INTRODUCTION

In the light of growing need & importance of exports for our country it is of utmost importance that
everyone should have an insight in the field of exports. In the course of last two decades, the export
scenario in India has undergone a tremendous change. The liberalization initiated by the
government, the keen competition in the market place & the rapid increase in the export of services
have all combined to change the picture completely.

This project will be covering various aspects of export finance. Areas covered in this project are
related to “export finance, types of export finance, role of finance in export various, financial
institutions providing finance for export, Processing export finance in a chemical export unit ” etc.
I hope that this project would provide some essential information that will be useful to in future.

FINANCE IS THE LIFE AND BLOOD OF ANY BUSINESS. Success or failure of any export
order mainly depends upon the finance available to execute the order. Nowadays export finance is
gaining great significance in the field of international finance. Many Nationalized as well as Private
Banks are taking measures to help the exporter by providing them pre-shipment and post- shipment
finance at subsidized rate of interest.

Some of the major financial institutions are EXIM Bank, RBI, and other financial institutions and
banks. EXIM Bank is India’s major bank in the field of export and import of India. It has
introduced various schemes like forfeiting, FREPEC Scheme, etc. Even Government is taking
measures to help the exporters to execute their export orders without any hassles. Government has
introduced schemes like Duty Entitlement Pass Book Scheme, Duty free Materials, setting up of
Export Promotion Zones and Export Oriented Units, and other scheme promoting export and
import in India. Initially the Indian exporter had to face many hurdles for executing an export
order, but over the period these hurdles have been removed by the government to smoothen the
procedure of export and import in India.

MEANING AND DEFINATIONS OF EXPORT

Export in simple words means selling goods abroad. International market being a very wide
market, huge quantity of goods can be sold in the form of exports. “Export refers to outflow of
goods and services and inflow of foreign exchange”. Export occupies a very prominent place in the
list of priorities of the economic set up of developing countries because they contribute largely to
foreign exchange pool. Exports play a crucial role in the economy of the country. In order to
maintain healthy balance of trade and foreign exchange reserve, It is necessary to have a sustained
and high rate of growth of exports. Exports are a vehicle of growth and development. They help not
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only in procuring the latest machinery, equipment and technology but also the goods and services,
which are not available indigenously. Exports leads to national self-reliance and reduces
dependence on external assistance which howsoever liberal, may not be available without strings.
Though India’s export compared to other countries is very small, but one of the most important
aspects of our export is the strong linkages it is forging with the world economy which is a great
boon for a developing nation like India.

EXPORT FINANCE
Credit and finance is the life and blood of any business whether domestic or international. It is
more important in the case of export transactions due to the prevalence of novel non-price
competitive techniques encountered by exporters in various nations to enlarge their share of world
markets.
The selling techniques are no longer confined to mere quality; price or delivery schedules of the
products but are extended to payment terms offered by exporters. Liberal payment terms usually
score over the competitors not only of capital equipment but also of consumer goods.
The payment terms however depend upon the availability of finance to exporters in relation to its
quantum, cost and the period at pre-shipment and post-shipment stage.
Production and manufacturing for substantial supplies for exports take time, in case finance is not
available to exporter for production. They will not be in a position to book large export order if
they don’t have sufficient financial funds. Even merchandise exporters require finance for
obtaining products from their suppliers.

RESEARCH METHODOLOGY

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While preparing a project report, it is very essential to know what exactly we are going to do, how
to do, in such a way so that the purpose of our report would be solved and what should be the
procedure, we are going to adopt. In dealing with practical issue instead of theoretical problem are
very much different. So it is very important to collect appropriate data in such a manner so that it
helps us in preparing accurate report and taking correct decision.

There are several ways of collecting data while doing the project report or any survey.

(1) Primary sources

(2) Secondary sources

(1) Primary sources

For the primary data I took an appointment from the assistant manager of Oriental Carbon and
Chemicals Ltd. and requested him to provide related information for the dissertation. He guided me
well about all the procedure of export finance, types of export finance, explain the circumstances in
which an export firm needs the export finance and what are the sources available for that. The
company did not disclose the crucial data and information related to their clients; however I have
used their procedure of dealings with clients in various places in the project as the references.

Secondary data:

I have collected the secondary data from the various Government institutions site like EXIM Bank,
ECGC and RBI. There are no. of books related to export finance and international business
available in the library and taken the data from company’s website and various financial and
exports documents of the company.

The methodology adopted in the procedure followed in order to give the projects its shape is:

• Understanding of working process in an export company.

• Studying the Documents used in the export finance.
• Collecting information from export deal files, documents, folders maintained by the
company

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 • Seeking information from the executives of various departments such as finance,
international marketing divisions.
• Studying the client’s files regarding export deals and understands various kinds of terms
and conditions used in export finance.
• Studying the various types of credit facilities given to the export companies from leading
financial institutions.
• Finally compiling the data in a proper format and making a study of option available.

COMPANY PROFILE

1.1 Introduction

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The Oriental Carbon and Chemicals Ltd. was established in 1978 as Dharuhera Chemicals Ltd.
(DCL). In 1983 Oriental Carbon Ltd. a group of manufacturing Carbon Black, was merged with
DCL to form Oriental Carbon and Chemicals Limited (OCCL). In 1994, OCCL setup a unit of
manufacturing insoluble sulfur, which later emerged as a flagship product of the company. The
company has installed capacity to produce 10000 MT of Insoluble Sulphur and 41250 MT of
Sulphuric Acid. During my project, I also came to know about the distribution channel of the
OCCL, which has covered multiple nations in across the world. The countries where the company
has the distributors are:

USA, Brazil, Turkey, Egypt, Germany, Austria, Eastern Europe, Spain, Italy, Iran, Kenya, South
Africa, South Korea, Australia, New Zealand, Malaysia, Indonesia, Pakistan etc.

