International BusinessExport and Import procedure in India : International BusinessExport and Import procedure in India Kishor Jagirdar Infopace

Management Pvt Ltd kishorjagirdar@gmail.com Export procedure : Export procedure 6 classified Stages Preliminaries Offer and receipt of confirmed order Production and clearance of the products for exports Shipment Negotiation and documents and realization of export proceeds obtaining various export incentives PRELIMINARIES : PRELIMINARIES IEC code number license from DGFT Membership of Promotion bodies Registration with Export promotion councils Sales Tax authorities and shop and establishment act. INQUIRY, OFFER AND RECEIPT OF CONFIRMED ORDER : INQUIRY, OFFER AND RECEIPT OF CONFIRMED ORDER Inquiry is the request made by a prospective buyer/importer regarding his wish to import certain items/goods. Offer is a proposal submitted by an exporter expressing his intention to export specific goods with specific terms and condition this is made in the form of Performa Invoice The Proforma invoice includes : The Proforma invoice includes Name of buyer Description of the goods technical, physical, chemical features Price Unit wise pricing of goods in internationally accepted currencies or mutually agreed currencies. It will be in FOB, C&F, CIF, DOP, POD or credit advance Condition of sale Among them are i) Validity ii) Escalation clause rising cost Ex Truckers strike which in India is a common phenomenon may result in elongated period of goods lying at the Warehouse or trust Port which will escalate costs of demurrage and eat into the profit margins of the exporter. iii) Delivery schedules iv) Inspection v) Force de Majeure clause The Proforma invoice includes 2 : The Proforma invoice includes 2 e) Payment terms L/C, bills of exchange etc Other obligation i) Post sales service ii) Providing Spare parts iii) Warranty/Guarantee for the equipment technology Confirmed order signing of the duplicate invoice and reverting Export license if required Procuring of finance PRODUCTION PROCUREMENT OF GOODS : PRODUCTION PROCUREMENT OF GOODS Packing and marking Quality control and pre-shipment inspection Excise duty rebates rule 12 of central excise rules of 1944.After its paid then Gate pass, GP-1, AR-4 form SHIPMENT STAGE : SHIPMENT STAGE Transportation of the goods by Ship is cheaper compared to that of the air. In addition, Physical size of the products creates hurdles for transporting by air. SHIPMENT STAGE.2 : SHIPMENT STAGE.2 Agents Assist booking of space on the ship for cargo placement. The shipping company issue shipping advice against a confirmed order. This has no obligation for the shipping company other than confirmation/information of the availability of space .But when the company issues Shipping order it is obligated to accept the cargo. Customs clearance the exporter has to get custom clearance of the goods before they are loaded on the ship. Customs authorities accord their formal approval after scrutinizing complete set of shipping documents, copies of shipping bills etc. SHIPMENT STAGE.3 : SHIPMENT STAGE.3 They include Proforma invoice in original and duplicate GR -1 forms in duplicate AR -4 forms (in original and duplicate) Export license (if required) Letter of credit covering export, order, export contracts or order in original. Certificate of inspection (where necessary) Form of declaration (in duplicate) Shipping Bill (Five copies) Quality control Inspection certificate (if required) Original contract wherever available Packing list Letter of registration certificate (if applicable) SHIPMENT STAGE.4 : SHIPMENT STAGE.4 GR-1 Form: this form is an exchange control document required by the RBI. The exporter has to realize the proceeds of the goods exported within 180 days from the date of the shipment from India. This form is not necessary in case of export to Nepal and Bhutan. Shipping Bill: this is an exchange document needed by the customs official for granting permission for shipment .This bill contains the following information. Name of the exporter/Shipper including his address and IEC number Description and quantity of goods to be shipped Value of goods Number of packages and markings on them Amount of draw back claimed (draw back duty is allowed when the goods are produced in India) Port of destination Name of the ship and its agent. 5 copies of the shipping bills to be provided to the customs official

