Export Procedure and Documentation


CHAPTER – 1

BASIC DOCUMENTS USED IN INTERNATIONAL TRADE

In any trade, documents are used to record a written evidence of having carried out a transaction.  International trade is no exception.  In fact, it calls for execution of more documents than in local trade.  Normally, documents are required to satisfy two basic requirements, namely:

a)             Regulatory Requirements

b)            Operational Requirements

Documents used or executed to satisfy the statutory requirements or requirements of any trade and other regulatory authorities are Regulatory Documents or Official Documents. For example, in the International Trade the commercial parties need to execute documents to satisfy the requirements of Trade Control Authorities, Banking Authorities etc.

Documents used or executed to satisfy the normal commercial requirements of the parties to the transactions are referred to as operational or commercial documents.

Classification of Documents used in International Trade Transactions

Documents used in International trade transactions are broadly classified into five categories, namely. 

1.             Financial Documents

2.             Commercial Documents

3.             Transport Documents

4.             Risk Covering Documents

5.             Official/Regulatory Documents

The above classifications are based on functional aspects of the documents.  Sometimes, a document may perform more than one function.  In such cases it can be classified into more than one category.  For example:  A commercial invoice may contain declaration regarding origin of goods which is duly attested by a competent authority.  In such a case it is an invoice-cum-certificate of origin and fulfils the functions of commercial as well as regulatory requirements.  Accordingly it can be classified as a commercial document or as regulatory document.  Other examples are inspection certificate, health certificate etc.  Hence, it should be remembered that functional classification of documents is not a water-tight classification.

In International trade scores of documents are used to fulfill the requirements of buyer, seller, buyer’s country’s requirement as well as seller’s country requirements.  In the following pages only a few basic documents are discussed which are very common and important from the bank’s point of view.

1.             Financial Documents 

As the name indicates financial documents are the documents which perform the function of obtaining finance, collection of payment etc.  The most common financial document used is a Bill of Exchange. 

A.            Bill of Exchange 

A Bill of  Exchange (or B/E shortly) is also referred to as ``Draft” or ``Hundi’’.  In many of the countries, a Bill of Exchange is recognised as a legal document.  In India, section 5 of the Negotiable Instruments Act, 1881 defines the Bill of Exchange.  As per the definition given, it has three basic parties namely Drawer, Drawee and Payee and has following five important characteristics. 

It is an instrument in writing

It is an unconditional order signed by maker  (Drawer)

It is a direction given to a specific person (Drawer)

It is a direction to make payment of a specific or fixed amount

It is made payable to a certain person or to his order or Bearer

The Act does not specify any particular format for a Bill of Exchange but it must satisfy the above characteristics.

A          B/E performs the following five basic functions

a)         Means for collecting payment:   It is a well-known fact that the basic function of a B/E  is to show that there is a commercial or trade transaction underlying the B/E drawn and it s a means for collecting payment arising out of such a transaction. 

b)         Means for Demanding Payment:   When a payment is due from a person, generally a demand has to be made on him.  A B/E is drawn for demanding such payment.  When a B/E is drawn and presented to the drawee for payment, it amounts to having made a demand on the drawee to pay the amount.  Thus, a B/E serves as a means for demanding payment. 

c)         Means for extending credit:   A B/E can be drawn in such a way that it can be made payable at sight or at a future date (Tenor).  When it is drawn for a particular tenor it means that the drawer is allowing the drawee (or buyer) to make payment at a future date.  In effect he is extending his buyer a credit.  Thus, a B/E is a means for extending credit. 

d)         It is a promise of Payment:   Certain B/Es are drawn on acceptance basis i.e. the drawee will be given the documents upon his acceptance to pay the bill at a specified tenor.  Such an accepted B/E is suffiecient evidence of promise of payment after it is accepted for payment by the drawee at a specified tenor. 

e)         It is a Receipt for payment:   When the amount shown on a B/E is paid by the drawee, the payee endorses the Bill of Exchange as “Received payment” and hands it over to the drawee.  Such a discharged B/E acts as a receipt for having paid the amount stated thereon.  Thus, B/E also acts as a receipt for payment. 

The drawing of a Bill of Exchange is not always necessary.  In certain countries a B/E is not a recognized legal documents, while in certain other countries it is discouraged because it attracts heavy stamp duty (seven if it is drawn on sight basis).  In certain credits like Payment Credit and Deferred payment credit bills of exchange are not to be drawn.

In International trade generally Bills of Exchange are drawn in sets of two so that each can be sent with a set of documents.  When they are drawn in sets of two, each one bears the exclusion clause making the other part of the draft invalid.  The first of exchange contains the words “The second of the same tenor and date unpaid” or similar words. The second of exchange contains the words  “The first of the same tenor and date unpaid” or similar words.

Bills of exchange can be classified into two categories depending upon the time of payment ordered thereunder: 

Sight Bill of Exchange:   It is also known as on Demand Bill of Exchange.  Under such a Bill of Exchange the drawee has to make payment on presentation/ sight/demand.

Usance Bill of Exchange:  They are also known as “TENOR” or “TIME” Bills of Exchange.  The drawee is directed to make payment after a stated number of days or a period from a particular date or event.  In International trade usance bills of exchange are normally drawn in two ways namely: 

i)              DP BASIS  -  Documents against Payment Basis

ii)             DA BASIS  -  Documents against Acceptance Basis 

In the first case, drawee is allowed to make payment after a stated tenor but documents covered by the draft will be delivered only on payment of the draft amount.  In the second case, documents will be delivered to the drawee against his acceptance of the draft for payment at the maturity on the due date.  As per Indian Stamp Act usance bills of exchange drawn or made payable in India attract stamp duty.  The stamp duty payable varies according to tenor and value of draft.  Also, Bills of exchange drawn in favour of banks for the purpose of Discount/purchase or for securing finance thereof attract lower rate of stamp duty.  For the purpose of determination of stamp duty foreign currency Bill amounts must be converted into rupees at the exchange rates to be announced from time to time by Ministry of finance, Dept. of Revenue under Section 20(2) of Indian Stamp Act, 1899.

Other common financial documents used are Receipts, Promissory notes etc. 

2.             Commercial Documents

The documents which are needed by the buyer and the seller for their normal commercial (business) transactions are termed as commercial documents.  Some of the common commercial documents are: 

B.1  Proforma Invoice: Proforma invoice is basically a form of quotation by the seller to a potential buyer.  It is a sort of invitation to the buyer from seller to place a firm order on him.  Normally, a proforma invoice is similar to an ordinary commercial invoice except for the fact that the word “PROFORMA” appears on it.

The proforma invoice normally shows the terms of Trade and prices in addition to the description of goods so that once the buyer has accepted the order, there is a firm contract to be performed as per terms and conditions mentioned in it.  The proforma invoice normally  forms the basis of all Trade transactions.

A proforma invoice is required by the buyer for his record purposes since this forms the basis of the Trade Transaction.  A proforma invoice may also be required by authorities of the buyer’s country for granting him import license or foreign exchange etc. 

B.2       Commercial Invoice: Commercial invoice is the basic document in any trade.  It is also called a “document of contents” because it generally contains all the information required for the preparation of all other documents. 

A commercial invoice is the seller’s bill of merchandise.  There is no standard format for commercial invoice but it normally contains the following: 

a.             Date

b.            Name and address of the seller and the buyer

c.             Order number/contract number/proforma invoice number or details of Letter of Credit.

d.            Description, Quantity and (sometimes) Quality of the goods.

e.             Terms of sale

f.             Port of shipment and port of destination.

g.            Value of the goods and any adjustments like advance/discount etc. but the total value payable must always be given.

h.             Shipping marks or number on packages 

Additionally it may also contain reference number etc. of other documents.

The main use of a commercial invoice is to check whether the proper merchandise is shipped at an agreed price.  Further, the form and the contents of the invoice enable the actual goods to be checked against the invoice and the invoice against the underlying commercial contract. 

B.3       Consular Invoice: It is a special type of invoice which is required by certain countries like Philipines and South America.  As the name indicates, it is an invoice which is “consularised” by an appropriate notation thereon by the Consul of the country of destination of goods (importer’s country).  Thus, a consular invoice is an invoice certified by the Consulate of the importer’s country situated in the exporter’s country.  Generally, consular invoice is in a prescribed format.

The main purpose of this invoice is to give an accurate record of the type of merchandise shipped, their quantity, value, etc. so that it may facilitate fixing of duties in the importer’s country.  Further, this is used for statistical purposes and for avoiding delay on account of customs inspection etc. in the importer’s country since its correctness has already been verified by the consul of that country. 

B.4       Customs Invoice: Customs invoice is generally required by countries like U.S.A., Canada etc.  This invoice is to be drawn in specific form to be supplied by the consular office of the importer’s country.  This facilitates entry of merchandise into Importer’s country at preferential tariff rates etc. 

B.5       Legalised Invoice: These invoices are otherwise called as ``Visaed’’ invoices.  This is a invoice which is. Legalised (stamped and attested) by the Consul of the importer’s country, situated in the exporter’s country.  This invoice is not very much different from the consular invoice as far as the aim of the importing country is concerned.  The only difference is that the legalised invoice is not in a prescribed form unlike consular invoice.  This type of invoice is required mostly by middle-east countries etc. 

B.6       Combined Certificate of Origin and Value: This is another type of commercial invoice which is required mostly by Commonwealth countries.  In this, there is not only value declared (as well as description of merchandise etc) as in a commercial invoice, but also a declaration by the shipper regarding the origin of goods.  His declaration of origin is also generally attested or certified by a Chamber of Commerce and Industry or other agency designated for this purpose.  The main purpose of this invoice is to allow goods of origin of specified countries in importer’s country with concessional tariffs etc.

B.7       Packing List: As the name indicates, it is a document which shows the nature and number of goods etc. put in each packet/container etc. with distinctive numbers or marks.  This is generally needed by the importer,  when he is importing different types or sizes of merchandise so that he may identify the nature of goods in each package.  This may also be used when an importer is importing goods for ultimate direct distribution to various suppliers etc.  It is also used by Customs for checking the goods on random basis or otherwise.  Thus, packing list is mainly to facilitate easy identification of goods in each package/container by the importer or Customs etc.

B.8       Weight Certificate: It is a document certifying the weight of the goods.  Generally it is given by the exporter, which may at times be countersigned by a independent agency.  Generally it gives the weight of each article or bunch of articles.  It may also give the net weight as well as the gross weight.  This certificate is generally required in case of bulk goods like Iron Ore, food items etc.

B.9       Certificate of Analysis and Quality: It is a certificate which indicates the inner composition, quality, technical composition and intricate nature of the goods broadly described in the invoice.  This certificate may be given by the exporter himself or an institution/organisation which is competent or nominated to give such a certificate.  In certain types of goods like chemicals, food articles, clothes etc., this certificate is generally called for so that the goods exported conform to the desired quality/standard/analysis.

B.10     Certificate of Inspection: As the name indicates, it is a document certifying having inspected the goods (prior to shipment).  This certificate is generally desired by the importer so that he can be sure that the right type of goods ordered are being sent by the exporter.  In India certain goods are statutorily subjected to quality control and pre-shipment inspection.  For this purpose an agency called Export Inspection Council was created.  EIC in turn has nominated certain agencies to issue Inspection Certificates in respect of certain types of goods.  Sometimes, the importer may also nominate a person to issue such a certificate. 

In India, the export inspection will be generally carried out with reference to: 

a).        Specifications laid down by the importer

b).        Samples approved by Importer.

c).        Where no sample/specification is given, ISI specification or other specification is generally taken as a measure of Standard 

B.11     Health Certificate: When live animals or plants etc. are exported generally the importer insists on a certificate of health by a recognised agency indicating the health and transportability of the export product.  Sometimes, this certificate may also be required as per the laws of either Importer’s country or exporter’s country.  Other certificates of this category are PHYTOSANITARY/RADIATION/ FUMIGATION certificates. 

3.              Transport Documents 

In international trade the goods move from the warehouse of the exporter to the warehouse of the importer.  The goods may more by land, water or air or a combination of one or more of these modes.  In international trade such transport documents are more in number and it is very important to know the significance of each type of document and its nomenclature etc.  One of the important aspects to be remembered with regard to any transport document is that it must show the name of the carrier. 

C.1       Bill of Lading: This is transport document representing movement of goods by water (ocean or sea).

           A Bill of Lading is a formal receipt given by the ship owners or their authorised agents stating that the goods mentioned therein (quantity, quality, description etc.) are shipped to a specified date and vessel and are deliverable to the person mentioned therein or to his order after payment of all dues of the shipping company.

There are three main functions of a Bill of Lading:

a)             It is an evidence of contract of affreightment

b)            It is a receipt for the goods

c)             It is a document of title to goods

A Bill of Lading is a memorandum of contract of carriage because it contains detailed terms and conditions on which the carrier has accepted the goods for shipment (carriage) from the shipper

A Bill of Lading is a receipt for goods because the ship owner or their agents who have issued it, declare that the goods described therein  are received from the specified person for shipment to a named port.  Thus, it is an evidence of receipt of goods by the carrier.

A Bill of Lading is a document of title to goods because it states that the goods received for shipment by the carrier are deliverable to the named person or his order.

A unique feature of the Bill of Lading is that it belongs to the restricted class of documents, which possess some of the qualities of a negotiable instrument.  Hence, it is called a “QUASI NEGOTIABLE” instrument.  Though the title to the goods covered by a Bill of Lading can be transferred by endorsement and delivery of the instrument, it is still not a fully negotiable instrument like a Bill of Exchange, the simple reason being that it represents the title to goods and is governed by a Sale of Goods Act, whereas a Bill of Exchange represents title to money and is governed by the Negotiable Instruments Act.  As per Sale of Goods Act, when goods are transferred from one person to another, the transferee gets no title to the goods than that of the transferor, whereas under Negotiable Instruments Act the transferee gets a better title than the transferor has, provided he takes it in good faith and for due consideration. 

For these reasons a Bill of Lading is termed as “QUASI NEGOTIABLE” instrument because its negotiation may not be complete and free from qualifications. 

Generally, Bills of Lading are issued in a set of 2 or 3.  The exact number of originals issued is indicated on each Bill of Lading.  These are called negotiable Bills of Lading and presentation of any one of them will entitle the holder to claim the goods thereunder and render the other negotiable copies void.  Production of one copy of negotiable Bill of Lading is a must for claiming the goods. 

There are various categories of Bills of Lading.  Some of them are described hereunder:

a)         Received for Shipment Bill of Lading: It is a Bill of Lading which merely acknowledges that the goods have been received by ship owners or their agents for shipment. The Bill of Lading of this type generally contains a clause reading “Received in apparent good order and condition (or otherwise) for shipment by S._______________ or the next following vessel”.  The goods received might be stored in a ship or warehouse of a ship owner/his agents and there is no guarantee that the goods will be carried by the ship named thereunder.  It is not considered as a safe document since it may not be considered to be a good delivery under a sale contract.

b)         On Board Bill of Lading: This Bill of Lading acknowledges the goods having been put on board a ship for shipment.  Hence, this type of Bill of Lading is a safer document for the importer (since it is an assurance that the goods are being carried by the named ship) and is a good delivery under sale contract for an exporter.  Hence, in international trade generally only On Board Bills of Lading are called for.  This Bill of Lading will have a notation “Shipped on Board” or words to that effect.  A received for shipment Bill of Lading can also be inscribed with such notation with proper authentication and date.  In such a case that Bill of Lading will be considered as On Board (or Shipped) Bill of Lading.  An “On Board” Bill of Lading must specify the name of the vessel 

c)         Short Form Bill of Lading: One of the functions of a Bill of Lading is that it evidences underlying contract of carriage.  Thus, a Bill of Lading should have the terms and conditions of carriage printed on it.  But in case of a Short Form Bill of Lading such terms and conditions will not be stated on the Bill of Lading and even if stated, it may be by reference to other documents or source.  Thus, a Short Form Bill of Lading is one,  which merely states the name of shippers, name of ship, date of shipment etc. and no terms and conditions of carriage are mentioned.  Generally, charter party Bills of Lading are of this nature since they are governed by terms and conditions of charter party and not liner Bill of Lading terms and conditions. 

d)         Long Form Bill of Lading: This is converse of Short Form Bill of Lading.  In this case the terms and conditions of carriage are given on the Bill of Lading.

e)         Clean Bill of Lading: A Clean Bill of Lading is one which bears no super-imposed clause or notation which expressly declares the defective condition of the goods or packaging  This Bill of Lading indicates that “ the carrier has received the goods in apparent good order and condition.”  Since the carrier acts as bailee of the goods, by issuing a Clean Bill of Lading, he has to deliver the goods in the same good order and condition.

f)          Claused Bill of Lading: This is also called as a Foul Bill of Lading or Dirty Bill of Lading.  It is the opposite of a Clean Bill of Lading and contains super-imposed clauses or reservations expressly declaring the defective nature of goods, its packing etc.  When a Claused Bill of Lading is issued, the ship owners or their agents can disclaim their liability to deliver the goods in good order and condition.  This type of Bill of Lading is neither good for the seller nor for the buyer (so also Bankers).

g)            Through Bill of Lading: A Bill of Lading is issued for the entire voyage covering several modes of transport and (or) transhipments is called a through Bill of Lading.  This is used generally when the goods have to take more than one more of transport.  In this type of Bill of Lading there is no guarantee of carriers for the safe carriage of goods.

h)             Straight Bill of Lading: A Bill of Lading which is issued directly in the name of the consignee is called a straight bill of lading.  In this case the goods will be delivered to the named consignee.  This Bill of Lading does not require any endorsement either in blank or otherwise by the shipper.  From the banker’s point of view this type of Bill of Lading is not safe. 

i)          Charter Party Bill of Lading: It is a Bill of Lading which is issued to charter parties i.e. those parties who have hired the space in the vessel either in full or in part.  Charter party Bills of Lading are issued subject to the terms and conditions agreed upon by the hirers of the ship/shipspace and shipowners and is not subject to Liner Bill of Lading terms and conditions.  Charters may be

a)             Time Charter (i.e. for specified time)

b)            Voyage Charter (i.e. for one or more voyages) and

c)             Mixed Charter (i.e. for specified time and voyage).

The charter party bills of Lading are generally not acceptable because Sea Charters are full of problems and the ship owners may exercise lien over the goods in case charterers do not pay hire charges. 

j)          Container Bill of Lading: It is a Bill of Lading which indicates that the goods are carried in a container as one unit of cargo.  The containers in which the goods are locked-in are generally numbered in a systematic manner in a string of letters and figures.  These numbers indicate the ownership, type of container, size of container and identification number of the container.

k)         Combined Transport Bill of Lading or Multimodal Bill of Lading : A combined transport bill of lading very much resembles a through bill of lading.  It is a bill of lading issued by a shipping company or their agents who act as multimodal transport operators and carry the goods all the way through (from start to finish) accepting the liability for performance of carriage and for losses or damages to the goods wherever they occur (on land, sea or air).  The essence of a combined transport bill of lading is that the shipping company or their agents act as principal carriers (called as contractual carriers) guaranteeing the safe conduct of goods and losses from start to finish.  In a through bill of lading no such guarantee of carrier is available

l)               Lash Bill of Lading: It is a Bill of Lading issued by operators stating that the goods are received and put on board a barge to be carried and put on a parent vessel.  Thus, a Bill of Lading issued by a LASH operator is the same as a received for shipment bill of lading until it bears a clause stating that the barge is put on board the parent vessel (then it becomes an on board bill of lading and becomes acceptable like a regular bill of lading)

m)        Crocka Bill of Lading: Crocka Bill of Lading on the face of it is a Bill of Lading covering goods carried by road issued by sea carriers.  It cannot be deemed as Ocean Bill of Lading though it is issued by a shipping company/or their agents.

n)         House Bill of Lading: This type of bill of lading is one issued by generally an association of forwarding agencies or non-vessel-owning carriers (shipping people) who combine their resources to acquire and operate expensive transport vessels for example, FIATA.  Such bills of lading are safe only when they are issued subject to ICC Rules.  But the liability of carriers in this case is limited. 

C.2       Airway Bill: Airway Bill is an acknowledgement issued by an Airline Company or their authorised agents (and not forwarding agents) stating that they have received the goods detailed therein (number of packages, quantity and nature of goods) for despatch by Air to the named consignee at the address stated therein.  Unlike a Bill of Lading, AWB is not a document of title to goods because it is merely an acknowledgement of goods.  When it is not a title to goods naturally it is not a negotiable document.

Since an AWB is not a document of title to the goods it is not necessary for a consignee to possess the AWB for taking delivery of goods.  Thus, for shippers the AWB is not as safe a document as a Bill of Lading.  Further, in case of AWB it is obligatory on the part of the Airlines to notify the consignee on arrival of goods and they will normally deliver the goods to the consignee or his order on proper identification. 

Air Consignment Note 

It is otherwise called as Air Receipt.  This is issued generally by forwarding agents.  This document shows the departure and the destination stations as well as the name of the shipper and the addressee.  It must also indicate forwarding station and date stamp.  This document also gives the description of goods etc. and their apparent good order and condition (or otherwise).

House Airway Bill

House Airway Bill is a receipt for goods issued on the same lines as Airway Bill by cargo consolidating agents.  When Air cargo is shipped under consolidation, the Airline company issues and Airway Bill called Master Airway Bill called Master Airway Bill to the consolidating cargo agent and he in turn issues his own House Airway Bills to individual shippers.  Thus, House Airway Bill is a receipt for goods issued not by the actual carriers or their agents but an intermediary cargo consolidating agent.  A House Airway Bill is not as safe as an Airway Bill.  In case the consolidating agent fails to pay the freight, the carriers will have the right over the goods and the holder of House Airway Bill will not get his goods. 

C.3       Postal Receipt: As the name indicates it is a receipt issued by postal authorities.  It can be a Sea Mail receipt or Airmail receipt depending upon the mode by which they are sent.  Postal receipt is also an acknowledgement of receipt of goods for delivery to a named consignee hence, it is not a document of title to goods nor is it a negotiable instrument.  Though the postal receipt is not a must for taking delivery of goods in certain countries receipt must be shown to the customs and postal authorities for clearance and delivery.  Postal regulations in certain countries allow senders to issue and authenticate their own certificates of posting.  Considering all these, it is not considered a safe document from the banker’s point of view. 

C.4       Courier/Expected Delivery Service: A Courier/Service document evidences receipt of goods for delivery and should appear on its face to indicate the name of the courier/service and should be stamped/signed or otherwise authenticated by such named courier/service unless the credit specifically calls for a document issued by a named courier/service.  This document should also indicate the date of pickup or receipt.  If no name of courier/service is stated in the letter of credit, bank can accept the document issued by any courier/service.

C.5       Multimodal Transport Document (MTD): This document is issued when the movement of goods involve more than one mode of transport.  Hence, this is also called as “intermobile transport document” or “Combined Transport Document”.  In simple words it is defined as a document evidencing contract for performance and procurement of performance of combined transport.  Thus, in a Multimodal transport document the carriers (called as Multimodal Transport Operators) take the liability for safe conduct of transport of goods by various modes of transport from the place of receipt of goods to the place of delivery.  In most respects it has the  characteristics of a Bill of Lading.  It is a document evidencing receipt of goods and not shipment on board.  It is also a negotiable document and issued in sets. MTD is a safer document than a Through Bill of Lading (which serves the same practical purpose) in the sense, it has the guarantee of M.T.O for the safe conduct of goods right through.

4.  Risk Covering Documents

            As the name indicates these are the documents which represent the insurance cover against the physical risks to the goods that are moving from Exporter to Overseas Importer.

D.1       Insurance Policy: Insurance Policy is a contract of insurance.  It is an undertaking given by the insurers promising to pay or secure payment of money as compensation in case the goods under movement or otherwise are subjected to loss, theft, damage, etc.  In international trade marine insurance is the most common document obtained either by exporter or importer for the safety of goods.  Insurance policies are of different nature and may cover different types of risks.  But the basic cover is perils of sea.  Insurance policies are generally freely assignable to anyone who acquires insurable interest without notice to the underwriters.  The assignment is usually effected by blank endorsement.

SPECIFIC POLICY:  When a policy is issued for a particular voyage covering specific goods, such policy is termed as a specific policy.

OPEN POLICY:  It is blank policy issued by the insurers for a specified amount and period and exporter can cover any number of shipments within the stipulated amount and period he gets the insurance.  This type of policy is commonly used these days.  In these cases generally the cover becomes effective only when details of shipment are informed in good time to the insurers along with premium if any, as agreed to.  Open policy has its own advantages and disadvantages. 

D.2       Insurance Cover Note: Insurance cover note is a precursor or the Insurance Policy.  When a specific policy is required and the details of ship or shipment are not known, the insurance issues a cover note which acts as a provisional policy to be replaced by a regular policy when the details of ship/shipment are furnished to insurers.  Insurance cover notes are generally valid for short periods of normally three months and within that validity period the insurer has to supply the details of ship/shipment and get it replaced by a regular policy failing which he is deprived of the insurance.  Thus, the cover notes are not as secure a document as a policy and generally not acceptable in international trade.

5.         Official Documents

Official documents are otherwise called as Regulatory documents, because most of these documents are required for compliance of regulations of either exporter’s country or importer’s country.

E.1       Export Declaration Forms: As per Indian Exchange Control regulations details of all goods  (except certain exempted categories) by whatever means exported from India are required to be declared on certain specified forms.  These forms are known as Export declaration forms.  These forms are evolved by Reserve Bank of India to ensure that the value of all the goods exported from India is declared and the foreign exchange due there against is repatriated to India.  In export trade, the goods leave under the supervision of one agency (Customs/post office) and proceeds thereof are received through another agency (banks etc.)  These export declaration forms are so designed that they can have an effective check over the cycle of movement of goods out of India and receipt of their value in foreign exchange into India.  These forms also enable Reserve Bank of India to compile vital foreign trade data of the country and also to exercise control over the exporter/export activities.  These export Declaration forms have two important aspects: one is the declaration of exporter as to the nature and exact (or appropriate market value in case exact value is not ascertainable at the time of export) value of goods being exported.  The second is an undertaking of the exporter to realise the full export value declared thereon and repatriate the same into India.   All these forms bear district serial numbers with a two alphabet prefix followed by a six digit numeral.  Each form has a specific validity date by which the same can be used for shipment.  Presently there are 4 types of such forms which will be printed only by RBI for sale to Authorised Dealers for supply to their exporter clients.

a)             G.R. FORM:  This form is in duplicate to be used when  exports are made to all countries otherwise than by Post.

b)            P P. FORM:  This form is also in duplicate and should be used when exports are made to any country by parcel post except when on “Value Payable” or “Cash on Delivery” basis.

c)             V.P./C.O.D. FORM:  This form should be used for exports to all countries by Parcel Post under arrangements to realise proceeds through the Postal channels on “Value Payable” basis.

d)            SOFTEX FORM:  This form is to be used when computer software is being exported in Non-Physical form.  This form has to be submitted in triplicate.

E.2       Export Certificate: Certain goods can be exported from India subject to conditions of export licensing policy etc.  For example, the Government may restrict the quantity of exports to be made or goods may be allowed to be exported out of quantitative restrictions placed by importer’s country under the Trade agreements/arrangements.  In such cases the goods will be allowed to be exported (and imported into the country of import) only when an export certificate is issued.  Generally these certificates are issued by the agencies like Commodity Boards, Export Promotion Councils nominated by Government of India.  For example, Cotton Textiles Export Promotion Councils issues export certificates for export of cotton textiles to EEC countries in terms of trade agreements between Government of India and EEC nations.  This certificate may be needed for verification by Customs of both exporter’s/importer’s country.

E.3       Certificate of Origin: The certificate of origin indicates the country (origin)where the goods were originally produced/manufactured.  Generally in a certificate of origin of goods by manufacturer/exporter on the basis of which an independent agency like Chamber of Commerce, Export Promotion Council, Trade Association or any other body which is authorised in this behalf issues a certificate of origin of goods.  This document may form part of the invoice itself or may be a separate document.  In many of the countries, permission to import is refused unless a certificate of origin is produced.  Further, this is also used to determine the concessional tariff rates applicable to the goods.  Certificate of origin is used mostly to serve/ensure the following purposes: 

a)             Some countries may not wish to use the goods of a particular country or enemy country.

b)            Some countries may not wish a particular country to export the goods manufactured in another country to avoid intermediary trade or avoiding competition from the goods manufactured by competing country and to encourage their own industry.

c)             Some countries may allow import of goods manufactured in certain countries at concessional tariff rates (e.g.  Generalised System of Preference Scheme of GATT)

LIST OF DOCUMENTS REQUIRED TO BE SUBMITTED BY

THE EXPORTER  TO VARIOUS AUTHORITIES,

ORGANISATIONS & AGENCIES
 
To the Customs Authorities

1.             Shipping Bill

2.             Commercial Invoice

3.             GR Form (Original & Duplicate)

4.             Shipper’s Declaration Form

5.             Copy of the Export Contract/LC/Export order

6.             Inspection Certificate

7.             AR-4 Form

8.             Export Licence (wherever necessary)

9.             Weighment Certificate (wherever necessary)

 
To the Port Authorities

10.          Port Trust Copy of the Shipping Bill

11.          Cart Ticker/Chits

12.          Shipping Order (only at Chennai)

 
To the Bank

13.          Letter of Credit (where required)

14.          Commercial Invoice

15.          Bill of Lading

16.          Insurance Policy/Certificate

17.          Bill of Exchange

18.          GR Form (duplicate copy)

19.          Bank Certificate (Three copies)

20.          Export Inspection Certificate (where required)

21.          Certificate of Origin

22.          Shipment Advice

 
To the Licensing Authority

23.          Application for Exporter/Importer Code Number in duplicate

 
A.  For Advance/Imprest Licence

24.          Application in prescribed form

25.          Copy of Export Order/Letter of Credit

26.          Statement of Export

27.          Bank Receipt/Draft for application fee

28.          Bond/Legal Undertaking towards export obligation

29.          Chartered Engineer’s Certificate, where applicable

B.  Special Import Licence – Documents not yet specified 

To the Export Promotion Council

30.          Application for Registration Form-cum-Membership Certificate

31.          Bank Certificate regarding financial soundness


To the Maritime Collector of Central Excise

32.          Application in Form ‘C’

33.          Duplicate Copy of the AR-4 Form

34.          Non-negotiable Copy of the B/L or the Shipment Certificate

35.          Customs Certified Copy of the Shipping Bill 

To the Export Inspection Council

36.          Application in the prescribed form

37.          Copy of L/C

38.          Copy of the Export Contract

39.          Commercial Invoice

40.          Bank Pass Book showing credit in favour of EIA to the extent of inspection fee or Bank Draft/crossed cheque for fee 

To the Reserve Bank of India

            (for remittance of Foreign Exchange for payment of claims)

41.          Application form

42.          Copy of the Invoice

43.          Sales Contract

44.          Bill of Lading

45.          Inspection/Analysis Report 

To the Export -Import Bank

            (for direct financial assistance to exports)

46.          Export Contract

47.          L/C or Letter of Guarantee from the importer

48.          Balance Sheet of the exporter

49.          Statement of profit and loss in the transaction covered by the export contract.

50.          Statement regarding the projections of the credit requirements

To the Bank (for Packing Credit)

51.          Proforma Invoice

52.          Original RR endorsed to the Bank

53.          Copy of despatch advice

54.          Copy of Order or L/C

55.          Application form 

For Medium-term Credit

56.          Export Contract

57.          L/C or Guarantee from the importer

58.          Statement giving reasons why exports are made on deferred payment arrangements 

To the Export Credit Guarantee Corporation (ECGC)

(for export risk insurance)

59.          Proposal form

60.          Bank Certificate about financial position

61.          Application form for fixing the credit limit 

Documents required by the Importing Countries

62.          Consular invoice (mainly required by Latin American, Middle Eastern countries

63.          Certificate of Value

64.          Combined Certificate of Origin and Value (mainly required by some Commonwealth countries)

65.          Customs Invoice (for USA and Canada)

66.          Health Certificate for export of food products, seeds, vegetables, fish, etc.

67.          Phyto Sanitary Certificate in case of fresh fruit, vegetables, cut flowers

68.          Certificate of Origin

69.          GSP Certificate of Origin


CHAPTER 2

EXPORT LETTERS OF CREDIT

 
GENERAL

 

Letters of Credit established in favour of Indian residents by persons resident outside India for purchase of goods and services are referred to as Export Letters of Credit.  Such letters of credit may be received for following purposes:

a.             For physical export of goods and services from India to a foreign country.

b.            For execution of projects (project exports) outside India by Indian exporters by supply of goods and services from India or partly from India and partly from outside India (third countries).

c.             Towards deemed exports where there is no physical movement of goods from outside India but the supplies are being made to a project financed in foreign exchange by multilateral agencies,.  UN Organisations or projects being executed in India with the aid of external agencies.

d.            For sale of goods by Indian exporters with total procurement and supply from outside India (merchanting trade by Indian intermediary).

In all the above cases there would be earning of foreign exchange or conservation of foreign exchange.  Banks in India associate themselves with the export letters of credit in various capacities such as Advising Bank.  Confirming Bank, bank nominated for effecting settlement under LC, Transferring Bank, Reimbursing Bank or as remitting bank.  In every case the bank will be rendering services not only to the Issuing Bank as its agent/correspondent bank but also to the exporter in advising and financing his export activity.

 

Advising an Export Letter of Credit

The basic responsibility of an Advising Bank is to advise the Credit received from its overseas branch/correspondent only after checking the apparent authenticity of the credit established by the Issuing Bank.  Though the matter is apparently very simple and does not entail much effort on the part of the bank, as a responsible bank, it must take the matter seriously and try to give efficient and professional service to the exporters and their branches/correspondents.  LC, by whatever mode it is opened will not be advised to the beneficiary unless the bank is in a position to check the authenticity of the same.

Advising of Brief Cables (Brief Details of LCs)

When the Issuing Bank opens LC by airmail preceded by an authenticated brief cable, the Advising Bank first receives a brief cable information giving minimum details about the LC being opened by it.  Such a cable always contains words like “Details to Follow” or “Airmailing Details” “Mail confirmation is to be the operative credit” etc.  If such words are missing, it cannot be treated as a brief cable advice but would be treated as the operative credit.  In such cases, the Issuing Bank may be contacted immediately to clarify the same.  Meanwhile, the (exporter) beneficiary will also be informed of the same.

 

If the bank is convinced that the cable advice received is only a brief pre-advice of LC it will proceed with advising the contents of the cable.  In such a case, it will take the following steps:

 

1.             Get the test decoded/verified by the official(s) in charge of test keys.  If the test does not agree, a cable must be sent to the Issuing Bank and meanwhile without responsibility inform the beneficiary of the receipt of the unauthenticated brief cable.

 

2.             Advise the brief cable as it is (after/obliterating the test number) to the Beneficiary under the bank’s standard letter of advising credit/brief cables.  A copy of such advising letter copy can be mailed to the issuing Bank. Retain one copy of advice together with the cable copy.  The cable advice being sent to the beneficiary will be affixed with the bank’s seal indicating the Export LC advice, reference number, date and indication that it is the original cable advice copy.

 

3.             Diarises for follow up of airmail confirmation.  (Though the Issuing Bank is expected to send the same promptly, the matter will also be followed up by the Advising Bank.  Sometimes when the Issuing Bank has made arrangement to advise LCs through several branches of the same bank in the same city, there is always a possibility of the cable message coming to one branch and the airmail confirmation going to another branch.  Such incidents can be avoided by the Advising Bank’s follow up).

 

4.             When the airmail confirmation is received, the same will be advised to the beneficiary under the same reference number.  While advising, a notation stating that “This letter of credit is mail confirmation of brief cable advised to you under our even reference of…….(date).  Please keep this LC attached to the same as its integral part” will be incorporated in the covering letter.

 

Advising of Regular Full Operative Telecommunication/Airmail LCs

 

1.             Check whether the airmail copy of LC is in confirmation/ of brief cable advice received earlier.  This fact is normally stated on the LC itself or sometimes on the bank’s covering letter also.  In such a case, connect the earlier cable advice papers before further processing is done.  If the Credit says that it is in confirmation of their brief cable advice your bankers have not received/advised any such cable, the matter will be taken up with the Issuing Bank and the beneficiary will be kept informed of this. Read tructions of LC.  Normally LCs contain one of the following    instructions:

 

2.             Read the instruction of LC.  Normally, LCs contain one of the following instructions:

 

a)             Advise the LC without adding your confirmation.

b)            Advise the LC only after adding your confirmation.

c)             Advise the LC and add confirmation to the credit if desired by beneficiary.

 

In the first case, it is mere advising without engagement on the Banks part.  In the other two cases the bank has to/may have to add confirmation, which would be done only if there are arrangements for confirmation of credits and adequate credit confirmation lines are available.  These facts will be got confirmed before adding confirmation.  In case of delay in decision-making, beneficiary may in the meanwhile be advised of these facts (without divulging anything regarding arrangements or credit confirmation lines).  He may be simply informed somewhat on the lines of “We are requested by the Issuing Bank to advise the credit adding our confirmation.  This request is under process and we shall let you know in the matter as soon as possible”.  Only when the bank is in a position/will be in a position to add confirmation, it will go ahead further in the matter.

 

3.             Go through  the whole LC and understand the nature of transaction, terms and conditions imposed, documents called for etc.  If the transaction is unusual, has any possibilities of problems of compliance with Trade and Exchange Control requirements etc. note them down.  Also find out whether there are any inconsistent or ambiguous instructions/clauses in the LC.

 

Advising of Amendments to LCs

For various reasons LCs may be amended.  The amendments are normally advised either by telecommunication or airmail directly without any prior cable advice.  While advising the amendments normally the Issuing Bank serialises the amendment numbers.  It has to be ensured that no previous amendment is missing.  Normally, whenever an amendment is effected there is a likelihood of inconsistencies creeping into the LCs because of not amending the connected clause of LC.  (For example whenever LC value is enhanced there should be a corresponding enhancement in the quantity/or unit prices).  The Banking must go through the provisions of LC and the amendments, to ensure that on account of such amendments no inconsistency arises in the LC.  If the amendment is not clear, necessary clarifications sought for from the Issuing Bank.  Only on receipt of satisfactory information/clarification, the amendment will be advised.

