Steps in Export Procedures

A project by
1. Jay (roll no. 28)
2. Amol (roll no.42)
3. Azhar (roll no39)
4. Subhash (roll no.49)
5. Punit (roll no.40)
INTRODUCTION

Any good or commodity, transported from one country to another country in a

legitimate fashion, typically for use in trade is termed as export. Export of goods
or services are provided to foreign consumers by domestic producers.
It consists of several commercial & regulatory formalities, which exporter is
required to complete during the course of export trade transaction.
These formalities are very complex & time consuming requiring many
documentation.
It should be ensured that all the formalities are done & documentations are
prepared & filed with appropriate authority.
At the same time it should be ensured that the rules & regulation of not only
exporting Country but also of importing Country are duly compiled with.

Overview of export procedure

Stage 1- Registration procedures

Stage 2- Pre shipment procedure
Stage 3- Shipment procedures
Stage 4- Realizing Export incentives
Stage 5- Post-shipment procedure

STAGE 1 - Registration procedures

Exporter is required to register his organization with number of institution &

authorities.
The registration stage includes-- Registration of the organization---The form of organization
selected by exporter must be registered under the appropriate act of the
Country.
#A joint stock Company under the Companies act,1956.

#A partnership firm under the Indian partnership Act,1932.

#A sole trader should seek permission from the local authorities, as required
Opening Bank account---The exporter should open a current in name of
the firm or company with a commercial Bank which is authorized by RBI to
deal in foreign exchange.
Registration with export promotion council---It is obligatory for
exporter & he has to obtain the Registration-cum-Membership Certificate
(RCMC).
Obtaining membership of chamber of commerce---An exporter must
become member of regional chamber of commerce. Membership of such
organization is useful for securing certificate of origin.

a)
b)
c)
d)
e)
f)
g)
h)
i)

Obtaining GIR No./PAN---Income from exports is exempted from

income tax, for which exporter is required to register his firm with Income
Tax Authorities. For this purpose he has to first obtain General index
Registration (GIR) number which is temporary number allotted by income tax
authority to a new entrant in the field of export trade. Such GIR No. is then
replaced by the PAN No. in due course of time
Registration for the code number from DGFT---The code number is
known as IEC number. This is granted by Director General of Foreign Trade.
For obtaining IEC number , exporter has to apply to Regional Licensing
Authority in duplicate with the following documentsTwo copies of passport size photos duly attested by customs,
Photocopy of PAN
Details of current Bank account
RCMC from EPC
Photocopy of Industrial license
Certificate of incorporation issued by the registrar of Companies
DD for payment of fee of Rs.1000
Declaration that exporter isnt on RBIs caution list,
Any other document.
Registration for BIN--- BIN stands for Business Identification
Number. The exporter are required to obtain Pan based Bin from DGFT
before customs clearance of goods.
Filling income tax return---It is compulsory for the exporter to file
income tax return annually. The return must include the details of exportimport made in the preceding year by 30th June each year. The return is
filed with the website www.nic.in/eximpol. If return is not filed then IEC
No. shall be blocked till such time that the return is filed.

STAGE 2 - PRE-SHIPMENT STAGE

PRE-SHIPMNET STAGE CONSISTS OF FOLLOWING STEPS

APPROACHING FOREIGN BUYERS: In order to secure an export order, a new

exporter can make use of one or more of the techniques, such as, advertising in
international media, sales promotion, public relation, personal selling, publicity
and participation in trade fairs and exhibitions.

INQUIRY AND OFFER: An inquiry is an request from an prospective importer

about description goods, their standard or grade, size, weight or quantity, terms of
payments, etc. On getting an inquiry, the exporter must process it immediately by
making an offer in the form of proforma invoice.

CONFIRMATION OF ORDER: Once the negotiations are completed and the

terms and conditions are finalised, the exporter sends three copies of proforma
invoice to the importer for the confirmation of order. The importer signs these
copies and sends back two copies to the exporter.

OPENING OF LETTER OF CREDIT: The documentary credit or letter of credit

is the most appropriate and secure method of payment adopted to settle
international transactions. On finalization of export contract, the importer opens
the letter of credit in favor of the exporter, if agreed upon in contract.

ARRANGEMENT OF PRE-SHIPMENT FINANCE: On securing the letter of

credit, the exporter procures a pre-shipment finance from his bank for procuring
raw materials and other components, processing and packing of goods and
transfer goods to the port of shipment.

