Bank Export Formalities

Document Sample
Bank Export Formalities Powered By Docstoc
					                                         Seminar on “Export Procedure and Documentation”

                                          Seminar on

                         BHOPAL, SEPTEMBER 08, 2006

The Seminar was conducted by the Eximius Centre, Exim Bank
in association with the Federation of Madhya Pradesh
Chamber of Commerce & Industry (FMPCCI) at Bhopal on
September 08, 2006. The objective of the programme was to
develop the knowledge and skill of existing and potential
entrepreneurs in proper compliance with the procedure and
documentation for exports, and thereby to enhance the
prospect of their export efforts.           40 participants
representing small, medium and large enterprises from both
private and public sectors attended the Seminar.

    1. Mr. P.C. Tripathi, Jt. Director General of Foreign
       Trade (DGFT), Bhopal;
    2. Dr. Sanjiv Sharma, General Manager, Reserve Bank of
       India (RBI);
    3. Mr. P. C. Borkar, Jt. Commissioner of Customs,
    4. Ms. Aditi Chitre, Manager, Global Trade Finance Ltd
    5. Mr. A.K. Sahoo, Asst. Manager, Export Credit Guarantee
       Corporation of India Ltd.


    1.   Foreign Trade Policy;
    2.   Foreign Exchange Regulations;
    3.   Introduction to exports procedures;
    4.   Customs formalities;
    5.   Export Factoring & Forfaiting;
    6.   Export Credit Risk Insurance;

Eximius Centre, Export-Import Bank of India                                           1
                                         Seminar on “Export Procedure and Documentation”

                                  GIST OF MAJOR TOPICS

                               1. Foreign Trade Policy

India’s Foreign Trade Policy (FTP) originally introduced to
regulate and control trade, particularly imports, in order
to preserve the country’s foreign exchange, is now designed
to serve as a trade promotion mechanism. The objective of
FTP is to accelerate India’s global merchandise trade- to
double our percentage share in 5 years- and to act as an
effective instrument of economic growth.     The process of
liberalisation of FTP started in April 1992, and become an
ongoing process towards removal of restrictions and
achieving simplification. As an export promotion tool, FTP
provides for various incentive schemes for exports: duty-
free   import   of   raw  materials   required  for   export
production, import, on concessional duty, of capital goods
and plant & machinery required for export production, and
special schemes for EOU, SEZ and areas having potential for
export   of   agri/horticultural   products.     A   special
Agriculture & Village Industries Scheme (Vishesh Krishi
Gram Udyog Yojana) has been introduced under the FTP to
facilitate export of fruits, vegetables, flowers, minor
forest produce, dairy, poultry, value added products and
Gram Udyog products.

DGFT, functioning under the Ministry of Commerce and
Industries, Government of India, regulates the country’s
export-import trade, and formulates the related policies
and procedures. In its role as facilitator of foreign
trade, the office of DGFT has simplified a number of
procedures such as the procedure for registration of IEC
code. Online access, through internet, has been introduced
for activities such as viewing IEC status and submission of
documents (electronic filing). Schemes such as Duty
Drawback, Duty Entitled Pass Book, and Standard Input
Output Norms for availing incentives, have been simplified
to   make   them   more   user-friendly.     DGFT   website
( incorporates regular updates on export
incentives and other aspects of FTP.


Eximius Centre, Export-Import Bank of India                                           2
                                         Seminar on “Export Procedure and Documentation”

                        2. Foreign Exchange Regulations

Reserve Bank of India (RBI) is vested inter alia with the
task of monitoring India’s foreign exchange inflow and
outflow. Prior to the economic liberalisation process which
commenced in the 1990’s, foreign exchange was a scarce
commodity and its release was governed by the Foreign
Exchange Regulation Act (FERA). With liberalisation of the
FTP, RBI’s role has evolved into that of a facilitator.
FERA has been replaced by the Foreign Exchange Management
Act (FEMA) with the objective of facilitating external
trade and payments, and for orderly development and
maintenance of foreign exchange market in India. Commercial
banks through notified Authorised Dealers (ADs) and
financial institutions have been given greater flexibility
in meeting the foreign exchange requirements of exporters.
Based on the FTP, ADs have been given increased autonomy to
extend facilities to exporters, and need to seek RBI’s
prior permission in very select cases. ADs are authorised
to receive advance payment for exports, change of buyer,
reduction in value, write-off of unrealised export bills
and permit Exchange Earners’ Foreign Currency Account
(EEFC), in which prescribed percentage of export earnings
can be credited. Reflecting the liberalised environment and
the comfortable position of India’s foreign exchange
reserves, RBI’s Exchange Control Department has been
renamed as Foreign Exchange Department. ADs now handle the
export transactions in conformity with the FTP announced by
DGFT and the directions issued by RBI from time to time.

