MBA_531_Export Import Documentation

insurance and freight), etc. It becomes possible to achieve a goal regarding the setting up of export pricing, when the company aims to sell the maximum number of products. Furthermore, these goods must go at competitive rates, enabling the greatest margin of profit for the company. Therefore, it would be worthwhile to create a costing sheet for the export of every product. x. Consulting with Purchasers: Negotiations in the price or discount are done once the purchasers expressed interest in the products, business continuity and future prospectus. xi. Using ECGC to Cover Risks: The insolvency related to purchaser or country results in payment risks with regard to global trade. However, if a relevant policy from the ECGC (Export Credit Guarantee Corporation Ltd) were in place, it would be possible to handle these risks appropriately. For instance, sometimes, the purchaser places an order without offering a Letter of Credit. Then again, the buyer may not be willing to pay in advance. In such a scenario, it would be best to have protective measures in place to tackle the risk of not receiving payment. One such measure is using ECGC to gain a credit limit on the foreign purchaser. (Click here for more information about ECGC). Processing an Order for Export i. Confirming the Purchase Order: It is essential to examine any export order that comes in, carefully. The aspects of examination include the items ordered; specifications, if any, the modes of payment; conditions related to payment, if any; methods of packaging; conditions related to delivery, etc. Once the examination is through, the company may confirm the order. In turn, a formal agreement comes into play between the exporter and the purchaser. ii. Procuring the Products: Once the company has confirmed an order, it should proceed immediately with the next step. This refers to the manufacture or acquirement of the goods awaiting export. It is important that the establishment keep in mind the efforts that have gone into acquiring the order, especially in a scenario of heavy competition, always. This aids in proceeding with the procurement of goods in alignment with buyer’s requisites. iii. Control of Quality: Being conscious of quality regarding export products, is vital in the race to stay a step ahead of the competition. In other words, one must remember that specific goods, such as particular chemicals, food, agricultural, fish, etc., undergo strict pre-shipping examination. Then again, foreign purchasers may come up with their own specifications/standards. It may involve the insistence of inspection via the 151 CU IDOL SELF LEARNING MATERIAL (SLM)

concerned purchaser’s own inspection agents. Therefore, adhering to high standards in the export business is extremely essential. iv. Financing the Process: Commercial Banks are keen to offer finance at reduced rates of interest to exporters. These finances relate to the transactions involved in pre- shipping or post-shipping. In case, the offer is for the pre-shipment stage, the bank grants a Packing Credit advance, especially to new business owners. These exporters must lodge L.C or confirm an order for 180 days. The advance helps the new exporter to handle working capital expenses. Such expenses refer to buying of finished products or raw materials for manufacturing the products, labour costs, packaging, transportation and delivery, etc. Commercial banks tend to offer 75-90% advance of the actual value of the purchase order. The balance remains in the margin. The concerned bank then adjusts this advance against the revenue gained from export bills that have undergone purchase, negotiation, or discounting. v. Financing Post Shipment: An exporter generally receives almost 90% of the value of the invoice, for a normal transit period. Even if an usance export bill comes into play, displaying the due date of the notation, the same percentage applies. In general, the post-shipment advance sustains from the date of shipment until the subsequent 180 days. Banks recover their advance payments via the collection resulting from sales of export bills. If the export bills do not pay on time, banks demand interest. The rate of interest is in alignment with the commercial rate of interest. vi. Proceeding with Packaging, Packing, and Marking: It is important to adhere to the purchaser’s specifications regarding the packaging of products. When the packaging is attractive and good, the products reach the receiver in a healthy condition. Similarly, packing should be such that there is easy handling of the purchased products. Furthermore, good packing helps in loading to maximum advantage, reducing shipping expenses, and maintaining the standard and safety of the specific cargo. Finally, there is marking of the name and address for delivery on the packing. Other details include weight, package number, instructions for handling, etc. This information also serves as identification of the cargo inside the package. vii. Insurance: This particular policy refers to the damages as well as the risks involved in goods during its transit. Usually, a CIF policy refers to the marine insurance being arranged to the exporters whereas in a contract involving C&F and FOB, it’s for the buyers. viii. Delivery: The exporter should be aligned with the delivery schedule since it very important one. Planning is essential for encouraging efficacious and speedy delivery. 152 CU IDOL SELF LEARNING MATERIAL (SLM)

ix. Procedures Linked to Customs: The exporter may expect clearance for shipping of export products, only after receiving BIN from the Customs department. BIN refers to business identification number. It is PAN-based. Another requisite is to have a current account in a bank. The department designates this bank for taking charge of crediting drawback amounts. The details must also go on to the computer system handling the entire process. Sometimes, there is a non-EDI. In such a scenario, the Shipping Bill and Bill of Export (Form) regulations of 1991 come into play. These regulations describe the format for submitting the export bills or the shipping bills. The exporter has to keep track of diverse types of export bills or shipping bills. They are applicable to various kinds of export, such as exporting of goods under drawback, delivering of duty-free products, exporting of dutiable products, etc. as per the rules proffered by the EDI System, the exporter must submit declarations to the Service Centres of the Customs department. Additionally, the documentation must be presented in the requisite format. The CHA/exporter creates a checklist too, for verifying data. Once the data is verified, the operator at the concerned Service Centre enters the information into the system. Thereafter, the system creates a shipping bill number. It duplicates itself on the printed checklist. Finally, the CHA/exporter receives it. The system uses the declarations to process the shipping bill, automatically. There is no need for manual processing. Then again, the appraiser dock requests the drawing of a couple of samples from the export consignment. These samples have to undergo testing. The Customs Officer takes over the job of drawing and testing. This individual also enters the details of the drawn samples and the testing agency, into the E/ICES system. x. Customs House Agents: Exporter take the help of agents belonging to the Customs department which is licensed by Custom Commissioner. These agents are too professionals and can do the work related to cargo clearance handled by the Customs department. xi. Documentation: The compulsory documents for the export and import under FTP 2015-2020 are listed below. 1. The Bills connected to Lading and the Airway 2. Export invoice and the list related to packing 3. For imports - Shipping bill/bill of export/bill of entry (Other documentation for possible submission, includes inspection certificate, certificate of origin etc.) xii. Submitting the Requisite Documents to the Bank 153 CU IDOL SELF LEARNING MATERIAL (SLM)

Once the shipment is in progress, the exporter must display the requested documents to the bank. This submission must take place within 21 days after shipment. It is necessary for establishing a connection between the local bank and the foreign bank. Only then, can the monetary transactions go through successfully. It is important that the documents align with the Negotiation/Collection/Purchase rules under L/C. The following documents should be present. a. Bill of Lading/Airway Bill b. Bill of Exchange c. Certificate of Inspection, wherever essential d. Packing List e. GSP/Certificate of Origin f. Invoice g. If shipped under L/C, Letter of Credit h. Declaration under Foreign Exchange (L/C or the purchaser may demand other documents. Sometimes, there is a statutory request for other documents.) xii. Acquiring the Proceeds of Exports: According to the FTP of 2015-2020, Indian currency will come into play for every invoice for every exporter. Any currency may be freely converted to Indian rupees. However, the proceeds from exported goods should also show up in freely convertible currency. The only exception is for Iran. Above all, the exported goods should receive payments within a span of nine months. 154 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 8.1: International Shipping Process from India 155 CU IDOL SELF LEARNING MATERIAL (SLM)

8.3 EXPORT CONTRACT The export contract comes into play for the international sale of certain products (industrial supplies, raw materials, manufactured goods), which are projected for resale. Also, the buyer can be an importer or wholesaler or a trader or a distributer who sell products/goods to some other merchant or to other company. Although it is a commonly accepted practice to export products based a proforma invoice or quotation received from exporters, it is equally safe to use written and legal export contracts. An export contract or a sales contract is essentially a contract between you and a foreign importer to do business. Telephonic Contract Written Contract (Quotation) A Proforma/ Invoice Figure 8.2: The Different Forms of Export Contract  The Essential Elements of an Export Contract i. The party’s name and the addresses. Mention clearly about these details in the agreement. ii. The specifications, its standards of the manufactured good. Mention the products details such as its name including its technical name, its standard size, the destination for delivery, and standards including national and international, specification of the samples and buyer requirements. iii. Quantity. Mention the unit that relates to the quantity being measured both in words and in figures. iv. Inspection. Mention the manner, its focus and the quality of the inspection including the inspection agency. Today, the designated agency carries out the pre-shipment inspection of the goods, and even the foreign buyers can stipulate their own agencies for the inspection and conditions. 156 CU IDOL SELF LEARNING MATERIAL (SLM)

v. Total value. Mention the overall contract value in figures and in words and also mention its currency. vi. Delivery Terms. Mention the delivery terms that is in alignment with a specific Incoterm 1990. Companies may note that a new version of Incoterms will get applicable from 1 January 2000 onwards. vii. Taxes, charges and duties. Should have a clear picture about the taxes. The seller’s quoted prices will be inclusive of duties, taxes and charges. But levies of import, that might depend on the imported countries, is held responsible by the purchaser. viii. Delivery. Specify the place of dispatch and delivery. It is necessary to be specific about the period of delivery. Will it begin from the date that the contract was signed? Will it begin from the day that the seller received a notice that the import license had been issued? Will it begin from the date when an irrevocable letter of credit was issued, and the concerned person notified? ix. Details regarding trans-shipment, part-shipment, or cargo consolidation. It is important to determine whether both the parties have opted for trans-shipment or part- shipment. In case, the shipments are going to be partial (trans/part), there must be clarity about the delivery location and the number on the shipment. In case, the shipping is to take place in the name of Consolidation of Export Cargoes program, the documentation should mention it. x. Details Concerning the Packaging, Labelling and Marking of goods. It is important to take note of everything concerning the packaging, labelling, and marking of exported products. xi. Details regarding Payments: The aspects of payment relate to currencies, modes, and amounts. It is essential that the exporter take note of the existing rates of exchange regarding diverse currencies, while stating terms of payment. The exporter must also specify whether the pricing is in alignment with a common global currency (U.S. dollars, for example), or with the current exchange rate for an in-country currency. Sometimes, there are fluctuations in the exchange rate. This should come into consideration too. xii. Details regarding Commissions and Discounts. There must be clarity regarding the amount connected with a commission or a discount. Who should pay it, and how much – the importer or the exporter? There must be clarity about the method of calculations and applicable rate, with regard to commissions. Commissions or discounts may/may not enter the picture, while the importer and exporter are discussing pricing for goods. 157 CU IDOL SELF LEARNING MATERIAL (SLM)