Oriental Carbon and Chemicals Ltd. is equally aware of the needs of its clients and exports the
excellent quality products as per the requirements of their clients. This company has steadily
progressed over the years from strength to strength.

Manufacture of Tyres and different types of Rubber articles like Belts, Hoses and other goods
wherein long compound storage, prevention of premature vulcanization, superior adhesion and
green tack and use of various reinforcements are pre-requisites for manufacturing superior quality
products.

High Quality Product Attributes

DIAMOND SULF demonstrates all the features one would expect from the finest quality Insoluble
Sulfur.

• Polymeric sulfur that is insoluble in elastomers, DIAMOND SULF is completely non-

blooming: an ideal vulcanizing agent for unsaturated elastomers.
• It is particularly suitable for use in compounds where sulfur loading levels are required
above the sulfur solubility rating of particular elastomers.

DIAMOND SULF offers a single point solution to multiple processing problems, viz,

• It prevents bin scorching

• Eliminates sulfur bloom
• Ensures uniform dispersion
• Prevents sulfur migration
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 • Facilitates optimum curing every time
• Preserves building-tack
• Improves bonding between rubber to rubber as also with dissimilar reinforcement material.

Currently DIAMOND SULF is being consumed mostly by the automotive tyre sector in the
production of carcass, tread, cushion, beading as well as non-retreading compounds that need long
storage periods.

However it is also being increasingly used in the manufacture of conveyer and transmission belts,
hoses and other rubber products that require green tack and adhesion, extended compound storage
and prevention of premature vulcanization.

1.2 Product grades and composition

DIAMOND SULF is available in various Grades to cater to different customer requirements:

1) Regular Diamond Sulf Grades

2) High Stability Diamond Sulf Grades
3) Special Diamond Sulf Grades

1.2.1 Regular Insoluble Sulfur

TYPICAL PHYSICO CHEMICAL DETAILS OF REGULAR DIAMOND SULF
DIAMOND SULF oil treated grades are insoluble in elastomers, they are completely non-blooming
and are ideal vulcanizing agent for unsaturated elastomers. They are particularly suitable for use in
compounds where sulfur loading levels are required above the sulfur solubility rating of particular
elastomers.
QUALITY PARAMETERS DS - OT - 10 DS - OT - 20 DS - OT - 33 Test Method

Material Safety Data Sheet DS - OT - 10 DS - OT - 20 DS - OT - 33

Physical Appearance Fine Yellow Fine Yellow Fine Yellow

Powder Powder Powder

Elemental Sulphur % 90±1 80±1 67±1

Insoluble Sulphur (Min)% 90 90 90 ASTM D

(On Total S) 4578-89

Oil Content % 10±1 20±1 33±1 ASTM D

4573-95

Acidity(as H2SO4) (Max)% 0.05 0.05 0.05 ASTM D

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 4569-89

Ash Content (Max)% 0.05 0.05 0.05 ASTM D

4574-94

Heat Loss (Max) % 0.5 0.5 0.5 ASTM D

4571-94

Fineness Retention on (Wet ASTM D

Screen) 4572-89
100 Mesh (Max)% 0.2 0.2
0.2
200 Mesh (Max)% 2.0 2.0 2.0

Packing:
Goods are packed in 20/25 kg paper / HDPE Bags which are stretch wrapped by polyfilm and
palletized in wooden/steel/plastic pallets. The pallets are stuffed inside the factory in 20'/40'
containers and dispatched through world Class Shipping Lines.
Packing in 500 Kg big bags is also available.

1.2.2 High Stable Insoluble Sulfur

TYPICAL PHYSICO CHEMICAL DETAILS OF HIGH STABLE DIAMOND SULF
Insoluble Sulfur possessing higher level of thermal stability provides optimum resistance to
reversion to the soluble form of sulfur even at elevated temperatures. Such a product would
facilitate enhanced bloom protection. High stable DIAMOND SULF ensures more consistent
vulcanizing properties and allows storage at relatively higher ambient temperature.

QUALITYPARAMETERS DS - OT - 10 DS - OT - 20 DS - OT - 33 Test Method

(HS) (HS) (HS)

Material Safety Data Sheet DS - OT - 10 DS - OT - 20 DS - OT - 33

HS HS HS

Physical Appearance Fine Yellow Fine Yellow Fine Yellow

Powder Powder Powder

Elemental Sulphur % 90±1 80±1 67±1

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Insoluble Sulphur (Min)% 90 90 90 ASTM D 4578-
(On Total S) 89

Oil Content % 10±1 20±1 33±1 ASTM D 4573-

95

Acidity(as H2SO4)(Max)% 0.05 0.05 0.05 ASTM D 4569-

89

Ash Content (Max)% 0.05 0.05 0.05 ASTM D 4574-

94

Heat Loss (Max) % 0.5 0.5 0.5 ASTM D 4571-

94

Fineness Retention on (Wet ASTM D 4572-

Screen) 100 89
100Mesh (Max)% 0.2 0.2 0.2
200 Mesh (Max)% 2.0 2.0 2.0

Thermal Stability Heating 80 80 80

at 105°C for 15 min.(In
Liquid Paraffin ) (Min) %

Packing:
Goods are packed in 20/25 kg paper / HDPE Bags which are stretch wrapped by polyfilm and
palletized in wooden/steel/plastic pallets. The pallets are stuffed inside the factory in 20'/40'
containers and dispatched through world Class Shipping Lines.

PRE DISPERSED DS-75 is a newly designed 'Pre dispersed Insoluble Sulphur' for applications in
both natural and synthetic rubber based compounding. It enhances the dispersion of IS in rubber
matrices up to the highest level to achieve more consistent vulcanized properties in final product.
The product is eco-friendly and is supposed to have acceptance in rubber industry.

