Tuesday, May 08, 2018

International Marketing: Export Procedures and Documentations

Export Procedures and Documentation
Export Procedures
Export Procedure involves different stages from organizing for export business through formalities and procedures before the actual shipment of export goods, shipment of procedure and also various formalities Post Shipment of export goods. These different procedures can be classified into preliminary stage, pre- shipment stage, shipment stage and post shipment stage.
1. Preliminary Stage
a. The exporter should organize either as an individual exporter or form an enterprise in the form of partnership or of a limited entity. Primarily this stage involves decision making as to exporting of goods to foreign countries (markets) and setting up the necessary organizational structures to facilitate the decision of exporting.
b. Registering with Various Authorities like:
I. Income Tax Authorities - to obtain permanent account number (PAN).
ii. With Joint Director general Foreign Trade Office - to obtain import export code number (IEC No)
Iii. With Export Promotion Council - to obtain registration cum membership Certificate (RCMC)
lv. Registration with other authorities such as Federation of Indian Exporters Organization, Sales Tax Authorities, Chamber of Commerce etc.
c. Appointing Agents/Distributors: It is advisable that the exporter engages the services of Agents and/or Distributors in foreign markets where he intends to export goods. It is also suggested that the exporter may open his own office/show room etc. In the foreign market where he intends to export.

d. Selecting Foreign Importers: Through advertising and other methods of approaching the prospective importers, the exporter manage to convince the importer about his products and provide with quotations including proforma invoice to motivate the importer to place import orders. The role of distributors and/or foreign agents in this regard is praise worthy.
2. Pre-Shipment Stage
a. Confirmation of Export Order: The Exporter should acknowledge and confirm the supply of goods as desired by the importers in his import order which was sent to the exporter.
b. Obtaining Letter of Credit: Exporters should also confirm that confirmed Letter of Credit as far as possible is obtained along with the Export Order received from the importer.
c. Obtaining Export Licence/Permission from the Government Authorities: If the export goods attract export licence, the exporter has to complete the formalities and obtain such licence.
d. Arranging Pre-Shipment Finance: Considering the huge size of the export order, the exporter may be requiring large sums as working capital. Therefore, he should approach his bankers and do the necessary banking formalities with respect to and in order to avail packing credit facility (Pre-Shipment Finance).
e. Production and/or Procurement of the goods for Exports: The exporter n0w turns to arranging the goods for exports as per the specifications in the export order with respect to quality and quantity and export schedules. He may either produce the goods in his factory or outsource the production to some manufacturing firms. In the alternate he may also procure the goods from the open market.
f. Packing and Marking: It is important that the goods meant for exports are packed according to the advices/specifications given by the importer. If no such specifications are given by the importer, the exporter should ensure that the export goods are proper; packed to avoid damage, leakage, pilferage and · deterioration dung the voyage i.e. shipment from India to the foreign country, It is also important that proper marking of· (Identification Marks/Nos) the goods and packages for identification purposes. The exporter is advised to take necessary advice from the Indian Institute of Packaging. The export goods must accompany a certificate of origin and which must be along with the marking of the cargo, the net and gross weight port or entry, port of shipment and other details to be provided on the packing itself in addition to documentary proof thereof.
g. Pre-Shipment lnspection: If the export goods are subject to pre-shipment inspection and quality control, the exporter should apply to the Export Inspection Agency (EIA). The EIA ma y issue inspection certificate if they are satisfied with the quality. Exporters who have obtained ISO 9000 Certification need not apply to the Export Inspection agency for the purpose of obtaining export inspection certificate.
h. Central Excise Clearance: Even though export goods are exempted from Central Excise, it is necessary that necessary clearance is obtained from the Central Excise Authorities. There are two different ways of excise clearance, i.e. export under rebate and export under bond.