PRODUCTION OR PROCUREMENT OF GOODS: On securing the preshipment finance from the bank, the exporter either arranges for the production of
the required goods or procures them from the domestic market as per the
specifications of the importer.

PACKING AND MARKING: The goods should be properly packed and marked
with necessary details such as port of shipment and destination, country origin,
gross and net weight, etc. If required, assistance can be taken from the Indian
Institute of Packing (IIP).

PRE-SHIPMENT INSPECTION: If goods to be imported are subject to

compulsory quality control and pre-shipment inspection then the exporter should
contact the Export Inspection Agency (EIA) for obtaining an inspection
certificate.

CENTRAL EXCISE CLEARANCE: The exporters are totally exempted from the
payment of central excise duty. However, the exemption should be claimed in one
of the following ways:- a)Export under Rebate.
b)Export under Bond.

OBTAINING INSURANCE COVER: The exporter must take appropriate

policies in order to insure risks :-a) ECGE policy in order to cover credit risks.
b) Marine policy, if the price quotation agreed upon is CIF.

APPOINTMENT OF C & F AGENT: Since exporting is a complex and a time

consuming process, the exporter appoint a Clearing and Forwarding(C & F) agent
for the smooth clearance of goods from the customs and preparation and
submission of various documents

STAGE 3 - Shipment stage

Goods can be shipped by rail, road, sea or air. As most of the
exports orders are of large volume shipment by sea is the most
preferred mode of transport. In consultation with C&F agent, the
exporter must prepare proper shipping documents, keep ready
relevant declaration, filling the correct classification and hand over
documents to the c&f agent in time to maintain delivery schedule.
Procedure consists of following:
1)reservation of space in the ship: the exporter has to contact the
shipping company well in advance for booking the required space
in the vessel for shipment of his consignment through his c & f
agent. he has to provide information as regards date of shipment,
gross and net weight of each package, arrival and departure date of
vessel etc. when shipping company accepts the exporters request,
the company or its agent issues shipping order containing
instructions regarding loading and shipment.
2)arrangement of internal transport from factory to the port of
shipment:

The exporter has to make necessary arrangements for transporting

the goods by road or rail from his own place to the port of
shipment if railway wagon or wagons are to be booked, the
shipping order and a forwarding note with necessary fees
etc.should be submitted to railway authorities. After loading the
goods into wagon, the railway office issues railway receipt. it may
be either freight paid or freight to pay which serve as a document
of title to the goods.
3)prepration and processing of shipping documents: when goods
reach the port of shipment, the exporter hands over the complete
set of documents to the forwarding agent; which are submitted to
the customs appraiser at the custom house.
1)shipping bill(five copies)
2)commercial invoice(in duplicate)
3)letter of credit together with the export contact.
4)certificate of origin.
5)GR form(original and duplicate)
6)ARE-1FORM(original and duplicate)
7)packing list or packing note
8)exice invoice
9)valuation certificate
10)declaration of duty drawback(in duplicate)
11)marine insurance policy
12)weightmant certificate(if needed).
13)rail freight concession form(if needed)
All the above documents except the original of GR ,original copy
of shipping bill and one copy of commercial invoice are returned
to forwarding agent.
Custom clearance:
According to custom regulation no cargo meant for export can be
loaded on a ship unless the custom authorities at the port accord
the formal approval. The officer of the customs department of the
rank of an appraiser scrutinizes the documents to determine

accuracy and genuineness. He further ensures that formalities

relating to exchange control, quality control, pre shipment
inspection and licensing has following stages:
1) Carting order:
The C&F agent obtains carting order from the port trust authorities
to cart or carry the goods inside the dock. The customs appraiser
issues carting order after verifying the endorsement on the
duplicate copy of the shipping bill.
2) Storing the goods in the shed:
After obtaining the carting order, the cargo can be moved into the
appropriate
shed inside the docks.
3)examination of goods: the C& F agent now approaches the
custom examiner who may physically inspects the goods, the
custom examiner, if satisfied issues, let export order it is a
clearance from the customs that goods are permitted to export.
4)let ship order:
The duplicate copy of shipping bill which is endorsed by the
customs examiner is handed over to the customs preventive officer
who endorses it with let ship order. It is permission of actual
loading of cargo into the ship. It is issued by preventive officer of
the customs.
5)loading of goods:
The goods are then loaded on board the ship for which mates
receipt is issued by the mate of the ship.
6) Obtaining bill of lading:
The C&F agent approaches the shipping company surrenders
mates receipt and obtaining bill of lading.yhe shipping company
issues 2 or 3 negotiable copies of B/L and as many non negotiable
copies are required by exporter.
CUSTOMS EDI SYSTEM
On 15th sept.2004 government of India introduced computerized
processing of shipping bills under the Indian customs EDI
(electronic data interchange) system.