QUALITYPARAMETERS Pre dispersed DS-75

Physical Appearance Bright Yellow

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Total Sulphur % 75 (±2.0)%

Insoluble Sulphur (Min)% (On 72 (±2.0)%

Total S)

Binder (including process aid) 25 (±2.0)%

Physical Form Available both in slab & pastilles (tablets)

forms

MASTER BATCHES of Insoluble Sulphur with polymers in different ratio are also available.

1.2.3 Special Grade Insoluble Sulfur

TYPICAL PHYSICO CHEMICAL DETAILS OF SPECIAL GRADE DIAMOND SULF

• DS 90 is uncoated Insoluble Sulfur grade, which is available to specific requirements of

users.
• DS OT 25 AS is an oil coated Insoluble Sulfur grade having specific blend of precipitated
silica of compatible fineness. The resultant product has good thermal stability and exhibits
better disposability. Presence of precipitated silica improves flow characteristics of
insoluble sulfur as it inhibits caking effect of oil and also helps in bonding of rubber
compound to coated steel cord used for radial tyre and belting
• DS OT 20(HD) is a special grade of DIAMOND SULF exhibiting higher levels of
dispersion. during the mixing process this grade disperses more easily leading to reduction
in incorporation time under identical conditions. This grade contains requisite quantity of
suitable polymeric binder which facilitates better dispersion resulting in homogeneous
vulcanization and physical properties

QUALITY DS - 90 DS - OT - 25 DS - OT - 20 Test Method

PARAMETERS (AS) (HD)

Material Safety Data Sheet DS - 90 DS - OT - 25 DS - OT - 20

AS HD

Physical Appearance Fine Yellow Fine Yellow Fine Yellow

Powder Powder Powder

Elemental Sulphur % 99.5±0.5 67±1 80±1.5

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 Insoluble Sulphur (Min)% 90 90 90 ASTM D
(On Total S) 4578-89

Oil hinder % - 25±1.5 20±1.5 ASTM D

4573-95

Acidity(as H2SO4)(Max)% 0.05 0.05 0.05 ASTM D

4569-89

Ash Content (Max)% 0.10 8±1 0.01 ASTM D

4574-94

Heat Loss (Max) % 0.5 0.5 0.5 ASTM D

4571-94

Fineness ASTM D
Retention on (Wet Screen) 4572-89
100 Mesh (Max)% 0.2 0.2 0.2
200 Mesh (Max)% 2.0 2.0 2.0

Thermal Stability Heating - 75 75

at 105°C for 15 min. (In
Liquid Paraffin ) (Min) %

Packing:
Goods are packed in 20/25 kg paper / HDPE Bags which are stretch wrapped by polyfilm and
palletized in wooden/steel/plastic pallets. The pallets are stuffed inside the factory in 20'/40'
containers and dispatched through world Class Shipping Lines.
Packing in 500 Kg big bags is also available.

1.3 Marketing strategies

Oriental Carbon & Chemicals Limited offers Insoluble Sulfur manufactured in its modern plant.
Wide ranges of grades of Insoluble Sulfur are available in company’s product category including

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high stability and other special grades. Custom made grades are also available to suit specific needs
of tyre companies.

The company has separate marketing division which has a General Manager for international
marketing. The main objective of this department is to search new markets for the company and
maintain the existing clients by changing its production strategies time to time. The company
provides on demand presentation and seminars for the possible foreign clients.

1.4 Distribution channel of OCCL to sale its products in international business

The company has presence in the various countries to improve its products and looking for new
markets. Oriental Carbon and Chemicals Ltd. is equally aware of the needs of its clients and
exports the excellent quality products as per the requirements of their clients. This company has
steadily progressed over the years from strength to strength.

Sales Network (Worldwide):

USA
Name of the Company: M/s Continental Carbon Company
Contact Person: Mr. Steve J. Renegar
Mailing Address: 333 Cypress Run, Suit 100
Houston, Texas 77094
Tele Number: 00281-647-3837
Fax Number: 00281-647-3845
Email Address: [email protected]

Brazil
Name of the Company: M/s White Rubber Representacoes S/C Ltda.
Contact Person: Mr. Julian L. White
Mailing Address: RUA QUITANDUBA, 241, Sao Paulo
SP 05516-030, Brazil
Tele Number: 0055-11-3722-0299
Fax Number: 0055-11-3722-1638
Email Address: [email protected]
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Turkey
Name of the Company: M/s Aziz Insel
Contact Person: Mr. Aziz Insel
Mailing Address: Inonu Cad. Camplipark Sok.No:8
K: 1 81080 Sahrayicedid- Istanbul, Turkey
Tele Number: 0090-216-411-1282
Fax Number: 0090-219-386-9119
Email Address: [email protected]

Egypt
Name of the Company: M/s Letraco
Contact Person: Mr. Roger Kayal
Mailing Address: 26 Sheriff Street, Apt. 780- Cairo-C.C.R-178882, Egypt.
Tele Number: 00202-3957268
Fax Number: 00202-3938687
Email Address: [email protected]

Germany
Name of the Company: M/s Distri Warehouse Bremen GmbH & Co. KG
Contact Person: Mr. Eduard Dubbers-Albrecht, Ms. Bettina Gutjahr
Mailing Address: Distri Warehouse Bremen GmbH & Co.KG
Tillmannstrasse 5, 28239 Bremen
Germany
or
Distri Warehouse Bremen GmbH & Co. KG
P.O. Box 21 03 23, 28223 Bremen, Germany.
Tele Number: 0049-421-649 11 0
Fax Number: 49-421-649 11 98
Email Address: [email protected]; [email protected]; [email protected]

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Austria/ Germany
Name of the Company: M/s OKA – Tec GmbH
Contact Person: Dr. Artur Stilter
Mailing Address: Im Technologiepark, Herbert-Wehner-Strabe 2
59174 Kamen, Germany
Tele Number: +49-2307-2888-44
Fax Number: +49-2307-2888-45
Email Address: [email protected]

