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Export Procedure

The procedure and the sequence in which these are documented vary from one export transaction to another. Following are the steps involved in a typical export transaction:
  1. Receipt of Enquiry and Sending Quotations: The potential buyer of a particular product sends an enquiry to various exporters requesting them for information regarding price, quality, terms and conditions for export of the goods. Exporters can be informed of such an enquiry even by way of advertisement in the press put in by the importer. The exporter replies to the enquiry by forwarding a quotation - referred to as proforma invoice. The proforma invoice provides information about the price at which the exporter is ready to sell the goods and also provides information about the quality, grade, size, weight, and mode of delivery, type of packing and payment terms.
  2. Receipt of Order or Indent: In case if the export price and other terms and conditions are acceptable to the potential buyer, they place an order for the goods to be despatched. This order, which is also known as indent, shows a description of the goods ordered, prices to be paid, delivery terms, packing and marking details and delivery instructions.
  3. Assessing Importer's Creditworthiness and Securing a Guarantee for Payments: On receiving the indent, the exporter enquires about the creditworthiness of the importer. The purpose of the enquiry is to analyze the risk factor of non payment by the importer once the goods reach the import destination. To minimise this risk, most exporters insist on a letter of credit from the importer. A letter of credit can be defined as an assurance issued by the importer's bank that it will honour payment to a certain amount of export bills to the bank of the exporter. Letter of credit is identified as the most appropriate and secure method of payment adopted to settle international transactions
  4. Obtaining Export Licence: On getting an assurance on the payments, the exporting firm looks forward to the rules and regulations and the compliance. Export of goods in India is subject to Laws of the Customs which demand that the export firm should possess an export licence before it proceeds with exports. The credentials for getting an export licence are as follows:
    • Should hold a bank account in any bank authorised by the Reserve Bank of India (RBI) with a valid account number.
    • Should possess Import Export Code (IEC) number from the Directorate General of Foreign Trade (DGFT) or Regional Import Export Licensing Authority.
    • Should register with appropriate export promotion council.
Should register with Export Credit and Guarantee Corporation (ECGC) in order to prevent risks of non payments. An export firm needs to have the Import Export Code (IEC) number as it has to be duly filled in various exports/ import documents. For obtaining the IEC number, a firm has to apply to the Director General for Foreign Trade (DGFT) with valid documents such as exporter/importer profile, bank receipt for requisite fee, certificate from the banker on the prescribed form, two copies of photographs duly attested by the banker, particulars of the non-resident interest and declaration by the applicant for non association with caution listed firms.