Confirmation of Export Letters of Credit

Confirmation is an extension of advising of credit.  In case of confirmation, the bank not only advises the credit, but adds its guarantee to the undertaking given by the Issuing Bank.  Hence, adding of confirmation entails assessment of risk on the Issuing Bank and the country of the Issuing Bank.  Banks in India have the facility of covering their credit confirmation risks with E.C.G.C. under their “Transfer Guarantee” Scheme. While confirming the credits following precautions will be taken by Banks.

·                     The relative LC should be/should have been advised through its medium.  (very rarely the LCs advised by a bank are confirmed by another bank).

·                     There must be arrangements with the Issuing Bank for confirmation of their credits.  Normally banks set up separate credit confirmation lines or exposure limits.  The request made should be within the limit set up.  Otherwise the matter may be taken up with higher authorities for the setting up of limits or authorising the branch to add confirmation.

·                     LC should be free from inconsistencies, ambiguities and should not contain any clause which puts the bank in jeopardy.

·                     LC should not contain any provisions which are likely to contradict Trade and Exchange Control Regulations.

·                     Reimbursement instructions must be clear and as far as possible there should be automatic reimbursement.

·                     If the credit is on usance basis, the usance period should not be too long and where it exceeds six months from the date of shipment, RBI approval must be available for the deferred payment terms.

·                     Credit should be irrevocable (revocable credits are not confirmed).

·                     Issuing Bank must request or authorise the bank to add its confirmation.  If the credit issuing bank states “You are authorised to add confirmation to the credit if desired by Beneficiary” etc., there must be specific request from the beneficiary.

·                     It should be clear, as to who will bear the confirmation charges whether beneficiary or the Issuing Bank.  If instructions are not clear, the Issuing Bank may be asked to clarify.

·                     If credit is opened by a bank in a country which has severe Exchange Control restrictions or shortage of foreign exchange resources, the Issuing Bank may be asked to confirm that it holds necessary approval for remittance of funds from the Central Bank of the country concerned.

Operational Aspects

After the bank has satisfied itself of having taken all the precautions and availability of adequate credit confirmation lines, it may add its confirmation to the credit and advise the credit to the beneficiary (if it is to be advised after adding confirmation).  If the Credit is already advised, beneficiary may be asked to present the original LC for adding confirmation.

“We ………(Name of Bank) hereby confirm this Letter of Credit and engage with the drawers, endorsers and bonafide holders that the Drafts drawn under this credit shall be duly honoured by us on presentation provided they are drawn and presented strictly in accordance with the terms of this Credit accompanied by all documents enumerated here and compliance of conditions stated herein”.

Transfer of Export LCs

Important Provisions /Guidelines Regarding Transfer of LCs. 

1.             A credit can be transferred only when it is expressly designated as” “TRANSFERABLE”  by the issuing bank (Art. 48.b).

2.             A credit can be transferred only by the bank which is entitled to effect settlements under the credit  (it must be a Nominated Bank) In a freely negotiable Credit, the bank which is specially authorised in the credit as Transferring Bank can transfer the credit. (Art. 48.a).

3.             A bank which is entitled to transfer the credit (even if it is the confirming bank of such credit) is under no obligation to transfer the credit. (Art. 48.c).

4.             A credit which is specifically designated as “TRANSFERABLE” can be transferred only at the request of the beneficiary (Art 48.a).

5.             Unless otherwise stipulated in the LC, bank charges for transfer of LCs must be paid for by the First Beneficiary.  Transferring Bank can refuse to transfer the LC unless such charges are paid (Art. 48.f).

6.             The beneficiary of a Transferable Credit has right to request for transfer of LC in whole or in part to one or more other parties known as “Second Beneficiaries”.  However, a Credit can be transferred in fractions (parts) only when partial shipments are not prohibited and the aggregate of such transfers does not exceed the credit amount.

7.             The Credit can be transferred only on the same terms and conditions stipulated in the original LC.  However, one or more of the following terms can be reduced or curtailed while transferring the credit.

(a).  Amount of Credit

(b).  Unit prices.

(c).  Period of validity of LC.

(d).  Period of shipment.

(e).  Last date for presentation of documents (as per Art. 43). 

Further, the beneficiary can request/stipulate for an increased percentage of insurance cover or ask for increase of cover up to the amount of cover stipulated in the original credit (i.e. He can ask for insurance cover for increased percentage of amounts like 120% of transferred value or may ask for say “insurance cover US$ 110,000” when the credit is transferred for just US$90,000). 

8.             The Transferor can also request for substitution of the name of the applicant with his name subject to the condition that if the original credit requires the name of the applicant to be mentioned on documents (other than invoice), the requirement must be met.

9.             Unless otherwise stated in the credit a transferable Credit cannot be transferred again at the request of the Second Beneficiary to whom it has been transferred i.e. no vertical transfer can be allowed.  For example, if a transferable credit is opened in favour of “a” and ‘”A” has transferred the same in favour “B” (who is known as the Second Beneficiary), “B” cannot further transfer the LC to another party.  However, the credit can be retransferred to the First Beneficiary.

10.          Under a transferred credit, the First Beneficiary retains his right to substitute his invoices and Drafts (wherever they are asked to be drawn) for those of the Second Beneficiary and claim the difference of amount if any, not exceeding the original Credit amount.  But the First Beneficiary must present his invoice and Draft for substitution on First demand made by the Negotiating Bank, failing which the Negotiating Bank will remit documents to the Issuing Bank as received from the Second Beneficiary.

11.          A transferable Credit can be transferred by the first beneficiary to a second beneficiary in the same country (as that of first beneficiary) or in another country unless then Credit specifically prohibits such transfer. 

12.          Unless specifically prohibited in the Credit, the bank transferring a credit which is available at its own counters, could at the request of the first beneficiary, transfer the place of availability to the country of the second beneficiary.

Operational Aspects of Transfer of LCs

If a beneficiary is requesting for transfer of a Credit opened in his favour, the bank may check the following before effecting the transfer: 

·                     Whether the LC is transferable or not.  (only if it is expressly stated as “TRANSFERABLE” it can be transferred, not otherwise).

·                     Whether the bank is the authorised bank for effecting settlement under the said LC or the bank is specifically authorised as the transferring bank when the credit is a freely.

·                     Whether negotiable one the beneficiary has presented original/negotiable copy of LC/or not.

·                     Whether the letter requesting for transfer is signed by authorised signatory(ies) of the first beneficiary or not.

Only when answers to all the above are in the affirmative the transfer will be effected as under:- 

·                     If the request is for transfer of full amount of LC without reducing or curtailing any of the terms of the LC, the original LC itself may be endorsed with transfer endorsement.

·                     If the request is for transfer of full amount of LC with reduction or curtailment of permissible terms and conditions, the original LC itself will be endorsed with transfer endorsement subject to the conditions of curtailment as requested by the first beneficiary.

·                     If the request is for transfer of part amount, check whether the partial shipments are permissible or not.  Only if it is permissible, will be considered.  In such cases Bank will take out a copy of LC and on the copy of LC will make the transfer endorsement and mark it as “Negotiable (Transferred) LC”.  The amount of such transfer must be marked off from the amount of the original LC by suitable endorsement thereon.

·                     The endorsement of transfer will be affixed on the original LC/copies  of LC (while transferring part amounts) or on the covering letter will be on the lines of “At the request of the beneficiary of the credit, M/s…………..vide their letter of………………. (date) full amount of this LC/an amount of …………..(state the amount of transfer) is transferred to M/s……… (Name and address of the second beneficiary)”.  (Also specify conditions of transfers, if any, such as curtailment/reduction of amount etc.).  The transfer endorsement will be under the signatures of two Authorised Officials.

·                     The fact of having effected the transfer will be informed to the Issuing Bank if requested.

CHAPTER 3

PROCESSING OF AN EXPORT ORDER

 

Before accepting an export order the exporter has to scrutinise it properly with reference to the terms and conditions of the contract.  Before starting the scrutiny procedure a simple acknowledgement letter to the foreign buyer is to be sent expressing our thanks for the order and stating that confirmation follows:

Examinee the order and see that the order is for the product for which offer was sent.

The size and specification should be same as per your offer, even a small variation may result in loss.  The stipulation for pre-sanction inspection should be by an agency easily available.  On your offer this particular aspect may not be clear, as at the time of placing the order the buyer may name another party.  This may create problems, because of the non-availability of that agency near to the locality of the exporter.

Conditions for payment is another factor to be looked into.  It should be same as offered by you.  The best mode of payment is through letter of credit mechanism.  The LC should be examined in respect of:

1)            If the LC is not opened by a first class European Bank confirmation by an Indian Bank is to be insisted Confirmation means the payment is confirmed/assured by a bank known to the exporter.

2)            The LC should not be restricted for negotiation with some other banks.  Such restrictions may delay the payment.

3)            Whether the LC calls for sight or usance drafts.

4)            Validity period is sufficient to ship the Cargo and submission of documents.

5)            Payment is permissible according to exchange control requirements.

The buyers condition for labelling and marking and also special packaging if any is to be checked. Shipment and delivery schedule is another important factor is to be verified with the offer.  The following points are to be ascertained.

1.    Part shipment permitted/prohibited.

2.    Transhipment is permissible/not permissible

3.    Port of shipment/destination is same or modified.

4.    Marine insurance is by the buyer or exporter, conditions of insurance.

5.    Consolidation of export – cargo scheme whether LC allows such arrangement.

6.    Documents required such as

7.    Commercial invoice is used or there is any specific notation required.

8.    Certification by any authority is required for eg: legalised/consular invoice known as Visa Certification may be insisted.

9.    Bill of Lading:  Straight, to order, shipped, or received for shipment, direct or through etc.

10.  Certificate of origin  -  whether the usual one issued by trade associations or Chamber of Commerce or special one like GSP – whether certification on commercial invoice will be sufficient or separate one is required.

11.  Packing list requirements

12.  Marine policy or certificate required.

Confirmation

If the exporter is satisfied with the terms and conditions of the order, a confirmation is to be sent to the buyer.  There is no special form for this purpose.  So exporters get the confirmation in the copy of the purchase order itself.  A format of the same is given in the reference book “Export-Import Correspondence”.

Registration

An exporter may get himself registered with an Export Promotion Council related to this main product line of export.  If there is no E.P.C., registration can also be done with authorities like Commodity Boards, Juri commission, Khadi and Village Industries Commission, State Directors of Industries  Development Commissioner of Foreign Trade Zones, Export Processing Zones, and Federation of Indian Export Organisation.  This registration enables the exporter to claim export incentives.  The formalities for getting registered with such agencies will be discussed later.

Importer/Exporter Code Number

IE Code - Every person importing and exporting goods required to contain an Importer/Exporter Code Number from the Regional Licensing Authorities concerned.  Custom authorities shall not allow clearance of goods to an importer and exporter who does not posses a valid Importer-Exporter Code Number.  Registration formalities for IE Code is discussed in Chapter 2 of study material “Import Procedure and documentation”.

Procurement of Export Goods

Those Exporters also are not manufacturing the products for which they have received export orders have to procure goods from external sources.  There are various organisations/agencies which will help the exporters for locating manufacturing of various products.  Details of such organisations are given below:

DGCI&S:

The Directorate General of Commercial Intelligence and Statistics, Council House Street, Calcutta has information of manufacturers and exporters of various commodities and products.  Where it does not have, it may obtain it from other sources and give the exporters

DCSSIO

Development Commissioner, Small Scale Industries, Nirman Bhavan, Maulana Azad Road, New Delhi 110011, and branch offices known as SISI Small Industries Service Institute and Extension Centres located at more than 40 Centres in the country may be contacted for information on units engaged in production of items in SSI sector.

IIFT

 

The Indian Institute of Foreign Trade, B-21 Institutional Area (South IIT Campus), New Delhi 110016 will be helpful in finding out manufacturers of various items 

Export Promotion Councils and Commodity Boards:

These authorities have list of manufacturers with line of activity which will be available at nominal cost   Contact the Councils/Boards for the required information.

India Trade Promotion Organisation (ITPO)

The ITPO, Pragati Maidan, Mathura Road, New Delhi – 110002 has a vast fund of knowledge on products and its trade information centre would help to locate manufacturers of almost all products.

Directorate of Industries:  The Directorate of Industries at state level are also a sources of information.  A visit to and contact with the merchants selling various products in wholesale markets is another way of locating manufacturers. An insertion about your requirement in a popular daily will also help to locate manufacturers.

Excise Customs Formalities

For the manufacture of goods intended for export, production processing and manufacture of various items from indigenous/imported raw materials and components other wise subject to excise/customs duty, is allowed “Underbond”.  This involves entering into a bond under such terms and conditions as the Collector of customs may decide.  When the export goods are removed from the factory, a debit entry for excise duty is made in the bond account of the exporter.  This obligation is discharged after exportation of the goods.  Imported materials, components goods etc can be processed in bond under section 65 of Customs Act 1962.  The facility is mainly extend to export oriented units so that difficulty in paying the duty and later claims drawback can be avoided.  Under the central excise procedure the exporter has to prepare FormAR-4 and invoice/chellans in time of gate pass.  If the exporter so wishes, the Central Excise official can make physical verification at the factory and seal the packages   For this, he has to pay the prescribed fees.  AR-4 is to be prepared with 6 copies.  Then it is to be presented to the Range Superintendent, Central Excise who will bring and signs all the copies.  The original, duplicate and 6th copy are given back to the exporter.  The triplicate copy will be sent to the Maritime Commissioner or Assistant Commissioner in charge of refund etc.  4th copy is sent to the Chief Accounts Officer and the remaining copy is kept by the office of the Range Superintendent.

Quality Control

Goods of inferior quality spoil one country’s market as well as brings bad name to other products.  To ensure supply of good quality products according to International Standards and or to buyers samples and specifications, the scheme of compulsory quality control and pre-shipment inspection has been stipulated by the Government under the Export (Quality Control and Inspection) Act 1963.  As many as 997 items have so far been notified thereunder.  These items are under product group heads of engineering, chemicals, and allied products, food and agricultural products, jute and jute products. Coir and coir products, footwear and footwear components, cashew, fish and fishery products.  It is obligatory for an exporter to fulfil all conditions relating to quality control and inspection laid down by the concerned organisations.  Before commencing production of goods, the exporters should make themselves aware of the requirements under these regulations.

Exemptions

The following categories of exporters are exempted from compulsory pre-shipment inspection.

1)            Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses

2)            Approved 100% Export Oriented Units and EPZ Units.

3)            If overseas buyers are not interest in pre-shipment inspection by any Indian inspection agency except for the product involving safety and health hazards.

4)            Units approved by Export Inspection Agency (EIA) who are authorised to issue statutory certificates by themselves instead of EIAs.  This exemption is not applicable for fish and fishery products and Engineering goods.

5)            Manufacturer/exporters of engineering goods and fish, fishery products having exports of these items of Rs. 1.5 crores.

6)            If the exporter produces a firm letter from the overseas buyer stating that the latter does not require a pre-shipment inspection from any official inspection agencies and files it with the concerned Customs authorities at the time of shipment, he will be exempted.

7)            ISI Mark/Agmark products.

Procedure for pre-shipment Inspection

 
The applications for inspection is to be submitted along with prescribed fees to Export Inspection Agency seven Days prior to the date of shipment with

(a)           Commercial invoices (5 copies)

(b)           Declaration regarding importers technical specifications.

If the consignment is found in order, certificate of inspection will be issued in triplicate  While the original (white) copy is to be submitted to the Customs, duplicate copy is for overseas buyers and 3rd copy is for the exporter.

Cargo Insurance

Export Cargo insurance covers the transportation and protects losses which result due to accidents of unexpected events.  Irrespective of the terms of export sale contract and mode of transportation, all export consignments should be insured.  Under FOBs and I&E contracts where insurance is taken by overseas buyers, it is safer to take insurance policy by    exporter also under the scheme “sellers contingency insurance.  In the case of CIF & CIP contracts it is obligatory on the part of the exporter to insure the good.

CHAPTER 4

EXCISE DUTY AND SALES TAX PROCEDURE

Goods exported outside India are exempted from excise duty as well as Sales Tax, whether the exporter is himself a manufacturer or not.  Though rebate of excise duty paid on finished goods can be claimed their export outside India , it is better to export in bond without payment of duty.  Excise duty paid on raw materials and components used in export products is covered under duty drawback scheme. There is no Sales tax, turnover tax and surcharge on export sales.

Excisable  Goods

 

Finished goods subject to excise duty for home consumption can be exported outside India either in bond i.e. without payment of excise duty or under claim for rebate of such duty wherever paid.  The various rules/schemes providing such facilities are summarised below. 

General Exemption to SSI Units

Small scale units having value of clearances for home consumption (including clearances for export to Bhutan or Nepal) within exemption limit (Rs. 50 lakhs for 1999-2000) and which are availing full exemption are exempt from registration (and declaration too, provided total clearances remain below Rs. 40 lakhs) as well as following of regular AR4 form procedure for export

Export in Bond

a)    Export in bond outside India, except to Nepal or Bhutan, of excisable finished articles without payment of duty (Rule 13 of CE Rules, 1944, in the like manner, as the goods regarding which the rebate is granted under CE Rules 12(1).

b)    Export of goods manufactured in bond from excisable goods on which duty has not been paid (Rule 13 of CE Rules, 1944)

c)     Intermediate goods supplied to manufacturer of all resultant excisable articles against an Advance Release Order (Notif. No. 49/94-CE (NT) dt. 22/9/94).

d)    Ships’ stores export in bond (Notif. No. 179/79-CE dt. 5/5/79 and 307/87-CE dt. 9/9/87)

e)     Export of all excisable goods in bond but without payment of duty to Nepal/Bhutan for which payment is received in foreign exchange; (Notif. No. 51/94-CE (NT) dt. 22/9/94)

f)      In bond export of indigenously produced Petroleum Oil and Lubricants (POL) to Nepal.

g)     EOUs and EPZ units’ – No excise formalities. (Notif. No. 13/92-CE (NT) dt 14/5/92).

h)    Supplies to units in jewellery complexes – No excise duty (Notif. Nos. 146 – 147/89-CE dt. 19/5/89)

i)      processing of Goods after clearing for Export in Bond.

j)      Excisable goods sent abroad as exhibits or for test/trials.  (Notif. No. 263/79-CE dt. 22/9/79)

k)    Sales to duty free shops in India.

l)      Sales to EPZ units.

m)   Sales to EOUs

Export under Claims for Rebate or Refund of Duty

 

a)    Rebate of excise duty paid on excisable goods exported to any country except Nepal and Bhutan. (Notif. No. 41/94-CE (NT) dt. 22/9/94)

b)    Rebate of duty paid on excisable materials used in the manufacture of excisable goods exported outside India, except to Nepal and Bhutan. (Notif. No. 42/94-CE (NT) dt. 22/9/94)

c)     Rebate of duty on ship stores/mineral oil products exported outside India or shipped as provision or stores for use on board a ship.  (Notif. No. 44/94 & 46/94-CE (NT) dt. 22/9/94)

d)    Rebate of duty paid on castor oil and groundnut oil on export outside India.  (Notif. No. 43/94-CE (NT) dt. 22/9/94)

e)     Rebate of duty paid on any excisable goods exported to Nepal to be granted to His Majesty’s Govt. of Nepal. (Notif. No. 50/94-CE (NT) dt. 22/9/94)

 

Miscellaneous 

a)    Refund  of duty/discharge of bond on export of consignment in part.

b)    Export order cancellation – Diversion of goods for home consumption.

c)     Credit of duty on inputs used in products cleared for export in bond (Rule 57F)

d)    Re-entry of exported goods for repairs, reconditioning, refining etc. and subsequent re-export.

Duty Drawback

Drawback or refund of duty of excise or customs (import duty) paid on indigenous  or imported goods used in export products (Duty Drawback Rules)

Alternative Provisions

The various provisions referred to above
 are, to a large extent, of an alternative nature, the central theme being that refund on account of a particular duty (actually paid) should be claimed only once either under Central Excise Rules or Drawback Rules, by way of “Rebate” or “Drawback” as the case may be.  While the scheme relating to rebate of excise duty is discussed here, the subject of Drawback has been treated separately in another chapter.

Excise Documents

There are certain specified forms/documents to be used in regard to export of excisable goods.  Some of the important documents used in regard to export consignments are explained below.

Invoice

An assessee’s invoice is to be used with effect from 1/4/94 as a transport document or Gate Pass.  Hence, the GP-1 and GP-2 used heretofore are no longer in use.

AR/5 Form:  Form AR4 is an application for removal of excisable goods for export from India by any mode i.e. sea, air, post, land.  It is required in cases where sealing of goods and their examination at place of despatch and also for despatch of goods without examination.  It is also for export of goods obtained from the market in mill packed condition.  AR4 form is to be used for export of finished excisable goods in bond i.e. where no excise duty is paid and also for export under claim of rebate of duty paid on finished (and not inputs) goods.  However, for rebate of claim on raw materials or for export in bond of goods in which such materials have been used on which no duty has been paid but brought in bond, AR5 form is to be used as explained below.

Distinction between AR4 and AR5:  Both forms AR4 and form AR5 can be used for export in Bond or under Rebate of Central Excise Duty.  However, there is a distinction in their use.  Form AR4 is to be used in case of exports in Bond, of all goods without payment of duty on finished items (and not on inputs).  Where finished stage duty is paid and a rebate thereof is to be claimed after export, AR4 Form is again to be used.  Therefore, AR4 form is to be used where either finished stage duty is not paid or its rebate is to be claimed later on.  But where the goods are to be manufactured/exported even without payment of duty on inputs known as input stage duty, Form AR5 is to be used.

Therefore, form AR5 is for cases where no duty is paid on production inputs and the finished stage duty is also not to be paid on account of their export being made in bond.  Where inputs for which duty is not paid but duty on inputs known as input stage duty, Form AR5 is to be used.

Colours of AR4/5 Forms:  These forms are required to be got printed in different colours to facilitate disposal of goods for export in bond or under rebate of duty.  However, it will be sufficient if the copies of AR4 contain a colour band on the tip or right hand corner in accordance with the under-mentioned colour scheme.

The colours are as following:-

      Copy                                                                                                    Colour         .

Original                                                                                               White

Duplicate                                                                                             Buff

Triplicate                                                                                             Pink

Quadruplicate                                                                                     Green

Quintuplicate                                                                                      Blue

Sixtuplicate                                                                                         Yellow

Bond: For clearance of excisable goods, without payment of duty, for export from the factory or warehouse or any other premises as approved, the manufacturer or the merchant exporter is required to execute a bond with the concerned central excise authorities as follows:

(i)            Where the export is from any of the port, airport or post office falling within the jurisdiction of Maritime Commissioner of Central Excise the bond can be executed with –

(a)           either such Maritime Commissioner

(b)           or the Jurisdictional Assistant. Commissioner of Central Excise

(ii)           in other cases, the bond should be executed with Assistant Commissioner of Central

Excise having jurisdiction over the factory of manufacture of excisable goods.  For the purpose of execution, exporters should clearly indicate on the AR4 complete postal address of the authority before whom bond is executed.

Types of Bonds:  There are six types of bonds available for purpose of due despatch of goods for exports.  These are:

-               B1 (Surety) & B1 (Security)

-               B1 (General Surety) & B1 (General Security)

-               B16  (General Surety) & B16 (General Security)

-               B17  General Bond1 (Surety/Security)

Exporters have option to execute general bond (B1 general) or bond (B1_ to cover particular consignment.

Bond to be Executed by Manufacturer Exporters: Manufacturers who are exporting on their own account (Manufacturer Exporters) who manufacture dutiable excisable goods and desiring to export without payment of excise duty (under bond) can execute either a particular B-1 bond [to cover a series of export from his factory], or B-16 (General Security or General Surety) with the jurisdictional Assistant Commissioner of Central Excise.

Where the export is from any of the port, airport or post office falling within the jurisdiction of Maritime Commissioner of Central Excise, the option is available to the Manufacturer Exporter to execute the particular bond or the consolidated bond before such Maritime Commissioner of Central Excise.  In case where B-1 bond is executed for a specific consignment before the Maritime Commissioner of Central Excise, the Manufacturer Exporter should obtain an attested photo copy of the Bond executed before the Maritime Commissioner of Central Excise and produce the same at the time of presentation of AR4 to the Superintendent of Central Excise.  Where a Consolidated B-1 general bond is executed before the Maritime Commissioner of Central Excise, the Manufacturer Exporter shall inform him of intention to export the goods and obtain a Certificate of provisional debit in the Running Bond Account2.  This certificate will have to be produced by the manufacturer exporter before Superintendent of Central Excise at the time of presentation of AR4/5 for signature.

Bonds to be Executed by Merchant-exporters and Manufacturers Procuring Goods from other Manufacturers: The merchant-exporters and manufacturer-exporters who procure excisable goods for export under bond from other manufacturers in different parts of the country, are also permitted to export excisable goods under bond.  In such circumstances, for purposes of complying with Central Excise Law and Procedures, the manufacturer who has executed the Bond would be responsible for discharging all the liabilities under the said provisions.  In such circumstances, the application in Form AR4 will be in the name of the manufacturer of the goods who executes the bond.  All other procedures for admission of the proof of export would be the same as in the case of manufacturer-exporters.  It should be brought to the notice of manufacturers that once they permit the Bond executed by them for exports by merchant-exporters, it would be the manufacturer’s responsibility for accountal of the export goods.

Simplified Procedure 1:  As a ,measure of simplification of the export procedures.  It has been decided that Commissioners of Central Excise (excluding those under whose jurisdiction the Office of Maritime Commissioner already exist) will designate one Deputy/Assistant Commissioner of Central Excise as “Deputy/Assistant Commissioner of Central Excise (Exports)” who will discharge a similar function as being discharged by the existing Maritime Commissioners, so far as the exports under rules 13(1)(a) and rule 14 are concerned.  The procedure will be as follows:

1.    Any merchant exporter/manufacturer-cum-merchant exporter (hereinafter referred to as “the exporter”) can file a Bond under rule 13(1)(a) or a General Bond under rule 14 of the Central Excise rules, 1944 with the designated Deputy/Assistant Commissioner of Central Excise (Export) under whose jurisdiction his head office/factory is located (within the jurisdiction of the Commissionerates).  The bond will be furnished along with security/bank guarantee equal is exempted from furnishing such security by the Commissioner in terms of Board’s Circular No. 284/118/96-CX dated 31/12/96 (as modified – to add “Trading Houses”).  To reiterate the relevant provisions of Circular No. 284/118/96, supra, it is stated that the Circular exempts Super Star Trading House, Star Trading House, Trading House, Export House, Registered Exporters (Registered with the relevant Export Promotion Council), manufacturers registered with Central Excise Department, subject to the conditions that -–(i)  the exporters have not come to the adverse notice of the Department in last three years, (ii) all the formalities required under Central Excise Act and Rules related to exports are regularly complied with and (iii) a copy of the registration-cum-membership certificate (RCMC), duty attested by the exporter is submitted.  The exemption from giving security/sureties can be withdrawn without prior notice to any exporter if he comes to the adverse notice of the Department.

2.    The exporter can procure the goods from a factory located anywhere in India.

3.    In the cases where B1 bond is executed for specific consignment before the Deputy/Assistant Commissioner of Central Excise (Export), the exporter should obtain an attested photocopy of bond duly accepted by such Deputy/Assistant Commissioner of Central and produce the same to the Superintendent of Central Excise having jurisdiction over the factory/approved place of storage from where the goods have to be removed for export, at the time of presentation of AR-4.

4.    Where a consolidated B1/B16 general bond is executed, the exporter shall request in writing in the proforma given in Appendix, the Deputy/Assistant Commissioner of Central Excise (Export) [with whom he has furnished the bond/for issue of a certificate of provisional debit in the Running Bond Account maintained in the Divisional Office.  The Duplicate copy will be retained by the Divisional Office and the original & triplicate copies will be handed over to the exporter.  The original copy will be presented to the Superintendent having jurisdiction over the factory of export goods.  The triplicate copy will be to exporter’s records.

5.    The format of Running Bond Account will be the same as given in Circular No. 87/87/94-CX, ibid.  The provisional debit/credit should be recorded in remarks column with date and the Deputy/Assistant Commissioner of Central Excise (Export) will initial on each such entry in relevant column.

6.    The certificate will have to be produced by the exporter before the superintendent of Central Excise at the time of presentation of AR-4 for signature in cases where the exports are being effected under the examination and sealing of the consignment in the factory/approved premises by the Jurisdictional Central Excise Officer.

7.    Where the exporter intends to clear the goods under the self-removal or self-certification procedure, he will submit this certificate within 24 hours of removal along with the requisite copies of AR-4.  The Superintendent will endorse on the triplicate, quadruplicate, quintuplicate and sixtuplicate copies of AR-4 (At Sl. No. 1 of Part-I) the details of bond based on the certificate and dispose of the AR-4 as specified in existing instructions.

8.    The provisional debit shall be converted into actual on the basis of Central Excise duty (corresponding to the quantity & value), received from the jurisdictional Central Excise Range Office (place of removal for export). 

      The documents for proof of export shall be filed before the Deputy/Assistant Commissioner of Central Excise (Export) with whom the bond is executed and the usual procedures contained in Paras 10.1, 10.2 and 10.4 of Circular No. 87/87/94-CX supra, shall be followed.

The Deputy/Assistant Commissioner with whom bond is executed, may also make Block Transfer in favour of the Deputy/Assistant Commissioner of Central Excise having jurisdiction over the factory, and entire procedure related to Block Transfer contained in Circular No. 87/87/94-CX. Supra will apply muatis mutandis  Except as provided hereinbefore, all the instructions contained in Circular No. 87/87.94 supra, as amended from time to time by other instructions of the Board, will continue to be followed.

It is specifically clarified that the above procedure shall be in addition to the existing procedure of furnishing bond with:

(a)           the Maritime Commissioner,

(b)           with the Deputy/Assistant Commissioner having jurisdiction over the factory from which the export goods are cleared.

(c)           by merchant exporters themselves

(d)           by manufacturers on behalf of a merchant exporter.

Amount of Bond Bank Guarantee and Surety:  In case of particular B-1 bond, amount of bond should be equal at least to the duty chargeable on the goods to be exported.  In case of general B-1 bond, amount of the bond would be equal to the full duty on the exporters estimate of the maximum quantity of the excisable goods likely to be in transit during the period between clearance from the factory and acceptance of proof of export.

Bank Guarantee/Security:   Manufacturer-exporters (other than those registered with EPCs and Central Excise, Export Houses etc. as detailed below) are required to execute B-1/B-16 bond with 10% security/bank guarantee.  Merchant exporters (other than registered exporters) shall execute B1 bond with 25% security/bank guarantee.

Exempt Categories:  Following categories of exporters need not furnish any Bank Guarantee or Cash Security or surety for the export bond.  Bond only will suffice in cases of –

-               Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses

-               Registered Exporters i.e. exporters registered with Export Promotion Councils, etc

-               Manufacturers registered with Central Excise Department subject to the condition that –

(i)            the exporter has not come to the adverse notice of the Department in the last three years,

(ii)           all the formalities required under Central Excise Act and Rules related to exports are regularly complied with by the exporters,

(iii)          a copy of the Registration-cum-Membership Certificate (RCMC) duly attested by the exporters is submitted.

Running Bond Account: Every Central Excise Authority (and not the exporter) before whom a consolidated B-1 general bond has been executed shall maintain a Running Bond Account in the prescribed proforma.  Whenever any block transfers are made in favour of other Central Excise authority, debit shall be made in the account.  Suitable debit shall also be made whenever exports are allowed against the bond.  On acceptance of the proof of export the bond account shall be credited to the extent the debit was made while permitting the exports.  The Running Bond Account shall also be credited after the Block Transfer is returned by the other authority.  However where it becomes necessary to take action for recovery of duties, such action shall be taken by the authority before whom the bond is executed in consultation with the Assistant Commissioner of Central Excise having jurisdiction of Central Excise.

Forms

B-1 Bonds:  These bonds are to be used in regard to export of excisable goods without payment of duty.  The bonds in forms B-1 (Surety) and B-1 (Security) or B-1 (General Surety)/B-1 (General Security) are to be used for individual consignments or a number of consignments respectively.

B 16 Bond (General Surety/General Security):  It is for removal of excisable goods from time to time for export to a foreign country, without payment of duty.  It, thus, avoids the need for execution of individual bonds like B.1. 

B 17 Bond (General Surety/General Security):  is to be executed both under Customs and Central Excise Acts, by an EOU/EPZ/EHTP/STP units.  This single bond is also for export of excisable goods to foreign countries without payment of duty.  The bond amount will be equivalent to double the amount of duty calculated on the goods procured/imported duty free.

Bank Guarantee:  Wherever bank guarantees are furnished, special forms of guarantee bond are to be used.

Head of Account:  Cash of amount on account security should be credited under the head –

“K. Deposits & Advances (b) Deposits not bearing interest, 843, Civil Deposits – Revenue Deposits”.

Invoice for In-Bond Export to Nepal:  For in-bond exports of excisable goods to Nepal for which payment is received in freely convertible currency, the special form of invoice (but different from Nepal Invoice) is to be prepared.

Bank Certificate: It is a special type of certificate to be used in case of excisable goods payment for which is received in freely convertible currency for exports to Nepal.

Application for Refund: There is a combined application form for rebate of duty on excisable goods exported by sea/air, post or land (surface). 

Information/Declarations in Forms: Care should be taken with regard to giving of information/declaration in different excise forms, as indicated below.

AR4/5 Form: Exporters should take adequate care in filling up the AR4/5 proforma.  The authority before whom the bond is executed or in whose favour BLOCK TRANSFER is obtained [who is also the authority for accepting the proof of export] should be clearly indicated in the AR4/5 along with its complete postal address at appropriate place in AR4/5.  The applicable portions should be carefully retained and inapplicable portion struck off.  The exporters are now required to give following certificates/declaration.

In addition, take care of the following points.

Declarations 1: “We hereby certify that the above mentioned goods have been manufactured

(a)           availing facility/without availing facility of Modvat Credit under rule 57A of Central Excise Rules, 1944

(b)           availing facility/without availing facility under Rule 12(1)(b)  of Central Excise Rules, 1944

(c)           availing facility/without availing facility under Rule 13(1)(b) of Central Excise Rules, 1944

We hereby declare that the export is in discharge of the export obligation under a Quantity based Advance Licence/Value based Advance Licence/Under Claim of Duty Drawback under Customs & Central Excise Duties Drawback Rules, 1995”.

(i)            Indicate the Port of Export  at the top of all the copies of the application form AR4/5.

(ii)           Where the goods are despatched to the port of shipment by rail, enter the R/R

Number in Column 12 of the AR4/5 form:

(iii)          Affix postage stamps to cover the prescribed fee per package on the duplicate copy of the AR4/5 form, before presentation to the Post Office.

(iv)          Indicate the bond number if any, and the authority before whom the relevant bond is executed in the relevant column of Ar4/5 form.

(v)           Declare the credit availability on each copy of AR4/5 form relating to export in bond, as given below.

“Credit available in our bond account covers the duty on excisable goods intended to be removed as mentioned herein”:

Also give the following information in the AR4/5 form at the time of clearance for export.

Amount of bond                                                                                             Rs …………..

(a)           amount of duty involved on goods cleared for export

but not yet exported                                                                           Rs …………..

(b)           balance at credit as on the day of clearance (plus or minus)            Rs .………….

(vi)          Value of Goods. Show in the AR4/5 form at the time of clearance of the goods, the Central Excise Assessable Value.  As regards acceptance of FOB. value of exports 2, it has been decided to accept the same as assessable value for goods meant for exports.  The value for export under claim for rebate or in bond would be based on FOB. value.  However, for goods which are not proved to have been exported, FOB. value would not apply.

(vii)         Export Licence.  Give the particulars of the export licence, if any, and your full address i.e. of the exporter.

(viii)       Marks & Numbers.  The package in which the goods are to be exported should be legibly marked in ink or oil colour or in such other durable manner with progressive number commencing with number “1” for each calendar year and with the exporter’s name.  Commissioner of Central Excise may having regard to the nature of goods or trade practices may relax any of the conditions regarding markings.

(ix)          Duty under AR-1 1/Invoice.  Where duty is paid under AR-1/Invoiceby the manufacturer, he should append the following declaration in the AR4 form, if the exporter is other than the manufacturer.

“The refund of duty when sanctioned may be paid direct to exporter”.

(x)        Index Number:  Show the index number allotted by the Maritime Commissioner in each co9py of AR4 forms, preferably in RUBBER STAMP.  Particulars of the Invoice, rate of duty, the amount of duty paid or payable on the goods meant for export along with the full name and address of the manufacturer of the goods must be given.

(xi)          Where the bond is executed by the merchant-exporter, both the manufacturer and the exporter shall sing the AR4.

Invoice

(i)            Give complete particulars like rate of duty, amount of duty payable in these forms.

(ii)           Indicate on the top “Goods for Export” on Invoice or “Goods for Export under Claim for Rebate of Duty” on Invoice.

Procedure to Export

1.            Simplified Procedure for SSI Units Exempt from Duty

Regular AR4 Procedure

Units which are availing

-               facility of Modvat credit under rule 57A of Central Excise Rules, 1944

-               facility under Rule 12(1)(b) of Central Excise Rules, 1944 i.e. availing rebate of duty paid on materials used in the manufacture of goods

-               facility under Rule 13(1)(b) of Central Excise Rules, 1944 i.e. manufacturing goods in bond from materials removed without payment of duty shall follow regular procedure of AR4/5 form and execution of bond for exports.

No AR4 Procedure:  The CBEC has, vide its Circular No. 212/46/96-CX dt. 20/5/96 2, introduced a simplified procedure for SSI units having value of clearances for home consumption including clearances to Nepal and Bhutan, within exemption limit 3 during the relevant financial year, and who are availing full exemption.  Hence, the units which though eligible for full exemption, are not availing themselves of the exemption, are not covered by the simplified export procedure.

No Registration/Declaration: The SSI units availing full excise exemption  (minus Rs. 10 lakhs) for total clearances for home consumption (including export to Nepal and Bhutan) and exporting their products need not either register themselves or file a declaration with the Central Excise Department.

