EXIM Policies Procedures

Exim Policies & Procedures

Select The Blank

Question
Position Bias is a possibility in ________Questions.
Correct Answer
Multiple choice

Your Answer
Multiple choice
True/False
Question
Data published by the audit bureau of circulation is an external published data.
Correct Answer
True
Your Answer
True
Multiple Choice Single Answer

Question
In cluster analysis linkage is based on farthest neighbor, which is known as :Correct Answer
Complete linkage
Your Answer
Complete linkage
Select The Blank

Question
Finding out the number of vehicles at a given junction is a ________ method.
Correct Answer
Direct Observation
Your Answer
Direct Observation
Select The Blank

Question
The ________ objectives are derived from research objectives.
Correct Answer
Data
Your Answer
Data
Multiple Choice Multiple Answer

Question
Main features of Technical Report are :Correct Answer
Minute details of planning data collection , Analysis , Interpretation
Your Answer

Question
For logical concrete and helpful interpretation which things are the most
important?
Correct Answer Interpretation should be honest and undistorted , Infrequent answers should
not go unnoticed , Objective and fundamental principal should always be dealt
first
Your Answer
Interpretation should be honest and undistorted , Infrequent answers should
not go unnoticed , Objective and fundamental principal should always be dealt
first
True/False
Question
HTML formats uses graphics, grids, sequencing and skip patterns.
Correct Answer
True
Your Answer
True
Select The Blank

Question
Convenience Sampling is used for ________.
Correct Answer
Exploratory research
Your Answer

Question
A list of population members used to obtain a sample is known as the:Correct Answer
Sampling frame
Your Answer
Sampling frame
True/False
Question
A Show card is the identity of the researcher conducting the interview
Correct Answer
False
Your Answer
False

Question
Over the counter drugs (OTC) are those :
Correct Answer
Which consumers buy on their own without doctor's prescription
Your Answer

Question
The responses for the 'education' of a respondent can include
Correct Answer
Not disclosed , Illiterate , Literate without formal schooling
Your Answer

Question
What is coding?
Correct Answer
Assigning a code number to each possible response to the question
Your Answer

Question
Which publications are used for research on Chemical Industry?
Correct Answer
Your Answer
True/False
Question
Indian Chemical Directory , Chemical Industry News , Chemical & Petro

Chemicals Journal
Chemicals Journal
Correct Answer
Getting the response for television viewership from a group of respondents

over the period of six months is an example of consumer panel survey.
True
Your Answer
True

Question
Identify the Close ended question type :Correct Answer
Scales
Your Answer
Scales

Question
Scale Intervals can be used for
Correct Answer
Age
Your Answer
Age
Match The Following

Question
Correct Answer
Your Answer
Executive Report
Report for decision maker
Pictographs
Graphical depiction
Graphical depiction
Histograph
Vertical bar chart
Vertical bar chart
Report for publication
Report for general public

Question
A multivariate technique which attempts to ascertain the relation between a
given variable & a no of other variables is known as :Correct Answer Regression analysis
Your Answer
Conjoint analysis
True/False
Question
Reports printed by the professional bodies are external unpublished data.
Correct Answer
False

Your Answer
False

Question
Stimulated Test Marketing can be used in :Correct Answer
Your Answer
Product Concept testing , Pilot study before National launch , Packaging

Appropriateness
Appropriateness

Question
What are the various subparts of research objectives?
Correct Answer
Research Questions , Hypothesis Development , Research Boundaries
Your Answer
Hypothesis Development , Research Boundaries , Timeframe

Question
Cluster analysis is used in :Correct Answer
Your Answer
Market segment , Understanding buyer behavior , Selecting test markets for

various marketing strategies
True/False
Question
Range is the simplest measure of calculation of mean.
Correct Answer
False
Your Answer
False

Question
The types of report are
Correct Answer
Technical report , Publication Report , Executive Report
Your Answer

Question
Barometric methods of sales forecasting are :Correct Answer
Historical analogy , Product like cycle concept , Survey methods
Your Answer

Question
Spontaneous response from respondent is possible in :-

Correct Answer
Free response questions , Probing questions , Unstructured questions
Your Answer
True/False
Question
Correct Answer
The popularity of Likert scale is due to its ease of construction and

administration.
True
Your Answer
True

Question
The preference of Sunsilk Shampoo to Clinic Plus shampoo can be judged
with :Correct Answer Ordinal Scale
Your Answer
Ordinal Scale

Question
Adhoc methods for determining Sample size are :Correct Answer
Rules of thumb , Budget constraint , Comparable studies
Your Answer
Select The Blank

Question
The significance of Market Research is increasing due to shift from ________
competition.
Correct Answer Price to non price
Your Answer
Price to non price
Select The Blank

Question
Searching & Developing Alternatives is done in ________.
Correct Answer
Exploratory Research
Your Answer
Preliminary Research
True/False
Question
Correct Answer
The over counter drugs are those which the consumers buy their own with
Doctors advice
False
Your Answer
False
Select The Blank

Question
Correct Answer
Kurtosis is measure of ________ or flatness of curve defined by the frequency

distribution.
Relative peakedness
Your Answer
Relative peakedness
Select The Blank

Question
Complete________ of respondent and secrecy of data should be maintained.
Correct Answer
confidentiality
Your Answer
confidentiality

Question
In Market Research, Research Director must oversees :Correct Answer
Execution of research at each stage
Your Answer

Question
An ideal Questionnaire :Correct Answer
Is short and concise , Has specific questions , Has uncluttered layout
Your Answer
True/False
Question
Correct Answer
Sales quotas are set before estimation of market potential and sales
territories.
False
Your Answer
False
True/False
Question
Ratio scale does not have a zero point.
Correct Answer
False
Your Answer
False
Select The Blank

Question
In two mode, two way data of MDS, the products can be compared on the
basis of ________ .
Correct Answer Objective and perceived attributes
Your Answer
Objective and perceived attributes

Question
The impact of promotional slogans on the consumers can be studied with
Correct Answer
Association technique
Your Answer
Select The Blank

Question
________ is the determinant of how people act.
Correct Answer
Knowledge
Your Answer
Knowledge
Select The Blank

Question
The assumption that the respondents externalization is the process of his
internalization is observed in ________.
Correct Answer Thematic Apperception Test
Your Answer
Thematic Apperception Test

Question
Which is the institution specialising in Pharma Research?
Correct Answer
Central Drug Research Institute, Lucknow
Your Answer
Pharmaceutical Research Institute
Match The Following

Question
Correct Answer
Your Answer
Bharat Leather Corpn. Ltd.
Agra
Agra
Cashew Corporation Of India

Ltd.
Cement Corporation Of India
Ltd.
Automotive Research
Association Of India
Cochin
Cochin
New Delhi
New Delhi
Pune
Pune

Question
A multivariate Statistical technique that uses a class of procedures for data
reduction & summarization is known as :Correct Answer Factor analysis
Your Answer
Select The Blank
Factor analysis

Question
Position Bias is a possibility in ________Questions.
Correct Answer Multiple choice

Your Answer
Multiple choice
True/False
Question
Data published by the audit bureau of circulation is an external published data.
Correct Answer True

Your Answer
True

Question
In cluster analysis linkage is based on farthest neighbor, which is known as :Correct Answer Complete linkage
Your Answer
Complete linkage
Select The Blank

Question
Finding out the number of vehicles at a given junction is a ________ method.
Correct Answer Direct Observation
Your Answer
Direct Observation
Select The Blank

Question
The ________ objectives are derived from research objectives.
Correct Answer Data
Your Answer
Data

Question
Main features of Technical Report are :Correct Answer Minute details of planning data collection , Analysis , Interpretation
Your Answer

Question
For logical concrete and helpful interpretation which things are the most
important?
Correct Answer Interpretation should be honest and undistorted , Infrequent answers should not
go unnoticed , Objective and fundamental principal should always be dealt first
Your Answer
Interpretation should be honest and undistorted , Infrequent answers should not
go unnoticed , Objective and fundamental principal should always be dealt first
True/False

Question
HTML formats uses graphics, grids, sequencing and skip patterns.
Correct Answer True

Your Answer
True
Select The Blank

Question
Convenience Sampling is used for ________.
Correct Answer Exploratory research
Your Answer

Question
A list of population members used to obtain a sample is known as the:Correct Answer Sampling frame
Your Answer
Sampling frame
True/False
Question
A Show card is the identity of the researcher conducting the interview
Correct Answer False

Your Answer
False

Question
Over the counter drugs (OTC) are those :
Correct Answer Which consumers buy on their own without doctor's prescription
Your Answer

Question
The responses for the 'education' of a respondent can include
Correct Answer Not disclosed , Illiterate , Literate without formal schooling
Your Answer

Question
What is coding?
Correct Answer Assigning a code number to each possible response to the question
Your Answer

Question
Which publications are used for research on Chemical Industry?
Correct Answer Indian Chemical Directory , Chemical Industry News , Chemical & Petro
Chemicals Journal
Your Answer
Chemicals Journal
True/False
Question
Getting the response for television viewership from a group of respondents

over the period of six months is an example of consumer panel survey.
Correct Answer True
Your Answer
True

Question
Identify the Close ended question type :Correct Answer Scales
Your Answer
Scales

Question
Scale Intervals can be used for
Correct Answer Age
Your Answer
Age
Match The Following

Question
Correct Answer
Your Answer
Executive Report
Pictographs
Graphical depiction
Graphical depiction
Histograph
Vertical bar chart
Vertical bar chart
Report for publication

Question
A multivariate technique which attempts to ascertain the relation between a
given variable & a no of other variables is known as :Correct Answer Regression analysis
Your Answer
Conjoint analysis
True/False
Question
Reports printed by the professional bodies are external unpublished data.

Your Answer
False

Question
Stimulated Test Marketing can be used in :Correct Answer Product Concept testing , Pilot study before National launch , Packaging
Appropriateness
Your Answer
Appropriateness
Question
What are the various subparts of research objectives?
Correct Answer Research Questions , Hypothesis Development , Research Boundaries
Your Answer
Hypothesis Development , Research Boundaries , Timeframe

Question
Cluster analysis is used in :Correct Answer Market segment , Understanding buyer behavior , Selecting test markets for
Your Answer
True/False
Question
Range is the simplest measure of calculation of mean.

Your Answer
False

Question
The types of report are
Correct Answer Technical report , Publication Report , Executive Report
Your Answer

Question
Barometric methods of sales forecasting are :Correct Answer Historical analogy , Product like cycle concept , Survey methods
Your Answer

Question
Spontaneous response from respondent is possible in :-

Correct Answer Free response questions , Probing questions , Unstructured questions
Your Answer
True/False
Question
The popularity of Likert scale is due to its ease of construction and

administration.
Correct Answer True
Your Answer
True

Question
The preference of Sunsilk Shampoo to Clinic Plus shampoo can be judged with
:Correct Answer Ordinal Scale
Your Answer
Ordinal Scale

Question
Adhoc methods for determining Sample size are :Correct Answer Rules of thumb , Budget constraint , Comparable studies
Your Answer
Select The Blank

Question
The significance of Market Research is increasing due to shift from ________
competition.
Correct Answer Price to non price
Your Answer
Price to non price
Select The Blank

Question
Searching & Developing Alternatives is done in ________.
Correct Answer Exploratory Research
Your Answer
Preliminary Research
True/False
Question
The over counter drugs are those which the consumers buy their own with
Doctors advice
Your Answer
False
Select The Blank

Question
Kurtosis is measure of ________ or flatness of curve defined by the frequency

distribution.
Correct Answer Relative peakedness
Your Answer
Relative peakedness
Select The Blank

Question
Complete________ of respondent and secrecy of data should be maintained.
Correct Answer confidentiality
Your Answer
confidentiality

Question
In Market Research, Research Director must oversees :Correct Answer Execution of research at each stage
Your Answer

Question
An ideal Questionnaire :Correct Answer Is short and concise , Has specific questions , Has uncluttered layout
Your Answer
True/False
Question
Sales quotas are set before estimation of market potential and sales territories.

Your Answer
False
True/False
Question
Ratio scale does not have a zero point.

Your Answer
False
Select The Blank

Question
In two mode, two way data of MDS, the products can be compared on the basis
of ________ .
Correct Answer Objective and perceived attributes
Your Answer
Objective and perceived attributes

Question
The impact of promotional slogans on the consumers can be studied with
Correct Answer Association technique
Your Answer
Select The Blank

Question
________ is the determinant of how people act.
Correct Answer Knowledge
Your Answer
Knowledge
Select The Blank

Question
The assumption that the respondents externalization is the process of his
internalization is observed in ________.
Correct Answer Thematic Apperception Test
Your Answer
Thematic Apperception Test

Question
Which is the institution specialising in Pharma Research?
Correct Answer Central Drug Research Institute, Lucknow
Your Answer
Pharmaceutical Research Institute
Match The Following

Question
Correct Answer
Your Answer
Bharat Leather Corpn. Ltd.
Agra
Agra
Cashew Corporation Of India

Ltd.
Cement Corporation Of India
Ltd.
Automotive Research
Association Of India
Cochin
Cochin
New Delhi
New Delhi
Pune
Pune

Question
A multivariate Statistical technique that uses a class of procedures for data
reduction & summarization is known as :Correct Answer Factor analysis
Your Answer
True/False
Factor analysis

Question
An EPCG License holder may source capital goods from domestic leasing
company.
Correct Answer True
Your Answer
True
True/False
Question
Third party export also counted towards export obligation provided address of
manufacturer is mentioned in shipping bill.
Correct Answer True
Your Answer
False

Question
Advance License obtained against supplies made to EOU/EHTP/ STP etc will
be entitled for exemption from :Correct Answer Anti Dumping and Safeguard duty
Your Answer
Anti Dumping and Safeguard duty
Select The Blank

Question
Industrial cluster town of Tirupur is famous for production of ________.
Correct Answer Hosiery items
Your Answer
Hosiery items
Match The Following

Question
Correct Answer
Your Answer
CIF
Cost Insurance Freight
100% EOU
100% Export Oriented Units
SEZ
Special Economic Zone
EPCG
Export Promotion Capital

Goods
Export Promotion Capital Goods

Question
New or Second Hand Capital Goods are allowed for import or export without
license, provided
Correct Answer Bank Guarantee is executed , Items freely exportable under ITC(HS) ,
Transactions being done by Registered Exporter
Your Answer
Bank Guarantee is executed , Items freely exportable under ITC(HS) ,
Transactions being done by Registered Exporter
Question
Advance License under Deemed exports category can be issued to supplies
made to:Correct Answer Aid programme under United Nations

Your Answer
Aid programme under United Nations
True/False
Question
Panipat has become Industrial cluster town because of manufacturing of

Curtain Material
Your Answer
False

Question
Deemed exports is beneficial to Indian buyers because :Correct Answer It reduces costs in supply chain management , After sales service is easier ,
Saves foreign exchange
Your Answer
It reduces costs in supply chain management , After sales service is easier ,
Saves foreign exchange
Question
Authorised Air Ports for export consignments are :Correct Answer Coimbatore , Srinagar , Varanasi
Your Answer
Coimbatore , Srinagar , Varanasi

Question
Under Duty Exemption Scheme following items are allowed for import without
payment of customs duty against firm export obligations :Correct Answer Raw Materials , Components , Packing Material
Your Answer
Raw Materials , Packing Material , Technical expertise

Question
Government gives concessions to Export Oriented Units to enable them to
meet international competition in terms of :Correct Answer Pricing , Quality , Delivery
Your Answer
Pricing , Quality , Delivery
Select The Blank

Question
Containers meant for packing of goods for exports are allowed for import or
export________.
Correct Answer Without any license or permission
Your Answer
Without extra charges

Question
Export promotion units may be allowed to import following items duty free :-

Correct Answer Capital equipment , Raw Material , Spares
Your Answer
Capital equipment , Raw Material , Spares
True/False
Question
Dappar is the entitled ICD for export consignments.
Correct Answer True

Your Answer
True
True/False
Question
Applications received electronically will be cleared within 24 hours
Correct Answer True

Your Answer
True
Select The Blank

Question
For supplies of goods to multilateral agencies legal agreement provide for
tender evaluation without including ________ duties.
Correct Answer Customs
Your Answer
Excise
True/False
Question
Deemed export means supply made from India to Indian buyers against their
import entitlements.
Correct Answer True
Your Answer
True
True/False
Question
Export Promotion Councils are autonomous bodies and regulate their own
affairs
Correct Answer True
Your Answer
True

Question
Export Promotion councils will utilise financial assistance for
Correct Answer Marketing studies , Common warehousing facilities , Transport subsidies for
agriculture products
Your Answer
Marketing studies , Common warehousing facilities , Foreign visits by office
bearers
Select The Blank

Question
Whenever any duty free import is allowed, the importer shall execute a
________with the custom authorities
Correct Answer Bank Guarantee
Your Answer
Bank Guarantee

Question
DEPB means :Correct Answer Credit limit upto which the exporter do not have to pay Custom duty on import
Your Answer
Credit limit upto which the exporter do not have to pay Custom duty on import
Select The Blank

Question
In case of sub contractors whose name appear in the ________ contract
should make supplies to Main Contractor.
Correct Answer Main
Your Answer
Main

Question
Non fulfillment of export obligation will lead to :Correct Answer Customs duty + 15% Interest pa
Your Answer
Customs duty + 15% Interest pa
Select The Blank

Question
The exporter shall furnish ________ Returns to the Registering Authorities
Correct Answer Quarterly
Your Answer
Quarterly
Select The Blank

Question
All activities of Export Promotional units are to be undertaken in ________.
Correct Answer Bonded area
Your Answer
Bonded area
Select The Blank

Question
Latest EXIM policy is valid for the period of ________.
Correct Answer 2002-2007
Your Answer
2004-2009

Question
Entitled LCS for export consignments are :Correct Answer Raxaul
Your Answer
Raxaul

Question
FTWZ is entitled for :Correct Answer Free Foreign Exchange Transactions
Your Answer
Free Foreign Exchange Transactions

Question
Deemed export's benefits are :Correct Answer Advance License , Deemed export draw back , Refund of Terminal Export Duty
Your Answer
Advance License , Deemed export draw back , Refund of Terminal Export Duty
Select The Blank

Question
Authorised ICD for export shipment is________.
Correct Answer Pitampur (Indore)
Your Answer
Pitampur (Indore)

Question
EOU production can be sub contracted to DTA provided :Correct Answer Final products are returned to EOU for exports
Your Answer
Final products are returned to EOU for exports
Select The Blank

Question
Foreign Trade Policy aims to act as an effective instrument of economic growth
by giving thrust to ________.
Correct Answer Employment Generation
Your Answer
Employment Generation
True/False
Question
DGFT may issue advance licenses on self declaration basis for import of horn,
hoof and other organ of animals.
Your Answer
False

Question
Imported items may be exported in the same or substantially in the same form
without specific permission, provided
Correct Answer They are imported into customs bonded warehouse , They are freely
exportable as per ITC(HS) , Payment in freely convertible currency
Your Answer
They are imported into customs bonded warehouse , They are freely
exportable as per ITC(HS) , Payment in freely convertible currency
Match The Following
Question
SIDA
FERA
IBRD
ADB
Correct Answer
Your Answer
Swedish International
Development Agency
Foreign Exchange Regulation
Act
International Bank for
Reconstruction and
Development
Asian Development Bank
Swedish International
Development Agency
Foreign Exchange Regulation
Act
International Bank for
Reconstruction and
Development
Asian Development Bank

Question
Supply of goods to nuclear power projects is termed as deemed exports
when :Correct Answer Projects approved through competitive bidding
Your Answer
Projects approved through competitive bidding

Question
FTWZ is eligible for :Correct Answer Income Tax exemption , Service Tax exemption , Customs duty exemption
Your Answer
Income Tax exemption , Service Tax exemption , Customs duty exemption
Select The Blank

Question
Authorised Air Port for export consignments is________.
Correct Answer Nagpur
Your Answer
Nagpur

Question
Export Promotion Zones were created in order to :Correct Answer Support Manufacturing Sector
Your Answer
Support Manufacturing Sector

Question
Documents required for Application to be made for supplies to Nuclear Power
projects are :Correct Answer Application form in Appx 12-B , Project Authority Certificate Appx 12-A , Invoice
certified by Project Authority
Your Answer
Application form in Appx 12-B , Project Authority Certificate Appx 12-A , Invoice
certified by Project Authority
Question
Special Agricultural Produce Scheme' was devised to promote
Correct Answer Export of Fruits, Vegetables and flowers
Your Answer
Export of Fruits, Vegetables and flowers

Question
IEC code has perpetual validity so long as there is no change in Correct Answer Constitution or management of the applicant
Your Answer
Constitution or management of the applicant
True/False
Question
SION is fixed for frequently exported goods.
Correct Answer True

Your Answer
True
True/False
Question
Sub Contracting is allowed provided products are dispatched directly form EOU
premises.
Correct Answer True
Your Answer
True

Question
Adverse factor which is hampering exports is :
Correct Answer Lack of value added processing
Your Answer
Lack of value added processing

Question
Under Market Access Initiatives (MAI) Central Government extends assistance
to
Correct Answer Export Promotion councils , Industry and Trade Associations , Agencies of
State Governments
Your Answer
Export Promotion councils , Industry and Trade Associations , Agencies of
State Governments

Question
Any person applying for any License of benefit or concession under the Foreign Trade Policy will
be required to furnish :
Correct Answer
Registration cum Membership Certificate (RCMC)
Your Answer
Registration cum Membership Certificate (RCMC)
True/False
Question
In case of Free of cost imported raw material, value addition would be computed by adding
Notional Value of free of cost material to both CIF value of imports and FOB value of exports.
Correct Answer
True
Your Answer
False
Select The Blank
Question
Authorised Air Port for export consignments is________.
Correct Answer
Nagpur
Your Answer
Ranchi
Select The Blank
Question
Market Development Assistance is given to Exporters having annual Export turnover upto
Rs.________.
Correct Answer
5 Crs
Your Answer
5 Crs
Match The Following
Question
Correct Answer
Your Answer
SEZ
Special Economic Zones
BOA
Board of Approval
Board of Administrators
EPZ
Export Processing Zones
Exempted Processing Zones
OBU
Offshore Banking Units

Question
License holder shall furnish following details of material being imported :Correct Answer
Specifications , Technical Characteristics , Pricing
Your Answer
Specifications , Technical Characteristics , Quality control report of country of origin
Question
Special Economic Zones were created to :Correct Answer
Boost manufacturing , Augment exports , Generate employment
Your Answer
Boost manufacturing , Augment exports , Generate employment
True/False
Question
Deemed export benefits are sanctioned by DGFT without claims.
Correct Answer
False
Your Answer
False
True/False
Question
Private sector cannot develop Special Economic Zones.
Correct Answer
False
Your Answer
True
Question
Under Advance License goods imported may be used in any of the units of :Correct Answer
License Holder , Jobber , Supporting manufacturer
Your Answer
License Holder , Jobber
Question
The major functions of Export Promotion Council (EPC) are
Correct Answer
Provide commercial information , Organise trade fairs, exhibitions , Promote interaction between
trade and Government
Your Answer
Provide commercial information , Organise trade fairs, exhibitions , Bail out exporters in case of
losses
Question
Documents required for supplies made against Advance License are :Correct Answer
Xerox copy of Purchase order /Contract
Your Answer
Bank Guarantee

Question
For EOU units Disposal of used packing material will be allowed on payment of duty on :Correct Answer
Transaction Value
Your Answer
CIF value
Question
Import of Capital Goods is allowed for :Correct Answer
Jigs , Fixtures , Dies
Your Answer
Jigs , Fixtures , Dies
Question
Major function of Export Promotion Councils is :
Correct Answer
Offer Professional advise to exporters
Your Answer
Offer Professional advise to exporters
Question
Sale by EOU to SEZ units is treated as :Correct Answer
Physical exports
Your Answer
Deemed exports
Question
DGFT may issue Advanced License, where SION does not exists, based on self declaration,
based on :Correct Answer
Undertaking by the applicant , Final adjustments as per adhoc SION , Adhoc norms fixed
category
Your Answer
Final adjustments as per adhoc SION , Adhoc norms fixed category , Track record of exporter
True/False
Question
Foreign exchange earning by way of Equity Participation and donations will not be entitled for
duty credit.
Correct Answer
True
Your Answer
False
Question
FTWZ is entitled for :Correct Answer

Free Foreign Exchange Transactions
Your Answer
Transaction only with advance payments
Question
Objective of Foreign Trade Policy is to:
Correct Answer
Double our Share in Global Market within next 5 years
Your Answer
Double our Share in Global Market within next 5 years
Question
Under International Trade Agreements India is required to :Correct Answer
Eliminate Quantitative restrictions on imports
Your Answer
Eliminate Quantitative restrictions on imports
Select The Blank
Question
Foreign Trade Policy aims to act as an effective instrument of economic growth by giving thrust to
________.
Correct Answer
Employment Generation
Your Answer
Increase trade
Question
In order to obviate need for litigation , Foreign Trade Policy lays down :
Correct Answer
Grievance Redressal Mechanism
Your Answer
Grievance Redressal Mechanism
Select The Blank
Question
Four Star Export House should have minimum export performance of Rs.________.
Correct Answer
1500 Crs
Your Answer
1500 Crs
Question
Granite sector EOU may supply capital goods inputs to :Correct Answer
Farms/Fields/Quarries directly
Your Answer
Manufacturing bases only
Select The Blank
Question
FTWZ is expected to address the issues of ________.

