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A guide on Indian
economic scenario with relevant trade statistics and a directory of
Indian businesses, manufacturers, exporters, and
traders.

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Policy | Export
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Export Procedure

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How To
Export

Preliminaries
for Starting Export

Registration

Register
with Export Promotion Council

Despatching
Samples

Appointing
Agents

Specimen
Copy of Agreement

Acquire
an Export License

Acquire
Export Credit Insurance

Arranging
Finance

Rates
of Interest

Understand
Foreign Exchange Rates & Protect Against Their Adverse Movement

Forward
Contracts

Procuring/Manufacturing
Goods for Export & Their Inspection by Government Authorities

Labeling,
Packaging, Packing & Marking Goods

New
Excise Procedure

How To Export

Golden
Rule

Sell
Experience

Selling
in Export

On-time
Deliveries

Communication

Testing
Products

Approach

Golden Rule: In order
to be successful in exporting one must fully research its markets. No one should
ever try to tackle every market at once. Many enthusiastic persons bitten by the
export bug, fail because they bite off more than they can chew. Overseas design
and product requirements must be carefully considered.

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Always
sell as close to the market as possible. The fewer intermediaries one has the
better, because every intermediary needs some percentage for his share in his
business, which means less profit for the exporter and higher prices for the
customer. All goods for export must be efficiently produced. They must be
produced with due regard to the needs of export markets. It is no use trying to
sell windows which open outwards in a country where, traditionally, windows open
inwards.

Sell Experience: If a
person cannot easily export his goods, may be he can sell his experience.
Alternatively, he can concentrate on supplying goods and materials to exporters'
who already have established an export trade. He can concentrate on making what
are termed 'own brand' products, much demanded by buyers in overseas markets
which have the manufacturing know-how or facilities.

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Selling in Export: In
today's competitive world, everyone has to be sold. The customer always has a
choice of suppliers. Selling is an honorable profession, and you have to be an
expert salesman.

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On-Time Deliveries: Late
deliveries are not always an exporters fault. Dock strikes, go-slows, etc. occur
almost everywhere in the world. If one enters into export for the first time, he
must ensure of fast and efficient delivery of the promised consignment.

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Communication: Communication
internal and external must be comprehensive and immediate. Good communication is
vital in export. When you are in doubt, pick up the phone or email for immediate
clarification.

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Testing Product: The risk of
failure in export markets can be minimized by intelligent use of research.
Before committing to a large-scale operation overseas, try out on a small scale.
Use the a sample test, and any mistakes can then be corrected without much harm
having been done. While the test campaign may appear to cost more initially,
remember that some of the cost will be repaid by sales, so that test marketing
often turns out to be cheaper.

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Approach: If possible some
indication of the attitudes towards the product should be established, like any
sales operation. Even if the product is successful, to obtain reactions from the
customer.

Preliminaries for Starting Export
Business

Setting
up an appropriate business organization.

Choosing
appropriate mode of operations

Naming
the Business

Selecting
the company

Making
effective business correspondence

Selecting
the markets

Selecting
prospective buyers

Selecting
channels of distribution

Negotiating
with prospective buyers

Processing
an export order

Entering
into export contract

Export
pricing and costing

Understanding
risks in international trade

Setting up an appropriate business
organization

The first and the foremost question you as a prospective exporter has to
decide is about the kind of business organisation needed for the purpose. You
have to take a crucial decision as to whether a business will be run as a sole
proprietary concern or a partnership firm or a company. The proper selection of
organisation will depend upon

Your ability to raise finance

Your capacity to bear the risk

Your desire to exercise control over the business

Nature of regulatory framework applicable to you

If the size of the business is small, it would be advantageous to form a sole
proprietary business organisation. It can be set up easily without much expenses
and legal formalities. It is subject to only a few governmental regulations.
However, the biggest disadvantage of #138;sole proprietary business is limited
liability to raise funds which restricts its growth. Besides, the owner has
unlimited personal liability. In order to avoid this disadvantage, it is
advisable to form a partnership firm. The partnership firm can also be set up
with ease and economy. Business can take benefit of the varied experiences and
expertise of the partners. The liability of the partner though joint and
several, is practically distributed amongst the various partners, despite the
fact that the personal liability of the partner is unlimited. The major
disadvantage of partnership form of business organisation is that conflict
amongst the partners is a potential threat to the business. It will not be out
of place to mention here that partnership firms are governed by the Indian
Partnership Act,1932 and, therefore they should be form within the parameters
laid down by the Act.

Exporters Manual and Documentation

Company is another form of business organisation,which has the advantage of
distinct legal identity and limited liability to the shareholders. It can be a
private limited company or a public limited company. A private limited company
can be formed by just two persons subscribing to its share capital. However, the
number of its shareholders cannot exceed fifty, public cannot be invited to
subscribe to its capital and the member's right to transfer shares is
restricted. On the other hand, a public limited company has a minimum of seven
members. There is no limit to maximum number of its members. It can invite the
public to subscribe to its capital and permit the transfer of shares. A public
limited company offers enormous potential for growth because of access to
substantial funds. The liquidity of investment is high because of easiness of
transfer of shares. However, its formation can be recommended only when the size
of the business is large. For small business, a sole proprietary concern or a
partnership firm will be the most suitable form of business organisation.In case
it is decided to incorporate a private limited company, the same is to be
registered with the Registrar of Companies.

For details as to be procedures for registration with the registrar of
Companies, kindly refer to Nabhi's FORMATION AND MANAGEMENT OF A PRIVATE COMPANY
ALONG WITH PRACTICAL PROCEDURES.

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Choosing appropriate mode of
operation

You can chose any of the following modes of operations:

Merchant Exporter i.e. buying the goods from the market or from a
manufacturer and then selling them to foreign buyers.

Manufacturer Exporter i.e. manufacturing the goods yourself for export Sales
Agent/Commission Agent/Indenting Agent i.e. acting on behalf of the seller and
charging commission Buying Agent i.e. acting on behalf of the buyer and charging
commission

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Naming the Business

Whatever form of business organisation has been finally decided, naming the
business is an essential task for every exporter. The name and style should be
attractive, short and meaningful. Simple and attractive name indicating the
nature of business is ideal. The office should be located preferably in a
commercial complex, in clean and workable surroundings. The letter head should
be simple and superb providing information concerning H.O., branches, cable
address, telephone number, fax number, banker's name and address etc. Pick up a
beautiful trade name and logo which reinforces your organisation's name and
image.

Open a current account in the name of the organisation in whose name you
intend to export. It is advisable to open the account with a bank which is
authorised to deal in Foreign Exchange.

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Selecting the Company

Carefully select the product to be exported. For proper selection of product,
study the trends of export of different items from India. The selected product
must be in demand in the countries where it is to be exported. It should be
possible to procure or manufacture the selected product at most economic cost so
that it can be competitively priced. It should also be available in sufficient
quantity and it should be possible to supply it repeatedly and regularly.
Besides, while selecting the product, it has to be ensured that you are
conversant with government policy and regulations in respect of product selected
for export. You should also know import regulations in respect of such
commodities by the importing countries. It would be preferable if you have
previous knowledge and experience of commodities selected by you for export. A
non-technical person should avoid in dealing in high tech products.

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Making effective Business
Correspondence

You should recognise the importance of business correspondence as it is an
introduction with the buyer in proxy which may clinch his response according to
the impression created by the correspondence. For creating a very favorable and
excellent impression, you must use a beautiful letter head on airmail paper and
a good envelope, nicely printed, giving fully particulars of your firm's name,
telephone, telex and fax number etc. Your language should be polite, soft, brief
and to the point, giving a very clear picture of the subject to be put before
the customer. Letters should be typed/ computer typed set, preferably in the
language of the importing country. Also make sure that the full and correct
address is written and the envelope is duly stamped. It should also be borne in
mind that the aim of your business correspondence is not only to clinch the
buyer's order but also to obtain the information on the following:

The specifications of the products already in use in the importing country.
Whether your product meets the above specifications. If not, Whether your
specifications offer any distinct advantages in terms of prices, quality,
after-sales service, etc. The import policy prevailing in the buyer's country
(e.g. whether there is any import licensing, any restrictions on remittances,
any pre-qualification for product/supplier, etc.)

The trade practices in the buyers' country with special reference to your
product, information like whether importers import and distribute the
product/high sea sales, whether agent is required to book orders from actual
users etc. In case your item requires after sales service, the manner in which
it can be offered. The prices at which your product sells in the
retail/wholesale market, the duty structure and any other cost element to arrive
at the landed cost. Information on the margins at which the product is sold.
This information will help you in evolving a pricing strategy.

Study of various market segments viz. Importers, Supermarkets, Government
Suppliers, Institutional Sales, Tenders, Suppliers, etc.

The various factors that rule the market viz. Quality, Price, Delivery, Brand
Name, Credit Terms, etc. Role of advertising and publicity and reference to the
product and the country.

A specimen export letter is given below :

Specimen of Introductory Letter to International Importers

Ref: TIL/NYK2001/ 14th Novl,2000

The Manager (Purchase)

M/s. TIL Ltd.

.........................

.........................

(U.S.A.)

Dear Sir,

We are exporters of a wide variety of items including .......... for the last
ten years. Our major buyers are ......... in .......... We are one of the
registered export houses in India. We represent .......... the leading
manufacturers of these items in India. These items are produced in collaboration
with .........., the world famous company. We follow the ISI specifications. We
believe that your company imports the items we export. We are enclosing herewith
a copy of our brochure and price list for your perusal. We shall be glad to send
you detailed literature/ samples of items that may be of interests to you.

Yours sincerely,

For NYK Ltd.

Manager (Marketing)

Encl: As above.

Comments :

The text can be suitably amended with reference to the manufacturing activity
or/items dealt in by the exporter.

Where the manufacturing is not in collaboration with a foreign company, it
need not be referred to.

Product literature (of the buyer's interest) and price list should invariably
be sent along with the letter.

The price list should categorically indicate whether the prices are f.o.b.,
& C&f or c.i.f. etc. However, discount need not be indicated in the
price list.

The profile about your company should generally include the following
matters:

Company's name and address /Telex /Telephone /Cable /Fax/Email/ Date of
establishment

Export Executives

Status: Partnership/ Company (Pvt. Ltd./Pub.Ltd) Govt.(Semi-Govt.)