I. ECGC Cover: The exporter should take risk cover policies to protect from risks of loss due to several reason from the Export Credit and Guarantee Corporation of India. There are standard policies and specific policies issued by ECGC, Exporter can obtain any of these policies depending upon the type of product, service and period of credit extended to the import abroad.
j. Marine Insurance Policy: Once the goods are ready for export, the exporter has to apply to the Insurance co. for insuring the goods if it is priced CIF (Cost, Insurance & Freight). In case of all other types of quotations if the importer wants the export4er to obtain Insurance cover on his behalf, the exporter does so on behalf of the importer.
k. Appointment of Clearing and Forwarding Agents: C & F Agents are specialized personnels to look after the forwarding work including booking of shipping space, preparation of documents, submissions of documents to customs and customs clearance before the goods are transported to the port tor the purpose of shipment.
I. lnstructions to C& F Agents: The exporter should provide the following documents to the C & F Agents and advising for the shipment of cargo. :
i. Commercial Invoice (2 copies)
ii. G.R. Form (Original and Duplicate)
iii. AR-4/AR-4A form (Original and duplicate)
iv. Packing List
v. Original UC Export Contract/Export Order
vi. Other required documents.
All these documents are required to be submitted to the customs for obtaining customs approval for taking the goods in board the shop.
3. Shipment Stage
a. Processing of Shipping Documents in the Customs: The C & F agent prepare five copies of the shopping bill and present it along with other documents to the customs appraiser at the customs house, when found everything in order the customs preventive officer endorses the duplicate copy of the shopping bill. All documents except the original copy of G.R. Form, original copy of shipping bill and one copy of commercial invoice are returned to the C & F Agent after verification.
b. Physical examination of the goods at the Port: After obtaining customs clearance and the carting order from the Port Trust to cart the goods inside the docks, the C & F Agent after such carting of goods to the dock approaches the customs examiner for physically inspecting the goods. After such physical examination the customs examiner issues the "Let Export Order".
c. Loading of Goods: The Duplicate copy of shipping bill endorsed by the customs examiner is handed over to the customs preventive officer who endorses it with "Let Ship Order". The goods are loaded on board the shop and the Captain of the Shop now issue Mate's Receipt The Mate's Receipt is handed over to the shipping company to obtain Bill of Lading.
4. Post Shipment Stage
a. Dispatch of documents by C & F Agent to the Exporter: After completing the shipment procedure, the C & F Agent returns the following documents to the Exporter:
i. Commercial Invoice attested by Customs
ii. Shipping Bill (Export Promotion Copy)
iii. Original UC Export Order
iv. Bill of Lading in appropriate number of copies
v. GR Form (Duplicate copy attested by Customs)
vi. AR-4 Form (Duplicate copy)
vii. Railway Freight Renate Form attested by the customs
b. Shipment advice to the Importer: The Exporter now issue shipment advice to the importer. Following documents are also enclosed with the shipment advice :
i. A Non-Negotiable copy of Bill of Lading
ii. Packing List
iii. Commercial lnvoice
c. Presentation of Documents to the Bank: The Exporter now hand over the entire setoff documents consisting of commercial invoice, customs, invoice, consular invoice, certificate of original packing list, bill of exchange, Letter of Credit, negotiable copy of bill of lading and insurance policy. The Bank now sends these documents to the Importer's bank for realizing the export proceeds.
d. Realization of Export Proceeds: The Export proceeds are realized from the importer through his bankers by the exporter's Bank. Generally the export proceeds must be realised within 180 days from the date of shipment otherwise special permission is to be obtained from the Reserve Bank of India.
e. Claiming Export Incentives: The Exporter now proceeds to claim export incentives from the government on the basis of the Bank's Certificate. The Bank Certificate includes details of the products exported, its value, rate of conversion into Indian rupees, the details of invoice etc. The exporter is entitled to incentives such as duly drawback, REP Licence .and many other incentives announced by the government of India from time to time.
f. Follow up of Export Sales: It includes after sales service, maintaining contacts with the importer and knowing from him about the importer's opinion about the product etc. Good follow up work will generate more export orders and also build the image of the exporter in the international market.