It is mandatory for every exporter to register with the appropriate export promotion council. The export promotion councils such as Engineering Export Promotion Council (EEPC) and Apparel Export Promotion Council (AEPC) were incepted by the Government of India to enhance the exports of different products. It is mandatory to hold a membership in export promotion council and obtain a Registration cum Membership Certificate (RCMC) in order to avail benefits from the Government. Registration with the ECGC is required to protect overseas payments from political and commercial risks. This document of registration also helps the export firm in acquiring financial assistance from commercial banks and other financial institutions.
  1. Obtaining Pre-shipment Finance: On acquiring a confirmed order and letter of credit, the exporter requests his banker for pre-shipment finance, which the exporter requires for procuring raw materials and other important components for processing and packing of goods and there by also carry out the transportation of goods to the port of shipment
  2. Production or Procurement of Goods: On receipt of the preshipment finance from the bank, the exporter proceeds with the production and packing of goods as per the specifications of the importer. Either the firm itself goes in for producing the goods or else it is bought from the market.
  3. Pre-shipment Inspection: The Government of India has implemented measures to ensure that only good quality products are exported from the country. One such measure is inspection of certain products by a competent agency as designated by the government. The Export Quality Control and Inspection Act, 1963 has been passed by the government and has also authorised a few agencies to act as inspection agencies. For instance, if the product to be exported falls under such a category, the exporter has to contact the Export Inspection agency (EIA) or the other designated agency to obtain inspection certificate. The pre-shipment inspection report is also needs to be submitted along with other export documents during exports. This inspection need not be carried out if the goods are being exported by star trading houses, trading houses, export houses, industrial units located in export processing zones/special economic zones (EPZs/SEZs) and 100 per cent export oriented units (EOUs).
  4. Excise Clearance: As per the Central Excise Tariff Act, excise duty is to be paid on the materials utilized for manufacturing goods. The exporter, hence, has to apply to the Excise Commissioner of the region enclosing an invoice. On getting an approval from the Excise Commissioner, he may issue the excise clearance. But in many cases the government exempts payment of excise duty or later on refunds it if the goods so manufactured are meant for exports. The idea behind such exemption or refund is to offer an incentive to the exporters to enhance the number of exports and also to make products more competitive to reach the world markets. The refund of this excise duty is known as duty drawback which is being administered by the Directorate of Drawback under the Ministry of Finance and is responsible for fixing the rates of drawback for different products. The work relating to sanction and payment of drawback is, on the other hand, looked after by the Commissioner of Customs or Central Excise in-charge of the concerned port/ airport/land custom station from where the export of goods takes place.
  5. Obtaining Certificate of Origin: Few countries provide tariff concessions or other exemptions to the goods exported from a one particular country. In order to avail such benefits, the importer might ask the exporter to produce a certificate of origin. This certificate of origin is the proof that the goods have actually been manufactured in the country from where the export has been transacted. This certificate is obtained from the trade consulate located in the exporter's country.
  6. Reservation of Shipping Space: The exporting firm in turn applies to the shipping company appealing for provision of shipping space. Specifications on the types of goods to be exported, feasible date of shipment and the port of destination. On receipt of application for shipping, the shipping company issues a shipping order. A shipping order serves as an instruction to the captain of the ship that the goods specified in the order after their customs clearance at a designated port is received on board.
  7. Packing and Forwarding: The goods are then rightly packed and marked with required details viz., name and address of the importer, gross and net weight, port of shipment and destination, country of origin, etc. The exporter in turn, makes appropriate arrangements for transportation of goods to the port. On loading goods into the railway wagon, the railway authorities would issue a 'railway receipt' which serves as a title to the goods. The exporter in turn endorses the railway receipt in favour of his agent for him to take delivery of goods at the port of shipment.
  8. Insurance of Goods: The goods are required to be insured with an insurance company to avoid risk factors like loss or damage of the goods due to the perils of the sea during the transit.
  9. Customs Clearance: The goods have to be cleared from the customs before these can be loaded on to the ship. In order to obtaining customs clearance, the exporter has to prepare the shipping bill which is the key document, based on which the customs office gives the permission for export. Shipping bill holds particulars of the goods being exported, the name of the vessel, the particular port at which goods are to be delivered, country of final destination, exporter's name and address, etc. There are five copies of the shipping bill along with the following documents that submitted to the Customs Appraiser at the Customs House:
    • Export Contract or Export Order
    • Letter of Credit
    • Commercial Invoice
    • Certificate of Origin
    • Certificate of Inspection, wherever necessary
On proper submission of these documents, the Superintendent of the concerned port trust is consulted for obtaining the carting order. Carting order serves as the instruction to the staff at the gate of the port to allow cargo inside the dock. Later the cargo is physically moved into the port area and stored in the appropriate shed. These formalities are generally carried out by an agent - referred to as Clearing and Forwarding (C&F) agent.
  1. Obtaining Mates Receipt: The captain of the ship issues a receipt called the mates receipt after the goods are loaded on the ship, to the port superintendent. The receipt contains details like the ship's name, berth, shipment date, marks, numbers, and information regarding the package and the condition of the goods when they were boarded on to the ship. After receiving the port dues the port superintendent gives the mate receipt to the C& F agent.
  2. Payment of Freight and Issuance of Bill of Lading: The shipping company receives the mates receipt from the C&F agent to determine the freight. The shipping company gives a bill of lading which serves as an evidence that it has agreed to carry the goods to the consigned place. If the goods are being transported through airways an airway bill will be issued.
  3. Preparation of Invoice: After the goods are sent, an invoice is prepared about the goods. The invoice contains details like the volume of the goods sent and also the amount which the importer has to pay. The C&F agent has to give the invoice to the customs for their attestation.
  4. Securing Payment: The importer receives information about the shipment from the exporter. The importer has to submit a certified invoice copy, bill of lading, a list of the packing, insurance policy, certificate of origin and letter of credit to receive the title of the goods, to the customs in his country. The exporter send these documents via his bank on a condition that they are to be given to the importer only after the bill of exchange is being accepted. Filing the required documents to the bank in order to receive the payment from the bank is known as 'negotiation of documents'. An order received by the importer to make a payment to a particular person is called a bill of exchange. A bill of exchange is of two kinds namely a document against sight or known as sight draft and a document against acceptance or known as usance draft. A sight draft is used when the documents are given to the importer only after receiving the payment. On the other hand the documents are delivered to the importer against the acceptance of the bill of exchange for usance draft for making payment within a specified period. After receiving bill of exchange importer has to release payment in sight draft or accept the usance draft for payment on maturity of bill of exchange. On signing a letter of indemnity and submitting the same immediate payment is made by bank to the exporter. By signing the indemnity letter the exporter undertakes to indemnify the bank in the event of non-receipt of payment from importer along with accrued interest. A bank certificate of payment has to be obtained by the exporter on receiving exports. This certificate says that the goods received are in accordance with exchange control regulations.

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