Bank Reference

Exporting Since

Value of Assets

No. of Employees/ Manufacturing/ Sales/ Administration

Foreign Offices/Representatives, if any

Exporter/ Manufacturer/ Agent

Main Line

Technical Collaboration

Standards/Specification followed

Major Buyers- In India; Abroad

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Selecting the markets

Target markets should be selected after careful consideration of various
factors like political embargo, scope of exporter's selected product, demand
stability, preferential treatment to products from developing countries, market
penetration by competitive countries and products, distance of potential market,
transport problems, language problems, tariff and non-tariff barriers,
distribution infrastructure, size of demand in the market, expected life span of
market and product requirements, sales and distribution channels. For this
purpose you should collect adequate market information before selecting one or
more target markets. The information can be collected from various sources like
Export Promotion Council (EPCs)/Commodity Boards, Federation of Indian Export
Organisation, (FIEO), Indian Institute of Foreign Trade (IIFT), Indian Trade
Promotion Organisation (ITPO), Indian Embassies Abroad, Foreign Embassies in
India, Import Promotion Institutions Abroad, Overseas Chambers of Commerce and
Industries, Various Directories, Journals, Market Survey Reports.

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Selecting prospective
Buyers

You can collect addresses of the prospective buyers of the commodity from the
following sources:

Enquiries from friends and relatives or other acquaintances residing in
foreign countries.

Visiting/ participating in International Trade Fairs and Exhibitions in India
and abroad. Contact with the Export Promotion Councils, Commodity Boards and
other Government Agencies. List given in Appendix 4 of this book).

Consulting International Yellow Pages (A Publication from New York by Dun
& Bradstreet, USA or other Yellow Pages of different countries like
Japan,Dubai Etc.)

Collecting addresses from various Private Indian Publications Directories
available on cost at Jain Book Agency,C-9, Connaught Place, New Delhi-1. (PH.
3355686, Fax.3731117).

Collecting information from International Trade Directories/
Journals/periodicals available in the libraries of Directorate General of
Commercial Intelligenceand Statistics, IIFT, EPCs, ITPO etc. A list of selected
trade directories published abroad is given in Appendix 5 of this book.

Making contacts with Trade Representatives of Overseas Govt. in India and
Indian Trade and Other Representatives/ International Trade Development
Authorities abroad. A list of international trade development authorities abroad
like Foreign Chambers of Commerce etc. is given in Nabhi's EXPORTERS MANUAL AND
DOCUMENTATION.

Reading biweekly, fortnightly, monthly bulletins such as Indian Trade
Journal, Export Service Bulletin, Bulletins and Magazines issued and published
by Federation of Exporters' Organisations, ITPO, EPCs, Commodity Boards and
other allied agencies. A list of Indian Trade Periodicals containing names and
addresses of importers is given in Appendix 6 of this book.

Visiting Embassies, Consulates etc. of other countries and taking note of
addresses of importers for products proposed to be exported.

Advertising in newspapers having overseas editions and other foreign
newspapers and magazines etc.

Consulting ITPO,IIFT,etc.

Contacting authorised dealers in foreign exchange with whom exporter is
maintaining bank account.

Overseas importers can be contacted or informed about the products by the
following methods:

By corresponding and sending brochures and product literature to prospective
overseas buyers.

By undertaking trips to foreign markets and establishing personal rapport
with overseas buyers. The number of trips will depend on your budget and
resources. But it is essential forlong-term success in international marketing
to establish personal rapport. Foreign trip will provide first-hand information
regarding the market, overseas customers, their requirement, taste, preference
and better out communication of the merits of exporters' products.

Participation in buyer-seller meets and meeting the members of foreign
delegation invited by Export Promotion Councils concerned.

Participation in international trade fairs, seminars.

Advertisement and publicity in overseas reputed newspapers and magazines.
Facilities of free publicity can be availed from Import Development Centres.

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Selecting channels of
distribution

The following channels of distribution are generally utilised while exporting
to overseas markets :

Exports through Export Consortia

Export through Canalising Agencies

Export through Other Established Merchant Exporters or Export Houses, or
Trading Houses

Direct Exports

Export through Overseas Sales Agencies

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Negotiating with Prospective
Buyers

Whatever the channel of distribution for exporting to the overseas countries
is proposed to be is utilized, it is essential that the exporters should possess
the necessary skill for negotiating with the overseas channels of distribution.
The ability to negatiate effectively is needed for discussion with importers or
trade agents. While conducting business negotiations, the prospective exporter
should avoid conflict, controversy and criticism vis-`-vis the other party.
During conversation the attitude should be to communicate effectively. There
should be coherence, creativity, compromise, concessions, commonality,
consensus, commitment and compensation in business negotiations. The general
problem you may face is about pricing. The buyer's contention is that prices are
too high. It should be noted that though the price is only one of the many
issues that are discussed during business negotiations, it influences the entire
negotiating process.

Since this is the most sensitive issue in business negotiations, it should be
tactfully postponed until all the issues have been discussed and mutually agreed
upon. As far as the price is concerned, you should try to determine the buyer's
real interest in the product from the outset, only then a suitable counter
proposal should be presented. It should also be remembered that the buyer may
request modifications in presentation of the product. You should show the
willingness to meet such request, if possible, provided that it will result in
profitable export business. Price being the most important sales tool, it has to
be properly developed and presented.

Therefore, in order to create a favorable impression, minimize costly errors
and generate repeated business. The following points should be kept in mind
while preparing the price list:

Submit a typewritten list, printed on the regular bond paper and laid out
simply and clearly (with at least an inch between columns and between groupings)
Prominently indicate the name of your company, its full address, telephone and
fax numbers, including the country and city codes. Fully describe the items
being quoted. Group the items logically( i.e. all the fabrics together, all the
made-up together etc.).

Specify whether shipped by sea or by air, f.o.b. or c.i.f. and to what
port.

Quote exact amount and not rounded-off figures.

Mention the dates upto which the prices quoted will remain valid.

Where there is an internal reference number which must be quoted, to keep it
short (the buyer has no interest in this detail and the more complex it is, the
greater is the risk of error).

As regards the factors determining your price, please refer to 'EXPORT
PRICING AND COSTING'

One main point regarding export pricing is that while negotiating with
overseas buyer, you may not remember the cost of a product. It may also be
difficult for you to remember the profit margin built in various prices quoted
by you. A clear jotting of this information is not free from the risk of being
leaked out to the competitors or to the overseas buyers.

Some coding is, therefore, essential for the prices quoted by you so that at
any stage/point of time, you can always utilise the information, enabling you to
profitably negotiate with the overseas buyer. This can be done by assigning
codes to the cost price.

For assigning codes to the cost price, you may select an English password
consisting of 10 separate letters, each letter to represent a numerical figure.
For example: 'CRAZY MOUTH' is the password selected by you, where C=1, R=2, A=3,
Z=4, Y=5, M=6, O=7, U=8, T=9, H=0. This password can be successfully used for
recognising various items of exports and their varieties.

Thus, a brass candle stand which is being quoted at Rs. 100(sale price) but
whose cost price to you is Rs 25.50 will be coded as item number 'RYYH' and then
assigned with a running serial number to make it more fascinating. You can
decode the word 'RYYH' to write as Rs 25.50 so as to get an idea of difference
between the Sale Price and the Cost Price, which will provide you the range
within which you can negotiate with overseas buyers.

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Processing an Export
order

You should not be happy merely on receiving an export order. You should first
acknowledge the export order, and then proceed to examine carefully in respect
of items, specification, preshipment inspection, payment conditions, special
packaging, labeling and marketing requirements, shipment and delivery date,
marine insurance, documentation etc. if you are satisfied on these aspects, a
formal confirmation should be sent to the buyer, otherwise clarification should
be sought from the buyer before confirming the order. After confirmation of the
export order immediate steps should be taken for procurement/manufacture of the
export goods. In the meanwhile, you should proceed to enter into a formal export
contract with the overseas buyer.

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Entering into an Export
contract

In order to avoid disputes, it is necessary to enter into an export contract
with the overseas buyer. For this purpose, export contract should be carefully
drafted incorporating comprehensive but in precise terms, all relevant and
important conditions of the trade deal.

There should not be any ambiguity regarding the exact specifications of goods
and terms of sale including export price, mode of payment, storage and
distribution methods, type of packaging, port of shipment, delivery schedule
etc. The different aspects of an export contract are enumerated as under :

Product, Standards and Specifications

Quantity

Inspection

Total Value of Contract

Terms of Delivery

Taxes, Duties and Charges

Period of Delivery/Shipment

Packing, Labeling and Marking

Terms of Payment-- Amount/Mode & Currency

Discounts and Commissions

Licenses and Permits

Insurance

Documentary Requirements

Guarantee

Force Majeure of Excuse for Non-performance of contract

Remedies

Arbitration It will not be out of place to mention here the importance of
arbitration clause in an export contract Court proceedings do not offer a
satisfactory method for settlement of commercial disputes, as they involve
inevitable delays, costs and technicalities. On the other hand, arbitration
provides an economic, expeditious and informal remedy for settlement of
commercial disputes. Arbitration proceedings are conducted in privacy and the
awards are kept confidential. The Arbitrator is usually an expert in the
subject matter of the dispute. The dates for arbitration meetings are fixed
with the convenience of all concerned. Thus, arbitration is the most suitable
way for settlements of commercial disputes and it may invariably be used by
businessmen in their commercial dealings.

The Indian Council of Arbitration Federation House, Tansen Marg, New Delhi.
(Ph. 3319251 Fax:3320714) is a specialized arbitration institution providing
arbitration facilities for all types of domestic or international commercial
disputes. You should use their services as far a possible.

BRIEF SPECIMEN CONTRACT FORM FOR SALE PURCHASE TRANSACTIONS

EXPORTS AND IMPORTS

Name and address of the parties.......(state correct appellation and
complete address of the parties)

We, the above named parties have entered into this contract for the
sale/purchase, etc. ....... (state briefly the purpose of the contract) on
this ........(date) at ........(place)..... subject to the following terms
and conditions:

Goods ................

Quantity ...............Quality................. (Describe the
quantity, quality and the other specifications of the goods precisely as
per the agreement. An agency for inspection/certification of quality
and/or quantity may also be stipulated).

Price................ Mode of payment ...................(Quote the
price, terms, i.e. ex-works/FOB(free on board) CIF(Cost, Insurance &
Freight) etc. in the currency agreed upon and describe the mode of payment
i.e. payment against L/C(letter of credit)/DA (document against
acceptance) /D/P(document against payment)etc. It is also desirable to
mention the exchange rate.)

Shipment...............(Specify date of delivery and the maximum
period upto which delivery could be delayed and for which reasons, port of
shipment and delivery should be mentioned).