Eastern Europe
Name of the Company: M/s DBH Osthandelsgesellschaftt mbH
Contact Person: Mr. Kai Kunath
Mailing Address: Storkower Strasse 139B,
D-10407 Berlin, Germany
Tele/Fax Number : 0049 30 428411-30/32

Spain
Name of the Company: M/s World Elastomers Trade
Contact Person: Mr. Xavier Blanch
Mailing Address: S.L. Calle Els Cirers, 808811, Canyelles, Barcelona, Spain
Tele Number: +34 (93) 818 8826
Fax Number: +34 (93) 897 3500
Email Address: [email protected]

Italy
Name of the Company: M/s R. D. C. SRL
Contact Person: Mr. Giorgio Marzari (Sales Manager)
Mailing Address: VIA MONTE NOVOSO
16-20010, Bareggio, Milano, Italy.
Tele Number: 0039 0290360785
Fax Number: 0039 0290360782

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Iran
Name of the Company: M/s Sabahi Enterprises Co., Ltd.
Contact Person : Ms. S. Attar
Mailing Address : No. 148 Khoramshahr Ave, Tehran 15337, Iran
Tele Number : 0098 21 8740680(5 lines)
Fax Number : 0098 21 8744284
Email Address : [email protected]

Kenya
Name of the Company: Panafrican Business Enterprises Ltd.
Contact Person : Dr. Kariba J.C. Munio (Managing Director)
Mailing Address : Suite No. 5 Village Plaza
Ngara Road, Off Murang' A Road
P O Box 49591, Nairobi- 00100
Kenya.
Tele Number: 254-20-3750354 / 3748256
Fax Number: 254-20-3750355
Email Address: [email protected]

South Africa
Name of the Company: M/s Chempro
(A division of Prochem (Pty) Ltd)
Contact Person: Mr. G. Holtzhausen
Mailing Address: Private Bag 14786, Wadeville, 1422
South Africa
Tele Number: 00:27 11 842-363498
Fax Number: 00 27 11 824-2820
Email Address: [email protected]

South Korea
Name of the Company: M/s Intermax Corporation
Contact Person: Mr. Daniel Lee (President)
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Mr. D.Y.Hwang (General Manager)
Mailing Address : 1112, Woolim Lion's Valley 2,
Gasan-Dong 680, Geumcheon-Gu, Seoul,
Korea.
Tele Number: 0082-2-2027-2388
Fax Number: 0082-2-2027-2389, 2623
Email Address: [email protected]

Australia/ New Zealand

Name of the Company: M/s Rebain Internatioal (Aust) Pty Ltd
Contact Person: Mr. Andrew D. Lowe
Mailing Address: P.O. Box – 251, Port Melbourne,
Melbourne Victoria 3207, Australia
Tele Number : +61-3-96466379
Fax Number : +61-3-96466759
Email Address : [email protected]

Malaysia/ Indonesia
Name of the Company : M/s Bikawa Enterprise Sdn Bhd
Contact Person : Mr. Goh Ing King
Mailing Address : Co. No. 365082-P, No. 29-2, Jalan 10/125D, Desa Petaling
57100 Kuala Lumpur, Malaysia
Tele Number : +60-3-90591998
Fax Number : +60-3-90595998
Email Address : [email protected]

Pakistan
Name of the Company: M/s M. A. J. International
Contact Person: Mr. Mansoor Hakimuddin
Mailing Address: 13 F Block -6
P.E.C.H.S., Karachi-75400
Tele Number: 0092-21-453-6897 / 6898
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Fax Number: 0092-21-453-6896 / 2398
Email Address: [email protected]

CONCEPT OF EXPORT FINANCE

The exporter may require short term, medium term or long term finance depending upon the types
of goods to be exported and the terms of statement offered to overseas buyer. The short-term
finance is required to meet “working capital” needs. The working capital is used to meet regular
and recurring needs of a business firm. The regular and recurring needs of a business firm refer to
purchase of raw material, payment of wages and salaries, expenses like payment of rent,
advertising etc.

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The exporter may also require “term finance”. The term finance or term loans, which is required
for medium and long term financial needs such as purchase of fixed assets and long term working
capital. Export finance is short-term working capital finance allowed to an exporter. Finance and
credit are available not only to help export production but also to sell to overseas customers on
credit.

2.1 Objectives of Export Finance

• To cover commercial & Non-commercial or political risks attendant on granting credit to a

foreign buyer.
• To cover natural risks like an earthquake, floods etc.

This project is an attempt to throw light on the various sources of export finance available to
exporters, the schemes implemented by ECGC and EXIM for export promotion.

The export finance is being classified into two types viz.

• Pre-shipment finance.
• Post-shipment finance.

2.2 Pre-Shipment Finance

2.2.1 Meaning:

Pre-shipment is also referred as “packing credit”. It is working capital finance provided by

commercial banks to the exporter prior to shipment of goods. The finance required to meet various
expenses before shipment of goods is called pre-shipment finance or packing credit.

2.2.2 Definition:

Financial assistance extended to the exporter from the date of receipt of the export order till the
date of shipment is known as pre-shipment credit. Such finance is extended to an exporter for the
17
purpose of procuring raw materials, processing, packing, transporting, warehousing of goods meant
for exports.

2.2.3 Importance of finance at pre-shipment stage:

• To purchase raw material, and other inputs to manufacture goods.

• To assemble the goods in the case of merchant exporters.
• To store the goods in suitable warehouses till the goods are shipped.
• To pay for packing, marking and labeling of goods.
• To pay for pre-shipment inspection charges.
• To import or purchase from the domestic market heavy machinery and other capital goods
to produce export goods.
• To pay for consultancy services.
• To pay for export documentation expenses.

2.2.4 Forms or methods of pre-shipment finance:

Cash Packing Credit Loan:

In this type of credit, the bank normally grants packing credit advantage initially on unsecured
basis. Subsequently, the bank may ask for security.