Correct Answer
Global Trading network
Your Answer
Star Trading Houses
Question
Fulfillment of Export obligation for licenses with duty saved of Rs.100 Corers or more is valid only
if :Correct Answer
It is 8 times the duty saved on capital goods , It is fulfilled within 12 years for issuance of license ,
Initial 5% custom duty has been paid
Your Answer
It is 8 times the duty saved on capital goods , It is fulfilled within 12 years for issuance of license ,
Initial 5% custom duty has been paid
Select The Blank
Question
EXIM Licensing is a________ function of Board of Trade under Foreign Trade Policy
Correct Answer
Regulatory
Your Answer
Promotional
Select The Blank
Question
Special Economic Zones will located in areas which will be technically treated as ________.
Correct Answer
Foreign Territory for applicability of domestic legislations
Your Answer
Financially independent
True/False
Question
All imported goods shall be subject to domestic laws, rules, orders, regulations.
Correct Answer
True
Your Answer
True
True/False
Question
An EPCG License holder may source capital goods from domestic leasing company.
Correct Answer
True
Your Answer
True
Question
Deemed exports is beneficial to Indian buyers because :Correct Answer
It reduces costs in supply chain management , After sales service is easier , Saves foreign
exchange
Your Answer
It reduces costs in supply chain management , Saves foreign exchange
True/False
Question
In Special Economic Zones Domestic Laws will not be applicable.
Correct Answer
True
Your Answer
False
Question
Export promotion units may be engaged in :Correct Answer
Manufacturing activities , Provision of Services , Trading activities
Your Answer
Provision of Services , Trading activities , Consultancy services
Question
Minimum investment required for FTWZ is :Correct Answer
100 Crorers
Your Answer
125 Croers
Question
Department of commerce allots funds to the states on following criteria:
Correct Answer
Growth in exports
Your Answer
Domestic market conditions
Select The Blank
Question
Latest EXIM policy is valid for the period of ________.
Correct Answer
2002-2007
Your Answer
2002-2007
True/False
Question
Gopalpur is the entitled sea port for export consignments.
Correct Answer
False
Your Answer
True
Select The Blank
Question
Under International Trade Agreements India is required to eliminate________ on our imports.
Correct Answer
Quantitative restrictions
Your Answer
Red tape in the transaction processing
Select The Blank

Question
Industrial cluster town of Tirupur is famous for production of ________.
Correct Answer
Hosiery items
Your Answer
Fire Crackers
Select The Blank
Question
The exporter shall furnish ________ Returns to the Registering Authorities
Correct Answer
Quarterly
Your Answer
Quarterly
True/False
Question
Sub Contracting is allowed provided products are dispatched directly form EOU premises.
Correct Answer
True
Your Answer
False
True/False
Question
Import of second hand (maximum 3 years old) capital goods are allowed.
Correct Answer
False
Your Answer
True
Match The Following
Question
Correct Answer
Your Answer
CIF
100% EOU
SEZ
EPCG
Export Promotion Credit Guarantee
Question
Under Market Development Assistance Government provides
Correct Answer
Expenses for trade fairs abroad , Expenses for buyer /sellers meet , Foreign travel
Your Answer

Expenses for trade fairs abroad , Expenses for buyer /sellers meet
Question
Benefits to Star Export Houses are
Correct Answer
Custom clearances on Self Declaration basis
Your Answer
Custom clearances on Self Declaration basis
Question
India could achieve import substitution because :Correct Answer
Concessions given on Technology transfer , Training of Indian professionals abroad , Technical
collaboration
Your Answer
Training of Indian professionals abroad , Technical collaboration , Expertise in IT sector
True/False
Question: In case of Free of cost imported raw material, value addition would be computed by
adding Notional Value of free of cost material to both CIF value of imports and FOB value of
exports.
Correct Answer: True
Select The Blank
Question: Authorised Air Port for export consignments is________.
Correct Answer: Nagpur
Select The Blank
Question: Market Development Assistance is given to Exporters having annual Export turnover
upto Rs.________.
Correct Answer: 5 Crs
Match The Following
Question
SEZ
BOA
EPZ
OBU
Correct Answer
Board of Approval
Export Processing Zones

Question: License holder shall furnish following details of material being imported :Correct Answer: Specifications , Technical Characteristics , Pricing
Question: Special Economic Zones were created to :Correct Answer: Boost manufacturing , Augment exports , Generate employment
True/False
Question: Deemed export benefits are sanctioned by DGFT without claims.
Correct Answer: False

True/False
Question: Private sector cannot develop Special Economic Zones.
Question: Under Advance License goods imported may be used in any of the units of :Correct Answer: License Holder , Jobber , Supporting manufacturer
Question: The major functions of Export Promotion Council (EPC) are
Correct Answer: Provide commercial information , Organise trade fairs, exhibitions ,
Promote interaction between trade and Government
Question: Documents required for supplies made against Advance License are :Correct Answer: Xerox copy of Purchase order /Contract
Question: For EOU units Disposal of used packing material will be allowed on payment of duty on
:Correct Answer: Transaction Value
Question: Import of Capital Goods is allowed for :Correct Answer: Jigs , Fixtures , Dies
Question: Major function of Export Promotion Councils is :
Correct Answer: Offer Professional advise to exporters
Question: Sale by EOU to SEZ units is treated as :Correct Answer: Physical exports
Question: DGFT may issue Advanced License, where SION does not exists, based on self
declaration, based on :Correct Answer: Undertaking by the applicant , Final adjustments as per adhoc SION ,
Adhoc norms fixed category
True/False
Question: Foreign exchange earning by way of Equity Participation and donations will not be
entitled for duty credit.
Question: FTWZ is entitled for :Correct Answer: Free Foreign Exchange Transactions
Question: Objective of Foreign Trade Policy is to:
Correct Answer: Double our Share in Global Market within next 5 years

Question: Under International Trade Agreements India is required to :Correct Answer: Eliminate Quantitative restrictions on imports
Select The Blank
Question: Foreign Trade Policy aims to act as an effective instrument of economic growth by
giving thrust to ________.
Correct Answer: Employment Generation
Question: In order to obviate need for litigation , Foreign Trade Policy lays down :
Correct Answer: Grievance Redressal Mechanism
Select The Blank
Question: Four Star Export House should have minimum export performance of Rs.________.
Correct Answer: 1500 Crs
Question: Granite sector EOU may supply capital goods inputs to :Correct Answer: Farms/Fields/Quarries directly
Select The Blank
Question: FTWZ is expected to address the issues of ________.
Correct Answer: Global Trading network
Question: Fulfillment of Export obligation for licenses with duty saved of Rs.100 Corers or more is
valid only if :Correct Answer: It is 8 times the duty saved on capital goods , It is fulfilled within 12 years
for issuance of license , Initial 5% custom duty has been paid
Select The Blank
Question: EXIM Licensing is a________ function of Board of Trade under Foreign Trade Policy
Correct Answer: Regulatory
Select The Blank
Question: Special Economic Zones will located in areas which will be technically treated as
________.
Correct Answer: Foreign Territory for applicability of domestic legislations
True/False
Question: All imported goods shall be subject to domestic laws, rules, orders, regulations.
True/False
Question: An EPCG License holder may source capital goods from domestic leasing company.
Question: Deemed exports is beneficial to Indian buyers because :Correct Answer: It reduces costs in supply chain management , After sales service is
easier , Saves foreign exchange

True/False
Question: In Special Economic Zones Domestic Laws will not be applicable.
Question: Export promotion units may be engaged in :Correct Answer: Manufacturing activities , Provision of Services , Trading activities
Question: Minimum investment required for FTWZ is :Correct Answer: 100 Crorers
Question: Department of commerce allots funds to the states on following criteria:
Correct Answer: Growth in exports
Select The Blank
Question: Latest EXIM policy is valid for the period of ________.
Correct Answer: 2002-2007
True/False
Question: Gopalpur is the entitled sea port for export consignments.
Select The Blank
Question: Under International Trade Agreements India is required to eliminate________ on our
imports.
Correct Answer: Quantitative restrictions
Select The Blank
Question: Industrial cluster town of Tirupur is famous for production of ________.
Correct Answer: Hosiery items
Select The Blank
Question: The exporter shall furnish ________ Returns to the Registering Authorities
Correct Answer: Quarterly
True/False
Question: Sub Contracting is allowed provided products are dispatched directly form EOU
premises.
True/False
Question: Import of second hand (maximum 3 years old) capital goods are allowed.
Match The Following
Question
CIF
100% EOU
SEZ
EPCG
Correct Answer

Question: Under Market Development Assistance Government provides
Correct Answer: Expenses for trade fairs abroad , Expenses for buyer /sellers meet , Foreign
travel
Question: Benefits to Star Export Houses are
Correct Answer: Custom clearances on Self Declaration basis

PGDIEM- SEM I
Exim Policy &
Export Procedure & Documentation
(102)
(I)
Preliminaries For Exports
Registration IEC,
RCMC, EPC, C.Excise
Registration of Exporters/Importers
All intending importers/ exporters are required to register themselves
with the following authorities before commencing business;
DGFT( regional authority) for obtaining Importer-Exporter Code
Number (IEC Number)
Concerned Export Promotion Councils / Federation of Indian
Export Organization) for obtaining Registration- cum Membership
Certificates (RCMC)
Registration with Value added Tax Authorities
Registration with Central Excise Authorities
Registration of Exporters /Importers
Importer Exporter Code Number (IEC)
No person is allowed to export or import goods
without obtaining an Importer-Exporter Code
Number, from the regional authority, unless
specifically exempted, under any other provision of
FTP.
Exporter of goods to Nepal or Myanmar through
Indo-Myanmar border areas, are exempted,
provided that the CIF value per consignment, is
below Rs. 25,000.00.
Registration of Exporters /Importers
(cont)
Application For Grant Of IEC Number
An application for grant of IEC number shall be made by the
Registered Office/ H.O., of the applicant, to the Regional
Authority, (DGFT-Regional Office), under whose jurisdiction,
the Registered Office in case of the company, or H.O. in case
of others, falls in the Ayyat-Niryat Form, and shall be
accompanied by:
DD or Bank Receipt for Rs. 1000.00
ST registration certificate or passport copy (for an
individual), or copy of the legal authority letter when the
application is signed by an authorized signatory.
Certificate from banker of the firm as required
A copy of PAN card duly attested, copies of passport size
photographs etc
Registration of Exporters Contd..1
The regional Office concerned, will grant an IEC number
to the applicant, in the prescribed format. A copy of such
certificate, shall also be endorsed to the banker.
An IEC number allotted, shall be valid, for all its
branches/ divisions / units/ factories, as indicated on the
IEC number.
To facilitate collection of license / other documents,
identity cards are issued by Regional Authority, to the
authorized representative of the applicant.

Registration With EPCs
Registration with Export promotion Councils/ Commodity
Boards/ Authorities
To enable exporters avail of benefits/ concessions given under
the FTP, they are required to register with concerned EPC/
C.B /or authority and obtain an registration cummembership
certificate (RCMC)
The Exporter is required to apply in the prescribed format to
EPC relating to their main line of business
Status Holder can also obtain RCMC from FIEO.
Application for obtaining RCMC, to be made in prescribed
manner & accompanied by IEC code number. If application is
granted, EPC or FIEO will grant status of the exporter as
merchant exporter or manufacturer exporter
Registration With VAT Authorities
Registration with Value added Tax Authorities (VAT)
Goods which are to be shipped out of the country
for exports are eligible for are eligible for
exemption from both VAT & CST.
For this , the exporters are required to register
themselves, with the VAT authorities of the state, in
which they are located.
The registration has to be done in the manner
prescribed by the state VAT authorities.
Registration With Central Excise & PAN
Registration with Central Excise Authorities
Goods meant for export are exempt from CED.
For this the manufacturer has two options :
either they can deposit CED at the time of clearance from
factory
or take refund or avail procedure for export of goods
without payment at the time of clearance.
Obtaining PAN
Exporters & importers who obtain the IEC number
are also required to obtain PAN. An application in
form number 49A has to be submitted
Other Registrations
Any exporter who wants to export his goods needs to
obtain PAN based Business Identification Number
(BIN) from DGFT prior to filing of Shipping Bill for
clearance of export goods.
The exporter must also register themselves to the
authorized foreign exchange dealer code & open a
current account in the designated bank for credit of
any drawback incentive.
All exporters intending to export under export
promotion schemes need to get their licenses, DEEC
Books etc.
(II)
Categories Of Exports
Physical Direct & Indirect
Deemed Exports
Merchant & Manufacturer Exports
Categories of Exporters
Exporter
Means a person, who exports or intends to export and holds an

importer-exporter code number, unless otherwise specifically
exempted
Manufacturer Exporter
Manufacturer exporter means a person, who exports goods
manufactured by him, or intends to export such goods
Merchant Exporter
Merchant exporter means a person, engaged in trading activity
and exporting or intending to export goods.
A status holder means an exporter recognized as Export House,
Trading House, PTH etc by DGTD/ Development Commissioner.
Categories of Exporters (Cont)
Supporting Manufacturer , means any persons who
manufactures any product or part/ accessories/ components
of that product. Name of supporting manufacturer as well as
exporter must be endorsed on export documents.
Third Party exports means exports made by an exporter or
manufacturer on behalf of another exporter(s). In such
cases, export documents such as shipping bills shall include
name of both manufacturer exporter/manufacturer & third
party exporters. BRCs, GR declaration, export order &
invoice should be in the name of third oarty exporter.
Categories of Exporters (Cont)
Service Exporter means a person providing:
Supply of service from India to any other country
Supply of service to a service consumer of any other
country in India
Supply of service from India through commercial or
physical presence in the territory of another country.
Supply of service in India relating to exports paid in FFE
Services normally means services recognized by GATT /
WTOS Agreement & includes 161 tradable services covered
under GATS & where payment for services is received under
FFE.
Deemed Exports
Deemed Exports refers to those transactions in
which goods supplied do not leave the country &
payment for such supplies is received either in
Indian Rupees or in FFE.
Following categories of supplies by main/sub
contractors shall be regarded as deemed exports
under FTP, provided goods are manufactured in
India:
Supply of goods under advance authorization/
DFIA
Supply of goods to EOUs/ STPs/ EHTPs or BTPs
Deemed Exports (cont)
Supply of capital goods to holders of authorization
under EPCG scheme.
Supply of goods to projects funded by multilateral or
bilateral agencies or funds as notified by DEA.
Supply of capital goods to fertilizer plants.
Supply of goods to power projects & refineries.
Supply to projects funded by UN agencies & nuclear
power plants etc.
Benefits For Deemed Exports
Deemed exports, shall be eligible for any/ all of

the following benefits, in respect of manufacture &
supply of goods, qualifying as deemed exports
Advance authorization/ DFIA
Deemed export drawback.
Exemption from terminal export duty where
supplies are made against ICB. In other cases
refund of terminal excise duty will be given.
Benefits For Deemed Exports (cont)
In respect of supplies made against the Supplier
Authorization / DFIA in terms of paragraph 8.2(a)
of FTP, supplier shall be entitled to Advance
Authorization / DFIA, for intermediate supplies.
If supplies are made against Advance Release
Order (ARO) or Back to Back Letter of Credit
issued against Advance Authorization / DFIA, in
terms of paragraphs 4.1.11 and 4.1.12 of FTP,
suppliers shall be entitled to benefits listed in
paragraphs 8.3(b) and (c) of FTP, wherever is
applicable.
Export & Trading Houses
Export & Trading Houses: Merchant as well as Manufacturer
Exporters, Service Providers, EOUs & units located in SEZs ,
AEZs, Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) & Bio-Technology Parks
(BTPs) shall be eligible for status.
Status is calculated on total FOB export performance during
current plus previous three years (taken together) upon
exceeding limit given below:
EXPORT HOUSE (EH): Rs. 20 Crores
STAR EXPORT HOUSE (SEH): Rs. 100 Crores
TRADING HOUSE (TH): Rs. 500 Crores
STAR TRADING HOUSE (STH): Rs. 2500 Crores
PREMIUR TRADING HOUSE (PTH): Rs. 10,000 Crores.
Export & Trading Houses Contd.
Status holder will be eligible for a number of facilities including :
Authorization & customs clearance for both imports &
exports, on self-declaration basis.
Fixation of input-output norms on priority within 60 days
Exemption from compulsory negotiation of documents through
banks
100% retention of foreign exchange on EEFC account
Enhancement of normal repatriation period from 180 days to
360 days.
Exemption of providing Bank guarantee in schemes under
FTP.
SEH & above to be permitted to establish export warehouses
as per DoR guidelines
Conferring ACP status within 30 days of application.
(III)
Shipping Documents &
Terms Used In Shipping
III(a)
Shipping Documents
Documents For Declaration Of Goods
Under Foreign Exchange Rules
Section 7 of FEMA 1999, lays down the statutory control

concerning exports.
Under FEMA regulations ( number 3), every exporter of goods
or software in physical form or through any other form, either
directly or indirectly, to anyplace outside India ( other than
Nepal & Bhutan) shall furnish to the specified authority a
declaration in prescribed form & supported by such evidence as
may be specified.
Certain goods & services like trade samples, personal effects,
personal gifts, goods being sent for testing, defective goods
being sent outside for repair etc are exempted from the above.
Documents For Declaration Of Goods
Under Foreign Exchange Rules
The appropriate declaration forms are :
GR Forms : To be completed in duplicate for all exports
(other than by post) including export of software in physical
form.
SDF Form : In duplicate and appended to the shipping Bill
for exports declared to customs offices notified by Central
Government which have introduced EDI system for
processing Shipping Bill.
PP Form : for exports by post
SOFTEX : To be completed in triplicate for export of
software otherwise than in physical form ie. Magnetic
tapes, disks & paper media.
GR Form
GR Form is an exchange control document required by RBI. The
exporter through the GR Form has to assure to the RBI that the export
proceeds will be realized within 180 days.
It is submitted in duplicate, to the customs, at the port of shipment
along with the Shipping Bill & the customs certify the value declared
by the exporter & also record the assessable value.
Customs returns one copy to exporter & retains the original for
transmission to RBI
The exporter is required to negotiate the shipping documents, through
his bankers (authorized dealers), along with the GR Form, within 21
days of the shipment.
The authorized dealer reports to the RBI after negotiation of
documents & has to retain the documents till the full exports proceeds
have been realized, & thereafter send the documents to RBI.
Electronic Data Interchange (EDI)
Electronic data Interchange can be used to electronically transmit
documents such as purchase orders, invoices, shipping bills, receiving
advices and other standard business correspondence.
Coping with the increasing imports/exports the Excise & Customs has
computerized the manual process of assessment of Bills of entry,
clearing of shipping bills for export & all documents relating to
imports & exports are being processed on-line
At present all types of bills of entry for import of goods under export
related schemes, e.g., 100% EOUs, EPCG scheme, EPZ, STP, EHTP,
DEPB, DEEC, & imports for research purposes are being processed
on EDI system.
A new centralized electronic data system will be in place at major
ports, airports by the end of the year (2008), for speedy and hasslefree
clearance of exports and imports as well as to reduce delays in
settling duty drawback claims.
SDF Forms

On account of introduction of EDI system at certain customs
offices, where shipping bills are processed electronically, the
existing declaration in Form GR, is replaced by declaration in
Form SDF ( statutory declaration form) .
SDF form is to be submitted in duplicate, annexed to the relative
shipping bill to the concerned commissioner of customs.
After verifying & authenticating the declaration, the commissioner
hands over to the exporter, exchange control copy of the shipping
bill & the SDF form annexed thereto.
This must be submitted to the authorized dealer, within 21 days
from the date of export, along with other shipping documents for
negotiation.
The manner of disposal of the shipping bill & the SDF form
annexed thereto is the same as that of the GR form.
SOFTEX Forms
The exporter should submit declaration in Form SOFTEX in
triplicate in respect of export of computer software & audio/
video/ television software to the concerned designated official of
GOI at STPI/ EPZ/FTZ/SEZ for valuation/ certification not later
than 30 days from the date of invoice.
The designated official may also certify the SOFTEX forms of
EOUs which are registered with them.
In respect of long duration contracts, where the exporter bills the
client periodically, the exporter can submit a combined SOFTEX
form of all invoices including advance remittance.
Disposal of SOFTEX forms is done as per prescribed procedure in
Export Of Goods & Services Regulations, 2000. Duplicate copy of
SOFTEX along with a copy of the invoice may be retained by
authorized dealers.
Documents For Transportation Of goods
The documents required for transportation of goods are:
Airway Bill or Air consignment Note
Bill Of Lading
Mate Receipt
Combined transport document : ICDs have been set up
at various centers within the country for convenience of
exporters.The movement of goods from ICDs to the
destination is covered by the Combined transport
document.
Airway Bill or Air Consignment Note
The receipt issued by an airline company or its agent for
carriage of goods, is called airway bill (AWB) or airconsignment
note.
It is not a document of title and it is not issued in a negotiable
form.
The goods are delivered to the consignee mentioned in the AWB,
after identifying himself as the party named in the AWB as the
consignee / receiver, against payment of charges if any.
It is therefore desirable to cosign the goods in the name of the
foreign corresponding bank, as it will enable us to retain the
control of the goods, till payment is made/ documents are
accepted for payment.
Mates Receipt
Mates receipt is a receipt issued by the
commanding officer of the ship when the cargo is
loaded on the ship.This receipt is a prima facie

evidence that goods are loaded in the vessel.
Mates receipt is first handed over to the Port Trust
authorities & on receipt of port dues, the Port Trust
authorities, hand the mates receipt to the exporter
or his agent.
Mates Receipt (cont)
The mates receipt has to be handed over shipping
company for obtaining the Bill of Lading.
The mates receipt is a transferable document &
can be of two types
Clean mates Receipt : This signifies that the goods have
been received well in order, properly packed & without
any defect or damages
Qualified Mates receipt: This signifies goods have not
been packed properly or received damaged. In this case
the shipping company does not take any responsibility
for damage in transit.
Bill of Lading
Bill of Lading (B/L) is a document issued by the shipping company or
its agent acknowledging the receipt of goods on board the vessel, and
undertaking to deliver the goods in the like order and condition as
received, to the consignee or his order , provided the freight & other
charges as mentioned have been duly paid. It is also a document of
title to the goods & as such is freely transferable by endorsement &
delivery.
B/L serves three main purposes :
As a document of title to the goods
As a receipt from the shipping company
As a contract for the transportation of the goods.
Types Of Bill of Lading
Clean B/L B/L acknowledging receipt of goods apparently in good order &
condition & without any qualification is a clean B/L. Such B/L
does not contain any negative remark about condition of goods.
Claused B/L B/L with a remark such as goods insufficiently packed is known
as claused B/L.
Transshipment or
through B/L
For multimode transportation, or when another shipping
companys vessel is used, this B/L is issued.
Stale B/L A B/L held too long (normally more than 21 days)), before
negotiations, is termed stale B/L.
Freight paid B/L B/L issued when freight is paid at the time of shipment is a freight
paid B/L
Freight collect B/L B/L issued when freight is not paid at the time of shipment& is to
be collected from consignee is a freight collect B/L
Contents Of The Bill Of Lading
Name & logo of the Shipping Line
Name & address of the shipper
Name & number of vessel
Name of the port of lading, port of discharge & place of delivery
Marks & container number, container seal number
Packing & container description
Total number of packages & containers
Description of goods, gross weight, volume
Amount of freight paid or payable
Shipping Bill number & date

Signature & initials of the Chief Officer
Documents For
Customs Clearance Of Goods
The Shipping Bill is the main document required by customs
for clearance of goods for shipment.
Where the goods are to be cleared by Land Customs, Bill Of
Export is prepared instead of the Shipping Bill.
Bill Of Exports are also of four types
White for export of duty free goods
Green for export of goods under claim for duty drawback
Yellow for export of dutiable goods
Pink for export of duty free goods ex-bond.
Shipping Bill
Shipping Bill is an important document required by
the customs authorities for allowing shipment.
It is prepared by the exporter & it contains the name
of the vessel, name of port of discharge, country of
final destination, , exporters name & address,
details about packages, number & description of
goods, marks & numbers, quantity & details about
each case, FOB price, total number of packages
with the weight & value and the name & address of
the importer.
Shipping Bill (cont)
The shipping Bills are of following types:
Duty Free Shipping Bill : No duty or cess
applicable
Dutiable Shipping Bill : Goods subject to
export duty / cess
Drawback Shipping Bill :
Shipping Bill for shipment Ex-bond.: For goods
imported for re-export.
Documents Required For Processing Of
Shipping Bill:
The following documents are required for the processing of the Shipping
Bill:
GR forms (in duplicate) for shipment to all the countries.
4 copies of the packing list mentioning the contents, quantity, gross
and net weight of each package.
4 copies of invoices which contains all relevant particulars like
number of packages, quantity, unit rate, total f.o.b./ c.i.f. value, correct
& full description of goods etc.
Contract, L/C, Purchase Order of the overseas buyer.
AR4 (both original and duplicate) and invoice.
Inspection/ Examination Certificate.
Other Documents
Other documents as shown in the following
pages are also necessary and required to
carry out various formalities for shipment
& negotiation of documents and for meeting
the regulations in the importing country.
Aligned Documentation System
Aligned Documentation System is based on the
UN layout key.
Under this system, different forms used in the
international trade transactions are printed on

paper of the same size & in such a way that the
common items of information are given in the
same relative slots in the same piece of paper.
Aligned Documentation System (cont)
Commercial Documents
These are required for effecting physical transfer of goods &
their title from the exporter to the importer & the realization of
export proceeds. Out of the 16 commercial documents in the
export documentation, as many as 14, have been standardized
and aligned to one another. These are proforma invoice,
commercial invoice, packing list, shipping instructions,
intimation for inspection, certificate of inspection, insurance
declaration, certificate of insurance, mates receipt, B/L,
application & certificate of origin, shipment advice &
negotiation of documents.
Shipping order & bill of exchange could not be brought under
this system.
Aligned Documentation System (Cont)
Regulatory documents
Regulatory pre-shipment export documents are
prescribed by different government department &
bodies in order to comply with various rules &
regulations under the relevant laws governing
export trade such as export inspection, etc.
Out of the nine regulatory documents, four have
been standardized and aligned. These are Shipping
Bill, Exchange Control Declaration (GR Form),
port trust copy of the Shipping Bill for payment of
Port Charges.
Packing List
The exporter prepares the packing list to facilitate the buyer
to check the shipment. It contains the detailed description of
the goods, packed in each case, their gross & net weights
etc.
The packing list also contains all basic information about
the export order like name & address of the buyer & the
exporter, purchase order number & date etc.
The packing order is the basic document used in the
preparation of further documents like proforma invoice &
so on.
Proforma Invoice
The starting point of the export contract is in the
form of offer made by the exporter to the foreign
customer.
The offer made by the customer is in the form of
the Proforma Invoice.
It is a quotation given as a reply to an enquiry.
It normally forms the basis of all trade
transactions & enables importer to obtain import
license, if required.
Proforma Invoice (cont)
Contents of Proforma Invoice are generally the
following:
Name & addresses of exporter & importer
Mode of transportation, port of discharge, final destination
Buyers & seller's reference numbers / dates

Description of the goods, mode of packing, total number of
packages, expected total weight etc.
Origin of goods
Price offer on FOB & CIF Basis
Basic terms & conditions of sale.
Commercial Invoice
Commercial invoice is the basic export document & contains all
information required for making other documents.
It is prepared by the exporter after the execution of the export order
giving details about the goods shipped
It should be addressed to the consignee as per the letter of credit.
It is the basic evidence of the contract of sale or purchase &
therefore must be prepared strictly in accordance to the terms 7
conditions mutually agreed between the buyer & seller.
It should contain basic details as in the proforma invoice, the detailed
description of goods, as well as the final packing lists and the
markings on packages plus details of shipment of goods, name &
number of vessel/ voyage.
This document is used for various export formalities, incentive claims,
negotiation of documents , accounting etc.
Certificate Of Origin
The importers in several countries require a Certificate Of
Origin without which clearances to import is refused.
The certificate of origin states that the goods exported are
originally manufactured in the country whose name is
mentioned in the certificate.
Certificates of origin are required when:
Goods produced in a particular country are subject to preferential
tariff rates in the foreign market at the time of importation
The goods produced in a particular country are banned for import
in the foreign market.
Types Of Certificate Of Origin 1
(1) Certificate Of Origin for Availing Concessions under
GSP :
Required by countries like France,Germany, Italy, Benelux
countries,UK, Australia, Japan, USA etc., which extend GSP
benefits & are issued by specialized agencies like:
Export inspection agencies
Joint DGFT, Commodity Boards & their regional offices
Development Commissioner, Handicrafts
Textile Committee for textiles
Marine product export development authority for marine
products
Development Commissioner for EPZs
Types Of Certificate Of Origin (cont)
(2) Non-preferential Certificate Of Origin:
These are normally required for clearance of goods by all
importers & are issued by the Chamber of Commerce of the
exporting countries or by Trade Association of the importing
country.
(3) Certificate For availing concessions Under
Commonwealth Preferences:
This is also known as Combined Certificate Of origin &
value & is required by two commonwealth countries,
Canada & New Zealand for concessions under
Commonwealth preferences.

These have to be obtained from the High commission of the
country concerned.
Types Of Certificate Of Origin (cont)
(4) Certificate For Availing Concessions Under Other
System Of Preferences
Certificates of Origin are also required for tariff
concessions under the Global system Of Trade
Preferences (GSTP), Bangkok agreement (BA),
SAPTA,
Export Inspection Councils have the authority to
print blank Certificates of Origin & these are
issued by EPCs, DCs of EPZs, EIC, FIEO etc.
Consular Invoice
Consular Invoice is a document required mainly by the African &
certain other countries like Kenya, Uganda, Tanzania, Mauritius,
Australia, New Zealand Nigeria, Ghana etc.
The exporter is required to submit 3 copies of the Commercial invoice
& related documents for certification to the respective Embassy &
one copy is returned to him after certification.
Balance copies are sent by the Embassy to the customs department of
the importing country for verification upon arrival of goods &
calculation of the import duty payable.
The consular certified copy is negotiated by the exporter along with
other documents.
Customs Invoice
Countries like USA, Canada etc need customs invoice
It is generally made out on a special form presented by the
customs authorities of the importing country & helps for
allowing entry of goods in the importing country at
preferential tariff rates.
The invoice forms are generally available at the consular
office of the importing country and are required to be
signed and witnessed after duly filling the same.
Bill Of Exchange / Draft
A Bill Of Exchange also known as Draft contains an order from the
creditor to the debtor to pay a specified amount to a person
mentioned therein.
The maker of the Bill is known as Drawer & the person who is
directed to pay is called the Drawee
The person who is entitled to receive the amount is called Payee
A Bill Of Exchange is of two types: (i) Sight draft (immediate
payment) & (ii) Usance Draft ( Credit Usance 30 days or usance
60 days)
Unless & until the draft is retired, the negotiating collecting bank
does not hand over the shipping documents & the buyer can not
take delivery of goods.
Legalization & Attestation Of Documents
Documents issued in one country ('Source Country') which need to be
used in another country ('Destination Country') must be
'authenticated' or 'legalized' before they can be recognized as valid in
the foreign country. This is a process in which various seals are
placed on the document.
The number and type of authentication certificates depends on the
nature of the document and whether or not the foreign country is a
party to the multilateral treaty on "legalization" of documents.
"Embassy (Consular) Legalization" of official documents is a

procedure of confirmation of the validity of originals of official
documents or certification of authenticity of signatures of the officials,
authorized signatures on documents, and also the validity of prints of
stamps, seals by which the document is fastened.
III(b)
Terms Used In Shipping
(INCO Terms)
INCO Terms
Incoterms are internationally accepted commercial
terms, developed in 1936 by the International Chamber
of Commerce (ICC), in Paris.
Incoterms 2000 define the respective roles of the buyer
and seller, in the agreement of transportation and
other responsibilities and clarifies, when the ownership
of the merchandise takes place.
Incoterms are used in union with a sales agreement or
other methods of sales transactions and define the
responsibilities and obligations of both, the exporter
and importer, in Foreign Trade Transactions.
INCO Terms
Incoterms 2000, is mainly concerned with the
loading, transport, insurance and delivery
transactions.
Its main function is the distribution of goods and
regulation of transport charges.
Another significant role played by Incoterms is to
identify and define the place of transfer and the
transport risks involved.
Incoterms make international trade easier and
help traders in different countries to understand
one another & are most widely used international
contracts
INCO Terms- Objectives
Incoterms safeguard the following issues in the
Foreign Trade contract or International Trade
Contract:
To determine the critical point of the transfer of the
risks of the seller to the buyer, in the process of
forwarding of the goods (risks of loss, deterioration,
robbery of the goods).
To enable the person who supports these risks to
make arrangements in term of insurance & other
arrangements.
To specify who is going to subscribe the contract of
carriage; seller (exporter) or the buyer (importer).
INCO Terms- Objectives
To distribute between the seller and the buyer, the logistic and
administrative expenses, at the various stages of the process
It is important to define, who is responsible for packaging,
marking, operations of handling, loading and unloading,
inspection of the goods.
Need To confirm and fix respective obligations, for the
achievement of the formalities of exportation and importation,
the payment of the rights and taxes of importation, as well as
the sending of the documents.