Documentation

Clearance Document:

(i)            Such manufacturers are permitted to use their own printed delivery challan/invoices or other similar documents bearing printed Serial Numbers for the purpose of clearances for home consumption as well as for exports.  (The printing of Serial Numbers can be done by use of numbering machine.)

(ii)           The Declarant’s Code Number should be mentioned on all clearance documents.  In case a manufacturer does not possess the declarant’s Code Number, he may indicate on the relevant invoice, the date of filing of declaration.

(iii)          Such clearance document should contain particulars of the description on goods, name and address of the buyer, destination value, progressive total of value of excisable goods cleared for home consumption since the beginning of the financial year, vehicle number, date and approximate time of the removal of the goods.

(iv)          The clearance document will be pre-authenticated by the manufacturer or his authorised agent.

(v)           In case of export through merchant exporters, the manufacturer will also mention the Export “Through Merchant Exporters” and will mention the Export-Import Code No. of such merchant exporters.

(vi)          In case of direct export by the manufacturer exporters, he will mention on the top “For Export” and his own Export-Import Code (IEC) No., if any.

Records:  Such units may be asked to maintain a simple record of production and clearance.  Entries in production record should either be allowed to be made at the close of the day or before the commencement of the production on the following day.  Entries need not be made on days when there is no production or clearance of goods.

Statement:  Such units shall file a quarterly statement to the Jurisdictional Range Superintendent containing required particulars.

Proof of Exports

A.            Following documents can be accepted as proof of export –

1.            Direct Export by the manufacturer exporter

(i)            Duly attested photocopy of shipping bill (Export Promotion Copy) bearing the particulars and date of clearance document under which the goods are cleared from the factory of production, having endorsement on its reverse by the Customs of the particulars of mate’s receipt no. (wherever applicable), name of the ship/flight no. of the aircraft by which the goods were exported out, date of export, and EGM Number/Air way bill Number (wherever applicable);

(ii)           Duly attested copy of Bill of Lading; and

(iii)          Foreign Exchange Remittance Certificates.

2.            Export through Merchant Exporter 

It has been decided to accept the document prescribed by Sales Tax Department as the proof of export.  Sales made by manufacturer of the goods to the merchant exporter which ultimately are to be exported out are exempt from Central Sales Tax.  The Sales Tax Department issues booklet to the merchant exporters containing serially numbered H-Forms/ST-XXII form.  After the goods have been exported by the merchant exporters, the latter issues these forms to the manufacturers of the goods from whom the goods were purchased by them.  The merchant exporters, in turn, have to account all these serially numbered forms to the Sales Tax Department by furnishing a proof that the goods have been exported out.  These proofs are in the form of presentation of the shipping bill duly completed by the customs, bill of lading, foreign exchange remittance certificates etc.  The liability of the manufacturers to the Central Sales Tax gets waived only where they submit these forms to the Sales Tax Department.  It is, therefore, seen that indirectly exports get accounted for through the issue of H-Form or ST-XXII Form.  Therefore, it has been decided that to accept photocopy of H-Form or ST-XXII Form or any other equivalent sales tax form duty attested and stamped by the manufacturer or his authorised agent should be submitted for the purpose of proof of export.

B.            Submission of proof and processing thereof

The proof of

(i)             export should be submitted to the Range Officer within a period of 6 months from the date of clearance of goods from the factory of production.

(ii)           If Range Superintendent finds that the clearances for home consumption, and the clearance for export where proof of exports have not been furnished within 6 months, when taken together, are likely to exceed the exemption limit (which is presently Rs. 30 lakhs for home consumption), he should issue show cause notices for safeguarding revenue.  These show cause notices, however, should be kept pending for six months by which time proof of exports are expected to be received.

(iii)          The Range Superintendent will maintain manufacturerwise record on the basis of the quarterly return and the proof of exports submitted by the manufacturer from time to time in order to ascertain that the clearances for exports and the proofs of exports are duly accounted for and in case of failure on the part of exporter to submit proof of export, necessary action can be initiated promptly on the lines already mentioned in the above para.

Regular AR4/5 Procedure: In case clearances of such manufacturers for home consumption plust clearance for export where proof of export were not furnished within 6 months, exceed the exemption .limit, they should take Central Excise Registration and follow the regular AR4/5 procedure.

However, non-SSI units manufacturing excise dutiable goods and desiring to export the same without payment of excise duty can do so after execution of the requisite bond, and following regular AR 4 procedure.

2 .Finished Excisable Goods Export in Bond to all Destinations other than Nepal: For exporting excisable finished goods, the procedure is a little different  for consignments sent by:-

(i)            sea, air and parcel post, and,

(ii)           land route to neighbouring countries.  A little different procedure is also to be followed in regard to (a) export of goods under ‘claim for rebate’ and (b) for goods exported under ‘bond’.  There is still another scheme for processing of excisable goods after clearance for exports.

Accordingly, the procedure is divided into three categories; (I) export by sea, air or parcel post, (ii) export by land and (iii) processing of excisable goods after clearance for exports.

It may be reiterated that units manufacturing dutiable (excisable) goods and desiring to export the same without payment of excise duty can do so after execution of the requisite bond with the competent central excise office.  The bond is to be filed and regular AR4 procedure followed even if the units’ clearance in the domestic market is exempt from excise duty, but not in case of SSI units having domestic clearance up to the exemption level.

(i)            Export by Sea, Air of Post

To export goods by sea, air or parcel post either under ‘claim for refund’ or under ‘bond’, follow the procedure as detailed hereafter. 

Packing/Marking Export Goods & Preparation of Documents:  Pack the export goods in cases or packages and mark them in ink or oil colours with necessary Central Excise markings and numbers.  Prepare the necessary documents i.e.  AR4  and invoice and fill them in giving necessary information/declarations.

If you want to export a number of consignments regularly in ‘bond’, furnish General Bond in Form B-1 or B-15 (General Surety) or B-1 or B-15 (General Security).  Alternatively, you can give a B-1 (Surety) or B-1 (Security) in case you want to cover only one particular consignment.  If you are a warehouse licensee/exporter, you may execute a combined bond in form B-2 (General Surety) or B-e (General Security) to cover your duty liability on storage, movement of excisable goods from a licensed warehouse and clearance of goods for export.

Self-Sealing of Package-2:  A manufacturer-exporter who has paid excise duty exceeding Rs. 10 crores or who has been accorded the status of Export House, etc. may himself seal the packages or containers at the place of despatch and remove them for export.

Removal without CE Examination: The exporters are now allowed to remove the goods for export on their own without getting the bonds examined by the Central Excise officers in respect of all commodities other than those covered under physical control.  The AR4/5 would be prepared in sixtuplicate, giving all particulars and declarations.  Where the bond is executed by the merchant exporter, both the manufacturer and the exporter shall sign the AR4/5, to the Superintendent of Central Excise having jurisdiction over the factory or the warehouse, within twenty four hours of the removal of the consignment and would retain the original and duplicate copies for presenting along with the consignment to the Customs Officer at the point of export.  However, the exporters may ensure before clearances that the necessary bond as detailed above has been executed for this purpose.

Exporters, whether manufacturer exporter or merchant exporter may note that unless they execute the necessary bond before the Competent Authority they should not clear the goods under the above relaxed procedure.  They should without fail indicate the Bond Number and the authority before whom the relevant bond is executed in the relevant columns provided in Form Ar4/5.

The jurisdictional Superintendent of Central Excise shall examine the information contained in AR4/5 and after he is satisfied that the information contained in the AR4/5 is true, he would then send the triplicate copy to the authority before whom bond is executed, quadruplicate copy to the Chief Accounts Officer, return the Sixtuplicate copy to the exporter and retain the quintuplicate copy for his record.

Removal after Examination of Goods: Where the exporter desires the sealing of the goods by the Central Excise officers so that the export goods may not be examined by the Customs Officers at the Port/Airport of shipment, he should present an AR4/5 application in sixtuplicate to the Superintendent of Central Excise having jurisdiction over the factory/warehouse at least twenty four hours before the intended removal of the export goods from the factory/warehouse.  However, where exporter is unable to give 24 hours advance notice to the Superintendent of Central Excise, his request for shorter notice should normally be accepted.

Samples:  The Central Excise Officer examining the consignment would draw samples wherever necessary in triplicate.  He would hand over two sets of samples, duly sealed, to the exporter or his authorised agent, for delivering to the Customs Officer at the point of export.  He would retain the third set for his records.  The export consignment would be carefully examined vis a vis the description of goods, their value and other particulars/declarations on the AR4/5.  The Central Excise Officer shall verify the facts, certificates/declaration made by the exporter.  The value declared on AR4/5 should be as per Section 4 of Central Excises and Salt Act, 1944.  After Central Excise Officer is satisfied that the information contained in the AR4/5 is true and after verifying that necessary bond has been executed by the exporter, he would allow the clearances.

The original & duplicate copies of AR4/5 would be given to the exporter for presenting to Customs Officer at the point of export along with the export consignment.  The sixtuplicate copy shall be given to him or his authorised agent in a sealed cover, for handing over to Customs Officer.  The remaining three copies will be used for official purposes.

The original, duplicate and sixtuplicate copies of the AR4/5 shall be presented by the exporter/his authorised agent to the Customs officer at the point if export along with the goods, Shipping Bill/Bill of Export and samples sealed by the Central Excise Officer.  The export consignment shall be checked by the Customs Officer and if found in order he may allow exports after ensuring that the No. of the AR5 has been indicated in the Shipping Bill or the Bill of Export, as the case may be.  After the goods have been shipped the proper officer of Customs would make necessary endorsements in the Original, Duplicate and Sixtuplicate copies of the AR5 at appropriate places and put his stamp with his name and designation below his signature.  The original and sixtuplicate copy will be returned to the exporter and the duplicate copy sent to the appropriate authority.

Filing of Proof and Discharge of Bond:  After having made exports, following documents should be filed by the exporter for proof of due exportation –

-               Original copy of AR4/5

-               Duplicate copy of Ar4/5 (in sealed cover received from Customs Officer) [optional]

-               Duly attested copy of Bill of Lading/Air waybill

-               Duly attested photocopy of Shipping Bill (Export Promotion Copy)

with the Maritime Commissioner of Central Excise or Assistant Commissioner of Central Excise jurisdiction over the factory.  They will either accept the proof or issue a deficiency memo.

Partial Export:   If the scrutiny of AR4/5 reveals that only part of the consignment removed in bond for export has actually been exported out of India, the Assistant Commissioner or Central Excise or the Maritime Commissioner of Central Excise, as the case may be, shall forthwith call upon the bonder to pay within 10 days the duty leviable on the quantity short-shipped in terms of the bond.

3.         Finished Excise Paid Goods Export under Claim for Refund of Duty

(i)            All Excisable Goods and Materials 

Goods: Refund (rebate) of duty is granted under Rule 12 of the Central Excise Rules and Notifications Nos. 41 to 44/94-CE (NT) all dated 22/9/94, 46/94-CE(NT) dt. Dd/8/94 and 50/94 CE (NT) dt. 22/9/94, paid on –

(a)           all excisable goods except mineral oil products exported as stores for consumption on board an aircraft on foreign run and goods exported as ship stores for consumption on board a vessel bound for any foreign port, to any country except Nepal and Bhutan.

(b)           Materials used in the manufacture of goods.

The rebate of duty on goods exported to Nepal is made to the Nepal Govt. and, hence, explained separately.

Conditions

(a)           For refund of duty paid on finished excisable goods, the following conditions are to be satisfied.

(i)            No rebate of duty in respect of excisable materials used in the manufacture of goods exported shall be allowed if the exporter –

(a)           avails of duty drawback or credit of duty

(b)           avails the credit of duty under heading 4A of Chapter V of the Central Excise Rules

            However, rebate of such duties of excise which are not included in  the AI (All Industry rate of drawback or brand rate/special brand rate of drawback, is permitted.

It would be ensured that exporters don’t get AI/brand/special brand rate of such duty and also no modvat of such duty has been availed of.

(ii)           The amount of rebate of duty admissible should not be less than Rs. 500/-.

(iii)          If goods are exported by land, the export shall take place by such routes or land customs stations or border check posts as specified.

(iv)          Where export is made by parcel post the parcel is delivered by the exporter at the Post office of despatch within Six Months of payment of duty.

(v)           Rebate of duty paid on those excisable goods export of which is prohibited shall not be made.

(vi)          Goods are exported within six months from the date on which the same were cleared for export.

(b)        1  For refund of duty paid on excisable raw materials, consumables, components, semi-finished goods, sub-assemblies, intermediates, accessories, parts and packaging materials required for manufacture of export goods (but not on Capital Goods) used in the factory in or in relation to manufacture of export goods, the following conditions should be fulfilled.

(a)           The manufacturer shall file a declaration describing the finished goods proposed to be manufactured, rate of duty leviable and manufacturing formula, tariff classification, rate of duty payable on the materials.

(b)           The manufacturer shall obtain the materials to be utilised in the manufacture and packing of the finished goods directly from the registered factory in which such goods are produced, accompanied by documents evidencing payment of duty.  (The manufacturer may also procure excisable goods from open market)

(c)           The excisable goods shall be in original packed condition.

The Commissioner of Central Excise may permit a manufacturer to remove the material as such or after the said materials have been partially processed during the course of manufacture of export goods to a place outside the factory, for the purpose of test, repairs, manufacture of intermediate products, etc.

(ii)           Mineral Oil Products.2

Rebate of excise duty paid on mineral oil products falling under Chapter 27 of the Central Excise Schedule, exported as stores for consumption on board an aircraft on foreign run, shall be allowed provided:

(a)           The rebate shall be at the rate of duty in force on the date the aircraft leaves the last airport on the foreign journey,

(b)           The market price of the goods at the time of exportation is not less than the amount of rebate claimed

(c)           The amount of rebate admissible is not less than Rs. 500/

(iii)  Ship stores/mineral oil products 3 for use on board a ship or

supplied to a foreign aircraft

(a)        The goods are in such quantities as the Commissioner of Customs at the port of shipment may consider reasonable.

(b)        The amount of duty paid on the goods to be exported and the date of payment thereof, are established, from the central excise records, to the satisfaction of Commissioner of Central Excise.

(c)        The condition for ‘time limit for export’ ‘amount of rebate’, and ‘value of goods’ are same as above.

(iv)  Castor Oil 4 and Groundnut Oil 2

Rebate will be granted without the production of documents evidencing the payment of duty on the goods and even without an application in form AR4/5.

(v)  Tea (blended/packaged)5

For the purposes of rules 12 and 13, the expression “manufacture” has very wide connotation.  It includes blending, packaging or any other operation.  Even if a process does not conform to manufacture under the Central Excise Act, for the purposes of export benefit, the wide connotation has to be applied.  Thus, process of blending, packing etc. are well covered under CE Rule 12(1)(b).  The condition of direct purchase from the factory of manufacture laid down in Notif. No. 42/94-CE (NT) dt. 22/9/94 can be relaxed under proviso to rule (1) to allow rebate of the specified duty on tea.  However, the exporter shall follow the detailed procedure regarding declaration, permission, procurement of material (tea, packaging material etc.) record maintenance, preparation of AR 5 and its disposal, claim of rebate computation of rebate, etc

(vi)  Goods Obtained from Market or Stocked Outside the Factory

For rebate of duty on goods exported from the market, the following conditions need to be complied with.

(i)            Packages/bales should be in “mill-packed condition”, not tampered with and identifiable with the duty paid documents

(ii)           The exporter should make a written request on plain paper (or AR4 form) to the Range officer indicating –

(a)           name and full address of the stockist,

(b)           bale number/package number,

(c)           name(s) of mills where the goods were manufactured,

(d)           number and date of invoice under which goods were cleared,

(e)           export licence number, if any,

(f)            the manufacturer of cotton fabrics should pay the duty by debit in Personal Ledger Account (PLA) on behalf of the merchant exporter and may endorse a declaration to this effect on the invoice and inform the Range Officer of Central Excise accordingly,

(g)           the merchant-exporter should present the duty paid cotton fabrics for exportation with invoice and AR5, duly signed by him, to the Range Officer In-charge of the Mills from where the fabrics are proposed to be exported.  The Range Officer should be requested to note on invoice the number and date of removal and the quantity of goods covered by the relevant AR5.  The complete address of mills should be noted on AR5, and also a declaration made by the licensee i.e. the mill that the refund of duty be made to the merchant exporter,

(h)           the refund of duty will be directly made to the merchant exporter,

(i)            the goods should be exported within six months from the date on which these were first cleared from the producing factory/warehouse or within such extended period (not exceeding two years) after the date of removal from the producing factory as the Commissioner may allow,

(j)            the claim for rebate, together with proof of due exportation, is filed with the Assistant Commissioner of Central Excise before the expiry of period specified in Section 11B of the CE Act.

Numbering and Marking

The goods or packages in which excisable goods are packed should be legibly marked in ink or oil colour or in such other durable manner as the Commissioner may in a particular case allow, with a progressive number commencing with No. “1” for each year and with the owner’s name and special mark, if any.

Relaxation 1:   The Commissioner of Central Excise may, having regard to the nature of the goods or the trade practice, may for reasons to be recorded in writing, exempt the export from marking and numbering of a consignment in a particular way.

Application for Removal: An application in form AR4 in sixtuplicate duly signed by the exporter or his authorised agent is to be made separately in respect of each consignment.

Invoice

Prepare an invoice separately in respect of each consignment in the manner provided in rule 52A read with sub-rule (2) of rule 173-G indicating therein prominently “Goods for Export under claim for Rebate of Duty”.. The invoice is to be made out, in triplicate, with indelible pencil using double-sided carbon with no mutilation, overwriting, correction or erasers 

Examination

The excisable goods meant for export can either be examined before their despatch from the factory by the Central Excise Officer at the factory itself, or at the port of export by the Customs Officer.

Examination Before Despatch:  Present the packages to the proper officer at least 24 hours before the intended removal of the goods together with the application in proper form i.e. AR4 in sixtuplicate, duly signed by the exporter or his authorised agent.  The application shall contain the account of duty and value of goods in figures as well as in words.

After examining the goods, the proper officer shall seal each package with the central excise seal and endorse each copy of the application in token of such examination and return the original, duplicate and sixtuplicate copies to the owner.  Thereafter, the owner shall enter the number and date of the RR (Railway Receipt/GR (Goods Receipt) in original and duplicate copies and also communicate these particulars to the excise officer for entry in other copies.

The triplicate copy shall be sent by the proper officer to the Maritime Commissioner of Central Excise either by post or by handing over the exporters in a tamper proof sealed cover.  The quadruplicate shall be sent to the Chief Accounts Officer and quintuplicate copy retained by the proper officer for his record.

Drawback Copy:  The sixtuplicate copy is for use by the exporter for claiming duty drawback.

Export by Post Parcel:  In case of export by parcel post, after the goods are sealed, the exporter shall affix to the duplicate application sufficient postage stamps to cover postal charges and present the documents together with the concerned package or packages to the Postmaster at the office of booking.

Where No Examination is Required:  In all other cases i.e. where no examination by the proper officer in the factory is desired, the exporter shall also prepare the application (AR4 form) in sixtuplicate and the invoice.  He shall enter the amount of duty and value of goods in figures and words and send the original, duplicate and sixtuplicate copies of AR4 form along with the goods at the place (port) of export.

The triplicate, quadruplicate 1 and quintuplicate copies of the AR4 form shall be sent by the exporter to the proper officer of Central Excise within 24 hours of removal of the consignment.  The said officer shall,, after verifying the particulars of the duty paid or payable, send the triplicate copy to the Commissioner of Central Excise having jurisdiction over the factory or warehouse or as the case may be, Maritime Commissioner of Central Excise either by post or by handing over to the exporter in a tamper proof sealed cover, quadruplicate to his Chief Accounts Officer and quintuplicate copy for his record. He will also endorse on all copies of the AR4 and the invoice as follows:-

“Claim for refund of duty subject to the satisfactory proof of shipment to be entertained by the Commissioner of Central Excise …… (State here the Maritime Commissioner/Jurisdictional Assistant Commissioner concerned)”

Examination at Port: Where the goods are to be examined at the port of export, whether or not these were inspected and sealed at the factory, follow the under-mentioned procedure.

(i)            Present the export consignment to the Customs along with invoice indicating complete particulars of payment of duty and also bearing on top the words “Goods for Export under Claim for Rebate of Duty”.

(ii)           Submit application form AR4 (original, duplicate and sixtuplicate) duly signed by the owner or his authorised agent.

(iii)          The Customs shall carefully examine the consignment and if all the particulars as cited in the application concerning the goods agree in all respects, he will allow export and, then, certify on all copies of the application that the goods have been duly exported, citing the shipping bill number and date and other particulars of export.

 Return of AR4 Form:  The Customs officer shall return the original and sixtuplciate copies of AR4 form to the exporter, forward the duplicate copy either by post or handing over to the exporter in a tamper proof sealed cover, to the officer specified in the application (AR4 form) whom exporter wants to claim rebate.

Drawback Copy:  The exporter shall use the sixtuplicate copy for the purpose of claiming duty drawback.

Extra Copies 2:  Extra copies (not exceeding 3 in addition to which are otherwise made available) of AR5 form, which are issued by the CE authorities, on presentation by the exporter may be endorsed by the Customs authorities certifying the shipment.

Non-observance of Procedure under Chapter IX of CE Rules Claim for Rebate: Claim for rebate of duty is to be lodged in proper form with either the Maritime Commissioners on ports/airports or the Commissioner from whose jurisdiction the goods were exported.

Recovering the Payment of Unrebated Duty 3: The Finance Ministry has clarified that the practice of recovering the payment of unrebated duty (under Rule 12) in respect of goods cleared under Rule 13 under bond so as to maintain parity in respect of ultimate and net incidence of duty covered under the two rules, was correct.

Lack of Compliance of Procedure Condonable 1: In the interest of promotion of exports, the Govt. have issued instructions to the Commissioners to condone minor procedural lapses.

Claim of Refund 2

Claim Authority:  The claim for refund of any duty of central excise is to be made to Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacture.

Time Limit: The claim is to be filed before the expiry of six months from the date on which the ship or aircraft in which such goods are loaded, leaves India or the date on which such goods pass the frontier in case export is made by land or the date of despatch of goods by the Post Office in case of postal exports.

Application Form

The application for refund is to be filed in prescribed form in duplicate.  This form is to be used for refund against all goods, except vegetable non-essential oils.

Documents:  The following documents should be enclosed with the application form.

(i)            AR4/5 form (original duly endorsed by the Customs

(ii)           Duplicate copy of AR4/5 in sealed cover, if obtained from Customs

(iii)          Bill of lading (non-negotiable copy) air waybill  or air consignment note/postal receipt, duly attested

(iv)          Attested copy of shipping bill/bill of export

(v)           Duplicate copy of invoice under which central excise duty was paid on goods cleared for export

(vi)          Disclaimer certificate, where claimer is other than an exporter.

(vii)         Detailed worksheet indicating the amount of rebate claimed.

Processing & Rebate Sanction:  The Assistant Commissioner of Central Excise shall carefully examine the refund claim and satisfy himself that the exports are not under claim for duty drawback.  He will also satisfy himself that the exports are neither under VABAL nor QBAL (as indicated above) issued prior to 31.03.95 (where the Shipping Bill or the Shipping Bill contains an endorsement that the same is in discharge of export obligation under VABAL or QBAL issued before 31.03.95, the claim should be rejected) he shall verify from his records that the manufacturing unit is not availing the Input Stage Credit under Chapter V(AA) of Central Excise Rules, 1944. The Assistant Commissioner of Central Excise should point out deficiency, if any within 15 days of lodging of the claim and ask the exporter to rectify the same within 15 days.  Queries/deficiencies shall be pointed out at one go and piecemeal queries should be avoided.  The claim of rebate should be disposed of within a period of two months. The Assistant Commissioner sanctioning rebate shall ensure that the relevant transport copies (duplicate copies) of Duty paying documents have been suitably defaced before payment is made.

4.  Diversion of Export Goods for Home Consumption

In the event of cancellation of export order in the whole or in part, the excisable goods cleared for export in bond can be diverted for home consumption.  The following procedure has to be followed in this regard.

Intimation: send an intimation together with the original, duplicate and sixtuplicate copies of the AR4/5 to the authority with whom bond is executed and declared such on the AR4/5 (i.e. the Maritime Commissioner of Central Excise having jurisdiction over the factory).  Where the bond is executed with the Maritime Commissioner of Central Excise, a copy of the intimation sent to the Maritime Commissioner shall also be endorsed to the Assistant Commissioner of Central Excise having jurisdiction over the factory.

The intimation shall contain following minimum information.

(i)            Description of the goods to be diverted for home consumption.

(ii)           Identification marks.

(iii)          No. of packages and complete description of packages.

(iv)          Quantity.

(v)           Assessable Value

(vi)          Amount of duty due.

(vii)         Reasons for diversion for home consumption.

(viii)       Place where the said goods are lying pending clearance for home consumption.
 

1.          Re-entry of the Goods, Cleared for Export but not Actually Exported, in the Factory of manufacture 

Sub-Rule (1A) of Rule173M of the Central Excise Rules, 1944 empowers the Commissioners of Central Excise to allow return of goods cleared for export under bond but not actually exported, provided such goods are returned to the factory within one year and other assessee gives intimation of the re-entry of each consignment in Form D-3 within twenty-four hours of such re-entry.  Further, such goods are to be stored and accounted for separately.  For re-entry of goods cleared under rebate (refund), contact the Customs/Excise authorities.

6.            Re-import of Exported Goods for Repairs etc. and Subsequent Re-export 

In Rule 173 MM, provisions have been made for permitting re-entry of goods that have been re-imported for undertaking repairs, re-conditioning, etc., and subsequent re-export thereof.  It may, however, be specifically noted that such permission for re-entry will be granted in those cases where the goods after being subjected to the specified processes, are to be re-exported out of the country.

7.         Export of Goods to Nepal/Bhutan in Bond

Rule 13(2) permits export of specified excisable goods in bond, without payment of duty, to Nepal or Bhutan.  These will be subject to following conditions.

(i)            The payment for the goods shall be in convertible currency, certified by a Bank Certificate.

(ii)           The importer in Nepal or Bhutan shall open an irrevocable letter of credit in favour of the exporter in India, before exports takes place. However, this condition does not apply if excisable goods, other than consumer goods, but excluding motor vehicles, are exported as supplies to UN, IBRD (World Bank), IDA, ADB or any other multilateral agency, or for the diplomatic missions in Nepal or Bhutan

(iii)          The exporter shall execute a bond in proper form

Special Procedure

Invoice

(i)            The exporter or his agent shall prepare six copies of the invoices in carbon, for the purpose of removal of goods for export to Nepal/Bhutan without payment of Central Excise duty and shall make the following declaration on the same.

“I/We declare that the goods entered herein are intended for export to Nepal/Bhutan in bond, and shall not be diverted or delivered en route to any other country.”  He shall, thereafter, present all the six copies of the invoice to the Central Excise officer in-charge of the warehouse or factory or the approved premises;

Sealing of Goods

(ii)           The goods shall then be sealed, by the said officer, in the manner as laid down by the Commissioner of Central Excise, after due verification of the goods with the particulars in the invoice and shall be delivered to the exporter or his agent, together with the original copy of the invoice, duly completed and registered.  The said officer, will also give duplicate, triplicate and quadruplicate copy of invoice in a sealed cover, to the exporter or his agent for delivery to the customs officer incharge of the Land Customs Station through which the goods are intended to be exported and will obtain acknowledgement to this effect.

Customs Formalities

(iii)          On arrival of the goods at the land customs station such goods shall be presented by the exporter or his agent to the officer of Customs in-charge of the land customs station along with the original copy of invoice accompanying the goods.  The exporter or his agent, will also deliver the sealed envelops containing duplicate, triplicate and quadruplicate copy of invoices to the Customs officer of the land customs station and obtain acknowledgement.

Time Limit

(iv)          The exporter will submit the quadruplicate copy duly endorsed by the officer at land customs station to the Central Excise officer in-charge of the factory or the warehouse as the case may be, along with Bank certificate evidencing receipt of payment, in freely convertible currency, within three months from the date of removal of the goods.

Failure to Export

(v)           In case of failure to export, the customs officer in-charge of the land customs station, shall send necessary intimation to the Central Excise officer who has allowed the clearance for export of the goods to Nepal or Bhutan, as the case may be, with copy endorsed to Assistant Commissioner, Central Excise Division.  If goods are not exported within the time allowed for such export or if shortages are noticed at the time of export, full duty should immediately be demanded on the goods not so exported or shortages noticed on the goods from the exporter on hearing from the Customs officer in-charge of land customs station.

8.  Export to Nepal under Refund of Duty to Govt. of Nepal

Excisable goods, other than processed textile fabrics, specified non-alloy steel ingots 2 and billets  and non-alloy steel/hot rerolled product 2 can also be exported to Nepal under claim for refund of duty, but rebate of excise duty paid thereon is given to His Majesty’s Government of Nepal, and not to the exporter.

Conditions

            The rebate shall be subject to the following conditions.

(i)            The rebate does not, in each case, exceed the aggregate of the customs duty, and additional customs duty levied by His Majesty’s Govt. of Nepal on such goods when such goods are imported from any country other than India

(ii)           The amount of duty paid on the goods exported and the date of payment thereof are established from Central Excise records, to the satisfaction of the officer competent to sanction such rebate.

(iii)          Where the goods are exported by land, the exports take place through any of the following border checkpost, namely, Sukhiapokhri, Panitanki, Jogbani, Jayanagar, Bairgania, Bhimnagar, 3[Bitamore (Sursand)], Raxaul, Sanauli, Barhani, Nepalganj Road, shahratgar, Jarwa, Katarnighat, Gauriphanta, Barbasa, Jhulaghat, Dharcula, Naxalbari, Galgalia, Kunauli, Sonbarsa, Tikonia, or such other checkpost as may be specified by the Central Board of Excise and Customs

(iv)          The whole or that part of the duty as is granted as rebate to the exporter is not allowed as rebate to HMG of Nepal

Simplified Procedure:  For exports of excisable goods to Nepal under refund of duty system, a simplified procedure has been put into effect.

POL Export to Nepal: Export of petroleum oil and lubricant products to Nepal, through the Nepal Oil Corporation, is permitted in bond without payment of duty of excise from calibrated stocks of Indian Oil Corporation licensed as a warehouse or purchased without payment of duty from tanks of other oil companies or undertakings.

B.  Sales Tax Exemption on Exports.

No Sales Tax

There is no tax on sales made for export purpose.  It implies that the exporter need not pay sales tax either on the goods purchased from manufacturers or traders i.e. other merchants.  The only condition imposed is that the exporter must be registered dealer with the Sales-Tax Department.  If he is not registered dealer, he cannot utilise the facility provided for export of goods without payment of sales tax under the Form H or form ST49 1 (for Delhi only) procedure.  The condition of the exporter being a registered dealer, therefore, implies that if the exporter is engaged in selling products in the country which are not otherwise subject to sales-tax and, hence, has not got himself registered with the Sales Tax Department, he cannot utilise the Form ‘H’ or form ST49 facilities i.e. exporting goods without payment of sales tax.

Registration Procedure

Therefore, get yourselves registered with the Sales Tax Department for utilising the facility.  Apply toe the Sales Tax Officer under whose jurisdiction your head/registered office is located.  Therefore, a Sales Tax Inspector may visit your office to check –

(i)            account books showing sales/purchase transactions

(ii)           house rent/tax receipt

(iii)          partnership deed, or other relevant documents

(iv)          ration card, etc.

Then, he will send a report to the STO for registration or otherwise.  On receipt of the report, the STO may call for the exporter for further clarifications, if any.  If satisfied, he will permit registration.

Security

The STO usually asks the exporter to file a security bond from another firm(s) registered under Sales Tax law.

Form

Having got registered yourselves, follow the under mentioned procedure:-

(i)            apply to the concerned STO in form ST-2C3 for obtaining Form ‘H’/ST 49 with:-

(a)           copy of the L/C, or

(b)           copy of the confirmed export order,

(c)           copy of the export invoice, where the goods have already been purchased,

(ii)           put prescribed court fee stamp for each form according to the number 2 of forms sanctioned.

(iii)          The STO will put the name stamp for obtaining the Form ‘H’ along with your company’s name stamp to be put in the body of the form.

Hence, you should approach the STO for obtaining the Form ‘H’ along with your company’s name stamp to be put in the body of the form.

Procurement of Goods Free of Sales Tax:  For obtaining goods free of sales tax either locally or from other State(s), the exporter may hand over the form ST-49 or Form ‘H’ along with proof of export, to the concerned seller.  The documents for such proof of export, inter-alia, include:

(i)            a non-negotiable copy of Bill of Lading or

(ii)           Air waybill or

(iii)          Bill of Export or

(iv)          Post Parcel Receipt/Courier Receipt or

(v)           RR/Goods Receipt.

Form H

The Form ‘H’ is to be filled in triplicate.  While on copy is retained by the exporter himself, the remaining two copies will be given to the seller of the goods i.e. the manufacturer or trader from whom the goods purchased by the exporter.  The seller will, then, send one copy of the Form ‘H’ given to him by exporter to the STO concerned along with his Return of Sales Tax.  Its 3rd copy will be retained by him.  No document is required to be attached with Form ‘H’ while submitting it to the STO, along with the Sales Tax Return.

No Further Endorsement:  Form ‘H’ cannot be endorsed to any other party than the one to whom it is issued in the first instance.

Form ST-49: For procurement of local goods free of sales tax, use form ST-49.  It is to be handed over to the dealer/seller along with:

(i)            evidence of export (as above under form ‘H’),

(ii)           copy of bill/cash memo.

The seller of goods will then, send one copy of form ST-49 to the STO along with his return of sales tax.

C.  Reimbursement of Central Sales Tax:  The export oriented units and unit in EPZs will be entitled to full reimbursement of Central Sales Tax paid by them, on the specified terms and conditions.  See Chapter on EOUs/EPZ units.

D.  Turnover Tax and Surcharge:  Export sales out of India under Se. 75 of the Bombay Sales Tax Act, 1959 are not 1 liable for any tax including turnover tax and sales tax.  It may be stated that with effect from 1st April 1999, the Government of Maharashtra has introduced new levies of turnover tax and surcharge.  However, these taxes will not be levied on export sales.


CHAPTER 5

PRE-SHIPMENT DOCUMENTS 

Any export shipment involves a number of documents required mainly by the Customs/Port authorities.  Whereas the format of these documents is common in most of the cases, it may differ as well in respect of documents used at different ports and airports, particularly on airports where computer processing has been introduced.  Hence, a reference to the Clearing and Forwarding Agent and/or the Customs/Port authorities is suggested.

Since a deeper knowledge about these documents is a pre-requisite for quicker clearance of goods at the Customs and Port Offices, important Shipping Documents are explained here.

1.  Shipping Bill/Bill of Export

The Shipping Bill 2/Bill of Export is the main document required by the Customs authorities for allowing shipment.  It contains description of export goods and other particulars like number and description of packages, marks and numbers, quality and value as defined in the Sea Customs Act, Indian or foreign merchandise, name of the vessel in which goods are to be shipped, master or agent, country of destination, etc.  It is only after the Shipping Bill is stamped by the Customs that cargo is allowed to be carted to Port Sheds and Docks.

Whereas SB is used for export by sea or air or even for transportation (shipment) of goods by sea from one coastal port to another in the country, Bill of Export is used for export by land.

Types of Shipping Bill/Bill of Export: The major distinction between one type and another of Shipping 

Bills lies with regard to the goods being subject to (a) export duty/cess, (b) free of duty/cess, (c) entitlement to duty drawback, and (d) re-export of imported goods ex-bond.  For shipment from one coast to another in the country, coastal SB is used.  Further, the Shipping Bill used under Customs EDI System is known as EDI SB or Electronic SB and for export by courier, there is courier SB i.e. CSB-I and CSB-II.

(i)            Free Shipping Bill/Bill of Export:  It is used for export of goods which neither attract any duty/cess nor entitled to duty drawback on their exportation.

(ii)           Dutiable Shipping Bill 1/Bill of Export 1:  It is used in case of goods subject to export duty/cess but may or may not be entitled to duty drawback.  Primarily, it is of two types i.e. for use in case of goods in respect of which export duty is levied on the basis of their on yellow 2 paper for use in case of all goods except mica and jute.  The goods on the export of which duty is leviable on the basis of their tariff value, clear and bold notation to that effect is printed at the top of this Shipping Bill.

Note:   Where the goods are though subject to export duty, also entitled to drawback on their exportation, a copy of the Drawback Shipping Bill along with the usual number of copies of the Dutiable Shipping Bill should be filed.

(iii)          Drawback Shipping Bill/Bill of Export:  It is used for export of goods on which duty drawback is available or to be made available after fixation.  If the export goods may simultaneously be duty free and/or subject to export duty/cess, the Drawback Shipping Bill is to be compulsorily used whether alone or along with any other Shipping Bill.  All exporters must declare the present market value of export goods in the shipping bill filed under claim for duty drawback, in the absence of which their shipments are likely to be delayed.

(iv)          Shipping Bill for Shipment Ex-Bond:  It is for use in case of imported goods for re-export and which are kept in-bond.

(v)           Coastal Shipping Bill:  Also known as Export Coastal Shipping Bill, it is used for shipment of goods from one port to another by sea in India.  Hence, it is not an export document.

(vi)          Courier shipping Bill-I:  The CSB-I is to be filed for despatch of documents of no commercial value by courier.

(vii)         Courier Shipping Bill-II:  The CSB-Ii is to be used for despatch by courier of bona fide commercial samples, prototypes of goods bona fide gifts of articles for personal use.

(viii)       DEPB SB:  It is to be used for export of goods for which DEPB is to be claimed.  A normal SB or Drawback SB with a notation ‘Goods for Export under DEPB Scheme’ can be used.

Amendment of Shipping Bill:  There is a form of application for amendment of the Shipping Bill.  It shall be filed along with necessary amendment fee.

2.  Bill of Transhipment

It is a document to be used for goods imported into a customs port/air port intended for transhipment.  It should be distinguished from Transhipment Permit explained below.

3.  Transhipment Permit

The Transhipment Permit is to seek permission for transhipment of goods from the vessel on which the same are booked originally to another for export.  It should be distinguished from the Bill of Transhipment described above.