SHIPMENT STAGE.5 : SHIPMENT STAGE.5 Export license: it is necessary for only certain categories of goods and can be obtained form the JDFT office. Carting order: This is an order given by the superintendent of the concerned Port Trust once the exporter is ready to move goods physically inside the port area. This order gives permission to move inside. Customs examination of cargo at docks - the customs authorities after checking the documents, checks the products to be exported at the docks. The exporter can arrange for the physical check of the products at his factory or warehouse. Applications for this facility can be made to Assistant collector of customs. Unless the exporters confides are doubtful the cargo is not checked again at the port after the formal approval and the exporter can load it into the ship. SHIPMENT STAGE.6 : SHIPMENT STAGE.6 Let Ship: Before loading the cargo into the ship the exporters forwarding agent has to get permission from the Preventive officer of the customs department. This is called Let ship order Mates receipt: After the goods are loaded into the ship, the captain of the ship furnishes a document to the Port Superintendent this is a certified document of the specifications of the loaded cargo and its condition while loading, etc. Port trust dues: The port trust authorities after getting the Mates receipt from the captain of the ship, i ssues the bill of lading to the exporter. Bill of lading The forwarding agent collects the Mates receipt and submits the same to the authorities and collects in turn Bill of lading from the port authorities. The forwarding agent supplies these following documents at this final stage to the exporter A copy of the invoice duely attested by the customs Drawback copy of the shipping bill Export promotion copy of the shipping bill Full set of clean on board bill of lading together with the non negotiable copies. The original letter of credit Customers copy or contract Duplicate copy of the AR-4 form Shipping by other modes of transport Shipping by Air Shipping by Post Shipping by land E- Commerce has increased the shipment by Post on a large scale. SHIPMENT STAGE.7 : SHIPMENT STAGE.7 DOCUMENTS The exporter submits the relevant documents to his banker for getting the payment for the goods exported. Submission of relevant documents to the bank and the process of getting the payment from the bank are called Negotiating the documents, through the bank. These documents are called negotiable set of documents Bill of lading Commercial invoice together with the packing slip and bill of exchange Certificate of origin GR-1 form (in duplicate) Letter of credit (in original) Aligned Documentation systems: Government of India appointed a committee to recommend on the recommendation regarding export trade. Government of India accepted the recommendations of the committee and introduced standardized documents with effect from 1st Oct 1981, which is known as the Aligned Documentation system. This system is based on the UN layout key. Standardized documents for the Indian exporters based on the aligned documentation system include: Invoice Exchange control Declaration (GR) form Shipping Bill (Dock Challan/Duty Draw back and Port Trust Copy) Bill of Lading EXPORT INCENTIVES : EXPORT INCENTIVES This includes The Duty Draw back The Excise Duty Refund The Duty Draw back- The exporter is eligible to get back the excise duty and central excise paid on all raw materials, Components and consumables used in the production of good exported under this scheme. The Excise Duty Refund- Exporter is eligible for refund of the excise duty .It can be recovered after exports if paid in the beginning. He she also can execute a bond with the excise authorities without making the payment. IMPORT PROCEDURE : IMPORT PROCEDURE Importing refers to the purchase of foreign products for the consumption or sale in the home country Import process consist of five stages 1) Determine the market 2) Locating and negotiating with source of supply 3) Securing physical distribution 4) Preparing documentation and customs processing to facilitate movement among countries and organizations 5) Developing a plan for resale or consumption Different kinds of institutions import goods and services from foreign countries Different kinds of importers include Private industrialist Government agencies Faciliting Agencies End users Stages of import procedures : Stages of import procedures Preliminaries Enquiring and placing the indent Obtaining foreign exchange Arranging the payment Payment of customs duties and taking the delivery of goods Preliminaries : Preliminaries The importing firm or an individual has to obtain a license and importer-exporter code number from the controller of Exports and imports. The license is usually issued for a period of one year and the importer can become registered importer by actual repeat activity of imports of the choosen commodity in the given period of time frame of the license. Enquiring and placing the indent : Enquiring and placing the indent Approaching several exporters from different country source for the particular commodity that the importer wants to import and seeking their quotes. At this stage the importer will ask for invoice and then after negotiating and picking the best quote the importer will ratify the invoice and that will be considered as confirmed order.

This can happen directly or through an intermediary agency called the indenting agent/house. This could be a firm or an individual who has strong transactional ties with the exporter and has a historical association. The Indent could be open or closed Enquiring and placing the indent..2 : Enquiring and placing the indent..2 Open Indent - This doesnt specify the price and other details of the goods and leaves them to the discretion of the exporter Closed Indent this specifies the brand, price, number, packing, shipping mode, insurance etc. The indents incorporated and the exact price is called confirmatory indent. OBTAINING FOREIGN EXCHANGE : OBTAINING FOREIGN EXCHANGE After the process is indenting is over then the importer has to procure the Foreign Exchange (FE) from the Exchange Control Department of the Reserve Bank of India. The importer has to produce the import license and the prescribed forms for securing the foreign exchange which is needed to pay for the import of goods. The RBI releases the FE based on the strength of the application, availability of FE and the FE policy of India. ARRANGEMENT OF PAYMENT : ARRANGEMENT OF PAYMENT The importer has to make arrangement for paying for imports after obtaining the FE. Documents required for the payment process Letter of Credit (L/C) - This is the center of international transaction. Importers instead of paying for the imports before taking delivery of goods, request their bankers to issue a letter of credit that indicates that the banker will pay to the exporter as long as the goods are shipped as per the specification meeting the conditions and instruction already documented. Bill of exchange /Draft: Bill of exchange or draft is an order written by an exporter instructing an importer or his/ her agent to pay a specified amount of money at a specified time. Bill of Lading This is the third most important instrument financing international trade. ARRANGEMENT OF PAYMENT.2 : ARRANGEMENT OF PAYMENT.2 Documentary bill Alternatively, he may request the exporter to forward the documentary bill through his banker, which would be delivered to him either against its payment. Thus, the documents may be received by the importer either through D/A (documents against acceptance of bill of exchange) or D/P (documents against payments) the importers bank after receiving the documents from the exporter bank, hands the importer only when the latter pays the amount of the bill on maturity. Normally, indent houses help the importer if he fails to pay the amount on maturity date of the bill. Slide 24: Thank You