About 20 ports in India have adopted computerized processing of

shipping bills. Only statuary declarations will be manually
screened. With exception of minor variance custom clearance
remains same under computerized processing of documents.

Stage 4 - Realizing Export incentives

Incentive is an expectation that encourages people to behave in a certain way

The Government of India has framed several schemes to promote exports and to
obtain foreign exchange. These schemes grants incentive and other benefits. The
few important export incentives & exemptions are ----

Exemptions for Indian Exporters

I.

II.

III.
IV.

Registration with Excise Authorities--- Exporters are exempted from

payment of excise duty. They have two options either deposit excise duty at time
of clearance from factory & later claim return or open Bond Account with
Maritime Collector of Central Excise
Obtaining GIR No./PAN---Income from exports is exempted from income
tax, for which exporter is required to register his firm with Income Tax
Authorities. For this purpose he has to first obtain General index Registration
(GIR) number which is temporary number allotted by income tax authority to a
new entrant in the field of export trade. Such GIR No. is then replaced by the
PAN No. in due course of time
Registration with sales tax Authorities---he should register with authorities
of his state to get exemption from sales tax.
Registration with VAT Authority---Goods manufactured or purchased from
domestic market meant for export are fully exempted from VAT. It should be done
with authorities of concerned state.

V.

Registration with Export Credit Guarantee Corporation of India

(ECGC) ---An exporter must register with ECGC, to cover political &
commercial risks, to insure export realization, exchange rate risks etc.

Facilities to Indian Exporters

Marketing Development Assistance (MDA)--The Ministry of Commerce and Industry has a scheme of MDA, which was
launched in 1963 with a view to stimulate and diversify the export trade, along with the
development of marketing of Indian products and commodities abroad. The MDA is
utilized for: Market research, commodity research, area survey and research;
Participation in trade fairs and exhibitions; Export publicity and dissemination of
information; Trade delegation and study teams; Establishment of offices and branches in
abroad; Grant-in-aid to Export Promotion Councils and other approved organizations for
the development of exports and the promotion of foreign trade; and any other scheme
which is generally aimed at promoting the development of markets for Indian products
and commodities abroad.

Market Access Initiative (MAI)--The Ministry of Commerce and Industry has introduced the MAI in April 2001
with the idea that the Government shall assist the industry in R&D, market research,
specific market and product studies, warehousing and retail marketing infrastructure in
select countries and direct market promotion activities through media advertising and
buyer-seller meets. Financial assistance shall be available under the scheme to EPCs,
industry and trade associations and other eligible activities, as may be notified from time
to time. A small allocation of Rs 42 crore has been made for 2002-03.
Free Trade Zones (FTZ)--- Several FTZs have been established at various places in
India like Kandla, Noida, Cochin, etc. No excise duties are payable on goods
manufactured in these zones provided they are made for export purpose. Goods being
brought in these zones from different parts of the country are brought without the
payment of any excise duty. Moreover, no customs duties are payable on imported raw
material and components used in the manufacture of such goods being exported. If entire
production is not sold outside the country, the unit has the provision of selling 25% of
their production in India. On such sale, the excise duty is payable at 50% of basic plus
additional customs or normal excise duty payable if the goods were produced elsewhere
in India, whichever is higher.

Export Financing--Financial assistance extended by the banks to exporters at pre-shipment and postshipment
stages. While the pre-shipment finance is provided for working capital for the
purchase of raw material, processing, packing, transportation, warehousing, etc, of the
goods meant for export, post-shipment finance is generally provided in order to bridge
the gap between the shipping of goods and the realization of proceeds. With a view to
providing pre-shipment credit to Indian exporter at internationally competitive rates,

interest, Reserve bank of India announced a new scheme in November 1993 to provide
Pre-shipment Credit in Foreign Currency (PCFC) by the banks in India. The PCFC
scheme is in addition to normal packing credit schemes in Indian rupees presently
available to Indian exporters. Exporters are also permitted to draw foreign exchange
from the authorized dealers for the purposes such as foreign travel or for giving
advertisement aboard. Therefore, a person resident in India may open, hold and
maintain with an authorized dealer, a foreign currency to be known as Exchange Earners
Foreign Currency (EEFC) Account, subject to the terms and conditions of the EEFC
Account Schemes.