xiii. Licenses and permits. Mention licences and permits are required for any export transaction and mention the responsible for this export transaction and the expenses. Sometimes, it becomes difficult to obtain import licenses from the purchaser’s country. xiv. Insurance. There must be a contract which should mention about provision of insurance for commodities, goods against the damage, or loss during transit. Also need to specify the risk type and to what extent it is covered. xv. Documentary requirements. The four important categories by which the documents must require for the international trade are listed below: a. Documents are required for export and import of commodities or goods. b. Documents are required while taking delivery of commodities or good by the purchaser. c. Documents which require for payment related ones. d. Documents may require for special categories of products and their sale. For example, certain engineering goods will involve documents which are related to construction, maintenance and repair. e. Common documents for exporting goods. The letter of credit, the bill of exchange, the insurance policy, the commercial invoice, other invoices, and the airway bill/bill of lading, come under this umbrella. f. Product guarantee. Need to reach a firm decision on the guarantee period length. g. Delayed Delivery. In the case of delayed delivery of goods by the exporter, the details of the damages must reach the purchaser other than the force majeure. h. Force Majeure. It is a reference to a non-performing agreement. It is necessary to outline the details of what constitutes a non-performing contract. The document should also highlight the circumstances that will rid the concerned parties of any liability regarding non-performance. Officially, this is Force Majeure, which is intended to offer relief to the concerned parties, in the form of backing out of the contract. It could be that events not under the individual’s control serve to come into display during the validity period of the agreement. i. Remedial Measures. It could be that party may become prey to defaults in fulfilling the obligations outlined in the agreement. Therefore, remedial 158 CU IDOL SELF LEARNING MATERIAL (SLM)

measures should be in place. The parties should include them in the purchase/sale agreement. The measures should be in alignment with the mandatory legal procedures that can come into play when such defaults occur. j. Applicable Contract. Whichever geographical location governs the applicable agreement, it has certain business laws in place. They deserve a mention. k. Arbitration Measures. It would be good to have a clause on arbitration measures within the agreement. This will serve to bring about rapid and amicable resolutions of disputes/differences between the parties, if any. l. Taking Signatures. Both the parties should affix their signatures to the concerned agreement. It indicates a consensus regarding the terms and conditions showing up in the document. 8.4 FORWARD COVER A Case on ‘Forward Cover in India: A Banking Perspective’. India Inc. must take long-term forward cover to reduce the risks from volatility in foreign exchange rates, is the Reserve Bank of India’s suggestion. “What this entirely unexceptionable, and highly desirable, strategy does is substitute volatility of the spot exchange rate with that of forward margins at each rollover date. It is empirically and anecdotally established that the volatility of forward margins is far less onerous than that of the spot exchange rate,” said V K Sharma, executive director of RBI, at a function in Bangalore. Typically, banks offer Indian companies forward cover for short tenures of one month, three months, and six months and, at a maximum, one year. Sharma, however, said banks could easily customize a forward cover of five years by choosing a rolling hedging strategy. This would involve simultaneously cancelling and rebooking a short-term forward exchange contract until the desired long-term maturity. He said such simultaneous cancellation and rebooking of forward contracts for rollover was exempted from the restrictions RBI introduced on December 15 last year to reduce volatility in the foreign exchange market. The central bank had announced guidelines that restricted rebooking of cancelled forward contracts by companies and reduced the net overnight open position limit or trading limits for banks in the forex market. The rupee depreciated against the dollar by about 18 per cent between August 5 and December 15, 2011, with the volatility almost doubling from five per cent to 12 per cent in 159 CU IDOL SELF LEARNING MATERIAL (SLM)

this period. “I would very strongly encourage business and industry to routinely avail of this hedging solution, both to cover the foreign exchange risk of long-term imports and long-term foreign currency borrowings,” Sharma said. He also advised companies to not be enticed by lower interest rates abroad and suggested they rigorously evaluate foreign currency borrowing options, benchmarking these against comparable rupee borrowing. “Only if business and industry find the long-term foreign currency borrowing costs are lower, on a fully-hedged basis, than the comparable rupee borrowing costs, must they choose such options,” he said. Sharma said raising equity capital always turned out to be more expensive than debt. Hence, Indian corporate groups should fully provide against the possible liabilities from foreign currency convertible bonds, instead of hoping these instruments would be converted into equity. 8.5 EXPORT FINANCE The term refers to the financial help that banks, as well as other financial establishments extend to business owners. Timely help serves to help the products reach another geographical location, whether local or overseas. Thanks to export financing, MSMEs find it easy to approach a global audience. However, the exporter must first have knowledge about the documentation process that establishments offering export finance encourage, before actually requesting monetary help. In fact, certain papers are mandatory requisites for the majority of financial institutions. Furthermore, such establishments are ready to offer help at diverse stages of the export process. They offer them in the form of advances or long-term loans. For instance, the exporter may desire to have ready cash for purchasing raw materials to prepare finished goods. Then again, he/she may wish to have more money for manufacturing products, processing orders, pre-shipment credit (packing goods prior to shipment), etc. Export finance, as the term suggests, concentrates on the export marketplace. The aim is to lend a helping hand to business owners wishing to enter the international arena. After leaving the domestic environs, the goods find themselves in a transit zone lying between the exporter and the importer. This can be of significant duration, at times. Since emerging markets provide a highly competitive scenario, exporters go all out to offer attractive terms of payment to importers. This is an essential ingredient in fetching a good quantity of orders. Thus, export finance establishments aim to sustain a healthy cash-flow cycle when the shipment of goods is in transit. The granting of advances/loans begins from the date of shipment of goods. It ends on the date when the exporter receives the proceeds from the sale of goods. Thus, there is a pre-shipment credit and a post-shipment credit. Exporters may expect factoring services from banks and 160 CU IDOL SELF LEARNING MATERIAL (SLM)

other financial establishments. They purchase the accounts that the exporter intends to profit from at a discounted price. Thus, the exporter receives instant help for his/her immediate business needs. If exporters desire to have their niches in international marketplaces, they must offer acceptable terms of credit to their overseas purchasers. The exporters do realize that such actions place a great strain on their liquidity. It is why they are happy to have sufficient help available from other sources. True, these sources offer competitive terms, especially after the shipment has been delivered. Regardless, exporters do not mind opting for these offers. They are well aware that they will end up quoting reduced prices in order to compensate for the lack of opportunities to grant competitive terms for credit. Thus, choosing competitive trade finance is the only solution. Governments across the globe realize this too. Therefore, they strive to enhance exports by offering export credit, sometimes, even at concessional rates. 8.6 INSTITUTIONAL FRAMEWORK FOR EXPORT FINANCE There is an institutional framework in place for offering monetary help to exporters. In India, they comprise of the Reserve Bank of India, Export Credit & Guarantee Corporation, Export Import Bank of India, and commercial banks. The Reserve Bank of India is the main bank of India. Therefore, it decides upon policies and guidelines for the whole country. It also plays the role of a re-financing establishment for commercial banks that deal with short-term and medium-term loans. These commercial banks could be Indian or foreign. However, they are all linked to the Foreign Exchange Dealers Association. All of them handle export finance. Whenever necessary, the Export Import Bank of India combines with commercial banks, in order to help exporters, obtain medium-term loans. The Export Import Bank of India also joins the Reserve Bank of India in re-financing commercial banks, albeit at concessional rates. Commercial banks provide monetary help at reduced rates of interest to exporters. Sometimes, the commercial banks refuse refinancing. Then, they take advantage of the subsidy on the rate of interest. ECGC also does its bit via diverse guarantees and policies. The Export Credit & Guarantee Corporation serves as a refuge during times of commercial/political risks affecting the export business. Institutions involved in export finance: Many institutions are emerged for providing the export finance. Even the institutions which are existing ones have also opened many avenues for providing financial help to exporters. The institutions are:  Export Import bank.  Commercial banks, both nationalized and non-nationalized.  Development banks such as IDBI, ICICI, etc.  Small Industries Development Bank of India.  State Finance Corporations. 161 CU IDOL SELF LEARNING MATERIAL (SLM)

 National Small Industries Corporation.  Export Credit Guarantee Corporation. These all institutions will provide finance directly or even indirectly to the exporters. Foreign banks also provide loans for them. Also, these foreign banks are offering offshore lending where the Indian banks are not doing so yet. Using these offshore lending help foreign purchasers to get loans in a foreign currency of choice which enables them to purchase products or commodities from domestic producer. Export finance is available for people engaged in the supply of raw materials, and even partially completed products, too. They come to foreign companies having branches in India. These establishments function in free trade areas or in export processing zones. There are diverse types of export finance.  Dealing with pre-shipments.  Dealing with post-shipments.  Dealing with the collection of bills.  Dealing with subsidies and allowances.  Dealing with delayed export finance. Dealing with pre-shipments: It requires the exporter to receive a firm order from the importer. Additionally, the bank must have granted the importer an anticipatory letter of credit. The importer forwards this to the exporter. The bank then offers financial help to the exporter. Dealing with post-shipments: Once the shipment is underway, the exporter sends a bill to the importer. The importer has to pay the exporter as quickly as possible. However, it never happens quickly, stretching to anywhere between 3-6 months. This tends to affect the exporter, for there is a break in the continuity of production. Therefore, the bank steps in. The bank takes over the bill for exported goods from the exporter, handing over money in return. Alternatively, it may even just collect the bill or just discount it. It all depends on the existing economic scenario of the importing nation. Dealing with the Collection of Bills: Suppose, the exporter sends goods to diverse countries. Then, the individual or export company may request the bank to extend a loan against the bills that have been disseminated for collection. The bank will peruse the free-on-board (FOB), while considering the request. The CIF invoice has no role to play here. FOB encompasses every expense that occurs while the products remain in transit. CIF encompasses all costs, freight charges, and insurance. Thanks to the presence of the Export Credit Guarantee Corporation, banks do not hesitate to offer financial help to exporters. If there is a default in payment, the company that has taken up the role of guarantee serves to compensate for at least 80% of the total default amount. 162 CU IDOL SELF LEARNING MATERIAL (SLM)