4.  Shipping Order

It is a document issued by the Shipping (Conference) Line intimating the shipper (exporter) about the reservation of space for shipment of cargo through a particular vessel from a specified port and on a specified date.

5.  Cart/Lorry Ticket or Chit

It is prepared for admittance of cargo through the port gate.  It is also known as Vehicle Ticket or Gate Pass 3.  It includes details of export cargo—the shipper’s name, cart/lorry number, gate number, marks on packages, quantity and description.

6.  Dock Challan/Export Application

While Dock Challan is used at Calcutta Port, Export Application is required at Cochin, Mumbai and Madras Port for payment of port charges.  The format of Export Application used at Cochin and Madras ports is, however, different from that of the Mumbai port.

7.  Export Cargo Ticket

It gives details like name of the vessel, E
xport Application Number, Transit Shed Number, Shipper’s Name, Shipping Bill Number and Date and description of cargo.  It is used at Cochin port only.

8.  Shipper’s Declaration Form

It is a declaration by the shipper (exporter) regarding the value, sort, specification, quantity and description of goods being exported.  This declaration is usually printed in the body of the Shipping Bill.  Wherever not, it must be filed with the Shipping Bill.

9.  Packing List

It is a consolidated statement of contents for a number of cases/packs as explained in Chapter 21.

10.  Invoice-Commercial & Others

An invoice is a basic and complete document containing information about the shipper, importer, product, price, origin, etc.  It is of several types the main being a commercial invoice.

Commercial Invoice

A commercial invoice is the exporter’s bill for sale of the goods.  It is the basic and most important document required for preparation of all other documents which in greater or lesser detail reproduces information from a commercial invoice.  Export/import duty is also assessed on the basis of this invoice.

Format: There is no standard format for a commercial invoice.  Usually, it contains information on the following points.

But all this information may not be necessary for each transaction.  Hence, exact requirement of each country be ascertained from banks/shipping agents and even importer before drawing an invoice form.

(i)            Names and addresses of exporter and importer

(ii)           Invoice No. & Date

(iii)          Description, quantity (gross & net weight), total value and per unit value of goods

(iv)          Name of vessel, route taken and sailing date

(v)           Packing specifications, marks or number on packages

(vi)          Bill of Lading/Air Waybill number

(vii)         Terms of Sale and Payment

(viii)       Letter of Credit number

(ix)          Import License number

(x)           Marine Insurance reference

(xi)          Custom and Consular declaration

(xii)         Any other information 1

(xiii)       The country of origin; the port of entry to which the merchandise is intended.

The invoice must be signed by the exporter or his designated agent.

Sometimes, the Commercial Invoice is required to be certified by a Chamber of Commerce of the exporter’s country as a guarantee to cover some material aspects of the trade.  For example, if the importer has to pay duty on the current domestic value of goods, he would require the particular invoice to be certified by a Chamber of Commerce in exporter’s country.  Then, it may have to be certified for particular quality of goods like pure silk garments by the Central Silk Board.

Other Invoices

Different types of commercial invoices are require by different countries in certain cases.  Importers in United States, Canada and Australia require invoice to be prepared on special forms prescribed by their Customs Authorities, and as such known as Customs Invoice.

Importers in countries like Taiwan, Turkey and Liberia and some of the Latin American countries require the invoice to be certified by “Consulates” of their countries stationed in the country of the exporter, for the authentication of the particulars of such invoices which are, then, known as “Consular Invoices”.  There may/may not be special form of such invoice.  Certain countries like Mexico need ‘Legalised Invoice’, for which also there is no special form.  Legalisation is a mere formality to be done on the payment of prescribed fee to the Embassy/Consulate concerned.

For “in bond” export of excisable goods to Nepal, a different type of invoice is required.  It is different from the “Nepal Invoice”.

Then, there is “Combined Certificate of Origin and Value” on a special printed form required by several Commonwealth countries.  This is prepared by the exporter for the assessment of import duty in these countries.

Information on different types of invoices required by different countries must be ascertained by the exporter from either the importer or his country’s Embassy/Consulate or the shipping agent or also the concerned EP Council/Commodity Board.

11.  Foreign Exchange Forms

These are most important Forms  required to be filled in by exporters for all shipments, unless otherwise exempted, to countries other than Bhutan and Nepal.  These Forms are of five types which are in common use at present, namely, GR/PP (prepared in duplicate), SOFTEX form for export of computer software (to be prepared in triplicate) and SDF Form to be filed in cases where shipping bills for exports are processed electronically, obtainable from the Reserve Bank of India or a bank authorised to deal in foreign exchange.  For detailed instructions on filling in of these Forms and ‘valuation of exports’, refer to the chapter on Foreign Exchange Formalities.

12.  Mate Receipt

It is a receipt issued by the Master of the vessel after the cargo is loaded on the ship.  It contains information on name of vessel, berth, date of shipment, description of packages, marks and numbers, condition of cargo at the time of its receipt on board the vessel.

Qualified Mate Receipt:  If the Mate Receipt contains an adverse entry about the condition of cargo at the time of its receipt on board, it is known as a Qualified Mate Receipt.  Such a ‘Receipt’ is, however, not accepted normally as it would lead to a ‘Claused Bill of Lading’ which is not acceptable by the banks/importer abroad.

13.  Bill of Lading/Air Waybill 1/Sea Waybill 2

It is the most important document of (I) title of the goods shipped.  (ii) a receipt for the goods shipped and an admission to their apparent condition and quantity at the time of shipment and (iii) an evidence of contract of affreightment.  It is transferable by endorsement and delivery.  Its possession is equivalent to the possession of goods.  The Bill of Lading is issued and signed by the shipping company or its agent usually after the cargo is loaded on the ship and “Mate Receipt” has been obtained.  Each shipping company has its own particular style and layout of this Bill but contents are almost the same.  Normally, it is made out in sets – a set consisting of a certain number of originals (two or three) and a few copies depending upon the requirement of buyer.  The originals signed by the company are negotiable; copies being non-negotiable

Types

“Straight” or “To Order” B/L

If a consignee is named in the B/L, it is called “straight’.  Its holder is considered owner of goods and can obtain their delivery.  “Straight” B/L is made out usually when payment for goods is made through confirmed, irrevocable and without resource letter of credit, or when the exporter is sure of the financial status and reliability of the importer.  ‘To Order’ Bill of Lading can be made out to order of the shipper or his bank, or another party specifically designated.  The consignor or consignee as the case may be, can transfer the B/L either by a special endorsement i.e. an endorsement which names the transferee to whom delivery is to be made, or by an endorsement in blank (i.e. not naming an endorsee), thereby, making the B/L a highly negotiable document.  In the latter case, the goods can be delivered to the bearer.  ‘Although “To Order” Bills of Lading are in common use, certain Latin American countries do not allow them or make their use difficult’.

“Freight Paid” or “Freight Collect” B/L

If exports are effected on CIF basis i.e. freight is paid by the exporter, a Freight Paid Bill of lading is issued.  When freight is not paid by the exporter i.e. goods are exported on FOB basis, Freight Collect B/L is given.  The shipping company has in that event, a lien on goods till freight is paid by the importer either after the goods have arrived or before taking their delivery.

“Clean” and “Claused” B/L

A “Clean” Bill of Lading is one which is without any adverse entry about apparent order and condition of goods, as against a “Claused” or “Dirty” one marked with such entry.  When the packages show signs of damage, the shipping company draws attention to this fact by making an endorsement like ‘two cases damaged’ or ‘one bale torn’, thereby, making the B/L as “Claused”.  The usual form of endorsement is “Received in Apparent Good Order and Condition”.  Banks receive only “Clean” B/L for negotiation till the letter of credit states clearly that “Claused” bills are also acceptable.  All so see ‘Foul B/L’.

Partial Deliver B/L

A Bill of Lading must provide evidence of shipment of agreed quantity so long as there is no provision for partial delivery in the contract.  Whenever, there is short shipment; the sale contract must be reviewed.  If the B/L bears a clause “short-shipped to follow”, it is not the practice of shipping company to issue a B/L for the balance unless insisted upon by the exporter.

“Direct” and “Through” B/L

If the initial vessel takes the consignment from the port of shipment to port of discharge, a ‘Direct’ B/L is issued.  However, if there is a transhipment and carrier of another line is to carry the goods to their final destination, a “Through” B/L is given.  The exporter must, therefore, ensure that a “Through” B/L is given by the shipping company, particularly in CIF buyer’s port contract.

“Stale B/L”

If the Bill of Lading is not presented to the bank for negotiation soon after it is issued by the shipping company, the bank will consider it as ‘stale’, because it may not reach the overseas customer before the ship’s arrival.  The B/L should not, therefore, be held, for too long Delayed transmission to the overseas buyer through the negotiating/collecting bank, will involve inconveniences and even loss of money.

On Board B/L.  See shipped B/L below.

Charterparty & Steamship B/L

A B/L relating to goods loaded on a ship which is not hired in full or a substantial part of it not hired by the shipper, is known as Steamship B/L.  Thus, practically, all Bills of Lading are Steamship B/L. However, where the shipper hires the entire ship or a substantial part of it, he is to be issued a Charterparty B/L.  Thus, a Charterparty B/L is the bill which ‘incorporates, by reference, some of the terms of the charterparty, so that they will have effect against the assignee of the bill.  That introduces an undesirable element of uncertainty because it is by no means settled which clauses of the charter party operate against the assignee and which do not apply to him’.  A Charterparty  B/L may not be accepted by a bank for negotiation unless specifically instructed to accept the same.

Container B/L:  Such bills are issued in respect of the cargo transported from an inland place of the shipper to the final place of its arrival.  The Container Bills of Lading are issued by the Container Shipping Lines.

Custody & Port B/L:  The Custody & Port B/L 1 are used in the United States for the shipment of cotton.  The Custody B/L will be issued when the cotton is delivered to the carrier but not put on board the ship on account of its non-arrival at the port.  However, if the ship has arrived but not taken the consignment on board, the Port B/L is issued.

House/Groupage Bill of Lading or Forwarding Agents B/L:  Also known as Groupage B/L, these are issued by the clearing and forwarding agents who consolidate several cargos belonging to the different shippers or which forming the subject matter of different groupage transactions in one consignment shipped under groupage B/L issued by the carrier to the forwarding agent.  In technical sense, a House B/L is not a Bill of Lading as it is not a document of title giving consignee or assignee a right to claim the goods from the carrier.  The banks may also refuse to accept a House B/L unless specially asked to accept such bills.

House Air Waybill (HAWB) or Master Air Waybill (MAWB):   In case of small consignments, the airlines ask the agents to consolidate the cargo.  In such cases, the airlines issue a Master Air Waybill to the cargo agent who, in turn, issues his own House Air Waybill to individual shipper.

The HAWB is negotiable only if the concerned L/C allows negotiation of the same in place of Air Waybill.  The banks are, however, permitted to “accept freely HAWBs where documents are to be sent on collection basis”.

Negotiable B/L:  A B/L can be made negotiable and, thus, transferred to anybody for taking delivery of the goods.  It is a document of title to the goods relating thereto.  A B/L becomes ‘negotiable only when made negotiable by the exporter’.

Shipped & Received B/L: The B/L can either be ‘Shipped’ or Received for Shipment’ depending upon the fact whether the goods are loaded on board the ship or received by the shipping company for storing.  Where the goods are loaded, a ‘Shipped’ B/L will be issued.  Otherwise, the shipping company will issue only a ‘Received for Shipment’ B/L.  Thus, a received for shipment’ B/L does not confirm that the shipment has already been made or begun.  The buyer is not likely to accept such a B/L and insist upon ‘shipped’ B/L unless an explicit contract has been entered into this effect.

The ‘shipped’ B/L is known as ‘On Board’ B/L in the United States.  The ‘Received for Shipment’ B/L is also known as ‘Alongside’ B/L.

On Deck B/L:  It indicates that the goods have been loaded for storage on deck.

Ocean Liner  B/L: It covers shipment by sea from port of shipment to destination usually covering shipment made under L/C.

Third Party B/L:  Where the goods are shipped by someone else that the exporter (seller), a ‘third party’ B/L is issued.  It is acceptable if the third party shipper endorses it in favour of the beneficiary (sellers) who, in turn, either endorses it in blank or as stipulated in L/C.

Ship’s Bag B/L:  It is sent in ship’s bag so that it is immediately available when the ship arrives at the port of destination.

NVOCC Bill: Non-Vessel Operating Cargo Carrier is a new breed of B/L.  It shows that the carrier which is traditionally a ship-owner, may now be the charterer or any person who undertakes to carry the cargo on behalf of the owner of the goods, who may not himself be an owner or operator of a ship.

Short Form B/L: The Bill of Lading “indicating some or all of the conditions of carriage by reference to a source or document other than the Bill of Lading” itself is known as Short Form B/L.  It is, thus, an abbreviated type of document, smaller and not containing the long list of detailed clauses on the usual B/L.  It is not acceptable unless specifically permitted.

Alongside B/L:  Also known as ‘Received for Shipment’ B/L which see for details.

Foul B/L:  A B/L bearing a notation. That the outward containers or goods have been damaged.  Also see “Clean” and “Claused” B/L

14.  Combined Transport Document

CTD is a document for multi-modal movement of goods in containers i.e. movement by more than one mode, e.g., rail and ship.  The FEDAI (Foreign Exchange Dealers Association of India) has brought out brochure No. 081 and  082 to facilitate export of goods in containers from specified inland centres in India.  ACTD differs from Bill of Lading in several respects.  It provides an alternative to establishing a series of separate and non-uniform contracts for each segment of the total transport process.  It is acceptable for negotiation under L/C.

15.  Post Parcel Receipt

PPR is issued by the Post Offices in India in respect of export parcels sent by post.  It is merely a receipt of goods and not a document of title to goods.  The addressee (importer) may take delivery of the parcel despatched to him, without any specific document, except in case of VP (Value Payable)/COD (Cash on Delivery) parcels.  It contains details like (I) number and date of PPR, (ii) receiver’s (addressee’s) name and address, (iii)  sender’s (exporter’s) name and address, description, in brief, of the goods and (iv)  amount of charges i.e. postal stamps affixed on the parcel.

16.  Shut-out Advice

It is statement of packages shut out by a ship and is prepared by the shed concerned and sent to the shipper (exporter’s) showing the particulars of packages, for arrangement for disposal.

17.  Short-Shipment Form

It is an application form advising the customs authorities at port about the short-shipment of goods and for claiming the refund of the duty and/or cess paid on such short-shipped goods.

18.  Refund of Export Duty/Cess Form

In addition to the Short-Shipment Form, still another form “Refund of Export Duty/Cess Application Form” is used.  It is a combined form of application for claiming excess export duty/cess or import duty/cess

19.  Shipping Advice

A Shipping Advice or Shipment Advice is used to inform the overseas customer about the shipment of goods.  It contains information regarding the invoice number, Bill of Lading/Air Waybill number and date, name of port and vessel with date of shipment, description of goods and quantity.

20.  Exim Bank Certificate regarding Forfaiting Discount

For the forfaiting discount which is payable by the exporters to the Overseas forfaiting agency, the EXIM Bank of India will issue a certificate, shipmentwise, showing the forfaiting discount payable.  This certificate will be submitted by the exporter along with the shipping bill for scrutiny of the Assessing officers in the Customs House.

21.  Other Certificates/Documents/Declarations

There may be several other documents/certifications or attestations required/issued by different authorities for different products and/or destinations.  In particular, these may be for exports of textiles (including readymade garments), precious jewellery and diamonds, etc and required by the customs authority and/or the bank for negotiation of documents for realisation of export proceeds.  Their details appear at relevant places in different Chapters in this book, particularly on “Negotiation/Collection of Documents”.  However, a reference to the concerned Policy/Procedure as also the overseas importer’s requirement as per the export contract or the L/C received, is suggested.

The exporter may also be required to file a number of declarations depending on the product, its exportability, mode of shipment/despatch, etc.  Such declarations may, then, differ for export under Customs EDI (Electronic Data Interchange) System i.e. computerised processing of shipping bills as explained in another chapter(s).  Extreme care is to be taken in filing a right declaration.

16.  Shut-out Advice

It is statement of packages shut out by a ship and is prepared by the shed concerned and sent to the shipper (exporter’s) showing the particulars of packages, for arrangement for disposal.

17.  Short-Shipment Form

It is an application form advising the customs authorities at port about the short-shipment of goods and for claiming the refund of the duty and/or cess paid on such short-shipped goods.

18.  Refund of Export Duty/Cess Form

In addition to the Short-Shipment Form, still another form “Refund of Export Duty/Cess Application Form” is used.  It is a combined form of application for claiming excess export duty/cess or import duty/cess

19.  Shipping Advice

A Shipping Advice or Shipment Advice is used to inform the overseas customer about the shipment of goods.  It contains information regarding the invoice number, Bill of Lading/Air Waybill number and date, name of port and vessel with date of shipment, description of goods and quantity.

20.  Exim Bank Certificate regarding Forfaiting Discount

For the forfaiting discount which is payable by the exporters to the Overseas forfaiting agency, the EXIM Bank of India will issue a certificate, shipmentwise, showing the forfaiting discount payable.  This certificate will be submitted by the exporter along with the shipping bill for scrutiny of the Assessing officers in the Customs House.

21.  Other Certificates/Documents/Declarations

There may be several other documents/certifications or attestations required/issued by different authorities for different products and/or destinations.  In particular, these may be for exports of textiles (including readymade garments), precious jewellery and diamonds, etc and required by the customs authority and/or the bank for negotiation of documents for realisation of export proceeds.  Their details appear at relevant places in different Chapters in this book, particularly on “Negotiation/Collection of Documents”.  However, a reference to the concerned Policy/Procedure as also the overseas importer’s requirement as per the export contract or the L/C received, is suggested.

The exporter may also be required to file a number of declarations depending on the product, its exportability, mode of shipment/despatch, etc.  Such declarations may, then, differ for export under Customs EDI (Electronic Data Interchange) System i.e. computerised processing of shipping bills as explained in another chapter(s).  Extreme care is to be taken in filing a right declaration

    CHAPTER 6

STANDARDISED PRE-SHIPMENT EXPORT DOCUMENTS

As many as 17 pre-shipment export documents can be prepared from only two MASTER DOCUMENTS.  It requires standardised forms printed on paper of the same size and in such a way that items of identical information occupy the same position on each form.

With a view to overcoming this problem in preparing pre-shipment export documents, the Govt. of India (Min. of Commerce 0 CCI&E) has come out with Standardised pre-shipment Export Documents showing that as many as 17 of the 25 documents can be prepared from only two Master Documents.  This has been made possible by adopting the Aligned Document System. (ADS) based on the UN layout key.  The ADS is a methodology of creating information on a set of standardised forms printed on paper of the same size and in such a way that items of identical information occupy the same position on each of them.

Commercial Documents

The commercial documents in export trade refer to those, which are required for effecting physical transfer of goods and their title from the exporter to the importer and the realisation of export sale proceeds.  These are further divided into (i) Principal Export Documents and (ii) Auxillary Export Documents.

Principal Export Documents are:-

-               commercial invoice or invoice only

-               packing list

-               bill of lading/Combined transport document

-               certificate of inspection/quality control

-               insurance certificate of policy

-               certificate of origin

-               bill of exchange

-               shipment advice

 

Auxiliary Export Documents include –

-               proforma invoice

-               intimation for inspection

-               shipping instructions

-               insurance declaration

-               shipping order

-               mate receipt

-               application for certificate of origin

-               letter to the bank for collection/negotiation of documents

Standardisation

Of the above mentioned 16 documents, as many as 14 have been standardised, Two documents i.e. (1) Shipping Order and (2) Bill of Exchange could not be standardised.

Paper and Specifications

The 14 commercial documents are to be prepared as under –

Paper A.4

Size   (297 mm x 210 mm with standard margins – 10mm top, 20 mm left,  6 mm right and 7 mm bottom)

Inside measurement

Paper 70 to 85 g/m 2 – 50 % to 60% relative

Quality  humidity

Boxes-  Maximum tolerance is -+ 1 mm

Print of captions in-  6 pt. In any typeface, but sans-serif is recommended.  The caption  should be printed as near as possible to  the top left of the boxes.

Reproduction Technique:  The Master Document-1 is to be typed on a sheet of paper in light blue ink so that the box, lines, etc. are not transferred/photocopied on other documents to be prepared therefrom.  The information in boxes is to be typed preferably in dark black ribbon for easy and good photocopying..  The Mask for the photocopier may be made of a transparent polyester film (of 0.004 in or 0.005 in thickness) with white opaque patches to blank out unwanted information from the Master.  It may also be cut from any other opaque white plastic sheet.  A Simple white paper can also be put on the information which is not required to be copied from the Mater Document, thereby, altogether avoiding the use of above stated MASK.

 

After the desired information is typed on Master Document-I, the information not required for particular document say commercial/proforma invoice to be prepared from MD-I is to be blocked by putting a sheet of white paper (or plastic Mask with white patch).  It is, then, put on the photocopier.  The printed form of desired document say commercial/proforma invoice is to be fed in photocopier to get as many copies as desired.

Additional Information: Any additional information which is required in any particular document(s) can be either pre-printed or inserted/typed in the relevant box of the same.

Signature: The exporter or his agent should sign the document in ink after making photocopies

Regulatory Documents:  The regulatory documents are those which are prescribed
 and required by different Govt. Depts/Organisations like Central Excise. Customs, RBI, Export Inspection Council, CCI&E, etc.  Following documents are required at pre-shipment stage.

Central Excise

-               Invoice

-               AR-4

Customs

-               Shipping Bill/Bill of Export-4 different types required for shipment ex-bond, duty free  goods, dutiable goods and under claim for duty drawback.

Port Authorities (Port Trust)

-               Export Application/Dock Challan/Port Trust Copy of SB

-               Receipt for payment of port charges

-               Vehicle/cart ticket/chit

RBI

-               GR 1/PP form

Others

-               Freight payment certificate

-               Insurance premium

Standardisation :

Only three out of the above mentioned 9 pre-shipment regulatory documents have been standardised.  In the standardisation process, one document i.e. receipt for payment of port charges has been eliminated by incorporating it in the Port Trust Copy of the SB or Export Application/Dock Challan.  The three documents are –

(i)            Shipping Bill/Bill of Export

(ii)           GR Form

(iii)          Export Application/Dock Challan /Port Trust copy of SB including receipt for payment of port charges

Blank Forms of the Three Documents

The blank forms of the three regulatory documents need to be got prepared/printed with captions of each box and also the name of the document ast its top.

Paper and Specifications

Regulatory documents are to be prepared on fullscape size i.e. 34.5cms x 21.5cms (and not A.4 size as is the case for commercial documents).  The margins are –

 top – 1.5cms                                                               bottom - 1.5cms

.left – 1.8cms                                                               right – 0.5cms

Inside measurement                                                   - 31.5cms x 19.2cms

Quality of paper                                                          Same as for commercial

documents

The above mentioned three regulatory documents have been so aligned that their respective common data requirements are accommodated on the front side of these documents.  Accordingly, Master Document-II has been prepared from which the front side of all the three i.e. SB,GR and Export Application, etc. can be run off at one go even without using any Mask or covering any specific column with white sheet of paper while photocopying.  However, the caption MASTER DOCUMENT-II need to be either printed in light blue ink or blanked out white photocopying.

Six Versions

Taking into consideration the different types of Shipping Bill/Bill of Export, six versions of MD-II have been designed.  These are –

Master Document-II (A):  For Shipping Bills  for Export of Dutiable goods  and Shipping Bills for Export of Goods under Claim for Duty Drawback.

Master Document-II (B):  For Shipping Bills for Export of Duty Free Goods.

Master Document –II (C:  For Shipping Bills for exports of Goods Ex-Bond.

Master Document-II (D):  For Bills of Export for Dutiable Goods and Bills of Export for Goods under Claim for Duty Drawback.

Master Document-II (E)  For Bills of Export of Duty Free Goods.

Master Document-II(F):  For Bills of Export of Goods Ex-Bond.

Then, the SBs are required to be filed in duplicate, triplicate or quadruplicate.

Specimen

The box number and its size is not to be got printed in the blank forms of the three documents the front side of which is to be prepared from the MD-II.  The caption MD-II on top is also not to be printed or is to be printed in light blue ink so that it is not transferred while photocopying.

Completion of MD-II

(i)            All the columns in Master Document-II should be completed and necessary information typed within the relevant boxes or columns without any over-lap.  The caption ‘Master Document – II’ should be suitably covered to prevent its impression on the documents to be generated through the Master.

(ii)           With a view to achieving total legibility, and having due regard to the lay-out of the form of the documents,  It is necessary that type-writer and not, repeat not, fountain pen should be used by exporters.

(iii)          As the Master Document – II embodies all the information which is common to the front side of the three regulatory documents under reference, none of these documents would need to with the requisite number of copies may be photocopied from the Master Document – II on blank forms of the documents with pre-printed captions. are No masks required to be used

(iv)          Each copy of the three documents should be signed in ink by the exporter or forwarding agent, as the case may be, so that it becomes a legally valid document.

The words “Not Applicable” can be used/typed in the boxes, if no information is to be given therein.  Since the SBs and Export Application/Dock Challan/Port Trust copy of SB are to be prepared by the Forwarding/Shipping Agents and GR form is to be obtained from the RBI/banks, and also their versions are different depending upon the type of goods/SBs to be exported/used and different type of information is given on different copies (duplicate, triplicate, quadruplicate) etc.

Reproduction Technique

The front side of the three documents viz., SBs/Bills of Export, GR form and Export Application/Dock challan/Port Trust Copy of SB can be prepared from MD-II without using any MASK through a photocopier.  Their blank forms will, however, have a common pre-printed declaration about the correctness of the information/particulars furnished therein.

The reverse (back) side of all the three documents will be different and got printed/typed separately on their blank forms.

Additional/Declarations/Statements

The exporter or his Shipping/Forwarding Agents will also attach other relevant declarations/statements with the SBs/Bills of Export.

Guidance/Clarifications

For any further clarifications/guidance on the use of the Standardised Pre-shipment Export Documents, readers may approach –

(1)           The Export Commissioner O/o the DGFT

Udyog Bhavan,

New Delhi -  110 011.

(2)           The Indian Institute of Foreign Trade,

B-20 Institutional Area,

South of IIT Campus,

New Delhi -   110 016.

(3)           The Federation of Indian Export Organisations,

PHD House,

Hauz Khas,

New Delhi – 110 016.

The EP Councils, ITPO, etc. can also be contacted

  CHAPTER 7

TRANSPORTATION AND SHIPMENT OF CARGO

 export by Sea

1.  Clearing & Forwarding Agents

For smooth and timely shipment of cargo, appoint a suitable Clearing & forwarding Agent.  Nevertheless, prepare the shipping documents yourself as there are many intricacies and technicalities which you alone know properly.  Don’t depend too much on the C&F Agent who should be entrusted with getting the documents processed and shipment only.

For smooth and timely of goods, the exporter must appoint a suitable Clearing & Forwarding Agent who is able to, inter alia, provide the following services.

Essential

(i)            Warehousing facilities before the goods are transported to docks.

(ii)           Transportation of goods to docks and arrangement of warehousing at port.

(iii)          Booking of shipping space or air freighting, and advice on relative cost of sending goods by sea and air.

(iv)          Arrangement for shipment to be on board.

(v)           Equipped with/can provide information on shipping lines and freight to different destinations, and various charges payable by exporters.

(vi)          Obtaining of marine insurance policies.

(vii)         Preparation and processing of shipping documents, bills of lading, dock receipt, export declarations, Consular invoices, certificate of origin etc.

(viii)       Forwarding of banking collection papers.

Desirable

(ix)          Storage facilities abroad, at least in major international markets, to warehouse the goods in case importer refuses to take delivery on any account.

(x)           Can trace the goods, if shipment goes astray, through his international connections.

(xi)          Arrangement for assessing the damage to shipment enroute

2.  Reservation of Shipping Space

The process of cargo shipment commences with reservation of shipping space in a vessel sailing to desired destination on or before the contracted date of delivery.  Reservation should, however, be got done soon after the receipt and confirmation of export order.  The procedure for reservation is detailed here.

Booking Memos/Notes

Exporters may either approach the shipping company or its agent directly through a freight broker for reservation of necessary space I, where it has not already been done.  Reservation commences generally six to eight weeks before the ship’s arrival at port.  It can be done either through a formal agreement, as for example, for bulk shipments through charter ships, or by informal requests for shipment of general cargoes by liners.  The following details are required for reservation by the companies, which may either be conveyed verbally (on phone) or in the form of ‘Booking Memos/Notes’ of which there is no particular format.

(i)            Name and address of the shipper (exporter).

(ii)           Types and details of cargo.

(iii)          Ports of loading and destination.

Types of Cargo:  While sending the ‘booking memo’, do mention the types of cargo offered like -

General Cargo:  i.e. variety of consignments of goods or materials, possibly all packed in different types of container.

Full Cargo: relates to shipment of a similar commodity like gram, cocoa or cotton.

Bulk Cargo: are commodities like coal or iron stacked loose in the hold of ship

Shipping Order

Depending upon availability, the shipping company/agent will book the desired space and issue, if so desired 2 by the exporter, a Shipping Order.  Its original copy is sent to the exporter and duplicate copy endorsed to the Commanding Officer of the ship for receiving on board the ship, the cargo specified therein.

3.  Transportation to Port

After reservation of shipping space, the goods are required to be transported from the factory/warehouse to the port either by road transport or rail.  Normally, rail transportation is resorted to because of the priority given in movement.  Road transport is comparatively quicker and useful when date of sailing of the ship on which cargo has been reserved is very near.  Since arrangement with transport agency is very simple, it is not discussed here.

Rail Priority 3:  As per the provision of the current Preferential Traffic Schedule (PTS) General Order No. 77 (for allotment of wagons) in force from 1.4.89 all traffic for export via ports or by land frontiers is eligible for higher priority ‘B’ which is next to defence.  The relevant provisions are as under.

Priority B:  The priority ‘B’ is available for allotment of wagons only as per the following details. 

(a)           All traffic for export, supported by documentary evidence that the traffic is actually meant for export.

(b)           All traffic for export by land frontiers to foreign countries such as Afghanistan, Bangladesh, Bhutan, Nepal and Pakistan, provided contracts held by consignors are examined by offers 4 mentioned in Annexure C of the PTS and a certificate issued that the traffic is for export.

(c)           In the case of sugar for export, it should be sponsored by Deputy Director General (Food)/Joint or Deputy Commissioner (Movement) in the Ministry of Food and Civil Supplies and approved by Railways.

In order to expedite movement and clearance of export traffic, consignors are allowed to put large label on the wagons reading, “For Export only-Push On”.  The intermediate stations/yards are instructed to register these wagons in a separate register, and watch their transit and push them on to the destination.  Station Masters have to relay all indents for export traffic to their Divisional/District officers so that such traffic is cleared and moved expeditiously.  In case of demand for movement of consignments in large quantities, special arrangements are made to clear them in block rakes.  Export traffic is also exempted from operational restrictions except those arising from breaches in lines.

Application

 Exporters intending to secure priority in all movement should apply to station 1 master of the station concerned, with following documentary evidence

(i)            Shipping Order i.e. a letter from the Shipping Co., stating that space has been reserved.

(ii)           The date by which movement should be effected in order to catch the sailing.

(iii)          Copy of letter of credit as documentary evidence for export may also be asked for. 

The Shipping Order is, however, not necessary in case of:- 

(i)            cotton textiles, provided that outer covering of the bales bear the mark “FOR EXPORT ONLY”,

(ii)           molasses, power and raw tobacco, if their movement is sponsored by the Ministry of Commerce on the basis of quarterly programme duly approved by the Railway Board.

(iii)          deoiled cake from solvent extraction plants (as per specified list) under a manufacturer’s certificate that the consignment is meant for export.

Indent for Wagons:  Where a full wagon load cargo is to be moved, indent a wagon stating the type of wagon—open or covered—required.  Allotment/loading order is issued in accordance with the priority of registration and also having regard to the Preferential Scheme.

R.R:   After booking of cargo, the consignor i.e. exporter is issued a Railway Receipt (RR)2.  It may be “Freight Paid” or “Freight to Pay” depending upon whether the rail freight has been paid or to be collected at destination. 

Endorsement:.  The R/R may, if obtained in the consignor’s name, then, be endorsed in the name of your Clearing & Forwarding Agent at the port of shipment and sent to him along with other documents.

Speed link Quality Service Network:  The railways have introduced the SQSN train services along the sides and diagonals of the quadrilateral  formed by the four metropolitan cities of Delhi, Calcutta, Madras and Mumbai.  This service aims at providing high speed  low cost network of trains for freight movement.  Clearance of traffic in piecemeal wagon loads, container loads and even less than wagon loads is done on these trains which operate between multiple city pairs.  These services cater to conventional as well as inter-modal traffic.  The distinguishing characteristics of this service are—

-               assured wagon supply

-               nominated day clearance

-               guaranteed transit time

-               advance booking of space on train

-               advance stacking of goods facility available

-               prior registration of goods not mandatory

-               exemption from operational restrictions.

A 5% surcharge is leviable which is refundable if the goods don’t arrive within stipulated transit time.

Shipping Instructions

While sending the R/R or GR (Goods Receipt) and other documents to your Clearing and Forwarding Agent, issue him detailed Shipping Instructions. There is no particular form in which these instructions are issued.  You must tell your C & F Agent the details of Cargo, date of shipment, sailing under and name of vessel, shipping company and the documents which you are sending to him. 

4.  Excise Clearance

Having booked the shipping space and placed an indent order for rail wagon(s), the exporter should apply to the Central Excise authorities for removal of goods, if excisable.

5.  Marine Insurance

If the export contract is CIF, the exporter should simultaneously approach an insurance company for an appropriate risk insurance cover.  Even if there is a FOB/C&F or any other type of contract, you may have to obtain insurance cover on behalf of your overseas importer.

6.  Octroi/Entry Tax Exemption

Export consignments brought from outside into Mumbai 1 and Calcutta 2 are subject to octroi duty and entry tax at respective places.  However, the exporter may obtain exemption therefrom by moving an application in a prescribed manner.

If the octroi duty/entry tax is paid, its refund can be claimed after exportation.  Since the refund may involve some time, it is better to seek exemption therefrom.

Mumbai Port

Octroi Exemption 3

Cargo Not Stuffed in ICDs/CFSs.  For obtaining exemption  of octroi duty on cargo not stuffed in ICDs/CFSs, in Mumbai, file Form N (in duplicate) along with the Mumbai Port Trust (BPT) copy of the Shipping Bill is got processed well-in advance of shipment date or before moving the goods to the Mumbai Port town.

Octroi Refund:  Where the octroi duty has been paid and its refund is to be claimed, the exporter should fill in Form C (Octroi purpose) in duplicate and register it with the Octroi office inside the docks as well as with then Port Shed In-charge.  The Form ‘C” will be duly endorsed after loading of cargo.

Apply for refund of octroi duty within 45 days of the date of loading to the ‘Octroi Refund’ section with the following:-

(i)            Form ‘C’ duly endorsed by the octroi post inside the docks.

(ii)           Octori Challan (Cash Memo) for having paid the duty.

(iii)          Form ‘B’ (in duplicate).  Its content, must tally with that of the Form ‘C’.

On being satisfied with the documents, octroi duty paid less 1-2 per cent, shall be refunded to the exporter.

Cargo Stuffed in ICDs/CFSs. The cargo stuffed in the containers at ICD/CFS (Internal Container Depots/Container Freight Stations) all over India and received in Mumbai for onward despatch to overseas destinations and accompanied by “Transference Shipping Bill” instead of Transhipment Permit is exempt from ‘N’ form procedure, in terms of rule 5(b) of the Exemption from Octroi (Immediate Exportation) Rules 1965 (4).

 Calcutta Port

As at Mumbai Port, exemption from or refund of entry tax can be obtained at Calcutta port as well.  Contact your C & F Agent and/or the Entry Tax Office, 2-Brabourne Road, Calcutta for necessary information and procedure.

Specified (scheduled) goods brought to Calcutta for export by a Govt. body are exempted from the entry tax.

7.  Customs & Port Documents

(Other than those under EDI Systems)

The Categories

The documents required for shipment of cargo can be broadly divided into two categories, namely, (I) principal documents and (ii) additional documents.  The principal documents are then for (a) customs authorities and (b)  port trust authorities.   An attempt is made here to list them as required at the four major ports,

However, a reference to your C & F Agent is recommended for latest information.

Principal Documents                                                                No of Copies

For Port Authorities

Mumbai


Port Trust Copy of Shipping Bill (5)                                                        One


Export Application                                                                              Two

Cart Chit                                                                                             Two

Calcutta


  Dock Challan                                                                                      One


Cart Ticket per lorry                                                                           One

Cochin

Export Application                                                                              Four

Gate Pass                                                                                            Two

Export Cargo Ticket                                                                            One

Chennai


Export Application                                                                                 Four


Cart Chit                                                                                             Two

For Customs Authorities

(Common at all Ports)

Shipping Bill  – Appropriate for:-

(a)  Duty Free Goods                                                                            Triplicate

(b)  Dutiable Goods                                                                              Triplicate

(c)  Goods entitled to                                                                           Quadruplicate

Drawback

(i)            Drawback Payment Order (Duplicate                                     One

copy at Mumbai Port only).

(ii)           Weight Note where drawback is payable                                One

on weight basis

(iii)       Duty Free Goods Ex-bond                                                      Triplicate

Invoice                                                                                                 One Two

GR Form                                                                                              Duplicate

Shipper’s Declaration Form                                                                Three

L/C (photocopy attested by bank), or                                     One

Export Contract, (original or photo copy),                                           One

Or Buyer’s letter (original) leading to

Export contract

Packing List                                                                                        Two

Additional Documents

For Customs Authorities only (as applicable)

            Pre-shipment Inspection Certificate                                                   One

AR4 Form of                                                                                         Original &

Central Excise                                                                                     Duplicate copies

AR5 Form of                                                                                         Original, Duplicate

Central Excise                                                                                     and Sixtuplicate copies.