Documentation in Foreign Trade
Documentation is very important to move merchandise as well as cargo to the international marketing. It adds additional cost to the total cost of goods sold. In most of the cases the marketers find it more practical to leave the physical distribution of goods to the technically specialist agency. In Export market, a company is to insert the proper identification number to its products so as to fill out the required formalities of documentation. If a product is made of several materials, it should be classified with that material which represents its main characteristics. There are many types of documentation in the export market. But generally, it can be classified on the basis of three main categories:
(A) Shipping Documents
(B) Collection Documents
(C) Special Purpose Documents
(A) Shipping Documents: The shipping documents are prepared to move the shipments. They are prepared as to fill up the customs requirements and also to allow the cargo to be loaded, shipped and finally unloaded. All the requirements for shipping, loading and unloading are to be fulfilled and mentioned upon. There are many types of shipping documents. There can be explained as under:
(i) Export License: An export license is a permission which allow an exporter to export its merchandise. It is needed for all kind of exports. In the United States, there are two types of export license procedure: (i) General License, (ii) validated license.
(ii) General License: A general license is a permit for which no application is required. It is a permit for which no document or any kind of other authorization is granted. It is general kind of permission of export of certain commodities or some kind of other technical data, without applying for a license document. It allows the export of all those kinds of goods published in an authorizations list and also covers the export of those commodities not under restriction or control. Those products which meet the specific parameters can be shipped by putting General License symbol on the shipper’s export declaration.
(iii) Validated Export License: It is a formal authorization document, for which an exporter may apply if he fails to qualify for a general license. The United States require this type of licensing for the strategic commodities and for the technical significance. Under such systems of foreign policy controls the restriction are placed on export to certain countries. Further in certain circumstances of short-supply controls, the licenses are given on to keep an eye to prevent the depletion of strategic and scarce resources of the country. The most of the products are exported and shipped under individual validated export license.
(iv) Shipper’s Export Declaration Form: The shipper’s export declaration form is to be filed for all shipments. It should be deposited with an exporting carrier. The shipper’s export declaration form is a multipurpose document. Generally it serves the following purposes:
a.       It serves as an export control document.
b.      It is helpful to administer the requirements of the Export Administration Act.
c.       It assist the Bureau of Census by providing statistical information on export shipments.
(v) Packing List: A packing list is a document which contains all the detail about the merchandise. The packing list consists of following information:
(i) Types and total number of units,
(ii) The contents of the merchandise,
(iii) Weight and measurement of each unit.
(iv) Markup and numbers.
(vi) The Shipper’s Letter of Instructions: This is a form provided by the shipper to the freight forwarder. It contains all those pertinent information and instruction regarding the shipment and also about its handling. The shipper may authorize the forwarder to issue all necessary documents on behalf of him and to put his signatures accordingly.
(vii) Receipt: It is a proof of delivery (POD) for the merchandise received at the dock or warehouse. This document is required for shipments on the parts of united States, Gulf Coasts, etc.
(B) Collection Documents: An exporter is to provide with a number of documents to the buyer as to satisfy him that the shipment has been made as per the agreed terms and conditions. The seller can make the request for the payments accordingly, as per the agreed terms and conditions. On the other hand the buyer do need all these documents to satisfy the rules and regulation of his home country.
(i) Invoices: Invoices are used for the collection of payments. Generally there are two types of invoices used for this purpose:
(1) Proforma Invoice: It is an Invoice which is provided by the supplier prior to the shipment of merchandise. The proforma invoice is provided by the seller for the following purposes:
(a) To inform the buyers for the kinds of goods to be dispatched.
(b) To inform the buyers about the quantity of the goods dispatched. It includes important specifications like weight, size, etc.
(c) To inform the buyers about the value of the goods to be sent. It may help the buyers to make the arrangements for the payments at the earliest.
(d) The proforma invoice is required for the buyers, in order to obtain import license.
(e) The proforma invoice is also required to open letter of credit.
(ii) Commercial Invoice: It is an important document of export business, which provides a list of shipped goods and a detail of other charges. It provides a complete description of the goods dispatched. It can also be said to be a complete record of business transactions between buyers and sellers. The following types of description are included in the commercial invoice.
a.       quantity of the merchandise,
b.      price charged for the goods sent,
c.       shipping terms,
d.      payment terms.