Deferred export finance: For securing a helping hand for the importer for purchasing new and valuable commodities, it is possible to arrange a lease finance or hiring purchase finance. It has two types. Finances for Suppliers and Buyers Finance for Suppliers involved in exporting: In this case of supplier’s finance, exporter will get financial assistance from his/her banker for selling the products on instalment basis to importer. The exporter should receive the complete amount. The importer will pay in instalments to the exporter’s bank. Finance for Purchasers involved in exporting: The exporter’s banker grants a line of credit to the importer/purchaser. This permits the exporter to go ahead with forwarding the ordered products. Finance in the form of subsidies and allowances: The Government of any country grants subsidies to its exporters. It helps them to offer their products at reduced costs to importers. To illustrate, when expenditures rise, the government offers cash compensatory support as a subsidy to exporters. The rise in expenditures may be attributed to various causes. They include enhancement in costs of labour or transport, etc. The government may also grant allowances with an eye to enhancing exports. An example is the duty drawback. Whenever a product arrives as an imported one, the receiver has to pay import duty. Succeeding processing, the product acquires a higher export value. An example is gold. Once the imported gold acquires the shape of a golden ornament, it rises in value. Therefore, when the receiver receives a refund on the import duty paid, it is a duty drawback. True, the refund may take some time to arrive. Regardless, the bank is ever ready to offer financial help to the exporter against the refund of import duty. 8.7 EXCISE CLEARANCE The Central Excise and Salt Act of India and the related rules are responsible for the refunding of excise duty amounts. The Act is also responsible for exemptions related to excise duty payments. Renowned as Rebates, these exemptions concentrate on both, the inputs that come into play for manufacturing of export goods, and the final export production. The official documentation utilized for this task, include AR4/AR5 forms and invoices. The exporter must prepare six copies of the AR4/AR5 forms. Once the products are in the clear for dispatching to the shipment port, the production department of the export company gets into action. It sends an application to the authorities of the central excise department for clearing the export products. 163 CU IDOL SELF LEARNING MATERIAL (SLM)

When the clearance comes through from the examining Central Excise Officers, the exporter may take back the products. Alternatively, after submission of the requested copies of the AR4/AR5 forms, the exporter may retrieve the products without waiting for any kind of inspection. This is because four copies have reached the Superintendent of Central Excise. This official has control over the exporter’s premises for 24 hours after the consignment has been removed from it. The Superintendent signs and affixes his/her signature to the forms, only after a thorough perusal. The rest of the process gets underway after the exporter or concerned person receives the signed forms. Sometimes, the exporter would prefer the officers at the shipment port not to go through the export products once again. Therefore, he/she requests the officials at the central excise department to seal the goods. However, this request has to be in the written format, that is, AR4/AR5 forms. Six copies have to reach the concerned Superintendent of the department having jurisdiction over the exporter’s premises. Then, the Superintendent carries out the examination himself, before granting permission. Sometimes, a central excise inspector takes over the job. A satisfactory examination leads to permission for clearance. 1] Invoice 2] Personal ledger account (PLA) 3] ARE-1 (application for removal of excisable goods 1) 4] ARE-2 (application for removal of excisable goods-2) 5] CT-1 6] Blacklist certificate 7] Health/veterinary/sanitary certificate Table 8.1: The List of Agreements Requisite for Excise Clearance 8.8 PRE-SHIPMENT INSPECTION (PSI) The Pre-Shipment Inspection (PSI) is one amongst several types of quality control inspections conducted by HQTS. This essential step in the quality control process is the method for checking the quality of goods before they are shipped. An inspection prior to shipping, ensures that there is compatibility between the purchaser’s specifications and/or the purchase order’s terms, and the production of goods. Similarly, the inspection may prove that there is good agreement between production and the purchaser’s letter of credit. The pre- shipment examination takes place when the export company has completed at least 80% packing of the purchase order. The examination is in alignment with AQL specifications. 164 CU IDOL SELF LEARNING MATERIAL (SLM)

AQL stands for Acceptable Quality Limits and comes into play for finished goods. The inspector may also decide to find out if the shipment matches the requirements of the concerned customer. Samples are selected and inspected for defects at random, according to these standards and procedures. When the exporter ensures that the ordered goods are 100% finished products, which are then packed well, he/she waits for an inspector to arrive. The official makes sure that everything is in place prior to shipping the goods. The inspector may also select a few samples at random from the shipment. The idea is to make sure that they comply with MIL-STD-105E (ISO2859-1). This is the international statistical standard for exported goods. The pre- shipment inspection is a confirmation that the finished goods are in complete alignment with the client’s specifications.  What purpose does a pre-shipment inspection serve? The purpose of the pre-shipment inspection is to ensure that the exporter and importer are in harmony with one another regarding the products. In other words, the exporter has comprehended the purchaser’s specifications and/or the terms pertaining to the letter of credit or purchase order, perfectly. The pre-shipment inspection comes into play when the exporter has fulfilled at least 80% of the task. This means that the bulk of the order is ready for shipping. The inspection complies with AQL specs. The AQL specifications include both, products and importer’s requisites. Randomly selected samples undergo standard procedures, in order to check for defects.  What are the advantages of a pre-shipment inspection? A pre-shipment inspection can serve to mitigate risks to online commercial enterprises. These risks come in the form of fraud and phishing. The inspection helps purchasers to comprehend the quality of the products they wish to order. Only when there is satisfaction with quality, there is an increase in the quantity ordered. Finally, a pre-shipment inspection (PSI) serves to lessen the potential risks connected to delays in delivery of products. The inspection can also help the exporter to re-manufacture products, or fix visible defects, if necessary. When does a PSI come into play? Since there is expanding globalisation, international purchasers are bound to confront all manner of obstacles to their perceived growth in global marketplaces. National standards tend to fluctuate. Even requisites keep coming and going in the name of trends. Then again, fraudulent conduct in the trade and business arena is on the rise. All these obstacles tend to create a distortion in the trade equation. It is imperative, therefore, to discover an 165 CU IDOL SELF LEARNING MATERIAL (SLM)

inexpensive and rapid solution to the existing problem. Until then, a pre-shipment inspection suffices to serve as the best resolution. Pre-Shipment Inspection Procedure i. The inspector pays a visit to the exporter of goods, taking along essential instruments and equipment. ii. Verifying and signing of the compliance agreements, prior to the PSI inspection. iii. Verify the quantity requisites as they have been mentioned. iv. Perform a final examination at random v. Checking should be done on label, Package, instruction and tag. vi. Finding Workmanship and function examination vii. Measurement of weight and the size viii. Testing of Carton drop ix. Testing of bar codes x. Test related to the sealing of cartons  Certification of Pre-Shipment Inspection The purchaser may approach a genuine and qualified company that engages in pre- shipment inspections. However, prior to affixing a signature onto the certificate, it would be best for the purchaser to check the chosen company’s background. The company needs to meet all requisites. To illustrate, are there a sufficient number of inspectors working full time, to take up inspections as and when necessary? Once there is all-round satisfaction, the purchaser may accept a legitimate certificate from this organisation. 8.9 SUMMARY  Foreign trade policy controls the imports and the export, and this is notified by Govt. of India which exercising the powers under Section Five, Foreign Trade Act 1992.  In order to carry out the export transactions, the exporter may request commercial banks for help during the pre-shipment and post-shipment stages. The banks may even agree to offer a reduced rate of interest. New exporters may take advantage of the Packing Credit help that banks offer during the pre-shipment stage. All that they have to do is to lodge a 166 CU IDOL SELF LEARNING MATERIAL (SLM)

confirmed order or L/C with a 180-day duration behind the request. This should help them with the initial expenses related to working capital. They will have to expend upon transport, labour, conversion of raw materials into finished products, packaging and packing, etc.  Banks agree to cover 75-90% of the order value, ensuring that the balance remains as a margin. This is the advance that the exporter receives. The banks keep track of the proceeds of sales (export bills that are discounted or purchase-based) and recover the packing credit advance from them.  The purchaser’s instructions play a great role in the manner in which the exported goods are packaged, labelled and strictly packed. It helps to showcase the commodities or goods in very good condition and beautiful way.  The possession of BIN (business identification number) that is PAN-based, is essential for the clearance of the export cargo. The customs department should issue it. This process should get under way prior to submitting the shipping bill. Also, there should be a current bank account in place. for crediting of any backlog amount in the concerned account at the bank. And this should be registered over the computer system too.  Declarations are filled under the format prescribed by the customs under the EDI system. For the data verification, a checklist would be generated by CHA or the exporter.  For the arrangement of the payment from Foreign bank, the documents should reach the prescribed bank after the shipment within 21 days for the onward dispatch.  The export agreement could prove useful for the selling of finished goods internationally such as raw materials, industrial supplies and manufactured goods and also for the resale. But the buyer can be defined as the importer or wholesaler, trader or distributor which sell the products to different merchant or to another company.  MSMEs are able to capture the attention of an international audience via export financing. It is important that the exporter gain first-hand knowledge of specific documents that any authentic export finance establishment demands. Such documents are vital for receiving several types of assistance related to export finance. This assistance covers diverse stages of the whole export process. 8.10 KEYWORDS  Bona-fide Trade: Legal, certified and full compliance-based trade activity abiding the norms of trade.  Insolvency: The condition in which the person/company is unable to repay the loan. 167 CU IDOL SELF LEARNING MATERIAL (SLM)

 Procurement: The process, wherein an organisation sources and acquires products and services for completing business deals.  Arbitration: The method of resolving arguments (moderate/severe) taking place between two groups, without going to the court.  Depreciation: Devaluation of assets. 8.11 LEARNING ACTIVITY Refer the A Case on ‘Forward Cover in India: A Banking Perspective’ given under 8.3 section and answer the following questions: 1. What kind of Forward Cover has been offered to the Indian companies by banks? ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 2. Explain ‘the rolling hedging strategy’ in banking term. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 8.12 UNIT END QUESTIONS A. Descriptive Short Questions 1. Explain the requisites of the Customs Clearance Process. 2. Discuss the term ‘Procurement of Goods.’ 3. Comment on ‘Post Shipment Finance.’ 4. Justify the importance of insurance in the processes of exporting and importing. 5. Explain the term airway bill. Long Questions 1. Illustrate the export procedure that is applicable to agriculture, with respect to the points you studied. 2. Elaborate the International shipping process from India with specific reference to Figure-8.1. 168 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Define ‘Export Contract’, its forms and its crucial aspects, with examples. 4. Explain the scope of manufacturing and sector sectors in India. 5. Prepare the flow chart for Institutional Framework for Export Finance by including the names of relevant institutions. B. Multiple Choice Questions 1. Exporters in India receive an IEC number. It contains _______________ numbers. a) 10 b) 12 c) 15 d) 9 2. The export procedure starts from _____________________. a) Opening Bank Account b) Establishing the firm c) Getting PAN d) Getting IEC Number 3. RCMC Certificate can be obtained from ______________ . a) Export Promotion Councils b) FIEO c) Commodity Boards d) All of these 4. The maximum duration for post-shipment advances, beginning with the date of shipment, is ____________. a) 180 b) 120 c) 220 169 CU IDOL SELF LEARNING MATERIAL (SLM)

