Professional Documents
Culture Documents
e) Packing list.
f) Insurance policy or certificate.
Step III
If the exporter is satisfied with various aspects referred to above, a formal confirmation of the
export order should be sent to the buyer.
Step IV
If the exporter is not completely satisfied with the terms of the export order, clarifications should
be sought from the buyer before its confirmation. The clarifications could be in terms of quantity,
delivery schedule, terms of payment etc. The delivery period should be specific and not vague
like immediate delivery or as soon as possible. Similarly, payment should be
made in the country of exporter even if a foreign bank is involved. The exporter may specify a
reasonable time for clarifications to the buyer. The confirmation of export order should be sent
after receiving clarifications sought from the buyer. Once all the clarifications have been received
to the satisfaction of the exporter, a letter of confirmation must be sent. It is desirable to reiterate
terms of contract in the letter of confirmation.
Step V
The exporter should make reservation of cargo space for air freighting or sea freighting of the
export consignment as per the delivery period commitments made to the buyer. The services of
clearing and forwarding agents can be obtained for this purpose. A note on the services of
clearing and forwarding agents is given at the end of this section.
Step VI
In case the exporter himself is a manufacturer of the item to be exported, a delivery note (in
duplicate) containing details of the product, specifications, quantity etc. should be sent to the
Production Department. It may be a good idea not to disclose the exact date of shipment to
Production Department and an advanced date may be communicated. Information on packaging
and packing should also be provided to the Packing Department.
Step VII
In case the exporter needs to procure from outside all or part of the quantity to be exported,
purchase order with complete specifications etc. should be placed with the supplier(s). It would be
a good idea to discuss special requirements and production schedule with the supplier(s).
Step VIII
The exporter should apply for the grant of export authorization if the item is mentioned as
Restricted in the ITC (H.S.) Classification of Import-Export items. The application is to be made in
the prescribed Form to the Director General of Foreign Trade for a license. A copy of the confirmed
export order should be enclosed.
Q2. What do you understand by SEZ? Explain the special features of SEZ units.
(Meaning-4 marks, Features-6 marks) 10 marks
Answer.
Special Economic Zones (SEZ)
Special Economic Zones are duty free enclaves which are set up separately from the Domestic
Tariff Area (DTA) for the purpose of production of goods at low cost, meant for export, provided
with facilities like infrastructure, machinery, customs, expertise, etc. Goods and services coming
from DTA to SEZ area are treated as exports and goods and services coming from SEZ area to DTA
are considered imports. In view of the growing importance and great potentials for exports an Act
called SEZ Act, 2005 was enacted in India. The policy relating to Special Economic Zones is
governed by SEZ Act, 2005 and the Rules framed there under.
The special features of SEZ
i) SEZ units may import/procure from DTA units without payment of duty all types of inputs and
capital goods.
ii) Gems and Jewellery units of SEZ may source gold/silver/platinum through nominated agencies.
iii) SEZ units may also procure goods from bonded warehouses in the DTA and International
Exhibitions held in India, without payment of duty.
iv) SEZ units may procure without payment of duty and services from DTA units, for setting up,
operation and maintenance of units in the SEZ.
v) SEZ units may import/procure, from DTA, without payment of duty, all types of goods for
creating a central facility for use by units in SEZ.
vi) SEZ units may also source capital goods from a domestic or foreign leasing company, without
payment of duty.
Approvals, Monitoring and Management
Application for setting up a unit in SEZ except services sector shall be approved or rejected by the
Units Approval Committee. In case the SEZ unit requires an industrial license, the approval will be
granted by the Development Commission after clearance of proposal by SEZ Board of Approval
and Department of Industrial Policy and Promotion. The performance of SEZ units shall be
monitored by the Unit Approval Committee as per guidelines. SEZ units will be under the
administrative control of the Development Commissioner. All activities of such units, unless
otherwise specified, shall be through self-certification procedure.
Exit from SEZ Scheme
A SEZ unit may exit from the SEZ scheme with the approval of the Development Commissioner.
The existing units shall be subject to payment of applicable customs and excise duties on the
imported and indigenous goods and raw materials and finished goods in stock. In addition, if the
unit has not achieved Net Foreign Exchange Earning (NFE), the exit shall also be subject to
penalty. SEZ units may also be allowed exit, on payment of duty, under the EPCG scheme.
Net Foreign Exchange Earning (NFE)
SEZ units shall be Net Foreign Exchange earner. NFE shall be calculated cumulatively for a period
of five years from the date of commencement of production.
Inter-unit Transfers
i) SE units may transfer manufactured goods including partly processed, semi-finished goods and
services from one SEZ unit to another EOU/SEZ/EHTP/STP/BTP unit.
ii) Goods imported or procured by a SEZ unit may be transferred or given on loan to another
EOU/SEZ/EHTP/STP/BTP unit.
iii) Capital goods imported or procured by a SEZ unit may be transferred or given on loan to
another EOU/SEZ/EHTP/STP/BTP unit with prior permission of Development Commissioner and
Customs authorities concerned.
