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INTRODUCTION
In their sales contract buyer and seller
agree on the conditions of sale : payment on
the one hand and delivery on the other.
These terms determine at what precise
location the ownership of the goods is
transferred from seller to buyer and
when/how payment will be done. In
international trade a universal set of rules on
delivery has been developed over the years.
It is called INCOTEMRS.
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EXW = EX WORKS ( named place)
Cost of Goods plus cost of Export packing and marking
In this term the seller delivers the goods by keeping it ready in
deliverable state at the seller's place or another named place.
This named place can be factory/godown or manufacturing unit.
In this term seller does not clear the goods for exports nor
goods are loaded on vehicle.

FCA = FREE CARRIER ( named place)
Cost of Goods plus cost of Getting goods to railway station or
truck for transportation to port
This term refers to seller's responsibility to deliver the goods,
cleared for export, to the carrier appointed by the buyer at the
named place. In this term the place of delivery is very important.
If the delivery is at sellers place's then he is responsible for
loading. If the delivery occurred at any other place, the seller is
not responsible for unloading. This term can be used for all
modes of transport as well as multimodal.
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FAS = FREE ALONGSIDE SHIP (named port of
shipment)
Cost of Goods plus cost of Transport to
port and getting goods alongside ship
In this term when the goods are placed
alongside the vessel at the named port of
shipment it will be considered that the seller
has completed the delivery.
The buyer has to bear all risks of loss or
damage to the goods and all costs from this
point of time. However the seller must clear
the goods for the purpose of export. This
term can be used only for inland waterway
transport or shipment by sea. It is not used
when it is air shipment.

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FOB = FREE ON BOARD ( named port of
shipment)
Cost of Goods plus cost of Getting goods on
board and preparing shipping documents
This is the most popular term and is
widely in use. FOB means that the seller
delivers when the goods pass the ship's rail
at the named port of shipment.
Under this term the buyer has to bear all
costs and risk of loss of damage to the
goods from that point. This term requires
the seller to clear the goods for exports. This
term is used only for sea or inland waterway
transport. It is not suitable for shipment by
air.
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CFR = COST AND FREIGHT ( named port of
destination)
Cost of Goods plus cost of Freight cost (port
to port)
Earlier this term was popularly known as C&F or
CNF. CFR means the seller must pay the cost and
the freight necessary for the goods to reach at the
named destination. However, the risks of loss or
damage to the goods after the time of the delivery
is on buyers account.
The seller is required to clear the goods for
exports. This term can be used only for sea and
inland waterway transport.

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CIF = COST INSURANCE AND FREIGHT ( named port of
destination)
Cost of Goods plus cost of Marine Insurance
Cost, Insurance and Freight means that the
seller, delivers when the goods pass the ships rail in
the port of shipment. The CIF price refers that it
covers the cost of the goods, freight necessary to
bring the goods to the named port of destination and
also marine insurance.
Compared to the previous term, CFR the seller
contracts for the insurance and pay the insurance
premium. It will be essential for the buyer to know
that under the CIF term the seller is required to
obtain the insurance only on minimum cover.
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If the buyer wishes to have more
protection then he should make his own
insurance arrangement extra or should
specify to the seller at the time of contract.
In this term the seller must clear the
goods for exports and the buyer must
arrange necessary clearance for import.
This term can be used only for sea and
inland water transport.

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EXW Ex Works
Buyer takes title when taking delivery of
the goods at suppliers facility. Buyer is
responsible for the shipment and duties.
FCA Free Carrier
Buyer takes possession and title at the
airport or truck terminal at the port of
export in the sellers country after the
goods clear customs.
FAS
Free Alongside
Ship
Buyer takes possession at the dock at the
port of export after the goods clear
customs.
FOB Free of Board
Buyer takes responsibility and title for the
goods as they pass over the ships rail
during loading.
Purchasing & Supply Chain
Management, 4e
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CFR Cost and Freight
Supplier arranges freight and pays as far as
the buyers port of entry. Title and risk of
loss remain with the buyer.
CIF
Cost, Insurance,
and Freight
Supplier arranges freight and buys
insurance for the goods as part of the sales
price. Title and risk transfer to the buyer
once the goods clear a ships rail while
being loaded.
CPT Carriage Paid
Title transfers to buyer when goods are
loaded into a container. Seller selects and
pays the carrier. Similar to CFR.
CIP
Carriage and
Freight Paid to
Similar to CIF but applies to air or truck
transport only.
Purchasing & Supply Chain
Management, 4e
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What is Export Sales Contract?
Agreement between buyer and seller, stipulating
each and every details of the transaction.