RBI website ( incorporates these under the
master circulars link in the website.


                     3. Export Procedure & Documentation

Setting up an export business requires basic documentation
such as a Permanent Account Number (PAN card), Importer
Exporter Code (IEC) from DGFT office and opening a bank
account. Other key factors include knowledge of trading
systems, FTP and Industrial Policy, access to market

Eximius Centre, Export-Import Bank of India                                           3
                                         Seminar on “Export Procedure and Documentation”

information (for which internet is a good source), ensuring
product quality and compliance with export procedures &

The Ministry of Commerce, through the Director General of
Foreign Trade (DGFT), controls the Foreign Trade Policy
(FTP), while the Ministry of Finance, through the Reserve
Bank of India (RBI) and the Indian Customs, controls the
physical   movement   of   goods  and   services  and   the
transactions of foreign exchange (both inflow & outflow)
from the country. Receipts of proceeds of exports by way of
foreign exchange and payment for imports to foreign
suppliers by way of foreign exchange are to be routed
through normal banking channels only.

Some Common Terms used in International Trade

    •   EXW (Ex Works) at a named point of origin (e.g., ex-
        factory, ex-mill, ex-warehouse). Price quoted applies
        only at the point of origin. All other charges are for
        the account of the buyer.

    •   FCA (Free Carrier) to a named place. Price envisages
        seller's responsibility for cost of loading goods at
        the named shipping point.

    •   FAS (Free alongside ship) at a named domestic port of
        export. Price includes charges for delivery of the
        goods alongside a vessel at the port. The seller
        handles the costs of unloading and wharfage; all other
        costs viz. loading, ocean transportation, and insurance
        are left to the buyer.

    •   FOB (Free on Board) at a named port of export. Price
        covers all costs up to and including delivery of goods
        aboard an overseas vessel.

    •   CIF (Cost, Insurance, Freight) to a named overseas
        port of import. Price of goods includes insurance, all
        transportation and miscellaneous charges upto the point
        of debarkation from the vessel (used for ocean
        shipments only).

    •   CFR (Cost and Freight) to a named overseas port of
        import. Price of goods includes costs as above except
        insurance (used for ocean shipments only).

Eximius Centre, Export-Import Bank of India                                           4
                                         Seminar on “Export Procedure and Documentation”

    •    CPT (carriage paid to) and CIP (carriage and insurance
         paid) to a named place of destination. Used in place of
         CIF and CFR respectively, (used for shipment by modes
         other than water).

     •   Payment Terms: The common payment terms in export are:

              Advance payment (Payment by Buyer before shipment
         of goods);
              Documents against payment (Delivery of shipping
         documents to Buyer against payment);
              Documents   against    acceptance  (Delivery   of
         shipping documents to Buyer against acceptance by
         Buyer/its bankers to effect payment on the agreed
              Letter of Credit (an arrangement whereby a bank
         {the Issuing Bank} acting on the instructions of a
         customer {the buyer} is to make a payment to the
         beneficiary {the seller} or is to accept bills of
         exchange (drafts) drawn by the Beneficiary {the
         seller}. It is, in short, an undertaking or a
         guarantee by a bank of payment to the beneficiary
         should certain conditions be met).

    •    Insurance:   Export  shipments   are  usually   insured
         against loss, damage and delay in transit, by cargo
         insurance. For international shipments, the carrier's
         liability is frequently limited by international
         agreements. Cargo insurance may be made by either the
         buyer or the seller, depending on the terms of sale.