The SEZ units shall have to maintain proper records of all such transfers.
Q3. What is Bill of entry and what are its features? List the documents to be filed with
B/B.
(Meaning-3 marks, Feature-4 marks, Listing-3 marks)10 marks
Answer.
Bill of Entry
The documents involved in Import trade in India are discussed below: There are three types of Bill
of Entry:
White Bill of Entry or Home Consumption B/E.
Yellow Bill of Entry or Warehouse B/E.
Green Bill of Entry or Ex-bond B/E.
B/E must be presented to the customs for Noting in the Import Deptt. Of Customs House
after the item-wise document called Import General Manifest (IGM) is filed by the steamer
agent. The facility to file B/E prior to Import Manifest 30 days before the arrival of vessel is
permitted Under Section 46(3) of Customs Act, but the custom department applies prior
entry stamp on the B/E.
Documents to be filed with B/E
Invoice.
Packing list.
Insurance policy.
Original Bill of Lading or Airway Bill (Delivery Order)
Copy of L/C or contract.
Certificate of Origin.
Product Details.
Custom Copy of Import Authorization or Customs Clearance Permit in Original.
Features of B/E:
The salient features of Bill of Entry are as follows:
Assessable Value: The value is arrived at as provided under the Customs Act, insurance and
freight (if not included in the invoice), loading and local agency commission, miscellaneous
charge and landing charges. The rate of exchange (conversion) should be the one applicable for
the currency fixed by the customs.
Codes: For statistical purposes the codes should be mentioned for following information: Port,
Custom House Agent (CHA), and IE Code, Country of Origin / Consignment, Unit Code and
Currency Code.
Description of Goods: The information about the goods must include no. & marks of packages,
weight, volume etc. and total no. of packages. The description of goods should be product wise
for the assessment of duties.
Origin: The origin of goods is given to assess the value of duty as there may be duty concession
for some countries etc. or antidumping duties may be levied on import of goods of certain origin.
Vessel Details: The shipment details like B/L No., Date, Port of Shipment, Vessel name, and
Rotation No. and line No. are to be given.
Q4. Explain the meaning of exchange risk. What can be done to mitigate this risk?
Discuss.
(Meaning-3 marks, Protection against exchange risk-7 marks) 10 marks
Answer.
Exchange Risk Meaning
Any person who has dealings in foreign currency is exposed to exchange risks. For an exporter the
exchange risk is that the foreign currency in which
the transaction is conducted may depreciate in future and the exporter may realize less than the
expected in local currency. Similarly, an importer also faces exchange risk. The foreign currency in
which the transaction is
designated, may appreciate in terms of local currency resulting in payment of higher amount in
local currency than what was contemplated originally.
The above risk arises because of the fact that exchange rate is constantly changing and no one
can be certain about the exchange rate that will prevail on the future date. This uncertainty
about the exchange rate that would prevail on a future date is exchange risk.
Protection against exchange risk
Forward Contracts:
Forward exchange contract is used by exporters and importers to get adequate protection against
exchange risk. In a forward exchange contract a banker and a customer or two banks enter into a
contract to buy or sell a fixed amount of foreign currency on a specified future date at a
predetermined rate of exchange.
Under forward contracts, date of delivery will be as under:
i) For export documents negotiated, purchased or discounted; date of negotiation, purchase or
discount.
ii) In case of export documents sent on collection; date of payment of Indian Rupees to the
exporter.
Packing credit finance, being purpose oriented finance, is granted (whether to exporters or
manufacturers)
for
the
specific
purpose
of
procuring
raw
materials/purchasing/manufacturing/processing/transporting/warehousing/
packing and shipping the goods.
Form of Finance
Packing Credit as normally referred to, means a funded advance. However, non-funded facilities
can also be granted as may be required, to enable the exporters to manufacture and export the
goods. Funded advances bear different nomenclatures, in different banks such as packing credit
loan or shipping loan etc.
Quantum of Finance
There is no fixed formula for determining the quantum of finance to be granted to an exporter,
against a specific L/C or an export order. The only guiding principle to be applied is the concept of
"NEED BASED" finance. Banks can determine the percentage of margin, depending on the nature
of order, commodity capability of exporter, to bring in the requisite contribution etc. keeping in
view various relaxations suggested by RBI for export finance. Normally, the pre-shipment advance
granted to an exporter should not exceed the FOB value of the goods or domestic market value of
the goods, whichever is lower.
Period of Finance
Pre-shipment finance, being working capital finance, is basically a short-term finance. Maximum
period for which pre-shipment finance can be extended at concessive rates is determined by RBI.
At present, banks can allow credit at concessional rates of interest up to 270 days.
Rates of Interest
It is obligatory on the part of the banks to charge interest on export credit, at the concessional
rates stipulated by RBI. Rates of interest presently in force,