Further it is pertinent that the commercial invoice should provide the complete breakdown of all the charges. It is required to clear the goods through customs. Therefore the breakdown of the charges, related to inland transportation, loading charges, freight and insurance charges and others should be provided. The commercial invoice must include all other necessary information required by the importer’s country government. The necessary information required by the exporter’s country should also be satisfied.
(iii) Foreign Custom Invoice: It is an invoice which is required by the custom authorities in certain countries. Some time the custom authorities may not recognize the commercial invoice for their requirement purposes. Therefore a special format invoice is required in lieu of the commercial invoice. The information provided on such types of invoices are similar as in case of the commercial invoice. It may also contain the certification with regards to the value and origin of the shipment.
(iv) Consular Invoice: Many countries notably requires legalized documents. In addition to the commercial invoice, these countries require consular invoice. It is a descriptive document prepared by the exporter in the language of buyer’s country on an officially prescribed form supplied by the buyer’s country government. The main and basic purpose behind such invoice is to monitor merchandise and the flow of the capital. It must have seal, signature and an official stamp affixed on it. The Consulate General takes this responsibility to fulfill all the requirement, who represent on behalf of the government of the importing country.
(v) Certification Of Origin A certificate of origin is a document, which is prepared by exporter. It identifies that the particular merchandise is originated in a particular country. It is also an important and necessary document for tariff and control purposes. It is also helpful to prevent unusual import of goods from prohibited countries. The forms of certificate of origin can vary. It may be on shipper’s own letterhead to a countersigned certificate by the Chamber of Commerce. In certain circumstances such forms should be legalized by the resident consul of an importing country. The Form can be provided and recommended for this purpose by the United Nation.
(vi) Inspection Certificate: This certificate is generally prepared by an independent firm or agency, which is other than the exporter. An inspection certificate is a document, which certify the quality or quantity of goods being shipped. It also certifies that the merchandise was in a good conditions prior to its shipment. Many foreign buyers require a shipper’s affidavit or a certificate of an independent inspecting agency, which also certify the quality and quantity of goods strictly as per the order. It also ensure and certify that the goods has been shipped as per the agreed terms and conditions.
(C) Special Purpose Documents: The buyer can request for the special purpose documents as in the case of an inspection certificate. The special purpose documents may includes the following:
(a) Certificate of weight.
(b) Certificate of measurement.
(c) Certificate of analysis as to ensure quality and others.
The certificate of weight and measurement is provided by an independent agency. It ensure that weight and measurement of the merchandise is as per the contract. Further the certificate of analysis contains the report of an expert on the findings of the composition of merchandize shipped. It also ensures that the goods are shipped as per the contract made by an exporter.
Insurance Certificate: An Insurance certificate provide full coverage for the entire shipment. It also describes the transactions and other coverages in brief. Generally a certificate of insurance is issued as an open coverage policy. It provide the coverage to insure all kinds of shipments. It also protects the merchandise from any kind of damage in transportation. The marine insurance policy uses to cover every modes of transportation.
Air Way Bill: Basically it is a bill of lading issued by an air carriers for shipping the merchandize through air way. This is not a negotiable instrument or document. Therefore the merchandize is released to the designated consignee even without having a way bill.
Bill Of Lading: A bill of lading is a document, usually prepared by the shipper on its form issued to record transactions related to the shipment. The bill of lading serves the following purposes:
(a) A Document of Title: It is a document which certify the ownership of a merchandise. It also permit the importer to claim the goods as per description.
(b) A Receipt of Goods: A bill of lading serves the purpose of receipt of goods dispatched. It is also a proof of the freight of carrier’s possession. A receipt of goods is issued by the carrier to the shipper for merchandise handed over to the carrier’s care for transportation.
(c) A Contract of Carriage: A bill of lading establishes the contractual terms between shipper and the carrier. It also defines the terms and conditions under which the goods are to be dispatched. The responsibility for the delivery of merchandise is also defined by a contract of carriage.
Further a bill of lading can be issued for the following modes of transportations:
(a) Inland modes of transportation.