There are 13 Incoterms, globally adopted by the International
Chamber of Commerce.
INCO Terms- Groups
Incoterms 1990 / 2000 - which defines all trade terms are divided
into four basic groups.
Group E comprise of Departure term. Where the seller makes the
goods available to the buyer at the seller's own premises,
(EXW) - Ex Works
Group F: Comprise of Shipment terms - Main carriage unpaid.
Where the seller is called on to deliver the goods to a carrier
named by the buyer, (FCA, FAS and FOB). These are shipment
contracts with the shipment point named, and carriage unpaid by
the seller.
FCA - Free Carrier
FAS - Free Alongside Ship
FOB - Free On Board
INCO Terms- Groups
Group C: Comprise of Shipment terms - Main carriage
paid. Where the seller has to contract for carriage, but
without assuming the risk of loss of or damage to the
goods or additional costs due to events occurring after
shipment and dispatch, (CFR, CIF, CPT and CIP).
These are shipment contracts, with the destination point
named, and carriage paid by the seller.
There are two critical division points, one for costs, the
other for risk.
Costs being assumed by the seller until the destination
point; risk being transferred to the buyer at the point of
shipment.
INCO Terms- Groups
In CIF & CIP terms, the seller arranges the
contract of carriage and payment of freight.
CFR - Cost and Freight
CIF - Cost, Insurance and Freight
CPT - Carriage Paid To
CIP - Carriage and Insurance Paid To
INCO Terms- Groups
Group D: Comprise Of Arrival Terms. Where the seller
has to bear all costs and risk needed to bring the goods
to the country of destination, (DAF, DES, DEQ, DDU
and DDP). These are arrival contracts.
DAF - Delivered At Frontier
DES - Delivered Ex Ship
DEQ - Delivered Ex Quay
DDU - Delivered Duty Unpaid
DDP - Delivered Duty Paid
Ex-Works Contract (EXW)
Title and risk pass to buyer, (including liability for
payment for all transportation and insurance costs)
from the seller's door.
Used for any mode of transportation.
Seller : In EXW shipment terms the Seller (Exporter)
provides the goods for collection by the Buyer
(Importer) on the sellers or exporter's premise.
Responsibility for the seller is to put the goods, in a
good package which is adaptable and disposable by

the transport.
Ex-Works Contract (EXW)
Buyer : The buyer or Importer, arranges
insurance for damage in transit goods & have to
bear all costs and risks involved in shipment
transactions.
(However, if the parties wish the seller to be
responsible for the loading of the goods on
departure and to bear the risks and all the costs of
such loading, this should be made clear by adding
explicit wording to this effect in the contract of
sale.
FCA -Free Carrier (. Named place)
"Free Carrier" means that the seller fulfils his obligation to
deliver when he has handed over the goods, cleared for export,
into the charge of the carrier named by the buyer at the named
place or point.
If no precise point is indicated by the buyer, the seller may
choose within the place or range stipulated where the carrier
shall take the goods into his charge.
When, according to commercial practice, the seller's assistance
is required in making the contract with the carrier (such as in
rail or air transport), the seller may act at the buyer's risk and
expense.
This term may be used for, any mode of transport, including
multimodal transport.
FCA -Free Carrier (. Named place)
"Carrier" means any person who, in a contract of carriage,
undertakes to perform or to procure the performance of carriage by
rail, road, sea, air, inland waterway or by a combination of such
modes.
If the buyer instructs the seller to deliver the cargo to a person, e.g.
a freight forwarder who is not a "carrier", the seller is deemed to
have fulfilled his obligation to deliver the goods when they are in
the custody of that person.
"Transport terminal", means a railway terminal, a freight station, a
container terminal or yard, a multi-purpose cargo terminal or any
similar receiving point.
"Container" includes any equipment used to unitize cargo, e.g. all
types of containers and/or flats, trailers etc and applies to all modes
of transport.
FAS - ( Free Alongside Ship) Contract
FAS- Free Alongside ship: Title and risk pass to buyer, including
payment of all transportation and insurance cost, once delivered
alongside ship by the seller.
Used for sea or inland waterway transportation. The export clearance
obligation rests with the seller.
In FAS price includes all costs incurred in delivering the goods
alongside the vessel, at the port or nominated place of the buyer, but
seller does not pay charges for loading on board of vessel, as well as
ocean freight charges and marine insurance.
Seller: The responsibility of the seller are fulfilled, when goods are
placed cleared along the ship.
Buyer: Buyer or Importer bears all expenses and risks of loss or
damage of transit goods, delivered along the ship.
Free On Board (FOB) Contract

FOB is one of the most frequently used price
quotation, in the international market.
Under this quotation, the exporter undertakes to pay
all expenditure till the loading of goods, on board
the ship, including documentation charges.
All expenditure thereafter, such as ocean freight,
marine insurance, unloading charges etc are borne
by the importer.
Free On Board (FOB) Contract (cont)
The sellers obligations are :
To provide goods & the commercial invoice , or its equivalent
electronic message, in conformity with the contract of sale.
To obtain any export license or other official authorization,
and carry out all customs formalities, necessary for
exportation of goods.
To deliver the goods on board of vessel, at the port of
shipment, on the date, or within the period, stipulated.
To give the buyer sufficient notice, that, the goods have been
delivered on board the vessel
To pay the costs of checking quality, measuring, weighing,
counting , packing and marking of the goods.
Free On Board (FOB) Contract ( Cont)
The buyers obligations in a FOB contract are:
To pay the price as provided, in the contract of sale
To obtain import license or other official authorization &
carry out all customs formalities, for the importation of
goods
To take delivery of goods, when the goods have been
delivered, in accordance with the terms of the contract.
To reserve the necessary shipping space and give due notice
of the same, to the exporter ; &
To bear all costs and risks of the goods, from the time, when
they shall have effectively passed the ships rail,
Cost & Freight (CFR) Contract
In this term the exporter bears the cost of carriage or transport to
the selected destination port, & the risk transferable, to the
buyers at the port of shipment.
Seller: chooses the carrier, concludes and bears the expenses by
paying freight to the agreed port of destination, unloading not
included. The loading of the duty-paid goods on the ship falls on
him as well as the formalities of forwarding. On the other hand,
the transfer of risks is the same one as in FOB.
Buyer: The buyers supports all the risk of transport. When the
goods are delivered aboard by ship at the unloading port, buyer
receives it from the carrier and takes delivery of the goods from
nominated destination port.
CIF Contract
Cost, insurance & freight means, that, the seller has
the same obligations as under the FOB contract, but
with the addition, that, he has to organize the marine
freight & procure marine insurance, against the
buyers risk of loss or damage, to the goods during
carriage.
The seller contracts the insurance and pays the
premium and also pays the ocean freight.

CIF Contract(cont)
The seller has the following additional obligations as
compared to FOB Contract :
To arrange for the carriage of the goods to the named port of
destination by the usual route in a sea-going vessel & to pay its
costs & freights.
To obtain cargo insurance as agreed in the contract & to provide
the buyer with the insurance policy or other evidence of insurance
cover.
The above obligations are excluded from the buyers
obligations. Buyer still has the obligations, as indicated in
the buyers obligations, in FOB contracts.
CPT- Carriage Paid To.
"Carriage paid to... " means that the seller pays the freight for the
carriage of the goods to the named destination. The risk of loss of or
damage to the goods, as well as any additional costs, due to events
occurring after the time the goods have been delivered to the carrier, is
transferred from the seller to the buyer, when the goods have been
delivered into the custody of the carrier.
"Carrier" means any person who, in a contract of carriage, undertakes to
perform or to procure the performance of' carriage, by rail, road, sea,
air, inland waterway or by a combination of such modes.
If subsequent carriers are used for the carriage to the agreed destination,
the risk passes when the goods have been delivered to the first carrier.
The CPT term requires the seller to clear the goods for export.
DAF- Delivered At Frontier(Named Place)
"Delivered at Frontier" means that the seller fulfils his
obligation to deliver when the goods have been made available,
cleared for export, at the named point and place at the frontier,
but before the customs border of the adjoining country.
The term "frontier" may be used for any frontier including that of
the country of export. Therefore, it is of vital importance that the
frontier in question be defined precisely by always naming the
point and place in the term.
The term is primarily intended to be used when goods are to be
carried by rail or road, but it may be used for any mode of
transport.
DES - DELIVERED EX SHIP
(... named port of destination)
Ex Ship" means that the seller fulfils his obligation to
deliver, when the goods have been made available to the
buyer on board the ship, uncleared for import at the
named port of destination.
The seller has to bear all the costs and risks involved in
bringing the goods to the named port of destination. This
term can only be used for sea or inland waterway
transport.
DEQ -"Delivered Ex Quay (duty paid)"
"Delivered Ex Quay (duty paid)" means that the seller fulfils his
obligation to deliver when he has made the goods available to the
buyer on the quay (wharf) at the named port of destination. The
seller has to bear all risks and costs including duties, taxes and
other charges of delivering the goods thereto.
This term should not be used if the seller is unable directly or
indirectly to obtain the import license.
Buyer has to clear the goods for importation and pay the duty.

If the parties wish to exclude from the seller's obligations some of
the costs payable upon importation of the goods (such as value
added tax (VAT)), this should be made clear by adding words to
this effect: "Delivered ex quay, VAT unpaid (... named port of
destination)",.
This term can only be used for sea or inland waterway transport.
DDU- "Delivered duty unpaid"
Delivered duty unpaid" means that the seller fulfils his
obligation to deliver when the goods have been made
available at the named place in the country of
importation.
The seller has to bear the costs and risks involved in
bringing the goods thereto (excluding duties, taxes and
other official charges payable upon importation) as
well as the costs and risks of carrying out customs
formalities.
The buyer has to pay any additional costs and to bear
any risks caused by his failure to clear the goods for
import in time.
DDU- "Delivered duty unpaid(cont)
If the parties wish the seller to carry out customs
formalities and bear the costs and risks resulting there
from, this has to be made clear by adding words to this
effect.
If the parties wish to include in the seller's obligations
some of the costs payable upon importation of the
goods (such as value added tax (VAT)), this should be
made clear by adding words to this effect: Delivered
duty unpaid, VAT paid, (... named place of destination),
This term may be used irrespective of the mode of
transport.
DDP- Delivered Duty Paid
"Delivered duty paid" means that the seller fulfils his obligation to
deliver when the goods have been made available at the named place
in the country of importation.
The seller has to bear the risks and costs, including duties, taxes and
other charges of delivering the goods thereto, cleared for importation
whilst the DDU should be used.
If the parties wish to exclude from the seller's obligations some of the
costs payable upon importation of the goods (such as value added tax
(VAT)), this should be made clear by adding words to this effect:
"Delivered duty paid, VAT unpaid (...named place of destination)".
This term may be used irrespective of the mode of transport.
(IV)
Export Procedures
IV(a)
Excise Clearance For Exports
Excise Clearance Benefit/ Rebate
Excise Duty
Excise duty is a tax imposed by the Central government
on goods manufactured in India.
It is collected at source I.e. before removal of goods
from the factory premises
Exporters are totally exempted from payment of CED
However, necessary clearances must be obtained by the
exporter in one of the following ways

Excise Clearance Benefit/ Rebate (cont)
(i) Export Under Rebate
Under this system, an exporter is required to pay
CED initially & then claim it from central excise
department after shipment of goods.
(ii) Export under Bond
Under this system, an exporter is required to execute
a bond, in favor of excise authorities, for a sum
equivalent to the amount of excise chargeable on
such goods. Such bond should be supported by an
appropriate bank guarantee.
Excise Clearance Under Rule 18 & Rule 19
of Central Excise Rules
Export Procedures for Excise - There are basically
two procedures for dispatching the goods out of
India.
(a) (Rule 18 of Central Excise Rules).
In the first procedure, duties are paid and subsequently
rebate (refund) is claimed after exportation of such
goods. Alternatively, rebate is granted of duty paid on
inputs used in the exported final product.
Rebate claim had to be made to A.C. of Central excise
along with original of ARE-1 & other prescribed
documents.
of Central Excise Rules (cont)
(b) (Rule 19 of Central Excise Rules).
The other procedure is to export goods under bond
without payment of excise duty.
On actual exportation of goods and on presentation
of necessary proofs regarding exports, the bond is
released. Regular Exporters can have a running
bond for this purpose.
A merchant exporter has to furnish bond in form B-1
& certificate in CT-1.
Conditions For Central Excise
Clearance
As a part of further simplifications and
rationalization of excise rules announced by the
Finance Minister a new set of Central Excise
Rules, 2001, has come into effect from 1st March
2002.
The procedure for export of excisable goods
(except to Nepal & Bhutan) is subject to certain
conditions & limitations.
Conditions & Limitations
( Under payment of CED)
The excisable goods can be exported directly from a factory
or a warehouse after the payment of excise duty
The excisable goods must be exported within 6 months from
the date within which they were cleared for export from the
factory of manufacture or his warehouse.
The market price of the excisable goods at the time of
exportation is not less than the amount of rebate duty
claimed.
The amount of rebate of duty admissible is not less than Rs.

500.00
( Without payment of CED)
The exporter is required to submit a General Bond
( Surety or security) to the Assistant Commissioner of
Central Excise or the Maritime Commissioner for a sum
equivalent to the duty chargeable on the goods.
The excisable goods must be exported within 6 months
from the the date on which they were cleared for exports
from the factory of manufacturer or his warehouse.
Procedure For Central Excise Clearance
The following is the procedure for obtaining central excise clearance:
(i) Application to the Assistant Collector/ commissioner of Central
Excise (ACCE)
The exporter is required to make an application to the
Superintendent or the Inspector of Central Excise, having
jurisdiction over the factory of production or warehouse of the
exporter, by filling up 4 copies of ARE-I form, in five copies
with distinctive colors.
(ii) Information to the Range Superintendent
The ACCE informs the range superintendent, in whose area the
exporters factory or warehouse is located. On receiving
instructions from the ACCE, the range superintendent, deputes
an inspector for clearance of goods for exports.
(Cont)
(iii) Sealing of goods :
The inspector of Central Excise verifies the
goods mentioned in the application and the
particulars of the duty paid or payable.
If satisfied, he seals each package or the
container in the manner as may be specified by
the Commissioner of Central excise and
endorses each copy of the application.
(iv)Processing of ARE-I Forms
ARE-I(Original)
ARE-II(Duplicate)
The Superintendent or Inspector returns the original
& the duplicate to the exporter
ARE-I (Triplicate) The triplicate copy of ARE-I is sent to the Maritime
Commissioner at the port of shipment or to the Excise
Rebate Audit section in case the rebate is to be
claimed by EDI (Electronic Data Interchange) system
of customs.
ARE-I
(Quadruplicate)
This copy of ARE-I is retained by the Superintendent
or Inspector of Central Excise.
ARE-I
(Quintuplicate)
This copy is returned to the exporter for claiming any
other incentive.
(Cont)
(v) Examination of the goods at the place of exports
At the port of shipment, the exporter presents goods

together with original, duplicate & quintuplicate copies of
the ARE-I to the Commissioner of Customs.
The Commissioner of Customs examines the consignments
and if satisfied, certifies the goods for exports, by an
endorsement on all the copies of ARE-I.
The original & quintuplicate copies are returned to the
exporter and the duplicate copy is sent to the Maritime
Commissioner.
(Cont)
(vi) Submission of the claim: For claiming rebate, the exporter is
required to submit the following documents along with the prescribed
application in form C(in triplicate) to Assistant Commissioner of central
excise / maritime collector
Original copy of ARE-I duly endorsed by customs officer
Duplicate copy of ARE-I received from customs officer in a sealed cover.
Duly attested copy of shipping bill
Duly attested copy of Bill of Lading or airway bill
Duplicate copy of Central Excise invoice under which CED was paid
(Cont)
(vii) Verification of the application
Assistant or Deputy Commissioner of Central Excise compares the
details listed in the different copies of ARE-I & if he is satisfied that
the exports are not under claims for duty drawback, he sanctions the
rebate.
(viii) Refund of duty
If any refundable amount is not paid to the applicant within 3
months from the date of filing the claim, interest at the rate of 20%
is paid for the period between the expiry of 3 moths & the date of
refund.
(ix) Cancellation of documents
If the excisable goods are not exported, the Assistant Commissioner
of Central Excise cancels the export documents on request of the
exporter.
IV(b)
Shipment Of Goods
(Sea Shipment)
Shipping & Customs Formalities
According to Section 40 of Customs Act, the person in charge of
conveyance vessel, vehicle, aircraft etc., can not permit loading of
export cargo, at the customs station, until & unless a formal approval
to the export given by the authorized customs officer is presented.
Before granting permission, the customs officer ensures that the
goods being exported are in accordance with different regulations,
particularly in terms of the following:
Goods must be as declared by the exporter
The duty or cess leviable thereon has been properly declared &
paid.
Provision of Export Control order, Export (Quality Control &
Inspection Act) & FEMA are complied with.
Procedure For Shipping &
Customs Clearance
(a) Preparation & Submission of Export Documentation:
For clearance of cargo from customs, the exporter or his agent is
required to submit the following documents along with 5 copies of

Shipping Bill to the customs appraiser at the Customs House.
Letter of Credit along with Export Contract or Export Order
Commercial Invoice (2 copies)
Packing List or Packing Note
Certificate of Origin
GR Form ( original & duplicate)
ARE-I Form
Original copy of Certificate Of Inspection, wherever necessary.
Marine Insurance Policy.
Procedure For Shipping & Customs
Clearance ( cont 1)
(b) Verification Of Documents
The Customs appraiser verifies the details listed in each document
& ensures that all formalities relating to exchange control etc.,
have been properly complied with by the exporter. If satisfied, he
issues a Shipping Bill Number.
(c) Valuation Of Goods
The customs appraiser assesses the Shipping Bill and values the
goods.The value as determined by the customs officer, holds good
in future transactions, especially for the claim of incentives. All
documents are then returned to the exporter, except the following:
Original copy of GR, to be forwarded to the RBI
Original Copy of Shipping Bill
One copy of Commercial Invoice.
Clearance ( cont 2)
The validity of the assessed Shipping Bill, is for one
month only. If the exporter fails to deliver the goods in
that period, he will have to undergo the above procedure
again.
(d) Obtaining Carting Order
The C&F Agent, then, approaches the Superintendent of
the concerned Port Trust, for obtaining the Carting
Order for moving the cargo inside the docks. After
obtaining the carting order, the cargo is physically
moved into the port area & stored in the appropriate
shed.
Clearance ( cont 3)
(e) Customs Examination & Issue of Let Export Order:
The customs examiner at the port of shipment physically examines
the goods and seals the package in his presence. The same can be
arranged for at the factory or the warehouse by making an
application to the Assistant Collector of customs. The customs
examiner, if satisfied, issues a formal permission for loading of the
cargo on the ship in the form of a let export order. The above
procedure is now processed through EDI system.
(f) Obtaining Let ship Order from customs preventive officer:
Let export order must be supplemented by a Let Ship Order
issued by the Customs Preventive Officer. The C&F agent submits
the duplicate copy of the Shipping Bill, duly endorsed by the
customs examiner, to the preventive officer, who endorses it with
the Let Ship Order
Clearance ( cont 4)
(g) Obtaining Mates receipt & the Bill of Lading:

The goods are then loaded on board of ship for which the
Mate or the captain of the ship, issues Mates Receipt to
the Port Superintendent. The Port Superintendent on
receipt of the ports dues, hands over the mates receipt to
the C&F agent who surrenders the Mates receipt to the
shipping company for obtaining the Bill of Lading.
The shipping company issues two or three negotiable and
two or three copies of non-negotiable copies of the B/L.
Exports By Air
The exporter must have an IEC (Import Export Code)
number issued by DGFT (Director General of Foreign
Trade).
He has to file a Shipping Bill which has to be assessed by
Customs and the goods are also subject to examination by
Customs before LEO (Let Export Order) is given.
This document can be filed with Customs up to 15 days
before the goods are actually exported.
Like in case of imports, in exports too, the document for
assessment and examination by Customs Shipping Bill, is
processed through the EDI.
Exports By Air (cont)
To encourage exports, the Government has introduced
various export promotion schemes i.e. Drawback,
DEEC, DFRC, DEPB, EPCG etc. and the exporter has
a choice to avail any of them.
However, certain schemes cast an export obligation on
the exporter for which he is required to execute Bond
and Bank Guarantee for certain period.
Exports are also governed by the Customs Act, 1962,
the EXIM Policy and are subject to prohibitions and
restrictions imposed under various other Acts i.e.
CITES, NDPS Act, Arms Act, Antiques Act, Drugs &
Cosmetics Act, etc. .
Procedure For Air- Cargo as given by AAI
Shipment Procedure for Export General Cargo
1.Registration, Processing of shipping bill by customs.
2.Obtain carting order and AWB from the carrier or
through EDI
3.Present papers (shipping bill / AWB / Carting order) to
AAI counter and obtain terminal charges receipt.
4.Pay AAI Charges.
5.Enter Export Cargo along with relevant documents
6.Present TSP receipts to AAI staff at designated TO gate
and off-load cargo. Obtain AAI endorsement on TSP
receipt.
Procedure For Air- Cargo as given by AAI
7.Get the packages (as per the customs endorsement) examined by
customs and complete the formalities
8.Let Export Order / Customs Orders
9.Present TSP receipt along with let Export Order to AAI staff at
bonded area gate along with cargo for binning & for location slip
for airlines handled by AAI.
10.Hand over documents to airlines
11.Unitization - Airline submits Customs approved checklist for
unitization or bulk loading to AAI
12.Release of Export Cargo for the flight against request from

airlines duly approved by customs.
Basically the steps in clearance of air-cargo are the same as in seacargo.
However, suitable modifications as required are done.
IV(c)
Marine Insurance For Export Cargo
Introduction
Marine Insurance covers the loss or damage of ships, cargo,
terminals, and any transport or property by which cargo is
transferred, acquired, or held between the points of origin and
final destination.
Cargo insurance is a sub-branch of marine insurance, though
Marine also includes Onshore and Offshore exposed property
(container terminals, ports, oil platforms, pipelines); Hull;
Marine Casualty; and Marine Liability.
In the 19th. century, Lloyd's and the Institute of London
Underwriters (a grouping of London company insurers)
developed between them standardized clauses for the use of
marine insurance, and these have been maintained since. These
are known as the Institute Clauses because the Institute covered
the cost of their publication.
Marine Cargo Insurance
Transport Insurance
Export and import in international trade, requires transportation
of goods over a long distance.
No matter whichever transport has been used in international
trade, necessary insurance is must for every single good.
Cargo insurance also known as marine cargo insurance is a type
of insurance against physical damage or loss of goods during
transportation.
Cargo insurance is effective in all the three cases whether the
goods have been transported via sea, land or air.
Insurance policy is not applicable if the goods have been found to
be packaged or transported by any wrong means or methods. So,
it is advisable to use a broker for placing cargo risks.
Insurance- Scope Of Coverage
The following can be covered for the risk of loss or damage:
Cargo import/ export cross voyage dispatched by sea, river, road,
rail post, personal courier, and including associated storage risks.
Good in transit (inland).
Freight service liability.
Associated stock.
However there are still a number of general exclusions such as loss
by delay, war risk, improper packaging and insolvency of carrier.
Covers for some of these may be negotiated.
Regular exporters may negotiate open cover. It is an umbrella
marine insurance policy that is activated when eligible shipments
are made. Individual insurance certificates are issued after shipment
Insurance- Specialized Covers
Whereas standard marine/transport cover is the answer for general
cargo, some classes of business will have special requirements.
General insurer may have developed specialty teams to cater for the
needs of these business, and it is worth asking if this cover can be
extended to export risks.
Cover may be automatically available for the needs of the trade.
Examples of this are:
Project Constructional works: cover the movement of goods for

the project.
Fine art
Precious stones : Special Cover for of precious stones.
Stock through put cover: extended beyond the time goods are in
transit until when they are used at the destination.
Insurance- Specialized Covers
Seller's Buyer's Contingent Interest Insurance
An exporter selling on, for example FOB
(INCOTERMS 2000) delivery terms would according
to the contract and to INCOTERMS, have no
responsibility for insurance, once the goods have
passed the ship's rail.
However, for peace of mind, he may wish to purchase
extra cover, which will cover him for loss or will make
up cover where the other policy is too restrictive .
This is known as Seller's Interest Insurance.
Similarly, cover is available to importers/buyers.
Insurance- Specialized Covers (cont)
Loss of Profits/ Consequential Loss Insurance
Importers buying goods for a particular event
may be interested in consequential loss cover in
case the goods are received late and expensive
replacements have to be found to replace them.
n such cases, the insurer will pay a claim and
receive proceeds from the eventual sale of the
delayed goods.
Insuring Goods
Against Marine Risks
A marine insurance policy has to be obtained to cover
various risks while goods are in transit.
Marine insurance policy must normally be taken from an
Indian insurance company & should be for CIF value
plus 10% for incidentals.
Upon receipt of the cover, the insurer must study the
various clauses carefully.
Insuring Goods
Against Marine Risks (cont)
Policies can broadly be divided into 3 groups
Individual shipment policy
Open policy (automatic protection for all shipments. Each
shipment must be declared to the insuring company)
Floating Policy ( describes insurance in general terms &
leaves other particular to be stated subsequently)
Risks covered by marine insurance policies are represented by
special clauses like Institute Cargo clause (C), Institute Cargo
clause(B) , Institute Cargo clause(A) etc.
These policies are freely assignable
IV(d)
Quality & Preshipment Inspection
Introduction
For sometime now, a number of importers have used the services
of independent inspection companies, to certify the quality &
quantity of products , they want to import.
These inspections, mostly conducted prior to shipment & in the
country of exports, assure the importer that the goods conform to
the technical specification & quality standards laid down in the

contract & that the quantities exported are accurate.
Regulations in many countries, require that goods imported by
government departments to be inspected & certified for quality &
quantity by independent & competent inspection authorities.
Over 30 developing countries in the world use the services of
preshipment inspection (PSI) agencies to control unfair or
improper practices.
Introduction
The basic objectives of PSI are:
To carry out physical inspection of the goods to ensure that
they conform to the terms of the contract
To verify their prices &
To ensure that they are classified by the exporter under the
correct tariff classification of the importing country.
GATT Agreement recognizes PSI by several nations.
The purpose is to safeguard national financial interests
(prevention of capital flight and commercial fraud as well as
customs duty evasion, for instance) and to compensate for
inadequacies in administrative infrastructures.
Export Inspection Council of India (EIC)
The Export Inspection Council of India (EIC) was set up by the
Government of India under the Export (Quality Control &
Inspection) Act, 1963, as an apex body, to provide for sound
development of export trade, through quality control and preshipment
inspection.
The Act empowers the Central Government, to notify
commodities and their minimum standards for exports and to set
up suitable machinery for inspection and quality control.
The EIC is assisted in its functions by the Export Inspection
Agencies (EIAs) located at Chennai, Kochi, Kolkata, Delhi and
Mumbai, having a network of 38 sub-offices and laboratories, to
back up the pre-shipment inspection and certification activity
Export Inspection Council
Majority of export commodities have been brought within the
purview of this Act and are subject to compulsory pre-shipment
inspection.
All commodities will be covered by quality control and
compulsory pre-shipment inspection ultimately.
The Export Inspection Council, established under the Act
administers quality control and pre-shipment inspection.
The Council is responsible for establishing laboratories/ test
houses providing inspection facilities for the commodities notified
Has established inspection agencies, under which quality
inspection officials operate
IV(e)
ECGC Services
ECGC
Export contracts are open to risks which can generally be
categorized into two broad types:
POLITICAL RISKS
Can be caused by outbreak of war or civil war, in the
importers country or coup or an insurrection, which can
result in delay or non-receipt of payments. Same problems
may arise due to macro-economic or balance of payments
problems, in the importers country.
COMMERCIAL RISKS

These are insolvency or protracted default in payment by
the buyers.
ECGC
The Government set up the Export Risks Insurance Corporation
(ERIC) in 1957 to provide export credit insurance support to
Indian exporters.
This was transformed to Export Credit & Guarantee Corporation
Ltd. (ECGC) in 1964 & then to Export Credit Guarantee
Corporation of India Ltd. In 1983.
ECGC is wholly owned by GOI & functions under the Ministry of
Commerce.
ECGC is managed by a Board of Directors comprising
representatives of the Government, RBI, Banking , Insurance &
Exporting community.
The goal of ECGC is to provide cost effective insurance and trade
related services to meet the needs & expectations of the exporting
community.
Need For Export Credit Insurance
Payments for exports are open to risks even at the best of times.
The risks have assumed large proportions today,due to the farreaching
political and economic changes that are sweeping the
world.
Outbreak of war or civil war or coup or an insurrection, may
block or delay payment for goods exported.
Economic difficulties or balance of payment problems may lead
a country to impose restrictions on either import of certain
goods or on transfer of payments for goods imported.
In addition, the exporters have to face commercial risks of
insolvency or protracted default of buyers.
Export credit insurance is designed to protect exporters from the
consequences of the payment risks, both political and
commercial, to enable them to expand their overseas business
Services Provided By ECGC
To Exporters
To provide political & commercial risk cover to the
exporters.
To provide exporters information regarding credit
worthiness of overseas buyers (Dun & Bradstreet)
Provide information on approximately 180 countries
with its own export ratings.
To facilitate exporters in recovering bad debts.
Services Provided By ECGC
To Exporters (cont)
Assists exporters in obtaining financial assistance from
commercial banks / financial institutions & provides guarantees
to bankers for:
Packing Credit guarantee ( pre-shipment credit on the basis
of export order)
Post shipment export credit guarantee
Export performance guarantee ( Counter guarantee to
protect bankers against guarantees given by it on behalf of
exporters)
Export Finance Overseas Credit guarantee ( to banks
financing overseas projects)
Types Of Policies Issued By ECGC
Construction Works Policy

