d) Inspection certificate-original
(e) Bill of Lading (Clean on Board)–original
(f) Airway Bill/Combined Transport Bill
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10. Port of Loading/Shipping.
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11. Port of Discharges/Destination.
12. Price and terms of Shipment i.e FOB or CIF or CIF.
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13. Whether part Shipment allowed /Tranship-ment permitted.
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15. Type of Letter of Credit-Irrevocable/Revocable.d
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14. Certificate as the issuing bank’s responsibility in the credit.
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Documentry Credit.
Practical Mechanism
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16. Certificate or statement that the credit is subject to the provisions of the Uniform customs and practices for

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There is well established procedure of practical mechanism of a sequence which is usually followed in a Letter
of Credit as detailed below:

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1. The buyer and seller agree to terms of sale including payment by Letter of Credit as agreed upon.
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2. The buyer (importer) issues instructions to an issuing bank to issue a Letter of Credit as agreed upon.

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3. The issuing bank instructs the advising or confirming bank to confirm the establishment of Letter of Credit

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in favour of the seller exporter with specified stipulations and documents.
4. The advising bank informs and confirm to the beneficiary exporter about the establishment of Letter of

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Credit.
5. The beneficiary accepts the advice and starts processing the order.
6. When the exporter is ready to ship the goods he takes necessary for preshipment inspection.
7. The seller exporters after shipping the goods obtains a Clean-on Board Bill of Lading and other required
documents as stipulated under the Letter of Credit and deliver these documents with a Bill of Exchange to
the negotiating and the paying bank to seek the due payment.
8. The bank scrutinize the documents and if found in order effects payments.
9. If the paying bank is not the issuing bank, it sends the documents to the issuing bank which present them
to the buyer for release of Bill of Lading to take delivery of the shipment after payment.

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 10. The buyer importer uses the documents to get the possession of the goods after completing the custom
formalities.
(iv) Government Policy Making and Consultations Institutions.
Ans. Exports from a country reflect the economic strengths of the country which exports. It also help the country to make a
mark of the economic prosperity of the industry of the exporting country. Government of India has set up many institutions for
policy-making and consultations for export promotion in India. Some of the institutions are being described below.
Board of Trade: It has been established for ensuring regular consultations, monitoring and review of India’s
foreign trade policies. It has representatives from the Ministry of Commerce, various Trade and Industry Associations
and the Export Services Organisations. The deliberations in the Board of Trade provide guidelines to the Government
for appropriate policy measures for corrective action in the ongoing policies.
Committee on Exports

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To provide inputs to the export promotion policies and in monitoring of the efforts of promoting the Foreign
Trade the Cabinet Committe on Exports have been established which provides its views on export promotion policies.
Empowered Committee of Secretaries

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Since the exports are diverse and different in products commodities and may be incharge of various ministries to

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active speedier and quicker decision making an Empowered Committere of Secreteries has been setup which suggest

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various measures for export promotion to Cabinet Committee on Exports.
Director General of Foreign Trade
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It is an organ of the Ministry of Commerce which helps in the formulation of Export-Import policies so as to
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promote the exports from India. It also looks after the implementation of the EXIM Policy. EXIM Policies have been
made with the main objective of providing a suitable and stable policy framework which encourages the exports, it
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also has a plan known as Duty Drawback Scheme under the Excise Rebate policy given in the EXIM policy.
DGFT issues ICC Numbers
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Director General, Commercial Intelligence and Statistics.

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This institution provides statistial datas of exports and its own publication, Indian Trade Journal helps the

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exporters bag export orders.

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mainly through:
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Ministry of Textiles: Textiles being the major and ancient exports from India is given a special emphasis as
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India has the technical capability and the capacity of producing quality textiles for export purpose. This is achieved

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l All India Handloom Board
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l All India Handicrafts Board
l All India Powerloom Board
l Wool Development Board
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These organisations promote exports of those goods which are produced by their affiliate industries, Development

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Commissions, Handicrafts and Handlooms, the Textile Commissioner and the Textile Commissioner helps in the

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growth of exports
Development Commissioner: Small Scale Industries Organisation.

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l It provides export promotion services to small scale industries as follows:

l It helps Small Scale Industries to develop their export capabilities and capacities.

l It organises training programmes for exporters.

l It collects market information and provide information to the exporters.

l It provide assistance in developing markets for exports of the Small Scale Industries.

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