Invoice relating to excise clearance                                                    One

Export Licence (original)                                                                     One

Contract Regn. Certificate                                                                  One

(in case of jute goods only)

Insurance cover note                                                                          One

Duty Exemption entitlement Certificate                                             One

Market Value/Tariff Value Proof                                                         One

Exim Bank Certificate showing the                                                    One

Forfaiting discount payable, if any

Any Other Document                                                                          ---

8.  Shipment Procedure and Stages

The different stages involved in shipment of goods include (I) Customs verification of Shipping Bill (ii) Carting and Receipt of Cargo to/in Transit Shed (iii) Cargo Examination in Docks, (iv) Loading of Cargo and (v) Issue of Mate Receipt.  Besides, there are post-shipment formalities.

The procedure adopted at different ports, relating to different stages is different.  It is not detailed here as the exporter is not much concerned with the same.

Samples of Drawback Articles:  The Customs authorities draw samples of goods particularly textile items for determination of dominant fibre content and its weight in export product as drawback may be payable only on such determination.  This is particularly so in cases where there is no compulsory pre-shipment inspection and the consignment is not accompanied with any test/inspection report.  According to the Central Board of Excise and Customs instruction (1),   no  sample  will be  drawn if  the  drawback per  shipping  Bill is less than Rs 10,000/-.  Where the amount per SB is between Rs 10,000 and Rs One lakh, samples may be drawn once in one year depending upon whether product concerned has a brand rate of drawback.  Where goods are of generic nature but brand rates have been prescribed for an individual exporter, samples would be drawn from every consignment in case of specification based items.  But samples may be drawn once in six months if any specific certificate is produced from agencies like SASMIRA, CLRI, etc.

9.  Mate receipt

It is a receipt issued by the Master of Vessel after the cargo is loaded.  It contains information on name of vessel, berth, date of shipment, description, packages, marks and numbers, condition of cargo at the time of its receipt on board.  It is given to Export Cargo Receiver at Mumbai and Madras ports and to Shed Writer at Calcutta.  However, at Cochin, this receipt is directly given to exporters.

Before the Mate Receipt is handed over to exporter at Mumbai port, he prepares an Export Application (in duplicate) and submits it along with Shipping Bill (Port Trust Copy) to Cash and Accounts Department for payment of charges.  The CAD affixes “Dock Chappa” (port stamp) on the Bill (PTC) as token of having received the charges.  Thereafter, Export Application (original) and Shipping Bill (PTC) are given to the exporter who retains the Application and submits the Bill to the Export Cargo Receiver.  The ECR, in turn, transmits ‘Mate Receipt’ to the exporter after obtaining latter’s signature on “Shed Export Cargo Register”.

At Madras port, the ECR gives the Mate Receipt to exporter after entering its number and date in Export Shed Register and Form ‘A’.  The Shed writer at the port of Calcutta issues the Mate Receipt to exporter after making an entry date and time of receiving the ‘Receipt’ in ‘Export Mainfest’.  In certain cases mate Receipts are also delivered from Transit Sheds only to parties having Deposit Account.  Such exporters should note that Mate Receipt is not detained in the ship for more than 4 days.  Thus, before the Mate Receipt is delivered, the Dock Receipt if issued, should be returned.  Proper acquittance must be given for the delivery of Mate Receipt.

Qualified Mate Receipt:  The Qualified Mate Receipt is not accepted from the vessel unless it is so desired by the exporter and endorsed on the Dock Challan to this effect by him.

Endorsement by CPO:  Soon after the obtaining of ‘Mate Receipt’, the exporter submits the receipt and all the copies of Shipping Bill including Export Promotion Copy, to the Customs Preventive Officer (on duty).  The CPO puts the stamp of shipment and his signature on the S. Bill and makes an endorsement on export licence/certificate/permit.  He also enters ‘full or part shipment’ stamp on the Shipping Bills, and gives a certificate regarding shipment of export cargo in specified on the AR4/AR5  Forms, invoice and on such other documents where required.

10.  Post-shipment Documents

After shipment, the exporter receives back the following documents from Customs Authorities.

(i)            Export Promotion Copy of Shipping Bill

(ii)           Commercial Invoice – one copy.

(iii)          Export Contract, L/C, Export Order or correspondence relating thereto, if submitted in original.

(iv)          AR 4/AR 5 Form

(v)           Export Licence where there is a separate licence.

(vi)          Contract registration certificate relating to jute goods.

(vii)         Insurance cover note, if any.

11.  Bill of Lading

Proof of Shipment:  After the cargo is loaded on the ship and Mate Receipt is issued, the Shipping Company/Agent prepares a Bill of Lading.  The style and format of the Bill of Lading differ though its contents are the same.  The B/L is a proof of shipment.

Full set B/L: The B/L is made out in sets – set consisting of a specified number (2) of originals signed in ink.  This set is negotiable.  However, the exporter may ask for additional copies required by him.  The copies of B/L are non-negotiable.

12.  Shipping or Shipment Advice

On obtaining the B/L, the exporter should send a Shipping or Shipment Advice along with the following documents to his overseas buyer.

(i)            Bill of Lading – non-negotiable copy.

(ii)           Commercial invoice – copy.

(iii)          Customs invoice/Consular invoice copy.

(iv)          Packing list.

13.  Short Shipment/Shut-out Notice

The short shipment/shut-out notices are to be filed in triplicate in the Export Department in the prescribed form.  For amendments in quantity of the goods under export even when the goods are not carted inside the docks, short shipment notice is to be filed.  When the exporter does not want to export the goods for reasons whatsoever, shut-out notice is to be filed.  When the short shipment occurs after the goods are carted inside the docks, the short shipment application should be accompanied by –

(i)            Customs attested invoice.

(ii)           Packing list.

(iii)          Work sheet for computing the value of short shipment.

(iv)          EP copy of the shipping bill with ‘P.O.’ endorsement.

(v)           GR Form (duplicate copy), if available.

(vi)          Back-to-town application or port shipping bill for the goods short shipped.

In the case of shut-out cargo, shut-out notice should be accompanied by –

(i)            Shipping bill (duplicate/drawback/EP copies).

(ii)           GR Form (duplicate copy).

(iii)          Application for amendment of vessel’s name for taking foods back to the town.

However, if the amendment of vessel’s name is sought within seven days of the departure of the vessel, no shut-out notice is to be submitted.

EDI (Electronic Data Interchange) System  Or Electronic Processing of Shipping Bill:  Electronic processing of Shipping Bill under EDI system has been introduced at some air ports/and ICDs, and also at JN Port, Nhava Sheva, Mumbai.  The procedure and documents under this system are, by an large, same for export by/through sea or air of ICDs. 


CHAPTER 8 

SHIPMENT THROUGH INLAND CONTAINER DEPOTS AND

CONTAINER FREIGHT STATIONS

Manual and Computerised Systems

1.  Manual System

A scheme to accept containerised cargo for export by sea at selected places like Delhi, Panipat, Ludhiana, Jalandhar, Jaipur Moradabad, Ahmedabad, Hyderabad, Bangalore, Guntur, etc. has been introduced.  This Chapter explains the details of the scheme of ICDs including the process for the cargo/documents.  Contact the concerned ICD for further information before sending the consignment there for export.

Air consignments can also be cleared at ICDs/CFSs and the same can move to major airports in bonded trucks.  This facility is also available from the factory of manufacture.

Presentation of the Shipping Bill (S/B)

The exporter will file Shipping Bills at the Export Section of the Inland Container Deport.  (ICD)(2) in case the cargo comprise of a Full Container Load (FCL) and at Container Freight Station (CFS) in case the cargo comprise of Less than  Container Load (LCL).  In case of Duty Free, Dutiable and Ex-bond Shipping Bills, 5 copies are filed comprising of Original, Duplicate, Triplicate (Export Promotion) and two Transference copies and in case of Drawback Shipping Bills, 6 copies are filed, the Drawback copy being extra compared to other Shipping Bills.  The Export Section will allot a serial number to the Shipping Bill and affix the date of filing on the Shipping Bill.

Port of Exit:  In addition to the usual information given on the Shipping Bills, the exporter should mention the Port of Exit and the serial number of the containers.  Such containers must have different marks and number details which may be settled by the Commissioner in consultation with the Railways and Steamer Agents.

Documents to be sent with Shipping Bill

Following documents are to be sent with the Shipping Bill.

(1)           Invoice – three copies plus 2 copies showing excise clearance.

(2)           Packing-cum-weight list – 2 copies

(3)           GR Form in duplicate

(4)           Buyer’s Order

(5)           Copy of Letter of Credit

(6)           Export Licence/Permit if applicable on the export product

(7)           Inspection Certificate or a letter from the buyer that they do not want any inspection to be carried out by any agency in India.

(8)           Ar-4 Form of Central Excise – 2 copies

(9)           Any other documents.

Scrutiny of Shipping Bill

After Noting, the proper officer scrutinises the Shipping Bill with respect to the following:-

(i)            To check the forms used.

(ii)           To check whether all the columns of Shipping Bill, GR Form, Invoice, etc. have been duly filled.

(iii)          To check that each S/Bill submitted at Customs House has been signed by an authorised representative of the exporter.  In case the documents have been presented by a licensed Customs House Agent (CHA), to check whether, in addition to the signature of the exporter, the S/Bill has been signed by an authorised representative of the CHA.

(iv)          To check that the Harmonised Indian Trade Classification Code Number i.e. ITC(HS) Code of the export commodity has been shown on the Shipping Bill for the purpose of Statistical Department.

(v)           To check that G.R. Forms or GR waiver from Reserve Bank of India are attached with Shipping Bill except for those Shipping Bills where no payment is involved.

(vi)          To compare the original and duplicate Shipping Bill.

(vii)         To see that all the copies of S/Bills show clearly the G.R. Number and all columns of G.R. Form are duly filled in.  The R.B.I. Code Number allotted to individual exporters on G.R. Forms should also be shown in the Shipping Bills.

(viii)       To see that all particulars, viz., classification, description, quantity (in wt. And/or in number), value, port of exit, marks and number of the container(s), Duty Drawback Rates and other particulars required in all the columns of the Shipping Bills are correct and complete, that the number of packages, weight and value are declared both in figures and in words.

(ix)          To return the S/Bill which are lacking in requirements or under objection and to accept them again on furnishing the requisite particulars for which they were returned.

The Drawback S/Bills where FOB value is more than Rs 50,000/- and all shipping Bills under DEEC Scheme, are sent to the Assistant Commissioner for final scrutiny.  After scrutiny of papers, the original copies of Shipping Bill, G.R. Form and copies of Invoice, ,Packing List are detained and retained by Customs Department and a “Customs Detach Number” is allotted on the Duplicate & Triplicate copies of the S/Bill.

Carting of Goods inside ICD/CFS

After processing of the S/Bill, the goods are brought inside the ICD/CFS, as the case may be, and stocked in the proper sheds.  An acknowledgement of the Godown clerk is obtained certifying that the goods have been received in the Godown.

Examination

All the Shipping Bills against which goods have been brought inside, are sent to Assistant Commissioner and he/she decides as to which material/goods he/she would personally like to examine and mark those Shipping Bills.  Now all the S/Bills are taken to the Custom Superintendent who further marks to the concerned examining officers for Physical examination of the goods.  The examination is conducted in accordance with the procedure prescribed for the same.  Normally random examination is carried out and in general only 10% examination of goods are examined.  But in case the proper officer thinks fit, he can always conduct 100% physical check.  The Inspector writes examination report on duplicate (also on triplicate copy in case of a Drawback S/Bill) and superintendent signs the “LET EXPORT” order on the S/Bill.  The goods are now stuffed into the containers and sealed.

The quantity of goods loaded/shut out should be recorded on Duplicate copy of the G.R., in the space provided for the same.  The Duplicate copy of the S/Bill, Invoice, Packing list are also retained by the customs.  The Triplicate copy of S/Bill, Drawback copy of S/Bill, Invoice, Packing List, Inspection certificate, Duplicate copy of G.R. Form, AR-4/AR-4A Form, GP1/GP2, all duly signed and endorsed by customs are returned to the exporter or his authorised CHA.  After showing the EP copy to the shipping line, the exporters gets Bill of Lading from them.

Transit to the Gateway Port

The sealed containers are carried by the Railway to the Gateway Port.  The two Transference copies of the S/Bills should be placed in a sealed envelope and handed our to the carrier (Railways) who will be responsible for its being carried along with the container and its production to the customs officer at the port of exit. 

GR Formalities.  Same as given in the earlier Chapter.

Procedure at the Exit Port

At the exit port, the containers will be allowed to be exported under preventive supervision on checking of the seals without any further examination.  (Examination will only be done if the seals of the containers are found to have been tampered with or on the basis of any information, doubt, etc.)  The Preventive Officer who will be inspecting the containers suitably endorses the two ‘Transference Copies of the S/Bills’ regarding the fact of shipment in the following manner.

(i)            inspected and found intact the containers bearing the following marks and number :- (1) (2) (3) (4) etc.

(ii)           the Customs seals on the above mentioned container found intact,

(iii)          all the containers mentioned above have been shipped under my supervision.

At the port of shipment, the steamer agent will also file the export manifest in duplicate regarding the containerised cargo in the container unit of the export department of the Custom House.

The container unit will, within 24 hours of the receipt of the S/Bills, telex that portion regarding the fact of the shipment to the concerned ICD giving reference, of the S/Bill number to which it pertains.  The ‘container unit’ with reference to the date of filing of the S/Bill at the ICD/CFS and the date of entry outwards of the vessel by which it has been shipped and in case there has been any change in the rate of duty/cess in between the two dates, immediately issue a telex pointing out the same with reference to the particular S/Bill Number.  The container unit’ shall then despatch one copy of the ‘Transference S/Bill’ and one copy of the export manifest under registered A.D. to the ICD/CFS Commissionerate within 48 hours of their receipt.  A statement containing the following particulars shall be submitted to the Assistant Commissioner in-charge of the container unit on a weekly basis:-

(i)            shipping Bill Number, date of filing of S/Bill at the ICD, date of entry outwards of the vessel whether any change in rate of duty has taken place, if so, whether any telex has been issued,

(ii)           date of loading of the container,

(iii)          date of receipt of the S/Bills in the container unit of the Export Department,

(iv)          date of filing of the Export Manifest,

(v)           date of despatch of the documents referred to above the ICD Commissionerate,

(vi)          date of telex regarding GR forms issued to the ICD Commissionerate.

The Assistant Commissioner will check the statement to ensure that all the shipping bills and manifest have been duly despatched to the ICD/CFS Commissionerate and that telexes regarding shipment certificates and change of duty (if any) have been duly despatched. A copy of the statement each week so that proper correlation can be kept at the end.

The second copy of the Transference shipment bill will be retained by the Custom House for publication of export statistics.

2.  Electronic Or Computerised System

Customs EDI System: The Indian Customs EDI System seeks to integrate EDI (Electronic Date Interchange) applications into the customs procedures and bring into together an environment of participation and co-operation of all the agencies and which have a role to play in the international movement of goods, containers and passengers.  It has already introduced an automated customs clearance for exports at select air ports/ICDs.  Starting at IGI Airport, Delhi, the system has been extended to other locations, namely, Mumbai – Sahar Aircargo, Chennai Aircargo, Bangalore Aircargo, JN Port, Nhava Sheva, ICDs at Tughalkabad and Patparganj, Delhi.

The detailed procedure followed at Tughalkabad and IGI Airport.  New Delhi are by and large, same as explained here.

Documents

The documents required for export at ICD/Air port under EDI System are, by and large, the same as under manual system except that a few additional declarations are to be filed.  The documents are:

1.            Shipping Bill i.e. EDI or Electronic Shipping Bill, namely,

(i)            White SB

(ii)           Green SB – also known as Drawback SB

(iii)          DEEC SB

 

2.            Check List as given to exporter after entry of SB

3.            Invoice

4.            Letter of Credit, if any/Purchase Order

5.            Packing List

6.            Letter of AC Customs permitting factory stuffing of goods, if applicable

7.            GR Form (see below)

8.            DEEC Book (original)

9.            Declarations which are Common and Specific i.e. those required in all cases and other necessary for drawback only.  These are:

(i)            Declaration form for export of duty free goods – named as Annexure-A

(ii)           Declaration form for export of goods under claim for drawback – named as Annexure B

(iii)          GR Declaration – named as App. I – two copies

(iv)          DEEC Declaration – named as App. II

(v)           Drawback/DEEC Declaration – named as App. III

(vi)          Drawback Declarations specific to a particular items listed as App. IV to XII.

10.          Any other documents, as applicable

The GR form, both original & duplicate, is to be presented in the export processing section before lodging the declaration for data entry at the service centre.  Thereafter or simultaneously, the EDI SB is to be filed/entered in the Service Centre, as explained hereafter.

All the documents and declarations may not be applicable in all cases.  Hence, file only those as are relevant to the goods under export.

Bank Account

All exporters are required to open an account with Punjab National Bank located at the ICD/New Customs House (IGI Airport) basically for receiving their drawback amounts.  This account is essential as Customs will not be issuing any cheques, for disbursement of drawback amount on any other bank.  The formalities to open this account includes (I) two passport size photographs of Director/Partner/Proprietor (ii) Partnership deed/Minutes of Board Meeting of Companies for opening current accounts with Articles and Memorandum of Association and Certificate of Incorporation (iii)  photocopy of IEC Code (iv)  Introductory reference from the existing banker and (v) submission of prescribed account opening form.

1.  White Shipping Bill

Registration

Before filing EDI shipping bill, get the following particulars registered in the Customs System.

·                     IEC Code

·                     CHA licence number

·                     Account No. of PNB, ICD/New Customs House

Data Entry of Shipping Bills

Data entry of shipping bills will be allowed to be made only at the service centre in the ICD/New Customs House on payment of service charges.

Declaration

Exporters should also file a declaration which is different for export of duty free goods and export of goods under claim for drawback and DEEC cases.  It must be signed by the exporter or his authorised agent.

Export Cess

For export items which are subject to export cess, the corresponding serial number of the cess schedule should be clearly mentioned.  The Cess is to be paid in the PNB before the GR is detached in the export processing section.

Check List

After data entry the service centre  will give the exporter/his authorised agent a copy of check list, reflecting the data entered.

 The exporter should scrutinise the check list and satisfy himself that all particulars have been entered correctly.  If so, he should sign the check list and return it to the service centre for submission of the shipping bills to the Customs Computer System.

Allotment of SB No.

 On the receipt of check list, duly signed by exporter, the service centre will allot shipping bill number and date and intimate the same to the exporter.  It will also return the check list and the declaration showing the shipping bill No. and date.  No noting of the shipping bill will be required as in the manual system.

Carting of Goods

As soon as the shipping bill number is allotted, goods may be brought to the ICD/New Customs House.  Where processing is required (see below) to be made by the Assistant Commissioner of Customs, the goods can be brought only after the processing is complete.

Handling of Shipping Bill

Before the goods can be examined for “let export”, the following categories of white shipping bills will require the clearance of the Assistant Commissioner of Customs (Exports).

(i)            Shipping Bills where the FOB value of goods is more than Rs. 10 lakhs.

(ii)           Shipping Bills relating to free trade samples of value of more than Rs. 20,000/-.

2.  Drawback Shipping Bills

These are also known as green shipping bills.  The computerised system is applicable to all drawback shipping bills except:

(i)            DBK claims relating to EOU/EPZ Units,

(ii)           cases  of re-export of imported goods.

In respect of these two categories, the export documents will be filed manually and DBK claim shall also be filed separately with Assistant Commissioner, Drawback.

Filing

For goods to be exported under claim for drawback, except the above mentioned excluded categories, the exporters are required to file drawback declaration in the prescribed form mentioning therein their account number opened with PNB, ICD/New Customs House.  Further, they should also give their account number along with name of the bank through which the export proceeds are to be realised.  In addition, another declaration is required to be filed when the export goods are presented at the warehouse for examination and “let export”.

Declarations relating to All Industry Rates of DBK

Subject to Specified Conditions

The exporters are required to submit appropriate declarations in prescribed forms relating to the conditions laid down in different sub-heads of the Table of All Industry Rates of drawback.  They should give correct serial number of the relevant appendix relating to the declaration applicable to their case on the declaration as well as in the column “condition no.” in the Table given in proforma of drawback declaration.  The “appendix” relates to one of the appendices numbering I to XII of Public Notice No. 81/97 dated 13.8.97 and 59/97 dt. 2/6/97 from Commissioner of Customs, Delhi, for the drawback year 1997-98.  It may be changed in the new drawback year.

All exporters claiming drawback are also required to file drawback/DEEC declaration in the prescribed form.

No separate Drawback Claim

There is no need for filing separate drawback claim.

 Processing and Credit of DBK

In case any query has been raised or deficiency noticed, the same will be shown on the terminal and the print out of the query/deficiency may be obtained from the service centre.  The claim will be processed only after reply to queries/deficiencies.  The claims sanctioned will be transferred to PNB through EDI.  The bank will credit the drawback amount in the account of the exporter on the next day.

3.  DEEC Shipping Bills

DEEC SB Registration: All exporters intending to file shipping bills under the DEEC system whether under claim for drawback or otherwise, should first get their DEEC registered with the ICD service centre.  The origi8nal DEEC book is to be produced at the service centre for data entry i.e. registration.  A printout of the relevant particulars entered, will be given to the exporter for his confirmation.  After his confirmation, the DEEC book will be presented to the Superintendent, DEEC Cell in the Export Department who would verify the particulars entered in the computer with the original DEEC book and register the same in the EDI system.  The registration No. of the DEEC book will be given to the exporter, which is to be mentioned on the declaration forms for export of goods.

Declaration

The exporter is also required to file, besides DEEC Declaration and/or Drawback/DEEC Declaration, the following declarations.

(i)            Declaration about export under claim of rebate of excise duty or export in bond.

(ii)           Exporters not proposing to claim any drawback.

(iii)          Declaration relating to fulfilment of export obligation, etc.

All the export declarations for DEEC will be processed on screen.  After the declarations have been processed and accepted, the goods can be presented at the warehouse for examination and “let export” order as in the case of other export goods. (Also see below).

4.  Textile Export under Quota System

Under the EDI system, the quota allocation label will be pasted on the export invoice instead of shipping bill.  The quota certification of export invoice  would be submitted to customs along with other documents at the time of examination of the export cargo.

5.  Non-quota Items

Relevant certifications from agencies like Wild Life Inspection Agency, Engineering DPC, APEDA, Centr5al Silk Board, DC Handicrafts, Drug Controller, Archaeological Survey of India should be obtained on the export invoice and not on the shipping bill as SB will no longer be available for pre-shipment certification.

6.  Carting of Goods

The export goods should be brought for the purpose of examination and “let export” within 7 days of filing of declaration in the service centre.  In case of delay a fresh declaration is to be filed.

7.  Customs Examination Cargo

Let Export:  After entry of the goods inside the ICD the goods will be brought to the export shed for examination.  The exporter will present the check-list and declaration along with all original documents such as invoice, LC, purchase order and packing list.  In case factory stuffed containers, he should also bring a copy of the letter of AC Customs, ICD, permitting factory stuffing, and additional particulars, if any.  The Examination Officer will inspect/examine the shipment and enter his report in the system.  He will then mark the electronic shipping bill along with all original documents and check-list to the Superintendent.  Export Shed, who will, in turn, allow “let export”.

Generation of SB:  After the “let export order” is given on the system the exporter should collect 5 copies of the shipping bill (customs copy, exporters copy, EP copy, TR-1 and TR-2 copies) from the Shed Superintendent.

8.  SDF Processing

Two copies of the SDF (Statutory Declaration Form) are presented in the processing section before the declaration is lodged for data entry at the service centre, as stated earlier.  At this stage, the SDF and declaration will be stamped with running 10 digit serial number, the original detached and the duplicate returned to the exporter for presentation with the goods at the time of examination and “let export”.  The exporter should produce all the five copies of the shipping bills, as collected, and the duplicate copy of the SDF to the Export Shed Superintendent  for signature after the “let export order”.  After signing and stamping all the copies of the SB and SDF, the Superintendent will return all of them (except customs copy) to the exporter, who will then hand over TR-1 and TR-2. Copies of the shipping bill to the CONCOR for onward transmission to the Gateway Port with the export containers.

9.  Drawal of Samples

Where the Superintendent of Customs orders for samples to be drawn and tested, the Examination Officer will draw three samples from the consignment and enter the particulars thereof along with details of the testing agency, in the ICES/E system.

10.  Amendment of Shipping Bill

Normally, amendment of SB is done before “Let Export Order”.  If amendment is required in a shipping bill (other than those processed by the AC) before the examination of the export cargo, an application may be made to the service centre who will proceed to make the required changes on payment of amendment fee.  In case of shipping bills processed by the AC, amendment will be allowed by the AC.  If amendment is desired after the examination, an application should be made out to the AC.  After this permission, the exporter may get the amendment done through the service centre on production of the amendment permission and payment of amendment fee.

In exceptional cases, amendment can be allowed after issue of “let export” also but only after permission of the Additional/Deputy Commissioner.



CHAPTER 9
 

EXPORT BY AIR AND COURIER

A.  Manual System

Air Ports:  An essential difference between export by sea and air is that there are no documents required by the Airport authorities which are different from Customs authorities.  Hence, the procedure for export by air is comparatively simpler and quicker.

Export of cargo by air can be routed through specified international airports like Mumbai, Calcutta, Madras, New Delhi etc.  Whereas the major airports may be used for export of specified products.  A little different procedure is followed for Customs clearance and processing of documents at these air ports.  Hence, contact your Clearing & Forwarding Agent.

Movement of Goods

Pack the goods in air worthy packing, get excise clearance and/or obtain pre-shipment inspection certificate, if necessary, apply for octroi/entry tax exemption, obtain insurance cover, etc. in the same manner as detailed in Chapter 25.  However, Shipping Bill and other documents are got processed and passed by the Customs authorities in the first instance, before moving the goods to the air port.

Valuation of SOFTEX Forms

The valuation of exports declared on SOFTEX forms by the units located in EPZs will be done by the designated Officer of the EPZ.

For units in STPI and outside STPI (other than EPZ), as also forms in respect of export of video/TV software, the SOFTEX forms will be certified by designated officials at the nearest STPI.

Customs Documents

A Difference

An essential difference between the documents required for export by sea and air is that in the latter case there are no documents for the airport authorities.  All the documents related to Customs permission for export.  Accordingly, the documents required for export by air are listed here.

Caution.  Unless the export is covered by an irrevocable L/C opened by the overseas buyer for the full value of the goods or payment towards the full value has been received in advance, exporters should consign the goods in such cases to the concerned overseas branch/correspondent of the authorised dealer through whom the shipping documents will be forwarded for collection.

 

Documents (1)                                                                                   No. of Copies  

1.               Shipping Bill-Appropriate for:-

(a)  Duty Free Goods                                                                                   4

(b)  Dutiable Goods                                                                                     4

(c)  Drawback Goods                                                                           3 or 4

 

(i)         Weight Note where drawback is payable                                               3

On weight basis 

(ii)       Drawback Payment Order (at Mumbai air port)                                    1

Duty Free Goods Ex-bond                                                                      3

2.  Invoice                                                                                                        2

3.  GR Form                                                                                         Duplicate

4.  Shipper’s Declaration Form                                                                       1

5.  Packing List                                                                                               3

6. (a)  L/C (photo copy attested by bank)                                                       1

                           or

(b) Export Contract (original or photo copy)                                               1

 

(c)  Buyer’s letter (original) leading to                                                        1

export order

7.  Pre-shipment Inspection Certificate (5) if any                                           1

8.  RL 11 Licence for jewellery export                                                             1

                           or

Export licence, if applicable

9.  Central Excise Forms AR4 Form                                                    Original and duplicate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Duplicate

AR 5 Form                                                                                      Original, Duplicate

                                                                                                     and Sixtuplicate

10.  Duty Exemption Entitlement Certificate,                                     1

if any

11.  Market Value/Tariff Value Proof                                                              1

12.  Insurance Cover Note, if any                                                                   1

1.     Exim Bank certificate showing the                                                          One

 forfaiting  discount, if any

14.  Any other documents                                                                               --- 

Customs Processing

Submit all the above mentioned documents to the Air Customs Unit at the air port and/or in the Custom House in the City (6).  The procedure followed at Calcutta air port is described here.

Passing of the SB

In the first instance, the Shipping Bill is to be got passed by the Customs.  Soon after submission, the SB is stamped with the Customs seal and Entry Number given thereon.  It is also checked if there is any RBI adverse entry against the exporter.  Then, it is passed on to the Group Assessing Officer for value assessment, who also gives Drawback Order on the Drawback Shipping Bill, if any.

Drawback Order

The Drawback Order reads as under:-

To Airport-Appraiser

Please examine the goods for drawback purpose.  Please open……  for examination.  Please check contents and declarations.  Please check quantities as specified on remaining cases and verify the total quantity declared.  After examination, please initial the export invoice for drawback purposes’.

“P.O. to inspect the cases and allow shipment if in order.  Please return the Drawback Shipping Bill direct to Drawback Section after endorsement of shipment”.

“In case of leather consignments or in case drawback is payable on the basis of weight, please also check weight”.

GR Detachment

Thereafter, the original copy of the GR Form is detached, a reference No. of which is also given on the duplicate and triplicate copies of all the Shipping Bills.  With the completion of this formality, the Shipping Bill is considered to have been passed for Shipment i.e. air freighting of goods.

Shipping Bill

The original copy of the Shipping Bill is to be submitted to the SB clerk for record.  He will send the SB to the Department respectively.

Returning of Documents

Documents like export contract, GR, AR 4 (duplicate & triplicate copies), etc. are then, returned to the exporters.

Air Waybill

After the detachment of GR Form and other formalities, an Air Waybill(1) is issued by the airlines concerned or the Clearing & Forwarding Agent who stocks the blank forms of different airlines.  The AWB is a non-negotiable document unlike the Bill of Lading of which the original copies are negotiable.

Shipping or Shipment Advice: may be sent to the overseas buyer at this stage itself.

Transportation of Cargo to Warehouse

After getting the Shipping Bill passed, an Air Waybill is issued, and the goods are tagged with a slip indicating the AWB Number.  Goods are, then, transported to the airport godown (warehouse) of the International Airport Authority.  The IAAI, then, issues a Terminal Charges Receipt (Export) according to the wt.  of the consignment on slab basis.

Customs Examination

The Shipping Bill duly passed by the Customs presented to the Export Freight Officer (EPO) who, in turn, forwards to the Customs Appraiser marks it to one of the Examining Officers, for inspecting the goods according to the declarations made on the Shipping Bill.  If found in order, he submits his report for counter signatures of the Appraiser.  The documents are, then, returned to the EFO.

Loading of Cargo

Manifest Entry

Once the Appraiser has countersigned the SB, the C&F Agent will inform the airlines concerned that the goods are ready for carriage.  On receipt of this intimation, the airlines will include the same in the Manifest and submit it to the EFO.

EFO’s Permission

The EFO allows the airlines to take out the goods for loading them on the aircraft, after verification of the entry in the Manifest.

Disposal of Documents

Once the goods are loaded on board the aircraft, the EFO/PO will give necessary notation about the Aircraft’s Regn. No., Rotation and Flight No. on the Shipping Bill and sign the same.  While the Export Promotion Copy of the Shipping Bill is returned to the exporter, Drawback Copy is sent to the Drawback Department.  The extra i.e. “transhipment S. B. is returned to the C&F Agent, if the consignment does not involve transhipment.  The duplicate copy of the SB is sent to the Record section.

Shipping or Shipment Advice

The exporter should also send by courier or fax a Shipping or Shipment Advice, if not already done soon after the issue of Air Waybill, to his overseas buyer along with (i) packing list. (ii) air waybill (iii) commercial invoice and (iv) any other document specified by him.

B.  Computerised or Electronic System

The procedure & documents followed/required under the Indian Customs EDI (Electronic Data Interchange) System also known as Electronic or Computerised Processing of Shipping Bills which is already in operation at IGI air port, New Delhi and air ports at Mumbai, Chennai, Bangalore, besides ICDs, New Delhi, etc. as explained in Chapter 30 as it is, by and large, same for export through ICDs or air ports, except that form SDF (Statutory Declaration Form) in duplicate in place of GR Form, is to be filed.

2.  Export by Courier

In addition to export by ship/boat, aircraft, rail/road, transport vehicles and post (mail), export is also allowed by the courier mode, under the Courier Imports and Exports (Clearance) Regulations 1998 (1).  The 1998 Regulations supersede the Courier Imports (Clearance) Regulations, 1994-95.  Further, the 1998 Regulations contain procedure for clearance of import goods as well as export goods through courier mode, whereas the 1995 Regulations related only to import goods.

These Regulations shall apply for assessment and clearance of goods carried by the authorised couriers on outgoing flights on behalf of a consign or for a commercial consideration.

Export Items

Export of any item  can be effected by courier mode, except the following

i)          the goods which are subject to levy of any duty on their exports;

ii)         the goods proposed to be exported with the claim for drawback;

iii)        the goods proposed to be exported under Duty Entitlement Pass Book Scheme, Duty Exemption Schemes, Export Promotion Capital Goods Scheme or any other similar export promotion schemes;

iv)        goods in respect of which the proper officer directs the filing of Shipping Bill in prescribed from;

v)         goods where the value of the consignment is above Rs. 25,000 and transaction in foreign exchange is involved;

vi)        the goods where the weight of the individual package exceeds 32 Kgs;

vii)       the goods which require specific conditions to be fulfilled under any other Act for the time being in force or any Rule or Regulation made thereunder.

Samples Export

“Samples” means any bona fide commercial samples and prototype of goods supplied free of charge of a value not exceeding Rs. 10,000/- for exports, which are for the time being not subject to any prohibition (3) or restriction (3) on their export.

Airports

The goods can be exported from the following airports.

Ahmedabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Jaipur, Mumbai

Weight Limit

As stated above, goods of the weight of individual package exceeding 32 Kgs. cannot be  exported by courier.

Packaging

The export goods shall be packed separately in identifiable courier company bags, with appropriate labels, in the following categories;

(1)    documents;

(2)    samples and free gifts;

(3)    dutiable or commercial goods 

Declaration

Each package of export goods shall bear a declaration from the sender (exporter) regarding the contents of the package and the value thereof.

Procedure

The procedure for export is, by and large, for the authorised courier company to follow and not for the exporter.

Shipping Bill

There are special Shipping Bills for export by courier, namely:

(i)        Courier Shipping Bill – I (CSB-I)

(ii)       Courier Shipping – II (CSB –II)

The Authorised Courier shall make entry of goods for export in appropriate shipping bill which shall be processed at air cargo complex or the EOU/EPZ unit/STP or EHTP unit.

CHAPTER 10

EXPORT BY LAND/RIVER

By Rail to Bangladesh, Pakistan and Sri Lanka

Export by land/river in lorries/rail or boats is effected, more or less, in the same manner as by sea, air, except that the cargo must pass specified Customs Check posts and booked at specified stations.  Seek the advice of a Clearing & Forwarding Agent dealing in such transactions to the concerned country.

Export by land/river can be effected either by lorry transport or rail or in boats usually to three countries only i.e.  Bangladesh, Pakistan and Nepal.  Exports to Bhutan are also effected by road, but are not considered exports as such on account of the payment being not realised in foreign exchange in most of the cases, except where supplies are being made to UN or other internationally aided projects.  India’s trade with Nepal in foreign exchange, trade between the two countries is presently very restricted.

 

Export to Sri Lanka of specific commodities may also be sent by rail as detailed in the last section of this Chapter.

 

Procedure & Documents

 

Border Checkposts

 

The procedure to export by land/river is, by and large, the same as outlined for shipment by sea or air in Chapters 29 and 31; the essential distinction being that goods must pass through the specified Border (Customs) Checkposts.  Then, the documents have also to be got processed from the Land Customs Wing of the Customs Department having jurisdiction over the place through which the consignment is to pass through for the overseas territory.

 

While the consignment for Pakistan is permitted via the Attari (Amritsar) border, there are a number of check posts for Bangladesh and Nepal.  For example, export to Nepal under claim for drawback can be effected through one of the checkposts at Raxaul, Nautanwa and Jogbani.  However, in case the export  don’t involve any drawback and central excise duty refund is to be granted to His Majest’s Govt. of Nepal instead of the exporter, there are some other checkposts, in addition to these three, like Barhni, Gauriphanta, Jarwa, Phitorgar, Tikonia.  Tanakpur, Sonbarsa.

 

FOB Value of Exports

 

For exports made through various Land Customs stations, the FOB value will be taken to include the cost of domestic transportation from the point of loading of export goods, anywhere in India, up to the Land Customs Stations from which export is being effected.  The cost of international transportation beyond the Indian Land Customs Station, into the neighbouring country, will be excluded from the FOB. value.

 

Export to Bangladesh

 

Part Shipment against one L/C

 

Part shipment of goods, eligible for export will be allowed against one Letter of Credit, provided the Bangladesh Customs accepts the goods and the under mentioned Procedures are observed in addition to formalities prevailing as per law in force.

 

(i)            Separate bill of export as well as G.R. form indicating therein details of description of goods, quantity, FOB value etc. Are to be filed for each part consignment;

(ii)           Particulars of such part shipment, i.e. quantum of goods and its FOB. value of each part shipment are to be recorded on the relevant copy of Letter of Credit/Contract.

(iii)          At the time of shipment in part, the assessing unit will record the particulars of part shipment in a separate register, Letter of Creditwise/Contractwise, provided Letter of Credit has the condition of part shipment.

(iv)          Rate of duty/cess etc. is to be calculated as applicable under law for each consignment on the basis of relevant date.

(v)           Examination of the consignment is to be done, on presentation of the same before the Border Customs officer to ascertain whether the description of the goods tallies with the description mentioned in the Bill of Export.

(vi)          If a bill of export is assessed for a particular quantity and that quantity has not reached that can be amended as per the procedure laid down of the amendment of the Bill of Export, in the Customs Act, for the actual quantity to be exported.  Request for part shipment is to be made in writing to the Assistant Commissioner/Superintendent of Customs in charge of the land Customs Station by the exporter provided the Letter of Credit/Contract/agreement bears condition for part shipment.

 

Documents

 

The documents stipulated for export to Bangaldesh are detailed here.  More or less the same documents are required for other destinations.  Nevertheless, contact the C & F Agent  who is dealing in trade with the concerned countries.