It is a comprehensive policy covering credit risks faced by
Indian contractors executing civil contracts abroad. Nature of
these contracts differ from other normal supply contracts.
Insurance for Buyers Credit & Lines Of Credit
Buyers Credit is a credit extended by Banks in India to an
overseas buyer in order to enable him to pay for importing
machinery & equipment for a specific project from India
A Line of Credit is a credit extended by a Bank in India to an
Overseas Bank, institution or Government, for the purpose of
facilitating import of goods from India to the overseas country.
ECGC has evolved policies for banks which extend Buyers
Credit or Line Of Credit to overseas buyers.
Types Of Policies Issued By ECGC
Continued
Shipment Policy
Shipment ( comprehensive risks) Policy, commonly known as the
Standard Policy, is ideally suited to cover risks in respect of goods
exported against maximum 180 days terms & covering most risks
I.e political & commercial, from date of shipment.
Issued to exporters whose export turnover is over Rs. 50 Lakhs
Covers all shipments made by the exporter on credit terms
excepting shipments made to ones own associates.
Shipments on consignment basis ( where payments are made by the
agent on stock & sale of the goods ) are normally excluded.
Air shipments are covered only when the exporter has been issued
a cover against open delivery & has paid appropriate
premiums.
ECGCs Performance
(In Rs. Crores)
Item 2007-08 2006-07
Value Of risks covered 922,183 428,040
Premium Income 668 618
Claims Paid 420 372
Recoveries made 157 210
IV(f)
GSP Rules Of Origin
Generalised System Of Preferences
(GSP)
GSP is a non contractual instrument by which
industrialized (developed) countries
unilaterally & on the basis of non- reciprocity
extend tariff concessions to developing countries.
The following countries extend tariff preference
under their GSP schemes:
USA, New Zealand, Belarus, European Union ,
Japan , Russia, Canada, Norway, Australia,
Switzerland, Bulgaria.
Generalised System Of Preferences
(GSP)( Cont)
GSP schemes of these countries detail the sectors/
product & tariff lines under which these benefits are
available, besides the conditions & the procedures
governing these benefits.
These schemes are renewed & modified from time to
time.
Normally customs of GSP offering countries require

information in a prescribed form duly filled by
exporters of beneficiary countries & certified by
authorized agencies.
Global System Of Trade Preferences (GSTP)
Under the agreement establishing global system Of
Trade Preferences (GSTP), tariff concessions are
exchanged among developing countries, who have
signed the Agreement.
Presently there are 46 member countries of GSTP
and India has exchanged tariff with 12 countries on
a limited number of products.
Export Inspection Council (EIC) is the sole agency
authorized to issue certificate of origin under
GSTP.
SAPTA
The agreement establishing SAPTA (SAARC preferential
Trading Agreement) was signed by 7 SAARC members
namely India, Pakistan, Nepal, Bhutan, Bangladesh, Sri
Lanka, Maldives in 1993 & came into operation in 1995.
Four rounds of trade negotiations have been completed
and more than 3000 tariff lines are under tariff
concessions among the SAARC countries.
(v)
Benefits Of Exports
(i) Excise Clearance Benefits/Rebate
Income Tax Benefit
Excise Clearance Benefit/ Rebate
Excise Duty
Excise duty is a tax imposed by the Central government on goods manufactured
in India.
It is collected at source I.e. before removal of goods from the factory premises
Exporters are totally exempted from payment of CED
However, necessary clearances must be obtained by the exporter in one of the
following ways
(i) Export Under Rebate
Under this system, an exporter is required to pay CED initially & then claim it
from central excise department after shipment of goods.
(ii) Export under Bond
Under this system, an exporter is required to execute a bond, in favor of excise
authorities, for a sum equivalent to the amount of excise chargeable on such
goods. Such bond should be supported by an appropriate bank guarantee.
of Central Excise Rules
Export Procedures for Excise - There are basically two procedures
for dispatching the goods out of India.
(a) (Rule 18 of Central Excise Rules).
In the first procedure, duties are paid and subsequently rebate (refund) is
claimed after exportation of such goods. Alternatively, rebate is granted of
duty paid on inputs used in the exported final product.
Rebate claim had to be made to A.C. of Central excise along with original
of ARE-1 & other prescribed documents.
(b) (Rule 19 of Central Excise Rules).
The other procedure is to export goods under bond without payment of
excise duty.
On actual exportation of goods and on presentation of necessary proofs
regarding exports, the bond is released. Regular Exporters can have a

running bond for this purpose.
A merchant exporter has to furnish bond in form B-1 & certificate in CT-1.
Conditions For Central Excise Clearance
As a part of further simplifications and
rationalization of excise rules announced by the
Finance Minister a new set of Central Excise
Rules, 2001, has come into effect from 1st March
2002.
The procedure for export of excisable goods
(except to Nepal & Bhutan) is subject to certain
conditions & limitations.
( Under payment of CED)
The excisable goods can be exported directly from a factory
or a warehouse after the payment of excise duty
the date within which they were cleared for export from the
factory of manufacture or his warehouse.
The market price of the excisable goods at the time of
exportation is not less than the amount of rebate duty
claimed.
The amount of rebate of duty admissible is not less than Rs.
500.00
( Without payment of CED)
The exporter is required to submit a General Bond ( Surety
or security) to the Assistant Commissioner of Central Excise
or the Maritime Commissioner for a sum equivalent to the
duty chargeable on the goods.
the the date on which they were cleared for exports from the
factory of manufacturer or his warehouse.
Income Tax Benefits
1. Exemption from Income Tax: In order to
enable the exporters to plough back their
earnings and promote exports, the
Government has given IT exemption to
exporters under section 80HHC of the I.Tax
Act
2. Similarly long term tax holidays are allowed
to 100% EOUs in designated areas such as
EPZs, SEZs etc.
VI
Shipment & Transport
Sea, Air, Rail, Road, Pipeline
VII
Role Of Overseas Agents
& Remittance Of Commission
Overseas Agents
Selling through overseas agents is a strategic entry option
open to exporters.
Like all options, it has certain advantages & demerits.
Overseas Agents
Selling through an overseas agent is an effective strategy.
The agents serve as a source of market intelligence.
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.
Overseas Agents (cont)
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.
Some source of information on agents are:
Government Departments Trade Associations
/Chambers of Commerce /Banks
Independent Consultants/Export Promotion
Councils/Advertisement Abroad.
Appointing Overseas Agents
Points to be considered before appointing Agents
Size & age of the agent's company
Company's ownership and control, capital &
financial details
Name, age and experience of the company's senior
executives/ salesmen
Other agencies that the company holds.
Length of company's association with other principal
New agencies that the company obtained or lost
during the past year
Appointing Overseas Agents (cont)
Company's total annual sales and the trends in its sales in
recent years
Company's sales coverage, overall and by area
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
Demerits Of Appointing An Agent
There are certain disadvantages of appointing an
overseas sales agent, which are as follows;
After sales service can be difficult when selling
through an intermediary
There is some risk for the exporter to lose some
control over marketing & brand image.
(VIII)
Various Export Promotion
Schemes
Export Promotion schemes & Incentives
Duty Exemption Schemes- Advance license
Advance license (authorization) issued to allow duty free import of
inputs, which are physically incorporated in export product (making
normal allowance for wastage).
Advance license holders are exempted from payment of basic customs
duty, additional customs duty, anti dumping duty, education cess &
safeguard duty.
Consumables such as fuel, oil, energy, catalysts, etc are also allowed

under this scheme.
Available to a manufacturer exporter / merchant exporter
Also available to manufacturer of intermediate products used by
the main exporter & for deemed exports.
Duty Exemption SchemesAdvance Authorisation
Advance license is issued subject to actual user condition &
necessitate exports with a positive value addition. Exports to SEZ
units are allowed.
Input-output norms are the description of inputs that are required for
the production of particular products & are published in Handbook of
Procedures.
Export obligations for manufacturers using the scheme is normally 18
months for the date of issue of license.
This scheme is considered useful when a standard product is
manufactured in large quantities & standard raw materials are used
for production.
Duty free import of mandatory spares up to 10% of CIF value of
license are also allowed.
Presently a Quantity Based Advance Licensing Scheme (QABAL) is
allowed replacing the value based scheme in force earlier.
Export Promotion Schemes & Incentives
Duty Exemption & Remission Schemes
Duty Exemption schemes enable duty free import of inputs required
for export production. These schemes are :
Advance Authorization
Duty Free Import Authorization (DFIA) : salient features of
Advance Licensing Scheme & DFRC have been clubbed to evolve
a new scheme named as DFIA.
The new scheme offers the facility to import required inputs
before the exports & allows transferability of scrip once the
export obligation is fulfilled.
This scheme allows duty free import of specified inputs for
export production as per standard Input- Output norms.
DFIA is allowed under actual user condition till export
obligation is fulfilled
Minimum of 20% of value addition is required for such
authorization.
Duty Exemption & Remission Schemes (cont)
Duty Remission Schemes enables post export
replenishment/ remission of duty on inputs used in
export product. Duty remission scheme consists of
Duty Entitlement Passbook Scheme (DEPB) &
Duty Drawback scheme (DBK)
Duty Remission Schemes
The main Duty Remission Schemes are Duty Entitlement
Passbook Scheme (DEPB) & Duty Drawback (DBK)
Entitlement Passbook Scheme (DEPB)
Under this scheme, grant of customs duty credit against the
exported product, is provided on the import content of the
product exported.
The credit is granted on post- export basis, as a percentage
of FOB value.
DEPB is a fully transferable instrument, which can be

availed of by the manufacturer as well as the merchant
exporter.
Exports under the DEPB scheme are allowed only in respect
of items, for which standard input-output norms exist.
Duty Remission Schemes (cont)
DEPB is valid for a period of 12 months from date of its
issuance.
Credit rates of DEPB are generally better than Drawback
rates and this scheme is very widely used by the exporting
community.
Duty Free replenishment certificates ( DFRC)
DFRC is an alternative to the advance license scheme where
the benefits are provided on post export basis
DFRC scheme has been withdrawn with effect from 1st May
2006
Duty drawback Scheme (DBK)
Duty drawback is defined as the rebate of duty chargeable on any
imported or excisable material used in the manufacture of goods
exported from India.
This is a widely used incentive around the world and provides a level
playing field to the countrys exporters.
This scheme is widely used exporters in India & has worked very
well.
The rates are notified by Directorate of Drawback under the Ministry
of Finance, annually.
Drawback rates are fixed for any class of products manufactured,
known as all industry rates, or for a product manufactured by a
particular manufacturer, known as brand rates.
Duty drawback Scheme (DBK) (Cont)
All industry rates are published every year & are normally valid for
one year. These are calculated
On the basis of average consumption of inputs, duties & taxes
paid, quantity of wastage & export price of exported products.
These are given either on quantity basis (per kg) or on ad valorem
basis (as % of FOB value) & are reviewed and revised
periodically.
Brand rates/ Special Brand rates are calculated if all industry rates
are unavailable or industry rates provide inadequate compensation
These are product and exporter specific & require proof of
payment of duties, materials used & irrevocable wastages incurred
and other data.
(EPCG) Scheme
EPCG scheme: introduced in 1990 to enable the import of
capital goods at concessional rate of duty (3% at present`)
subject to an appropriate export obligation accepted by the
exporter. The specified export obligation needed to be fulfilled
over a specified period in a prescribed manner.
The aim of the scheme is to reduce the incidence of high capital
costs on export prices to make export competitive in
international markets.
The import duty slab on capital goods was quite high when this
scheme was introduced. However, the import duties have been

reduced in the succeeding years
(EPCG) Scheme (cont)
The export obligation is required to be fulfilled by the
export of goods manufactured or produced by the use of
the capital goods imported under the scheme.
Capital goods including spares, jigs, fixtures, dies &
moulds can also be imported.
The export obligation of the user of this scheme is linked
to the amount of custom duty saved (presently 8 times)
There are no restrictions on the quantum of domestic
sales in case of imports under EPCG.
Marketing Development Assistance
(MDA)
Marketing Development Assistance (MDA)
Under MDA, exporters with turnover upto Rs. 15.00 crores are
eligible for financial assistance for a range of export promotions
activities such as participation in Trade Fairs, buyer-seller meets
abroad or in India , export promotion seminars etc.
Financial assistance with travel grants is available to exporters
traveling to Latin America, Africa, CIS region, ASEAN countries,
Australia & New Zealand. In other areas, financial assistance
without travel grants is available
Market Access Initiative (MAI)
Market Access Initiative (MAI)
This scheme is intended to provide financial assistance for
medium term export promotion efforts with a sharp focus on a
country & product. Export Promotion Councils (EPC) Industry
& Trade Associations, Agencies of State governments, Indian
Commercial Missions abroad are eligible for assistance under
this scheme.
Range of activities can be funded by MAI scheme. These
include: market studies, setting up of showrooms/warehouses,
sales promotion & publicity campaigns, participation in
international trade fairs etc.
Financial assistance ranging from 25% to 100% of total costs
can be received
Focus Market Schemes (FMS)
Objective:
Objective is to offset high freight costs & other externalities
to select international markets with a view to enhance our
export competitiveness in these countries.
Entitlement
Exporters of all products to notified countries shall be
entitled for duty credit scrip equivalent to 2.5% of FOB
value of exports for each licensing year commencing from
1st April, 2006
Exports made by EOUs,/ EHTP/ BTP, who do not avail
direct tax benefits,/ exemptions shall be eligible, provided
the same benefits are not availed otherwise.
Focus Product Schemes (FPS)
Objective:
Objective is to incentivise exports of such products which have
high employment intensity in rural or semi-urban areas, so as
to offset infrastructure inefficiencies & other associated costs

involved in marketing of such products.
Entitlements:
Export of notified products to all countries (including SEZ
units) shall be entitled for duty credit scrips equivalent, to
1.25% of FOB value of exports for each licensing year
commencing from 1st April, 2006
Exports made by EOUs,/ EHTP/ BTP, who do not avail direct
tax benefits,/ exemptions shall be eligible, provided the same
benefits are not availed otherwise.
Export & Trading Houses
Export & Trading Houses: Merchant as well as Manufacturer
Exporters, Service Providers, EOUs & units located in SEZs ,
AEZs, Electronic Hardware Technology Parks (EHTPs),
Software Technology Parks (STPs) & Bio-Technology Parks
(BTPs) shall be eligible for status.
Status is calculated on total FOB export performance during
current plus previous three years (taken together) upon
exceeding limit given below:
EXPORT HOUSE (EH): Rs. 20 Crores
STAR EXPORT HOUSE (SEH): Rs. 100 Crores
TRADING HOUSE (TH): Rs. 500 Crores
STAR TRADING HOUSE (STH): Rs. 2500 Crores
PREMIUR TRDING HOUSE (PTH): Rs. 10,000 Crores.
Export & Trading Houses (Cont)
Status holder will be eligible for a number of facilities including :
Authorization & customs clearance for both imports & exports, on
self-declaration basis.
Fixation of input-output norms on priority within 60 days
Exemption from compulsory negotiation of documents through
banks
100% retention of foreign exchange on EEFC account
Enhancement of normal repatriation period from 180 days to 360
days.
Exemption of providing Bank guarantee in schemes under FTP.
Special focus Initiatives
Vishesh Krishi & Gram Udyog Yojana
(VKGUY)
A new scheme called Vishesh Krishi Upaj Yojana( now
Vishesh Krishi & Gram Udyog Yojana -VKGUY) to boost
exports of fruits, vegetables, flowers, minor forest produce
and their value added products, has been initiated.
Capital goods imported under Export Promotion Capital
Goods (EPCG) scheme shall be permitted to installed
anywhere in Agri-Export Zone (AEZ)
Funds shall be earmarked under the Assistance to States for
Infrastructure Development of Exports (ASIDE) scheme for
development of AEZs
Vishesh Krishi & Gram Udyog Yojana
(VKGUY) (cont)
Import of restricted items like panels shall be
allowed under various export promotion schemes.
New towns of excellence with reduced threshold
limit of 250 crores shall be notified.
Certain specific flowers, fruits and vegetables will
be entitled to a special duty credit scrip, in addition

to the normal benefit under VKGUY.
Imports of inputs such as pesticides under Advance
License.
Handloom & Handicrafts Sector:
Handloom & Handicrafts Sector:
Specific funds would be earmarked for Market Access
Initiatives(MAI) Market Development Assistance (MDA)
scheme for promoting handloom exports.
CVD is exempted on duty free imports of trimmings &
establishments for handlooms & handicrafts.
Exemption of samples from countervailing duty (CVD)
Authorizing Handicraft Export Promotion Council to
import trimmings embellishments and samples for small
manufactures
Handloom & Handicrafts Sector: (cont)
Establishment of a new Handicraft Special Economic Zone.
Duty free import entitlement of tools, machinery
&equipment, trimmings & embellishments shall be 5% of
FOB value of exports during the previous financial year.
This shall also extend to merchant exporter tied up to a
supporting manufacturer.
Handicrafts EPC is authorized to import trimmings on behalf
of exporters.
New towns of excellence with reduced threshold limit of 250
crores shall be notified.
Gems & Jewellery Sector
Gems & Jewellery Sector
Permission for duty free import of consumables for metals
other than gold & platinum up to 2% of FOB value of exports
Duty free re-import entitlement for rejected jewellery allowed
upto 2% of FOB value of exports.
Duty free import of commercial samples of jewellery allowed
upto Rs 3 Lakhs
Permission to import gold of 18 carat and above under the
replenishment scheme
Cutting & polishing of gems & jewellery to be treated as
manufacturing under the Income Tax for purposes of
exemption.
Leather & Footwear Sector
Leather & Footwear Sector
Increase in duty free entitlement of import trimmings &
embellishments & footwear components for leather industry
to 3% of FOB value of exports & duty free imports of
specified items for leather sector to 5% of FOB value of
exports.
Imports of machinery for Effluent Treatment Plants
exempted from basic customs duty
Re-exports of unsuitable material ( raw hides & skins & wet
blue) permitted.
CVD is exempted on lining & interlining material & raw,
tanned & dressed fur skins.
Special focus Initiatives (Cont)

Special Focus initiatives have also been extended to
Marine Sector
Duty free entitlement of specified specialized inputs/ chemicals and
flavoring oils is allowed to the extent of FOB value of preceding
financial years export.
Electronic & IT Hardware
Exporters/ associations would be entitled to utilize MAI & MDA
schemes for promoting their exports
Sports Goods & Toys
This sector will be treated as a priority sector under MDA/MAI
schemes wherein specific sums would be earmarked for this sector.
DGFT will issue Fast Track clearances to their applications.
Served from India Scheme (SFIS)
Service Exports
Objective is to accelerate growth in exports of
services so as to create a powerful & unique
Served From India brand, instantly recognized
and respected
All service providers of services listed, who have a
total free foreign exchange earning of at least Rs.
10 Lakhs in preceding year will qualify for duty
credit scrip equivalent to 10% of free F.E. earned
Service Exports (cont)
Service Exports
EPCs set up in order to map opportunities for key services in key
markets and develop strategic market access programmes,
including brand building in coordination with sectoral players &
nodal bodies of the service industry.
Services include all 161 tradable services covered under General
Agreement on Trade in Services (GATS) where payment for such
services is received in free foreign exchange.
Service exporters are required to register themselves with
respective EPC or FIEO.
(IX)
SEZ, EHTP,STP & EOUs
Export Processing Zones (EPZs)
In order to encourage exports, GOI, has provided special incentives
for units set up primarily for manufacturing goods for export. Such
units can be set up in designated Export processing Zones (EPZs)
These EPZs are designed to provide an internationally competitive
duty free environment at low cost for export production. Each of the
zones provide basic infrastructure facilities like developed land,
standard design factory buildings, roads, power, water supply,
drainage and customs clearance facilities.
The first EPZ set up in India was in 1965 - the Kandla Free Trade
Zone. Subsequently, six more EPZs have been set up at : Santa Cruz
(Bombay) , Falta (WB) , Madras (Tamil Nadu), Noida (U.P), Cochin
(Kerala), and Visakhapatnam (AP).
EPZs have now been merged into SEZs.
EOU Scheme
The Export Oriented Unit (EOU) Scheme, which had been
introduced in the early 1980s remains in the forefront of
countrys export production schemes.
The scheme has witnessed many changes over the last twenty-six

years in the context of ever changing economic realities.
However, the basic premise remains the same. This premise is
that the exporters are treated as a special class and given the
required tariff, non-tariff and policy support to facilitate their
export efforts.
Thus, today the EOU Scheme has emerged as a dynamic policy
initiative facilitating the exporting community in the task of
increased exports
EOU Scheme
There is a separate Export Promotion Council for EOU & SEZ
units.
100% EOUs fall into 3 categories
(a) EOUs established anywhere in India and exporting 100%
products except certain fixed percentage of sales in the
Domestic Tariff Area (DTA) as may be permissible under the
Policy.
(b) Units in Free Trade Zones or Special Economic Zones
(SEZs) and exporting 100% of their products.
(c) EOUs set up in Software Technology Parks (STPs) and
Electronic Hardware Technology Parks (EHTPs) of India,
Bio-technology Parks (BTP), for development of Software &
Electronic Hardware & Bio-technology respectively.
Export Oriented Units (EOU), Electronic Hardware Technology
Parks(EHTPs), Software Technology Parks(STPs)
Bio-technology Parks (BTPs)
Eligibility : Units undertaking to export their entire production of
goods & services (except permissible sales in DTA), may be set up
under the above schemes. Trading units are not covered under these
schemes.
These units may import and/or procure from DTA or bonded
warehouses in DTA/ international exhibitions held in India,
without payment of duty, all types of goods including capital
goods. Import of capital goods will be on self certification basis &
will be subject to actual user condition.
They may procure from DTA, without payment of duty, certain
specified goods for creating a central facility.
Export Oriented Units (EOU), Electronic Hardware Technology
Parks(EHTPs), Software Technology Parks (STPs)
Bio-technology Parks (BTPs)
These units ,other than service units, may export to Russian
Federation in Indian Rupees against repayment of State
Credit/ Escrow Rupee account , subject to RBI approval.
These units, may also source capital goods from a domestic/
foreign leasing company without payment of customs/ excise
duties
They will be entitled for reimbursement of CST on goods
manufactured in India & exemption from payment of CED on
goods procured from DTA.
They will be exempted from Income Tax as per section 10A &
10B of I.T. Act
They will be allowed to retain 100% of export earnings in
EEFC account.
(SEZ)
Special Economic zones (SEZ) is a specifically
designated duty free enclave which shall be deemed to

be a foreign territory for the purpose of trade
operations & duties & tariffs.
The policy provides for setting up of SEZ in the
public, private & joint sectors or by state
governments.
The Government has already converted a number of
Export Processing Zones (EPZ) to SEZ. Amongst them
is the Santa Cruz SEZ at Mumbai.
(SEZ) (cont)
SEZ Act 2005, was passed by the Parliament in May 2005 & came into
effect on 10th Feb 2006. The Act is supported by SEZ rules.
As on 9th Jan, 2008, number of notified SEZs were 193. At the end of
December 2007, there were 211 SEZs with formal valid approvals.
In 2006-07, total exports from all 18 SEZs (Government & private
together) were $ 7.68 B, indicating an increase of 48.8% over the exports
in 2005-06.
By the end of November, 2007, total investments in all SEZs were Rs.
59,631 Crores and 276,307 persons were employed by all SEZs.
(Statistical Outline of India)
Special Economic Zones(SEZ) (Cont1)
Some of the features of SEZ are:
Export & Import : Goods & services going into
the SEZ area from DTA shall be treated as deemed
exports and the domestic suppliers are eligible for
deemed export benefits. Similarly, goods &
services coming from SEZ area into DTA shall be
treated as if the goods are being imported. The
entire production of SEZ must be exported & DTA
sales are permitted only after payment of full
applicable customs duties.
Activities permissible : SEZ units may be set up for manufacture, services,
production, processing, assembling, trading, repair, remaking,
reconditioning etc. Units for generation of power may also be permitted at
SEZs.
Foreign direct Investments: (FDI) : FDI up to 100% is allowed through
automatic route for all manufacturing activities, except prohibited items.
Promotional Package:
Exemption from payment of CED on procurement of capital goods, raw
materials, consumable spares etc. from the domestic market.
Reimbursement of CST paid on domestic purchases.
Income Tax exemptions as notified in Section 10A and Section
80-LA of the I.T. Act.
Support services like banking, post offices, clearing agents etc.
are available within the zone.
Exemption from payment of Service Tax.
No license required for imports. Exemption from customs duty
on imports of capital goods, raw materials, consumables,
spares etc.
SEZ units can retain 100% of their export proceeds in
Exchange Earners Foreign Currency (EEFC) account.
Realization of export proceeds allowed up to 12 months from
the date of exports.
Highlights- EOUs Vs SEZs

Export Oriented Units Special Economic Zones
Establishme
nt
EOU can be set up at any place declared
as warehousing station under Customs
Act. There are over 300 such places in
India.
SEZ unit has to be located within
the specified zone developed
Import
Procedure
Can import capital goods, R.M.
consumables, packing material,etc without
payment of customs duty. Similarly, these
can be procured indigenously without
payment of CED Second hand capital
goods can also be imported.
SAME AS EOUs
Net Forex
Earnings
They have to achieve positive NFE.( Net
foreign Exchange Earnings)
SAME AS EOUs
Minimum
Investment
Min investment in plant & machinery &
building is Rs.100L before stating prodn.
There is no such limit for SEZs.
Export Oriented Units Special Economic Zones
Procedure A bond in prescribed format has to
be executed ( B-17 in case of EOU)
A bond in prescribed format has
to be executed ( A form
prescribed under SEZ Rules
2003)
Green
channel
There is no physical supervision of
customs/excise authorities over
production & clearances but proper
records to be maintained.
SAME AS EOUs
Customs
Clearance
Fast track clearance scheme for clearance of imported consignments for EOUs In case of SEZs ,
customs clearance for exports & imports is obtained within SEZ
Export Of Final Prod.
Generally all final prodn to be exported except rejects up to prescribed limit.
SAME As EOUs
EOUs SEZs
CST CST paid on purchases is refundable
In case of SEZs, suppliers do not have to pay CST.
Supplies made by Indian Suppliers
Supplies made by Indian suppliers

are deemed exports & suppliers
are entitled to benefits of deemed
exports
Supplies to SEZs are
exports and all export
benefits are available.
Infrastructure General infrastructure available to
EOU units are not as good as those
available to SEZs.
SEZ infrastructure is
normally much better.
UNIT I
INTRODUCTION
Preview
As your ambition is to become an expert manager in International Business, you must
understand the details of export-import (Exim) financing and documentation. You are all
aware, that business is impossible without finance, especially when it is international
business, it involves huge amount of finance, including foreign exchange (frex). Let us now
have an overview.
In order to equip you, well in this field, the study material consists of the following units.
Unit I - Introduction, dealing with export documentation foreign exchange regulation, ISO
9000 series, pre shipment inspection, export trade control and marine insurance.
Unit II - Export Procedures deals on export polices, procedures, credit (short term and long
term) and guarantee.
Unit III - Import procedure including different types of licensing, passbook and related
matters.
Unit IV - Export incentives provides you details on various types of incentives (duty as well
as tax ) and the procedures and documentation required.
Unit V - Trading Houses, Various export promotion measures, setting up EOU/FTZ/EPZ/SEZ
and the encouragement by providing the honour of stars to export houses according to their
performance.
With this overview of the subject, let us discuss the salient features of the unit 1, which will
be discussed in the form of the following lessons.
Lesson 1. Introduction : To Exim financing theories of international
Trade, scope and need of exim finance, finance function, and emerging challenges are
discussed.

Lesson 2. Export documentation: The need for documentation, various
documents required for multifarious export activities are discussed in detail wherever
necessary to explain the contents of the documents speciation is also shows.
Lesson 3. Foreign Exchange Regulation: In the present world of
momentary economics, different countries use different
currencies, and foreign exchange becomes pivotal in international
transactions. Foreign exchange needs continuous and
comprehensive control, as otherwise there would be danger of
economic crisis. Hence the aspects of forex regulations with
special reference to the Foreign Exchange Regulation Act is studied.
Lesson 4. ISO 9000 series and other internationally accepted quality:
Certificates. Export involves huge sums of money and if once the exported commodities are
returned due to lack of quality, the name of the country will be spoiled, apart from incurring
heavy loss, which could be detrimental to the business. Hence the need for quality and its
standardization how it in done and who controls it are elaborately discuss, so that when you
become the manager you may take steps for such quality implementation.
Lesson 5. Quality control and preshipment inspection: Following,
International Standards as per norms is on aspect and using it for quality control and
arranging for preshipment inspection to assure quality is another aspect. You would come to
know what are quality control measures and how preshipment inspection is made.
Lesson 6. Export Trade Control: In a vast country like ours export trade control is a
mammoth task and its need and procedures are explained so that you could adopt them.
Lesson 7. Marine Insurance: Foreign Trade / Export and import are mostly carried through
ships and the sea is source of high risk and dangers. Therefore, the need for marine insurance,
the procedures and modes of marine insurance are explained in this lesson.