Risks are inherent in both domestic trade and international
trade, but the degree of risk is higher in international
trade. Hence, proper documentation mitigates the risk in
international trade. Documentation must be precise. Slight
discrepancies or omissions may prevent merchandise from
being exported, result in exporting firms not getting paid,
or even result in the seizure of the exporter's goods by
local or foreign government customs. Collection documents
are subject to precise time limits and may not be honoured
by a bank, if out of date. Much of the documentation is
routine for the freight forwarders or customs brokers
acting on the firm's behalf, but the exporter is ultimately
responsible for the accuracy of the documentation. It is

Eximius Centre, Export-Import Bank of India                                           5
                                         Seminar on “Export Procedure and Documentation”

said that “International Trade is a sale of documents”. It
is very important to clearly understand the documents
involved in the transaction to avoid the risk factors and
adhere to the legal obligations.

The entire documentation in export trade can be basically
divided into two categories:

                                          Export Documents

                   Pre-shipment Documents               Post-shipment Documents

Pre-shipment documents are those that an exporter has to
generate,   authenticate  and   submit   to  the   concerned
authorities   and   departments   to   get   the   necessary
clearances, prior to the actual shipment of the cargo, so
that the cargo can be shipped out with valid documents.
The pre-shipment documents are generally prepared when the
product is ready for export and prior to shipment.
The standard pre-shipment documents include:

•   Customs Invoice
•   Packing List
•   G R Form (original and duplicate)
•   ARE-1 Form (original and duplicate)
•   Copy Of Export order
•   Letter Of Credit
•   Shipping Bill (entire set)
•   Export Licence(for notified items)
•   Certificate Of Origin
•   Certificate Of Inspection
•   Any Other Documents (as required in L/C or by Customs)

The post-shipment documents comprise the certified copies
of some of the main pre-shipment documents and certain
additional documents to be generated and compiled by the
exporter so that the proof of shipments can be properly
presented to the negotiating bank for collecting the

Eximius Centre, Export-Import Bank of India                                           6
                                         Seminar on “Export Procedure and Documentation”

payments through L/C or for presentation to the foreign
buyer for collection of payment through the nominated bank.
The standard pre-shipment documents include

•    Custom attested invoice
•    Custom attested packing list
•    Copy of Export Order / Copy Of LC
•    Commercial Invoice
•    Consular Invoice (If Specified)
•    Bill of Lading / Air Way Bill
•    Certificate of Origin
•    Certificate of Inspection (If Specified)
•    Bill of Exchange (Draft)
•    G R Form (Duplicate)
•    Any other document specified in Export Order / LC


                                4. Customs Formalities

Central Board of Excise and Customs (CBEC) is assigned a
number of tasks, some of which are:

a)    Collection of customs duties on imports and exports as
per basic Customs laws (Customs Act, 1962 and Customs
Tariff Act, 1975);
b)    Enforcement of the various provisions of the Customs
Act governing imports and exports of cargo, baggage, postal
articles and arrival & departure of vessels, air crafts
c) Discharge of various agency functions and enforcing
various prohibitions and restrictions on imports and
exports under the Customs Act and other allied enactments;
d)    Prevention of smuggling including introduction of
narcotics drug trafficking; and

e)      International passenger processing.

CBEC Mission is to achieve excellence in the formulation
and implementation of Customs and Excise initiatives aimed

Eximius Centre, Export-Import Bank of India                                           7
                                         Seminar on “Export Procedure and Documentation”

    •   realising the revenues in a fair, equitable and
        efficient manner;
    •   administering the Government's economic, tariff and
        trade   policies  with   a   practical  and   pragmatic
    •   facilitating trade and industry by streamlining and
        simplifying Customs and Excise processes and helping
        Indian business to enhance its competitiveness;
    •   creating a climate for voluntary compliance by
        providing guidance and building mutual trust;
    •   combating revenue evasion, commercial frauds and
        social menace in an effective manner.

Some of the important documents,                          procedures      and    terms
are briefly described below:

Customs Invoice: is a regulatory document for export, to be
prepared in prescribed format.

Customs Packing List: is also a regulatory document for
export, to be prepared in prescribed format.

G R Forms: Wherever manual-shipping bill is in force, GR
form in the prescribed format is a mandatory document.
These forms are available from RBI or Authorised Dealers of
Commercial Banks. Under the EDI scheme, the foreign
exchange copy of the shipping bill performs the role of GR
forms.   In addition, a self declaration form has to be
submitted by the exporter to the bank. Both these documents
perform the function of GR Form.