d) 160 5. The requisite duration for presenting the docs for the onward dispatch to a bank overseas, for arranging payment, is______________. a) 30 b) 21 c) 12 d) 15 Answers: 1-(a); 2-(b); 3-(d); 4- (a); 5-(b). 8.13 REFERENCES Textbooks  Drèze, John; Sen, Amartya (1996). India: Economic Development and Social Opportunity. Oxford University Press.  Sangeetha, G. N. (2010). Basic Econometrics, New York, Tata McGraw Hill  Das, Gurcharan (2002). India Unbound. Anchor Books, Noida.  Sudalaimuthu, S.; Raj, S.A. (2009). Logistics Management for International Business: Text and Cases. PHI Learning, Delhi. Reference Books  Kumar, Dharma (2005). The Cambridge Economic History of India, Volume II : 1757–2003. New Delhi: Orient Longman.  Asher, C.E.B. & Talbot, C. (2006). India Before Europe, Cambridge University Press.  Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. Chand Group. Websites  http://www.bizeurope.com/  https://exportimportpractical.com  www.indiantradeportal.in  www.enterpreneur.com 170 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 9: EXPORT PROCEDURE & DOCUMENTATION Structure 9.0 Learning Objectives 9.1 Introduction 9.2 Methods of Pre-Shipment Inspection 9.3 Role and Function of Clearing and Forwarding Agents 9.4 Shipping and Customs Formalities 9.5 Customs EDI System 9.6 Negotiation of Documents 9.7 Realisation of Exports Proceeds 9.8 Summary 9.9 Keywords 9.10 Learning Activity 9.11 Unit End Questions 9.12 References 9.0 LEARNING OBJECTIVES After studying the unit, the students would be able to:  Explain selling of goods to countries.  Analyse the market for goods by producing them on a large scale.  Evaluate Earning foreign exchange through exports.  Assess a country increase the national income.  Examine the export and documentation procedure. 9.1 INTRODUCTION Exports have achieved immense influence in the contemporary world. It has emerged as one of the essential criteria of a nation’s social, economic, and political growth. It is impossible for any country in the world to produce every single goods and service it required. To overcome this situation, they have to buy and sell from one another. Therefore, countries have to engross in international trade. Export and import are like two sides of the coin of international trade. The countries have to purchase the goods which are not available or not adequately available in the native land and sell the excessive goods/ services produced by it to other countries which need them most. In brief, every single country has to export surplus goods and import deficit goods. Consequently, it earns precious foreign exchange and uses the foreign exchange to import goods that are adequately produced or not produced in the native country. Many developing countries like India, Bangladesh, and South Korea, and so on need an ample amount of foreign exchange to acquire different types of machinery, equipment, raw 171 CU IDOL SELF LEARNING MATERIAL (SLM)

materials, petroleum products, mineral resources, technical know-how, and managerial talents for faster economic development. The Indian government has begun solvent steps to encourage exports which include promoting export by providing:  Cash incentives  Tax incentives and relief  Institutional support  Concessional interest rate  Infrastructural assistance  Loan assistance  Tax exemptions  Transport concessions  Tax holidays. The government sends trade delegations abroad to analyse the export capability of various commodities and to understand services provided by different countries across the world. Agreements with foreign countries for bilateral trade offer illuminating possibilities for export. Events like exhibitions and trade fairs help to promote international business. The Indian Government has set up various institutions for boosting exports. 9.2 METHODS OF PRE-SHIPMENT INSPECTION A professional pre-shipment inspection assures suppliers that their products are ready to be sent to their destination market. This course of action demands seven essential steps. But before exploring them, let's recall the fundamentals of pre-shipment inspections. A pre- shipment inspection/ examination is a step taken by trade operators like buyers, suppliers, agencies to examine, explore and scan newly manufactured products before they are ready for export/import. The purposes of a pre-shipment inspection are to:  Examine the quantity and quality of the merchandise.  Find products for any defects.  Make sure products meet the safety standards of the destination market.  Report issue related to import and billing. Main Steps of Pre-Shipment Inspection Procedure Step 1. Production Site Inspection Pre-shipment inspections take place at the factory or at production site. If inspectors suspect the presence of restricted chemicals in the products, then they can carry lab testing of those products externally or off-site. Suppose the suspected products contain toxic chemicals such as lead and toxins obtained from azo dyes, which are governed by the Federal Trade Commission in the US and Europe’s REACH directives. 172 CU IDOL SELF LEARNING MATERIAL (SLM)

Step 2. Quantity Inspection The inspectors confirm the accurate quantity by counting the shipping cartons. This step makes sure that the right quantity is dispatch to the exact destination. Hence to start off payment for a letter of credit, the pre-shipment inspection agreed between a buyer, a supplier, and a bank to initiate payment for a credit letter. Before safe transportation- the packaging, packing materials, and packaging labels are checked thoroughly. Step 3. Random Selection Highly professional pre-shipment inspection services make use of globally acknowledged ANSI/ASQC Z1.4 (ISO 2859-1) statistical sampling procedure. An Acceptance Quality Limit (AQL) defines the acceptable number of defects in a batch that is before rejection. In short AQL is based on the type of product being assessed and the aim is to give a well-balanced, impartial opinion. Step 4. Cosmetic and Craftsmanship Inspection An inspector checks the overall craftsmanship of the completed products randomly, checks for any visible defects immediately. Depending upon predetermined acceptable tolerance levels defects classified as critical, major, or minor. The supplier and manufacturer together decide them during manufacturing of the product. Step 5. Conformity Check The material and construction, dimensions, weight, colour, marking, and labelling of the product checked by the quality control inspectors. For example, pre-shipment inspection, the inspectors for garments examine whether appropriate sizes allot to the freight and checks the sizes tally with production labels and dimensions. For extra products, dimensions can be more significant. At this stage, finished product dimensions are measured and compared with original descriptions. Step 6. Function and Safety Test The inspectors carry out physical tests for inspection of garment, apparel, and footwear to check the strength of buttons, zippers, and other accessories with the help of pull tests, fatigue tests, and stretch tests. To test the quality, strength, and thickness of fabrics used in garment production they take help of like fabric density and composition tests. For measuring the density of the fabric, the inspectors use special tools. The quality control inspectors physically count the number of stitches per inch. If the cloth is thin and not dense enough, then this shows that manufacturer has used a fabric or textile. In short, the fabric cannot hold out against normal washing and wearing.  Tests for Mechanical Safety For products with movable parts such as pushchairs and bicycles, the mechanical safety tests are conducted for them. If these products are defective, then they can be dangerous and cause harmful injuries. The inspection includes checking the design and shape of the product, examine edges or parts that could entangle fingers, toes, and other accessories. 173 CU IDOL SELF LEARNING MATERIAL (SLM)

Mechanical safety test also involves check the safety of critical parts such as hinges and screws used in a completed product.  Test for Electrical Safety Before certifying and labelling electrical and electronic items, they must go under quality check to ensure that wide range of safety guidelines are followed. Electrical safety test carries out under laboratory conditions rather than performing at the factory. It involves the following tests: i. High voltage test or dielectric withstand test- Examines the capacity of an item. Calculates how well the electric product works when a high voltage passes between the ground and product’s electrical circuit. ii. Current leakage test - Verifies the current that flows between an AC source and the ground exceeding a set limit. iii. Test for insulation resistance - Measures the calibre of the electrical insulation used. iv. Test for ground continuity - Checks that a proper path is accessible between the power system ground and exposed metal surfaces and ground.  Markings for Electrical Products and Country-Specific Labels What do you mean by markings for electronic products and the country-specific labels and? Based on the product type and targeted market, a particular type of electrical safety testing is need. UL Certification Mark – This is most recognised certification mark by Underwriters Electrical Bureau for the U.S. federal agency Occupational Safety and Health Administration (OSHA). CE Marking – It is recommended worldwide and confirms protection standards such as health, safety, and environmental for goods sold within the European Economic Area (EEA). VDE e.V. (Germany) - The VDE Association for Electrical, Electronic & InformationTechnologies (Verband der Elektrotechnik, Elektronik und Informationstechnik) is an excellence mainly acknowledged in Germany and internationally for electrical engineering, developing acknowledged technical directives for national and international standards in addition examines and certifies electrical and electronic devices and systems. CSA (Canada) - The Canadian Standards Association (CSA) registered mark declares that a product has been separately checked and certified to fulfil widely recognised standards needed in Canada for performance and safety. BSI (UK) - It is the national standards body of the United Kingdom and develops high- tech standards on a different range of goods, services, and supplies. It also provides certification and standards-related services to businesses. CCC Mark (China) – CCC mark stands for China Compulsory Certificate mark. It is a mandatory safety mark for many products that imported, traded, or utilised in the Chinese market. 174 CU IDOL SELF LEARNING MATERIAL (SLM)

Step 7. Inspection Report After completing the pre-shipment check, a detailed record is organised. The inspection report consists of the final result, main observations, and detailed description of inspection results. Some records provide vivid images covering all inspection points, which helps to discover the actual findings. 9.3 CLEARING AND FORWARDING AGENTS ROLE Export-import procedures are complex to understand, tedious, and time-consuming. Due to this every exporter has to utilize the services of a skilled Clearing and Forwarding (C&F) agent who is well versed with customs and shipment process. In short, C&F agent helps the exporter in timely shipment of goods. An efficient C&F agent gives following services:  Transport goods to docks and warehousing the goods at the port properly.  Warehousing facilities ahead of goods transportation to docks.  Reserving space for air freighting or shipping and provide guidance on the relative cost of dispatching goods by air and sea.  Help in loading of goods.  Provide details on shipping lines, shipments to various port of call and different bills that need to be paid by exporters.  Acquiring marine insurance policies.  Processing and devising of documents related to shipping, Bills of Lading, Dock Receipt, Export Declarations, Consular Invoice, Certificate of Origin, etc.  Help to redirect banking collection papers.  Desirable Services i. Overseas storage facilities, in major global marketplace, to storing the commodities in case the importer denies taking delivery due to some reason. ii. Tracking down the products, if the freight goes off track, with help of his international connections. iii. Arrangement to estimate damage happen to freight and route. 9.4 FORMALITIES IN CUSTOMS AND SHIPPING As stated in the Section 40 of the Customs Act, the in-charge of the conveyance vessel, vehicle, aircraft cannot allow stocking of export freight at the Customs Station unless a formal approval is given by the authorised Customs Officer. Before permitting, the Customs Officer confirms that the exported goods are according to different directives, especially in terms of the following:  The exported goods are of the same type, sort and value as mentioned by the exporter.  The duty tax has been properly determined and paid in time. 175 CU IDOL SELF LEARNING MATERIAL (SLM)