Packing and marking...............(Requirements to be specified
precisely)

Insurance .................(State the type of insurance cover
required, i.e. FPA(free from particular average)/WA (with average)/ All
Risks, etc. State also the party responsible for insurance)

Brokerage/Commission ........(if any payable may be mentioned)

Passing of the property and of risk. The property or ownership of the
goods and the risk shall finally pass to the buyer at such stage as the
parties may agree, i.e. when the goods are delivered at the seller's place
of work/pass the ship's rails/are covered by insurance etc. as per agreed
terms).

Arbitration

Arbitration clause recommended by the Indian Council of Arbitration: "All
disputes or differences whatsoever arising between the parties out of relating
to the construction, meaning and operation or effect of this contract or the
breach thereof shall be settled by arbitration in accordance with the rules of
the arbitration of the Indian Council of Arbitration and the award made in
pursuance thereof shall be binding on the parties."(or any other arbitration
clause that may be agreed upon between the parties). 3.Any other special
condition, prevalent in or relevant to the particular line of trade or
transaction, may also be specified.

Sd/-Seller

Sd/-Buyer

Notes: The above specimen contract form, drawn up in brief
essentials, is meant for simple small scale transactions and is intended to
draw the attention of the parties to important aspects of the trade deal in
drafting the contract. The parties are free to add to or modify the terms as
per the peculiar nature of their trade transaction. They may also consult with
advantage, experienced commercial or arbitration bodies for the purpose or
study published literature on the subject. The use of the arbitration clauses
in commercial contracts is becoming increasingly commom, particularly in
export-import transactions, with a view to promoting smooth and swift flow of
business. The Indian Council of Arbitration (ICA) which is partly founded by
the Government of India, provides comprehensive institutional arbitration
service to all government departments and public undertakings as well as
private traders, exporters and importers in India for amicable and quick
settlement of all types of commercial disputes. It has been suggested by the
Ministry of Commerce that all commercial organisations should make use of the
arbitration clause of the Council in their commercial contracts with Indian
and foreign parties.

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Export Pricing and
Costing

Export pricing should be differentiated from export costing. Price is what
we offer to the customer.Cost is the price that we pay/incur for the product.
Price includes our profit margin, cost includes only expenses we have
incurred. Export pricing is the most important tool for promoting sales and
facing international competition. The price has to be realistically worked out
taking into consideration all export benefits and expenses. However, there is
no fixed formula for successful export pricing. It will differ from exporter
to exporter depending upon whether the exporter is a merchant exporter or a
manufacturer exporter or exporting through a canalising agency. You should
also assess the strength of your competitor and anticipate the move of the
competitor in the market. Pricing strategies will depend on various
circumstantial situations. You can still be competitive with higher prices but
with better delivery package or other advantages.

Your prices will be determined by the following factors:

Range of products offered

Prompt deliveries and continuity in supply

After-sales service in products like machine tools, consumer durables

Product differentiation and brand image

Frequency of purchase

Presumed relationship between quality and price

Specialty value goods and gift items

Credit offered

Preference or prejudice for products originating from a particular
source

Aggressive marketing and sales promotion

Prompt acceptance and settlement of claims

Unique value goods and gift items

Export Costing is basically Cost Accountant's job. It consists of fixed
cost and variable cost comprising various elements. It is advisable to prepare
an export costing sheet for every export product. For the format of the export
costing sheet and other relevant details refer to Nabhi's EXPORTERS MANUAL AND
DOCUMENTATION.As regards quoting the prices to the overseas buyer, the same
are quoted in the following internationally accepted terms:

Ex-Works: 'Ex-works' means that your responsibility is to
make goods available to the buyer at works or factory. The full cost and risk
involved in bringing the goods from this place to the desired destination will
be borne by the buyer. This term thus represents the minimum obligation for
you. It is mostly used for sale of plantation commodities such as tea, coffee
and cocoa.

Free on Rail(FOR): Free on Truck(FOT):These terms are used
when the goods are to be carried by rail, but they are also used for road
transport. Your obligations are fulfilled when the goods are delivered to the
carrier.

Free Alongside Ship (FAS): Once the goods have been placed
alongside the ship, your obligations are fulfilled and the buyer notified. The
buyer has to contract with the sea carrier for the carriage of the goods to
the destination and pay the freight. The buyer has to bear all costs and risks
of loss or damage to the goods hereafter.

Free on Board (FOB): Your responsibility ends the moment
the contracted goods are placed on board the ship, free of cost to the buyer
at a port of shipment named in the sales contract. 'On board' means that a
'Received for Shipment' B/L (Bill of Lading) is not sufficient. Such B/L if
issued must be converted into 'Shipped on Board B/L' by using the stamp
'Shipped on Board' and must bear signature of the carrier or his authorised
representative together with date on which the goods were 'boarded'.

Cost and Freight (C&F): You must on your own risk and
not as an agent of the buyer, contract for the carriage of the goods to the
port of destination named in the sale contract and pay the freight. This being
a shipment contract, the point of delivery is fixed to the ship's rail and the
risk of loss or of damage to the goods is transferred from the seller to the
buyer at that very point. As will be seen though you bear the cost of carriage
to the named destination, the risk is already transferred to the buyer at the
port of shipment itself.

Cost Insurance Freight (CIF): The term is basically the
same as C&F, but with the addition that you have to obtain insurance at
your cost against the risks of loss or damage to the goods during the
carriage.

Freight or Carriage Paid (DCP): While C&F is used for
goods which are to be carried by sea, the term "DCP" is used for land
transport only, including national and international transport by road, rail
and inland waterways. You have to contract for the carriage of the goods to
the agreed destination named in the contract of the sale and pay freight. Your
obligations are fulfilled when the goods are delivered to the first carrier
and not beyond. In case the buyer desires you to insure the goods till the
destination, he would add 'including insurance' before the word 'Paid in
Freight' or 'Carriage Paid to'.

EXS/EX-Ship: This is an arrival contract and means that
you make the goods available to the buyer in the ship at the named port of
destination as per sales contract. You have to bear the full cost and risk
involved in bringing the goods there. Your obligation is fulfilled before the
customs border of the foreign country and it is for the buyer to obtain
necessary import license at his own risk and expense.

EXQ/Ex-Quay: Ex-Quay means that you make the goods
available to the buyer at a named quay. As in the term 'Ex-Ship' the points of
division of costs and risks coincide, but they have now been moved one step
further -- from the ship into the quay or wharf i.e. after crossing the
customs border at destination. Therefore, in addition to arranging for
carriage and paying freight and insurance you have to bear the cost of
unloading the goods from the ship.

Delivered at Frontier (DAF): The term is primarily
intended to be used when the goods are to be carried by rail or road. Your
obligations are fulfilled when the goods have arrived at the frontier, but
before the 'Customs border' of the country named in the sales contract.

Delivery Duty Paid (DDP): This term may be used
irrespective of the type of transport involved and denotes your maximum
obligation as opposed to 'Ex-Works'. You have not fulfilled his obligation
till such time that the goods are made available at his risk and cost to the
buyer at his premises or any other named destination. In the latter case
necessary documents (e.g. transport document or Warehouse Warrant) will have
to be made available to the buyer to enable him to take delivery of goods. The
term 'duty' includes taxes, fees and charges.Therefore, the obligation to pay
VAT (Value Added Tax) levied upon importation will fall upon you. It is,
therefore, advisable to use 'exclusive of VAT' after the words 'duty
paid'.

FAO/FOB Airport: 'FOB Airport' is based on the same main
principle as the ordinary FOB term. You fulfill your obligation by delivering
the goods to the air carrier at the airport of departure. Without the buyer's
approval delivery at a town terminal outside the airport is not sufficient,
your obligations with respect to costs and risks do not extend to the arrival
of the goods at the destination.

Free Carrier (Named Point) FRC: The term has been designed
particularly to meet the requirements of modern transport like 'multi-modal'
transport as container or 'roll-on-roll-off' traffic by trailers and ferries.
The principles on which the term is based is same as applicable to FOB except
that the seller or the exporter fulfills his obligations when he delivers the
goods into the custody of the carrier at the named point.

Freight Carriage and Insurance Paid (CIP): The term is
similar to 'Freight or Carriage Paid to'. However, in case of CIP you have
additionally to procure transport insurance against the risk of loss or damage
to the goods during the carriage. You contract with the insurer and pay the
insurance premium.

Back

Understanding risks in International
trade

While selling abroad, you may undergo the following risks:

Credit risk

Currency risk

Carriage risk

Country risk

These risks can be insured to a great extent by taking appropriate steps.
Credit risk against the buyer can be covered by insisting upon an irrevocable
letter of credit from the overseas buyer. An appropriate policy from Export
Credit and Guarantee Corporation of India Ltd. can also be obtained for this
purpose. Country risks are also covered by the ECGC. As regards currency risk,
i.e. possible loss due to adverse fluctuation in exchange rate, You should
obtain forward cover from your bank authorised to deal in foreign exchange.
Alternatively, you should obtain export order in Indian rupee. Carriage risk,
i.e. possible loss of cargo in transit can be covered by taking a marine
insurance policy from the general insurance companies.

Registration

Registration with Reserve Bank Of India: No longer required. Prior to
1.1.1997 it was compulsory for every exporter to obtain an exporters' code
number from the Reserve Bank of India before engaging in export. This has
since been dispensed with and registration with the licensing authorities is
sufficient before commencing export or import.

Registration with Regional Licensing: Authorities (obtaining IEC Code
Number) The Customs Authorities will not allow you to import or export goods
into or from India unless you hold a valid IEC number. For obtaining IEC
number you should apply to Regional Licensing Authority (list given in
Appendix 2) in duplicate in the prescribed form given in Appendix 1. Before
applying for IEC number it is necessary to open a bank account in the name of
your company / firm with any commercial bank authorised to deal in foreign
exchange. The duly signed application form should be supported by the
following documents:

Bank Receipt (in duplicates)/Demand Draft for payment of the fee of Rs.
1,000/-.

Certificate from the Banker of the applicant firm as per Annexure 1 to the
form given in Appendix 1 of this Book.

Two copies of Passport size photographs of the applicant duly attested by
the banker to the applicants.

A copy of Permanent Account Number issued by Income Tax Authorities. If PAN
has not been allotted, a copy of application of PAN submitted to Income Tax
Authorities.

In case the application is signed by an authorised signatory, a copy of the
letter of legal authority may be furnished.

If there is any non-resident interest in the firm and NRI investment is to
be made with repatriation benefits, a simple declaration indicating whether it
is held with the general/specific permission of the RBI on the letter head of
the firm should be furnished. In case of specific approval, a copy may also be
furnished.