(1) Advance against hypothecation:

Packing credit is given to process the goods for export. The advance is given against security and
the security remains in the possession of the exporter. The exporter is required to execute the
hypothecation deed in favor of the bank.
(2) Advance against pledge:
The bank provides packing credit against security. The security remains in the possession of the
bank. On collection of export proceeds, the bank makes necessary entries in the packing credit
account of the exporter.

(3) Advance against Red L/C:

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The Red L/C received from the importer authorizes the local bank to grant advances to exporter to
meet working capital requirements relating to processing of goods for exports. The issuing bank
stands as a guarantor for packing credit.

(4) Advance against Back-To-Back L/C:

The merchant exporter who is in possession of the original L/C may request his bankers to issue
Back-To-Back L/C against the security of original L/C in favour of the sub-supplier. The sub-
supplier thus gets the Back-To-Bank L/C on the basis of which he can obtain packing credit.

(5) Advance against exports through export houses:

Manufacturer, who exports through export houses or other agencies can obtain packing credit,
provided such manufacturer submits an undertaking from the export houses that they have not or
will not avail of packing credit against the same transaction.

(6) Advance against duty draw back (DBK):

DBK means refund of customs duties paid on the import of raw materials, components, parts and
packing materials used in the export production. It also includes a refund of central excise duties
paid on indigenous materials. Banks offer pre-shipment as well as post-shipment advance against
claims for DBK.

2.3 SOME SCHEMES IN PRE-SHIPMENT STAGE OF FINANCE

2.3.1 Packing Credit

Sanction of packing credit advances:

There are certain factors, which should be considered while sanctioning the packing credit
advances viz.

• The exporter should hold I E code allotted by DGFT.

• PCL is given only on the basis of confirmed /firms export orders or confirmed L/C’s
• There is no overdue export finance outstanding either in the pre-shipment credits or in the
post-shipments credits either with their earlier banker or with own branches.
• If exporter is banking with more than 1 banker, detail of overdue position of export finance
should be called for.

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 • Overdue outstanding on export bills on collection basis should be called for unit as a whole.
• Outstanding under import bills even on collection basis to be called for.
• How the export orders are being procured. If export order are being procured through local
agents whether any such agreement exists between the local agents and the overseas buyer.
• Amount written off, if any, with reason, to be ascertained and furnished.

• Banks may relax norms for debt-equity ratio, margins etc but no compromise in respect of
viability of the proposal and integrity of the borrower.

• Satisfaction about the capacity of the execution of the orders within the stipulated time and
the management of the export business.
• The Quantum of Finance is granted to an exporter against the LC or an expected order
• Standing of credit opening bank if the exports are covered under letters of credit.
• Regulations, political and financial conditions of the buyer’s country.

Disbursement of packing credit:

After proper sanctioning of credit limits, the disbursing branch should ensure:

To inform ECGC the details of limit sanctioned in the prescribed format within 30 days from the
date of sanction.

a) To complete proper documentation and compliance of the terms of sanction i.e. creation of
mortgage etc.
b) There should be an export order or a letter of credit produced by the exporter on the basis of
which disbursements are normally allowed.
In both the cases following particulars are to be verified:

i. Name of the Buyer.

ii. Commodity to be exported.
iii. Quantity.
iv. Value.
v. Date of Shipment / Negotiation.
vi. Any other terms to be complied with.

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2.3.2 Foreign Currency Pre-Shipment Credit (FCPC)
• The FCPC is available to exporting companies as well as commercial banks for lending to the
former.
• It is an additional window to rupee packing credit scheme & available to cover both the
domestic i.e. indigenous & imported inputs. The exporter has two options to avail him of export
finance.
• To avail him of pre-shipment credit in rupees & then the post shipment credit either in rupees
or in foreign currency denominated credit or discounting /rediscounting of export bills.
• To avail of pre-shipment credit in foreign currency & discounting/rediscounting of the export
bills in foreign currency.
• FCPC will also be available both to the supplier EOU/EPZ unit and the receiver EOU/EPZ unit.

Pre-shipment credit in foreign currency shall also be available on exports to ACU (Asian Clearing
Union) countries with effect from 1.1.1996.

Eligibility: PCFC is extended only on the basis of confirmed /firms export orders or confirmed
L/C’s. The “Running account facility will not be available under the scheme. However, the facility
of the liquidation of packing credit under the first in first out method will be allowed.

Order or L/C : Banks should not insist on submission of export order or L/C for every
disbursement of pre-shipment credit , from exporters with consistently good track record.
Instead, a system of periodical submission of a statement of L/C’s or export orders in hand, should
be introduced.

Sharing of FCPC: Banks may extend FCPC to the manufacturer on the basis of the disclaimer
from export order also.

2.4 Post-Shipment Finance

2.4.1 Meaning:
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Post shipment finance is provided to meet working capital requirements after the actual shipment
of goods. It bridges the financial gap between the date of shipment and actual receipt of payment
from overseas buyer thereof. Whereas the finance provided after shipment of goods is called post-
shipment finance.

2.4.2 Definition:

Credit facility extended to an exporter from the date of shipment of goods till the realization of the
export proceeds is called Post-shipment Credit.

2.4.3 Importance of finance at post-shipment stage:

• To pay to agents/distributors and others for their services.

• To pay for publicity and advertising in the over seas markets.
• To pay for port authorities, customs and shipping agents charges.
• To pay towards export duty or tax, if any.
• To pay towards ECGC premium.
• To pay for freight and other shipping expenses.
• To pay towards marine insurance premium, under CIF contracts.
• To meet expenses in respect of after sale service.
• To pay towards such expenses regarding participation in exhibitions and trade fairs in India
and abroad.
• To pay for representatives abroad in connection with their stay board.