 Arrangements of Export (Control) Order, Export (Quality Control and Inspection) Act and Foreign Exchange (Regulation) Act are put together.  The shipping and customs clearance procedure is as under: i. Preparing and Submitting Export Documents: For the cargo clearance from customs, the exporter or his agent is needed to provide the given set of documents at the Customs House along with five photocopies of shipping NI to the Customs Appraiser. ii. Letter of Credit with export order or export contract. iii. Two copies of Commercial Invoice. iv. Packing Note or List. v. Origin Certificate . vi. Original and duplicate copy of GR Form . vii. ARE-I Form. viii. Certificate of Inspection (Original copy), if necessary. ix. Policy of Marine Insurance. x. Documents Verification : The Customs Appraiser checks the details provided in all documents and verifies all the necessary formalities of exchange control, pre- shipment check, and license submitted by the exporter. If contented, then Customs Appraiser permits a 'Shipping Bill Number' which is important for the exporter. xi. Goods Valuation: a. Evaluation of the shipping bill and goods valuation is done by the toms Appraiser. The value of goods set by him is followed for each and every future transaction, specifically for claiming incentive. After that, all documents go back to the exporter or his representatives except the following:  GR form (original copy to be redirected to the RBI)  Shipping Bill (original copy)  Commercial Invoice. b. The verified shipping bill remains valid for one month. If exporter failed to provide the products in specified time-period, then once again he will have to go through the above-mentioned procedure. xii. Acquiring 'Carting Order' from the Port Trust Authorities The skilful C&F agent communicates with the Superintendent of the specified Port Trust for acquiring the 'Carting Orders' for allowing cargo inside the dock. After attaining the Carting Order, the cargo is allowed in the port premises and warehoused in the shed appropriately. xiii. Customs Verification and Issue of 'Let Export Order': The Customs Examiner physically verifies the products at the port and in front of him seals the packages. The same step is possible at the or exporter’s warehouse factory by applying in favour of Customs Assistant Collector. if the Customer Examiner is satisfied; then, he would 176 CU IDOL SELF LEARNING MATERIAL (SLM)

issue 'Let Export Order' which means permission to load the cargo. Now, the above procedure is followed with the help of Electronic Data Interchange (EDI) System. xiv. Attaining 'Let Ship Order' from the Customs Preventive Officer: ‘Let Export Order' must be boosted by a 'Let Ship Order' that is issued by the Customs Preventive Officer. The skilled C&F agent forwards the duplicate copy of the Shipping Bill, aptly supported by the Customs Examiner, to the Customs Preventive Officer, who supports it with the 'Let Ship Order'. xv. Acquiring Bill of Lading and Mate's Receipt : The products have then loaded to the ship for which the Mate ( the Captain of the ship) provides Mate's Receipt to the Superintendent of the Port. On receiving the port dues receipt, the Superintendent of the Port hand over the Mate's Receipt to the C&F Agent. After that the C&F Agent submits the Mate's Receipt to the Shipping Company for obtaining the Bill of Lading. Later, the Shipping Company provides negotiable and non- negotiable copies of Bill of Lading (two to three ). 9.5 CUSTOMS EDI SYSTEM  ICES aims to promote the acceptance of documents electronically and exchange information electronically between agencies involved in international trade. The electronic processing of Bill of Entry helps to facilitate, streamline and expedite customs clearance for imports. It is a communication from computer to computer and replaces all manual operations. The system has been operating at many Air Cargo complexes and sea- ports. The steps involved in the processing of the Bill of Entry are as under:  There is no filling of Bill of Entry formally when the products get clearance through the EDI system. It generates in the computer system and the importer does not submit documents for evaluation. In electronic format he gives declarations containing all the necessary details to the Service Centre for processing of Bill of Entry for customs approval. The service centre operator takes the signed copy of the statement for non- repudiation of the declaration. The data is fed to the computer of the importer or his clearing agent. At the customs Service Centre, a separate provision can be avail by those who do not enjoy computer service.  The Bill of Entry can be filed in two ways: First, at the Service Centre and second alternative is that it can be filed through the EDI System remotely. If the Importer/CHA files it through the Service Centre, then he has to submit a signed declaration in a prescribed format along with the Invoice and Packing List copy. The computer at Service Centre connects with the Customs computer department. The data from the computer of Service Centre transfers to the Customs computer department. The system assigns a number for Bill of Entry, which endorses on the checklist. Then, the list generates for checking of data by the importer/CHA. If any errors are detected, they rectify them. After the importer/CHA confirms it, the signed \"Check List\" is to be deposited in the Service Centre with a signature as an acceptance. At this point, original documents are not 177 CU IDOL SELF LEARNING MATERIAL (SLM)

required. Only once that is at the time of examination the original documents are needed. Another way to file documents is through the Remote EDI System. The checklist can be created electronically in one's computer by the importer/CHA for verification. Just in case of Remote Electronic Data-Interchange System, the system validates data, and if errors are detected, a message goes to the party. If the data passes the check, the electronic system accepts data, and an acknowledgment goes to the Importer/CHA.  In case the Appraiser disagrees with the importer regarding tariff classification, declared value and notification, then he can raise a query. The Importer/ CHA has to check at the Service Centre about queries related to Bill of Entry and at this stage should reply to the same through the Service Bill of Entry.  Bill of Entry electronically mailed to the terminal of the concerned Appraiser (Chapter wise) for assessment. Thereafter, they are forwarded to the audit section. Following both stages, the Assistant Collector approves the Bill of Entry in the system itself.  After that, the Bill of Entry returns to the computer centre where duty challan (TR6) (three copies) are processed. With the TR-6 Challan the Examination Order is also printed along.  The duty is paid through the designated bank. After Duty payment, the bank set the foot in the system at the terminal at their end.  Then the electronically generated Bills of Entry are sent to the Superintendent of the Shed.  The Superintendent of the Shed forwards the Bills of Entry to the Examiner/Inspector for physical examination of products. Then the Bill of Entry emerges on the Appraisers’ screen (Docks). The Importer/CHA provides the document such as checklist/acknowledgment, duty paid challan, and other documents including invoice, packing list, etc. at the time of verification of goods. The Shed Appraiser checks the goods and files the verification report in the system. The Superintendent of the Shed also supports the report. Once the goods verification is over, the Appraiser (Docks) per Out of Charge order on the system. Later, the system prints two copies of the Bill of Entry for the importer and the Exchange Control Copies.  Thereafter, the system generates three copies of the Bill of Entry: Importer's copy, Exchange Control Copy, and Copy for a bank that has made the remittance. 9.6 NEGOTIATION OF DOCUMENTS What do you mean by the negotiation of export bills? How does it work? Who does the negotiation? How can we pull off export documents from the bank? What are the procedures and formalities to negotiate export bills? Once your goods come out of your factory, the appointed Customs House Agents complete customs formalities on your behalf and provide you necessary export shipping documents. Once customs formalities accomplish and acquire the ‘let export order’ shipping bill, you hand over cargo to shipping line to carry your freight 178 CU IDOL SELF LEARNING MATERIAL (SLM)

to the final destination at the buyer’s place. After handing over shipment to the shipping line, a Bill of Lading is forwarded. While negotiating documents, you must submit all necessary records, papers, and documents. Follow terms and conditions of the letter of credit to the bank to send to your overseas buyer through LC opening bank. When the freight is under Letter of Credit, documentation plays an essential role as the opening bank debits you against any discrepancy found on documents. On receiving the Letter of Credit, get a copy of the same; go through it thoroughly and highlight each and every point for your reference. Whether any need of international inspection, clean on-board Bill of Lading, certificate for factory inspection and origin, legal documents, consulate attestation, SGS, BVQI Inspection, Phytosanitary Certificate, chemical analysis certificate, freight certificate, shipped on board certificate, etc. Enlist all the documents needed to deposit while negotiating for bills. Go through each and every record twice at least, check whether each document is as per requirements set by LC. Ensure all necessary documents are kept according to the terms of LC and no discrepancy is noticed in the documents. It is essential while put forward the documents with the bank to redirect the same to the international buyer through the buyer’s bank. 9.7 REALISATION OF EXPORTS PROCEEDS It is mandatory on the exporter’s part to realize, deliver and repatriate the full valuation of goods or software to India within a specific period as under: Participants in an international exhibition/trade fair are allowed to open a foreign currency account abroad temporarily for credit of foreign exchange gained by the sale of products at the fair and easily operate the account when they stay outside India. The account balance is supposed to be converted to Indian currency within one month from the date of closure of the trade fair/ exhibition.  An Indian entity, for operating its overseas office/branch is allowed to open, maintain and hold an account for foreign currency with a bank outside India.  A unit located in a Special Economic Zone (SEZ) may open, maintain and hold a Foreign Currency Account with the bank (AD) in India subject to certain conditions.  A project/service exporter who is Indian resident can open, hold and maintain a foreign currency account with a bank outside or inside India, subject to the standard terms and conditions. Banks are permitted to approve GR forms for displayed export items or display cum sale in exhibitions /trade fairs out of India subject to conditions including the manufacturing of relative Bill of Entry for import of the unsold products or repatriation of the sale returns to India in accordance with the FEMA guidelines, etc. Banks can grant GR approval for commodities which are being transported for re-import after repairs /maintenance/testing/calibration, etc. Under the condition that the exporter shall generates relative Bill of Entry within a month of re-import of the Indian exported item. 179 CU IDOL SELF LEARNING MATERIAL (SLM)

9.8 SUMMARY  Export-Import Policy or Exim Policy is a set of guidelines and instructions related to the import and export of goods.  The Export-Import Policy is upgraded every year by 31st March of every year. Moreover, the modifications, improvements, and new schemes become effective from 1st April of every year.  Export Documents provide a detailed description of the product and its destination port. Additionally, these are used for quality control inspection and taxation certification. Shipping Bill/ Bill of Export is the prominent records required by the Customs Authority for permitting freight.  To begin business of export, then follow the given steps: o Establishment of an Organisation o Open a Bank Account o Acquire Permanent Account Number (PAN) o Obtaining Importer-Exporter Code (IEC) Number o Registration cum membership certificate (RCMC) o Selection of product. o Selection of Markets  An export process starts when we received the receipt of an export order. An export order clearly states that there should be a proper documentation between the exporter and importer before the exporter commences the manufacturing or arrangement of goods for shipment.  Export documentation plays a vital role in global market as it stimulates the easy flow of products and payments thereof across national frontiers. Several documents accompany every shipment. These records are filed with accuracy. Moreover, documents required varies for all countries.  Exports smooth global trade and stimulate domestic economic activity by creating employment, production, and revenues. Businesses export services and goods where they have an advantage.  The checklist helps to assess the development of exporting leads or to get a snapshot of the entire process. Before Exporting: Make any necessary product modifications for the export market including, but not limited to product adaption, redesign, labelling, or packaging. 9.9 KEYWORDS  Electronic Data Interchange: is made up of data elements such as sender’s ID and receiver’s ID. EDI became the primary way businesses exchange documents in the B2B transaction process. mapping software. point-to-point connection. value added network. 180 CU IDOL SELF LEARNING MATERIAL (SLM)