 

Document                                                                                     No. of Copies

1.            Application for Export or Bill of  Export                                              6

By Lorry or Ferry

Or

2(i)       Application for Export                                                                         7

under claim for Drawback                                                                  6

By Lorry                                                                                             

By Ferry                                                                                 

2(ii)      Drawback Bill or Bill of Export                                                           3

1.            Packing List

Drawback claim                                                                                  7

Non-Drawback Items                                                                          5

4.            Commercial Invoice

Drawback Claim                                                                                 7

Others                                                                                                 5

5.            GR Form                                                                            in Duplicate

6.            Export Contract or a Buyer’s                                                              1

signed  proforma invoice or Price

Confirmatory letter. Wo

7.            Letter of Credit  (photo copy attested                                      1

by the bank)

8.            Purchase Invoice (voucher)                                                                 1

9.            Treasury Challan on TR 6 Form,                                                        1

10.          Pre-shipment Inspection certificate, if any                                         1

11.          AR4 Form                                                                         Duplicate & Triplicate

12.          Invoice showing clearance of excisable goods                                    Original

13.          Export Licence, if any                                                                         1

14.          Exim Bank Certificate reg. Forfaiting                                                 1

discount, if any

 

Any other Document                                                                           --

 

 

Assessment:  Submit the above mentioned documents to the Land Customs Wing or the Customs House, Calcutta for proper assessment and passing of order to allow crossing of the border.

 

Claim for Compensation:  Claims in respect of goods not traceable, but proved to have been made over by the concerned Railways to Bangladesh Railway under clear receipt, are not to be entertained by the Indian Railways.  However, if a consignment is not made over to Bangladesh Railways, the claims are to be settled by the concerned Indian railway which received and lost the consignment.

 

Export  by Rail to Pakistan: Through booking of goods traffic on “paid-to-pay” basis in wagon loads from any station on Indian Railways to stations on Pakistan Railways is permitted via the Attari (Amritsar) border, provided the goods are:-

 

(a)           accompanied with a customs p0ermit;

(b)           covered by a valid export licence;

(c)           land-customs formalities are observed by the exporter at the border land-customs office at Amritsar.

 

Freight Charges

 

The exporters should pay all the freight charges up to the border point between India & Pakistan at the time of booking of goods.  Freight charges on Pakistan Railways will be “To Pay” and realised by the destination station. Consignments in “Smalls” can also be booked on “Paid-to-Pay” basis from India to Pakistan Railways only to Lahore Station for direct local delivery.  If an economic load is obtained by clubbing consignments, the same can also be booked in through sealed vans to six stations, namely, (i)  Karachi, (ii) Hyderabad, (iii)  Multan City, (iv) Lyallpur, (v) Rawalpindi and (vi) Peshawar Cantt.

 

Customs Examination Charges

 

All Customs charges must also be paid at the time of booking.

 

Export by Rail to Sri Lanka

 

Parcels and goods of 29 specified commodities (2) can also be booked from selected railway stations in India for Sri Lanka (Colombo fort Station) and vice versa

 

Commodities

 

The specific commodities that can booked are:  beedi leaves, beedi  tobacco,  bonegrist or meal, buckets-galvanised iron, cement product (castings block sheet and tiles), coriander seeds, chillies, cotton piece goods, cotton lungies, cotton yarn in cases,  cotton bales fully pressed, electrical goods (domestic appliances and machinery), fish (tinned and fresh), fruits (dry and fresh in cases), fullers earth, furniture, garlic, ginger (green or dry), glassware, jaggery, molasses, machinery (other than electrical), onions, palmyrah fibres and stalks, potatoes, pulses, tamarind, toor husk, turmeric,

 

Railway Stations

 

The railway stations from which these can be booked for Colombo Fort station are:-

 

Wadi Bandar, Shalimar, Faridabad, Madras Egmore, Madurai, Tiruchirappalli/Golder Rock, Coimbatore, Virudhunagar and Bangalore city (meter guage).

 

Contact the concerned railway stations for detailed instructions/information.

 

CHAPTER 11

EXPORT BY POST

Postal channel is cheaper and quicker.  The formalities are fewer.  It is available almost at exporter’s door.  Hence, it should be utilised to export samples or small consignments of high value articles.

 

Prohibitions

 

Subject to the prohibitions and restrictions imposed under Import and Export Trade (Control) Regulations, Foreign Exchange Regulations, etc; exports are otherwise permissible through post by surface or air mail to countries with which Indian Postal Administration maintains mail service and those countries with which there is no trade ban.  Articles like tigers, therefrom, including skins of these animals, antiquities, arms, and ammunition, explosives, inflammable articles, crude drugs, intoxicants, charms, talisman, etc; claiming to possess magical and mystical character and advertisements relating to such goods are not allowed to be exported by post.  Similarly, export of Indian and Foreign currency, Bank Notes/Drafts/Cheques, National Saving Certificates, and such other Negotiable Instruments are also not permitted unless they are either accompanied by valid RBI permits or being exported by authorised dealers in foreign exchange for prohibitions and restrictions on exports by post, information may be had from General Post Offices.

 

Trade Samples/Trade Goods

 

Exports of articles through post can be grouped under two heads, namely (i) articles not involving foreign exchange i.e. gift parcels or trade samples and (ii) articles involving foreign exchange i.e. trade goods.

 

1.  Trade Goods

 

Export of trade good is also allowed by post.  These goods are, however, further sub-divided into (i)  goods other than jewellery, which are not entitled to customs duty drawback (ii) jewellery items and (iii) goods which are entitled to duty drawback and excise rebate.  Still there is one more category relating to articles sent abroad for repair and to be reimported.  There is a little different procedure for despatch of goods described at (ii) i.e. jewellery by post either surface or air mail, before their parcels being accepted by Post Offices, which is explained below.

 

Jewellery Items

 

All parcels containing jewellery/precious stones must be sealed by/or in the presence of Customs authorities after necessary valuation by them.  This applies equally to both trade samples, if otherwise permissible, and trade samples, if otherwise permissible, and trade goods.  The relevant Declaration Form i.e.  PP Form must be countersigned by the Customs.  However, in case of senders living in places ‘where there is no Customs House, a certificate from an authorised dealer in foreign exchange as to the value of contents of the article will be accepted by post offices in lieu of the Customs valuation provisionally’.

 

Drawback or Excisable Articles

 

Export of goods under claim for customs drawback is also permitted by post.  Except printed books eligible for concessional postage if despatched by Book-Post, which are exempt from sealing, all other parcels of articles proposed to be exported under claim for drawback or excise rebate should be presented to the nearest Customs and Central Excise Officer having jurisdiction over the place of posting, for examination along with Form D/AR4.  In case of bulk and heavy articles, an officer may also be deputed to the factory/godown of exporter to supervise the packing and sealing of such articles if requested in this behalf.  In case of excisable goods required to be inspected in the factory premises of the exporter, Form AR4 is to be filled in.

 

Form AR4:  These Forms are to be filled in quadruplicate in case of goods to be exported by post under excise rebate.  The duplicate copy of these duly processed Forms should be affixed with sufficient postage stamps before presentation to Post Office.

 

VP/COD Articles

 

Since the Money Order facility stands suspended, no articles can be sent by VP/COD notwithstanding the provision in the Exchange Control Manual.

 

2.         Booking at Post Offices

Parcel of both trade samples a well as trade goods intended for export to any permissible destinations may be booked at any Post Office in India, “provided they are made up according to given specifications and properly addressed and weighing up to specified limits” as discussed in detail later. 

These parcels are routed through the main Post Offices of Exchange i.e. Foreign Post Offices at Mumbai, Calcutta, Delhi, Iaipur and Madras or through the sub-offices of exchange at Ahmedabad, Bangalore and Cochin.  Such parcels should be accompanied with specified documents.

 
Documents

(i)            PP Form.  It is to be submitted in duplicate duly countersigned by the exporter’s bank.  In the case of jewellery items, the PP Form should also be countersigned by the Customs.

(ii)           Export Licence, if applicable

(iii)          Forms ‘D’ (in quadruplicate), for goods entitled to customs duty drawback, duly processed in the manner described above.

(iv)          AR4 Form (in sixtuplicate), for export of excisable goods in bond/rebate.

(v)           Insurance Note issued by Post Office for articles like jewellery and precious stones for which insurance is obligatory.

(vi)          Duty Exemption Entitlement Certificate, if applicable.

(vii)         Commercial invoice (in duplicate)

(viii)       Packing list (two copies)

(ix)          Self addressed envelope duly affixed with sufficient postage stamps for registration.

(x)           Any other document.

 

Small Pouch

For speedy clearance of the parcel, the exporter should stitch one small pouch on one of the packets (where there is more than  one) and keep therein:-

(i)            PP Form (second copy)

(ii)           invoice (one copy)

(iii)          packing list (one copy)

(iv)          self-addressed envelope duly affixed with sufficient postage stamps for registration charges

After keeping the above mentioned documents in the pouch, stitch it and write on the parcel in block letters “DOCUMENTS ENCLOSED”.

Availability of Forms:  The Insurance Note is available from Post Offices, P PP Forms from banks, Export licence from Export Trade Control Authorities. 

The booking clerk at the Post Office will receive the parcels and issue necessary receipt, provided the parcels are packed in the prescribed manner (detailed later) and accompanied with concerned documents.  The number and the date of the parcel will be entered on all the Forms except Form ‘D’ of which part III is to be completed by him.  He will retain the original copy of the PP Form, the duplicate and triplicate copies being returned to exporter.  Three copies of Form ‘D’ are retained and the fourth copy is given back to the exporter.

All parcels are, then, passed on the Foreign Post Office concerned for Custom clearance before the final despatch to overseas destinations.

3.  Customs Clearance and Despatch

The Postal Authorities at the Foreign Post Office will present the parcels to the Customs Officers attached with them and stationed in the Foreign Post Office itself for examination and verification of the correctness of the contents and declaration.  If any mis-statement in the ‘declaration’ as to sort, quality, value of the contents is suspected, or if the articles are subject to any restriction or prohibition, the parcels will be detained and/or notice issued to the sender calling for explanation and/or documentary evidence to prove that the export is authorised or permissible, or that ‘declaration’ furnished is correct.  If the explanation furnished or documents produced are found satisfactory, the parcel(s) will be allowed to be despatched out of India. 

In case explanation is found to be unauthorised or the mis-statement is deliberate or international, goods may be confiscated with or without an option to redeem them on payment of fine. 

Where the contents of the parcels and the documents relating thereto are found in order, the Customs allow their export.  They shall also attest the original copy of the PP form and one copy of the invoice.  The invoice duly attested will be returned to the postal authorities for onward delivery to the concerned exporter and PP form sent to the RBI.

 
Drawback Parcels

Parcels for export under claim for customs duty drawback will also be examined.  However, parcels already sealed by the Central Excise Officers prior to posting are normally not subject to further examination.  The drawback parcels are examined with reference to a few additional documents, given below, which the exporter simultaneously with the booking of parcel, sends separately to Customs Office attached with Foreign Post Office.  The additional documents are:-

(i)            Commercial Invoice.  For ‘canalised items’, invoice must be endorsed by canalising agencies.

(ii)           Packing list in case there is more than one parcel in one consignment.

(iii)          Quality Control and Pre-shipment Inspection Certificate, if required.

 

The Customs Office will link these documents with the three copies of Form ‘D’ sent along with parcels by Superintendent Foreign Post Offices.  In cases where the declaration/information furnished is furnished is found to be incorrect or incomplete, suitable action will be initiated for accepting or rejecting the claim for duty drawback after affording adequate opportunity to the exporter to explain his case.

Dutiable Parcels

In case of parcels containing articles, subject to levy of customs duty, the Customs Officer will issue an intimation (in triplicate) to the exporter directing him to pay the duty at the nearest Customs Office/Treasury.  These ‘forms’ containing intimation are to be presented at the office indicating along with the amount of duty due.  The original of the form will be retained at the Customs Office and the other copies returned to the exporter with endorsement of realisation of duty.  The duplicate copy is to be presented to the Postal Appraising Department of Foreign Post Office.  On verification, the export of parcel(s) will be permitted. 

Articles for Re-import 

In case of articles wished to be exported for purposes of getting them repaired and re-imported, exporters should ask for and obtain an Export Certificate from the Customs Authorities at the Postal Appraising Department of Foreign Post Offices.  Such a ‘Certificate’ will obviate the difficulty in getting clearance on their re-import through Customs, mainly with reference to levy of duty and import control regulations.

Damage to or Loss of Parcel(s): Postal articles are under the physical custody of the Post Offices during the process of transit in export.  Complaints, if any, relating to the damage to or loss of contents or non-arrival of the parcel(s) at the destination, should be sent to the Superintendent of Foreign Post Office concerned.

2.            Weight, Dimension, Packing Limits on Weight

The weight of post parcel(s) should not exceed the specified limits as shown below.

Surface Mail:  10 kgs. to all countries except those which don’t admit parcels of more that 10 kgs.  But there is an overall limit of 20 kgs.  Information on such countries should be obtained from any Post Office in India.
 
Air Mail:  20 Kgs. to all countries except Lebanon, Marshal Islands, Nepal and Pureto Rico for which the limit is 5 (five) Kgs.  Parcels for Quemuy in Taiwan (formosa) are allowed of 3 kgs. only
 
Dimension

Foreign parcels are subject to the following limits regarding their dimensions.

Maximum.  Length of parcel should not exceed one metre.  The sum of the length and greatest circumference measured in a direction other than the length, should not exceed two meters.

Minimum.  A parcel should have a surface measuring not less that 90 mm x 140 mm.

Make-up & Packing

(i)            Every parcel must be packed and closed in a manner with due regard to the weight and the nature of the contents as well as the more of transport and length of journey.

(ii)           The exporter’s mark must not be currency coin or merely a series of straight curves or crossed lines which are amenable for easy imitation.

(iii)          Seals must be placed over joint or flap of the covering of parcel.  In case a string is used in packing, a seal must be put on the ends of such string where they are tied.

General Instructions: The insured value of such parcels be (i) expressed in Indian currency which should be written on the parcel in words in Roman Lettering and figures in Arabic Numerals at the top of the address side, as “Insured for Rupees Five Hundred only (Rs. 500)”, and (ii)  it should be entered in words and figures on ‘Despatch Note’ in the space provided.

5.  Shipping or Shipment Advice

As in case of despatch of cargo by sea, air, etc., the exporter may send an intimation to his overseas buyer to that effect.  A copy of the commercial invoice and packing list along with the date of despatch and the bank’s name, etc. may be sent to the overseas buyer.

CHAPTER 12

NEGOTIATION/COLLECTION OF DOCUMENTS

1.  Approaching a Bank

Payment against exports should normally be realised through an authorised dealer in foreign exchange.  However, payment of export proceeds can be received directly from the overseas buyer in the form of bank draft, pay order, banker’s cheque, personal cheque foreign currency notes, foreign currency traveller’s cheques, etc. without any monetary limit provided the exporter’s track record is good, the is a customer of the authorised dealers through whom documents are to be negotiated and prima facie the instrument of payment represents export proceeds realisation.  Take care to submit various documents in a proper manner and within the prescribed time schedule.  Follow the hints given herein with regard to important banking documents like Commercial Invoice, GR Form, Bill of Lading, Insurance Policy, etc.  Apply to the Reserve bank for extension of time in case you feel there is likely to be a delay in realising export proceeds.

In terms of Foreign Exchange Regulations, all payments for exports of goods and/or services must be realised by exporters through the medium of a dealer in foreign exchange, unless permitted otherwise in the manner prescribed (detailed later).  After the despatch of export consignments to foreign destinations whether by land, sea, air or post, the exporters should approach his bank (which should be an authorised dealer) with a formal letter requesting it to realise the sale proceeds from his foreign buyer.

Time Limit 

It is obligatory for the exporters to submit the shipping documents to an authorised dealer within 21 days of the date of shipment of all goods, except those relating to jewellery and precious stones in which case the documents should be submitted within five working days from the date of counter-signature on them.

Full value of the exports should be realised on due date for payment or within 6 months from date of shipment, whichever is earlier to all countries.  However, the prescribed period for realisation of proceeds of export consignment sent to Indian-owned warehouses abroad established with the permission of Reserve Bank, a minimum period of 15 months is allowed.

Advance payment against Exports

Indian exporters are allowed to receive advance payment from their overseas buyers subject to the condition that (i) rate of interest on such advance does not exceed libor plus 100 basis point, (ii)  the shipments to be made against advance payments so received, are monitored by the bank in India through which an advance payment has been received and (iii)  the shipments are made within one year from the date of receipt of advance payment.

Refund of Advance payment:  Where exporters are unable to make shipments against advance payment received for exports, they are allowed to make remittance towards refund of advance payments (partly or fully) within a period of one year of its receipt. 

Direct (Cash) Payment

Exporters may not accept direct i.e. cash payment from overseas importers, provided the goods are despatched  in due course.  The authorised dealers are also permitted to handle documents in cases where the exporter has received payment directly from overseas buyers form exports in the form of bank drafts, pay orders, banker’s cheques and personal cheques, foreign currency notes/travellers cheques without any monetary limit.  However, following conditions need to be satisfied. 

(i)        The exporter’s track record is good.

(ii)       The exporter is a customer of the authorised dealer.

(iii)      Prima facie the instrument represents payment for exports.

 

Further, RBI vide its Notif. No. FERA 158/94-RB dt. 24/2/94 has granted general permission to resident Indians to receive foreign currency from any non-resident who is on a visit to India for services rendered or in settlement of any lawful obligation subject to the condition that the foreign currency so received should be surrendered to an authorised dealer within 7 day of its receipt.

Persons tendering the foreign currency notes/coins need not necessarily possess passports and, hence, its production may not be insisted upon as a matter of course by an authorised dealer.  Specific instances where bank i.e. A.D. insisted upon the production of passport by the person tendering foreign currency notes for encashment may be brought to RBI’s notice for suitable follow up action.

Pre-payment of Export Bills:  Exporters are permitted to give cash discount to the overseas buyer for pre-payment of export proceeds to the extent of amount of proportionate interest on un-expired period of usance where the export contract stipulates the rate of interest or at the prime rate of the currency of invoice where the export contract does not specify the rate of interest.

Extension:  Where it is not possible to realise the export sale proceeds within the prescribed period, apply for extension of the same in the prescribed form ETX (in duplicate).  Extension will not ordinarily be granted unless RBI is satisfied that the exporter is in no way directly or indirectly responsible for the delay in realisation of proceeds and by the grant of a short extension the exporter will be able to realise the proceeds.

Documents 

The letter to the bank should be enclosed with the documents as prescribed in the letter of credit, if any, or stipulated in the export order or such documents which enable the buyer to take delivery to claim export assistance, if any.  The documents generally required by bank to negotiate for or collect necessary payment from abroad and those required by the exporter are the following:- 

(i)         Bill of Exchange (First of Exchange and Second of Exchange).

(ii)       Full set of Bill of Lading/Air Waybill (all negotiable copies plus one non-negotiable copy)/Post Parcel Receipt/Combined Transport Document as the case may be.

(iii)      Commercial invoice including one copy duly certified by the Customs.  The number of copies should be the same as specified by the buyer plus two additional copies.  Invoice not certified by the Customs may also be acceptable, in cases where the particulars furnished in the GR form agree with those indicated in the copy of invoice produced by the exporter and the value of the invoice agree with the value of goods passed for shipment by Customs.  However, Customs Certified invoice is necessary where the RBI has specifically stipulated such a requirement, viz, for counter signing GR.

(iv)      Original letter of credit, if any.

(v)        Customs Invoice.

(vi)      Certificate of Origin, GSP/APR Certificate, etc.

(vii)     Insurance policy/certificate with complete set. (brokers cover note should not be sent).

(viii)    Packing List.

(ix)      Foreign exchange declaration forms i.e. GR/SDF/Softex/PP Forms - duplicate copies.

(x)        Exchange Control copy of the Shipping Bill.

(xi)      Bank certificate of export realisation in the prescribed form (in triplicate).

(xii)     Other documents like certificate of analysis/inspection certificate, etc.

(xiii)    Original sale contract entered into between exporter and overseas buyer.  In the absence of sale contract, any of the following documents:

(a)     order of the overseas buyer together with order confirmation of exporter,

(b)     proforma invoice of exporter buyer together with order confirmation of exporter,

(c)     indent from overseas buyer or his authorised agent.

Another copy of GR/SDF and SB:  In cases where the duplicate copy of the GR form/Exchange Control copy of the Shipping Bill, to which the form SDF has been appended., is misplaced/lost by the exporter, Ads may accept another copy of duplicate GR form or EC copy of SB together with SDF form, as the case may be, duly certified by the Customs authority for collection/negotiation of documents.

While the documents at serial Nos. (ii) & (ix) are received by the exporter from his Clearing & Forwarding Agent after the shipment of goods, remaining documents are either already with t he exporter having been prepared before the shipment of goods or to be prepared for submission to the bank.  In several cases, more than one copy of a document should be forwarded to the bank depending on exporter’s or the overseas customers requirement.  Since it is customary to despatch two sets of documents by two different mails followed by one another, at least the documents to be transmitted abroad, be submitted in duplicate.

Important:  Before presenting the documents to bank for negotiation, check the following points.

(i)        Where the sale contract is on FOB, f.a.s. etc basis, include the amount of freight in the invoice and the bill

(ii)       In the case of c.i.f., & c & f etc. contracts where freight is sought to be paid at destination, deduction should have been made only to the extent of freight declared on GR form on the actual amount of freight indicated on the Bill of Lading/Air Waybill, whichever is less.

(iii)      Where the marine insurance is taken by the exporters on buyer’s account, actual amount paid should have been received from the buyer through invoice and the bill.

Moreover, the documents should not reveal any material inter se discrepancies in regard to description of goods exported, export value or country of destination.

Variations in Value:  The export realisable value may be more than what was originally declared to/accepted by Customs on the GR form in certain circumstances such as where in c.i.f., or c & f contracts, part or whole of any freight increase taking place after the contract was concluded is agreed to be borne by buyers or where as a result of subsequent devaluation of the currency of the contract, buyers have agreed to an increase in price.

In some lines of export trade, final settlement of price may be dependent on the results of such analysis will become available only after shipment.  Sometimes, contracts may provide for payment of penalty for late shipment of goods in conformity with trade practice concerning the commodity.  In such cases, while exporters declare to Customs the full export value based on the contract price, invoices submitted along with shipping documents for negotiation/collection may reflect a different value arrived at after taking into account the results of analysis of samples or late shipment penalty, as the case may be.

Hence, variations from the terms of contract, ADs may accept them on production of documentary evidence after verifying that the arithmetical calculations showing the variations and are based on the terms of underlying contracts.

Letter of Indemnity 

If The exporter is unable  to present documents in accordance with the terms and conditions of letter of credit, the bank normally refuses to negotiate the same.  Because, the bank’s authority is to accept documents as described in the L/C.  In such an eventuality, the solution is to execute a ‘letter of indemnity’ or request the bank to obtain special ‘Authority to Pay’ from the bank of the overseas importer which has advised the L/C.  The implications of an indemnity letter is that in the event of refusal of payment by the opening/reimbursing bank, the negotiating bank can debit the amount to exporter’s account.  Each bank has its own form of indemnity. 

Documents relating to shipment not covered by L/C, are also accepted for negotiation by banks, provided the exporter has obtained a ECGC policy for the amount covered and a ‘status report’ on the buyer.  Details on ECGC policies are explained in a separate Chapter.

Transfer of Documents 

The banks may accept from their constituent-exporters for negotiation/collection, shipping documents covering exports even where the original declaration on GR Forms has been signed by some other party, provided-

(i)        the constituent is in possession of an Exporter’s Code Number allotted by the Reserve Bank;

(ii)       the constituent drawing the Bill countersigns (quoting his code number also) on the duplicate copy of GR Form, the undertaking to deliver to a bank the foreign exchange proceeds of the shipments within the prescribed period; and

(iii)      the constituent furnishes a declaration on the duplicate copy of the GR Forms as under:-

“I/We am/are resident(s) in India or I/We have a place of business in India and I/We have become entitled to sell the goods exported or to procure their sale, and

I/We am/are not on  the Exporter’s Caution List of the Reserve Bank”.

Despatch of Documents

Before the transmission of documents for negotiation/collection, the bank examines them thoroughly with reference to the terms and conditions of the buyer’s order, letter of credit and the laws relating to foreign exchange control. 

If after scrutiny, the documents are found in order, the bank despatches them to its overseas branch/correspondent as expeditiously as possible. 

Direct to the Consignee:  Banks may despatch shipping documents direct to the consignees or their agents resident in the country of final destination of goods in cases where advance payment or an irrevocable L/C has been received for the full value of the export consignment and the underlying sale contract/letter of credit provides for despatch of shipping documents direct to the consignee or his agent resident in the country of final destination of goods.  Besides it will be in order for Ads to handle documents in cases where the exporter has received payment of export proceeds directly from the overseas buyer in the form of bank draft, pay order, banker’s cheque, personal cheque, foreign currency notes, foreign currency travellers cheques, etc, without any monetary limit provided the exporter’s track record is good, he is a customer of the concerned A.D.  and prima facie the instrument represents payments for export.

Telegraphic Delivery Order (TDO):  For consignments to nearby countries such as Sri Lanka, Malaysia, Indonesia, Gulf countries, Kenya, Tanzania, etc., exporters may obtain the signed Telegraphic Delivery Orders from the shipping company/agent addressed to their agents at the port of delivery, and hand over the same to their bank.  The banks would, then, prepare its own cable instructions to its overseas correspondent and despatch both the cable and the TDO prepared by the shipping co./agent simultaneously.  In its cable the bank would issue suitable instruction regarding handing over of the delivery order to the consignee and payment to be obtained against the shipment.

B/L to Master of Vessel etc.  In case of export to certain landlocked countries, particularly in Europe, the letter of credit may stipulate that one negotiable copy of Bill of Lading should be delivered to the Master of the Vessel or trade representative of the country concerned.  The bank delivers the B/L to either of them, provided the L/C is irrevocable and documents conform strictly to the L/C terms.

Change of Tenor of Bill 

Substitution of D.P. bills by D.A. bills is allowed provided the date of maturity of the D.A. bills falls within the period prescribed for realisation of proceeds of export.  In case of commodities subject to floor price restrictions, the authorised dealer would permit such substitution only if a ‘no objection certificate’ has been produced from appropriate authority enforcing the floor price unless overseas buyer has agreed to pay interest for usance period. 

The preparation of documents in accordance with these stipulations and adherence to exchange control regulations involve several intricacies.  Similarly, the realisation of export proceeds necessitates several additional documents/statements to be prepared by the exporter, in addition to the shipping documents.

Change of Tenor of Bill:  It will be in order for ADs to allow change of tenor of bills in respect of bills drawn on the original buyer or the alternate buyer, provided the revised due date of payment does not fall beyond six months from the date of shipment and the change of tenor takes place before the original due date of payment of the bill.

2.  Reduction in Invoice Value

The amount of bill which has been negotiated for sent for collection, may be reduced (i)  up to 10% and (ii) up to any limit i.e. without any percentage ceiling and (iii)  reduction on account of pre-payment of usance bills.

10% Reduction

Send an application by a letter to the bank giving therein or with –

(i)         full particulars of shipment

(ii)       an attested copy of invoice

(iii)      documentary evidence in support of the reduction sought for.

 
Conditions
 
            The reduction will be allowed provided:

(i)         it does not exceed 10% of invoice value and it does not relate to an export of-

(a)     gold or silver jewellery or articles made out of cut and polished diamonds

(b)     export is not subject to floor price stipulations, and

(c)     the exporter is not on the exporter’s caution list (1) of Reserve Bank.

No Ceiling

In case of exporters who have been in export business for more than  three years, reduction in invoice value may be allowed, without any percentage ceiling subject to: 

(i)         above conditions as for 10% reduction,

(ii)           track record of exporter is satisfactory i.e. the export outstanding don’t exceed 5% of the average annual export realisations during the preceding three calendar years,

For the above purpose, the exporter should give:

(i)            a declaration, duty certified by his auditors or by a Chartered Accountant, indicating the total export realisations during each of the preceding three calendar years

(ii)           export bills outstanding beyond the prescribed period for realisation o0f export proceeds

(iii)          average outstanding in absolute and percentage terms

Percentage Outstanding:  For the purpose of reckoning the percentage of outstanding export bills to average export realisations during the preceding three calendar years, outstanding export bills in respect of exports made to countries facing externalisation problems may be ignored provided the payments have been made by buyers in local currency.

Periodicity:  The above declaration duly certified, will be submitted, as on January and July every year.

Reduction on account of Pre-payment of Usance Bills

See foregoing pages for details.

GSP Concessions

Exports effected under the Generalised System of Preferences (GSP) on which the benefit of the scheme is not available on account of the quota ceilings applicable on their import in the concerned countries having been reached, are also eligible for reduction in their invoice value.  Authorised dealers would allow reduction in invoice value to the extent of duty paid abroad without reference to RBI, provided the exporter produces:

(a)      certificate from the GSP certifying agency in India that the product in question is covered by the GSP Scheme of the importing country,

(b)      certificate from the Indian Mission in the importing country indicating date on which the quota level for the commodity in question under GSP was reached, and

(c)      suitable documentary evidence regarding the duty paid/payable by importers abroad.

Refund: Where export proceeds have already been realised by the exporter, the amount of duty paid by the importer may be required to be refunded by remittance from India.  Applications for such refund are to be referred to Reserve Bank together with documents specified above.  In addition, a certificate from the authorised dealer about realisation of export proceeds must also be enclosed.

3.  Foreign Exchange Formalities

Declaration as regards export of goods and services

i)       Every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms set out in the Schedule i.e. GR, SDF, PP and SOFTEX forms, and supported by such evidence as may be specified, containing true and correct material particulars including the amount representing—

(i)      the full export value of the goods or software; or

(ii)       if the full export value is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market, and affirms in the said declaration that the full export value of goods (whether ascertainable at the time of export or not) or the software has been or will within the specified period be, paid in the specified manner.

(1)       Declarations shall be executed in sets of such number as specified.

(2)       For the removal of doubt, it is clarified that, in the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the FEMA, and these Regulations, as also other rules and regulations made under the Act.

Exemptions

Notwithstanding anything contained in Regulation 3, export of goods or services may be made without furnishing the declaration in the following cases, namely:

(a)       trade samples of goods and publicity material supplied or unaccompanied;

(b)       personal effects of travellers, whether accompanied or unaccompanied;

(c)       ship’s stores, transhipment cargo and goods supplied under the orders of Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements;

(d)       goods or software accompanied by a declaration by the exporter that they are not more than twenty five thousand rupees in value;

(e)       by way of gift of goods accompanied by a declaration by the exporter that they are not more than one lakh rupees in value;

(f)        aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their reimport into India after overhauling/repairs, within a period of six months from the date of their export;

(g)       goods imported free of cost on re-export basis;

(h)       goods not exceeding US $ 1,000 or its equivalent in value per transaction exported to Myanmar under the Barter  Trade Agreement between the Central Government and Government of Myanmar;

(i)        the following goods which are permitted by the Development Commissioner of the Export Processing Zones or Free Trade Zones to be re-exported, namely:

1)        imported goods found defective, for the purpose of their replacement by the foreign suppliers/collaborators;

2)        goods imported from foreign suppliers/collaborators on loan basis;

3)        goods imported from foreign suppliers/collaborators free of cost, found surplus after production operations.

(j)        replacement goods exported free of charge in accordance with the provisions of Exim Policy in force, for the time being.

 

Indication of Importer-Exporter Code Number

 

The importer-exporter code number allotted by the Director General of Foreign Trade under Section 7 of the Foreign Trade (Development & Regulation) Act, 1992 (22 of 1992) shall be indicated on all copies of the declaration forms submitted by the exporter to the specified authority and in all correspondence of the exporter with the authorised dealer or the Reserve Bank, as the case may be.

 

Authority to who Declaration is to be furnished

and the manner of dealing with the Declaration

A.  Declaration in Form GR/SDF

(i)      The declaration in form GR/SDF shall be submitted in duplicate to the Commissioner of Customs.

(ii)     After duly verifying and authenticating the declaration form, the Commissioner of Customs shall forward the original declaration form/data to the nearest office of the Reserve Bank and hand over the duplicate form to the exporter for being submitted to the authorised dealer.

B.      Declaration in Form PP

(i)      The declaration in form PP shall be submitted in duplicate to the authorised dealer named in the form.

(ii)     The authorised dealer shall, after countersigning the declaration form, hand over the original form to the exporter who9 shall submit it to the postal authorities through which the goods are being despatched.  The postal authorities after despatch of the goods shall forward the declaration form to the nearest office of the Reserve Bank.

C.     Declaration in Form SOFTEX

(i)      The declaration in form SOFTEX in respect of export of computer software and audio/video/television software shall be submitted in triplicate to the designated official of Department of Electronics of Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) or Export Processing Zones (EPZs) in India.

(ii)     After certifying all three copies of the SOFTEX form, the said designated official shall forward the original directly to the nearest office of the Reserve Bank and return the duplicate to the exporter.  The triplicate shall be retained by the designated official for record.

D. Submission of duplicate declaration forms to the Reserve Bank.  On realisation of the export proceeds, the authorised dealer shall after due certification, submit the duplicate of the GF/SDF, PP or as the case may be, SOFTEX form to the nearest office of the Reserve Bank.

Evidence in Support of Declaration

The Commissioner of Customs or the postal authority or the official of Department  of Electronics, to whom the declaration form is submitted, may, in order to satisfy themselves of due compliance with Section 7 of the FEMA and these regulations, require such evidence in support of the declaration as may establish that: 

(a)     the exporter is a person resident in India and has a place of business in India;

(b)       the destination stated on the declaration is the final place of the destination of the goods exported;

(c)       the value stated in the declaration represents:

1)      the full export value of the goods or software; or

2)      Where the full export value of the goods or software is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods in the overseas market.

Explanation

For the purpose of this regulation, ‘final place of destination’ means a place in a country in which the goods are ultimately imported and cleared through Customs of that country.

Forms of Declaration 

As stated earlier, different forms of declaration have been prescribed for different types of exports categorised according to their destination and/or means of carriage or kind of export goods.  Each of the different type of forms is printed in distinctive colour or ink and each set bears a printed number which appears on both copies in the set.  This number together with the alphabetical prefix like AH, BY, DEL, should invariably be cited in all remittance applications and correspondence with RBI.  In the case of exports declared on GR form, the 10 digit number allotted to the GR form by Customs should also be cited in full.  These forms are available from authorised dealers in foreign exchange which include most of the scheduled banks.

GR Form:  This is known as Exchange Control Declaration (GR) form and required to be completed in duplicate, in respect of all shipments made otherwise than by post to all countries other than Nepal and Bhutan, and submitted to Customs authorities at the port of shipment.  (Every GR Form bears a superscription indicating the date before which it should be used).

However, declaration on GR/PP form is not required in certain cases as detailed above under ‘Exemptions’.

While filling up the Form, care should be taken in respect of the following:

(i)        The inapplicable terms or clauses should be clearly scored out and required information recorded in the space earmarked for respective items in the form,

(ii)       Bank’s name and address through which the export proceeds have been or will be realised should be specified in the space provided,

(iii)      Where export is being made against a firm order or sale contract, the word ‘consignor’ appearing in the declaration part of the form and the entire clause (b) thereof should be struck out.  If export is on ‘consignment’ basis, the word “seller” and the entire clause (a)  in declaration part of the form should be struck off,

(iv)      (a)  Under the item ‘analysis of full export value’ a break-up of the full export value of goods under FOB. value, freight and insurance should be furnished in all cases, irrespective of the terms of contract,

(b)       The FOB. value exclusive of forfaiting discount should be indicating  against the sub-column “FOB value”.  The forfaiting discount will, however, has to be shown separately under sub-heading “other deductions”. On the basis of Exim Bank Certificate,.

(v)       trade discount and/or agency commission if payable should invariably be declared in both the copies of GR/PP form before submission,

(vi)      all the entries should be made in the currency of the invoice including commission, freight, etc.,

(vii)     give correct “Importer-Exporters Code Number”.

(viii)   In the case of exports made under deferred credit arrangement or to joint ventures abroad against equity participation or under rupee credit agreement, the number of and date of the relative AD circular should be recorded at the appropriate place in the GR form.

If the amount of freight and/or insurance is/are known after the goods are placed on board the ship such as (in the case of short shipment) these details should invariably be recorded in the duplicate copy of the form before presenting to an authorised dealer for negotiation or collection of bills.

Processing:  After examination of the particulars in the form and admittance of the shipping bill, customs will certify the export value and brand, their running serial number on both the copies of the GR Form.  They will retain the original copy for being forwarded to the RBI and return the duplicate to the exporter.

Exporter will submit the duplicate copy of the GR Form again to Customs along with  the cargo to be shipped.  After examination of the goods and certifying the quantity passed for shipment on the duplicate copy, customs will return it to the exporter for submission to an authorised dealer for negotiation or collection of export bills.

The following procedure is to be followed in regard to filling of the GR forms where exports are to be made by road, rail or river.

Exports by Barges/Country-Craft or Road Transport:  The GR form is to be presented to the customs authorities at the border.  The exporter may arrange either to give the form to the person in-charge of vehicle/vessel or forward to his agent at the bo9rder for being presented to the Customs.

Exports by Rail: At certain designated railway stations a list of which can be obtained from the Railways, Customs staff have been posted to collect the relevant Forms relating to goods loaded at these stations so that goods may move without further formalities.  In regard to goods loaded at stations other than designated stations, the Forms should be presented to the Land Customs Stations at the border.

PP form:  Exports to all countries other than Nepal and Bhutan., by parcel post, be declared on PP Form which is also to be filled in duplicate.  In the first instance, this Form should be presented to the bank for countersignature except where RBI has specifically waived the requirement of countersignatures in the case of the concerned exporter.  The parcels containing articles of jewellery or precious stones must first be produced for valuation to the Customs who will seal the parcel and stamp the invoice.  The banks will countersign the PP Form only after the completion of Customs formalities.  All parcels should moreover, be addressed to the bank’s branch or correspondent in the country of  importation, except in the following cases:

(i)        where an advance payment of full value of the export has been received through an authorised dealer.