COMMERCIAL PRACTICE:
You would be learning the theoretical parts of the subject through the study materials but you
should also know the details of commercial practices through some practical field visits to the
nearly respective spots like the office of the clearing and forwarding agents, Port Trust office,
Tax and excise department, foreign Trade Organizations, Bank offices dealing with forex
marine Insurance Agents office Trading and Export houses various licensing, authorities,
nearby EOU / FTZ / EPZ / SEZ units etc. Visit is one aspect; There other modes of gaining
practical knowledge. Among your group of students registered for the course, there may be
students who are actually working in such export connected fields recognition / promotion /
knowledge etc. You could identity such students (Employees) and have individual discussion,
group discussion, clarification of certain points of view studied in the material.
You can also take up case studies of certain aspects of nearby export centre office unit. If
retired officers, employees from export units are available, you can also have discussion and
they can share their experience and discuss certain reel case studies which they have
experienced. These activities would enhance your knowledge and develop profound
understanding of international trade.
Lesson -1
INTRODUCTION TO EXIM FINANCING
Objectives
To understand the concepts of Exim finance, its function and global financial market.
To study the scope of Exim Finance.
To list out the needs of Exim Finance.
To analyse the Exim financial functions.
To examine the emerging challengers in global financial market.
Structure
1.1. Preliminaries
1.2. Scope of Exim Finance
1.3. Need for Exim Finance

1.4. Finance Functions
1.5. Emerging challenges in a global financial market
1.6. Summary
1.7. Keywords
1.8. Answers
1.9. Questions
1.10.Further Reading
1.1 PRELIMINARIES
International (Exports / Imports) Trade
Every country in the globe has to depend on others for some purpose or other. In the modern
world the wants are increasing and they can not be satisfied within a country. All
products/services cannot be provided within a countrys limit. Crossing the boundaries of
countries or even crossing the boundaries of the world will become the order of the globe, to
fulfil its needs and demands.
Nature has distributed the factors of production unequally over different counties and so
certain countries are endowed with certain resources abundantly. Countries differ in terms of
climatic conditions, natural resources, mineral resources and mines, labour and capital
resources, technological competencies, entrepreneurial and managerial capabilities and many
other variables which are essential for producing goods and services. Hence, different
countries become experts and efficient in certain production / services whereas theory are not
so in several others.
There fore countries depend on each other and get the goods and services from the countries
which are more efficient than themselves. Thus international trade in the form of exports
and imports is inevitable for satisfaction of the people and their survival too.
There are several theories of international trade about which you may be already aware.
These theories indicate or explain why export import is taking place. Just to mention some of
them are
Absolute cost advantage theory

Comparative cost theory
Factor proportion theory
Human capital approach
Natural resources theory
R and D on product life cycle theory
Scale economies theory
Thus, the international trade is necessitated by so many complex variables / factors and it is
clear that international trade cannot be neglected for development of a country.
Exim Finance
The Export / Import trade cannot function smoothly, efficiently and effectively unless new
techniques, methods and instruments have been evolved in the field of international finance.
Global wants
and needs
International
Trade Export / Import
Exim Finance
The international trade is growing faster than the world output. India is also realised the need
for international trade and introduced economic liberalization and favourable exim policy etc
from 1991-92 onwards. The capital flow and direct investment across the countries have
increase enormously in tune with the growth of international trade. The fast growth of
multinational, national corporations has place at the disposal at the disposal of world large
and varied quantum of goods / services.
In order to cope with the growth of international trade in leaps and bounds, the international
monetary and fiscal systems have also developed fast and are

improving their sophistication. A number of important innovations like. Letter of Credit, Bill
of Exchange have taken place in international payment and credit mechanisms which have
facilitated free exchange of goods and services.
1.2.SCOPE OF EXIM FINACE
The future for exim finance is bright and brilliant because the export / import trade is
catching fire and growing with accelerated pace. Naturally, the exim finance should also
develop faster to match the needs of international trade.
Various aspects of export / import trade which will increase the scope of exim finance are
discussed now.
Scope of exim finance
Facilitates more international trade / export
There is high competition to increase the exports of the countries and naturally the concerned
countries take efforts to provide much credits and facilities in collaboration with national and
multinational financial institutions.
Difference in technological development
The technological development is not uniformly good in all countries. In less developed
countries, technological know-how is less and so they have to pay heavy charge for utilizing
the services of the experts. Huge finance is required to make such payments and this process
of transfer of technology is continuous. One country or other will be advancing in one field
or other and the countries which have not mastered the technology have to pay for it. Thus,
this aspect also creates increasing scope for exim finance.
Easy terms and condition of credit makes export / import easier
When the exporters could get finance in easier terms, they will be selling goods and services
on easier terms to the importers. The national / international institutions come to help the
exporters / importers and such assistance enables the exim traders to utilize more of exim
finance.

Source of economic development
Developing countries need more exim finance to improve their economy, through
development projects. Such projects require huge exim finance in various forms of goods and
services. Hence there is a vast scope for further progress of exim finance.
To reduce adverse balance of payment
In the initial stages of development there is chain action of adverse economy. Borrowings for
developmental activities and repayment, pushes the balance of payment to adverse
conditions. Even to meet such situation exim finance comes to the rescue of the countries.
Further the export assistance would help to improve their exports and economy also.
Exim finance as a factor of production
Under agreements of international finance, manufacturers can get finance / credit for new
materials, heavy duty capital goods on deferred payment and could improve their production.
When production improves, it will reflect the countrys better economy also.
Sales promotion
Activates like, organization of trade fair, exhibitions, large scale advertisement publicity and
other sales promotion measures need adequate international finance and assistance.
Better consumer service
In the context of awakening of the consumers, manufacturers have to spend more on product
modification, improvement of quality, increasing use of products better and suitable pricing,
after sales service, all these activities require exim international financial assistance in some
form or other (example: for using technical know how in the area).

To meet Increasing costs
In spite of all fiscal and monetary measures, the cost of production, distribution,
documentation, all require more and more finance. International finance helps to overcome
this problem and to improve their exports and economy.
Source of improving exports
Apart form production, distribution, documentation etc, the exports can be increased only be
improving the export promotional activities including sophisticated production techniques
and improved quality products etc. Here again international finance has a role to play.
To meet, short, medium, and long-term financial needs
Manufactures need such finance to improve their business unless the exim finance comes to
the help of the exporters / importers, they will all be in trouble. Such credits help them to
devote on export promotion activities without worrying on such credits.
International payments made easier
Export / Import transactions require funds in different currencies for payment and settlement.
The modern instruments like LC, Bills of exchange, documentary credits as international
finance through banks and other institutions make the international payments easier.
Thus there is ample scope for the fast growth and development of exim finance because of its
involvement in all developmental programmers and international trade.
1.3 NEED FOR EXIM FINANCE
The scope of expansion / growth is based on needs of any country, the exim finance is needed
in all activities of export/import short, medium and long-term
basis. These needs are analysed on these two dimensions
Needs for Exim Finance

Need of short-term finance to exports
Since the export activity involves huge international finance, the success of
it depends on providing such credit/finance to importers. The exporter gets his export based
needs from the banks for the purposes of
Procuring raw materials
Manufacturing process or making advances to other producers
from whom exportable goods are ordered
To meet the expenses of packing, handling, internal transport, insurance and warehousing
charges
Shipment charges
Need of short-term finance to importers
Mostly the short-term finances are provided by the exporter and hence the importers do not
require much short-term finance generally. However, an importer may require short-term
finance/credit for the following:
For payment of advance to the exporter
For meeting the shipping charges, insurance etc when he undertakes them
To pay duty in obtaining import license and other import formalities.

Need of long-term finance for exporter/importer
The long-term finance is equally essential to the exporter and importer. Developing countries
need long-term finance from the point of manufacturing to the stage of sales, for various
purposes
Import-export of capital goods.
To provide finance on liberal terms to importer
To carry out export promotion programmes involving huge sums
Establishment of new enterprises
Capital investment in other countries
Check your progress. 1
1. State any two resources variations of different countries.
2. State any two theories of international trade
3. Mention any three advantages of exim financing
4. Draw a flow chart indicating needing exim financing
1.4. FINANCE FUNCTION
As discussed earlier, a number of significant innovations have been
introduced in international payment and credit mechanisms which have facilitated the easier
exchange of goods and services. This leads to the study of functions of exim finance.

The finance function has two roles to playas indicated in Fig 1.3
1) Accounting and control and
2) Treasury management
These two are not independent of each other. These two functions are interlinked and any
action in one area will have definite impact on the other area. For example, if the treasurer
takes some decision, it will have implication on the controller and so also the efforts of the
controller could be reflected in treasury management. Some of the tasks relating to controller
are:
o Accounting
o Reporting
o Internal control
Some of the tasks of the treasurer are
o Financial analysis
o Planning
o Acquisition and deployment of funds
The core of treasury management is acquisition and allocation of financial resource so as to
minimise cost and maximise the return consistent with the level of financial risks acceptable
to the firm/corporation.
In non-financial companies, financial management can be confined to short and long-term
flows of funds arising out of operational requirements.
In such concerns, active efforts to take advantage of market conditions to generate profits by
creating financial flows unrelated to operations need not be taken. But the treasurer can
effectively exploit market imperfections and the firms superior forecasting ability to generate
purely financial gains. However, there is a complexity and challenge of international exim
finance and it is due to wide variety of instruments, products, funding options and investment
vehicles which are available for both reactive and pro-active management.
Exim finance control and management functions are quite challenging and complex with
multiplicity of solutions depending upon the given conditions.

1.5. EMERGING CHALLENGES IN A GLOBAL FINANCIAL MARKET
Exim finance being international by nature is a complex system which may further get
complicated due to new methods, strategies and procedure through innovation. Hence global
financial market is emerging with challenges for global financial managers. They should be
shrewd, alert and active in meeting the challenges. Some of the challenges are discussed
hereunder.
Knowledge of up-to-date information
There are many variables in the global financial management which will be changing over
time and therefore it is necessary that up-to-date information is promptly known to the
manager
The areas which may change are
o Foreign exchange rates
o Credit conditions at home and abroad
o Industrial tax
o Changing foreign trade policies and connected policies relating to industry and
investments
o Development of new financial instruments
o New modes of communication
Analysing the complex interrelationship
Apart form trying to get latest information on the above variables/areas, the manager should
be able to analyse the inter-relationship among them and the impact of reactions on the
corporate body and the competitors
Adaptation of firms finance function
Adaptation to the changing needs is a trait to survive because the theory says survival of
the fittest" only. So the manager should see that their firm is fittest in the field by adopting
proper changes and by absorbing necessary adaptations.

It could be in the following areas:
o Product-market mix
o Opening up of a -sector or an industry, so far not taken up by the firm.
o Increased Pace of diversification
o Adopting changes in operating results
o Substantial reorientation in a major competitors strategies measures
o Exploration of innovative funding strategies and
o Changes in dividend policy
Take necessary measures to rectify failures/mistakes
In a fast changing highly competitive world, mistakes and failures, may bring in catastrophe
and mistakes may also be unavoidable. In such circumstances, fast and alert action to remedy
the mistakes and failures should be taken to reduce their adverse impact. A tactful manager
could tackle such failures in lightning speed so that the competitors may not know such a
thing has happened. If time is given, they may adopt a strategy to win over the firm.' Catch
the opportunities offered' is the maxim to be followed.
In a highly competitive world opportunities are volatile and may be grabbed by the opponent
in no time. So, design and implement effective strategies to catch opportunities in the market.
With such brief introduction on the exim finance, in this lesson, the different types of export
documentation.
Check your progress 2
1. The two major functions of finance and (1) -------(2)------2. List out the tasks of the treasurer of a concern
3. Normally short item finance is for _________days
4. Write any two areas of change relating to emerging challenges

1.6 SUMMARY
In the subject on exim Financing and Documentation, all information on international trade
(exports / imports) are provided in brief so that you could become knowledgeable manager in
international trade. The nature, scope and need of exim finance is discussed in this first lesson
apart from the financial functions which should be well understood by the managers of export
organization. The emerging challenges are indicated so that they should be prepared to face
and tackle them.
1.7 KEYWORDS
Exim finance : Finance required for export / import
International Trade : Export / Import of goods and services
Short-term finance : Up to 180days (subject to extension by the concerned authority)
Medium and longterm : The number of years vary. Some classify, 1 to 3 years as medium
term. Some classify 3 to 20 years as medium and long- term
Finance functions : It consists of control and treasury management functions.
Control function : Keeping accounts, reporting and internal controlling
Treasury Management : Analysis, Planning, Acquisition and Deployment of funds.
1.8 ANSWER
1. Natural resources, labour, Capital etc.
2. Absolute cost advantage theory, factor proportion theory
3. Source of economic development, serves as a factor of production, provides better
consumer service.
4. See fig-1.2
5. (1) Accounting and control (2) Treasury management
6. (1) Financial Analyse (2) Planning (3) Acquisition and development of fund. 7. 180. 8.
Foreign exchange rates, credit conditions.
1.9. QUESTIONS
1. Why International Trade is important for the development of a country?
2. What is the relation between International (export/import) and exim finance?
3. Discuss the scope of exim finance?
4. What are the needs of exim finance for exporters and importers?
5. What are the functions of exim finance?
6. What are the emerging challenges for the global financial managers?
7. Globalisation is the only way to survive in the modern market, discuss.
8. Distinguish
a) Control function of finance
b) Treasury management function of finance
1.10. FURTHER READING
M.J.Mathew, Management of Export Marketing, RBSA Publishers, Jaipur, India, 1997
VA.Avadhani, International Finance, Theory and Practice, Himalaya Publishing House, New
Delhi, 1998.
M,L.Varma, Foreign Trade Management in India, Vikas, New Delhi, 1983.

Lesson 2
EXPORT DOCUMENTATION
Objectives
To explain uses of principal and auxiliary documents for export-Principal documents;
invoice, bill of exchange; Auxiliary documents; letter of credit (LC), certificate of origin,
packing list, Inspection certificate, shipping bill, Mates receipt.
To identify the documents for claiming export assistance-application for registration,
import licence, cash assistance, duty drawback, AR-4 form, drawback of shipping bill,
transport assistance.
To compare the difference between principal and auxiliary documents
Structure
2.1.Introduction
2.2.Principal Documents
2.3.Auxiliary Documents
2.4.Documents for claiming Export Assistance
2.5.Summary
2.6.Keywords
2.7.Answers
2.8.Questions
2.9.Further Reading
2.1 INTRODUCTION
Significance of documents
In international trade, documentation and procedures play a significant role. Full knowledge
and accurate compliance of procedures and documentation formalities are essential.
Inadequate understanding of the various formalities results in delays; and prolonged
correspondence, adversely affecting the business and cash flow, due to delays in realisation of
export proceeds and other

incentives. Without prompt money flow, the trade will face total blow.
Peculiar Nature
The movement of goods in international trade is associated with a number of documents. The
number of documents and related procedures have multiplied over time making international
trade complex and cumbersome. The essentials of documentation arise primarily due to
certain peculiarities of international trade and its transactions.
It is not like the domestic trade. The buyers and sellers are separated by long distance in
overseas trade transactions. This necessitates entering into a formal contract laying down
duties and responsibilities of buyers and sellers respectively. Otherwise, there will be a lot of
confusion and dispute. Further, some intermediation becomes inevitable.
Intermediaries
No international trade transactions can be completed without the assistance of at least three
intermediaries.
A carrier who undertakes to deliver the goods to the buyer on behalf of seller.
An insurance company that covers the risks arising out of hazards of long voyage and a
banker who collects the sale proceeds from the buyer and hands over the same to the exporter
There are other intermediaries involved in foreign trade
Freight forwarders
Freight brokers
Chambers of commerce
Documentation and connected formalities become necessary to ensure compliance of contract
obligations of the concerned parties such as the exporter, importer and intermediaries.
International trade is regulated everywhere. In India, several documents have been prescribed
for proper export trade control, Foreign Exchange Regulations, Quality Control and Preshipment Inspection,

Central Excise etc.
Major Documents of Export
The export documents can be classified into three major categories:
(1) Principal Documents,
(2) Auxiliary Documents,
(3) Documents for claiming Export Assistance,
2.2. PRINCIPAL DOCUMENTS
Definition
The documents which are used all over the world by the exporters and form the essential link
in foreign trade between the exporter and the importer and are used to control payment, title
and transportation are called principal documents.
It may also include certain documents which are required under Foreign Exchange
Management Act. The documents classified under principal documents for exports are
explained below.
2.2.1 Export Invoice.
The Need
An invoice is the basic document which gives full details of the contents of the shipment and
serves as sellers bill of goods and sets out the terms of sale. An invoice usually means a
Commercial invoice. An exporter must prepare this document which will fully identify the
overseas shipment and serve as a basis for the preparation of all other documents.
There is no standard form for an invoice and it is the exporter's choice to design his own
form. The invoice is prepared for the buyer abroad. Any special requirement of the importer
must be duly complied with.
Components
The specimen invoice given below indicates the components of invoice

The following are the essential details which should be available in the invoice
Name and address of the exporter
Invoice number and date
Buyer's and Seller's Order numbers
Name and address of the overseas customer Name of the vessel and sailing date
Unit price and total value
Terms of payment
Insurance reference
Customs and consular declaration
Shipping marks and number on packages
Quantities and description of commodities
Net weight and gross weight as well as measurement in metric units Specification of
packing
Terms of sale (FOB., CIC., C&F, FAS, etc,)
Bill of lading number

Letter of credit number and date.
Import licence number and date.
Types of Export Invoices
The main types of export invoices are as follows
(i) Proforma Invoice: Proforma Invoice is a preliminary, provisional, temporary invoice for
an anticipated shipment which mayor may not take place. Such invoices serve some useful
functions.
The overseas buyer is in a position to deal with certain requirements before placing the order,
etc. obtaining an import licence.
It can be supplied to the bank when a Letter of Credit is to be opened by the overseas buyer
with the instructions that the letter of credit be opened in accordance with the invoice.
(ii) Combined Certificate of Origin and Value. This is required by Common wealth countries.
The exporter should make inquiries as to the particular form which satisfies the requirements
of the port of destination as well as the particular good being exported. The statement of the
value of the goods made by the exporter is of great use in determining the import duty which
should be paid at the destination.
(iii) Consular Invoice: Sometimes the importer requires the invoice to be certified by the
consulate of his country residing in the exporter's country. Consular invoice facilitates the
clearing of goods through the customer at the destination and serves as authentication of the
particulars in it.
(iv) Invoice Certified by a Recognized Chamber of Commerce: If the importer has to pay duty
on the current domestic value of the goods, he would require the invoice certified by the
recognized chamber of commerce of the exporter's country.
(V) Legalized Invoice: There is no specific form prescribed for legalized invoice. Mexico
needs a legalized invoice. Normally, invoice is acceptable for

legalization. Four copies are required along with legalization fee. Three copies will be
generally sent to the exporter and one copy will be retained by the Mission.
(vi) Customs Invoice: Countries like Canada and the United States of America need customs
invoice. This is needed so that goods could enter at preferential tariff rates.
2.2.2 Bill of Lading
Definition
A Bill of Lading is a document issued and signed by a shipping company or its agents
acknowledging that the goods mentioned in the bill of lading have been duly received for
shipment, or shipped on board a vessel, and undertaking to deliver the goods in the same
order and condition as received, to the consignee, or his order or assignee, provided that
freight and other charges specified in the bill of lading have been duly paid.
The specimen Bill of lading is shown in the next page.
Purposes
A Bill of lading serves the following purposes:
It is a receipt for goods received by the shipping company.
It contains the terms of the contract between the shipper and the shipping company,
between stated points at a specified charge; and
It is a certificate of ownership to the goods.
The requirements which must be fulfilled to make the bill of lading negotiable:
It must be made out to the order of the shipper.
It must be signed by the steamship company.
It must be endorsed in blank by the shipper.
2.2.3 Bill of Exchange
Definition
It is defined as an unconditional order in writing, addressed by one person to another,
signed by the person giving it, requiring the person to which it is

addressed to pay on demand or at a fixed or determinable future time a sum of money, to or
to the order of a specified person, or to bearer .
Types
The bill is called a sight draft if it is made out payable at sight i.e. on demand.
If it is payable at a fixed or determinable future time it is called term draft or usance draft
because the buyer is receiving a period of credit, known as the tenor of the bill. The buyer
signifies an agreement to pay on The due date by writing an acceptance across the face of the
bill.
The specimen Bill of Exchange is shown below the name and the address of the

exporter should be given at the top of the bill.
Parties
There are three parties to a Bill Exchange. They are:
The Drawer (Exporter) (Seller): The person who executes the Bill of Exchange, therefore,
the person to whom payment is due.
The Drawee (Importer) (Buyer): The person on whom the bill of exchange is drawn and
who is required to meet the terms of the document.
The Payee: The payee is the party who receives payment.
It may be noted that the words bill and draft are used to mean the Bill of Exchange.
2.2.4 GR/PP/VPP/COD forms
Regulations
GRJPP/VPP/COD Forms are submitted to the customs authorities according to the exchange
control regulations. Section 18 of foreign Exchange Regulations Act, 1973 and para 11 B. 1
of Exchange Control Manual 1987 states that all exporters other than those exporting to
Nepal and Bhutan are required to submit a declaration in the prescribed from duly supported
by such evidence as may be

prescribed or so specified and true in all material particulars.
Value of Goods
It should also include the details of the amount representing:
The full export value of the goods; or
If the full export value of the goods is not ascertained at the time of
export, the value which the exporter, having (regard to the prevailing market conditions
expects to receive on the sale of goods in the overseas markets, and affirms in the said
declaration that the full export value of the goods (whether ascertained at the time of export
or not) has been, or will within the prescribed period be, paid in the prescribed manner.
Purposes
The specific purpose for which the specific forms should be used are as given below
GR; for all shipments (except by post)
PP; for exports by post parcel
PP/COD; for collection of proceeds through post office. COD means cash on Delivery.
Submission
The forms should be submitted in duplicate. The original copy is meant for the customs
authorities and the duplicate is lodged with an authorized dealer (AD) along with other
documents for realisation of export proceeds from the foreign buyer. The copy which is
retained by the customs authorities is sent to the Exchange Control department of the Reserve
Bank of India; RBI the duplicate submitted to the AD, is also sent to the RBI after the
documents are negotiated.
Check your progress. 1
1. Major classes of documents for export are .
2. State any two types of invoice
3. State true or false
(a) A Bill of lading in another name for bill of exchange

(b) The shipping company acknowledges the goods mentioned in the Bill of lading (BOL)
(c) PP form is used for collection of proceeds
2.3 AUXILIARY DOCUMENTS
Introduction
The documents which are required in any shipment or for that matter used in the preparation
of the principal documents are called auxiliary documents. These include documentary Letter
of Credit (LC), Certificate of Measurement. Certificate of Origin, Packing list, etc.,
2.3.1. Letter of Credit
Definition
A commercial letter of credit is issued by a bank at the request of a buyer of merchandise
whereby the bank itself undertakes to honour drafts drawn upon it by the seller of the
merchandise concerned. Thus, the letter of credit, (LC) substitutes the banks promise to pay
for that of the importer. All the requirements specified in the LC must be met including the
furnishing of documents, delivery dates, product specification, etc. before the seller can
receive payment.
The three essential parties to commercial letter of credit are:
The opener or importer or the buyer who opens the credit
The issuer-the bank that issues the letter of credit, and
The beneficiary-the seller in whose favour the credit is opened.
The specimen LC is shown in the next two pages.
Types of LC
There are several types of LCs. Required according to the specific requirements in the
foreign trade. Some of them are described below.
Revocable and Irrevocable LC
Now-a-days revocable letter of credit is rather rare because it means that the

terms of the credit can be cancelled or amended by an overseas buyer through the issuing
banker without prior notice to the exporter. Even when the buyer becomes a bankrupt it
cannot be revoked; only when the seller agrees it can be revoked.

The issuing banker is at liability to revoke even without giving notice. An irrevocable LC is
never confirmed. If it provides for the documents and if the draft is accepted for payment
within the prescribed time, the issuing banker loses his right to revoke.
Majority of letters of credit are irrevocable which means that once the buyers conditions in
the letter have been agreed to by an exporter, they constitute a definite undertaking by the
buyers bank and cannot be revoked without the exporters agreement.
If it is not confirmed the LC is unconfirmed.
Confirmed and Unconfirmed LC
A Confirmed LC carries the confirmation of another bank, generally, in the country of the
exporter. This type of confirmation binds the confirming banker to negotiate the drafts drawn
under the credit provided the terms and conditions thereof are fulfilled.
Without Recourse and with Recourse
A without recourse to drawer LC is one under which the negotiating bank cannot have a
recourse against the exporter if the draft is subsequently not taken up or reimbursed by the
issuing bank provided, of course, the negotiation is without recourse.
LC Sight and Usance
Documentary credit may provide for payment at sight or for acceptance of a usance bill of
exchange by either issuing bank in a buyers country or the correspondent bank in exporters
country. If the LC is not an at sight LC, it will be a usance LC.
Transferable LC
A transferable LC is one which can be transferred by the beneficiary named therein favour of
another party. A credit can be transferred only when it is expressly designated as transferable
by the issuing bank.

Checking the LC
Exporters are encouraged to check LC carefully to make that there is no misunderstanding
later. The beneficiary should check for the following:
The correct title has been used in addressing the beneficiary
The correct title of the buyer has been used.
The amount is sufficient, taking into consideration the terms of the sale and possible
addition of any charges.
The tenor of the drafts is the same as your quotation to the buyer,
The credit is available at the banking institution or in the location requested by you.
The document are required in the credit in accordance with the arrangements with the
buyer, and can such documents be furnished
The description of the merchandise is correct. (Check unit price trade definition, point of
shipment, and destination).
Any special instructions which may appear in the credit are agreeable
The expiration .date and place of expiration are correctly givt.'1\
The credit is confirmed by a domestic bank, or an unconfirmed
credit is enough.
The letter of credit permit & partial shipments or transshipments
if necessary.
2.3.2 Certificate Of Origin
Certificate of origin serves as an evidence to show the actual country of origin of the goods.
It is signed in the exporting country by the consul of the importing country or by the exporter
or by the Chamber of Commerce on the basis of required regulation.
The specimen certificate of origin is shown in the next page.
2.3.3 Packing List
Packing list should contain, item by item, the contents of cases or containers of a shipment,
with its weight and description set forth in such a manner as to
permit checks of the contents by the customs on arrival at the port of destination and by the
recipient. The packing list must be made in accordance with the instructions of the customer.