Declaration by the applicant that the proprietors/partners/directors of the
applicant firm/company, as the case may be, are not associated as
proprietor/partners/directors with any other firm/company which has been
caution-listed by the RBI. Where the applicant is so associated with a
caution-listed firm/company the IEC No. is allotted with a condition that he
can export only with the prior approval of the RBI.

Exporter's Profile as per form attached to Appendix 1 of this book (See
Appendix 1A of this Book). The Regional Licensing Authority concerned will on
merits grant an IEC number to the applicant. The number should normally be
given within 3 days provided the application is complete in all respects and
is accompanied by the prescribed documents. An IEC number allotted to an
applicant shall be valid for all its branches/divisions as indicated on the
IEC number.

Register With Export Promotion Council

In order to enable you to obtain
benefits/concession under the export-import policy, you are required to register
yourself with an appropriate export promotion agency by obtaining
registration-cum- membership certificate.

For this purpose you should apply in the prescribed form, given at Appendix 3
of this Book to the Export Promotion Council relating to your main line of
business.

For list of Registering Agencies, please refer to Appendix 4 of this Book.
However, if the export is such that it is not covered by any EPC, RCMC in
respect thereof may be obtained from the Regional Licensing Authority
concerned.

An application for registration should be accompanied by a self certified
copy of the Importer-Exporter code number issued by the Regional Licensing
Authority concerned and bank certificate in support of the applicant's financial
soundness. In case an exporter desires to get registration as a manufacturer
exporter, he should furnish evidence to that effect. In the case of a
manufacturer exporter the licensing authority may seek copy of registration with
SSI/any other sponsoring authority in addition to the application in the
prescribed form for the Import Export Code Number.

If the application for registration is granted, the EPC or FIEO shall issue
the RCMC indicating the status of the applicant as merchant exporter or
manufacturer exporter. The RCMC shall be valid for five years ending 31st March
of the licensing year. The certificate shall be deemed to be valid from 1st
April of the licensing year in which it was issued.

Registration With Sales Tax Authorities: Goods which are to be shipped out of
the country for export are eligible for exemption from both Sales Tax and
Central Sales Tax. For this purpose, you should get yourself registered with the
Sales Tax Authority of your state after following the procedure prescribed under
the Sales Tax Act applicable to your State.

Despatching Samples
As the overseas buyers generally insist for the samples
before placing confirmed orders, it is essential that the samples are
attractive, informative and have retention and reminder value. Besides, the
exporter should know the Government policy and procedures for export of samples
from India. He should also be aware about the cheapest modes of sending
samples.

In this connection, it is advised that the postal channel is comparatively
cheaper than sending samples by air. While sending samples through postal
channel due regard should be given to weight and dimension of the post parcels
as postal authorities have prescribed maximum weight and dimension for the post
parcels handled by them. Where it is not possible to send the samples by post
parcels, the same may be sent by air. So far as the Government policy regarding
export of samples is concerned, distinction has been made between export of
commercial samples and gift parcels. In terms of Para 11.4 of the Import Export
Policy as modified upto 31.3.1999, goods including edible items of value not
exceeding Rs.1,00,000 in a licensing year may be exported as a gift. Items
mentioned as restricted for exports in the ITC (HS) Classifications of Export
& Import Items shall not be exported as a gift without a license except in
the case of edible items. Export of bonafide trade and technical samples having
indelible marking as "sample not for sale" is allowed freely without any limit.
However, in such cases where indelible marking is not available, the samples may
be allowed for a value not exceeding US $ 10,000, per consignment. In addition
the exporter has the option to avail the facility of free samples upto US $
5,000 or 1% of the preceding year's exports, whichever is higher. An application
for export of gifts/samples in excess of the limits specified above may be made
to the DGFT.

Special provisions have been made for export of garment samples. Garment
samples are allowed to be exported only by exporters who are registered with the
Apparel Export Promotion Council (AEPC) or the Wool and Woolen Export Promotion
Council for woolen Knitwears. Export of samples to be sent by post parcel or air
freight are further divided into 3 categories, namely : 1.Samples of value upto
Rs.10,000, 2.Samples of value less than Rs. 25,000, 3.Samples of value more than
Rs. 25,000.Where the value of the articles is less than Rs. 10,000, the exporter
should file a simple declaration that the sample does not involve foreign
exchange and its value is less than Rs. 10,000.Where the value of samples is
more than Rs. 10,000 but less than Rs. 25,000 you should obtain a value
certificate from the authorised dealer in foreign exchange (i.e. your bank). For
this purpose, you should submit a commercial invoice certifying thereon that the
parcel does not involve foreign exchange and the aggregate value of the samples
exported by you does not exceed Rs. 25,000 in the current calendar year.If the
value of samples exceeds Rs. 25,000 you should obtain Gr/PP waiver from the
Reserve Bank of India.

Export of trade samples is allowed by sea/air (as distinguished from
sea/airmail) without any value restriction, provided the customs authorities are
satisfied about the bona fide of the goods that they do not fall in the export
control restrictions. However, customs authorities may ask for suitable
documentary evidence in this regard viz. correspondence etc. with the overseas
buyer. Trade samples against which the foreign buyer agrees to make payment can
be exported in the same manner in which normal exports are effected. Samples can
also be carried personally by you while traveling abroad provided these are
otherwise permissible or cleared for export as explained earlier.

However, in case of precious jewelry/stone items, you should declare the same
to the customs authorities while leaving the country and obtain necessary
endorsement on export certificate issued by the Jewelry Appraiser of the
Customs.

Appointing Agents
Selling through an overseas agent is an effective strategy.
These agents serve as a source of market intelligence. Regularly sending the
latest trends on the current fashion, taste and price in the market. Being a man
on the spot, the agent is in a position to render his advice to exporter or new
methods and strategy for pushing up sales of your products. He also provides you
support in the matter of transportation, reservation of accommodation,
appointment with the government as and when required by you. In some countries
it is compulsory under their law to sell through local agents only. It is,
therefore, essential that you should carefully select your overseas
agent.

Consider the points listed below when appointing an Agent :

Size of the agent's company

Date of foundation of the agent's company

Company's ownership and control

Company's capital, funds, available and liabilities

Name, age and experience of the company's senior executives

Number, age and experience of the company's salesman

Oher agencies that the company holds, including those of competing
products and turn-over of each

Length of company's association with other principal

New agencies that the company obtained or lost during the past year

Company's total annual sales and the trends in its sales in recent years

Company's sales coverage, overall and by area

Number of sales calls per month and per salesman by company staff

Any major obstacles expected in the company's sales growth

Agent's capability to provide sales promotion and advertising services

Agent's transport facilities and warehousing capacity

Agent's rate of commission; payment terms required

References on the agents from banks, trade associations and major buyers

Some source of information on agents are:

Government Departments Trade Associations

Chambers of Commerce

Banks

Independent Consultants

Export Promotion Councils

Advertisement Abroad.

Specimen Copy of Agreement
An agreement made this the ....... day ....... of between
.......(name and address) hereinafter called the exporters of the first part and
........ (name and address) hereinafter called the importers of the second part,
wherein the exporters grant to the importers the importation and selling right
in the territory of ..........(fill name of country) for .........(names and
brief description of product) subject to the terms and conditions given below
:

The exporter agrees that during the currency of the agreement he will not
correspond or in any way deal with any part in the territory specified unless
requested to do so by the importers.

The exporter agrees that any orders or enquiries relating to the specified
territory received by him during the currency of this agreement will be passed
on to the importers to deal with.

The exporter agrees that he will make shipment of all orders received from
the importers by earliest shipping opportunity unless prevented from so doing
by circumstances beyond the former's control.

The exporter agrees to charge the importers for all goods ordered during
the currency of this agreement the prices detailed in Price List No. .........
appended to this agreement unless any order is received at least one month
after notification of price changes by the exporter to the importer.

The exporter agrees to pay the importer commission on ......... (fill in
the dates of each year during the currency of this agreement) at the rate of
...... per cent of ....... the F.O.B. value of all orders satisfactorily
completed during the ...... months preceding the dates specified.

The exporter agrees that he will allow to the importers ........ per cent
....... of the value of all business satisfactorily completed with the
importers during the currency of this agreement as contribution towards the
importer's costs in publicising the products covered by this agreement. This
allowance is to be settled by deduction from the manufacturer's invoices to
the importers.

The importers agree that during the currency of this agreement they will
not sell, recommend or in any other way deal with any competing or rivaling
lines in the territory specified.

The importers agree that they will use their best efforts and endeavors at
all times during the currency of this agreement to promote the sales of
products covered by this agreement.

The importers agree that they will make net and full payment for all goods
ordered through confirmed and irrevocable letter of credit established in
........... (name of manufacturer's town or city). OR The importers agree that
they will make net and full payment for all goods ordered against presentation
of draft and shipping documents in ......... (name of importer's town or
city). OR The importers agree that they will immediately upon presentation at
......... and retire such drafts net and in full upon maturity.

The importers agree that they will write to the manufacturer at least once
each calendar month and will send to the manufacturer a full market report on
the prospects for sale of the products covered by this agreement every six
months.

The importer agrees that they will place regular and adequate order with
the manufacturer amounting in total to not less than ........ during the first
calendar year and not less than Rs. .......... in each and every subsequent
year during the currency of this agreement.

This agreement shall become valid with effect from the date of shipment of
the substantial order amounting in value of not less than Rs. ........ and
remain in force for a period of twelve calendar months there from subject to
either party being at liberty to terminate this agreement without notice in
the event of the other party being in breach of any of the terms and
conditions stated herein.

Notwithstanding anything herein aforesaid if during the first twelve
calendar months the importers have placed satisfactory orders with the
exporters amounting to not less than Rs. ....... this agreement shall be
automatically renewed year after year provided that in the twelve calendar
months immediately preceding the expiry date satisfactorily business amounting
in total to not less than Rs. ....... has been placed by the importers with
the manufacturer.

Any disputes arising under this agreement shall be settled in accordance
with Indian Law in (.............)

Witness.............. (Exporter)

Witness.............. (Importer)

Acquire Export License
Exports free unless regulated: The current
Export Licensing Policy of the Government of India is contained in the new
Import Export Policy and Procedures, 1997-2002 as amended upto 31.3.1999. The
Policy and Procedures are amended from time to time and for latest position
kindly refer to. However, for the sake of information of the prospective
exporters, it may be stated that all goods may be exported without any
restriction except to the extent such exports are regulated by the ITC (HS)
Classifications of Export and Import items or any other provisions of this
policy or any other law for the time being in force. The Director General of
Foreign Trade may, however, specify through a Public Notice such terms and
conditions according to which any goods, not included in the ITC (HS)
Classifications of Export and Import items may be exported without a license.
Such terms and conditions may include Minimum Export Price (MEP), registration
with specified authorities, quantitative ceilings and compliance with other
laws, rules, regulations.