2.4.4 Forms/Methods of Post Shipment Finance

(1) Export bills negotiated under L/C:

The exporter can claim post-shipment finance by drawing bills or drafts under L/C. The bank
insists on necessary documents as stated in the L/C. if all documents are in order, the bank
negotiates the bill and advance is granted to the exporter. Purchase of export bills drawn under
confirmed contracts: The banks may sanction advance against purchase or discount of export bills

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drawn under confirmed contracts. If the L/C is not available as security, the bank is totally
dependent upon the credit worthiness of the exporter.

(2) Advance against bills under collection:

In this case, the advance is granted against bills drawn under confirmed export order L/C and
which are sent for collection. They are not purchased or discounted by the bank. However, this
form is not as popular as compared to advance purchase or discounting of bills.
(3) Advance against claims of Duty Drawback (DBK):
DBK means refund of customs duties paid on the import of raw materials, components, parts and
packing materials used in the export production. It also includes a refund of central excise duties
paid on indigenous materials. Banks offer pre-shipment as well as post-shipment advance against
claims for DBK.
(4) Advance against goods sent on Consignment basis:
The bank may grant post-shipment finance against goods sent on consignment basis.
(5) Advance against Undrawn Balance of Bills:
There are cases where bills are not drawn to the full invoice value of gods. Certain amount is
undrawn balance which is due for payment after adjustments due to difference in rates, weight,
quality etc. banks offer advance against such undrawn balances subject to a maximum of 5% of the
value of export and an undertaking is obtained to surrender balance proceeds to the bank.

(6) Advance against Deemed Exports:

Specified sales or supplies in India are considered as exports and termed as “deemed exports”. It
includes sales to foreign tourists during their stay in India and supplies made in India to IBRD/
IDA/ ADB aided projects. Credit is offered for a maximum of 30 days.
(7) Advance against Retention Money:
In respect of certain export capital goods and project exports, the importer retains a part of cost
goods/ services towards guarantee of performance or completion of project. Banks advance against
retention money, which is payable within one year from date of shipment.
(8) Advance against Deferred payments:
In case of capital goods exports, the exporter receives the amount from the importer in installments
spread over a period of time. The commercial bank together with EXIM bank do offer advances at
concessional rate of interest for 180 days.
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2.5 SOME SCHEMES UNDER OPERATION IN POST-SHIPMENT FINANCE

2.5.1 Deferred Credit

Meaning:

Consumer goods are normally sold on short term credit, normally for a period up to 180 days.
However, there are cases, especially, in the case of export of capital goods and technological
services; the credit period may extend beyond 180 days. Such exports were longer credit terms
(beyond 180 days) is allowed by the exporter is called as “deferred credit” or “deferred payment
terms”.

How the payment is received?

The payment of goods sold on “deferred payment terms” is received partly by way of advance or
down payment, and the balance being payable in installments spread over a period of time.

Period of financial credit support:

Financial institutions extend credit for goods sold on “deferred payment terms” (subject to approval
from RBI, if required). The credit extended for financing such deferred payment exports is known
as Medium Term and Long Term Credit. The medium credit facilities are provided by the
commercial banks together with EXIM Bank for a period up to 5 years. The long term credit is
offered normally between 5 yrs to 12 yrs, and it is provided by EXIM Bank.

Amount of credit support:

Any loan up to Rs.10crore for financing export of capital goods on deferred payment terms is
sanctioned by the commercial bank which can refinance itself from EXIM Bank. In case of
contracts above Rs.10 Lakhs but not more than Rs50crore, the EXIM Bank has the authority to
decide whether export finance could be provided. Contracts above Rs.50crore need the clearance
from the working group on Export Finance.

2.5.2 Rediscounting of export bills abroad (EBRD) scheme:

The exporter has the option of availing of export credit at the post-shipment stage either in rupee
or in foreign currency under the rediscounting of export bills abroad (EBRD) scheme at London
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Inter Bank Offered Rate (LIBOR) linked interest rates. This facility will be an additional window
available to exporter along with the exiting rupee financing schemes to an exporter at post
shipment stage. This facility will be available in all convertible currencies. This scheme will cover
export bills up to 180 days from the date of shipment (inclusive of normal transit period and
grace period) .
The scheme envisages ADs rediscounting the export bills in overseas markets by making
arrangements with an overseas agency/bank by way of a line of credit or banker’s acceptance
facility or any other similar facility at rates linked to LIBOR for six months.
Prior permission of RBI will not be required for arranging the rediscounting facility abroad so long
as the spread for rediscounting facility abroad does not exceed one percent over the six months
LIBOR in the case of rediscounting ‘with recourse’ basis & 1.5% in the case of ‘without recourse’
facility. Spread, should be exclusive of any withholding tax. In all other cases, the RBI’s
permission will be needed.

2.5.3 Finance for Rupee Expenditure for Project Export Contracts (FREPEC)

What is FREPEC Program?

This program seeks to Finance Rupee Expenditure for Project Export Contracts, incurred by Indian
companies.

What is the purpose of this Credit?

To enable Indian project exporters to meet Rupee expenditure incurred/required to be incurred for
execution of overseas project export contracts such as for acquisition/purchase/acquisition of
materials and equipment, acquisition of personnel, payments to be made in India to staff, sub-
contractors, consultants and to meet project related overheads in Indian Rupees.

Who are eligible for Assistance under FREPEC Program?

Indian project exporters who are to execute project export contracts overseas secure on cash
payment terms or those funded by multilateral agencies will be eligible. The purpose of the new
lending program is to give boost to project export efforts of companies with good track record and
sound financials.

What is the quantum of credit extended under this program?

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Up to 100% of the peak deficit as reflected in the Rupee cash flow statement prepared for the
project. EXIM Bank will not normally take up cases involving credit requirement below Rs. 50
lakhs. Although, no maximum amount of credit is being proposed, while approving overall credit
limit, credit-worthiness of the exporter-borrower would be taken into account. Where feasible,
credit may be extended in participation with sponsoring commercial banks.