2.3.4 Inspection Certificate
As per the Export Act, 1963, the exporter has to submit an application in the prescribed form
in duplicate, sending the original to Export, Inspection Agency and duplicate to the Export
Inspection Council, seven days in advance of the expected date of shipment. The application
form contains details of shipment. including technical requirement including specifications as
stipulated in the

export contract. The goods are inspected and certificate issued, if found in order after
inspection.
2.3.5 Shipping Bill
A Shipping bill is required by the customs. There are separate forms of shipping bills for free
good, and goods for which there is a claim for drawback of duty.
It is prepared in duplicate. It is only after the shipping bill is stamped by the customs that the
cargo is allowed to be carted to the docks. There are a number of items such as the name of
the vessel, master or agent,' country of destination, description of goods, quantity and weight,
value, etc., which are included in this form.
2.3.6 Mates Receipt
The commanding officer of the ship will issue a receipt called the "mate's receipt" for goods.
When the cargo is loaded on the ship. It is first handed over to the port trust authorities so
that all port dues are paid by the exporter to the port trust. After making payment of all port
dues, the merchant or agent will collect the mate receipt from the port trust.
2.3.7 Business Travel Application For Foreign Exchange
Applications for grant of foreign exchange allotment to meet the maintenance, travelling and
entertainment expenses of businessmen proceeding abroad on ground of business, should be
made to the office of the Reserve Bank in whose jurisdiction the Head Office of the firm, on
whose behalf the travel is undertaken, is situated.
2.4 DOCUMENTS FOR CLAIMING EXPORT ASSISTANCE
In order to claim Export Assistance, the exporter has to complete certain formalities as per
the procedure laid down and furnish required information in various forms and documents
prescribed by the Government. Export Promotion Council, etc. for claiming export
assistance. The necessary documents required for submission for claiming export assistance
are discussed in the ensuing

paragraphs.
2.4.1 Application for Registration
Registered exporters are required to register themselves with appropriate registering
authority such as Export Promotion Councils, Commodity Boards and Chief Coritroller of
imports and Exports for availing the benefit of export assistance. The application for
registration should be accompanied by a certificate from the exporter. banker in regard to his
financial soundness. If the firm is having branches, the application for registration should be
made only by the Head Offices. The registration authority shall, if satisfied, issue a
certificate of registration to the exporter.
2.4.2 Import Licence for Raw Materials Intermediates Including
Components and Spares
Application for import licence should be made only by the registered exporters whether
merchant-exporter or man~facturer-expor1er, in the prescribed form to the licensing authority
under whose jurisdiction the Head Office of the registered exporter is situated.
Application for import licence will be made in respect of the exports made during the
preceding period according to the procedure laid down. The application should reach the
licensing authority within one month after the period to which the exports relate and should
be accompanied by the following documents:
(i) Treasury challan showing the payment of application fee.
(ii) The documents of export in the name of the registered exporter are require as mentioned
below:
(a) Shipping bill duly authenticated by customs:
(b) Bill of Lading:
(c) Invoices duly attested by the negotiating bank.
(iii) Original with a certified copy of the valid actual user licence on which the

items applied for are based.
2.4.3 Cash Assistance On Selected Export Products
Government gives cash assistance to promote exports of certain export products. The purpose
of the assistance is to neutralize the disadvantages, which result from prices and high import
duties, so that they could meet competition in the foreign markets. Application for grant of
cash assistance should be made in the prescribed form and sent along with shipping bill duly
authenticated by customs, bill of lading, and invoices duly attested by the negotiating bank.
2.4.4 Drawback Of Import And Excise Duties
The scheme of drawback of import and excise duties has been formulated by the Government
with the object of relieving the Indian exporter of the burden of import and excise duties on
the products exported, so as to put him on par, in the matter of competitive position, with
foreign competitors.
2.4.5 General Surety For Executing Bond (Form B-1)
The excisable goods can be exported outside India either under claim for rebate of excise or
under Bond. The difference between these two procedures is that in the case of former the
duty is first paid and its refund claimed after export, and in the latter case, the goods are
allowed to be exported without payment of duty provided a bond is executed in Form B-1
(General Security).
2.4.6 AR-4 Form
Each consignment is required to be presented to the Central Excise Officer having
jurisdiction over the factory together with an application in form AR-4 for claiming rebate of
excise duty. On the basis of the endorsement of the collector or concerned officers
endorsement the exporter will claim the rebate of excise duty if he has already paid, or
discharged his obligation to that extent in case he has executed the bond.
2.4.7 Drawback Shipping Bill
Shippers are required to give the details of the goods intended to be exported

under claim of drawback in a shipping bill which should clearly be marked Under claim
for drawback in order to take advantage of the drawback of import duty on the products
exported. Four copies of the drawback-shipping bill are normally prepared. Exporters should
furnish the information under the various columns in the drawback-shipping bill so that the
drawback is allowed early.
2.4.8 Drawback Bill
Drawback bill is required in addition to the shipping bill. It furnishes information about the
date of presentation of original bill of entry, number and date of the drawback shipping bill,
marks and number on the packages, description of goods, weight and quantity of the goods,
amount of drawback etc. This has to be certified by the Collector of Customs to the effect
that the amount of the bill does not exceed the amount of import duty paid on the goods
specified therein and drawback has not been allowed on the same article in any previous bill.
2.4.9 Transport Assistance
Railways give freight concession on export cargoes in respect of certain commodities. In
order to claim the refund of the railway freight, each export consignment should be
accompanied by declaration in the prescribed form by the exporter that the goods are meant
for export. The declaration should mention the name and other particulars of the consignee.
Endorsement on different copies of the declaration form will be made by:
(i) The Station Master of the accepting station to the effect that the goods described in the
declaration from have been received for movement from station to station.
(ii) The station master of the port station to the effect that the goods described in the
declaration form have been moved from the station to the port for export; and
(iii) The customs authorities at the port to the effect that the goods have actually been
exported. On the production of these documents to the appropriate railway authorities, one
gets refund of 50 percent or
less, as the case may be, of the railway freight paid by the exporter.
Check Your Progress 2
1. LC is a principal documents True/False
2. Shipping bill and bill of lading are same True/False
3. Write any two types of LC
4. What is the purpose of AR-4 form?
2.5 SUMMARY
The success of export/import finally depends on the proper use of the documents and
following correct form and action at every stage. You should be thoroughly familiar with
forms.
All principal documents, auxiliary documents, forms for export assistance are explained with
specimen forms for export assistance are explained with specimen forms. There could be
slight variation in format by different companies. Collect more specimen form your friend
working in an export company or by making a personal visit.
2.6 KEYWORDS
Bill of Exchange : It is an unconditional order by a person to pay the stated
amount to him or to the person ordered by him Certificate of origin : Indicates the origin of
goods
COD : Cash on Delivery
Drawee (Importer) : The person on whom the bill is drawn and who is
required to meet the terms of document
Drawer (Exporter) : The person who executes the bill of exchange and to
whom payment is due.
Export invoice : Given full details of the contents of the shipment. It is
like a commercial bill of good.
Inspection Certificate : Issued after in spoken of the quality of goods by Export
Inspection agency/Export Inspection Council
LC (Letter of Credit) : Issued as a guarantee by the Importers Bank
Mates Receipt : Issued by commanding officer of the ship. It is not equal
to bill of leading

Packing List : List giving term by item, the extents, cases, containers, with weight and
description
Payee : The party who receive the payment
VPP : Value Payable Parcel
2.7 ANSWERS
1. Principal, Auxiliary, and for export assistance
2. Proforma invoice, consular invoice
3. (a) False (b) True (c) False 4. False 5. False
6. Confirmed LC, Transferable LC
7. To claim rebate of excise duty from CEO
2.8 QUESTIONS
1. Could you put forth your agreements for the need of any three principal documents

2. Proper documents are essential to minimise dispute in foreign trade Discuss the
validity of the agreement
3. What do you mean by principal document explain any 3 of them

4. Why auxiliary documents are required explain with two examples
5. Narrate the Procedure to claim duty drawback

6. What are the documents which must accompany an export shipment. Describe them briefly
7. Write short notes on

(a) Certificate of origin(DOUBT)
(b) Inspection certificate

(c) Packing List
(d) Shipping Bill

(e) Maters Receipt
2.9 FURTHER READING
1. Cherian and Parab: Export marketing, Himalayas, New Delhi.
2. Govt of India: Handbook of procedures, import and export promotion, New Delhi.

LESSON - 3
FOREIGN EXCHANGE REGULATIONS
Objectives
To understand the concepts under foreign exchange regulations,
To analyse the sections of FERA / FEMA
To various restrictions of FERA
To list out the transactions regulated infer under exchange control
To Recognise the objective on methods of exchange control
To analyze the measure of exchange control of recepts and payment
To explain the concept of LERMS and its management
Structure
3.1 Introduction
3.2 An Overview of FERA
3.3 Transaction regulated under exchange control
3.4 Forex control in India
3.4.1 How regulation was introduced
3.4.2 Definition
3.4.3 Objectives
3.4.4 Methods
3.4.5 Administrator
3.4.6 Control of exchange earnings
3.4.7 Control over spendings
3.5 Foreign Exchange Market in India
3.5.1 Modified LERMS
3.5.2 How Managed
3.5.3 Advantage
3.6 Summary
3.7 Keywords
3.8 Answers
3.9 Questions
3.10 Further Reading

3.1 INTRODUCTION
Trade among different countries of the world is known from the past and exchange of goods
and services among different nations have been taking place form ancient days.
In the initial stages, international trade was based on barter-exchange of goods and service for
goods and services. However in the present global scenario, one cannot imagine trading on
barter basis. Every country in the world has a currency of its own which is the legal tender in
the country of issue but not outside its territory. Hence when trade takes place, the settlement
is done by exchange of currencies.
In the present interdependent World, it is impossible for a country to remain self sufficient
and deny itself the advantages of comparative cost. This in turn gives birth to the exchange
and the whole world has become a global village and hence there is need to exchange
currencies for trade.
The need for foreign exchange arises for settlement of trade and non trade transactions.
The exchange rate played important role in influencing the forex (foreign exchange)
transactions and the stability of the currency in the global market. Hence there is need to
enact all regulations to control forex transactions.
The Foreign Exchange Regulations Act was evolved based on British system first in 1947
and then modified in 1973. It underwent many changes to match with the increasing demand
for simplification. When economic liberalization was introduced an amendment act was
legislated in 1993.
The system of Foreign Exchange Control must be effective to strengthen and stabilize the
national economy but at the same time, it should be simple to adopt and transparent to avoid
misuse of the regulations.
Let us examine the major sections of FERA and the subject which they deal in order to get an
overall glimpse of the FERA 1993.

3.1.1. Foreign Exchange
The mechanism of converting currency of one country into another countrys currency is
known as Foreign exchange forex.
In India Sec. 2 (h) of the Foreign Exchange Regulation Act (as amended by the Foreign
Exchange Regulation Amendment Act, 1993) defines Foreign exchange as Foreign
currency and includes.
(a) all deposits, credits and balances payable in any foreign currency, and any drafts,
travellers cheques, letters of credit and Bills of exchange, expressed or drawn in Indian
currency but payable in any foreign currency.
(b) Any instrument payable, at the option of the drawee or holder thereof or any other party
thereto either in Indian currency or in foreign currency or partly in one and partly in the other.
Foreign exchange includes foreign currency, balances abroad, the instruments claimable in
foreign currency payable abroad.
3.2 AN OVERVIEW OF FERA
The purpose
The act was legislated to consolidate and amend the laws regulating certain payment dealings
in foreign exchange and securities, transactions indirectly affecting foreign exchange and the
import and export of currency and bullion, for the conservation of the foreign exchange
reserves and proper utilization thereof in the interests of the economic development of the
country.
Sections:
1. Short title, extent, application and commencement
2. Definitions: All connected definitions starting from Appellate Board to transfer are
given.

3. Classes of officers of Enforcement: Starting from the Directors of Enforcement to Assistant
Directors of Enforcement along with other officers who may be appointed have the powers
4. Appointment and powers of officers of Enforcement are explained
5. Entrustment of functions of Directors or other officer of Enforcement is given

6. Authorised Dealers in Foreign Exchange; How they are appointed and their role and
functions are explained
7. Money changers: Apart from Ads, RBI authorizes money changers with restricted
functions
8. Restrictions on dealing in Foreign Exchange: Transactions which can be done and which
should not be done are stated.
9. Restrictions on payment: This section elaborately gives details on what are the payments
and who could make such payments.
10. Blocked Accounts: The Blocked account is defined and how it should be operated is also
stated
11. Restrictions regarding assets held by non-residents.
12. Special Accounts: 11 & 12 Both omitted by Amendment Act 1993 w.e.f 8-1-93
13. Restrictions on import and export of certain currency and bullion Currency and bullion
cannot be imported/exported freely.
14. Acquisition by Central Government of foreign exchange. The central Government has
authority to transact on forex in order to control the exchange rate, movement etc.
15. Power of Central Government to direct payment in foreign currency in certain cases is
explained. Omitted by Amendment.
16. Duty of persons entitled to receive foreign exchange etc. Without the general/specific
permission of RBI no transaction could be made
17. Power to regulate uses etc of imported gold and silver is explained, omitted by
Amendment.
18. Payment for exported goods. The detailed procedure for getting payment for exported
goods is explained. In the context of Foreign Trade, this section must be thoroughly
understood by exporters for adopting the correct procedures.
19. Payment for lease, hire, or other arrangement: Inserted by amendment Act 1993.
20. Restrictions on payment in respect of certain securities
21. Custody of securities: 20 & 21, Both omitted by Amendment Act 1993
22. Restrictions on issue of bearer securities is explained.
23. Acquisition by Central Government of foreign securities: omitted by the Amendment Act
1993
24. Restrictions on Settlement etc: This is relating to settlement of properties which should
not be done without the permission of RBI when the person is resident outside India
25. Restrictions on holding of immovable property outside India
26. Certain provisions as to guarantee in respect of debit or other obligation The pervious
relating to companies has been substituted by this, by Amendment Act 1993
27. Restrictions on persons resident in India, associating themselves with or participating in
concerns outside India: (omitted)
28. Restrictions on the appointment of certain persons and companies as agents or technical
or management advisers in India: The definition of agent, company, processing are also
explained along with details on restrictions
29. Restrictions on establishment of place of business in India A person resident outside India
cannot start business without the permission of the RBI. The procedures are narrated in
detail.
30. Prior permission of RBI required for taking up employment etc in India by nationals of
foreign state Even employment of foreign nationals involves forex movement and hence
restricted
31. Restrictions on acquisition, holding etc of immovable property in India Any person who
is not a citizen of India, cannot freely acquire properties. The restrictions are explained
32. Restriction of booking of passages outside India and restrictions on foreign travels:
omitted by Amendment Act 1993
33. Power to call for Information. This is very vital because the adoption of regulations can
be verified only on the basis of facts and figures.
34. Power to search suspected persons and to seize documents. Most of the people using
foreign exchange are rich and could try to defy the enforcement officers. Hence they should
have statutory powers to search and seize documents to produce as evidence in the case of
offence.
35. Power to arrest: Otherwise the culprits may stay outside and try to distort the evidences
36. Power to stop and search conveyance: The culprits may try to escape in
vehicles/ship/plane and hence this power becomes essential.
37. Power to search premises: They may hide material evidences in
premises/house/factory/office
38. Power to seize documents. Even on knowing certain documents would be useful the
enforcement officers can seize the documents
39. Power to examine persons. This enables to enquire, search individuals
40. Power to summon person to give evidence and produce documents. It is also related to
getting the document by calling individuals.
41. Custody of documents: Officers can have the documents for a period not exceeding one
year
42. Encashment of cheque, draft, etc: The procedure for encashment is explained
43. Inspection: Who could inspect and how they could inspect are explained
44. Prohibition of disclosure of documents/information except in certain cases: Keeping
secrecy is essential for effective control and implementation of regulations.
45. Power of police officers and other officers to enter, search etc. sometimes police and other
officers help is necessary for enforcement.
This provision helps in this regard

46. Procedure in respect of foreign exchange or any other goods seized by police officers: In
order to avoid untoward behaviour of police officers and to guide them in the case of seizure,
detailed procedures have been formulated

47. Contracts in evasion of the Act Such contracts should not be made.

48. False statements: No false statement should be given by any body connected with forex

49. Failure to comply with conditions subject to which permission or licences have been
given or granted under the Act to be contravention of the Acts: Failure to comply with
conditions will be treated as contravention

50. Penalty for contravention is explained

51. Power to Adjudicate: Enquiry can be held in the prescribed manner

52. Appeal to Appellate Board: Freedom to appeal is given to know the truth.

53. Powers of the adjudicating officer and the Appellate Board to summon witnesses: The
Board has powers to summon witnesses

54. Appeal to High Court: over and above the board, appeal to High court is permitted.

55. Continuance of proceedings in the event of death or insolvency. The procedure in such
events to be followed is explained

56. Offences and prosecutions: When offence is proved, the procedure for prosecution is
stated

57. Penalty for contravention of order made by adjudicating officer, Appellate Board, High
Court is imprisonment for a term extending up to two years with fine or both may be imposed

58. Vexatious search: False information etc will also attract prisonment up to two years
with/without fine

59. Presumption of culpable mental state which means, intention, motive, knowledge of fact
and belief etc. but it shall be a defense for the accused to prove that he was not so.

60. Power to tender immunity from prosecution: Procedure to provide immunity is explained.

61. Cognizance of offences: Once offences are cognized, the culprits are punishable under
code of criminal procedure (CCP) 1898.

62. Certain offences to be non-cognizable: Subject to provisions of section 45 and
notwithstanding anything contained in the CCP, an offence punishable under section 56 shall
be decided to be non-cognizable

63. Confiscation of currency: security etc can also be done

64. Preparation: Attempt etc These are also treated as contraventions.

65. Corrections of clerical errors can be done if found before 2 years.
66. Application of section 360 of the CCP 1973 and of the probation of offenders Act 1958.
This is applicable to persons below 18 years of age
67. Application of the customs Act 1962.
68. Offences by companies are explained
69. Power of court to publish name: place of business etc of companies convicted under the
Act is described
70. Recovery of sums due to Government can be done as if it were an arrear of land revenue.
71. Burden of proof in certain cases would be on the accused.
72. Presumption as to documents in certain cases where any document is
produced/furnished/seized. The signature/handwriting of the documents can be presumed as
that of accused
73. Supplemental provisions in which the RBIs powers to declare residents etc are explained
74. Penalty for contravention of direction of Reserve Bank or failure to file returns is added.
75. Delegation of powers and the procedures are explained.
76. Power of Central Government to give directions is stated.
77. Factors to be taken into account by the Central Government and the RBI, while giving or
granting permission or licence under the Act are narrated.
78. Certain officers to assist officers of enforcement: Officers of customs, central excise
police, State Government officers, local authority, can help them
79. Bar of legal proceedings. Central Govt./RBI the enforcement officers are immune to legal
proceedings
80. Power to make Rules. The Central Government has power to make rules.
81. Power to remove difficulties is explained.
82. Repeal and saving: The previous FERA of 1947 is repealed
These heading with brief comments give a birds-eye-view of the FERA 1973 which has been
amended in 1993 taking into consideration the new developments due to liberalization of
Indian Economy around 1991-92.
Sections 11, 12, 15, 17, 20, 21 and 32 have been omitted by the Amendment Act 1993 w.e.f.
8-10-93.
Sections 18A, 73A have been added afresh.
Section 26 has been substituted by the previous one
In order to get a complete picture about the FERA, you may get any one of latest

bare Act, published by several agencies like Commercial Law Publishers (India) pvt. Ltd.
The amendment details will be incorporated in such updated bare Act books and comments
and case studies will also be available under relevant sections.
It may be noted that the FERA has since been named as FEMA (Foreign Exchange
Management Act).
In addition to the general rules under the Foreign Exchange regulations specific rules have
been arrange we will discuss that here Publication of names rules 1975, have been framed
with the following sections:
1. Short title
2. Definitions
3. Publication of names and other particular of persons
4. Publication under rule 3 to be made after specified period
Another legislation entitled Foreign Exchange Regulations (Authentication of Documents)
Rules 1976 has been framed with two section one is on short title and the other is on authority
for authentication and manner of authentication of documents.
The Foreign Exchange Regulation (Encashment of Draft, cheque or other instrument) Rules
1997 have been published under GSR 553 dt 15-04-1977 with the following sections:
1. Short title and commencement
2. Definitions
3. Delivery of draft, cheque or other instrument for encashment
4. Encashment of draft, cheque or other instrument
5. Indemnity
6. Direction for payment of the proceeds
7. Payment of the proceeds and interest
The Government of India has published further rules and clarifications under FERA apart
from the 1993 amendment act. Foreign exchange regulations rules (1974) was notified G.S.R
80 dt 1.1.74 which deals on the following subjects:

Sections
1. Short title and commencement
2. Definitions
3. Service of direction, orders or notices made or issued under the Act, or these rules or under
any order or notification made there under
4. Indication of import-export code number
5. Form of declarations
6. Authority to whom declaration to be furnished
7. Evidence in support of declaration
8. Period within which export value of goods to be realized
9. Manner of payment of export value of goods 10 & 11 omitted
10. Application for permission to practice any profession or carry on any occupation, trade or
business in India Along with VII schedules have been given, out-of-which, schedules IV, V &
VII have been omitted.
3.3 TRANSACTIONS REGULATED BY EXCHANGE CONTROL
In a nut-shell, the following types of transactions having international financial implications
are regulated by FERA 1973 as amended in 1993.
Purchase, sale and other dealings in foreign exchange and maintenance of balances at
foreign centers.
Procedure for conducting export business
Export-import of securities
Export-import formalities
Procedure for realization of proceeds of exports
Payments to Non-residents or to their accounts in India.
Transfer of securities between residents and non-residents.
Acquisition, holding of foreign securities
Foreign travel with exchange
Export and import of currency, cheques, drafts, travelers cheques and other financial
instruments, securities etc.,
Activities in India of branches of Foreign firms and companies and foreign nationals
Foreign direct investment and portfolio investment in India including investment by nonresident Indian nationals, persons of Indian origin and corporate bodies predominantly owned
by such persons.
Appointment of non-resident and foreign nationals and foreign companies as agents in
India.
Setting up of Joint ventures/Subsidiaries outside India by Indian companies.
Acquisition, holding and disposal of immovable property in India by foreign nationals and
foreign companies
Acquisition, holding and disposal of immovable property outside India by Indian nationals
resident in India.
Now let us see briefly how the regulatory system was evolved over a period and how the
control functions are carried out
2.10 The first forex Regulation was framed in ___________________(year)
2.11 After independence FERA was encoded in __________________(year)
2.12 State any two transaction regulated under FERA.
3.4 FOREX CONTROL IN INDIA
3.4.1 How Regulation Was Introduced?
BK Choudhury traces the historic development as follows:
Exchange control system was introduced in India during the Second World War, on
September 3, 1939, as an adjunct to the British system to help the U.K.s war efforts. It
embraced the transactions between India and the then on-sterling area countries.
At the end of the war, the huge sterling balance accumulated on Indias account in London
during the war years were frozen by the U.K. Government, though India, after Independence,
needed foreign exchange most to meet the requirements of her developing economy.
The countrys sources of foreign exchange earnings were limited to the exports of a few
traditional commodities like tea, jute, etc. Hence, the freezing of the sterling balance vis--vis
the needed imports of plant and machinery, raw materials, foodstuffs, etc., led to large
deficits in Indias balance of payments, even when the countrys foreign balances were
supplemented by borrowings from abroad. So, to conserve the countrys scarce foreign
exchange resources for use to the best national advantage according to a scheme of priorities
and to correct the balance of payments deficits, the war time control was continued.

This was done using the provisions of Article XIV of the IMF Agreement, as a peace time
control system under the Foreign Exchange Regulation Act, 1947, effective March 25, 1947.
This has since been replaced by the Foreign Exchange Regulation Act, 1973, now amended
under Foreign Exchange Regulation (Amendment) Act 1993. The operations of the Exchange
Control system have now come to encompass transactions with all countries outside India
excepting Nepal and Bhutan.
3.4.2 Definition:
Exchange Control means official interference in the foreign exchange dealings of a country.
The control may extend over a wide area, covering the import and export of goods and
services, remittances from the country, inflow and outflow of capital, rate of exchange,
methods of payment, maintenance of balance at foreign centers, acquisition and holding of
foreign securities, financial relationship between residents and non-residents, etc.,
Exchange control, in short, involves a rationing of foreign exchange among various
competing demands for it, and is effected through control of receipts, or of payments, or of
both as in India.
The control of receipts is intended to centralize the countrys means of external payments in a
common pool in the hands of its monetary authorities to facilitate judicious use thereof. The
control of payments is intended to restrain the demand for foreign exchange broadly in
consonance with the national interest within the limits of available resources.
3.4.3. Objectives:
The main objects of exchange control are to maintain the value of the countrys currency in
terms of other currencies and to bring about and maintain as far as practicable equilibrium in
the countrys balance of payments.
3.4.4 Methods:
Besides the control on the import and export of goods, the other methods used

for exchange control are:
a. Control of the exchange rate, i.e., fixing the exchange rate of the countrys currency in
terms of other currencies, exchange pegging,
b. Fixing currency areas, i.e., fixing the currencies in which payments for imports and
exports should be made and received, to and from specified countries. Such fixing, by
restricting the convertibility of home currency in terms of other currencies, helps the growth
of foreign exchange resources in approved currencies considered necessary in the national
interest.
c. Bilateral agreements, i.e., trade agreements between two countries contracted principally
for the purpose of avoiding the balance of payments deficits.
3.4.5 Administration:
The Exchange Control policy is determined by the Ministry of Foreign Trade, Government of
India, on the basis of the Foreign Exchange Regulation Act, 1973, amended under Foreign
Exchange Regulation (Amendment) Act, 1993. while the day-to-day administration thereof is
left to the Reserve Bank. To achieve the objectives of the Control, the Exchange Control
Department works hand in hand with the Trade Control authorities who control the import
and export of goods.
3.4.6 Control of Exchange Earning:
(iii) Surrender of forex through exports: For the purpose of control of foreign exchange,
every person, firm, company or authority in India earning foreign expressed in any currency
other than the currency of Nepal or Bhutan by the export of goods or services or in any other
way is required to surrender the foreign exchange to an authorized dealer and obtain payment
in rupees within three months from the date of acquisition thereof.
(iii) By its notification No. FERA 47/77-RB and FERA 48/77-RB of 24 th November 1977
under Sections 8 and 9 of the FERA 1973, respectively, the Reserve Bank has made it
obligatory for any person acquiring foreign exchange by way of income on assets held
outside India,
inheritance, settlement, gift, remuneration for services or by wayof payments made on behalf
of persons resident outside India, or any foreign exchange sent to or brought into India-to
offer the same for sale to an authorized dealer within seven days from the date of receipt in or
being brought to India.
The following are, however, exceptions to the general rule:
a. Foreign exchange held by authorized dealers.
b. Foreign exchange held or acquired by persons from business or any other purpose within
the scope of authorisation by the Reserve Bank.
c. Foreign exchange and any income there on earned by persons under employment, business
or vocation outside India taken up or commenced while they were resident outside India and
such stay outside India was for a continuous period of not less than one year.
d. Foreign exchange held in the form of coins.
e. Foreign currency or currencies held for numismatic purpose up to a total of U.S. $500.
f. Foreign currency or currencies held for personal purposes up to the total value of U.S. $
500.
g. Foreign currency or currencies held for personal purposes up to the total value of U.S.
$500 or its equivalent.
(iii) Declare export value: Though the export of goods other than those essentially needed for
use within the country as listed in Schedule I to the Export (Control) Order, 1968, or under
deferred payment arrangements is free, i.e., may be made without any permit or licence,
exporters are required to declare the export value of the goods before they are shipped and to
lodge the shipping documents for collection of the export proceeds with an authorized dealer.
The authorized dealer, in his turn, has to report the collection (or non-collection) to the
Reserve Bank in due course.
(iv) Fixing currencies for receipt: The Reserve Bank has listed the currencies in which
payment for exports can be received. Thus, the export of goods from shipment till the
receiving of payment as well as the currency in
which such payments can be received is under control.

3.4.7 Control Over Spendings:
(i) Import of goods The spending of foreign exchange is almost fully controlled. Except for
the few items listed in the Open General Licence (OGL) in operation for the time being,
goods can be imported from outside India only against a licence. Such licences are issued by
the Director General of Foreign Trade, while the receipt into India of goods of a value
equivalent to the amount of foreign currency paid out abroad is looked after by the Reserve
Bank.
The import policy is announced annually by the Central Government, and the import license,
granted by the Director General of Foreign Trade permitting import of goods, carries with it
permission to pay for them, while the Reserve Bank prescribe, more correctly has prescribed,
the currencies as well as the manner in which payment should be made.
(iii) For the import of services, or for remittances otherwise than in payment of imported
goods, or for the foreign exchange required for foreign travel, the licensing authority is the
Reserve Bank and in some cases, the Government of India. The control is exercised through
permits granted by the Reserve Bank against an application in a prescribed form.
(iii) The issue of foreign exchange in any form. Such as travellers cheques, notes, coins etc.
to persons resident in India even under instructions from an overseas branch/correspondent of
an authorized dealer requires prior permission of the Reserve Bank.
Let us have a brief view of exchange market in India.
3.5 FOREIGN EXCHANGE MARKET IN INDIA
There is no physical market for foreign exchange and the Banks having forex business
dealing with import/export customers, deal with each other through telephones, telex, Reuter
system etc., and thus create a market for foreign exchange. In view of modern advancement
of communication technology, the market is developing fast. But, care should be taken to
curb misuse. Such markets exist in India in Bombay. New Delhi, Calcutta, Madras,
Bangalore, Hyderabad etc., the most important center being Bombay. Indian Forex market
has been growing faster in the recent past to match the global market, a well functioning
market with greater depth and maturity. The major currencies traded in our forex market are
U.S. Dollar (USD), Pound Sterling (GBP),

Deutschemark (DM), Japanese Yen (JPY), French Francs (FRF), Swiss francs (CHF) etc.,
3.5.1. Modified Liberalised Exchange Rate Management System (LERMS)
The Balance of payment problems and the liquidity crisis in 1990 and 1991 brought about
reforms in the economy with liberalization, sweeping all sectors including forex front. On
March 1, 1992, RBI announced a new system of exchange rate known as Liberalised
Exchange Rate Management System (LERMS).
With the introduction of LERMS in March 1992 U.S. dollar was adopted as intervention
currency in the place of pound sterling. The rupee was partially with the introduction of dual
exchange rate system. 60% foreign exchange remittances including export earnings were
converted at market rates determined by the forces of demand and supply and the balance
40% were to be converted at official rate which was the rate quoted by RBI.
The 60% portion can be retained by the authorized dealer to sell in the market while the 40%
is to be surrendered to the RBI. Certain imports by Government and import of life saving
drugs were to be met at the market rates.
The dual exchange rate was abolished from March 1993 and the rupee was allowed to float
relatively and the external value of rupee was determined entirely by the forces of demand
and supply in the market. The official rate was abolished. The external value of rupees is
calculated on the basis of market rates and even the RBI rates are quoted on the basis of
market rate.
How managed?
The Liberalised Exchange Rate Management System (LERMS) which became effective from
1st March 1992 has been modified with effect from March 1, 1993. The main features of the
new arrangement are discussed below.
All foreign exchange transactions (receipts/payments both under current and capital accounts
of Balance of payments) would be put through by authorized

dealers at market-determined rates of exchange. Foreign exchange receipts payments would,
however, be subject to exchange control regulations. Foreign exchange receipts should be
surrendered by residents to authorized dealers except where residents have been permitted,
either under a general or special permission of RBI, to retain them either with banks in India,
or abroad.
Authorised dealers will be free to retain the entire foreign exchange receipts surrendered to
them for being sold for permissible transactions and are not required to surrender to RBI any
portion of such receipts.
Government of India has issued a general order in super cession of all its pervious orders.
Under Section 40 of the RBI Act, 1934, Pursuant to the order, RBI will sell to any authorized
person at its offices/branches referred to there in, U.S. doller for meeting foreign currency
payments at its exchange rate based on the market rate, only for such purposes as are
approved by the Central Government.
RBI will buy spot U.S. dollar from any authorized person at its offices/branches referred to in
the aforesaid order at its exchange rate. RBI will not ordinarily buy spot Pound Sterling.
Deutsche Mark or Japanese Yen. It will not ordinarily buy forward any currency. Any offer of
foreign currency to the Reserve Bank will be governed by the provisions of the Exchange
Control Manual.
No forward sale in any currency will be made by the RBI to authorized dealers. But will, be
prepared to enter into swap transactions under which it will buy U.S. dollar spot and forward
for two to six months.
The purchases/sales of U.S. dollar will be made by the RBI in multiples of U.S. dollar 5,000,
with a minimum of U.S. dollar 25,000
3.5.3 Advantages
The new system is a step towards full convertibility of current account transactions with a
view to reap the benefits to integrating the Indian economy with the world economy.