Application for an Export License: An application for grant
of export license in respect of items mentioned in Schedule 2 of ITC (HS)
Classifications of Export and Import items may be made in the form given in
Appendix-18A or 18B or 18C, as the case may be, to the Director General of
Foreign Trade and shall be accompanied by the documents prescribed therein. The
Export Licensing Committee under the Chairmanship of Export Commissioner shall
consider such applications on merits for issue of export licenses special High
Powered Licensing Committee under the Chairmanship of Director General of
Foreign Trade shall consider applications for export of dual purpose chemicals
and for special materials, equipment and technologies, as specified in Schedule
2 Appendix 5 and Schedule 2 Appendix 6 respectively of the book p 7 3 titled
ITC(HS) Classifications of Export and Import items on the basis of guidelines
issued in this regard from time to time.

Export of Canalised Items: An application for export of
canalised items mentioned in ITC (HS) Classifications of Export and Import items
may be made to the Director General of Foreign Trade.

Trade Fairs/Exhibitions: Any Indian wishing to organise any
Trade Fair/Exhibition in India or abroad, would be required to obtain a
certificate from an officer of the rank not below that of an Under Secretary to
the Government of India, in the Ministry of Commerce, or an Officer of India
Trade Promotion Organisation, duly authorised by its chairman in this behalf, to
the effect that such exhibition, fair or as the case may be, similar show or
display, has been approved or sponsored by the Government of India in the
Ministry of Commerce or the India Trade Promotion Organisation and the same is
being held in public interest.

Gifts/Spares/Replacement Goods: For export of gifts,
indigenous/imported spares and replacement goods in excess of the prescribed
ceiling/period, an application may be made to the Director General of Foreign
Trade.

Export through Courier Service: Import/Exports through a
registered courier service is permitted as per the Notification issued by the
Department of Revenue. However, importability/exportability of such items shall
be regulated in accordance with the policy.

Acquire Export Credit Insurance

Export credit insurance protects you from the
consequences of the payment risks, both political and commercial. It enables you
to expand your overseas business without fear of loss. Further, it creates a
favorable climate for you under which you can hope to get timely and liberal
credit facilities from the banks at home.

You can obtain Export Credit Insurance from the Export Credit and Guarantee
Corporation of India Limited. In order to provide you Export Credit Insurance,
the following covers are issued by the ECGC :

Standard policies to protect you against the risk of not p 7 3 receiving
payment while trading with overseas buyers on short-term credit.

Specific policies designed to protect you against the risk of not receiving
payment in respect of:

exports on deferred payment terms

services rendered to foreign parties

construction work, including turnkey projects undertaken abroad

The policies are either:

Whole Turnover Policies in the form of 'Open Cover' in respect of shipments
made during 24 months period. You have to obtain credit limit on each one of
your buyers to enable ECGC to approve a limit on the basis of credit worthiness
of the buyer. These policies are basically similar to whole turnover policies
but only apply to specific contracts.

Specific Policies for exports of capital goods on medium or long-term credit,
turnkey projects, civil construction works and technical services.These policies
are basically similar to whole turnover policies but only apply to specific
contracts.

Financial guarantees issued to banks against risk involved in providing
credit or guarantee facilities to you, and

Special schemes viz. transfer guarantee issued to protect banks which add
confirmation to letters of credit, Insurance cover for Buyers' Credit, Lines of
Credit, Joint Ventures and Overseas Investment Insurance, and Exchange
Fluctuation Risk Insurance. The other guarantees which banks can offer to
youthrough ECGC schemes are :--- Bid Bonds,--- Advance Payments Guarantee,---
Bank guarantee for due performance of the contract by the exporter,---Bank
guarantee for payment of retention money,--- Bank guarantee for loans in foreign
currencies. Details of these schemes can be obtained from your own banker or
local office of the Export Credit and Guarantee Corporation of India Ltd.

The Shipments (Comprehensive Risks) Policy is the one ideally suited to cover
risks in respect of goods exported on short-term credit. Shipments to associates
or to agents and those against letter of credit can be covered for only
political risks by suitable endorsements to the shipments (comprehensive risks)
Policy. Premium is charged on such shipments at lower rates.

For obtaining a policy you should apply to the nearest office of the ECGC in
the prescribed Form no.121 (obtainable from ECGC) along with the following
documents :

Bank Certificate about the financial position

Application form for fixing the credit limit

Name/address of foreign buyer fixing sub-limits

After examining the proposal, ECGC would send the exporter an offer letter
stating the terms of its cover and premium rates. The policy will be issued
after the exporter conveys his consent to the premium rate and pays a
non-refundable policy fee of Rs. 100 for policies with maximum liability limit p
7 3 upto Rs. 5 lakhs; Rs. 200 between Rs. 5 lakhs and Rs. 20 lakhs and Rs. 100
for each additional Rs. 10 lakhs or part thereof subject to a ceiling of Rs.
2500.As commercial risks are not covered in the absence of a credit limit, you
are advised to apply to ECGC for approval of credit limit on buyer in the
prescribed Form No:144 (obtainable from ECGC) before making shipment. Credit
limit is the limit upto which claim can be paid under the policy for losses on
account of commercial risks. If no application for credit limit on a buyer has
been made, ECGC accepts liability for commercial risks upto a maximum of Rs.
5,00,000 for D.P./C.A.D. transactions and Rs. 2,00,000 for D.A. transactions
provided that at least three shipments have been effected to the buyer during
the preceding two years on similar terms, at least one of them was not less than
the discretionary limit availed of by the exporter and the buyer had made
payment on the due dates.

Arranging Finance
Financial assistance to the exporters are generally provided
by Commercial Banks, before shipment as well as after shipment of the said
goods. The assistance provided before shipment of goods is known as per-shipment
finance and that provided after the shipment of goods is known as post-shipment
finance.Pre-shipment finance is given for working capital for purchase of
raw-material, processing, packing, transportation, ware-housing etc. of the
goods meant for export. Post-shipment finance is provided for bridging the gap
between the shipment of goods and realization of export proceeds. The later is
done by the Banks by purchasing or negotiating the export documents or by
extending advance against export bills accepted on collection basis. While doing
so, the Banks adjust the pre-shipment advance, if any, already granted to the
exporter.

Pre-Shipment Finance

An application for pre-shipment advance should be made by you to your banker
along with the following documents:

Confirmed export order/contract or L/C etc. in original. Where it is not
available, an undertaking to the effect that the same will be produced to the
bank within a reasonable time for verification and endorsement should be given.
An undertaking that the advance will be utilised for the specific purpose of
procuring/manufacturing/shipping etc., of the goods meant for export only, as
stated in the relative confirmed export order or the L/C. If you are a
sub-supplier and want to supply the goods to the Export/Trading/Star Trading
House or Merchant Exporter, an undertaking from the Merchant

Exporter or Export/Trading/Star Trading House stating that they have not/will
p 7 3 not avail themselves of packing credit facility against the same
transaction for the same purpose till the original packing credit is liquidated.
Copies of Income Tax/Wealth Tax assessment Order for the last 2-3 years in the
case of sole proprietary and partnership firm. Copy of Exporter's Code Number
(CNX). Copy of a valid RCMC (Registration-cum-Membership Certificate) held by
you and/or the Export/Trading/StarTrading House Certificate. Appropriate
policy/guarantee of the ECGC.

Any other document required by the Bank. For encouraging exports, R.B.I. has
instructed the banks to grant preshipment advance at a concessional rate of
interest. The present rate of interest is 10% p.a. for preshipment advance upto
an initial period of 180 days. Preshipment advance for a further period of 90
days is given at the concessional rate of 13% p.a. Banks are free to determine
the interest rate for advances beyond 270 days and upto 360 days.

Following special schemes are also available in respect of pre-shipment
finance:

Exim Bank's scheme for grant of foreign currency pre-shipment credit to
exporters for financing cost of imported inputs for manufacture of export
products.

Scheme of export packing credit to sub-suppliers from export order.

Packing credit for deemed exports.

Pre-shipment Credit in Foreign Currency (PCFC). For further details refer to
Nabhi's "How to Borrow from Financial and Banking Institutions".

Post Shipment Finance

Post-shipment finance is the finance provided against shipping documents. It
is also provided against duty drawback claims. It is provided in the following
forms:

Purchase of Export Documents drawn under Export Order:
Purchase or discount facilities in respect of export bills drawn under confirmed
export order are generally granted to the customers who are enjoying Bill
Purchase/Discounting limits from the Bank. As in case of purchase or discounting
of export documents drawn under export order, the security offered under L/C by
way of substitution of credit-worthiness of the buyer by the issuing bank is not
available, the bank financing is totally dependent upon the credit worthiness of
the buyer, i.e. the importer, as well as that of the exporter or the
beneficiary. The documents dawn on DP basis are parted with through foreign
correspondent only when payment is received while in case of DA bills documents
(including that of title to the goods) are passed on to the overseas importer
against the acceptance of the draft to make payment on maturity. DA bills are
thus unsecured. The bank financing against export bills is open to the risk of
non-payment. Banks, in order to enhance security, generally opt for ECGC
policies and guarantees which are issued in favor of the exporter/banks to
protect their interest on percentage basis in case of non-payment or delayed
payment which is not on account of mischief, mistake or negligence on the part
of exporter. Within the total limit of policy issued to the customer,
drawee-wise limits are generally fixed for individual customers. At the time of
purchasing the bill bank has to ascertain that this drawee limit is not exceeded
so as to make the bank ineligible for claim in case of non-payment.

Advances against Export Bills Sent on Collection: It may
sometimes be possible to avail advance against export bills sent on collection.
In such cases the export bills are sent by the bank on collection basis as
against their purchase/discounting by the bank. Advance against such bills is
granted by way of a 'separate loan' usually termed as 'post-shipment loan'. This
facility is, in fact, another form of post- shipment advance and is sanctioned
by the bank on the same terms and conditions as applicable to the facility of
Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is,
however, stipulated in such cases. The rates of interest etc., chargeable on
this facility are also governed by the same rules. This type of facility is,
however, not very popular and most of the advances against export bills are made
by the bank by way of negotiation/purchase/discount.