 The Bill of Lading is an essential document to move a freight shipment. The Bill of Lading (BOL) works as an acknowledgement for shipment services, an agreement between a freight carrier and shipper.  Export Formalities: To understand the proceedings of export, the goods and services exporter has to undergo specific banking formalities. With the submission of the bill of exchange, these formalities initiate. Generally, the exporter receives payment in foreign currency.  Export Documents: The documents which give details about the cargo, its destination seaport, and also helpful for quality control inspection and taxation certification.  A Special Economic Zone (SEZ): It is a zone where laws of business and trade laws are different from the rest of the country. 9.10 LEARNING ACTIVITY 1. Describe the following Health and Safety Tests in short.  Pull Tests  Fatigue Tests  Stretch Tests ___________________________________________________________________________ ___________________________________________________________________________ 2.State the reasons for export marketing of Agriculture Products. ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 9.11 UNIT END QUESTIONS A. Descriptive Short Questions 1. What is the method of export? 2. Define the export procedure. 3. How to examine the garment products with an intent to transport them? 4. Discuss the ground on which basis Electrical Safety Testing takes place? 5. Elaborate the role of Clearing and Forwarding Agents. Long Questions 1. Illustrate the meaning, nature and functions EDI Customs with examples. 2. Outline the proceeding of negotiation and prepare the draft of the negotiation document. 181 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Examine the efficiency of SEZs in India depending upon the international market competitiveness from various perspectives. 4. Explain the Shipping and Customs Procedure in India for Agriculture sectors. 5. Outline the 7-Steps of Pre-Shipment Inspection Procedure for IT Products. B. Multiple Choice Questions 1. Export marketing is important to a company because it gives ___________ a) High profit b) Optimum utilisation of resources. c) Spreading risk d) All of the above options 2.Exporter must know ______________________ a) Culture and language of importers country b) Culture and senior citizen population of importer’s country c) Language and education policy of importers country d) Culture and employment opportunities in importers country 3. FTP means _______________________ a) Foreign Travel Policy b) Foreign Transfer Policy c) External Trade Policy d) Foreign Tariff Policy 4. Which of the given internal factors influence export marketing? a) High profit b) Favourable international trade policy c) Stability in production and distribution d) All of these 5. Exporting the product involves only ________________ a) Single currency b) Multiple currencies c) Rupees & Yens d) Dollars Answers: 1-(b), 2-(d); 3-(c); 4-(c); 5-(b). 182 CU IDOL SELF LEARNING MATERIAL (SLM)

9.12 REFERENCES Textbooks  Senthilvelmurugan, J., & Mahalakshmi, S. (2019). Export and Import Documentation and Procedures. MJP Publisher.  Gopal, C. (2007). Export Import Procedures - Documentation and Logistics. New Age International.  Das, Gurcharan (2002). India Unbound. Anchor Books, Noida.  Indira, R. B. (2015). Handbook of Statistics on Indian Economy, New Delhi: Reserve Bank of India. Reference Books  Paul, J., & Aserkar, R. (2013). Export Import Management. OUP India.  Seyoum, B. (2009). Export-Import Theory, Practices, and Procedures. Taylor & Francis.  Andrews, D.C. and Andrews, W.D, (1993), Business Communication, Macmillan Publication  Ford, D., (1997). Understanding Business Markets: Interactions, Relationships and Networks, The International Marketing and Purchasing Group (IMP), The Dryden Press.  Zang, W. and Baimbridge, M., (2012). Exports, Imports and Economic Growth in South Korea and Japan: A Tale of Two Economies. Applied Economics, Websites  https://niesbud.nic.in  www.shippinsolutions.com  www.howtoexportimport.com  www.civilserviceindia.com  www.economicsdiscussions.net 183 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 10: IMPORT PROCEDURE & DOCUMENTATION Structure 10.0 Learning Objectives 10.1 Introduction 10.2 Pre-Import Procedure 10.3 Steps in Import Procedure 10.4 Legal Dimensions of Import Procedure 10.5 Customs Formalities for Imports 10.6 Summary 10.7 Keywords 10.8 Learning Activity 10.9 Unit End Questions 10.10 References 10.0 LEARNING OBJECTIVES After studying the unit, students will be able to:  Explain the procedure of international customs clearance operations.  Describe the policy framework in global business.  Demonstrate documentation procedures.  Explain custom clearance in international business.  Evaluate the custom clearance phenomenon.  Analyse the principle of global business and strategies.  Integrate custom clearance concepts with functioning of global trade. 184 CU IDOL SELF LEARNING MATERIAL (SLM)

10.1 INTRODUCTION Import is explained as bringing products into own country from abroad for sale. We can say that Import trade suggests the purchase of products from internationally. The import trade process differs from country to country. Everything relies upon the statutory requirements, import policy, and customs policies of different countries. In most of the countries across the world, the government controls the external import business. These controls help to appropriately use foreign exchange, protection of indigenous industries, etc. For goods import, we have to follow a procedure. A manufacturer's import department often grows beyond the purchasing department, whose personnel assigns the authority to arrange raw material or components for the production process. For importers or trading companies that deal in final products, the import department may begin because of being appointed as the distributor for a foreign manufacturer. In the Indian context, the export-import of goods governed by the Foreign Trade (Development & Regulation) Act, 1992 and India’s Export-Import (EXIM) Policy. India’s Directorate General of Foreign Trade (DGFT) is the main governing body. It is accountable for all problems associated with EXIM Policy. Importers are all-important to register with the DGFT to acquire an Importer Exporter Code Number (IEC) issued against their Permanent Account Number (PAN) before engaging in EXIM activities. After attaining an IEC, it is must to identify and declare the items source for import. The Indian Trade Classification – Harmonized System (ITC-HS) permits the free import of maximum goods without a special import license.  Basic Import Procedures i. Setting Market Goals: ii. Mounting market goals on pricing and terms iii. Sourcing Products iv. Recognizing potential suppliers v. Acquiring distribution channels vi. Trade Regulations vii. Import regulations and requirements, and checking whether import license is required viii. Patent, trademark and copyright ix. Making Contacts: Sending enquiries to suitable suppliers x. Settling Quotation and Terms xi. Analysing the supplier's quotation and offers xii. Terms and Costs of sale xiii. Financing the Purchase xiv. Preparing for working capital 185 CU IDOL SELF LEARNING MATERIAL (SLM)

xv. Types of bank financing and application, such as exporter credit or other bank xvi. facilities xvii. Sales Contract: Validating the sales contract and transaction terms such as xviii. payment terms. Developing Payment and Insurance xix. a. Arranging payments and insurance specified in the sales contract. For example, when the payment term is D/C, submit the D/C application to the issuing bank; when the trade term is FOB, develop a cover note with an insurance company. b. Constructing insurance, cover note, if required. Acquiring Goods a. Getting shipping advice and arrival notice b. Collecting export documents from the exporter c. Gathering goods from the specified shipping company or forwarder d. Customs Clearance: Organising customs clearance and import declaration. e. All importers should follow detailed customs clearance formalities while importing goods into India. A detailed overview of EXIM procedures is available on the Indian Directorate of General Valuation's website. It is accepted in finance literature that smooth, efficient, and compliance- oriented exporting importing requires specialized knowledge of personnel. Some companies combine some or all functions of the export and import department in some way. In smaller companies, where the volume of export and import does not justify more personnel, and one or two-person may be accountable for both export and import documentation and procedures. Whereas in giant companies, these functions distribute between export departments and import departments. It is advantageous for companies to have an export and import manual of procedures and documentation. These manuals serve as the best tool for smooth operations and helpful training tools for new employees. Exporters and importers should maintain a record relating to their international trade business. Many companies provide software programs for Maintenance of the export process (such as taking the order, generation of export documents in consent with export control regulation, estimation of transportation charges and duties). Talking about the import side, many companies offer supply chain management software. 10.2 PRE-IMPORT PROCEDURE  Selecting the Commodity An importer must choose the product for import, keeping in mind commercial factors and legal considerations including the directives given in the EXIM Policy. Imports may be 186 CU IDOL SELF LEARNING MATERIAL (SLM)

made freely only to the extent they are regulated by the provisions of the EX1M Policy. Prohibited goods must not be imported at all.  Choosing the Overseas Supplier Imports can be possible from all countries of the world except Iraq. However, there is no ban on the import of products from Iraq. Just in case where the prior permission of the apprehensive sanction committee of the UN Security Council is attained. The details about overseas distributors acquire from different generals, exhibitions, international trade fairs, and trade directories Consulate chamber of commerce.  Creditworthiness and Capability of Foreign Supplier Successful accomplishment of an import transaction relies on the international supplier to fulfil his contract. Hence, it is necessary to check the capability of the foreign supplier and also his potential to accomplish the agreement through private reports about him from the Indian embassies and banks overseas. It is appropriate to settle the contract through indenting agents of foreign suppliers situated in a country.  Significance of Foreign Suppliers Agents in India Some well-respected Foreign suppliers have their indenting agents deployed in India. These agents obtain orders from the Indian groups and organize the goods supply from their principal abroad. It is better to import through these agents because they are easily approachable and available if there is any disagreement regarding the quantity and quality of imported goods, payment receipt, documentation formalities, etc.  Query, Offer and Counter-offer It is preferable that before determining the terms and conditions or details of import order, one should verify the samples, catalogue, relevant literature, and the specifications of the imported items. As stated in the 'Geneva' Convention of 7th November 1952, the goods import samples is spared from import duties. After evaluating the samples and the capabilities of the International distributors, the importer must decide to finalise the terms and conditions of the contract. 10.3 IMPORT PROCESS Import trade means to buy goods from abroad. The import process is different for different countries and rely on the statutory requirements, import policy, and varied trade policies of various countries. In many countries across the world, the government manages the import. These controls help the government to use properly the international trading restrictions, 187 CU IDOL SELF LEARNING MATERIAL (SLM)