The exchange rate reflects the true value of rupee as the rate is decided by the market forces
of demand and supply.
This system has removed a lot of trade restrictions and exchange controls.
The expatriate Indians (NRIs)could get market exchange rates for their remittances which
made capital inflows more attractive for NRIs
This system was a great boon to the exporters as it provided incentive in the form of higher
rate.
This system, along with relaxation in exchange controls made havala business less attractive.
The modified LERMS is a further step in the direction of freeing external transactions from
cumbersome administrative controls. However LERMS doesnt mean complete abolition of
trade and exchange control but LERMS has opened up the economy and has brought about
greater transparency in the exchange rate system.
5. What are major methods of forex control?
6. Who determines the Exchange control policy?
7. Foreign exchange held in the form of coin must be handed over to Authorised Deater
True/False
8. The exchange rate reflects________________of rupees, when decoded by Market forces
3.6 SUMMARY
In the context of export import financing, these is need for foreign exchange regulations and
the control of forex, as otherwise it may affect the very basis of development. Hence the
foreign exchange regulation have been formulated used for forex the FERA(FEMA) as
amended in 1993. Tracing an historic perspective

of evolving FERA, the objective methods, control of earnings and spendings, the forced
market in India, modified LERMS and its management are discussed.
3.7 KEYWORDS
Exim: Export Import
Forex: Foreign Exchange
FERA: Foreign Exchange Regulation Act (Now Known as Foreign exchange
Management Act)
LERMS: Liberalised Exchange Rate Management system(1992)
3.8 ANSWERS
(1) 1947 (2) 1973 (3) (i) Payments to Non Residents to their accounts in India (ii) Foreign
Travel with exchange
(4) (i) Control of the exchange rate (ii) Fixing currency areas (iii) Bilateral
agreements
(5) The Ministry of Foreign Trade (6) False (7) The True value.
3.9 QUESTIONS
1. What is the need for controlling foreign exchange
2. How forex regulations have been evolved
3. comment an few sections of FERA 1973 as amended in 1993
4. consolidate the powers of Govt. of India Under FERA 1973 (as amended in 1993)
(Get some bear Acts book and analyse)
5. Explain LERMS
6. What are the advantages of modified LERMS
3.10 FUTHER READING
1. Bear Act of Foreign Exchange Regulations
2. Battacharya, Exporters Handbook Indian Institue of Foreign Trade.
3. Choudhury B.K. Finance of Foreign Trade and Foreign Exchange, Himalaya Publishing
House, Delhi, Bangalore
4. RBI Exchange control Manual (Revised)
5. Govt. of India, Export Import Procedures (Revised)

Lesson 4
ISO 9000 SERIES AND OTHER CERTIFICATES
Objectives
To list out various needs of standards
To recall the meaning / expansion of ISO
To state the historic perspective of ISO 9000
To enumerate the benefits to the society
To analyse the hallmark features
To identify the link between WTO AND ISO
To synthesize the various applications of ISO
To differentiate different certificates of 9000 series
To recognize the 20 elements of ISO 9000 system
To distinguish ISO 9000 And Balridge certificate
To explain the management of the ISO
To analyse the process of development of standards.
To recall ISOS partners
Structure
4.1 Introduction
4.1.1 Need for standards
4.1.2 Importance of conformity assessment
4.1.3 What is ISO
4.1.4 Meaning of ISO and uniform name
4.1.5 Brief historic perspective
4.2 Benefits to society
4.3 Hall mark features of the ISO brand
4.4 ISO and world trade
4.5 ISO and developing countries
4.6 Wide application/uses of ISO standards
4.7 Different types of certifications
4.7.1 ISO 9000 and ISO 14000
4.7.2 ISO 9000 series
4.7.3 ISO 9000 and Balridge criteria.
4.8 Where to find information on standards
4.9 Who can join ISO.
4.10 Management of ISO
4.11 How ISO is financed
4.12 The standards development process
4.12.1 How developed

4.12.2 Who develops
4.13 ISO partners
4.13.1 International partners
4.13.2 Regional partners
4.14 Summary
4.15 Keywords
4.16 Answers
4.17 Questions
4.18 Further reading
4.1 INTRODUCTION
4.1.1 Need of standards:
Standards make an enormous contribution to most aspects of our lives although very often,
that contribution is invisible. It is when there is an absence of standards, their importance is
brought home i.e conspicuous by absence. For example, as purchasers or users of products,
we soon notice when they turn out to be of poor quality, do not fit, are incompatible with
equipment we already have, are unreliable or dangerous. When products meet our
expectations, we tend to take this for granted.
ISO (International Organization for Standardization) is the worlds largest developer of
standards. Although ISO principle activity is the development of technical standards, ISO
standards also have important economic and social repercussions. ISO standards make a
positive difference not just to engineers and manufacturers for whom they solve basic
problems in production and distribution but to society as a whole.
They are very useful to industrial and business organizations of all types, to governments,
and other regulatory bodies to trade officials to conformity assessment professionals to
suppliers and customers of products and services in both public and private sectors and
ultimately, to people in general in their roles as consumers and end users.

ISO standards contribute to making the development, manufacturing and supply of products
and services more efficient, safer and cleaner. They make trade between countries easier and
fairer. They provide governments with a technical base for health, safety and environmental
legislation. They aid in transferring technology to developing countries. ISO standards also
serve to safeguard consumers, and users in general, of products and services as well as to
make their lives simples.
When systems, machinery and devices work well and safely then it is because they conform
to standards. And the organization responsible for many thousands of the standards which
benefit society worldwide is ISO.
4.1.2 IMPORTANCE OF CONFORMITY
Conformity assessment means checking the products, materials, services, systems or
people measure up to the specifications of a relevant standard. Today, many products require
testing for conformance with specifications or compliance with safety or other regulations
before they can be put on many markets. The voluntary criteria contained in these guides and
standards represent an international consensus on what constitutes best practice. Their use
contributes to the consistency and coherence of conformity assessment worldwide and so
facilitates trade across borders.
4.1.3 What is ISO
ISO is a network of the national standards institutes of 157 countries on the basis of one
member per country with a Central Secretariat in Geneva, Switzerland, that coordinates the
system.
ISO is a non - government organization: its members are not, as is the case in the united
nations system, delegations of national governments. Nevertheless, ISO occupies a special
position between the public and private sectors.
Therefore, ISO is able to act as a bridging organization in which a consensus can be reached
on solutions that meet both the requirements of business and the

broader needs of society, such as the needs of stakeholder groups like consumers and users.
4.1.4 Meaning of ISO and uniform name.
Because international organization for standardization would have different
abbreviations in different languages (IOS in English, OIN in French for
organization international de normalization), it was decided at the outset to use a word
derived from the greek isos, meaning equal . Therefore, whatever be the country whatever
be the language, the short form of the organisations name is always ISO.
4.1.5 Brief Historic Perspective
International standardization began in the electrotechnical field: the international
electrochemical commission (IEC) was established in 1906. Pioneering work in other fields
was carried out by the international federation of the national standardizing associations
(ISA), which was set up in 1926. The emphasis within ISA was laid heavily on mechanical
engineering. ISAs activities came to an end in 1942.
In 1946, delegrates from 25 countries met in London and decided to create a new
international organization, of which the object would be to facillates the international
coordination and unification of industrial standards . The new organization, ISO, officially
began operations on 23 February 1947.
There is another version of the Americans. Historians there claim, that ISO 9000 originated
from the quality standards of the US dept of defence (MIL-Q98558) in the 1950s.
The British standards institution adopted these standards and expanded them to include the
entire business process in 1979 and called them British Standards 5750. The international
organization for standardization adopted it in 1987 and called it the ISO 9000 Series.
4.2 BENEFIT TO SOCIETY

For businesses, Businesses using international standards are increasingly free to compete on
many more markets around the world.
For customers, The world wide compatibility of technology which is achieved when
products and services are based on international standards brings them an increasingly wide
choice of offers, and they also benefit from the effects of competition among suppliers.
For governments, International standards provide the technological and scientific bases
emphasising health, safety and environmental legislation.
For trade officials, International Standards are the technical means by which political trade
agreements can be put into practice removing technical barriers created by divergent national
and regional standards.
For developing countries, International Standards give developing countries a basis for
making the right decisions when investing their scarce resources by adopting the state of the
art technological know how in the form of standards.
For consumers, Conformity of products and services to International Standards provides
assurance about their quality, safety and reliability.
For everyone, International Standards can contribute to the quality of life in general by
ensuring that the transport, machinery and tools we use are safe.
For the planet, We inhabit, International Standards on air, water and soil quality, and on
emissions of gases and radiation, can contribute to efforts to preserve the environment.
4.3 HALL MARK FEATURES OF THE ISO BRAND
Equal Footing
Every participating ISO Member Institute (full members) has the right to take part in the
development of any standard which it judges to be important to its countrys economy. No
matter what the size or strength of that economy, each participating member in ISO has one
vote. ISOs activities are thus carried out

in a democratic framework where each country is on an equal footing to influence the
direction of ISOs work at the strategic level, as well as the technical content of its individual
standards.
Voluntary
ISO standards are voluntary. As a non-governmental organization, ISO has no legal authority
to enforce their implementation. Some ISO standards may be adopted as regulatory
framework by legislation by their own decision. ISO itself does not regulate or legislate.
However, they may become a market requirement, as has happened in the case of ISO 9000
quality management systems, or of dimensions of freight containers and bank cards.
Market -driven
ISO develops only those standards for which there is a market requirements. The work is
carried out by experts from the industrial, technical and business sectors which have asked
for the standards and which subsequently put them to use. It may include representatives of
government agencies, consumer organizations, academia and testing laboratories.
Consensus
Although ISO standards are voluntary, the fact that they are developed in response to market
demand, and are based on consensus among the interested parties, ensures widespread
applicability of the standards. Standards are reviewed every five years to make it a state of
the out standard agreed by all.
Worldwide
ISO standards are technical agreements which provides the framework for compatible
technology worldwide. Developing technical consensus on this international scale is major
operation. In all, there are some 3000 ISO technical groups (technical committees,
subcommittees, working groups etc.) in which some 50000 exports participate annually to
develop ISO standards.
4.4 ISO AND WORLD WIDE

ISO together with IEC (International Electronic Commission) and ITU (International
telecommunication union) has built a strategic partnership with the WTO (World Wide
Organisation ) with the common goal of promoting a free and fair global trading system.
The political agreements reached within the framework of the WTO require underpinning by
technical agreements.
The WTOs agreement on technical barriers to trade (TBT) includes the code of good
practice for the preparation, adoption and applications of standards. The TBT Agreement
recognizes the important contribution that International Standards and conformity assessment
systems can make to improving efficiency of production and facilitating international trade.
Therefore, where International Standards exists or their completion is imminent, the code
states that standardizing bodies should use them as a basis for standards they develop.
4.5 ISO AND DEVELOPING COUNTRIES
ISO standards represent a reservoir of technology. Developing countries, with their scarce
resources, stand to gain from this wealth of knowledge. For them, ISO standards are an
important means both of acquiring technological know-how that is backed by international
consensus as the state of the art and of raising their capability to export and compete on globe
markets. The whole spectrum of ISOs activities in favour of developing countries is
encompassed in the ISO Action plan for developing countries 2005-2010. ISO has a policy
committee on developing country matters, DEVCO, with a membership of nearly 117
standards institutes from both industrialized and developing countries.
4.6
4.7 WIDE APPLICATIONS / USES OF ISO STANDARDS.
Between 1947 and the present day, ISO published more than 15000 International Standards.
ISO-work programme ranges form standards for traditional activities, such as agriculture and
construction, through mechanical engineering to medical devices, to the newest information
technology developments, such as the digital coding of audio-visual signals for multimedia
applications
Standardization of screw threads helps to keep chairs, childrens bicycles and aircraft
together and solves the repair and maintenance problems caused by a lack of standardization.
Standards make technology transfer easier.
Without the standardized dimensions of freight containers, international trade would be
slower and more expensive. Without the standardization of telephone and banking cards, life
would be more complicated.
Standardized symbols provide danger warnings and information across linguistic frontiers
consensus on grades of various materials give a common reference for suppliers and clients
in business dealings.
Agreement on a sufficient number of variations of a product to meet most current
applications allows economies of scale with cost benefits for both producers and consumers.
An example is the standardization of paper sizes.
Standardization of performance or safety requirements of diverse equipment makes sure that
users needs are met while allowing individual manufacturers the freedom to design their own
solution on how to meet those needs.
Standardizations protocols allow computer from different vendors to talk to each other.
Standardizations documents speed up the transit of goods, or identify sensitive or dangerous
cargoes that may be handled by people speaking different languages. Standardization of
connections and interfaces of all types ensures the compatibility of equipment of diverse
origins and the inter-operability of different technologies.

Agreement on test methods allows meaningful comparisons of products, or plays an
important part in controlling pollution whether by noise, vibration or emissions. Safety
standards for machinery protect people at work, at play, at sea.. and at the dentists.
Without ISO standards on quantities and units, shopping and trade would be haphazard,
science would be unscientific and technological development would be handicapped.
More than half a million organizations is more 149 countries are implementing ISO 9000
which provides a framework for quality management throughout the processes of producing
and delivering products and services for the customer.
Check your progress1
1. (a) ISO is a govt. organization True/False (b) ISO 14000 is for maintaining quality in
business True/false
2. ISO officially began operations in 23 Feb _______________
3. ISO 9000 series was adopted in _________________
4. How ISO is beneficial to the consumers?
5. From 1947 to the present day more than _______________ International standards have
been published
4.8 DIFFERENT TYPES OF CERTIFICATES.
4.7.1 ISO 9000 and ISO 14000
The ISO 9000 and ISO 14000 families are among ISOs most widely known standards ever.
ISO 9000 has become an international reference for quality requirements in business to
business dealings, and ISO 14000 looks set to achieve at least as much, if not more, in
helping organizations to meet their environmental challenges.
The vast majority of ISO standards are highly specific to a particular product, material or
process. However, the standards that have earned the ISO 9000 and

ISO 14000 families a world wide reputation are known as generic management system
standards.
4.7.2 ISO 9000 Series
The book production Operating Management by R.P.Chase et, al. lucidly explains the
elements of the series. ISO 9000 consists of five primary parts numbered as 9000 through
9004.
ISO 9000 Series Systems and Guidelines for Use
Quality System
9001: Model for Quality Assurance in Design, Production Installation, and Servicing. (To be
used when conformance to specified requirements is to be assured by the supplier during
several stages which may include design/development, production, installation, and
servicing)
9002: Model for Quality Assurance in Production and Installation. (To be used when
conformance to specified requirements is to be assured by the supplier during production and
installation)
9003: Model for Quality Assurance in Final Inspection Test. (To be used when conformance
to specified requirements is to be assured by the supplier solely at final inspection and test)
Guidelines for Use
9000: Quality Management and Quality Assurance Standards. Guidelines for Selection and
Use.
9004: Quality Management and Quality System Element-Guidelines for Performance
Improvement.

(ISO 9000 Standards and Their Areas of Application in Production Flow)
If we were to display them on a continuum of an operating firm, the series would range from
design and development through procurement, production, installation, and servicing. While
ISO 9000 and 9004 only establish guidelines for operation, ISO 9001, 9002, and 9003 are
well-defined standards.
Quite a bit of work and expense may be needed to be accredited at the highest level, which is
9001. Furthermore, some firms may not need ISO 9001 accreditation. For example, note that
in the figure, ISO 9003 covers quality in productions final inspection and testing. A firm can
be accredited at this level of final production only. This would essentially guarantee the
firms quality of final output and be attractive to customers. A broader accreditation would be
9002, which extends from purchasing and production through installation.
There are 20 elements in the ISO 9000 standards that relate to how the system operates and
how well it is performing. These are contained in section 4 of the ISO 9000 Guidelines. Each
of these elements applies in varying degrees to the three standards 9001, 9002, and 9003.
(ISO 9001 contains all of them.)
The 20 Elements to be Addressed in an ISO 9000 Quality System
1. Management Responsibility
2. Quality System
3. Contract Review
4. Design Control
5. Document Control
6. Purchasing
7. Customer-Supplied Material
8. Product Identification and Traceability

9. Process Control
10. Inspection and Testing
11. Inspection, Measuring, and Test Equipment
12. Inspection and Test Status
13. Control of Nonconforming Product
14. Corrective Action
15. Handing, Storage, Packaging, and Delivery
16. Quality Records
17. Internal Quality Audits
18. Training
19. Servicing
20. Statistical Techniques
ISO 9000 is somewhat intentionally vague. A firm interprets the requirements as they relate
to its business. From a practical and useful standpoint for businesses, ISO 9000 is valuable to
firms because it provides a framework so they can assess where they are and where they
would like to be
The ISO intended the 9000 series to be more than a standard, reflecting a well organized
operation with trained, motivated people. There are so many sub divisions: ISO 10006: 1997
is guidelines to quality in Project Management ISO/TS 16949: 1999 is specific to automotive
industry
4.7.3 ISO 9000 and Balridge criteria
ISO focuses closely on internal process, especially manufacturing, sales, administration
technical service and support. The Balridge places more emphasis on customer satisfaction
and business results. So it is called to adopt first ISO 9000 and their approach for Balridge,
which awards a few points for quality control under ISO series.
4.8 WHERE TO FIND INFORMATION ON STANDARDS
ISOs entire portfolio of standards is listed in the ISO catalogue which can be accessed
online. The site also provides access to the world standards services network (WSSN) which
is a network of publicly accessible web services of standards organizations around the world.
Through these website, WSSN

provides information on international, regional and national standardization and related
activities and services.
In fact, there are several hundred thousand standards and technical regulations in the world
containing special requirements for a particular country or region. Finding information about
these, or about related conformity assessment activities, can be a heavy task. Isonet, the ISO
information network, can ease the problem.
In many countries, the isonet and WTO enquiry points are one and the same. WTO/TBT
wants to have national enquiry point in member countries
4.9 Who can join ISO
Membership of ISO is open to National Standards Institutes most representatives of
standardization in their country (one member in each country). Full members, known as
member bodies, each have one vote, whatever the size or strength of the economy of the
country concerned. In addition, ISO has two categories of membership for countries which
do not yet have a fully developed national standards activity. They pay reduced membership
fees. correspondent members are entitled to participate in any policy or technical body as
observers, with no voting rights. subscriber members are institutes from countries with
very small economies that nevertheless wish to maintain contact with international
standardization.
4.10 Management of ISO
All strategic decisions are referred to the ISO members, who meet for an annual general
assembly. The proposals put to the members are developed by the ISO council, drawn from
the membership as a whole, which resembles the board of directors of a business
organization. ISO council meets two times a year and its membership is rotated to ensure that
it is representative of ISOs membership operations are managed by a secretary general,
which is a permanent appointment. The secretary general reports to the ISO council, the
latter being

chaired by the president who is a prominent figure in standardization or in business, elected
two years. The secretary- general based at ISO central secretariat in Geneva, Switzerland,
with a compact staff which provides administrative and technical support to the ISO
members, coordinates the decentralized standards development programme and publishes the
output.
4.11 HOW THE ISO IS FINISHED
ISOs national members pay subscriptions that meet the operational cost of ISOs central
secretariat. The subscription paid by each member is in proportion to the countrys gross
national income and trade figures. Another source of revenue is the sale of standards. The
main costs are borne by the member bodies which manage the specific standards
development projects and the business organizations which provides experts to participate in
the technical work.
4.12 THE STANDARDS DEVELOPMENT PROCESS
4.12.1 How decided
What happens is that the need for a standard is felt by an industry or business sector which
communicates the requirements to one of ISOs national members. The work item is assigned
to an existing technical committee or to new technical committee ISO only launches the
development of new standards for which there is clearly a market requirement.
Special committee: CASCO (conformity assessment); COPOLCO (Consumer policy), and
DEVCO (developing country matters). These committees help to ensure that the specific
technical work is aligned with broader market and stakeholder group interests.
4.12.2 Who develops
ISO standards are developed by technical committees comprising experts from the industrial,
technical and business sectors which have asked for the standards, and which subsequently
put them to use. In addition others with relevant

knowledge, such as representatives of government agencies, testing laboratories, consumer
associations, environmentalists, academic circles and so on .
The national delegations of experts of a technical committee meet to discuss, debate and
argue until they reach consensus on a draft agreement. This is then circulated as a Draft
International Standard (DIS) to ISOs membership as a whole for comment and balloting.
They ascertain views of connected people. If the voting is in favour, the document, with
eventual modifications, is circulated to the ISO members as a Final Draft International
Standard (FDIS). If that vote is positive, the document is then published as an international
standard. Every working day of the year, an average of ten ISO meetings are taking place
somewhere in the world.
4.13 ISOs PARTNERS
4.13.1 International partners
ISO collaborates with its partners in international standardization, the IEC (International
Electrotechnical Commission) and ITU (International Telecommunication Union). The three
organization, all based in Geneva, Switzerland have formed the World Standards Cooperation
in order to better coordinate their activities, as well as the implementation of International
Standards.
ISO is one of the few non-governmental organizations having an observer status in the World
Trade Organization. Its contribution is increasingly solicited in relation to the elimination of
technical barriers to trade.
ISO collaborates with the United Nations Organization and its specialized agencies and
commissions, particularly those involved in the harmonization of regulations and public
policies like WHO, UNCTAD, UNIDO, WMO (Maritime Organization Tourism) and

ISOs technical committees have formal liaison relations with some 580 international and
regional organizations.
ISO is now an institutional member of the World Economic Forum, has increased its
collaboration with NGOs representing societal or professional interests, such as Consumers
International, the World Business Council on sustainable Development or the international
Federation of Standards Users (IFAN) and collaborates regularly with the major international
organizations involved in metrology, quality and conformity assessment.
4.13.2 Regional Partners
Many of ISOs members also belong to regional standardization organizations. This makes it
easier for ISO to build bridges with regional standardization activities throughout the world.
ISO has recognized regional standards organizations
1. ISO 9000 consists of _________ primary parts from __________ to ___________
2. ISO 9000 is model for _____________________________
3. Expansion of WSSN is _____________________________
4. Correspondent members have voting rights (True/False)
5. The Major types of partners of ISO are _______________________
4.14 SUMMARY
What is ISO, and how it functions why and how it was started etc., are discussed.
ISO 9000 series formally launched 1987, are useful for international business, govt.
consumers customers, trade officials, developing countries and to the planet by reducing
environment pollution.

How ISO and WTO Coordinate for Maintenance of Standards what are the different types of
ISO 9000 series are discussed. ISO/4000 to meet the challenges of their environment. For the
sake of the practical application when you became a manager, details on who can join ISO,
and from where to get more information are also discussed
The management, finance systems of ISO are described apart from explain up the whole
process of developing standards by ISO. It is a scientific, transparent process. Finally how
ISO collaborates Coordinates with international and regional organizations in also described.
4.15 KEYWORDS
ISO :International Organisation for Standards some, use it as International
Standard, Organisation as expansion of ISO
WTO :World Trade Organisation
ISO9000 series: It consists of 5 standards 9000 to 9004 of which 9001 to 9003
one specific nature
IEC: International Electrotechnical Commission
ITU: International Telecommunication Union
TBT: Technical Barriers on Trade
DIS: Draft International Standards
WMO: World Maritime Organisation
WSSN: World Standards Service Network
4.16 ANSWERS
1. (a) false (b) false 2. 1947 3. 1987
4.Conformity of products and services to International Standards provides
assurance about their quality safety and reliability
5. 15000 6. five, 9000 to 9004

7. Quality Assurance in Final Inspection Test
8.World Standards Service Network 9. False 10. International and Regional
4.17 QUESTIONS
1. What are needs for Standards?
2. What is ISO?
3. What are the benefits to Society?
4. What are hall mark features of ISO brand?
5. Bring out the Coordination between ISO and LTO
6. How ISOs useful for developing countries
7. What are the wide applications of ISO standards?
8. What are different types of Certification Differentiate the Operational areas.
9. Compare ISO and Badridge award?
10. Where from information an ISO can be obtained?
11. Who can join ISO?
12. How the Standards are developed explain in detail?
13. Who are International Partners?
14. Who are regional Partners?
4.18 FURTHER READING/REFERENCES
1. http://www.iso.org/iso/en/ISOoonline.frontpage provides all details
2. Production and operating Management (Manufacturing and Service) Richard P. Chase
et.al., Tata McGraw Hill NewDelhi
3. Total Quality Management area.pounds etc., al., McGraw Hill

Lesson 5
QUALITY CONTROL AND RESHIPMENT INSPECTION
Objectives
To recall what is quality
To list out dimensions of quality
To distinguish inspection of production and preshipment inspection
To explain scope of using quality control techniques
To recognize countries requesting PSI
To analyse the process of PSI
To illustrate SQC
To find relation between WTO and preshipment inspection
To recall definition of PSI
To list out services provided by EIC
Structure
5.1 Introduction
5.1.1 What is quality
5.1.2 Quality control
5.1.3 Scope of using quality control techniques
5.1.4 Aims of quality control
5.2. Quality assurance
5.3. Uses of Inspection
5.4. Statistical quality control (SQC)
5.5 Preshipment inspection (PSI)
5.5.1 When required
5.5.2 Countries which request PSI
5.5.3 Who conducts PSI
5.5.4 Who is responsible for arranging PSI
5.5.5 The process
5.5.6 What to do when a problem or disagreement arises
5.5.7 PSI for agricultural and food production
5.5.8 WTO, PSI body
5.6 Export inspection council of India
5.6.1 What is EIC
5.6.2 EIC-A network with global agenda
5.6.3 Services provided
5.7 Summary
5.8 Keywords
5.9 Answers
5.10 Questions

5.1 INTRODUCTION
5.1.1 What is quality?
Quality has become one of the most important factors of consumers decision in selecting a
product among competing products (services). This phenomenon is wide spread regardless of
the fact whether the consumer is an individual organisation, retail store, or a military defense
programme.
The quality of products / services can be evaluated in several ways. It is important to identify
different dimensions of quality Garrin (1987) discusses eight components or dimensions of
quality as follows.
1. Performance (will the product do intended job?)
2. Reliability (how often does the product fail?)
3. Durability (How long does the product last?)
4. Serviceability (How easy is it to repair the products?)
5. Aesthetics (How the product looks like?)
6. Features (What does the product do?)
7. Perceived Quality (what is the reputation of the company?)
8. Conformance to standards (Is the product made exactly as the design indented
Performance and conformance to standards are too major aspects which could be evaluated
through some objective measurements; next, durability could also be tested through some
methods. The others are additional aspects to augment the quality of a product / service. The
evaluation of quality helps to control quality
5.1.2 Quality Control
Quality may be affected due two types of causes:
(i) Measurable / identifiable causes
(ii) Infinitesimal, unidentifiable chances causes. The first one can be easily controlled by
identifying the causes or by measuring the deficiency and the rectifying them. In the case of
chance causes, we have to adopt special methods to minimize the effect of chance causes.
Quality control
segregates the measurable or identifiable causes from chance cause and adopts methods to
minimise the influence of chance causes reflected as variance.
5.1.3. Scope of using quality control techniques
Quality Control methods can be introduced in any plant size. Since it is fundamental attack
on adjusting methods and operations to predetermined limits of variability, it can be adopted
even to a single process or plant. The size of the plant merely determines the size and
organization of the quality control scheme or department.
Meaning of Quality Quality in this context does not mean achieving the highest quality or
maintaining it irrespective of the need for such quality and the cost of it. Quality control
means several things
1. To lay down the desirable norm or standard of quality expected of the article or product or
service. This factor again is composed of two attributes.
a. The nature of the product.
b. The consumer or user satisfaction that is expected of it. Thus for a sophisticated machine
tool are an automobile part or aircraft component or a ball bearing the highest precision,
quality and rigid tolerance are necessary. For an ordinary kerosene stove the different
components need not observe such rigid quality standard.
2. To lay down the desirable quality. Each article carries with it a quality assurance. Quality
control seeks to establish production condition by which variations form the expected quality
standard are minimized.
3. Cost and quality have to be optimally matched. In fact almost any quality can be achieved
if the price is paid for it No businessman aims at achieving quality at any cost. Good business
consists in co-ordinating cost and quality which leaves the best margin between cost and
sales.
4. The next point is to ensure that both excess quality and under-quality is avoided. Also the
range and frequency of variability is minimized form the prescribes quality standard.
5.1.4. Aim of Quality Control The Quality Control Technique (also called Statistical
Quality Control because statistical methods are applied) aims at

systematizing the data collection and data processing method on the shop floor from which
objective interpretation can be made and conclusions drawn with measurable variances from
the standard or ideal quality.
Quality control aims at prevention. In this sense it is to be distinguished from inspection.
Acceptance inspection or control inspection operates by correcting methods and operations
through observed results. Quality control aims at laying down norms of quality and
establishing working condition which reduce the chance of variability and therefore aid
conformity of result with the predetermined norm.
The benefits of quality Control can be summed up thus1) Reducing faulty manufacture and therefore improving material usage, scrap rejection,
Spoilage and minimizing re-work cost, this leads to better consumer satisfaction, consumer
reliability, reduced complaints and lower after sales services.
2) Through better assurance standards a greater degree of standardization and interchangeability is achieved, both within the own work and also among outside users of the
components, spare parts or intermediary stores supplied by the company.
3) Reduction in inspection cost.
4) By stabilising quality higher sales is obtained at the same price or an equal sale at a higher
price. Assurance of quality and the goodwill for the brand name reduces selling and
advertisement cost.
5) It helps design efficiency by standardizing quality and identifying variables which operate
in the quality area.
6) It leads to improvement in prices, methods and operation by bringing out where
improvement or modification is necessary.
7) It improves quality-consciousness and a healthy rivalry for achievable quality in the works.
5.2 QUALITY ASSURANCE:
Quality assurance can be done in two ways (1) inspection after production to identify
defectives and rectify or reject them (2) adopting quality control methods like statistical
quality control (SQC) to minimize the deficiency. In the case of foreign trade there is third
aspect known as preshipment inspection.