Advance against Goods Sent on Consignment Basis: When the
goods are exported on consignment basis at the risk of the exporter for sale and
eventual remittance of sale proceeds to him by the agent/consignee, bank may
finance against such transaction subject to the customer enjoying specific limit
to that effect. However, the bank should ensure while forwarding shipping
documents to its overseas branch/correspondent to instruct the latter to deliver
the document only against Trust Receipt/Undertaking to deliver the sale proceeds
by specified date, which should be within the prescribed date even if according
to the practice in certain trades a bill for part of the estimated value is
drawn in advance against the exports.

Advance against Undrawn Balance: In certain lines of export
it is the trade practice that bills are not to be drawn for the full invoice
value of the goods but to leave small part undrawn for payment after adjustment
due to difference in rates, weight, quality etc. to be ascertained after
approval and inspection of the goods. Banks do finance against the undrawn
balance if undrawn balance is in conformity with the normal level of balance
left undrawn in the particular line of export subject to a maximum of 10% of the
value of export and an undertaking is obtained from the exporter that he will,
within 6 months from due date of payment or the date of shipment of the goods,
whichever is earlier surrender balance proceeds of the shipment. Against the
specific prior approval from Reserve Bank of India the percentage of undrawn
balance can be enhanced by the exporter and the finance can be made available
accordingly at higher rate. Since the actual amount to be realised out of the
undrawn balance, may be less than the undrawn balance, it is necessary to keep a
margin on such advance.

Advance against Retention Money: Banks also grant advances
against retention money, which is payable within one year from the date of
shipment, at a concessional rate of interest up to 90 days. If such advances
extend beyond one year, they are treated as deferred payment advances which are
also eligible for concessional rate of interest.

Advances against Claims of Duty Drawback: Duty Drawback is
permitted against exports of different categories of goods under the 'Customs
and Central Excise Duty Drawback Rules, 1995'. Drawback in relation to goods
manufactured in India and exported means a rebate of duties chargeable on any
imported materials or excisable materials used in manufacture of such goods in
India or rebate on excise duty chargeable under Central Excises Act, 1944 on
certain specified goods. The Duty Drawback Scheme is administered by Directorate
of Duty Drawback in the Ministry of Finance. The claims of duty drawback are
settled by Custom House at the rates determined and notified by the Directorate.
As per the present procedure, no separate claim of duty drawback is to be filed
by the exporter. A copy of the shipping bill presented by the exporter at the
time of making shipment of goods serves the purpose of claim of duty drawback as
well. This claim is provisionally accepted by the customs at the time of
shipment and the shipping bill is duly verified. The claim is settled by customs
office later. As a further incentive to exporters, Customs Houses at Delhi,
Mumbai, Calcutta, Chennai, Chandigarh, Hyderabad have evolved a simplified
procedure under which claims of duty drawback are settled immediately after
shipment and no funds of exporter are blocked.

However, where settlement is not possible under the simplified procedure
exporters may obtain advances against claims of duty drawback as provisionally
certified by customs.

Negotiation of Export documents Drawn under L/C: This aspect
has been discussed in the chapter on Special Care for negotiation of Export
Documents under Letter of Credit.

Rates of Interest
The rate of interest depends on the nature of the Bills,
i.e., whether it is a demand bill or usance bill. Like pre-shipment,
post-shipment finance is also available at concessional rate of interest.
Present Rates of interest are as under:

Demand Bills for transit period Not exceeding ( as specified by FEDAI) 10%
p.a.

Usance Bills (for total period comprising usance period of ex-port bills,
transit period as specified by FEDAI and grace period, wherever applicable:

Upto 90 days 10% p.a.

Beyond 90 days and upto six 12% p.a.months from the date of shipment.

Beyond six months from the 20% date of Shipment (Minimum)

Against duty drawback etc., receive- Not exce-vable from Government covered
by adding 10%ECGC guarantees (upto 90 days) p.a. 4. Against undrawn balance
(upto 90 days) -- do -- 5.Against retention money (for suppl- -- do -- ies
portion only) payable within one year from the date of shipment (upto90
days)

Normal Transit Period: Foreign Exchange Dealers Association
of India (FEDAI) has fixed transit period for export bills drawn on different
countries in the world. The concept of this transit period is that an export
bill should normally be realised within that period. The transit period so fixed
by FEDAI is known as 'Normal Transit Period' and mainly depends on geographical
location of a particular country.

Direct and Indirect Bill: If the currency of the bill is the
same as the currency of the country on which it is drawn, it is termed as direct
bill, e.g. an export bill in US $ drawn on a place in U.S.A. However, if the
currency of the bill in which it is drawn is different than the currency of the
country on which it is drawn, it is termed as indirect bill, e.g. an export bill
in US $ drawn on a place in Japan. The normal transit period fixed for indirect
bill is on higher side as compared to transit period fixed for direct bills.

Notional Due Date: To determine the due date of an export
bill we have to consider the following 3 components: (1) Normal transit period
as fixed by FEDAI (2) Usance period of the bill (3) Grace period if applicable
in the country on which the bill is drawn. Grace period is applicable only in
the case of usance bills. The notional due date of an export bill may thus be
calculated after adding all the above 3 components The concessional rate of
interest is chargeable upto the notional due date subject to a maximum of 90
days.

FORFAITING FINANCE BY AUTHORISED DEALERS: Reserve Bank has
now permitted the authorised dealers (Banks) to arrange forfeiting of medium
term export receivables p 7 3 on the same lines as per the scheme of EXIM Bank
and many International forfeiting agencies have now become active in Indian
market. Forfeiting may be usefully employed as an additional window of export
finance particularly for exports to those countries for which normal exports
credit is not intended by the commercial banks.It must be noted that charges of
forfaiting are eventually to be passed on to the ultimate buyer and should,
therefore, be so declared on relative export declaration forms.

EXTERNAL COMMERCIAL BORROWINGS: Proposals for raising
foreign currency loans/credits viz., Buyer's Credits, Supplier's Credits or
Lines of Credits by firms/companies/lending institutions, banks, etc. for
financing cost of import of goods, technology or for any other purposes, other
than short-term loans/credits maturing within one year should first be submitted
to government of India, Ministry of Finance (Department Economic Affairs), ECB
Division, New Delhi for necessary clearance. The proposals are considered by the
government on merits of each case and in the light of prevailing Government
policy. For details refer to (1) NABHI'S FOREIGN EXCHANGE MANUAL & (2)
NABHI'S MANUAL OF SEBI GUIDELINES ON CAPITAL ISSUES, EURO ISSUES, MERCHANT
BANKNG & MUTUAL FUNDS

EXIM BANK FINANCE: Besides commercial banks,export finance
is also made available by the EXIM bank. The EXIM bank provides financial
assistance to promote Indian exports through direct financial assistance ,
overseas investment finance, term finance for export production and export
development, pre-shipment credit, lines of credit, re-lending facility, export
bills re-discounting, refinance to commercial banks, finance for computer
software exports, finance for export marketing and bulk import finance to
commercial banks. The EXIM Bank also extends non-funded facility to Indian
exports in the form of guarantees. The diversified lending programme of the EXIM
Bank now covers various stages of exports, i.e. from the development export
markets to expansion of production capacity for exports, production for export
and post shipment financing. The EXIM Bank's focus is on export of manufactured
goods, project exports, exports of technology, services and export of computer
software.

Forfaiting Finance from EXIM Bank: A new financing option
for the Indian exporters is available under the forfaiting finance Scheme
recently introduced by the EXIM Bank. Forfaiting is a form of trade finance
involving discounting of medium-term export receivables with or without recourse
to the exporter. The arrangement envisages discounting by Indian exporters of
bill of exchange/promissory notes relating to export transactions which are
"avalised" or guaranteed by the buyer's bankers with overseas forfaiting
agencies on "without recourse" basis.Briefly, the procedure involved in the
scheme of for p 7 3 faiting finance by the Exim Bank is as follows:

Exporter initiates negotiations with the prospective overseas buyer with
regard to the basic contract price, period of credit, rate of interest, etc.,
After successful negotiations, he furnishes the relevant particulars such as
name and country of overseas buyer, contract value, nature of goods, tenure of
credit, name and country of guaranteeing bankers to the Exim Bank and requests
for an indicative discounting quote. Exim Bank obtains the indicative quote of
forfaiting discount together with commitment fee and other charges, if any, to
be paid by the exporter, from an overseas forfaiting agency.

On receipt of the indicative quote from the Exim Bank, the exporter finalises
the terms of the contract, loading the discount and other charges in the value
and approaches Exim Bank for obtaining a firm quote. Exim Bank arranges to get
the same from an appropriate overseas forfaiting agency and furnishes the same
to the exporter. At this stage, exporter would be required to confirm acceptance
of the arrangement to Exim Bank within a specific period as stipulated by that
Bank.

The export contract clearly indicates that the overseas buyer shall prepare a
series of avalised Promissory Notes in favour of the exporter and hand them over
against the shipping documents to his banker. The Prommissory Notes will be
endorsed with the words without recourse by the exporter and handed over to his
banker in India for onward transmission to the Exim Bank.

Alternatively, the export contract may provide for exporter to draw a series
of Bills of exchange on the overseas buyer which will be sent with the shipping
documents through latter's banker for acceptance by the overseas buyer. Overseas
buyer's banker will handover the documents against acceptance of Bills of
Exchange by the buyer and signature of 'aval' or the guaranteeing bank. Avalised
and accepted bills of exchange will be returned to the exporter through his
banker. Exporter will endorse avalised Bills of Exchange with the words 'without
recourse' and return them to his banker for onward transmission to the Exim
Bank.

Exim Bank will forward the Bills of Exchange/Promissory Notes after
verification to the forfaiting agency for discounting by the latter.

Exim Bank will arrange to collect the discounted proceeds of Promissory
Notes/Bills of Exchange from the overseas forfaiting agency and effect payment
to the nostro account of the exporter's bank as per the latter's
instruction.