(b) Ocean modes of transportation.
(c) Air Transport.
When the bill of lading is issued by the railways or roadways modes, it is called an inland bill of lading. It enables the movements of merchandise form the warehouse of the shipper’s to the port. On the other hand in an ocean bill of lading it is issued by ocean modes of transportation or by the steamship lines. Whenever a bill of lading is issued by an air carrier or transport, it is called an air way bill. Non vessel operator common carrier (NVOCC) is an another type of bill of lading, which consists freight of a container for shipping. Further, the bill of lading is acceptable in that case, whenever it is marked clean and on board. When there is no evidence of damage to the conditions of the cargo, it is called clean bill of lading. The cargo should be received in good order and conditions without exceptions. On the other hand, whenever there is evidences or indication of damage to this goods received, the bill of lading is foul. Further whenever an on board bill of lading is issued, the cargo should be loaded in abroad, the named vessel on the given date of loading. Further a received for shipment implies that goods are received by the steamship company. It is pertinent to mention here that goods are not yet loaded on board. In a particular vessel, which may end up on another vessel.

Methods of Payments in International Trade
International transactions are settled depending upon methods of payment because each method of payment involves varying degree of risk for the exporter. These are six methods of payments:
a) Payment in advance
b) Open account
c) Payment against shipments on consignment.
d) Documentary bills.
e) Letter of Credit.
(a) Payment in advance: Under this method, the buyer is not given any credit facility. He must make payments immediately Sometimes, the exporter will request the importer to make certain percentage say 50% in advance and the rest on receipt of consignment. This method is followed when:
i. There were no past dealings between importer and exporter.
ii. When the consignments is full of risks.
iii. When the credit worthiness of buyer is not properly known.
iv. When the political/economic situation in the buyers country is unstable.
v. When the price of the commodity is highly fluctuating.
(b) Open Account: Under this method, the exporter forwards all shipping documents to the buyer and waits for payment. If no condition is allowed then the importer has to pay immediately. There is no need to draw a bill of exchange in this case. This method is followed when there is a proper understanding between exporter and buyer regarding the terms of credit, rate of interest. This method is followed when:
i. Buyer's financial standing and reputation is known to the exporter.
ii. Long and established relationship between exporter and buyer.
iii. No exchanger fluctuation in the importers country.
iv. Foreign exchange regulations in exporters country permit such payment.
v. Political environment in quite stable in importer's country.
(c) Payment against Shipment on Consignment: This method is followed when the exporter has his own establishment abroad or appoints an agent to sell good on his behalf. In India, prior permission from RBI is required from exchange centers department. The exporter has to enter into legal contract with the agents who will sell goods when demand and send the payments to the exporter. This method should be made to trust worthy agents only because.
i. Distance to be covered by the consignment.
ii. Consignment exports is full of risks.
iii. Price to be realized depending upon market conditions.
(d) Documentary Bills: Under this method an exporter agrees to submit relevant documents of title along with the foreign bill of exchange. The documents required are:
i. Bill of lading
ii. Marine Insurance Policy
iii. Service and other documents.
Documentary bills are of two types:
i. Documents against payment (DIP)
ii. Documents against acceptance (DIA)
In case of DIP the exporter sends negotiable documents to the buyer through the bank. The buyer is expected to make payments on serving the d9cuments. Therefore it is known as payment made against "Sight Draft". This method is risky as the buyer may refuse accepting documents and making payments.
Under DIA the importer can collect documents only when he gives in writing his acceptance to make payments as per terms of export contract. The credit is allowed for a specific period of time say 60, 90 or 180 days. Documents are released against the Time draft.
(f) Letter of Credit (L/C): One of the most popular methods of making international payments in recent times is through letter giving. On importer's request his bank given a written understanding to the bank of the exporter that if the exporter present certain shipping documents covering the goods within a fixed period the bank can make payment to the exporter.
A letter of credit can be defined as "an understanding by importer's" bank stating that payment will be made to the exporter if the required documents are presented to the Bank within the validity of the L/C.

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