How are Disbursements made under this Program?

Disbursements will made in Rupees through a bank account of the borrower-company against
documentary evidence of expenditure incurred accompanied by a certificate of Chartered
Accountants.

How is a FREPEC Loan to be extinguished?

Repayment of credit would normally be out of project receipts. Period of repayment would depend
upon the project cash flow statements, but will not exceed 4 (four) years from the effective date of
project export contract. The liability of the borrower to repay the credit and pay interest and other
monies will be absolute and will not be dependent upon actual realization of project bills.

What is the security stipulated for FREPEC loan?

• Hypothecation of project receivables and project movables.

• Optional: where available

• Personal Guarantees of Directors of the Company.

• Available collateral security.

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 METHOD OF PAYMENT IN INTERNATIONAL BUSINESS

The buyer and the seller are at the heart of every business. Both parties have one thing in common:
to profit from the transaction and to expose themselves to the least risk possible. Payment methods
in international trade are similar to those in domestic business. In international trade, the means of
payment are known as “terms of payment.” There are five commonly used methods of payment,
each of which offers different levels of risk and stability for buyers and sellers.

3.1 Open account

Open account provides the least risk for the buyer and the greatest risk for the seller. The buyer
agrees to pay for the goods within a designated time after the shipment, usually in 30, 60 or 90
days. In open account method the importer is trusted to pay the exporter after receipt of goods.
The main drawback of open account method is that exporter assumes all the risks while the
importer get the advantage over the delay use of company's cash resources and is also not
responsible for the risk associated with goods.

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3.2 Payment Collection of Bills in International Trade

The Payment Collection of Bills also called “Uniform Rules for Collections” is published by
International Chamber of Commerce (ICC) under the document number 522 (URC522) and
is followed by more than 90% of the world's banks.

In this method of payment in international trade the exporter entrusts the handling of commercial
and often financial documents to banks and gives the banks necessary instructions concerning the
release of these documents to the Importer. It is considered to be one of the cost effective methods
of evidencing a transaction for buyers, where documents are manipulated via the banking system.

3.2.1 The Collection Order

The collection order is the key document prepared by the seller specifying the terms and conditions
of a documentary collection. It must be prepared with great care and precision as the banks are only
permitted to act upon the instructions given in the order and not on instructions from past
transactions or verbal understandings. These are notes for key provisions of the document:

• The payment period as agreed with the buyer.

• The name and address of the buyer.
• The buyer’s bank
• Instructions, if any, about what to do with the accepted bill of exchange.
• Notation concerning payment of charges for the documentary collection.
• Notation/instructions for the lodging of a protest in the event of non acceptance or non
payment.
• Instructions for notification of agent or representative in the buyer’s country.

Performa of collection order

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There are two methods of collections of bill:

(i) Documents against payment (D/P)

In D/P terms, the collecting bank releases the documents to the buyer only upon full and immediate
cash payment. The buyer must pay the presenting /collecting bank the full payment in freely
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available funds in order to take possession of the documents. This type of collection offers the
greatest security to the seller. The process of D/P is as follows here:

Documents against Payment/Bill of Exchange flow diagram

(ii) Document against Acceptance (D/A)

In D/A terms, the collecting bank is permitted to release the documents to the buyer against
acceptance (signing) of a bill of exchange or signing of a time draft at the bank promising to pay at
a later date (30,60,90 days). The completed draft is held by the collecting bank and presented to the
buyer for payment at maturity, after which the collecting bank sends the funds to the remitting
bank, which in turn sends them to the principal/seller. The seller should be aware that he gives up
title to the shipment in exchange for the signed bill of exchange that now represents his only
security in the transaction. Here is the process of D/A.

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3.3 Letter of Credit (L/C)
Letter of Credit also known as Documentary Credit is a written undertaking by the importers bank
known as the issuing bank on behalf of its customer, the importer (applicant), promising to effect
payment in favor of the exporter (beneficiary) up to a stated sum of money, within a prescribed
time limit and against stipulated documents. It is published by the International Chamber of
Commerce under the provision of Uniform Custom and Practices (UCP) brochure number 500.

Letter of Credit Flow diagram

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Various types of L/Cs are:

(i)Revocable & Irrevocable L/Cs

A Revocable Letter of Credit can be cancelled without the consent of the exporter.
An Irrevocable Letter of Credit cannot be cancelled or amended without the consent of all parties
including the exporter.

(ii) Sight & Time L/Cs

If payment is to be made at the time of presenting the document then it is referred as the Sight
Letter of Credit. In this case banks are allowed to take the necessary time required to check the
documents. If payment is to be made after the lapse of a particular time period as stated in the draft
then it is referred as the Term Letter of Credit.

(iii) Confirmed Letter of Credit L/Cs

Under a Confirmed Letter of Credit, a bank, called the Confirming Bank, adds its commitment to
that of the issuing bank. By adding its commitment, the Confirming Bank takes the responsibility
of claim under the letter of credit, assuming all terms and conditions of the letter of credit are met.
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3.4 Consignment sales

International consignment sales follow the same basic procedures as in the United States. The
goods are shipped to a foreign distributor who sells them on behalf of the exporter. The exporter
retains title to the goods until they are sold, at which point payment is sent to the exporter. The
exporter has the greatest risk and least control over the goods with this method. Additionally,
receiving payment may take quite a while.

It is wise to consider risk insurance with international consignment sales. The contract should
clarify who is responsible for property risk insurance that will cover the merchandise until it is sold
and payment is received. In addition, it may be necessary to conduct a credit check on the foreign
distributor.