Understand Foreign Exchange Rates &
Protect Against their Adverse Movement

Exchange Rates: Export contracts are concluded either in
Indian rupee or in foreign currency. Where the contracts are in Indian rupee,
the related documents are also prepared in Indian rupees and no conversion is
involved. However, where the bill is drawn in foreign currency, like US $, ,
DM etc., you will get Indian rupees only after the conversion of foreign
currency at the appropriate exchange rate. Thus the exchange rates become very
important to determine the Indian rupees payable. A favorable exchange rate
will fetch you more rupees and vice-versa. It, therefore, becomes essential
for you to gain some basic knowledge about exchange rate, the working out of
its quotation by the banks, the factors determining the exchange rates in the
market and the precautions you should take so as to avoid possible losses in
future, due to adverse movement of the exchange rates. In the following
paragraphs we shall endeavor to explain these issues. The rates applied by the
banks for converting foreign currency into Indian rupees and vice versa are
known as exchange rates. In other words, exchange rate is the rate at which
one currency can be exchanged for another. There are two systems of quoting
exchange rates :

Direct Quotation: Where the price of foreign currency
is quoted in terms of home or local currency. In this system variable units
of home currency equivalent to a fixed unit of foreign currency is quoted.
For example : US $ 1 = Rs. 40.00

Indirect Quotation: Where exchange rates are quoted in
terms of variable units of foreign currency as equivalent to a fixed number
of units of home currency. For example : US $ 2,500 = Rs. 40.00 Till
1.8.1993 banks were required to quote all the rates on indirect basis as
foreign currency equivalent to Rs. 100 except in case of sale/purchase of
foreign currency notes and traveller cheques where exchange rates on direct
quotation basis were quoted.

From 2.8.1993 banks are quoting rates on direct basis
only.There is distinction between inter-bank exchange rates and merchant
rates. Merchant rates are the exchange rates applied by the bankers for
transactions with their customers for various purposes, such as import,
export, travel, remittances etc. These rates are calculated by the banks as
per the guidelines issued by the Foreign Exchange Dealers Association of India
(FEDAI). On the other hand inter-bank rates are the rates for transactions
amongst the authorised dealers in foreign exchange. These rates depend on the
market conditions. It is not in out of place to mention here that exchange
rates are volatile and, therefore, you should make sincere efforts to choose
appropriate time for tendering your export documents to the bank for
purchase/negotiation. Therefore, plan your affairs in such a way that the
documents are delivered to the bank when exchange rates are favorable enabling
you to get more Indian rupees after conversion of foreign currency amount of
the bill into Indian rupees. A distinction is also made between spot rates and
forward rates. Spot rates are applicable on the day of transact p 7 3 tion ,
i.e, the same day, whereas forward rates are the rates fixed in advance for a
transaction which will mature at a specified date or during a specified period
in future. Quotations for spot rates only are generally available and the
customers have to enter into specific contracts for forward rates. Foreign
exchange rates are always quoted as two way price i.e., a rate at which the
bank is willing to buy foreign currency (buying rate) and a rate at which the
bank sells foreign currency (selling rate). Banks do expect some profit in
exchange operations and there is always some difference in buying and selling
rates. However, the maximum spread available to banks is restricted in terms
of ceiling imposed by Reserve Bank of India. All exchange rates by authorised
dealers are quoted in terms of their capacity as buyer or seller. Different
sets of exchange rates are applied for various types of foreign exchange
transactions as under :

TT Selling Rate: This rate is applied for all clean
remittances outside India i.e., for selling foreign currency to its customer
by the bank such as for issuance of bank drafts, mail/telegraphic transfers
etc. Bill Selling Rate: This rate is applied for all foreign remittances
outside India as proceeds of import bills payable in India. This rate is a
little worse than TT selling rate.

TT Buying Rate: This rate is appled for purchase of
foreign currency by banks where cover is already obtained by banks in India.
Thus all foreign inward remittances which are made payable in India are
converted by applying this rate. A mail transfer issued by a bank in Dubai for
US $ 10,000 drawn on (say) Oriental Bank of Commerce in New York.

Bills Rate: This rate is applied for purchase of sight
export bills which will result in foreign remittance to India after
realisation. This rate is worsen than TT buying rate and, in addition,
interest will also be recovered by the bank for the period for which the bank
is out of funds.

Forward Contracts
Elimination of
exchange risk due to movement in the exchange rat can be avoided by the
following options:

By invoicing in Indian Rupees.

By fixing the Foreign Exchange Contract.

First alternative is possible only when the buyer agrees to it. He may have
his own reasons for not agreeing to invoice in Indian rupees. The second
alternative is commonly resorted to. This alternative involves booking of
forward exchange contract with your bank.

This means that pending submission of documents to the bank for
purchase/negotiation, you have made firm commitment with the bank under which
you agree to sell to the bank foreign exchange at a future date/period and the
bank agrees to purchase at the firm rate the foreign exchange to be tendered by
you on that date / during the agreed period.

Thus you are in a position to know in advance the exchange rate you are going
to get on submission of your export documents. Thus, though you have to pay some
charge for booking a forward contract, you are certain about the rupee amount of
the bill on conversion of foreign currency at a future date. For booking a
forward contract, you should approach your bank with whom you are enjoying a
credit limit.

The bank will book a forward contract only against a firm export order
showing description and quantity of the goods to be supplied, aggregate price
and approximate date of shipment. The bank can accept telex, cable order/fax in
this regard, provided you give an undertaking to produce the original one. Where
shipment has already been completed, forward contract will be booked on the
basis of export bill tendered by you. It can also be booked against an
irrevocable Letter of Credit provided L/C is complete in all respects and you
give a declaration to the bank that you have not booked any forward contract
against the underlying sale contract covering shipments under the L/C.You must
ensure delivery of the related documents within the agreed period of the
contract. In case you fail to deliver the documents within the specified period,
the forward contract needs to be cancelled and fresh contract booked for which
your bank will levy cancellation charges as per the FEDAI Rules.

In case the documents are delivered before the stipulated period, it will
involve early delivery and bank will levy charges for the early delivery, as per
FEDAI Rules. Where the documents are not delivered at all, contract has to be
cancelled either at your request or by the bank itself under certain
circumstances, and this will entail cancellation charges as per the FEDAI
Rules.

It, therefore becomes extremely important that the period of delivery of the
export documents is carefully chosen and strictly adhered to, so as to avoid
unnecessary charges on account of early delivery or cancellation of forward
contracts. However, facility for substitution of export order is permitted by
RBI on specific request if the unfulfilled export order and the substituted
order is for the same commodity.

Procuring/Manufacturing Goods for Export
& their Inspection by Government Authorities

Procuring / Manufacturing Goods

Once you are ready with the infrastructure for exporting goods and have
obtained necessary finance, you should proceed to procure the goods for
export. Procuring the goods should be done with extreme care and caution as to
the quality and cost. However, procuring the raw materials etc. and
manufacturing the goods for export will need extra efforts on your part. If
you are an established exporter, you can have the facility of procuring raw
materials under the Duty Exemption Scheme.

Compulsory Quality Control & Preshipment Inspection

An important aspect about the goods to be exported is compulsory quality
control and pre-shipment inspection. Under the Export(Quality Control and
Inspection) Act, 1963, about 1000 commodities under the major groups of Food
and Agriculture, Fishery, Minerals, Organic and Inorganic Chemicals, Rubber
Products, Refractoriness, Ceramic Products, Pesticides, Light Engineering,
Steel Products, Jute Products, Coir and Coir Products, Footwear and Footwear
Products / Components are subject to compulsory pre-shipment inspection.

At times, foreign buyers lay down their own standards / specifications
which may or may not be in consonance with the Indian standards. They may also
insist upon inspection by their own nominated agencies. These issues should be
sorted out before confirmation of order. Specific provisions have also been
made for compulsory inspection of textile goods.

Products having ISI Certification mark or Agmark are not required to be
inspected by any agency. These products do not fall within the purview of the
export inspection agencies network. The Customs Authorities allow export of
such goods even if not accompanied by any pre-shipment inspection certificate,
provided they are otherwise satisfied that the goods carry ISI Certification
or the Agmark.

Depending upon the nature of products, goods meant for export are inspected
for quality in the following manner: Consignment to Consignment Inspection
Each individual consignment is inspected by the Export Inspection Agency,
Commodity Board and certificate of inspection is issued. The application for
inspection for goods has to be submitted well in advance before the expected
date of shipment of the consignment. Inspection of the consignment is
generally carried out either at the premises of the exporter, provided
adequate facilities exist therein for inspection, or at the port of shipment.
The export inspection agency has a right to exercise supervision of inspected
consignment(s) at any place or time.

The application should be made in duplicate in the new prescribed form
'Intimation for Inspection' as per standardised pre-shipment export documents
to the nearest office of the respective Export Inspection Agency along with
the following documents :

Particulars of the consignment intended to be exported. A crossed
cheque/draft for the amount of requisite inspection fees or an Indian Postal
Order.

Copy of the Commercial Invoice.

Copy of letter of credit.

Details of packing specifications.

Copy of the export order/contract, indicating inter alia the buyer's
requirement that goods are strictly according to the prescribed
specifications, or as per samples etc.

After satisfying itself that the consignment of exportable goods meets the
requirements stipulated in the export contract/order, the inspection agency
issues, generally within four days of receipt of intimation for inspection,
the necessary certificate of inspection to the exporter in the prescribed
proforma in five copies.

The certificate is issued in the standardised form which is aligned
pre-shipment export document. (Three copies for exporter, original copy for
customs use, the second copy for the use of the foreign buyer and the third
copy for the exporter's use, fourth copy for Data Bank, Export Inspection
Council, New Delhi and the fifth copy is retained with the agency for their
own office record).

In-Process Quality Control (IPQC)

Certain products like chemicals or engineering goods are subject to this
control. The inspection is done at various stages of production. The exporter
has to get his unit registered as "Export Worthy" and keep record of
processing and production. Inspection by the officers of Export Inspection
Agency is done from time to time. The certification of inspection on the
end-products is then given without in-depth study at the shipment stage. Under
this system, export is allowed on the basis of adequacy of in-process quality
control and inspection measures exercised by the manufacturing units
themselves. The certificates of inspection in favor of the units approved
under the scheme are issued by the Export Inspection Agencies (EIAs) in the
normal course. However, these units are kept under surveillance by the EIAs
and random spot checks of the consignments are carried out by them. Units
approved under this system of in-process quality control may themselves issue
the certificate of inspection, but only for the products for which they have
been granted IPQC facilities. However, these units have the option either to
get the certificate from the Export Inspection Agencies (EIAs) or issue the
same themselves. Consequently, the manufacturer exporters of products approved
under the IPQC have been recognised as an agency for pre-shipment inspection
for export of engineering products for which they have been approved by the
Export Inspection Agencies at Bombay, Calcutta, Cochin, Delhi and Madras.