Exim Bank Finance--The Export-Import Bank of India (Exim Bank) provides financial assistance to promote
Indian exports through direct financial assistance. Overseas investment finance, term
finance for export production and export development pre-shipment credit, buyers
buyers credit, lines of credit, relining credit facility, export bills rediscounting, refinance
to commercial banks finance for computer software export, finance for export marketing,
and bulk import finance. The Exim Bank also extends non-funded facility to Indian
exporters in form of guarantees. The diversified landing of the Exim Bank now covers
various stages of export, that is from the development of export market to expansion of
production capacity for exports, production for export and pre-shipment financing. The
Exim Banks focus is on export of manufactured goods, project exports and export of
technology services.

Advance Licence / Duty Exemption Entitlement Scheme (DEEC) & Duty

Drawback --

In this scheme advance licence, either quantity based (Qbal) or value based
(Vabal), is given to an exporter against which the raw materials and other
components may be imported without payment of customs duty provided the
manufactured goods are exported. These licences are transferable in the open
market at a price.
It means the rebate of duty chargeable on imported material or excisable
material used in the manufacturing of goods in and is exported. The exporter
may claim drawback or refund of excise and customs duties being paid by his
suppliers. The final exporter can claim the drawback on material used for
the manufacture of export products. In case of re-import of goods the
drawback can be claimed.

Manufacture under Bond--- This scheme furnishes a bond with the

manufacturer of adequate amount to undertake the export of his production.
Against this the manufacturer is allowed to import goods without paying any
customs duty, even if he obtain it from the domestic market without excise duty. The
production is made under the supervision of customs or excise authority.

STAGE 5 - Post shipment Stage

Presentation of documents to the bank for the purpose of negotiation
Dispatch of Documents will be done by bank to exporter
Documentary Bill of Exchange is formed and usance bill is awaited thereafter.
Letter of Indemnity is in the case when buyers bank does not release the
payment and exporter will refund the money with accrued interest.
Realization of export Proceeds occurs and
Processing GR Form thereafter will be done.
Importance of post shipment stage
1) To pay to agents , distributors and others for services.
2)To pay for publicity and advertising.
3)To pay for port authorities, customs and shipping agents charges.
4) To pay for export duty or tax if any.
5)To pay towards ECGC premium.
6)To pay for freight and other shipping expenses.
7)To pay for marine insurance premium under CIF contract.
8)To pay for various expenses in connection with visits abroad for market surveys
or for some other purpose.
9)To meet expenses in respect of after sales = service.
10)-To pay for expenses regarding participation I trade fairs and exhibitions in
India and abroad.

11)To pay for representatives abroad in connection with their stay abroad.
12)To pay for any other activity in connection with the export of goods
Importance of post shipment finance
1)one of the
significant aspect of export is its basic production facilities; they can be classified under
general finance as the scope of export business doesnt end over quality or quantity of
goods or services emphasizing the need to expand horizons.
General finance relating to goods are procurement of raw material,
creating needed infrastructure for manufacturing and cost of every element involved in
conversion process. even the stock insurance, godown insurance add to the cost of the
goods.
Marketing turns out to be an integral part of todays business,
times have come where marketing is to be given more weightage than the production of
goods,it is due to realization of the fact that production shall occur if the demand shoots
up. Thus marketing expenses like advertising of product, placing stock in fairs and
exhibitions for promotion, recruiting agents for selling overseas and all expenses of such
nature need finance.
Duties and taxes constitute a
important part of financing for a exporter. Since at times duties are to be paid which may
not be the liabilities of the exporter. excise duty has to be borne by manufacturer initially
but at a later the duty drawback is allowed since exported goods are exempt from tax.
Thus finance is needed to fasten work.
2)Secondly the main shipping expenses are something
unignorable whose unpayment would cause stoppage of goods supply to customer,hence
stoppage of business. Appointment of clearing and forwading agent, shipping company
transport fees or other sources fees, fees to get quality assessed to export inspection
council,payment for getting international standard organization stamp on the stock. the
other most important aspect is bank relating transaction charges.every second exporter
deals with bank either for finance, overseas party linking bank ,collection of foreign
currency ,clearance of guaranteed remittance form to RBI
Post Shipment Finance
Post-shipment finance is the finance provided against shipping documents. It is also
provided against duty drawback claims. It is provided in the following forms:
Purchase of Export Documents drawn under Export Order: Purchase or discount
facilities in respect of export bills drawn under confirmed export order are generally
granted to the customers who are enjoying Bill Purchase/Discounting limits from the
Bank. As in case of purchase or discounting of export documents drawn under export
order, the security offered under L/C by way of substitution of credit-worthiness of the
buyer by the issuing bank is not available, the bank financing is totally dependent upon
the credit worthiness of the buyer, i.e. the importer, as well as that of the exporter or the
beneficiary. The documents dawn on DP basis are parted with through foreign
correspondent only when payment is received while in case of DA bills documents
(including that of title to the goods) are passed on to the overseas importer against the