ARE-1 Form: It is a very important regulatory document
prescribed by CBEC for the Exemption/ Draw back of excise
duty.   Exporters are exempted from the payment of excise
duty, and the exemption can be availed by two methods.
Exporter can pay the excise duty, export the cargo and draw
back the duty paid earlier.     Alternatively, the exporter
can export the cargo under Bond i.e. without payment of
Excise duty.   In either case, the ARE-1 form formalities
have to be completed by the exporter as a pre-shipment
Document. ARE-1 is to be filled in and submitted to the
Excise department at least 24 hrs in advance along with
request for inspection, sealing and certification by the
department. If the export is done by paying duty, then the
specified copies of ARE-1 can be used for Draw Back. In
case of EPCG, it is used for completing the export

Eximius Centre, Export-Import Bank of India                                           8
                                         Seminar on “Export Procedure and Documentation”

obligation given under Bond to the Government,                                 and   for
discharging the Bond on such completion.

Custodian: The goods imported into India and exported out
of India are allowed through designated Sea Ports/ Land
Custom Stations/ Airports. The goods so imported/ exported
are initially deposited in the custody of Custodian such

             • Port authorities for goods imported through sea;
             • Custodians for goods imported by air-
                         Airport Authority of India
                         Air India or STC etc

             • For places other than points of landing-
                         Inland Container Depot (ICD)
                         Container Freight Station (CFS)

Export Promotion Schemes

Under the FTP, the                     following       are   some   of   the    Export
Promotion Schemes:

            Duty Exemption/Remission Schemes:-
            • Advance Authorisation Scheme (DEEC/Adv. Licence)
            • Duty Free Replenishment Scheme
            • DEPB Scheme
            • Duty Free Import Authorisation
            Export promotion capital goods scheme(EPCG)
            EOU/STP/EHTP/Biotechnology parks
            Special Economic Zones (separate act & rules framed)
            Free Trade And Warehousing Zones
            Deemed Exports
            Special schemes under export promotion
            • Vishesh Krishi and Gram Udyog Yojana
            • Focus market schemes (export to specified countries)
            • Focus product schemes (export of specified commodities)

Details on Customs formalities and circulars are available
on the website


Eximius Centre, Export-Import Bank of India                                            9
                                         Seminar on “Export Procedure and Documentation”

5. Export Factoring and Forfaiting

Global Trade Finance Private Limited (GTF), a Joint
Venture, promoted by Exim with WestLB, Germany (since
replaced by FIM Bank, Malta and Bank of Maharashtra) and
IFC (World Bank), commenced business in September 2001.
GTF's objective is to promote market driven export-
financing solutions for small and medium sized Indian
exporters operating in an increasingly competitive world
trade environment. GTF offers, for the first time in India,
structured foreign trade financing products such as
forfaiting and factoring.

Factoring is a continuous arrangement between a factoring
concern and the seller of goods and services (on credit)
whereby the factor purchases the accounts receivable for
immediate cash and also provides other services such as
sales ledger maintenance, collection and credit protection.

GTF offers various products such as:

   1. Domestic Factoring
   2. Reverse Factoring
   3. Channel Financing

   1. Export Factoring
           with credit protection
           with insurance cover
           with recourse
   2. Forfaiting

   1. Import Factoring

GTF has launched a new initiative to enable online sanction
of Factoring facilities for registered SSI export oriented
units.     Details can be obtained from the website


Eximius Centre, Export-Import Bank of India                                          10
                                         Seminar on “Export Procedure and Documentation”

                            6. Export Credit Insurance

Risks such as non-payment, country, geographical, loss in
transit and war are inherent in foreign trade.       Export
Credit Guarantee Corporation of India Ltd (ECGC) offers
policies to protect exporters from non-payment risks of
buyer/country and guarantees to banks against non-payment
by the borrower. Export credit insurance assesses the buyer
and the country risks, enabling it to devise various
insurance schemes.

ECGC offers different policies tailored to the specific
needs of the exporter against various risks which include:

    1.   Standard Policy
    2.   Export Turnover Policy
    3.   Specific Shipments Policy
    4.   Exports (specific buyer) Policy
    5.   Buyer Exposure Policy
    6.   Consignment Exports Policy
    7.   Software Projects/ IT-enabled Services Policy
    8.   Small Exporters Policy

Details of           ECGC      policies        are    available    on   its   website


Eximius Centre, Export-Import Bank of India                                          11

Shared By:
Description: Bank Export Formalities document sample