Legally binding document.

It reduces the probabilities of disputes &
differences as it fixes the role and responsibilities
of each party.

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Terms and Conditions:
While drafting the sales contract one must ensure
the following:-
1. Coverage is complete.
2. Maximum clarity.
3. Future probability to be provided.
4. Trade practices.
5. Law of both countries
6. Need of both parties.

There should not be any ambiguity regarding the
exact specifications of goods and terms of sale
including export price, mode of payment, storage
and distribution methods, type of packaging, port
of shipment, delivery schedule etc.
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Following standard terms and conditions are
covered in an Export Sales contract: -
Name & address of both the parties.
Contract Number & Date, place
Description of goods, quantity and quantity
Product Standards and Technical Specifications of
goods.
Inspection/certification
Total Value of Contract
Terms of delivery (F.O.B./C.F.R./C.I.F. etc.),
Period of Delivery/Shipment, part shipment, Trans-
shipment.
Terms of payment:- L/C, D/A, D/P, advance payment,
Amount/Mode & Currency
Contd..
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An Export order is an offer to sell made by the
exporter and its acceptance by foreign buyer.
It is a documents communicating decision of the
foreign buyer to purchase certain item (s) from the
exporter. It specifies:
Description of Items
Their Quantity and quality Specifications
Unit Prices
Delivery terms
Shipping Marks
Insurance requirement
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Labeling
Packaging and packing
Payment terms
Pre-Shipment Inspection requirements



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1. Exporter locates trade enquiry
2. The exporter then sends his profile to
know the interests of buyer
3. Buyer likes to have details of certain
products
4. Exporter then sends the quotation
5. Buyer specifies his requirements regarding
shape and size and other terms
6. Exporter send the Performa Invoice
7. Buyer confirms the Performa Invoice
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The Performa invoice should indicate the unit &
total prices of the production internationally
accepted or mutually agreed currency.

It should indicate total quantity of products
offered.

There should be clearly indicate the discount for
a specific volume.
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The Performa invoice submitted entails legal
obligations on the part of the exporter to supply
the product to the buyer, in the event of the
invoice being accepted by him.

Hence it is necessary that the conditions of sale
& other factors qualifying it should be clearly
spent out.
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Processing of an export order is to make
arrangements for the items to be produced at the
factory of exporter or to be obtained from
supplier.

All the operations from the time for production is
placed, till it reaches to export warehouse, are
normally covered by this phase.
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It is levy imposed by government of India on
all excisable item as specified by it and is
usually collected at source, i.e. manufacturing
stage.

The manufactured products, as soon as they
are ready for dispatch from the factory attract
the levy.

Only after the excise is paid can the products
be removed from the factory premises.
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The govt. allows exemption from paying sales tax
for export products.

For this, Exporter should register with the sales
tax authorities.

Sales tax exemption is for the last two stages of
transaction in a product before export.
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The GOI has introduced a compulsory pre
shipment inspection for selected items of
export to ensure that the products to be
exported conform to high quality std.

Pre shipment inspection scheme is
administered by the Export Inspection council.
Under this scheme, the emphasis is on quality
control rather than on inspection for export.
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In case the export of the product is subject to
export inspection by the agency, the exporter
makes an application in the prescribed form to
the export inspection Agency, enclosing the
following documents.

Copy of commercial Invoice
A cheque or Demand Draft
A copy of export contract
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More popular method of Dispatching goods to
an export buyer than dispatch by air.

Freight charges are less compare to air freight.

Physical size of product constraints the
exporter to dispatch the goods by air.


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This are specialized personnel who arrange
for the completion of all formalities
connected with the shipment of goods.