The oriental carbon and chemicals ltd use the following method:

1. cash in advance under letter of credit

2. document against payment

3.5 Cash in advance

Provides greatest security for the seller and greatest risk for the buyer. The buyer simply prepays
the seller prior to shipment of the goods either through Telegraphic Transfer (TT) or through a
cheque or a demand draft this is normally done after acceptance of the order by the exporter. This
term of payment requires that the buyer to have a high level of confidence in the seller to deliver
the goods as ordered. Added costs (for handling of the documentary credit) to buyer.

For the buyer, however, advance payment tends to create cash flow problems, as well as increase
risks. Furthermore, cash in advance is not as common in most of the world as it is in the United
States. Buyers are often concerned that the goods may not be sent if payment is made in advance.
Exporters that insist on this method of payment as their sole method of doing business may find
themselves losing out to competitors who offer more flexible payment terms.

FINDINGS AND SUGGETIONS

(1) Export Finance is a very important branch to study & understand the overall gamut of the
international finance market.

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(2) OCCL deals in the export transactions and deals with the clients through:

• Letter of Credit
• Bill of Exchange
• Cash against documents

In which the more risks involve in the cash against documents COD where the exporter have to
send the documents first than only the payments are made by the importer. This facility is given to
the regular clients of the company.

The Letter of Credit is the safest mode of payment in international business. It is used for the
security of payment. basically used in the country where risk of payment is involved like in African
continent countries like Somalia or where the chances of political instability happens like Kenya
Pakistan, Afghanistan etc.

Bill of Exchange is used by the company when the company has trust on the party or the credit of
the client is good in the market. In case of OCCL the company provides the facility of Bill of
Exchange to it regular clients.

The overall %age of realization of bills at OCCL is quite impressive because they prefer dealing in
Letter of Credit as a mode of payment.

(3) Learning of the proper documentation during imports and exports is very essential while doing
trade. Also the exporter and importer by studying the entire process of export and import finance
can get exposure to risks. The Oriental Carbon and Chemicals Ltd. uses its factory invoice to get
the benefit from the excise department of the government of India. It is done through the local
authority of that place where the plant is located.

(4) Availability of favorable Export finance schemes directly impacts the local trade, encourages
exporters, enlarges markets abroad, improves quality of domestic goods and overall helps the
nation boost its exchange earnings. The OCCL fulfills its requirement of finance through State
Bank of India (overseas branch) whether it is a packing credit loan (PCL) or the term loan.
(5) The Government of any nation plays a very vital role in boosting export turnover. The credit
policy of the Indian Government is also changed depending upon the needs of the exporters, global
trade environment etc.

(6) ECGC and EXIM Bank take a lot of efforts for Export promotion. The strategies of these 2
agencies in India should be flexible & their finance schemes should be constantly synchronized
34
with the changing scene of world trade. This alone can help Indian exporters to stand competition
in world markets effectively and more gain-fully.

(7) Chemical Allied Products Export Promotion Council known as CAPEXIL, a non-profit making
organization, was setup in March 1958 by the Ministry of Commerce, Government of India to
promote export of Chemical and Allied Products from India. And since then has been the voice of
Indian business community. Headquartered at Kolkata, and regional offices at New Delhi,
Mumbai, Kolkata and Chennai, CAPEXIL has more than 3500 members across the country. One of
the fascinating aspects of CAPEXIL is the overwhelming variety of products it deals with.

CAPEXIL offers a full range of services to Indian exporters and foreign importers. Acting as an
interface between the government and the members regarding trade and policy related matters-it
provides its members an indispensable information gateway and helping hand. From preparation of
authentic market reports to analysis of Indian export trend across country, product or other
parameters - it serves the exporters as an awesome resource of global trade data. The main service
categories include:

• Market Development Assistance

• Trade Leads
• Enquiries
• Exporter Helpdesk
• Export Returns Filing
• Visa Recommendation
• Market Development Assistance

CAPEXIL offers a full range of services to Indian exporters and foreign importers:

• Indispensable information gateway and helping hand for exporters

• An interface between the government and the members regarding trade and policy related
matters
• Dissemination of trade enquiries
• Participation in national/international workshops, organizing seminars/buyer-seller meets
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 • Analysis of Indian export trend across country, product or other parameters
• Awesome resource of global trade data
• Disbursement of grants through various
• Preparation of authentic market reports

CONCLUSION
This project covers various aspects related to export finance. the need of export finance depends
upon the period at pre-shipment and post-shipment stage. The export company may need the short
36
term, medium term or long term finance depending upon the types of goods which are to be
exported.

The requirement of finance to any exporter can be classified in two parts.

An exporter requires the short-term finance to meet its need of working capital. The working
capital is used to meet regular and day to day operations in the company needs of a business firm.
It can be anything like purchasing of raw material, payment of wages and salaries to employees,
expenses like payment of rent, advertising etc.

The exporter may also require term finance. The term finance or term loans, which is required for
medium and long term financial needs such as purchase of fixed assets and long term working
capital. Export finance is short-term working capital finance allowed to an exporter which can be
extended up to the post shipment finance. Finance and credit are available not only to help export
production but also to sell to overseas customers on credit. For that the ECGC is there to provide
the finance to the exporters.

For example an export order was sent by OCCL to Indonesia via sea transportation. OCCL
prepared the sales plan, arranged the delivery on time and delivered it by the Hyundai Marine
Merchant Co. Ltd, which was one of the fastest shipping lines in the business. The shipping line
delivered the consignment to the importer and the payment was done through the bank. The mode
of payment was Bill of Exchange which was written in the favor of OCCL after the date of one
month from the date of Bill of Lading. The bank of OCCL was State Bank of India.

BIBILIOGRAPHY

Websites:
1) www.occlindia.com
2) www.dgft.org

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3) www.eximindiamart.com
4) www.ecgc.in
5) www.eximbankindia.com
6) www.rbi.org.in
7) www.capexil.com

Books:
1) Export Import Management – Aseem Kumar
2) Export Marketing - Michael Vaz
3) Export Management - T. A .S. Balagopal

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