(ii)       Where an irrevocable letter of credit for the full value of the export has been opened in favour of the exporter and advised through the bank concerned, or

(iii)       the authorised  dealer is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realisation of the export proceeds, that he could do so.

Particulars of advance payment/letter of credit/authorised dealer’s certification of standing, etc. of the exporter should be furnished on the form under proper authentication.

ADs are permitted to countersign the PP forms covering parcels addressed direct to the consignee even where neither an irrevocable letter of credit nor advance payment has been received covering the full value of the goods provided the AD is satisfied, on the basis of the standing and track record of the exporter and the arrangements made for realisation of export proceeds, that this could be done.  These revised instructions will also be applicable for export of jewellery and precious stones by post parcel. Hence, RBI’s permission for sending parcels directly to buyers/consignee is no longer necessary.

If the AD is not satisfied about the standing etc. of the exporter. The application would be rejected.  No reference need be made to Reserve Bank.

The bank after countersigning the forms will return the original copy to the exporter for presentation to the post office.  It will also instruct its overseas branch/correspondent concerned to deliver the parcel to the consignee against payment or acceptance as the case may be, of the relative bill.

Wherever bank is not able to countersign the PP Form on account of (i)  absence of banking facility in the country of importation, (ii) payment has been received otherwise than through the bank e.g. through postal orders/money order, the exporter should approach the RBI for countersignature.  The manner of processing/disposal of the PP Form is broadly the same as that for GR Form.

SOFTEX Forms for Computer Software:  For export of computer software in non-physical form i.e. direct data transmission abroad through dedicated earth stations/satellite links, and also for export of video/TV software and all other types of software products/packages, declaration is to be made on SOFTEX form in triplicate.  Each set of these forms comprises three copies marked Original, Duplicate and Triplicate which carry an identical pre-printed number.  All the three forms in each set should be completed and the entire set submitted for the purpose of valuation together with relevant documents.  Each exporter will have to designated a single branch of an authorised dealer to whom export documents in respect of all software exports made vide dedicated earth stations/satellite links will be submitted by him together with the relative SOFTEX forms for negotiation/collection.

            Valuation of exports of software through satellite links, and video/TV software etc.  will be done by officials of the Department of Electronics, Government of India at the Software Technology Park of India (STPI) of nearest STPI.  After certifying all the three copies of the SOFTEX forms, the officials will directly forward the original to the nearest office of the RBI the day it is received or the next day and return the duplicate to the exporter.  The triplicate will be retained by the designated officials for record of the Department of Electronics.(1)

SDF Form:        The Statutory Declaration Form (SDF)  is required in case of exports the shipping bills relating to which are processed electronically.  It replaces GR form.  It shall be appended by the exporter to the Shipping Bill.

After verifying and authenticating the declaration in SDF, the Customs will hand over to the exporter, one copy of such SB marked “Exchange Control Copy” to which the form had been appended, for being submitted to AD (Bank).

The manner of disposal of SDF shall be the same as for GR form.

Short Shipment

In the event of short shipment of goods , the exporter should file a short shipment notice in the prescribed manner with the customs.  The details of the goods actually shipped should be show in the duplicate copy of the GR Form while submitting it along with shipping documents to an authorised dealer for negotiation or collection of bills.

In case there is delay in obtaining certified Short Shipment Notice from Customs, exporter should give an undertaking to the authorised dealer stating that the Notice has been filed with the Customs and a copy thereof will be furnished as soon as it is obtained from the customs.

Shut-Out Shipment 

Where a shipment has been completely shut-out, and proposed to be shipped by another vessel, exporters should apply to the Customs for permission to amend the name of the vessel in GR form and shipping bill.

Where there is delay to re-ship the completely shut-out shipment, exporter should give notice in duplicate of GR form and shipping bill, for cancellation of original GR form.  The customs will certify the duplicate of the notice as correct and forward it to the RBI, along with unused duplicate copy of the GR.

If a shut-out shipment is to be shipped subsequently, a fresh set of GR form is to be completed.

Future Shipment

In case of clean bills covering future shipments, complete set of Forms GR or PP as appropriate is to be filled in and lodged with bank along with the Bill for negotiation.  The bank sends the original copy after the negotiation of Bill and duplicate after payment against the Bill is realised.  The exporter should submit a complete second set of the forms concerned, after the shipment is actually made, stating in Red Ink on all copies that a clean Bill had already been drawn against the shipment against GR/PP Form No… date…..  In case of shipments made in more than one lot, a different set of Forms is to be used to cover each shipment.  As usual, the original copy of new Forms for each shipment, is to be submitted to the Customs/Postal authorities.  The duplicate copy together with a copy of invoice should be sent to the RBI through the bank which negotiated the original clean Bill.  If, however, a supplementary bill is negotiated covering freight or other charges or for the balance of shipment, the duplicate copy of the second Forms be attached with the Bill and submitted to the negotiating bank.

Importer-Exporter Code Number

Every exporter is required to invariably cite his Importer-Exporter Code Number allotted by the Regional Licensing Offices of the DGFT, in the different ‘declaration forms’ explained above. 

Methods for Realisation

The RBI has prescribed the methods by which payment for exports of goods from India must be realised.  These are given in Chapter 14.  Besides, conditions have been laid down to realise the proceeds within a particular period, viz; six months, except for exports made under deferred payment arrangements and 15 months in respect of exports to Indian-owned warehouses abroad.  The RBI may, however, extend this period if sufficient and reasonable cause is show for such extension.  Moreover, all proceeds must be brought in through the medium of an authorised dealer in foreign exchange, unless exempted otherwise.

For the purpose of receiving payment against exports, countries have been divided into two groups, namely, (i) All countries other than those in the other group i.e. ACU countries and (ii) Asian Clearing Union (except Nepal).  The countries in ACU (other than Nepal) are Bangladesh, Myanmar, Iran, Pakistan and Sri Lanka.

Realisation of proceeds for exports in a manner other than the specified methods requires special permission of the Reserve Bank of India.

RBI’s Guidelines for Realisation:  The RBI has issued guidelines to help exporters realise their export proceeds.  These guidelines cover the pre-export stage, the actual export and the procedures to be followed after completion of exports.  Following RBI’s advice in this regard may help an exporter to minimise delay or default on the realisation of export proceeds due from the importer.

1.        The exporter should verify the financial standing of the banker’s overseas buyer through his banker’s branch correspondent in the importer’s country, or the Export Credit Guarantee Corporation of India (ECGC) to satisfy himself that the buyer has adequate means to meet his commitments on due dates.

2.        The exporter should adhere to the delivery schedule, as well as quality specifications laid down in the contract as, on many occasions, the   buyers refuse to make payments on account of delays in shipments, and also because of interior quality of the goods exported.

3.        In the case of goods exported under letter of credit, the exporter should ensure that the terms of the letter of credit are in accordance with the terms of contract.  Further, the exporter should also ensure that the terms of credit are strictly complied with.

4.        When the payment of the bill falls due, the exporter should follow up with the buyers for payment.  In the case of DA bills, if the payment is not received on the due date, the bill should be protested promptly and followed up.

5.        In the case of DP bills, if the payment is  not made by the buyer, the exporter should arrange for warehousing of the goods through the overseas correspondent of the bankers and arrange to reimport the goods on ‘freight-to-pay’ basis in case he is not in a position to find an alternative buyer in reasonable time.

6.        In case where the buyer has not accepted the bill, and has refused  to take delivery of the goods, the exporter should arrange to reimport the goods if he is not in a position to find an alternative buyer.

7.        In the case of dishonoured bills, the exporter should issue a legal notice and consider initiating legal proceedings against the buyer if the legal expenses likely to be incurred are not disproportionate to the value of the shipment.  For the purpose of remittance of legal costs, the exporter must apply to the AD/Reserve Bank of India along with the opinion of the local lawyers or the lawyers from the buyer’s country regarding the changes of recovery of proceeds.

8.        The exporter may also obtain assistance from the Indian mission in the buyer’s country, or the representative trade bodies there.

9.        The exporter can resort to arbitration if the contract provides for an arbitration clause.

10.      In extreme cases, the exporter may, with prior approval of the Reserve bank, seek the assistance of debt collecting/recovering agents/expeditors against payment of reasonable charges.

11.      In cases where the exporter is not in a position to realise the proceeds within the prescri8bed period, he should apply to the Reserve Bank for extension of time limit in form ETX , explaining the reasons for non-realisation of proceeds and the steps taken in this regard.

12.      Only when the exporter has exhausted all means to realise the proceeds, he may approach the Reserve Bank of India for writing of the amount receivable and closure of the case. This application will be considered by the bank on merit.

Deferred Payment:  For receipt of proceeds over a period exceeding the specified limit of 6 months, prior approval needs to be obtained from the RBI.  Applications for this purpose i.e. deferred payment, which is allowed in respect of exports of capital and engineering goods, should be sent in the prescribed form through an authorised dealer in foreign exchange, to the Reserve Bank.

Specific permission of the RBI has also to be obtained before finalisation of the export contract with an overseas importer.  Application for this purpose should be made in the form of a letter with necessary documents.

Selling Commission 

Remittance of commission to overseas agents for canvassing orders for exports is allowed without any prior permission of the RBI.

 However, payment of commission is not permitted if the documents are negotiated under “reserve” or sent on “collection basis” on account of discrepancies or in compliance with the terms of the Letter of Credit.

Trade Discount

Export by Sea or Air:  Trade discount must be declared by exporter or relative GR form at the time of shipment and accepted by Customs.  Bills in respect of exports by sea or air which fall short of the value declared on GR forms on account of trade discount may be accepted by Ads (banks) only if declaration as above has been made.

Export  by Post Parcel:  Ads have been permitted to accept deductions on account of trade discount in the case of exports by post parcel declared on PP form, provided  they are in conformity with the normal level of  discount usually offered in the particular line of export trade.  No ceilings have, however, been stipulated on the quantum of deductions to be allowed by ADs.

Post Offices will not undertake scrutiny of trade discount deductions.

4.  Common Errors in Documents

Invoices

Commercial:  The invoice should be prepared carefully and the information provided therein, must tally with that of Bill of Lading and other documents.  The merchandise be described therein exactly as stated in the letter of credit though other details might be included as well.  The number of copies to be submitted to the bank should be the same as are required in the letter of credit, in addition to the copies required for claiming export incentives.  The COMMON ERRORS generally noticed in the invoices and which should be avoided are in the following:

(i)        the invoice is not made out by the beneficiary, and description of the merchandise is not exactly the same as given in the L/C.

(ii)       it is not made out in the name of the buyer or the person especially mentioned in the credit,

(iii)      description, marks and numbers of packages in the invoice do not conform to those appearing in the Bill of Lading/Air Waybill or other documents.  The additional description of goods, if any, given in the invoice should not be in conflict with the description as per the L/C,

(iv)      the amount of the invoice differs from the amount mentioned in the draft drawn under the terms of the credit, or it is in excess of L/C amount,

(v)       invoices contain adjustments of account or adjustments on prior shipment or expenses not allowed by the credit such as warehouse expenses, cable charges, demurrage, financing charges, ,petties, etc.,

(vi)      excess drawing or excess shipment or shipment of merchandise not covered by the credit,

(vii)     prices and their basis e.g., FOB, C&F, CIF, are not as specified in the credit,

(viii)   the invoice is not signed or certified or authenticated as stated in the letter of credit,

(ix)      invoices are not marked paid., if called for by the credit,

(x)       weight of merchandise in the invoice differs from those shown in other documents or gross weight shown for net when not expressly permitted by credit terms,

(xi)      export order and buyer’s import licence numbers are omitted though required by credit,

(xii)     statements/declarations though required by credit have been omitted,

(xiii)   invoice does not contain GR/PP form number.

 

Customs/Consular Invoices.  These should be prepared on the correct form because they vary from country to country.  The Customs Invoice must be signed by two persons, the exporter or manufacturer and a witness.  It must also indicate the Indian origin of the merchandise.  The Consular Invoice should incorporate all the conditions fixed for their validity by the Consular Authorities of the countries of importation. 

Bill of Lading

            Bill of Lading is of different types.  Before their submission to the bank, care should be taken on the following aspects.

(i)        All modifications, additions or corrections in the B/L must be attested by the seal and signature of the carrier

(ii)       The date of B/L should not be later than the shipping date specified in the L/C.

(iii)      The B/L being an independent document giving right to the delivery of merchandise should not contain any reference to any other contract such as the conditions of Charter party.  Therefore, Charter Party Bills of Lading should not be accepted unless permitted by the L/C.  Similarly, country craft or sailing vessel bills of lading, Port of Custody B/L or a B/L evidencing shipment of deck are not acceptable.

(iv)      The port  of shipment and destination mentioned in the credit should be strictly followed in the B/L

(v)       The B/L should not be stale.  It is considered stale if presented to the bank so late after its date that it is not possible for the bank to despatch it in time to reach the port of discharge by the time of the arrival of vessel carrying the export merchandise.

(vi)      The marks and numbers, number of packages and the description of/in the B/L should correspond to those given in the invoice.

(vii)     The B/L should be manually signed as a rubber stamp signature is not acceptable, by the shipping company or its authorised agents.  Bills of Lading issued by forwarding agents are not acceptable.

(viii)   The words “Freight Paid” ought always to appear in B/L in a prominent place in case terms of credit are C&F or C.I.F.

(ix)      The B/L must show that the merchandise has been loaded on board (unless waived by credit terms) and that ‘on board notation ‘ must be dated and signed.

(x)       It should not be “straight” and blank endorsed or issued to the order of overseas bank, depending on the L/C terms.  B/Ls should not be made out to the order of buyers.  It should state ‘notify’ party’s name and address wherever called for in the L/C.

(xi)      It should be only for the merchandise stipulated in the L/C.

(xii)     It must contain the number of GR/PP Form on which goods have been declared.

 

Endorsement on B/L.  By practice and custom, the B/L is transferable.  Any endorsement thereon should, therefore, be made out with great care and be strictly in conformity with letter of credit.  The following is one of the most usual clauses with regard to B/L in the L/C. 

“Full set clean “shipped” or “on board” Bill of Lading (i) to order and endorsed in blank or (ii) endorsed to the order of …………or, (iii) to order of ………… marked “Freight Paid”.

The three types of endorsements, namely, (i) to order and endorsed in blank (ii)  endorsed to the order of and (iii) to order of, must be carefully considered and the terms of L/C observed.  In case of a B/L made out ‘to order and blank endorsed’, any holder can get delivery.  When it is endorsed ‘to the order of a named person’ that person or any other person to whom it is endorsed further could get delivery.  If the B/L is made out in the name of the buyer or the foreign bank opening the credit as consignee then no one else can take delivery.  Consignment to a named consignee is not the same as consignment to the order of a named consignee.

Banks refuse shipping documents bearing a super-imposed clause or notation which expressly declares the defective condition of the goods and/or the packaging, unless the credit expressly states clauses or notations which may be accepted.  Similarly, banks accept only “On Board” Bills of lading and not “Received for Shipment” Bills of Lading unless the documentary credit permits the latter.

A non-negotiable copy of B/L can not replace a negotiable copy.  The number of negotiable copies to be submitted to bank must be according to the L/C.

Air Consignment Note/Air Waybill

(i)        original A.C. Note/Air Waybill should be submitted (marked as : Third original for the shipper),

(ii)        it should be issued by Airways companies either signed by them or by their agents,

(iii)      it should be made out in the name of the bankers of the buyers, as far as possible, unless otherwise called for in the L/C,

(iv)      it should be dated and presented within 2 or d days from the date of shipment or within such period from date of issue as stipulated in the credit,

(v)       particulars of shipment such as description of the goods, weight, quantity, etc. are to be stated in the A.C. Note,

(vi)      it should state whether freight has been “prepaid” or “to pay”,

(vii)     A.C.  Note should state airport of discharge.

 

Insurance Policy

The insurance policy in case of a CIF contract must be in conformity with the conditions laid down in L/C.  Before submission of the policy to the bank, it must be ensured that:

(i)        it covers the required risks for a sufficient amount.  Where there is no mention of amount in the L/C,

(ii)       it is issue din the same currency as mentioned in  the L/C,

(iii)      it is taken out in the name of the shipper and the policy is endorsed in blank, except when stipulated to the contrary.  It should be negotiable and countersigned/endorsed unless specified to the contrary,

(iv)      the name of the vessel carrying the export goods is indicated and the same as mentioned in B/L,

(v)       the merchandise is adequately described and the description corresponds with that stated in  the invoice or the B/L,

(vi)      the place of payment of claim be observed as provided for in the L/C,

(vii)     the corrections, additions and modifications are duly authenticated,

(viii)   the date when the insurance became effective is later than the date of B/L,

(ix)      it covers transhipment in case B/L indicates transhipment of merchandise

(x)       it must contain “on deck” notation, if so claused in the B/L,

(xi)      the name and address of the claim settling agent and the place where claims are payable should be stated in the policy which should be as per the L/C claims.

It is important to remember that banks only accept “policy of insurance” instead of a “certificate of insurance” or a broker’s certificate unless permitted in the L/C.  Care should, therefore, be taken that insurance policy is submitted and not the ‘certifcate’.

5.  Certificates of Origin

The importers in several countries required their exporters in India to send them a Certificate of Origin without which clearance of import is refused.  This certificate may form part of the invoice itself.  Its essential feature is that it indicates the country of origin where the goods were originally produced and/or manufactured.  It is required either for taking advantage of a preferential tariff granted to exports from India in a particular country or to ensure that the particular goods from India are not banned  for import in the country concerned.  Sometimes it ensures that goods have not been reshipped by a seller who has brought them into his own country from some other place of origin, not enjoying the preference.

Types

The Certificate of Origin is of several types, which include:-

(i)        certificate of origin – non-preferential required in general by all countries for clearance of goods  by the importer, on which no preferential tariff is given.

(ii)       Certificate required for availing of concession under Generalised System of Preferences (GSP) extended by France, Germany, Italy, The Netherlands, Belgium, Luxembourg, UK, Ireland, Denmark, Spain, Portugal, Greece, Austria, Finland, Norway, New Zealand, Sweden, Switzerland and Australia, Japan, USA, etc.

(iii)      Certificate or origin required for tariff concession under the Global system of Trade Preferences (GSTP), Bangkok Agreement (BA) and SAARC Preferential Trading Arrangement (SAPTA) under which India grants and receives tariff concessions on imports and exports.

(iv)      Certificate for availing of concession under any other kind of preference.

 

Forms/Agencies

Certificate of Origin – Non-Preferential.  All the ‘Certificates’ are to be obtained in prescribed forms.  The Certificate at No. (i) above is to be issued by an authorised Chamber of Commerce/Trade Association etc in a prescribed Form against a small fee.  It may sometime require the exporter to submit an invoice and/or an indemnity bond for the correctness of his statement, before certification/attestation of the Forms, which may be available from the Chamber, free of cost.

Handloom Certificate/Garment Certificate.  It is issued by:

(a)       In the case of export of all “handloom garments” corresponding to restrained i.e. quota items, other than category 1 (tailored collar shirts) to Canada, Cotton handloom, manmade fibres, handloom blouses, garments to Austria and special quantities reserved for handloom garments in some of the restrained categories to EEC, Norway and Finland, the Textile Committee will issue the certificate as prescribed in the Bilateral Agreement for such products;

(b)       for exports of handloom garments in category 1 (tailored collar shirts) to Canada and special quantities reserved for handloom garments in some of the restrained categories to USA, AEPC (Apparel Export Promotion Council) will issue Export Certificate/Certificate of Origin/Visa as stipulated in the Bilateral Agreement.  It will issue this certificate for garments subject to restraint to Austria.

(c)       In case of United Arab Republic and Yugoslavia, Certificate of Origin of goods will be required for tariff concession in customs duties for clearance of eligible garments.  AEPC will issue the Certificate of origin.

GSP Certificate:  The GSP – Generalised System of Preferences – is non-contractual instrument by which industrialised countries unilaterally extend tariff concessions to developing countries.  To utilise benefit under this scheme, GSP certificate issued by the exporter’s country (India) is required by the importer abroad.  This certificate is to be obtained (in triplicate) in Forms ‘A’ and ‘B’ from specified agencies, namely;

(i)        Export Inspection Agencies established at all over India for all products.

(ii)       Director General of Foreign Trade, through its Regional Offices known as Joint./Deputy. DGFT for all products.

(iii)      Central Silk Board, through its  regional offices for silk products.

(iv)      Coir Board, Cochin for coir and coir products.

(v)       Development Commissioner, Handicrafts, through all its regional offices for handicraft items.

(vi)      Textile Committee through all its regional offices for textiles and made up.

(vii)     Tobacco Board, Guntur for tobacco and tobacco products.

(viii)   Marine Products Export Development Authority through all its regional offices for marine products.

(ix)      Development Commissioners of EPZs for all products manufactured by EOUs/EPZ units within respective jurisdiction.

 

The GSP certificate in form A (see below) is used for goods exported by any mode except post. For postal articles, form APR is required as explained below.

Form ‘A’(1) is a combined declaration and certificate of origin, containing columns for details regarding exporter, consignee, means of transport and route, description of goods, declaration by the exporter and certification by the certifying authority.  Form ‘B’ is given on the reverse of the triplicate copy of Form ‘A’.  This constitutes the application for certificate of origin.  The exporter has also to mention in this Form, the documents which he is submitting in support of his declaration.  Such documents may be import documents, invoices, etc. relating to the materials or components used in the production of goods exported.  On the reverse of the Form, fill-in its various columns. 

The Forms are available from the concerned certifying agency against payment of a small fee.

GSTP/BA/SAPTA Concession:  Export Inspection Council (EIC) is the sole authority to print blank Certificates of Origin under BA, SAARC and SAPTA, which can be issued by a number of agencies at Appendix 51A of the HB of Procedures (Vol.1), 1997-2002.  Such agencies include EPCs, DCs of EPZs, EIC, APEDA, MPEDA, FIEO, etc.

APR Form (only for postal consignments) for GSP Concession:  A postal consignment containing originating products may be granted preferential treatment on presentation of Form APR if the value of the consignment does not exceed a specified amount, say, SEK 16,000 for Sweden.  The Form APR, which must conform to the prescribed specimen should be completed by the exporter and need not be endorsed by any authority.  It must be made out in English or French.  If it is hand written, it must be completed in ink and block capitals.  Form APR shall be 210x148 mm.  A tolerance up to plus 8 mm or minus 5mm in the length is permitted.  The paper used shall be white writing paper, sized, not containing mechanical pulp and weighing not less than 64 g/m. 

The Form APR must be completed for each postal consignment.

Form for CWP:  The Certificate of Origin for the purpose of Commonwealth Preference is also known as ‘Combined Certificate of Origin and Value’.  It is required by two member countries i.e. Canada and New Zealand of the Commonwealth.  This is given by the grower/producer/supplier and exporter on special printed Forms obtainable from the High Commission of the country concerned.  The Forms may/are sometimes different for different types of goods mainly divided into goods grown/produced and manufactured.  The exporters should, therefore, ascertain the particular Form which satisfies the requirements of the port of destination as well as the particular goods to be exported.

This Form is also termed as an invoice.

Special Tariff Concession Forms: India has entered into bilateral agreements for economic co-operation and trade expansion with some countries.  Such agreements envisage grant of tariff concession on the products of each country on presentation of a certificate of origin issued by an authorised agency.  For example, Indian goods will gain tariff concession on entry in UAR and Yugoslavia if accompanied with prescribed certificate of origin, as already explained above for garments.  For other products, contact the Ministry of Commerce (FT Division).  Rather, your overseas buyer may be the best guide.

India Item Certificate: Indian items which are traditional folklore, handicraft textile products, are termed as “INDIA ITEMS”.  There are 39 items/group of items.  They are allowed duty free entry in importing countries comprising EEC, USA, Finland, Austria, Sweden, Canada and Norway on the basis of appropriate certificate issued by the office of the Development  Commissioner (Handicraft) or the Textile Commissioner which may be contacted for this purpose.

6.  Other Certificates

Languages Certificate 

Importers in EEC countries require a Languages Certificate along with the GSP Certificate in respect of handloom cotton fabrics classifiable under NEMEX Code 55.09.  Indian exporters should apply for this certificate simultaneously or separately with the GSP Certificate and application for pre-shipment inspection.  The Languages Certificate is issued in quadruplicate, three copies of which are given to the exporter.  He should transmit one copy to his overseas importer, along with documents for realisation of export proceeds.  The Languages Certificate is issued by the Textile Committee against a small fee.

Manufacturer’s Certificate

In addition to the Certificate of Origin, some countries require a manufacturer’s certificate to the effect that goods shipped have actually been manufactured and are available.

Inspection Certificate

A certificate of inspection by an established authority is required under some contract or by countries.  It is issued by different inspection agencies authorised in this behalf, which should be contacted.  This certificate might be different from the certificate required under the Quality Control and Pre-shipment Inspection Rules as much as former is required by the importer and the latter is necessary for effecting exports from India.

Certificate of Chemical Analysis

To ensure that the quality and grade of items like metallic ores, pigments, etc. is the same as specified in the sale contract, importers may require the exporters to send a certificate of chemical analysis from a recognised analyst.

7.  Bill of Exchange 

A Bill of Exchange or draft as it is commonly known, is “an instrument in writing containing a conditional order, signed by the maker, directing a certain person to pay a certain sum of money only to the order of a person to the bearer of the instrument”.

It is a negotiable instrument in writing containing an instruction to a third party to pay a stated sum of money at designated future date or on demand.  A ‘cheque’ on the other hand, is a bill of exchange drawn on a bank by the holder of an account payable on demand.  Thus, a “cheque” drawn under Sec 6 of the Negotiable Instrument Act, 1881 is also a bill of exchange even though drawn on a banker.  If it is not payable on demand, it is not a cheque.

When a BE is drawn on a foreign firm it is termed as a foreign draft or bill of exchange, it is prepared either in an international currency or Indian rupees depending on the terms of contract.  Accordingly, the bill is known by the name of currency in which it is drawn.  For example, a bill drawn in US dollars is known a ‘Dollar Bill’ and when prepared in rupees, being termed as ‘Rupee Bill’.

Drawn in Sets:  When the goods are shipped by sea, the bill is drawn in a set.  Each one bears a reference to the other.  When any of the drafts is aid if it is a sight draft and accepted when it is a usance draft by the drawee, the second draft becomes null and void. 

It is of two types i.e. (i)  ‘Sight Draft’ or ‘Draft at Sight’ and (ii) ‘Usance Draft’ or a ‘Usance Bill’.  

Sight Draft 

When the drawer i.e. exporter expects the drawee i.e. importer to make payment immediately after the draft is presented to him, it is called a ‘Sight Draft’.  Unless and until this draft is retired, the negotiating/collecting bank does not hand over the shipping documents and the buyer cannot take delivery of goods.

Usance Draft 

Where the exporter has agreed to give credit to the foreign buyer, he draws a ‘Usance Bill’ i.e. draft is drawn for payment at a date later than the date of presentation.  A draft may be drawn according to the period of credit such as 30 days sight, 60 days sight and so on, implying thereby, that the drawee i.e. importer is to retire the draft 30 days or 60 days or as the case may be, after it  is presented to the drawee who will retire it by writing upon it ‘Accepted’ with his signature and date.  Thereafter, the documents are handed over to him for enabling him to take the delivery of goods.

Clean and Documentary Bill

A bill of exchange accompanied with a document of title to goods like Bill of Lading/Air Waybill or Air Consignment Note or any other equivalent document is called a Documentary Bill.  If no such document is attached with the bill, it is a clean bill.  Personal cheques, drafts and travellers cheques are some of the examples of the clean bills.

Stamp Duty 

The bills of exchange payable up to 3 months after date or sight do not attract stamp duty, vide Government of India Notification published in the Gazette of India dt. 19th August, 1989, which remitted the stamp duty chargeable under Article 13 of the Schedule I of Indian Stamp Duty in respect of Usance Bills of Exchange, where:

(a)       such Bills of Exchange are payable, not more than three months after date or sight

(b)       such Bills of Exchange are drawn on or made by or in favour of a commercial or co-operative bank; and

(c)       such Bills of Exchange arise out of bona fide commercial or trade transactions.

Bank Charges:  The exporter’s bank through which documents are negotiated for realisation of export proceeds as well as the foreign bank which collects payment from the drawee, charge are made for sending the documents by air mail.  These charges also vary depending upon the tenor and amount of draft, and information can be obtained from any bank.

Important Hints 

While drawing a bill of exchange i.e. draft, the following important hints must be borne in mind:

(i)        It should be drawn by the party’ indicated as beneficiary of the credit, to the order of the exporter’s bank dated and signed, along with the place drawn at, and title of signor or endorsee.

(ii)       It should be drawn on the bank opening the L/C or on the buyer as stipulated in the L/C, if any.  If drawn on the party, it should be endorsed in favour of the negotiating bank.

(iii)      Its tenor be in conformity with that stipulated in the L/C except when the credit contains the words “about”., “approximately”, “Circa” or similar expressions before the amount.  In such cases, drawing can exceed the amount by 10%  or be less by 10%

(iv)      It should be drawn within the amount for which L/C has been opened, and its amount be identical with the amount of invoice

(v)       The amount in ‘figures’ must correspond exactly with that in words.

(vi)      It should be superscribed with the words ‘Drawn under L/C No………..and date……of ……….bank’.

(vii)     In case of Bill not drawn for full invoice value of goods, the bank accepts the Bill only if the exporter gives an undertaking that he will, within six months from the date of shipment of goods, surrender the balance proceeds of shipment.

(viii)   It should bear interest clause, wherever necessary.

(ix)      All corrections should be signed in full and not initialled.

 

Part Drawings:  Bill of Exchange not drawn for the full invoice value of the goods, may be accepted for negotiation, provided;-

(i)        undrawn balance is in conformity with the normal level of balance left undrawn in the particular line of export trade, subject to a maximum of 10% of the full export value, and

(ii)       an undertaking is obtained from the exporter that he will surrender/account for the balance proceeds of the shipment within the period prescribed for realisation.

 

         This undertaking is to be given on the duplicate copy of GR/PP form.

 

Period of Validity

The Letters of Credit are operative for a particular time and up to a specified date.  The banks do not accept the documents bills after the due date.  Sometimes, the L/C stipulates the date on which the documents must reach the office of the bank opening the credit though the credit is payable and documents are to be negotiated in India.  Therefore, documents have to be submitted to the exporter’s bank well in advance of the expiry date of L/C, for their timely transmission to the overseas bank.  In other cases, the documents should reach the bank within the period of validity of credit.

It is the date of receipt in the bank and not the date of posting or the date of documents, that is taken into consideration for the purpose of negotiate.  Moreover, the documents should be handed over during the banking hours.  The banks do not honour the irregular documents i.e. documents not conforming the terms of letter of credit, even though presented during the validity period of credit.  So long as documents are not rectified and again presented within the validity period, they are not accepted for negotiation.  Hence, take care to submit all the documents stipulated in the L/C and before its expiry date, and well in advance of the date when they are required to be received in the office of a bank in the country of importation.  After all, there is a transit period even if sent by air mail, for reaching the documents in a foreign country.

Extension of Validity:  If an exporter finds that it is not possible to submit all the documents within the validity period, he must approach his importer for the extension of period of validity.  The approach should be made through his banker stating the reasons in detail for his inability to submit the document(s) in time.  Moreover, request for extension of validity period must be made well in advance of the expiry date so that extension is obtained before the latter.

8.  Disposal of Documents

Bill of Exchange

         The BE along with the documents submitted by the exporter are examined with reference to the terms and conditions of the original order and letter of credit, if any.  If found in order and received within the validity period of credit, a set of the documents is transmitted to the importer’s bank i.e. the bank which had opened the L/C, by the first air mail followed by a second set by the 2nd air mail to ensure that in case the first set is lost, the importer or his bank can take delivery of second set of documents.  The following documents are generally transmitted for negotiation.

(i)        Bill of Exchange for the amount permissible in  L/C

(ii)       Commercial invoice

(iii)      Customs/Consular invoice

(iv)      Packing list

(v)       Certificate or origin

(vi)      Bill of lading (negotiable copies)

(vii)     Insurance policy, or certificate of insurance, if permissible under L/C

Noting/Protesting of Bill: In case the B/E is dishonoured on presentation or maturity, the drawer/holder for value may cause dishonour to be noted by a  Notary Public on the instrument or upon a paper attached thereto or partly upon each.  Thus, “Noting” means the fact that the bill has been dishonoured as recorded on it and puts the drawer/holder for value on a higher pedestal in the eyes of law.  Usually, the Notary makes the following notification:-

(a)       date of dishonour

(b)       reason, if any, assigned for such dishonour

(c)       notary charges 

The foreign bills must, therefore, be protested for dishonour.  A “protest” is a certificate issued by the Notary attesting that the bill has been dishonoured and will usually contain:-

(i)        name of the person for whom and against whom the instrument has been protested,

(ii)       a statement that acceptance or payment was demanded form the acceptor or drawee by the Notary and the reason for dishonour

(iii)      the place and time of dishonour of the bill

(iv)      the signature of the Notary Public.

GR/SDF/PP Form

The bank checks the particulars given in these Forms with that of the bill of exchange and the terms of the relative sale contract between the exporter and importer, before their disposal.  The examination is done on the following aspects.  While filling up these forms, these points along with those mentioned in earlier paragraphs relating ‘Forms of Declaration’ must be taken into consideration to avoid delays in their disposal.

(i)        Declaration made on the Form is correct and the value declared is the same as contracted for.  Also see ‘Important’ and ‘Variation in Value’ in previous pages.

(ii)       Method of finance proposed is a permitted one.

(iii)      Amount for which B.E. is drawn and the invoice is written, is the same as the invoice value declared on the Forms.

(iv)      In case of Usance Bill, the date of maturity thereof is such as would enable the proceeds being realised within the prescribed period.

(v)       If the Bill of Lading/Air Waybill has been issued on “Freight Prepaid’ basis, the freight charges are to be to the account of the exporter in terms of the sale contract between him and the overseas buyer, or the export has been effected on consignment basis, or the Reserve Bank’s approval has been obtained for payment of the freight in rupees

(vi)      If the B/L, Air Waybill, etc has been issued ‘freight payable at destination’ while the sale contract between the exporter and importer is of CIF and C&F basis, the bank would verify that the deduction shown in the invoice on account of freight is for the actual amount of freight payable and should certify having done so on the invoice.

(vii)     Exporter has correctly completed the declaration on the Forms by cancelling the word ‘consignor’ and clause (b) in Forms covering exports made on outright sale basis, and the word ‘seller’ and clause (a) in the Forms covering exports made on consignments basis.

(viii)   The number of the duplicate copies of a Form is the same as that of the original which is usually noted on the B/L.  When the duplicate copy of a Form is not available, there is no objection to the corresponding copy of a fresh set of forms being used, care being taken to score out the printed number thereon and record in ink prominently the number of the lost Form.

(ix)      In case of export declared on GR form, the Shipping Bill No. and Date must have been indicated in the appropriate column.

Transmission to RBI: If the Forms are found in order, the bank completes the appropriate certificate on the duplicate copies and transmits them to the Reserve Bank along with a copy of the relative invoice within 21 days from the date of export. 

Duplicate copies of the Forms covering exports made on consignment basis, are held by the banks until all the goods declared on the Forms have been sold and the sale proceeds realised.

SOFTEX Form

See forgoing pages.

Bank Certificate

As explained in detain in a later Chapter, this certificate (issued in triplicate) is required for claiming export benefit/import licences against exports.  After necessary verification/certification of FOB value, the bank passes on the original copy with relevant copy of attested invoice to the exporter, duplicate to the licensing authority concerned and retain the triplicate copy for its record.  For exports on consignment/approval basis, the certificate is issued after the realisation of export sale proceeds.

Factoring Agencies:  Specified factoring agencies have also been authorised to certify the realisation of export proceeds in an approved manner, in addition to authorised dealers (ADs) in foreign exchange.

CHAPTER 13

REGISTRATION WITH EPCs, FIEO ETC UNDER EXIM POLICY

Registration Procedure

            The EXIM Policy lays down the condition for obtaining a Registration-cum-Membership Certificate Number for getting an import/export licence except items listed as restricted items in ITC (HS) Classification of Export-Import items or any other benefits/concession under the Policy.  Such RCMC will, however, be given after the exporter or importer has been admitted to the membership of an EPC, etc.  Besides, the exporter should have obtained the Importer-Exporter Code (IEC) Number.  Hence, membership is a pre-requirement to obtain a RCMC.  Export of the registered exporters having valid RCMC will only qualify for the benefits provided in the EXIM policy.  Exports effected by an exporter without holding any valid RCMC will not be counted for any benefits.

Kinds of Registration

The registration as exporter will be of two kinds, namely:

(i)             Manufacturer-Exporter, and

(ii)            Merchant-Exporter.

 

            Even Export Houses, Trading Houses, Star Trading Houses or Super Star Trading Houses will fall in either one of these two categories or both, i.e., they can also be Merchant- Exporter, Manufacturer-Exporter or both.  In case an exporter desires to get registration as a manufacturer-exporter, he shall furnish evidence to that effect.

 

No Multiple Registration

            Para 13.2 of the Handbook of Procedures (Vol. I), 1997-02 (March ‘2000 edn.) lays  down that exporter may obtain a RCMC (Registration-cum-Membership 
Certificate) from an EPC relating to his main line of business.  However, an exporter who hold Export/Trading/Star Trading/Super Star Trading House certificate has the option to obtain RCMC from the Federation of Indian Export Organisations (FIEO).  Hence, only one registration is required and not a registration with (or more than one) EPCs in case the exporter is engaged in exporting products falling in more than one product group and, hence, under different EPCs.  EH/TH/STH/SSTH can register with FIEO instead of an EPC, if they desire so.  EHTP/STP units may register with administrative authority concerned. Moreover, an exporter registered either as manufacturer-exporter or merchant-exporter may still export other products without obtaining more than one registration. However, an exporter may obtain a RCMC from FIEO or any other EPC, if the products exported by him also relate to those EPCs.