As soon as the export goods reaches to the
warehouse, the exporter arranges for a
complete set of shipping documents, to be
passed on the forwarding agent.
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These comprise:
GR-1 form
Performa Invoice
Certificate of inspection where necessary.
Form of declaration
Shipping bill
Export License
Mate Receipt
Port trust dues
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It is an exchange control document required
by RBI.

As per exchange control regulations, an
exporter has to realize the proceeds Within
180 days from the date of shipment from
India.

In order to ensure this, the RBI has introduced
the GR Form.
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Its a main document required by the custom
authorities for the purpose of Granting
permission for shipment.

It is prepared in 5 copies.

It contains the name of exporter, his address,
code no, the description and Quantity of goods
to be shipped, the value of goods, number of
packages etc.
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The GOI regulations require that an export
license be obtained for certain categories of
export products before shipment is made.

Obtained from DGFT

DGFT scrutinizes the application with
reference to quantity, value and description
of goods in all the documents.
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According to prevailing customs regulations, no
cargo meant for export can be loaded on a ship
unless the custom authorities at the port accord
their formal approval.

After obtaining the shipping documents,
including 5 copies of shipping bills is submitted
by the exporter to the customs house concern.
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A complete set of negotiating documents is
presented to the negotiating bank through
whom the L/C has been advised.

Where the exporter has compiled with all the
T&C of the L/C while submitting his
documents to the negotiating bank, the
documents are deemed to be clean.
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Let Export Order by Customs Authorities
Customs Officer will verify the contents and after he is satisfied
that goods are not prohibited for exports and that export duty,
if applicable is paid, will permit clearance by giving let ship or
let export order.


GR-1, ARE-1, octroi papers, quota certification for export etc.
are also signed. Exporters copy of shipping Bill, GR-1, ARE-1
etc. duly certified are handed over to exporter or CHA
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Processing under EDI system
Under EDI system, declarations in prescribed form are to be filed
through Service Centre of customs.
After verification, shipping bill number is generated by the
system, which is endorsed on printed checklist generated for
verification of data.
Goods are inspected at docks on the basis of printed check list.
All documents are submitted to Customs Officer along with
checklist.
If goods and documents are found in order, let export order is
issued. Then two copies of Shipping Bill are generated:
Customs Exporters copy
Exporters copy

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Import General Manifest-Important Document
To get an entry inward the Master of the Vessel or
his agent is required to submit to the proper officer
in the Custom House a document called Import
General Manifest or Import Manifest in a
prescribed form.

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The manifest is nothing more than a list of all
goods carried on board including those meant for
other ports in India or abroad with all details like
number of packages, marks and numbers,
description of the goods and the importers name.
Except with the permission of the proper officer.
No import goods can be unloaded at any Customs
Station unless they are mentioned in the aforesaid
import manifest for being unloaded at that Customs
Station.


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Examination of Goods:

In case the importer does not have complete
information with him at the time of import, he may
request for examination of the goods before
assessing the duty liability. This is called First
Appraisement.

The goods are examined subsequent to assessment
and payment of duty. This is called Second
Appraisement.

Examination is normally done on random basis.
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Examination of Goods

Under the EDI system, the bill of entry, after assessment
by the group or first appraisement, as the case may be,
need to be presented at the counter for registration for
examination in the import shed.

A declaration for correctness of entries and genuineness
of the original documents needs to be made at this
stage.

After registration, the B/E is passed on to the shed
Appraiser for examination of the goods.
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Examination of Goods:

Along-with the B/E, the CHA is to present all the necessary
documents. After completing examination of the goods, the Shed
Appraiser enters the report in System and transfers first
appraisement B/E to the group and gives 'out of charge' in case
of already assessed B/E.

Thereupon, the system prints Bill of Entry and order of clearance
(in triplicate).

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All these copies carry the examination report,
order of clearance number and name of Shed
Appraiser. The two copies each of B/E and the
order are to be returned to the CHA/Importer,
after the Appraiser signs them. One copy of
the order is attached to the Customs copy of
B/E and retained by the Shed Appraiser.

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