preservation of local industries, etc. The trade of goods has to obey a procedure or specific steps. The steps involve in the import process are discussed as follows:  Trade Enquiry This is the first stage of an import transaction. Similar to any other transaction of sale and purchase, which relates to making trade inquiries. An inquiry is a written appeal from the expecting purchaser or his representative for details related to pricing and the terms on which the exporter will provide goods. The importer must provide all essential details and information in the inquiry such as requirement of goods and their detailed description, catalogue number or grade, size, weight, and the quantity required. A similar manner indicates the time, delivery method and packing, terms regarding payment. As a response to this inquiry, the buyer will get price list from the sender. The price list gives the details about the available products, their quality, the cost at which they are available, and sales rules.  Acquiring of Import Permit and Quota The Indian import trade falls under the Control Act for Imports and Exports Act, 1947. Without an authentic import permit, an individual or a company are not allowed to trade anything in India. Import license can be a general or a specific license. With a general permit, the goods can be imported from any country across the world, whereas an individual license allows importing only from particular countries. The Indian Government announced its trading (import) policy in the Import Trade Control Policy Book or the Red Book. Each buyer should give warranty that he can buy goods he wishes and promises how much quantity of goods can be bought in during the time period allotted in the Red Book. To acquire an import license, the aspiring importer can apply to the license authority with the help of a prescribed form. Suppose the trader imports products of the certain class and looking forward for the same, so for specific time period, which is allotted for product class, he will be regarded as an established importer. The trader who is established can apply to obtain a Quota Certificate. This certificate determines the quantity of product as well as the value of the product that can be imported by the buyer. For this purpose, the trader provides products details that are imported in the period directed for the products along with documents as proof for the same. This includes a guarantee from a chartered accountant in the specified form verifying imported goods CIF value in the designated year. The goods invoice price, the cargo, and insurance of the commodities in the transit makes the CIF value. After attaining Quota Certificate, the established importer is allowed to buy as per to the indicated value (called Quota) that is computed based on past imports. If 188 CU IDOL SELF LEARNING MATERIAL (SLM)

the buyer is an original user, for instance, he desires to import products for his utility in the industrial manufacturing unit, the importer he has to arrange a license through the specified promoting authority. Registered exporter trading against exports made and others have to attain a license/permit from the Chief Controller of Exports and Imports. The Government also issues a commodities and product list called as Open General License list (O.G.L). These products can only be traded by acquiring permission.  Obtaining Foreign Trading Once the importer obtains the license or quota, he makes needful arrangements for obtaining international trading. The importer has to organise the currency of exporting country for buying goods.  The government controls the foreign currency stock in numerous countries and releases the foreign currency with the help of bank. The Exchange Control Department of Reserve Bank of India trade in with foreign exchange. The importer can apply for the authorised form with the import permit to any exchange bank. The exchange bank validates and redirects the applications to the Exchange Control Department of the Reserve Bank of India. As per Indian Government policy, at the time of application, the Reserve Bank of India issues of foreign exchange after checking the application. The importer receives the required foreign exchange from the concerned exchange bank. It is noted that the import license is provided for specified time period, and the exchange is given only for a specific transaction. The liberalization of the economy has waved off many restrictions because on current situation the rupee is convertible.  Order Placement or Indent After completing the prime formalities, the importer obtains the quota or license and releases foreign exchange, now the further action in the goods import is order placement. This is also known as Indent. Intend is an order by the importer and exporter for providing goods. Through this the exporter guides about the quantity and quality of required goods, their forwarding method, packaging, payment settlement mode and the pricing. Generally, an indent is developed in duplicate or triplicate. The indent can be of three different types such as open, closed and confirmatory indent. First one is an open indent, which does not provide the essential goods details, price in it, here the exporter from his end can accomplish the formalities. The second one is the closed indent in which goods particulars, the brand, the price, packaging and shipping 189 CU IDOL SELF LEARNING MATERIAL (SLM)

details, and insurance info are vividly given. The third type of indent is a confirmatory indent in which an order is finalised once the importer’s agent confirms it.  Discharging a Letter of Credit Usually, the international traders do not know each other, so they want to ensure importer’s creditworthiness before shipping goods. To ensure that there will be no possibility of non-payment, the exporter demands a letter of credit from the importers. A letter of credit is also known as ‘L.C ‘or ‘L/C’. This letter is an assurance by the importer’s bank (its issuer) that the bills of exchange spent by the international trader on the importer will be appreciated on release of particular amount.  Acquiring Essential Documents The importer dispatches the credit letter. On receiving the letter of credit, immediately the exporter organizes the goods shipment. After sending off the freight to the importer, the exporter forwards an Advice Note which is a track record for purchaser of goods just. The purpose of Advice Note is to update the importer about the dispatched goods. It also mentions the possible date the ship reaches the destined port. Then Bill of Exchange is drawn by the exporter on the importer for the invoicing the goods value. The Bill of Exchange along-with shipping documents such as the bill of lading, consumer invoice, origin certificate, insurance policy called as Documentary Bill. The foreign exchange bank helps to redirect the Documentary of Exchange. Generally, importer’s homeland has the exchange bank branch or a representative for obtaining the bill payment.  Two types of documentary bills are: i. Documents against payment bills, D/P, D.P. ii. Document against acceptance bills, D/A, D.A. If the Documentary Bill of Exchange is a D/P bill, in the that case the goods documents title is hand over to the importer (drawee) only on the full payment of bill. D/P bill can be sight bill which means that payment must be cleared instantly on the presentation of bill. Sometimes 24 hours grace period is permitted. After getting ownership documents of goods, the importer worries about safe delivery of his goods, when the comes, he wants to bring goods to his business place. Before that he has to follow different formalities for receiving goods delivery. Otherwise, the given below formalities conform with goods kept in the custom house custody. (a) To gain recommendation for delivery or delivery order When the consignment reaches, the first thing the importer has to attain is the shipping company’s recommendation on the back of the Bill of Lading. Sometimes the company 190 CU IDOL SELF LEARNING MATERIAL (SLM)

issues the delivery order, instead of accepting the bill. This endorsement of the delivery order will allow the importer to receive the goods delivery. The freight company forms this agreement and after full payment of freight permits the delivery. When the Bill of Lading shows freight forward that means the exporter has not done the freight payment. In this situation he has to do the payment in order to get the goods delivery.  Paying Dock dues and achieving Port Trust Dues Receipts The importer must submit two copies of a ‘Application to Import’ form, duly filled in the ‘Lading and Shipping Dues Office’ and this office imposes duties on all imported commodities for services provided by the dock authorities for the goods lading. Once the importer pays pending dues he receives ‘Port Trust Dues Receipt’, which is one copy of the application to import.  Entry Bill After that the importer will fill a form called as Entry Bill which is filled in triplicate and provided by the customs office. The Entry Bill includes details such as the name and importer’s address, ship name, packages number, quantity, marks, value, goods description, country name, from where goods have imported, and customs duty payable. There are three types of Entry Bills forms and these three forms are generated in three colours- black, Blue, and Violet. A black form is for free, non-dutiable goods, a blue form is for to be sold non-dutiable inside the country, and a violet form is for goods that can be exported again, means, goods for re-exporting. All three forms of Entry Bills along-with the Port Trust Dues Receipt need to be deposited to the customs office by the importer.  Sight Bill Suppose detailed particulars of goods are not provided by the importer, possibly due to insufficient information forwarded by exporter’s end. In such case he has to provide a statement called a Sight bill. The Sight Bill provides the information own by the importer along-with a comment that at present he is unable to give complete information about the products. The Sight Bill permits the importer to verify, check and investigate the goods packages in the front of a customs officer in order to facilitate the procedure of Entry Bill.  The Three Types of Imported Goods Are (i) Free goods or Non-dutiable. (ii) Goods to be traded inside the country or home consumption goods. 191 CU IDOL SELF LEARNING MATERIAL (SLM)

(iii) goods for re-exporting or Re-exportable goods. For duty free goods, no customs duty is imposed. After proper check only the custom authorities allow the delivery of such goods. But if the goods are leviable, then the importer has to remunerate import or custom duty that can be depend on the weight and good measurement and called as Specific Duty or on imported goods value called as Ad- valorem Duty. 10.4 LEGAL DIMENSIONS OF IMPORT PROCEDURE  Contract Term Finalisation The import contract must be carefully and comprehensively structured. It should have precise terms also consists of trade deal terms and conditions. No ambiguity should be there regarding the exact specifications of the goods and terms and conditions of the purchase including import price, mode of payment, type of packaging, the port of shipment, delivery schedule, license and permits, discounts and commission, insurance, arbitration, etc.  Mode of Pricing and INCO TERMS While settling the terms of the import contract, the importer should, inter-alia, be fully conversant with the mode of pricing and payment manner for the imports. In view of the pricing mode the terms prevailing in international tr. should be quoted by the foreign supplier. The International Chamber of Commerce, Paris, has provided 'INC° TERMS' (standard terms) that are the universally accepted.  Payment Settlement Mode Based upon the of the exporter or importer capability, product demand in the overseas marketplace, exchange control directives prevailing in the countries exporter or importer and other appropriate factors, there are three ways to settle international transactions: i. Advance Payment. ii. Acceptance or Payment in case of Documentary Collections. iii. Payment based on Credit Letter.  Acquiring IEC Number Every exporter and importer must get registered with Director General of Foreign Trade (DGFT) in India to acquire IEC number. After registering they would obtain the Import- Export Code Number (IEC No.). The registration form for acquiring an IEC number go along with the basic fee of Rs. 250 plus two passport size photographs of the applicant attested by the applicant’ banker, and other necessary documents. 192 CU IDOL SELF LEARNING MATERIAL (SLM)