Self Certification Scheme

Large manufacturers/exporters, export houses/tradingp 7 3 houses are
allowed the facility of Self-Certification on the theory that the exporter
himself is the best judge of the quality of his products and will not allow
his reputation to be spoiled in the international market by compromising on
quality. The industrial units having proven reputation and adequate testing
facilities have to apply to the Director (Inspection and Quality Control),
Export Inspection Council of India, 11th Floor, Pragati Tower, 26 Rajendra
Place, New Delhi-110008. They are granted a certificate valid for a period of
one year, allowing them self-certification facility. The facility is available
to manufacturers of engineering products, chemical and allied products and
marine products. During this period the exporter can issue a certificate
signed by himself or by a person authorised by him. The certificate has to
indicate the number and date of EIA's reference for registration under
Self-Certification Scheme. It has to be issued in the aligned format as per
new standardised pre-shipment documents. The approval of an industrial unit
under this scheme is notified in the Gazette of India and the exporter has to
pay a lump sum fee to the export inspection agencies depending upon his export
turnover.

Minimum Quality Norms prescribed by the Export Inspection Council should be
maintained and achieved for the grant of facility under Self-Certification
Scheme.

ISO 9000

The discussion on quality control and preshipment inspection will be
incomplete without saying a few words about ISO 9000.The ISO-9000 Series of
Standards evolved by the International Standards Organisation has been
accepted worldwide as the norm assuring high quality of goods. The ISO-9000 is
also the hallmark of a good quality- oriented system for suppliers and
manufacturers. It identifies the basic principles underlying quality, and
specifies the procedures and criteria to be followed to ensure that what
leaves the manufacturer / supplier's premises fully meets the customers
requirements. The ISO-9000 series of standards are basically quality assurance
standards and not product standards.ISO-9000 spells out how a company can
establish, document and maintain an effective and economic quality control
system which will demonstrate to the customer that the company is committed to
quality. The series of Standards aims the following:

Increased customer confidence in the company

Shift from a system of inspection, to one of quality management

Removing the need for multiple assessments of suppliers

Gaining management commitment

Linking quality to cost-effectiveness

Giving customers what they need

The implementation of ISO-9000 Standards involves:

Management education

Writing quality policy

Nominating a quality representative

Identifying responsibilities

Identifying business processes

Writing a quality manual

Writing procedures

Writing work instructions

It is thus clear that the ISO-9000 series of standards constitute of
concept of Total Quality Management (TQM).

Labeling, Packaging, Packing and Marking
Goods
An important stage after manufacturing of goods or their
procurement is their preparation for shipment. This involves labeling,
packaging, packing and marking of export consignments. Labeling requirements
differ from country to country and the same should be ascertained well in
advance from the buyer. The label should indicate quality, quantity, method of
use etc. Special international care labels have been specified for the textile
items by GINITEX, and the same should be scrupulously adhered to. Packaging
fulfills a vital role in helping to get your export products to the market in
top condition, as well as in presenting your goods to the overseas buyer in an
attractive way. While packaging, quality should not be compromised merely to cut
down costs, packaging should also be in conformity with the instructions issued
by the importer. Packing refers to the external containers used for
transportation . The shape of packing cases play a very important role in
packing the cargo, and the nature of packing material to be used will depend
upon the items exported As regard specification for the size, weight and
strength care must be taken to ensure that the weight of standard case does not
exceed 50 Kg. for easy handling of the cargo. Before packing and sealing the
goods, it should be ensured that all the contents are properly placed in the
case and the list of contents of packing notes should be prepared so that the
buyer, the Customs authorities and the Insurance authorities can easily check
the contents of each and every case.

The consolidated statement of contents for a number of case is called the
Packing List, which should be prepared in the prescribed standardised
format.

Marking means to mark the address, number of packages etc. on the packets. It
is essential for identification purpose and should provide information on
exporters' mark, port of destination, place of destination, order number and
date, gross, net and tare weight and handling instructions. It should also be
ensured that while putting marks, the law of buyer's country is duly compiled
with.

All shipping cases should be marked a number with special symbols selected by
the exporters or the importers, so that the competitors cannot find out the
details of the customers and the country of destination or supplier's country of
despatch. Care should also be taken to ensure that the marking conforms to those
written in the invoice, insurance certificate, bill of lading and other
documents. The International Cargo Handling Co-ordination, Association has set
out for the use of exporters a number of recommendations for the marking of
goods carried by ocean-going vessels. They are equally useful for sending goods
by other modes of transportation.

Suggestions:

The marks should appear in certain order. Essential data should be placed in
oblong frames with lines 1.5 centimeters thick, and subsidiary information
should be placed in another type of frame.

Declaration on large packages should be placed on two continuous sides, and
for consignments bound together on a pallet, also on the top.

Handling instructions should be placed on all four sides. Similar packages,
such as goods in sacks, should be marked on two opposite sides.

Lettering should be at least 7.5 centimeters high for essential data, and at
least 3.5 centimeters for subsidiary data. If the package is too small for such
letter, other sizes may be used, but in the same ratio. The sizes of the symbols
should also be in proportion to the size of the package and of the other
markings.

Only fast dyes should be used for lettering. Essential data should be in
black and subsidiary data in a less conspicuous colour; red and orange lettering
should be reversed for dangerous goods only. For food packed in sacks, only
harmless dyes should be employed, and the dye should not come through the
packing in such a way as to affect the goods.

Stick-on labels should only be used on individual package or parcel and all
old labels should be removed. Marking should be made by stencil or by branding
or by pencil or brush without a stencil. If stencils are used, care should be
taken that the letters and figures are perfectly legible to prevent confusion.
This is especially true of the letters and figures --- B.R.P, O, G-G-D-C, H.N;
3-8 : 6-9 and 1-7.

The surface to be marked should be smooth and clean. If packages are to be
bonded, they can be marked before this is done; the hoops should not however,
cover the markings.

The figure should indicate the total number of packages making up the
consignment and the consecutive number of the individual package. For example
:1520/15/1 identifies the first package of a total number of 15 packets and
1520/15/15 the last one.

The name of the ship and the bill of lading number should be shown when this
is possible. Handling instructions must appear in the language of the exporter
and importer, and also, if possible, in the language of the countries where
goods are to be handled en route or trans shipped.

New Excise Procedure
All excisable
goods exported out of India are exempt from payment of Central Excise Duties,
for which two different procedures have been approved

Rebate of Duty on Goods Export Procedure

Under the first procedure, known as 'Rebate of duty on Goods Export. The
manufacturer has first to pay the excise duty on goods meant for export and then
claim refund of the same after exportation of such goods to countries except
Nepal and Bhutan. This is done under Rule 12 of Central Excise Rules. Under this
rule, rebate of duty is granted for the finished stage as well as input stage.
Rebate of duty in respect of the excisable materials used in the manufacture of
the exported goods shall not be allowed if the exporter avails of the drawback
allowed under the Customs and Central Excise Duties Drawback Rules, 1995 or
Modvat. The following procedure should be followed while exporting under the
rebate of duty. Removal of goods under claim of rebate from a factory or
warehouse without examination by the Central Excise Officers. The exporters are
allowed to remove the goods for export on their own without getting the goods
examined by the Central Excise Officers. Form AR4 in such cases should be
prepared in sixtuplicate, giving all particulars and declarations. The exporter
shall deliver triplicate, and quadruplicate, quintuplicateand sixtuplicate
copies of AR4 to the Superintendent of Central Excise having jurisdiction over
the factory or the warehouse, within 24 hours of the removal of the consignment
and would retain the original and duplicate copies for presenting along with the
consignment to the Customs Officer at the point of export. The jurisdictional
superintendent of Central Excise examines the information contained in AR4 and
verifies the facts of payment of duty and other certificates/declarations made
by the exporter. After he is satisfied that the information contained in the AR4
is true, he signs at appropriate places in the four copies of AR4 submitted to
him and plus his stamp with his name and designation below his signature. He
would then dispose of the triplicate, quadruplicate, quintuplicate and
sixtuplicate copies of AR4 as under:-

Triplicate: To there bate sanctioning authority viz.
Maritime Commissioner of Central Excise or the assistant commissioner of
Central Excise declared by the exporter on the AR4. This copy on the request
of exporter may be sealed and handed over to the exporter / his authorized
agent for presenting to the rebate sanctioning authority.

Quadruplicate: To the Chief Accounts Officer in the
Commissionerate Headquarters.

Quintuplicate: Office copy to be retained by the Central
Excise Officer.

Sixtuplicate: To be given to the exporter.

Procedure for exports under Central Excise Seal Where the exporter desires
the sealing of the goods by the Central Excise Officers so that the export goods
may not be examined by the Customs Officers at the Port/Airport of shipment, he
should present an AR4 application in sixtuplicate to the Superintendent of
Central Excise having jurisdiction over the factory/warehouse at least 24 hours
before the intended removal of the export goods from the factory/warehouse. The
Superintendent of Central Excise may depute an Inspector of Central Excise or
may himself go for sealing and examination of the export consignment. Where the
AR4 indicates that the export is in discharge of an export obligation under a
Quantity-based advance License or a Value-based Advance License issued under the
Duty Exemption Scheme, in such cases the consignment is invariably examined and
sealed by the Superintendent of Central Excise himself. The Central Excise
Officer examining the consignment would draw samples wherever necessary in
triplicate. He would hand over two sets of samples, duly sealed, to the exporter
or his authorized agent, for delivering to the Customs Officers at the point of
export. He would retain the third set for his records. The export consignment is
carefully examined vis-`-vis the description of goods, their value and other
particulars/declarations on the AR4. The Central Excise Officer verifies the
facts of payment of duty and other certificates/declarations made by the
exporter. After he is satisfied that the information contained in the AR4 is
true he would allow the clearances and also sign all the six copies of the AR4
at appropriate places and put his stamp with his name and designation below his
signature. The copies of AR4 are disposed of as under:

Original and Duplicate: To the exporter for presenting to
Customs Officer at the point of export along with the export consignment.

Triplicate: To the rebate sanctioning authority i.e.
Maritime Commissioner of Central Excise or the jurisdictional Assistant
Commissioner of Central Excise, as declared by the exporter on the AR4. The
Central Excise officer may handover this copy under the sealed cover on
exporter's request.

Quadruplicate: To the Chief Accounts Officer at his
Commissionerate Headquarters.

Quintuplicate: To be retained for records.

Export under Bond Procedure

Under the second procedure known as "Exports Under Bond" goods can be
exported out of India except to Nepal or Bhutan without prior payment of duty
subject to the execution of the Bond with security / security for a sum
equivalent to the duty chargeable on the goods to be exported. This is done
under Rule 13 of Central Excise Rules which deals with export of goods in Bond
as well as utilisation of raw materials etc. without payment of duty for
manufacture and export of excisable goods. The following procedure has been
prescribed in this regard.

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