acceptance of the draft to make payment on maturity. DA bills are thus unsecured. The
bank financing against export bills is open to the risk of non-payment. Banks, in order to
enhance security, generally opt for ECGC policies and guarantees which are issued in
favor of the exporter/banks to protect their interest on percentage basis in case of nonpayment or delayed payment which is not on account of mischief, mistake or negligence
on the part of exporter. Within the total limit of policy issued to the customer, draweewise limits are generally fixed for individual customers. At the time of purchasing the bill
bank has to ascertain that this drawee limit is not exceeded so as to make the bank
ineligible for claim in case of non-payment.
Advances against Export Bills Sent on Collection: It may sometimes be possible to
avail advance against export bills sent on collection. In such cases the export bills are sent
by the bank on collection basis as against their purchase/discounting by the bank.
Advance against such bills is granted by way of a 'separate loan' usually termed as 'postshipment loan'. This facility is, in fact, another form of post- shipment advance and is
sanctioned by the bank on the same terms and conditions as applicable to the facility of
Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is, however,
stipulated in such cases. The rates of interest etc., chargeable on this facility are also
governed by the same rules. This type of facility is, however, not very popular and most
of the advances against export bills are made by the bank by way of
negotiation/purchase/discount.
Advance against Goods Sent on Consignment Basis: When the goods are exported on
consignment basis at the risk of the exporter for sale and eventual remittance of sale
proceeds to him by the agent/consignee, bank may finance against such transaction
subject to the customer enjoying specific limit to that effect. However, the bank should
ensure while forwarding shipping documents to its overseas branch/correspondent to
instruct the latter to deliver the document only against Trust Receipt/Undertaking to
deliver the sale proceeds by specified date, which should be within the prescribed date
even if according to the practice in certain trades a bill for part of the estimated value is
drawn in advance against the exports.
Advance against Undrawn Balance: In certain lines of export it is the trade practice that
bills are not to be drawn for the full invoice value of the goods but to leave small part
undrawn for payment after adjustment due to difference in rates, weight, quality etc. to be
ascertained after approval and inspection of the goods. Banks do finance against the
undrawn balance if undrawn balance is in conformity with the normal level of balance
left undrawn in the particular line of export subject to a maximum of 10% of the value of
export and an undertaking is obtained from the exporter that he will, within 6 months
from due date of payment or the date of shipment of the goods, whichever is earlier
surrender balance proceeds of the shipment. Against the specific prior approval from
Reserve Bank of India the percentage of undrawn balance can be enhanced by the
exporter and the finance can be made available accordingly at higher rate. Since the
actual amount to be realised out of the undrawn balance, may be less than the undrawn
balance, it is necessary to keep a margin on such advance.

Advance against Retention Money: Banks also grant advances against retention money,
which is payable within one year from the date of shipment, at a concessional rate of
interest up to 90 days. If such advances extend beyond one year, they are treated as
deferred payment advances which are also eligible for concessional rate of interest.
Advances against Claims of Duty Drawback: Duty Drawback is permitted against
exports of different categories of goods under the 'Customs and Central Excise Duty
Drawback Rules, 1995'. Drawback in relation to goods manufactured in India and
exported means a rebate of duties chargeable on any imported materials or excisable
materials used in manufacture of such goods in India or rebate on excise duty chargeable
under Central Excises Act, 1944 on certain specified goods. The Duty Drawback Scheme
is administered by Directorate of Duty Drawback in the Ministry of Finance. The claims
of duty drawback are settled by Custom House at the rates determined and notified by the
Directorate. As per the present procedure, no separate claim of duty drawback is to be
filed by the exporter. A copy of the shipping bill presented by the exporter at the time of
making shipment of goods serves the purpose of claim of duty drawback as well. This
claim is provisionally accepted by the customs at the time of shipment and the shipping
bill is duly verified. The claim is settled by customs office later. As a further incentive to
exporters, Customs Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, Hyderabad
have evolved a simplified procedure under which claims of duty drawback are settled
immediately after shipment and no funds of exporter are blocked.