 Obtaining Import License Imagine, the item to be imported falls in the forbidden list, in this case, that item will not be traded at all because it is a part of a forbidden list. But if the item falls in the restricted list then the proper clearance needs to be obtained from the concerned licensing authority. Same way if it is relating to the canalisation through State Trading Enterprises.  Attaining Foreign Exchange In India, all foreign currency transactions controlled by the Exchange Control Department of the Reserve Bank of India (RBI). For receiving sanction for making international payments, every importer should apply at the Reserve Bank of India (RBI). The Exchange Control Department examines the application thoroughly and later allows essential foreign currency for the transaction of import.  Arranging Finance for Import It is appropriate that a prior financial arrangement for import must be done, to avoid heavy penalties on the imported goods which are waiting for the payment clearance. Generally, banks do not increase any fund-based help to the purchasers, but they permit industrial units to access traded inputs and machinery by initiating letters of credit in favour of foreign suppliers.  Getting Import L/C Limit Limits of Import L/C sanctioned by the banks on an entire loan proposal submission, similar in other types of credit facilities. All this requires prior, well-advanced and well-timed financial arrangements to go off import bills under L/C. Delay in the bill retirement not only damages the importer’s relation with his bank but also the importer faces financial burden by paying additional commission, penalty interest, demurrage charges, etc.  Dispatching Credit Letter If a Credit Letter is the payment agreement between the importer and the foreign supplier, in that case the importer must receive the Credit Letter from bank and forward it to the foreign supplier within decided time limit. The importer must ensure that the credit letter is prepared according to the import contract agreed between them. 193 CU IDOL SELF LEARNING MATERIAL (SLM)

10.5 CUSTOMS FORMALITIES FOR IMPORTS To reduce complications related to export, import, and transit formalities and to simplify import, export, and transit documentation requirements and considering the legitimate policy aims and other different factors such as different circumstances, appropriate new information, business practices, techniques and technology availability, international best practices, and varied inputs from interested parties, each member shall analyse such formalities and documentation requirements, based on such analysis ensures that such formalities and documentation requirements are: i. endorsed and/or applied with a view to a rapid release and clearance of goods, especially perishable goods. ii. adopted and/or endorsed to reduce the time and cost of compliance for traders and operators. iii. the least trade-restrictive measure selected where two or more alternate measures are readily available for fulfilling the policy objective or objectives in question; and (d) not maintained, including parts thereof, if no longer required The Committee shall build procedures for the sharing relevant information and best practices by Members.  Copies Acceptance Each Member must try to welcome paper or electronic copies of supporting documents needed for import, export, or transit formalities. When a government agency Member holds the original document, in such case any other agency of that Member shall accept a photocopy or electronic copy in place of the actual document. A Member may not need to deposit an original document or export declarations to the customs authorities of the exporting Member.  Utilization of International Standards Members are motivated to use relevant international standards or parts as a basis for their import, export, or transit procedures and formalities, except provided for in the agreement. Members are inspired to participate within the limited resources, in preparation and occasional evaluation of appropriate international standards by suitable international organizations. The Committee must evolve sharing procedures by Members with significant information, and good practices, for execution of globally acclaimed standards. The Committee can invite appropriate international organisations to talk over about their global achievements. The Committee may recognize specific qualities that add specific values to Members. 194 CU IDOL SELF LEARNING MATERIAL (SLM)

 Single Window Members must focus on establishment and development of a single window, allowing traders to put forward documents and required data (data for importation, exportation, or transit of goods) to the participating authorities or agencies through a single-entry point. After the examining documentation and data by the cooperating agencies or authorities, the applicants result must be declared through a single window in time. When documentation or data specifications already gained through the single window, the exact documentation or data specifications shall not be asked by the participating agencies or authorities except in critical circumstances and some other exceptions (which are made public). Members shall inform the Committee about the single window operational details and practical utilisation of information technology to endorse the single window.  Pre-shipment Inspection Members do not need pre-shipment checks for tax classification and valuation of customs. Without damaging Members rights to use other types of pre-shipment observation not covered by paragraph 5.1, Members are advised not to apply or introduce any new requirements in regard to their use.  Utilising of Customs Brokers Custom brokers re not mandatory for members. Members are required to notify committee on use of custom brokers, including modifications promptly. Procedures of Common Border and Uniform Documentation Requirements  Every member shall use common customs procedures and uniform documentation requirements for issue and clearance of goods all over its territory in line with paragraph 7.2. Members can differentiate the procedures and documentation requirements based on the nature and type of goods, or their means of transport, based on risk management.  Members can differentiate its procedures and documentation specifications to give total or partial relief from import duties or taxes; applying filing or processing of electronics; or in a manner in accordance with the application of sanitary and phytosanitary measures.  Rejected Goods When the Member of proficient authority rejects the goods for export due to their non-conformity to meet authorised sanitary or phytosanitary directives or technical directives, then the qualified authority harmonious with its rules and regulations permits the importer to give back the renounced goods to the exporter or his representative. Under paragraph 8.1, if the importer is unable to execute disposition of 195 CU IDOL SELF LEARNING MATERIAL (SLM)

rejected goods within a reasonable time period, then the competent authority may take a different alternative to deal with such non-compliant products.  Temporary Goods Admission and Inward and Outward Processing Temporary Goods Admission Every Member shall permit goods to be taken into its customs area conditionally relieved, partially or totally, from clearance of import duties, levies and taxes. if such products are escorted into its customs area for a particular purpose, planned for re-exportation within a specified period, and have not encountered any change except normal devaluation and misuse due to the use made of them.  Processing Inward and Outward  All members shall as per rules and regulations allow inward and outward goods processing. Outward goods may be re-imported with partial or total relief from import duties, levies and taxes as per Member's laws and directives. Term \"inward processing\" refers the customs process under which certain goods can be brought into a Member’s customs area conditionally relieved, partially or totally, from clearance of import duties, levies and taxes, or entitled for duty drawback, based on that that such goods are planned for production, processing, or repairing and successive exportation. The term \"outward processing\" refers the customs process under which products that are in free circulation in a Member’s customs area may be for the time being exported for production, processing, or repairing widely and then re-imported. 10.6 SUMMARY  The goods purchase from the foreign land is called as import trade. The import trade procedure varies from country to country, depending upon the policy of import, the statutory needs and different countries customs.  Generally, the import and export procedure include activities such as ensuring, licensing and compliance before the shipping of goods. Arrangement for transport and warehousing after the goods unload and obtaining customs clearance as well as tax payment before the goods release.  There are three types of import duties. On some goods very low duties are charged and they are known as revenue duties. On some products high duties are imposed just to give protection to home, industries, and in case of international competitiveness.  Sometimes certain countries are provided special treatment. These nations are given the relief in import duties, and in they are not levied full protective duties. Following are the documents required for Imports Customs Clearance: 196 CU IDOL SELF LEARNING MATERIAL (SLM)

 Bill of Entry.  Commercial Invoice.  Bill of Lading or Airway Bill.  Import License.  Certificate of Insurance.  Letter of Credit or LC.  Technical Write-up or Literature (Only required for specific goods).  Industrial License (for specific goods).  Some necessary documents used in foreign trade are as follows: (i) Indent (ii) Bill of Lading (iii) Bill of Entry (iv) Letter of Credit (v) Bill of Sight (vi) Dock Challan (vii) Dock Warrant. There are ample documents utilised in foreign trade which have already been mentioned in the import procedure. 10.7 KEYWORDS  Inward Processing: it allows companies to obtain VAT and Duty relief on goods moving cross-border. Outward processing allows businesses to export outside the EU, temporarily, for processing or repairs.  Outward Processing: is the opposite of inward processing. It allows processing community goods abroad. When they return to the community, it is supposed to be put into free circulation, and that duty paid only on the value-added abroad.  Reshipment Inspection: A pre-shipment inspection is a step taken by trade operators (such as buyers, suppliers, agencies) to inspect newly manufactured products before shipping them for export/import.  Import License: Document discharged by a national government authorizing the acceptance of certain goods into its territory.  Exim Policy: A set of guidelines and instructions related to export and import of goods. ... Generally, the Export and Import Policy is reformed every year on the 31st of March and the modifications, improvements, and new scheme becomes effective from 1st of April of every year. 10.8: LEARNING ACTIVITY 1. Explain Inward Processing with example. ---------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- 2.Explain Outward Processing with example. 197 CU IDOL SELF LEARNING MATERIAL (SLM)

------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ 10.9 UNIT END QUESTIONS A. Descriptive Short Questions 1. Illustrate the importing procedure with the examples. 2. Enlist the requisite documents for the import procedure. 3. What are customs documents? 4. What is called import? 5. Enumerate the 10 stages of Basic Import Procedures. Long Questions: 1. Discuss the various legitimate dimensions of Import Procedure with examples. 2. Differentiate between the import and export documentation. 3. Explain in detail the procedure and documentation of import? 4. Explain the custom formalities of import? 5. Elaborate the stage of Pre-Import Procedure. B. Multiple Choice Questions 1. Dumping means selling goods at ___________________. a) Low price b) High price c) Medium price d) Negotiable price 2.Why importing goods has become a booming business? a) Due to liberalization of imports. b) Changing customer profile c) Rising middle income groups d) All of these 3.For developing countries, determining factor of import demand includes: a) Limitations of Government on all exports b) Limitations of Government on imports 198 CU IDOL SELF LEARNING MATERIAL (SLM)

c) Limitations of Government on commercial exports only d) Limitations of Government on gold shipments 4 Trade in manufactured goods ___________ a) has been a dynamic component of world commodities trade b) has been a dynamic element of developed countries’ trade with the rest of the world c) has been the fast-growing part of world trade d) Is now influenced by China, Korea, and Canada 5 The major benefits of trade are ____________ a) Depletion in transportation cost b) Increases in incomes and employment c) Advances in technical methods d) b and c Answers: 1-(d); 2-(d); 3-(b); 4-(a); 5-(d). 10.10 REFERENCES Textbooks  Senthil Velmurugan, J., & Mahalakshmi, S. (2019). Export and Import Documentation and Procedures. MJP Publisher.  Bade, D. (2015). Export/Import Procedures and Documentation. AMACOM.  Das, Gurcharan (2002). India Unbound. Anchor Books, Noida.  Pathak. A. (2016). An Analysis of India’s Foreign Trade Policy (2015-20)  Gopal, C. (2007). Export Import Procedures - Documentation and logistics. New Age International. Reference Books  Davidson, C., Matusz, S. J. (2009). International Trade with Equilibrium Unemployment. Princeton, NJ: Princeton University Press.  Keegan, W.J., (1995), Global Marketing Management, Englewoods Cliffs, N.J., Prentice-Hall.  Seyoum, B. (2009). Export-Import Theory, Practices, and Procedures. Taylor & Francis Publication.  Paul, J., & Aserkar, R. (2013). Export Import Management. OUP India.  Kumar, Dharma (2005). The Cambridge Economic History of India, Volume II : 1757–2003. New Delhi: Orient Longman. 199 CU IDOL SELF LEARNING MATERIAL (SLM)

Websites  www.fao.org  http://www.etcweb.net/  http://www.worldstopexports.com  www.vskills.in  www.eximbankindia.in/ 200 CU IDOL SELF LEARNING MATERIAL (SLM)