Inspection after Production
Quality Control (SQC)
Preshipment Inspection
Quality assurance
Quality control versus acceptance inspection-inspection after the production is completed is

costly and sometimes inexpedient. Sample inspection or test checks of finished product may
not bring out the defects in all the units produced. With more standardization the result of
sample testing may improve but can never reach 100% satisfaction. In production, inter-stage
or inter-operation inspection would be necessary to avoid faculty components being passed
on the next process or being marketed, to be finally rejected by the user. Further, it is not
possible to detect all the faults in inspection.
Where faults can only be assessed by destructive inspection such as, the firing test or the user
test of ammunition or drop test for petroleum barrels etc., hundred per cent screening test is
impossible.
Moreover, defects detected in inspection is always after manufacture which leaves no room
for correction. Quality control, on the other hand, offers a means of dynamic control which
prevents rather than corrects faults developing later on .It detects and isolates the factors and
causes which develop fault and tries to eliminate them .Quality control prevents complacence
and uncertainty in product quality. It is a source of assurance to the producers and a mark of
confidence to the users.
Uses of inspection there is no doubt that screening inspection is costly and inexpedient in
many cases .However the results of acceptance or screening inspection can be used for
improvement and control. Some of these uses are
1) To detect a mistake or fault at an early stage of operation. if faulty material or a faulty

component is passed on, without inspection, to the next process-subsequent labour, overheads
and any materials added thereon would be wasted.
2) To screen good products which can be marked out from rejects, seconds or poor quality
products.
3) To select items for re-work and to assign re-work cost.
4) To separate scrap, wastage or spoilage.
5) To judge whether fault is due to the machine or method or process or bad material or faulty
workmanship. This is the cue of suggesting changes in process or equipment; also the basis
for locating bad workers from good or modifying or improving equipment.
6) To identify the controllable causes of variation or faults from the uncontrollable or chance
causes.
7) They suggest variation in standards, specification or tolerances of the product .if the
variance is minor and inherent in the process and the product can be accepted with this minor
variation, a change in the standard or specification may be indicated
8) Improving the method or process. If the variances are due to wrong machine adjustments
or faulty equipment it may be corrected.
9) Caution and quality consciousness in staff and workmen. As workmen are paid for the
good pieces which pass inspection, acceptance inspection provides a moral check or deterrent
against loose or faulty work.
Thus, inspection is a tool of management control and should be used as such.

5.4 STATISTICAL QUALITY CONTROL(SQC)
Suppose we have to produce a part which should weigh only 100mg.In production all items
may be 100mg.some may be 101 or105mg or others may be 99 or 95mg.We may find on the
basis of experience. it may not affect the efficiency of the part, if it lies between 97mg to
103mg. But every time we cannot arbitrarily decide a experiments with the defective parts.
All production should normally conform to the statistical normal distribution which you have
studied in statistics. If 100 units are produced in a sample and the average the quality
variance unit because in a normal rejection will be only 0.27% which will be in terms of
specification, not suitable for use.
Using the normal distribution properties the control chart could be scientifically decided
instead of arbitrarily our self fixing the difference (variation) limits.
limit(UCL)and -(LCL). The units which are within this range are selected (units 1 to 6).Units
which exceed either the UCL or LCL,example units 7 to 8, are rejected.

If this technique is used in a process it is called statistical process control (SPC).In general it
is called statistical quality control. This method is scientific using samples and then adopted
for SQC
because, if one part is efficient at 0.9973 level, for using 100parts, this will be reduced as
shown below
0.9973*0.99973*0.9973=(0.9973)100 = 0.7631 which means totally putting all 100 parts
together the efficiency/quality level will be on 76.31% which is dangerous In order avoid
such deficiency 6 level is used (Motorolo used this level). Thus the SQC is a vast field with
several complex concepts and innumerable applications. If you are interested study books on
SQC.
Now we will study about preshipment Inspection
Check your Progress - 1
1. which are two major aspects quality dimensions which could be evaluated
2. SQC is applicable to control defects caused by chance causes (True/False
3. Desirable norm/ standard of quality is composed of (a) (b)
4. Normally the Upper and Lower limits of SQC are fixed at. level

5.5 PRESHIPMENT INSPECTION
5.5.1 When required?
Definition of preshipment inspection
Certification of the value, quality, and/or identity of traded goods done in the exporting
country by specialized agencies or firms on behalf of the importing country. Traditionally
used as a means to prevent over-or under-invoicing, it is now being used as a security
measure. OR
To ensure that the quantity and quality of goods to be traded conform to the specifications of
the contract.
Pre-shipment inspections (PSI) are required when mandated by the government of the
importing country. Governments assert that pre-shipment inspections ensure that the price
charged by the exporter reflects the true value of the goods, prevent substandard goods from
entering their country, and mitigate attempts to avoid the payment of customs duties.
5.5.2 Countries which request pre-shipment inspections
Angola, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Cameroon, Central African
Republic, Comoros, Republic of Congo (Brazzaville), Democratic Republic of Congo
(Kinshasa), Cote dIvoire Ecuador, Ethiopia, Guinea, India Indonesia, Iran, Kenya (under
review), Mauritania, Mexico Moldova (under review), Mozambique, Niger, Nigeria, Peru,
Rwanda, Saudi Arabia, Senegal, Sierra Leone, Tanzania (Zazibar only), Togo, Uzbekistan,
Venezuela.
Most countries on the list above request inspections for shipments above a certain value.
However, in some instances inspections are necessary for all imported products, regardless of
value.
In some cases, a country may require PSIs only for certain types of goods. For example, India
requires a PSI only for certain steel products, Indonesia for some

steel and waste products. Mexico requires a PSI for a variety of goods such as shoes, textiles,
steel, and bicycles only if they do not qualify for NAFTA. Shipments to Saudi Arabia and
Kuwait must contain a certificate of conformity for a small number of products. Though
not referred to as a pre-shipment inspection, this certification verifies that the product
conforms with the relevant standard by testing and inspection prior to shipment from the
exporting country.
PSI regulations change often, and contracts for pre-shipment inspections are reviewed
periodically. Exporters can contact the Commerce Departments Trade Information freight
forwarders for more information on current regulations.
5.5.3 who conducts the pre-shipment inspection
Pre-shipment inspections are typically performed by contracted private organizations. In most
cases, importers can select from a short list of these organizations when planning inspections.
However, sometimes one firm is appointed to carry out inspections for a given country on an
exclusive bases. The list could be obtained export Inspection council of India private
inspection companies:
Who pays for PSI
Inspection costs are generally paid either by the importer or by the government of the
importing country. However in some cases, the inspection agency may invoice the seller in
the event of supplementary inspection visits. The costs associated with presenting the goods
for inspection (such as unpacking, handling, testing, sampling, repackaging) are the
responsibility of the seller.
5.5.4 who is responsible for arranging PSI ?
Although the importer is responsible for arranging the pre-shipment inspection, the exporter
must make the goods available for inspection in the country of origin. Delays in the process
can lead to problems with the shipment and /or increased costs for the exporter. Therefore, it
is in the best interest of exporters

to work with their freight forwarder to ensure that all information is accurate and is provided
to the inspection company immediately after notification of the requested inspection.
Requirements for pre-shipment inspections are sometimes spelled out in letters of credit or
other documents.
Generally, the inspection company starts the inspection process once it receives a copy of the
inspection order from the importing country. An inspection order states the value of goods,
the name and address of the importer and the exporter, the country of supply, and the
importers declaration of customs code. The inspection company then contacts the exporter to
arrange an inspection site and time.
5.5.5 The Process
The steps of the inspection process are usually as follows:
1. The importer opens an import document or license
2. The importer informs the inspection service in the country of import of a pending
shipment, and either pays for the inspection up front or pays a percentage based on the value

of the commercial invoice, depending on the terms of the importing countrys inspection
contract.
3. An inspection order is forwarded to the inspection company office in the country of export.

4. The inspection company contacts the exporter to arrange date, time, and location for
inspection. It also requests all required shipping documents and price information (invoices).
The exporter must provide these documents in a timely manner to avoid demurrage or other
penalties.
5. The inspection is performed.

6. If no discrepancies are noted during the inspection, and once all final documents are
received from the importer and exporter, a Clean Report of Findings is issued
confirming the shipments value, customs classification, and clearance. The final documents
required for issuance of the Clean Report of Findings vary by contract but most often
include a final invoice and bill of lading or airway bill.
7. The goods are shipped to the importing country.

8. The importer uses the inspection report to get the imported goods released from customs. If
goods reach the border of the importing country without inspection, they usually have to be
re-exported to a nearby country for inspection prior to re-entry or are subject to heavy
penalties.

5.5.6 What to do when a problem or disagreement arises
If a disagreement arises on the findings of the pre-shipment inspection, a resolution to the
discrepancy should be negotiated with the inspection company. However, if exporting to a
World Trade Organization (WTO) member country, the WTO Agreement on Pre-shipment
Inspection spells out the responsibilities of the exporter and the inspection company. The
Agreement requires the inspection company to appoint an appeals official and comply with
the Agreement guidelines when carrying out their pre-shipment inspection services for
signatory countries.
5.5.7 PSI for agricultural and food products
Specific regulations are prescribed in every country according to their needs. The details
could be obtained from EIC India.
5.5.8 WTO PSI body
The WTO mechanism for settling disputes between exporters and preshipment inspection
companies the Independent Entity (IE) - became operational. The IE is constituted jointly
by the WTO, the International Chamber of Commerce (ICC) and the International Federation
of Inspection Agencies (IFIA), and is administered by the WTO.
The IE was established in December 1995 by the General Council pursuant to Article 4 of the
WTO Agreement on Preshipment Inspection, which calls for an independent review
procedure to resolve disputes between an exporter and a preshipment inspection (PSI)
agency.
IEs rules of procedure call for quick resolution of disputes. Once a complaint is filed, the IE
appoints, depending upon the agreement of the parties, either a single independent trade
expert or a three-member panel, selected from the List of Experts (one each from the sections
nominated by the ICC and IFIA, respectively, and one from the section of independent trade
experts). The panel

is required to make a decision, by a majority vote, within eight working days from the filing
of the dispute.
In specific cases, details can be obtained from WTO Secretariat Decisions by the panel are
taken by majority vote, and are rendered within eight working days of the request for the
independent review. These decisions would be binding on the parties on the parties to the
dispute. The cost of the independent review would be apportioned based on the merits of the
case by the panel or the independent trade expert.
5.6 EXPORT INSPECTION COUNCIL OF INDIA
5.6.1 What is it?
It is Indias official pre-shipment and certification body EIC-Export Inspection Council of
India, a statutory body set up by the Government of India, guarantees quality of Indian
exports through Certification schemes, which combine the best of product certification
integrated with a systems approach.
The Export Inspection Council (EIC) was set up by the Government of India under Section
(3) of the Export (Quality Control and Inspection) Act, 1963(22 of 1963), for sound
development of export trade of India through Quality Control and Inspection and for matters
connected therewith. EIC is a world-class service provider when it comes to pre-shipment
inspection and certification. You can access our services through our field organizations, the
Export Inspection Agencies (EIAs), located at Delhi, Mumbai, Kolkaa, Chennai and Kochi
with a network of 44 sub-offices including laboratories which can provide you with the
required logistic support and testing facilities at all major ports and industrial centers in India.
5.6.2 EIC-a network with a global agenda
As globalization intensifies with more and more countries and sectors getting swept-up in its
momentum, EIC seeks to enhance Indias stature in the world

market, through its belief in total quality management a strategy not only for strengthening its
current position but also gaining access to new markets.
Our endeavor towards quality assurance programmes began as early as 1963. Over the years,
we have radically transformed our activities from the regulatory domain of pre-shipment
inspection to that of a facilitator of export trade. It provides market access to exporters
through export certification based on International Standards. This helps eliminate reinspection of goods on arrival at foreign destinations, thus providing a green channel entry
into the international markets, avoiding rejections and high costs of recall. As the official
certification agency, EIC has the mandate to resolve export related quality complaints, giving
the importing agencies and overseas buyers an added protection in assuring quality of goods.
5.6.3. Services provided
Pre-shipment Inspection and Certification
We provide a whole range of pre-shipment inspection and certification services from
consignment-wise inspection to quality assurance and food safety management systems based
certification covering nearly 1000 notified items ranging from food products to chemicals to
footwear to jute and jute products to engineering products. This certification, as an assurance
from an official agency, improves market access for the exporters while enhancing importers
confidence in the quality of Indian products.
Notwithstanding the liberalization of compulsory pre-shipment inspection, EIC continues to
operate mandatory pre-shipment inspection and certification in food sector for products like
fish and fishery products, milk products and meat and meat products and egg products in
view of growing importance of health and safety parameters under SPS Agreement.
Today, many countries rely for pre-shipment inspection and certification with confidence. For
instance been recognized by United States Food and Drug

Administration (USFDA) for black pepper and by European Commission (EC) for basmati
rice.
EICs commitment to internationally accepted food safety management systems based
certification incorporating GMPs/GHPs/HACCP has already earned credibility to act on
behalf of many international agencies. EIC has gained recognition from EC for marine
products and egg products.
A pool of highly qualified technical personnel at ECI/EIAs share, integrate and develop
expertise to provide not only consignment-wise inspection but inspection but systems based
certification as well to stand through a constantly changing world of export trade.
Summary of Services Offered by EIC
Certification of Product Quality in accordance with the norms and legislations of different
destinations worldwide through consignment-wise inspection or systems approach including
In process Quality Control (IPQC) or Self Certification (SC).
Approval and certification of processing and manufacturing units based on Food Safety
Management Systems like HACCP, Good Hygiene/Manufacturing Practices (Gypsy/GMPs).
Product Testing-microbiological, chemical, biochemical, physical contamination, heavy
metals, pesticide residues, biotoxins, additives and all other relevant parameters.
Training and technical assistance to industry in installation of food
safety/quality/environment/lab management systems meeting HACCP/ISO 9000/ISO
14000/ISO 17025 standards and norms; product testing and certification under preferential
tariff schemes.
Issue of Certificates of Orgin under preferential tariff schemes like Generalized System of
Preferences (GSP), Global System of Trade Preferences (GSTP), Bangkok Agreement, Saarc
Preferential Trading Arrangement (SAPTA) and Indo-Sri Lanka Free Trade Agreement
(ISFTA).
Health for food items.
Inspection for all commodities
Authenticity for Basmati Rice.
Check your Progress 2
5. India requires PSI only for certain types of goods (True/False)
6. who is responsible for arranging PSI
7. shich is the WTO organization which settles dispute in PSI

8. EIC was set up in.(Year)
5.7. SUMMARY
Quality assurance is essential for business development and also for consumer satisfaction. It
comprises of production inspection, SQC and PSI. All the three aspects are discussed
elaborately explaining, what, why and how of these process of quality assurance. At the end
the functioning of EIC is elaborated
5.8 KEYWORDS
SQC: Statistical Quality Control
PSI: Preshipement Inspection
EIC: Export Inspection Council of India
5.9 ANSWERS
1. Performance and conformance to standards 2. True
3. (a) The Nature of Product (b) consumer satisfaction
5. True 6. Importer 7. IE 8. 1963
5.10 QUESTIONS
1. What is quality?
2. Explain scope of using quality control techniques.
3. What are the uses of Inspection?
4. Explain SQC with an illustration
5. When PSI in required
6. Explain the process of PSI
7. Examine: How to settle a problem when it arise
8. What is EIC?
9. Describe in detail the services provided by EIC.
5.11 FURTHER READING/REFERENCE
1. http://www.export.gov/logistics/exp_inpection.asp
2. http://www.shipabichitra.com

3. Introduction to SQC by Douglas C. Montgomery, John Wiley & Sons Inc Singapore

Lesson 6
EXPORT TRADE CONTROL
Objective
To recall the objectives of trade control
To explain the general procedure of export control
To distinguish the procedures for export of gold currency, unit of UTI from goods export
To describe the procedure for export of complete software
To analyse the methods of payment for goods exported
To recall/recognize the periods prescribed for different types of exports
To illustrate exempted categories
To understand various aspect of declaration forms
To elucidate GR/PP procedure
To ucall the utility of GR procedure
To enumerate as to when the counter signature on PP forms should be obtained
Structure
6.1. Introduction
6.2. Export Control
6.2.1. Objectives
6.2.3. Declaration
6.2.3. Caution list of Exporters
6.3. Export of gold and others
6.3.1. Gold/securities
6.3.2. Currency notes/foreign exchange
6.3.3. Units of UTI
6.3.4. Computer software
6.3.5. Goods under Lease hire
6.4. Code Number of Exporters
6.5. Payment Methods
6.6. Periods prescribed
6.7. Despatch of shipping Documents
6.7.1. Through Banks
6.7.1. Direct to importer in case of perishable
6.8. Categories exempted
6.9. Forms of Declaration
6.9.1 Description
6.9.2 Copies
6.9.3 Particulars

6.10. Shortshipment case
6.11. GR/PP procedure
6.11.1. GR form
6.11.2. PP Form
6.11.3. VP/COD
6.12. Disposal by Banker
6.13. Use of ER Procedure
6.14. Counter signature on PP Form
6.15. Exchange control Regulation for Nepal Bhutan
6.16. Summary
6.17. Keywords
6.18. Answer
6.19. Question
6.20. Further Reading
6.1 INTRODUCTION
You have studied so far, the preliminaries of Export Import trade (International Trade), the
documents required for organizing export/import effectively and efficiently, how quality
control, PSI and international standards of quality are necessary for improving export. Here
the export control measures stipulated by the Govt. are discussed in detail
Unless you know these export methods, procedures, rules, regulations, any time you may
make a mistake in your organization which may result in huge damage. So you should be
thorough with the export control measures also.
Try to take efforts that your organization is not coming under caution list of exporters which
will reduce your image.
6.2 EXPORT CONTROL
Objectives: The export of goods to countries outside India, except to Nepal and Bhutan, is
under control. The main purposes of the control are:
(a) to prevent the export of the goods which are essential for the development and/ or
maintenance of the countrys economy; and
(b) to ensure that the full value of the exported goods is received in India within the
prescribed time limit and in a permitted method of payment, i.e., currency
6.2.2 Declaration: The exporters are required, under the Exchange Control Regulation, to
declare on a prescribed form that the full value of the exports to be made will be realized
within the prescribed period. If the full value is not ascertainable at the time of export, the
value which the exporter expects to receive on the sale of the goods should be stated.
6.2.3 Caution List of Exporters
(a) The Reserve Bank may subject exports of certain exporters who have come to its adverse
notice in regard to realization of export value, to the conditions stipulated in clauses (b) and
(d) of Section 18/9 of FERA, 1973, in order to ensure that the full export value of further
exports to be made by them will be realized in proper time or without delay as required under
the law. In such cases, the RBI will issue a caution-listing order directing that the exporter
should submit GR/PP forms through an authorized dealer to the Reserve Bank for prior
approval, supported by documentary evidence which should indicate that the exporter has
received advance payment or an irrevocable letter of credit in his favour covering the full
value of the goods to be exported. Copies of the caution-listing order will be sent, among
others, to all Customs authorities in India, for the purpose of ensuring that the conditions of
the order are fulfilled. ADs will be advised whenever any exporter is caution-listed. They
should not accept for negotiation/collection shipping documents covering exports declared on
GR form completed by such exporters nor countersign PP forms completed by them unless
the GR/PP forms bear approval of the Reserve Bank.
If a caution-listed exporter presents documents to an AD together with GR form which does
not bear Reserve banks approval, the AD should withhold the documents under advice to
RBI pending receipt of the latters instruction as to the disposal thereof.
(b) The caution listing order of RBI will contain not only the names of the concerned
exporter and the name of the proprietor partners in the case of firms but also their associate
concerns. If an AD comes to know of any other associate concern of caution-listed exporter
which is in the export field he should bring the matter to the notice of the RBI.
(c) When a caution-listed exporter firm or company is removed from the list by the RBI a decaution-listing order will be issued to the AD customs etc, The
shipping documents etc. submitted by a de-caution listed exporter may be dealt with by an
AD according to normal regulations.
Exports to be dispatched by airway should, for better security be consigned to the branch /
correspondent of the AD through whom the proceeds are intended to be collected.
6.2.4 Export Trade notices : The office of the Director General of Foreign Trade issues
export trade notices as and when required
a. prohibiting the export of certain commodities
b. making the export of certain commodities subject to licence from the export trade control;
c. prescribing the minimum export prices for some commodities and / or the methods by
which payment for the export of some commodities should be received; and
d. otherwise regulating export
6.3 EXPORT OF GOLD AND OTHERS
6.3.1 Gold / Securities: The export of gold from India to any destination, or taking or
sending of sending of securities to any place outside India (including the transfer of securities
to a non-resident), requires the permission of the RBI. There is, however, a general
permission of the RBI bank for any person permanently resident in India to take out of the
country personal gold / jewellary, and for a foreigner to take out gold / jewellery purchased in
India up to a prescribe limit. The export of silver bullion and manufactures is regulated by the
Director General of Foreign Trade (DGFT) whose permission is necessary for the export of
silver and silverware.
6.3.2 Currency Notes / Foreign Exchange: No person can, except with the general or
special permission of the RBI or the written permission of any person authorized in this
behalf by the RBI take or send out of India any Indian currency or foreign exchange other
than the foreign exchange obtained by him from an AD dealer or a money changer in India.
The RBI permits any person resident in India to take or send out of India to any country other
than Nepal currency notes or Reserve Bank notes up to RS.1000

per person at any one time. The amount that can be taken to Nepal in Government of India or
Reserve Bank notes should be in denominations not over Rs. 100 and in Indian coins and in
other notes or coins which are the currency of Nepal.
6.3.3 unit of UTI: The Unit Trust of India has been granted general permission be the RBI to
export certificates covering units purchased by non-resident investors out of foreign
exchange remittance from abroad or out of funds held in their non-resident account in India.
6.3.4 Computer Software
Physical form: Computer software can be exported either in physical form, i.e., software
prepared on magnetic tapes and paper media, or in non-physical form, i.e., direct data
transmission abroad through dedicated earth stations / satellite links . The procedure of export
of computer software in physical form is the same as that of goods subject to declaration on
GR / PP form.
Non-Physical form : The export of computer software in non-physical form can be made only
against advance payment of, or and irrevocable letter of credit for, the full export value.
Secondly, the export has to be declared in serially numbered sortex form in triplicate and the
full set together with the relevant export documents and a copy of the export agreement or
contract has to be submitted to the Department of Electronics, Government of India for the
purpose of valuation.
The authorized official of the Department will forward the original copy after verification of
the set to the office the office of the RBI under the jurisdiction of which the exporter
operates, return the duplicate copy duly certified by him together with the export documents
to exporter, and retain the triplicate copy for office record. A copy of the export agreement /
contract has to be submitted to the concerned office of the RBI.

The duplicate copy of the SOFTEX form together with the export bill etc. should be tendered
to a previously designated branch of an ad for negotiation or collection of the bill.
Forwarding the documents for collection requires previous permission of the RBI and
providing by the buyer a guarantee from an acceptable bank in favour of the exporter for the
payment of the export on due date or within six months whichever is earlier.
Application for the permission of RBI has to be made in duplicate together with a copy of the
guarantee.
6.3.5 Goods under lease, hire etc.
Some good, such as machinery, equipment etc. are sometimes required to be exported on
lease, hire etc. basis under agreement with the overseas lessee/hirer etc. against collection of
hire charges and ultimate re-import of the goods exported, exporters desirous of exporting
goods on such terms should approach, through an AD the concerned office of the RBI i.e. the
office of the RBI Bank under the jurisdiction of which the exporter operates giving full
particulars.
6.4 CODE NUMBER OF EXPORTS
The RBI allots, on application on a prescribed form, a code Number to every person, firm or
company engaged in export business. The code number so allotted is required to be cited by
the exporter on the prescribed exchange control declaration form.
6.5 PAYMENT METHODS
Payment for good exported from India has to be realized in accordance with the methods
prescribed by the RBI. The basic rule is that the payment must be received through the
medium of an AD
It will, however, be in order for an AD to handle documents in cases (a) where the exporter
has received payment of exports directly from the overseas buyer in the form of bank draft,
pay order, bankers cheque, personal cheque, foreign

currency notes, foreign currency notes, foreign currency travelers cheque etc without any
monetary limit, provided the exporters track record is good, he is a customer of the
concerned AD and prima facie the instrument represents payment for exports; or
Where the payment of export is made out of funds held in a Non-Resident (External) Rupee
account, or from a rupee account held in the name of an Export House 2with an AD up to
Rs.50,000 per transaction in the country of destination of the foods as declared on the GR
form, irrespective of the country of residence of the buyer
For example, if the goods are shipped to Germany respecting the order of a buyer in France,
the payment must be made in a permitted currency or from a bank situated in a country in the
erstwhile external group of countries such as Austria, Belgium including Luxembourg, etc as
notified by the bank / RBI.
The financing of exports in a manner other than the permitted methods requires the prior
permission of the RBI.
AD may, however, receive payment in any permitted currency for exports to the countries in
the Asian clearing union, if the payment clearing is offered voluntarily in a permitted
currency by the overseas buyer. This provision is subject to review.
6.6. THE PERIOD PRESCRIBED.
The prescribed period for realization of the proceeds of exports to Pakistan, Bangladesh and
Afghanistan is three months and of exports to all other countries is six months, from the date
of shipment. The RBI may, for a sufficient and reasonable cause, extend the said period of
three months or six months, as the case may be
Where the goods are exported to a warehouse established outside India with the permission
of the RBI, the amount representing the full export value of the

goods exported should be paid to the AD as soon as it is realized but in no case beyond
fifteen months from the date of shipment of the goods.
Deferred payment
The realisation period for exports under deferred payments arrangement may be extended by
the RBI to two years in the case of consumer durable and other engineering goods, to eleven
years in the case of capital and producer goods, and to twelve years in the case of turnkey
projects.
Good other them projects
Normally, the proceeds of exported goods, other than the project exports, are to be realized
within 6 months or within 15 months when the goods are stored in overseas warehouses
owned by India
In some cases, however, where the buyers country does not permit payment of imports form
India on cash terms with 6 months the overseas buyer will then unavailable ask for
extension of the period of payment. In such cases the exporter concerned should approach the
RBI for permission of the extended period of payment of the exports made.
6.7 DESPATCH OF SHIPPING DOCUMENTS
Through Banks: All shipping documents covering the export of good from India must be
submitted within 21 days from the date or export to the AD (bank0mentioned in the relevant
declaration form, except where the export falls within one of the exempted categories.
Direct to importer in case of perishables: Railway receipts, steamer receipts, bills of lading,
airway bills or any other document conveying title to the foods exported to Pakistan or
Bangladesh may, where the exports consist of perishable commodities, be sent direct to the
importer with the prior approval of the RBL. Clean bills in respect of such exports, if
accompanied by the exporters invoice and duplicate and triplicate copies of the relative EP
or GR form, may, if

advised by the reserve Bank, be accepted for negotiation or collection by a banker.
6.8.CATEGORIES EXEMPTED
Certain kinds of exports the declaration on a prescribed form regarding the realistion of the
value of exports is not necessary. These are
a. Trade samples supplied free of payment;
b. Personal effect of travelers. Whether accompanied or unaccompanied, excepting unused
carpets, curios, silverware and such other articles of high value;
c. Passengers wishing to take these articles should obtain prior permission of the Reserve
Bank, known as the GR waiver.
d. Ships stores carried on board vessels for their own use during the voyage;
e. Transshipment cargo, i.e, goods shipped from counties outside India and transshipped in
any Indian port for destination outside India;
Nepalese goods exported from Nepal to countries outside India through Indian ports are
covered by this exemption
e. Goods exported under orders of the military, naval and air force authorities or of the central
government.
f. Parcels dispatched by post or by air freight and accompanied by a declaration by a
declaration by the sender that their value in each case is less than Rs.50 and that their
despatch involves no transaction in foreign exchange.
g. Parcels dispatched by post or by air freight and covered by a certificate issued by an
authorized dealer (banker) that the export of the parcel does no involve any transaction in
foreign exchange;
h. Goods in respect of which the reserve bank has waived the requirement of declaration; and
i. Goods exported by the United Nations Organization and its affiliate bodies in India for
their official use abroad when covered by a certificate to that effect by the body concerned.
Check your progress 1
1. the two main purposes of export control are (a)____ (b)______
2. SOFTEX form is used in the export of ________
3. in the case of turn key projects, the RBI may extend the period of collection to _____ year
4. give an example for exempted category

6.9 FORMS OF DECLARATION
Description: The forms Form
prescribed under the
Exchange
Control
Regulations in which the
declaration for exports,
vide paragraph 3.15 (b)
above should be made
are given below: Sl.No.
1
GR Form
2
PP Form
VP/COD Form
Mode
For shipments made

otherwise than by post to
all countries
For exports to all
countries by parcel post
except when made on
value payable or
cash on delivery
basis.
For exports to all
counties by parcel post
under arrangement to
realize the proceeds
through postal channels
on value delivery
basis.

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