Registering Authorities

            In terms of EXIM Policy and/or Handbook or Procedure (vol. 1), an exporter/importer may apply to become a member of an EPC/specified Commodity Board, etc., or FIEO.  However, if the export product is such that it is not covered by any EPC, CB, APEDA/MPEDA or FIEO, the RCMC will be issued by the FIEO.  Hence, there are different registering authorities for issuing RCMC.  These are as follows:

(i)             an EPC from the total of 20 existing at present, and six Commodity Boards out of seven  for all exporters including EH/TH/STH/SSTH (see below);  APEDA, MPEDA, etc. Central Silk Board is not the registering authority for exporters under the Exim Policy.

(ii)            FIEO – Federation of Indian Export Organisations in case of:

(a)           Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses.

(b)           Exporters of Services.

(c)           Exporters of products which don’t fall within the purview of any of then EPCs or CBs.

(iii)           Administrative authorities concerned for units in EHTP (Electronic hardware Technology Parks) and STP (Software Technology parks).  The Development Commissioner of the EPZ concerned shall be the registering authority for EOU/EPZ units/private bonded warehouses. A separate registration with any EPC, FIEO, CB, etc. is not required.

Note: The Jute Manufactures Development Council (JMDC) is though not a registering  authority under the Exim Policy, a registration with this agency is necessary  for taking benefit of the External Marketing Scheme for Jute products.

Compulsory Registration with Specified Authorities:   Notwithstanding the provision of registration with the Council (EPC) relating to main line of business of exporter, in some cases registration with specified authorities/Councils, other than JMDC, is compulsory.  For example:

3(i)        registration with Tribal Co-operative Marketing Development Federation of India Ltd. (TRIFED) for export of shellac and all forms of lac,

4(ii)       registration-cum-allocation certificate issued by the APEDA (Agricultural and Processed Food Products Export Development Authority) for export of grain and flour, namely, wheat and wheat products, barley, maize, bajra, jowar and ragi, sugar, milk, butter, etc.

5(iii)      registration-cum-membership certificate with Carpet Export Promotion Council for export of hand-knotted carpets and floor coverings, excludings cotton durries and floor coverings.

            In a number of cases for export of specified items, it has been made compulsory to register the export contracts, submit proof of export, obtain quota/ceiling slips and certificates from specified agencies which may require the exporters to register with them.  Hence, ascertain the position from the concerned agency.

Membership/Registration with EPCs/FIEO

            Since the RCMC will be issued by an EPC or FIEO to its members only, their membership or registration with them is a pre-requisite.

Application:  An application for membership/registration should be sent to the EPC concerned or FIEO.  However, some of the registering authorities may have evolved their own registration forms.  Hence, it is advisable to obtain the form from the concerned authority.

Documents:  The application for membership/registration should be accompanied with:

(i)             Importer-Exporter Code (IEC) Number – self-certified copy – issued by the Regional Licensing Authority.

(ii)            Details like SSI Registration Certificate or any other certificate indicating that the applicant is a manufacturer, if the registration is required as a manufacturer-exporter.

(iii)           Bank Certificate  (original) in support of the applicant’s financial soundness.  No form has been prescribed.  Hence, it may be obtained on banker’s letterhead.

(iv)          Registration-cum-Membership Certificate (RCMC) Form-Part-I duly filled.  It may be required in triplicate in some cases.

(v)           Cheque/Draft for membership fee (see below).

(vi)          Any other document required by the registering authority concerned, like, for example,-

(a)           If the applicant is already registered with or member of any other EPC/registering authority, send a copy of RCMC from that authority,

(b)           In case of AEPC (Apparel  Export Promotion Council), send an undertaking on non-judicial stamp paper, as per proforma obtainable from the Council.

(c)           applicant’s latest audited balance sheet or profit & loss account statement duly certified by a Chartered Accountant (in case of merchant-exporter),

(d)           publisher-exporter should send two photocopies of valid certificate to prove that he is a publisher, issued by an association of which he is a member,

(e)           a photocopy of export order or invoice duly certified by a banker, if any

Membership Fee:  The EXIM Policy does not lay down any membership fee for registration with an EPC or FIEO any other authority.  However, some of the authorities, do charge a fee.  The scale of fee differs from one authority to another and also for one or other exporter mostly depending upon turnover and/or right to vote in the election to their managing committees.  Hence, exporters-importers should find out the membership fee from the EPC concerned or FIEO.

 
RCMC

            If the application for membership is granted, the EPC or FIEO or RLA shall issue the RCMC indicating the status of the applicant as:

            Merchant-Exporter, or

            Manufacturer-Exporter,

            It will be issued in the prescribed form. In case an exporter desires to get registration as a manufacturer-Exporter, he shall furnish evidence to that effect.

 

Appeal:  An appeal on any matter connected with the issue (including de-registration) of RCMC shall lie with the Director General of Foreign Trade.

Validity:  The RCMC shall be valid for 5 years ending 31st March of the licensing year (April-March).  It will deemed to be valid from 1st April of the licensing year in which it is issued.

 
Change in Constitution/Address

 

            If the ownership, constitution, name or address of an exporter changes, he should intimate such changes to the EPC concerned within a period of one months from the date of such change.  The EPC may, however, condone the delay on merits in the case of genuine hardship.

 
De-registration

            An exporter may be de-registered for a specified period for violation of the conditions of registration.

Show Cause Notice (SCN):  Before de-registration, the exporter shall be given a Show Cause Notice by the EPC or FIEO, as the case may be.

Reasonable Opportunity:  The exporter will be given a  reasonable opportunity to make a representation against the proposed de-registration.

Appeal against De-registration

            An appeal against the decision of an EPC or FIEO shall lie with the Director General of Foreign Trade.  It should be made within 60 days against the said decision.  The DGFT’s decision will be final.  The DGFT may, on his own motion or otherwise, direct an EPC or FIEO to register or de-register an exporter or issue such other direction to them consistent with and in order to implement the provisions of the Foreign Trade (Dev. & Reg.) Act, 1992 Act, the Rules and Orders made thereunder, the EXIM Policy or the Handbook of Procedures.

 
Obligations

            The Registered Exporters are under the following obligations.

(i)            To furnish quarterly returns/details of his exports of different commodities (including nil returns) to the concerned EPC.  However, EH/TH/STH/SSTH shall send monthly returns to FIEO in the prescribed form specified by FIEO.

(ii)          To abide by such other conditions including floor price condition and export obligation, if any, to export a specific portion of production, imposed by the authority concerned.

(iii)         Not to indulge in any fraudulent, unfair or corrupt practice or ‘commit a breach of any law (including any rule, order or regulation), of customs or import and export or foreign exchange’.

(iv)         To fulfil or utilise satisfactorily any quota allocated for export.

(v)          To abide by any code of conduct that may be prescribed.

 

Facilities and Benefits

           The exporters are entitled to such facilities and benefits as may be provided under the Export-Import Policy.  They are not only entitled to Special licences, but also ‘advance’ licences to obtain essential supplies of raw materials and components required for export production.  In addition, they are given a number of facilities to accelerate their effort by the registering authorities, particularly EP Councils.

Green Cards

            All manufacturers exporting more than 50% of their production, subject to a minimum export of Rs. One crore in the preceding year, and also status holders, i.e. Export Houses, Trading Houses, Service providers rendering services in free foreign exchange for more than 50% of their services turnover, subject to a minimum of Rs. 35 lakhs in the preceding year, shall be issued a green card by the DGFT.  The green card holders shall be eligible for:

(i)             Automatic licence

(ii)            Automatic customs clearance for exports

(iii)           Automatic customs clearance for imports related to exports

(iv)          LUT (Legal Undertaking) facility for duty free imports

(v)           Any such facility as may be specified from time to time.

 

Procedure:  Applications by eligible exporters for issue of a green card are to be sent in form given in Appendix 56 of the Handbook of Procedures (Vol. 1), to the Regional  Licensing Authority under whose jurisdiction the head office/registered office of the company/firm is located.

 

Validity:  The validity of a green card shall be three years from the date of issue.

Number of Cards:  A firm/company may obtain up to five green cards.

 
Trade Information

 

            Information on trade opportunities, tenders, enquiries collected through Council’s overseas offices, trade commissioners, chambers of commerce and trade associations or published in international journals/magazines, is disseminated to Registered Exporters.  If the information is of general nature, it is circulated through the media of their bulletins published regularly and supplied generally free of cost to members.  However, specific enquiries or information are passed on individually to prospective exporters.  Sometimes, these are conveyed on telephone or fax/e-mail depending upon the urgency of the matter.  Assistance is also provided in obtaining tender forms through foreign offices or trade representatives.

            The Councils help the exporters to locate (i)   foreign buyers of their products and (ii)  quality manufacturer-suppliers of such products in the country.  They regularly collect this information through their foreign offices and such other media-national and international-that may be available to them, and regional office in India.

 
Foreign Samples

            The Councils keep track of latest product development in international markets, and obtain samples of such products for the guidance of their members.  These samples are displayed so that interested manufacturers/exporters can study them and take advantage  of the marketing opportunities abroad.

 
Trade Promotion

            The Councils organise participation in overseas exhibitions/trade fairs and other promotional displays with a view to publishing the image of Indian industry in general and their member-exporters in  particular.  Assistance is provided in obtaining foreign exchange for business travel abroad and for participation and visits to such exhibitions.

Brand Publicity:  The Councils operate joint Foreign Publicity (JFP) scheme to assist member-firms for undertaking effective brand publicity for promotion of sales of their products in overseas markets.  Member firms with a given export performance during the preceding calendar year, are entitled to receive assistance.  The allocation is given on pro rata basis after calculating the export performance of all applicants in the preceding calendar year.  The member firms availing themselves of assistance under JFP scheme are required to contribute 60 per cent of the allocated amount.  The media of publicity allowed under the JFP scheme are newspapers, exhibitions of cinema slides, films, advertisements over radio (with the exception of Radio Ceylon) and Television, sign boards, neon signs, decoration of show-windows, hoardings and large inflated balloons carrying the message.  The publicity must be done in overseas markets related either to past export performance or future export prospects.  Further, details about the JFP Scheme may be had from the Export Promotion Council concerned.

Trade Delegations/Study-cum-Sales Teams:  The Councils are ‘Approved’ Organisations not only to draw assistance for the Marketing Development Assistance (MDA), Fund but also to sponsor individual exporters to obtain such assistance.  They are, thus, sending individuals abroad to explore and study foreign markets.  Besides, member-firms are included in the trade delegations sent regularly by the Councils to build proper image of Indian industry and trade in general, and of individual exporters in particular.  The nominees on such delegations are chose from that Councils’ member-firms which need not necessarily be large scale exporters or Export Houses.  Even small scale units find place in the delegations, provided they are willing to share expenditure to the extent of about 40 per cent and are sufficiently export oriented.

Study Teams of Individuals:  Any Approved Organisation—the E.P. Councils in the present case—depute/can sponsor an individual for carrying out studies in relation to a particular product provided the report of such studies are made available to the industry and trade in general.  The MDA may grant two-third of the total cost including the cost of international travel and itinerary abroad, the remaining one-third being met by the sponsoring organisation.

 Trade promotion is also achieved through establishing contact between foreign individual buyers and their delegations visiting India either on their own or on invitations from the EP Councils and FIEO And such other organisations and Indian exporters.  Consequently, member-firms get change to come into their products, and to build the image of their contacts, as these buyers or delegations thereof are often taken around the factories and establishments in the country

 

Export Assistance

            The Councils provide liaison service to exporters in claiming different types of export assistance. In addition, they represent to the Government, on behalf of exporter, to provide adequate assistance where it is felt the present rate or scale of assistance is not adequate.  For this purpose, the Councils have to collect lot of a data on cost of production and related matters.  Guidance is also provided on procedural formalities relating to various types of government facilities and assistance.

            Some of the EP Councils/Commodity Boards, APEDA/MPEDA, etc. have special schemes for efficient export production and marketing.  The Council for Leather Exports administers the Leather Industry Development Fund for the leather industry.  The APEDA (Agricultural and Processed Food Products Export Development Authority) has a number of schemes like providing air freight subsidy for export of agricultural and floricultural products and financial assistance for agricultural and meat exports as detailed in Chapter 46 and 47.  The Spices Board has also a scheme for subsidising exports of cardamom by air.  The Rubber Board is administering natural rubber subsidy scheme.  All the important schemes operated upon by the EP organisation are detailed in various Chapters. 

Seminars and Conferences

            The Councils help the exporters and organisations including government departments to share their experiences and exchange views on areas/aspects of common interest by bringing them on a common platform through the media of seminars/conferences, organised often in major industrial centres.  These seminars and conferences are also quite effective in providing guidance and knowledge about exports and identification of problems affecting the production and marketing effort of the exporters.  Quite often solutions to such problems are found on the spot and decisions taken for their implementation.

 
Consignment-wise Inspection

            Exporters who do not have in-process quality control and whose units have not been declared ‘export-worthy’ under the Quality Control and Pre-shipment Inspection Rules, may be required to obtain a pre-shipment inspection certificate from the concerned Export Inspection Agency (EIA) for each of the export consignment of such products which are within the purview of such Rules.  The Export Promotion Councils help the exporters in obtaining such certificate by sorting out the problems, if any, in this regard.

Telephone Connection

Out-of-turn Allotment:  Foreign exchange earners – whether individuals, firms or organisations are given telephone connections out-of-turn.  The number of connections may be up to 5 (plus  one additional if the firm is also manufacturing goods) depending upon export turnover.  EOUs/EPZ units are also entitled to out-of-turn allotment.

            For out-of-turn allotment, contact the One Man Export Promotion Cell in the Department of Telecommunication cautions, which are located in as many as 25 cities in the country.

CHAPTER 14

EXPORT HOUSES, TRADING HOUSES, STAR TRADING HOUSES

AND SUPER STAR TRADING HOUSES

 

            When exporters, service providers achieve the specified level of exports over a period of time, they can get recognition or registration as Export House, Trading House, Star Trading House or Super Star Trading House.  Service EH, International Service EH, International Star Service EH and International Super Star Service EH.  Besides manufacturing Cos. or industrial houses with specified manufacturing turnover shall be recognised as Star Trading House and Super Star Trading House.  Such EH/TH/STH/SSTH etc. are entitled to certain additional benefits than available to other exporters.

Eligibility

            Merchant as well as manufacturer-exporter, service providers, EOUs/EPZ/EHTP/STP/SEZ units are eligible for recognition.  Exports made both in free foreign exchange and in Indian rupees shall be taken into account.  The eligibility for the grant of Export/Trading House/Star Trading House/Super Star Trading House Certificate is now determined, except for State Corporations and manufacturing companies or industrial houses, on the basis of average FOB. value of physical exports of goods or services, including software exports, or the net foreign exchange earnings from the exports actually made in the preceding three licensing years or preceding year which shall be considered as the base period, at the exporter’s option.  Accordingly, the Export houses can be grouped under ‘Category-A’ or ‘Category-B’.

            The exports made, both in free foreign exchange and in Indian rupees shall be taken into account for recognition/registration purposes.

            Moreover, only exporters registered with FIEO or an EPC, etc. are eligible for Export/Trading/Star Trading/Super Star Trading House Certificate.

State Corporations:  One State Corporation nominated by the respective State Govt./Union Territory may be recognised as a Export House only, even though the criterion relating to export performance as shown below, is not fulfilled.

Manufacturing Companies/Industrial Houses:  Manufacturing companies or Industrial houses with an annual manufacturing turnover of Rs. 300 crores and Rs. 1,000 crores in the preceding licensing year shall be recognised as Star Trading House and Super Star Trading House respectively on signing a Memorandum of Understanding in the prescribed form for achieving physical exports as currently prescribed for these categories over a period of next three years.

Service EH, etc:  Service providers shall be entitled to recognition as Service Export House, International Service Export House, International Star Service Export House, International Super Star Service Export House on earning free foreign exchange as given in paragraph 15.7 of the Policy. 

FOB Criteria (Effective 1/4/99)-Category ‘A’

            Companies whether manufacturing or merchandising or both with the following FOB value of physical exports are considered for (as well as renewal) as Export/Trading/Star Trading/Super Star Trading Houses.  Hence, deemed exports are not counted in export turnover.

For 2000-2001 Period

Category                      Average FOB value of                          FOB Value of exports

                                     exports made during the                                 during the preceding

                                     Preceding three licensing                               licensing year

                                 Years,  i.e. (April-March)                          (April-March)

Export House                             Rs.     15 crores                                         Rs.      22 crores 

Trading House                            Rs.    75 crores                                          Rs.     112 crores

Star Trading House                     Rs.   375 crores                                          Rs.     560 crores

Super Star Trading                    Rs. 1,125 crores                                          Rs.  1,680 crores 

    House                                                                                                               

OR

Net Foreign Exchange Earnings (NFE Criteria)-Category ‘B’: Exporters shall also have an option to apply for the EH/TH/STH/SSTH status on the basis of average annual NFE during the three preceding years of the NFE during the preceding year, at the option of the exporter as follows:

For 2000-2001 Period

Category                                 Average net foreign                             Net foreign exchange

                                                Exchange value of exports                  value of exports made

                                                made during the preceding                  during the preceding

                                                three licensing years in                        licensing year, in

                                                Rupees                                     Rupees

EH                                            Rs.     12 crores                                          Rs.     18 crores

TH                                            Rs.     62 crores                                          Rs.     90 crores

STH                                          Rs.   312 crores                               Rs.   450 crores

SSTH                                        Rs.   937 crores                               Rs. 1350 crores                                    


Eligible Exports

            Eligible exports made in free foreign exchange and in Indian rupees, for recognition as EH, TH, STH, SSTH include-

(i)             physical exports of goods and services including software exports

(ii)            services exports including professional services rendered abroad which also include overseas  consultancy  service contracts which may include the preparation of feasibility studies, project exports, preparation of designs and advice to the project authority on specifications for plant and equipment, preparation of tender documents, evaluation of tenders and similar engineering service contracts involving the supply of services such as design, erection, commissioning or supervision of erection and commissioning abroad.

(iii)           Computer software exports including computer software services rendered at the location of the foreign client abroad.

(iv)          Computer software through magnetic tapes, floppy discs and paper.

(v)           Computer software exports through data link satellite.

Calculation of NFE

            For the purpose of calculation of the Net Foreign Exchange earned on exports, the value of all the licences including the value of 2.5 times of DEPB credit earned/granted and the value of duty free gold/silver/platinum taken from the nominated agencies shall be deducted from the FOB value of exports made by the person.  However, the value of freely transferable Special Import Licences, EPCG licences and the value of licences surrendered during the validity of licence shall not be deducted.

EOUs/EPZ etc.  Units:   Approved EOUs, EPZ/FTZ/EHTP/STP Units shall also be eligible for grant of Export/Trading/Star Trading Super  Star Trading House Certificate subject to fulfilment of eligibility of criteria laid down for DTA units.

Export by Subsidiary Company:  FOB value of exports made by a subsidiary company of a Ltd. Company shall be counted towards exports performance of the Ltd. Company for the purpose of eligibility as EH, TH, STH.  For this purpose, the parent company shall have the majority share holding in the subsidiary company.  Hence, the parent company must hold at least 51% in the other company to be considered as subsidiary company.

 

Exports Not Eligible

            The following exports shall not be eligible for calculation of export performance level.

(i)             Deemed Exports

(ii)            Re-exports of goods imported, in the same or substantially the same form.

 

Less Weightage on FOB Criterion

            The FOB. value of physical exports of diamonds, gem and jewellery products covered by Chapter 8 of the EXIM Policy, 1997-02 shall be counted at 50% of the actual FOB value of exports.

 

Weightage to Exports

            For the purpose of recognition, weightage shall be given to the following categories of exports provided such exports are made in freely convertible currency and also in respect of payments which are received through Special Escrow Accounts denominated in US dollars maintained with RBI or with commercial banks in India.  It is, however, not available for the rupee denominated exports.

(a)(i)      Triple weightage on FOB or NFE on the export of products manufactured  and exported by units in the Small Scale Industry (SSI) Tiny sector/Cottage sector;

(ii)         Double weightage on FOB or net foreign exchange to merchant exporter exporting products reserved for SSI units and manufactured by units in the Small Scale Industry (SSI) Tiny sector/Cottage Sector;

Note: The weightage for exports at a(i) and a(ii) above, shall not be available to units exporting

Gem and Jewellery products.

(b)(i)     Triple weightage on FOB/NFE value on the export of products manufactured and exported by the handloom and handicraft sectors (including handloom made silk products), hand-knotted carpets, carpets made of silk;

(ii)            Double weightage on FOB/NFE to merchant exporter exporting products manufactured by the Handlooms and Handicraft sector (including handloom made silk products), hand knotted carpets, carpets made of silk;

(c)        Double weightage on FOB or NFE on the export of fruits and vegetables, floriculture and horticulture produce/products, project exports;

(d)           Double weightage on FOB or NFE on export of goods manufactured in  North Eastern States;

(e)           Double weightage on FOB or NFE on export to specified countries listed in Appendix to this Chapter.

(f)            Triple weightage on FOB or NFE on exports of products manufactured and exported by manufacturing units registered with KVIC (Khadi & Village Industries Commission) or (KVIBs (Khadi & Village Industries Boards) made with effect from Aug. 15, 1997.  However, such units shall not be entitled for the weightage given in (a) and (b) above.

(g)           Double weightage on FOB or NFE on exports made by units having ISO 9000(series) or IS/ISO 9000(series) or ISO 14000(series) certification.

(h)           Double weightage on FOB or NFE on exports of bar coded products.

(i)             Double weightage on FOB or NFE on export of goods manufactured in Jammu and Kashmir.

 

Application  (Also see ‘Provisional Certificate’)

 

Application

All applicants (other than Mfg. Cos. and Service Providers:   Eligible exporters should apply for grant of status certificate for Export House/Trading House to the concerned Regional Licensing Authorities headed by Jt. DGFT in  accordance with their jurisdiction on or before the prescribed date in the prescribed form (2 copies) and manner given in Appendix 19 to the Handbook of Procedures (Vol. 1) 1997-2002.

However, applications for grant of certificate for Star Trading/Super Star Trading House shall be filed with the DGFT at headquarters, i.e. New Delhi.

            Applications shall be filed by the Registered office of Co.  or head office in case of others.

Mfg. Cos./Industrial Houses:  should apply in the form at Appendix 19A of the Handbook of Procedures along with Memorandum of Understanding (MOU) given therein.

 

Documents

            The application should be accompanied with the following documents

(i)             RCMC (Registration-cum-Membership Certificate) from FIEO or EPC – self-certified copy.

(ii)            Memorandum of Understanding (MOU) in the application form itself., if applicable

(iii)           a certificate, in the application form itself, from a Chartered/Cost and Works Accountant who is not a partner, a Director or an employee of the applicant or its associates certifying:

(a)           export/import performance

(b)           the value of products manufactured by (and reserved for)/in

(i)             SSI, handloom, handicraft sub-sectors including sports goods, hand-knotted carpets, silk carpets, cut & polished diamonds

(ii)            North-eastern States and Jammu & Kashmir

(iii)           Export to specified countries

(c)           95% of the export proceeds have been realised in respect of exports made by the applicant in the preceding three licensing years/preceding year (excluding the exports made during the last six months from the date of filing of the application.

(iv)          A declaration about the irrevocable option to claim the benefits either on FOB value or NFE basis.

(v)           Any other document as stated in application form.

 

Issue of Certificate

            The EH/TH/STH/SSTH certificate will be issued if the application is found in order in all respects, in the name of the registered office of a company and head office in the case of others.  While issuing the certificate, the option for claiming the benefits on FOB or NFE basis, exercised at the time of filing of application shall be endorsed on the Export House, etc. certificate.

Provisional Certificate:  A provisional EH/TH/STH/SSTH Certificate shall be issued on the basis of a request by eligible exporters addressed to DGFT (Direct General Foreign Trade) and accompanied by the export performance certificate duly certified by a Chartered Accountant.  Such requests need not be sent in the prescribed form of application and other enclosures as given above, and will be considered on priority basis.

Change in constitution:  Any change in the constitution, name or ownership of the EH/TH/STH/SSTH, should be got effected in the recognition certificate by the concerned authority, i.e., DGFT within 60 days from the date of such change.

Validity:  The EH/TH/STH/SSTH Certificate will be valid for a period of three years starting from 1st April of the licensing year during which the application for the grant of certificate is made, unless otherwise specified.

            On the expiry of such certificate, application for renewal of status certificate shall be required to be made within a period as prescribed, which is November 30 of the licensing year concerned unless otherwise specified.  During the said period, the status holder shall be eligible to claim the usual facilities and benefits, except the benefit of a Special Import Licence (SIL).

Refusal/Suspension/Cancellation of Certificate

            The certificate of an Export House, Trading House, Star Trading House or Super Star Trading House may be-

Refused, or

Suspended, or

Cancelled

if the applicant-certificate holder or any agent or employee acting on its behalf-

(i)             fails to discharge the export obligation imposed;

(ii)            tampers with import/export licences;

(iii)           misrepresents or has been a party to any corrupt or fraudulent practice in obtaining any licence;

(iv)          commits a breach of the Foreign Trade (Development and Regulation) Act, 1992 or the Rules and Orders made thereunder; or

(v)           fails to furnish the information required by the DGFT or any person or authority authorised by him. 

Opportunity to Explain: A reasonable opportunity shall be given to the applicant or to the Export/Trading/Star Trading/Super Star Trading House before taking any action against him.

Appeal:  An appeal against a decision taken on an application for the grant of EH/TH/STH/SSTH Certificate or any amendment to the certificate or by any decision to suspend or cancel the certificate, will lie with the Export House Committee on Export Houses/Trading Houses/Star Trading House/Super Star Trading House in the DGFT office.

The period for appeal is 45 days from the date of decision.

The decision of the Committee shall be  final.

 

Obligation

Information:   Export/Trading/Star Trading/Super Star Trading House will be under obligation to furnish any information to the DGFT or to any other person or authority authorised by him, as and when required.

Accounts:  Every EH/TH/STH/SSTH shall maintain true and proper accounts of its exports and imports for three years.  These accounts will be made available for inspection by any authority nominated by the DGFT.

Monthly Returns:  They shall send monthly return to the FIEO in the form specified by it.

Facilities and Benefits

            Export Houses/Trading/Star Trading/Super Star Trading Houses are entitled to special benefits like-

(i)         Import Facilities

(ii)            Marketing  Development Assistance.

(iii)           Foreign Currency Accounts

(iv)          Foreign Exchange Facilities

(v)           Golden Status Certificate

(vi)          Other Facilities

 
Import Facilities

            Export Houses/Trading/Star Trading/Super Star Trading Houses are granted the following facilities under the import policy.

(i)         DEPB Scripts

(ii)            Advance Licences for physical export, intermediate supplies and deemed exports.

(iii)           Automatic Licence.

(iv)          LUT facility.

Duty Entitlement Passbook (DEPB) Scheme

            Under this scheme, an EH/TH/STH/SSTH and such other exporters as may be specified by the DGFT, will be issued a DEPB.

Automatic Licence

            The EH etc. status holders/green card holders shall be issued licences automatically within the stipulated  time period.  Deficiency, if any, shall be intimated in the covering letter which shall be required to be rectified by the status holder within 10 days from the date of communication of the deficiency.

LUT Facility

            The Super Star Trading Houses, Star Trading Houses, Trading Houses and Export Houses (and also Public Sector Undertaking) shall be required to furnish Legal Undertaking (without any Bank Guarantee) before clearance of goods imported under Advance Licences, etc.  Manufacturers other EH & PSU, not registered with the Central Excise, are required to furnish, bond supported by BG to the extent of 25% of customs duty, and merchant exporters to the extent of 100% of duty saved.

Foreign Exchange Facilities

 

Foreign Currency Accounts:  The facility of maintaining Foreign Currency (FC) Accounts has been introduced as a mechanism for settlement of payment for import, repayment of foreign currency loans and expenditure to be incurred for certain purposes approved by the RBI, out of export proceeds credited to such accounts.  Such accounts can be maintained with any Authorised Dealer in Foreign Exchange in India but only at its designated branches.  It can also be opened with a bank abroad. The facility of maintaining FC accounts either in India or abroad will be available to Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses, though it will also be available to other exporters whose net foreign exchange earnings (NFE) during the preceding year from exports are not less than Rs. 4 crores. 


EEFC Accounts

            Alternatively, the exporters may open, maintain and operate EEFC (Exchange Earners Foreign Currency) Accounts at designated branches in India of authorised dealers in FE.  Exporters and other recipients (including Export/Trading/Star Trading and Super Star Trading Houses) of inward remittances in convertible foreign currencies (other than remittances received under repatriation guarantees or under special schemes for priority allotment against foreign exchange receipts) may be allowed to credit up to 50% of such receipts to EEFC accounts.  Funds in such accounts may be utilised for setting up branches/offices abroad for promotion of sales of their goods/services by Export, Trading, Star Trading and Super Star Trading Houses.  The other purposes for which such funds can be utilised by all exporters including EH/TH/STH/SSTH.

Foreign Offices

            EH/TH/STH/SSTH, as also other exporters are allowed to open offices or post representative abroad.  However, no permission of RBI is required by the former, provided they utilise the FE for such offices out of their FCA or EEFC Accounts.

Other Assistance

Training of Personnel

            Preference may be given to personnel of Export Houses, etc. by selection of participants for training programmes organised in India and abroad by specialised institutions and organisations, where such participation is sponsored by the Government of India.  This is to ensure that personnel of such Export/Trading Houses are in continuous touch with and possess knowledge of latest and sophisticated marketing techniques.

 

Trade Delegations         

            A number of trade delegations are sent abroad by the Government of India, FIEO and EPCs for exploiting foreign markets and exchange of information to develop trade.  Representatives of Export/Trading Houses/Star Trading Houses/Super Star Trading Houses may be given preference for being included in these delegations. (Also see below).

 

Membership of Apex Bodies/Trade Delegations

            The Super Star Trading Houses will be entitled to-

(i)         membership of Apex Consultative bodies like Board of Trade concerned with trade policy and promotion.

(ii)            preferential treatment for representation on important business delegations.

(iii)           Permission for overseas trading

Eximption from Pre-shipment Inspection

            Export of items of EH/TH/STH/SSTH will be exempt from compulsory pre-shipment inspection.

 

Green Channel Facility

            Green Channel Facility for expeditious clearance of consignments, de-stuffing of containers in factory, etc. will be available as follows;

            All Trading Houses/Star Trading/Super Star Trading Houses and Manufacturer Export Houses will get the facility of expeditious assessment of Bill of Entry by a separate group of Appraisers and Assistant Commissioners specially earmarked for this purpose.  They will be given the green channel facility in the matter of expeditious examination of Bill of entry provided they have a good past track record.  Facilities of de-stuffing containers shall be provided at the factory premises of the above categories who are manufacturers/importers by the Central Excise Officers.  Such containers shall straight-away move from the port to the factory for the purpose.  The custom duty shall be charged based on the declaration in the Bills of Entry and as assessed by the Custom Houses.  The above facility will be available to the exporters who hold valid certificates of Export House/Trading House/Star Trading House/Super Star Trading House issued by the Director General of Foreign Trade.

 

Golden Status Certificate

            Exporters who have attained Export House, Trading House, Star Trading House and Super Star Trading House status for three terms or more and continue to export shall be eligible for golden status certificate which would enable them to enjoy the benefits of Export House/Trading House/Star Trading House and Super Star Trading House certificate irrespective of their actual performance thereafter as per the guidelines issued in this regard from time to time.

            Where the eligible applicant has obtained different categories of status for three successive terms or more, the golden status certificate shall be issued according to the last status obtained by it in the three successive terms.

Application:  A simple request for Golden  Status certificate shall be sent to the DGFT, along with:

(i)         self-addressed photocopies of previous three “status” i.e. EH certificate.

a Chartered Accountant’s certificate indicating the FOB. value of exports in the preceding year.

CHAPTER 15

EXPORT PROMOTION SCHEMES

Fiscal Incentives

        Fiscal incentives are provided by the Government to promote exports in India.  The incentives help the exporters to keep their prices competitive in the international market.  Fiscal incentive are inevitable in the developing countries for promoting exports.  The following fiscal incentives are provided by the Government to the exporters.

-             Duty Drawback (Customs and Central Excise Exemption)

-             Tax Concession

-             Market Development Assistance

-             Concessional Export Finance

-             Export Promotion of Capital Goods Scheme

-             Cash Compensatory Support

-             Air Freight Subsidy

DUTY DRAWBACK

        Duty drawback is an incentive provided by the Central Government to the exporters for encouraging exports.  Duty drawback helps the exporters to keep then Indian products competitive in the overseas market.  The duty paid on the inputs (indigenous and imported) used in the production of export goods can be refunded after the exporters provide proof of export of such goods.  The refund of duty is called duty drawback.

        According to Rule 2(a) of the Customs and Central Excise Duty Drawback Rules, 1995, ‘drawback’ in relation to any goods manufactured in India and exported means the rebate of duty chargeable on any imported material or excisable materials used in the manufacture of such goods.

DUTY DRAWBACK RULES 

       The relevant provisions for duty drawback are listed in section 75 of the Customs Act, 1962 under which the Government may notify such goods in respect of which drawback of duties paid on imported raw materials utilised in the production  of export goods may be allowed in accordance with the rules and regulations.  The refund of duty (drawback) is to be equal to the average amount of duty paid or inputs used in the production of export goods and the drawback rates may relate to the manufacturers in general or to any particular manufacturer.  For availing the duty drawback, the exporters should produce documents in evidence of duty paid and the exporters may give access to the authorised officer of customs to their manufacturing premises for verification.

        Section 75 of the Customs Act, provides a provision for the concept of ‘Deemed Import’ in respect of those raw materials whose Import into India is more than the total quantity of like materials used in the manufacture of goods in India and exported.  In such cases the Government notifies those materials which will be considered ‘Deemed Imported’ .  Some of the major materials in this category are lead, nickel, zinc, copper,/brass scarp etc.  Thus when such materials are used in the production of export goods, the exporters can claim drawback to the extent of import duty payable on such raw materials even though he  may have used indigenous raw materials.

        Section 37 of the Central Excise Act provides rebate for Central Excise paid on inputs used in the production of export goods.  Under the provision of Section 37 of the Central Excise Act and Section 75 of the Customs Act, Central Government notified the Customs and Central Excise Duties Drawback Rules, 1995.  Following are the provisions of drawback rules.

        Under the provisions of section 75 of the Customs Act and section 37 of the Central Excise Act, Government have notified the Customs and Central Excise Duties Drawback Rules, 1995.  Some of the main provisions of Drawback Rules are given below:

·         In respect of goods (inputs) on which lesser duty has been paid or rebate etc. has been claimed, the drawback admissible on said goods shall be reduced raking into account the lesser duty paid or the rebate, refund or credit obtained.

·         No drawback shall be allowed if no duty (customs or central excise only) has been paid.

·         While determining the rate of drawback the government shall have regard to average quantity or value of each class or description of the materials from which a particular class of goods is produced; and the average amount of duties paid on such materials.

·         Where amount or rate of drawback has not been determined (i.e. cases other than those where all industry rate of drawback is available), an application shall be made by the manufacturer/exporter within 60 days of export for fixation of drawback, giving all relevant facts and information in the prescribed proformas of DBK.

        Pending fixation of drawback rate, the exporter can make an application for provisional payment of drawback.  For this purpose the exporter has to give a bond undertaking to pay back the amount of drawback or the differential that may be so required after fixation of rate of drawback.

·         Where the manufacturer/exporter finds that the all industry rate of drawback is low (less than four-fifth of the duties actually paid on the materials or components used in the `manufacture of  export goods), he may within 60 days from the date of export make an application for fixation of brand rate of Duty Draw Back (DBK).  In the meantime he can avail the drawback provisionally.

·         In both the above cases, the department verifies the date submitted, and then the brand rate is fixed fore that particular product and that exporter for one shipment or for a specified period of time.

·         No drawback is to be determined when the DBK is less than one per cent of the FOB value of export or less than Rs. 500.

·         The exporter/manufacturer has to submit information and documents that may be necessary for fixation of brand rate of DBK.  He has also to give access to his manufacturing unit.

·         Drawback is also admissible on export of goods by post. 

·         Triplicate copy of the shipping bill is the claim of drawback.  No separate claim is required to be filed by the exporter.  Other documents required to be furnished are-export contract, LC, packing list, AR4 form, insurance certificate, copy of rate fixation authorisation, where applicable.

·         Where the amount of drawback sanctioned is found to be less that what was admissible, the exporter may file a supplementary claim.

·         Where it is found that the drawback amount has been paid erroneously, it can be recovered from him.

·         Drawback can also be recovered in cases where export proceeds have not been realised.

DUTY DRAWBACK – ALL  INDUSTRY RATE AND BRAND RATE

        There are two types of drawback rates.  They are ‘all industry rate’ and ‘brand rate’.  All industry rates are announced once in a year after three months from the presentation of Central Budget.  The rates are fixed for various export commodities based on the current rate of import duties and central excise duties on various input materials used in the production of export goods.  All industry rates are subject to revision either on the initiative of the government or export promotion councils.  The revision will depend upon the changes in the import duties and central excise.

        Brand rate is applicable to the products for which drawback rate is not mentioned in the table of duty drawback.  This table reveals the all industry rate for the various types of products produced and exported.  Brand rate is approved by the Drawback Directorate for the products for which all industry rate is not available.  The exporter should apply to the Drawback Directorate, Ministry of Finance for getting  brand rate.  The brand rate is fixed for a particular commodity and for a particular exporter for a particular shipment or for a specified period of time on the basis of the information submitted by the exporter.

        Exporters can avail special brand rate also.  If the existing duty drawback rate is less than 4/5 of the duty paid, exporters can approach the Drawback Directorate.  Ministry of Finance for getting special brand rate.  A separate application is to be made to the Drawback Directorate for availing special brand rate.  Based on the information  provided by the exporters, Drawback Directorate will fix the special brand rate after verification of the documents submitted by the exporter.  The exporters have to submit the relevant information in the prescribed formats stating the quantum of each raw material used for manufacture of a specified quantity of finished export products, central excise and customs duty paid on the inputs used and other documentary evidence about the duty paid and export of goods for getting brand rate/special brand rate.

PROCEDURE FOR CLAIMING DRAWBACK

        Exporters availing all industry rate of duty drawback, they have to submit all the relevant information about the export of goods and inputs used in the prescribed format to the customs department.  Shipping bill is treated as a claim for drawback and the customs department will approve and sanction the claim and the amount of duty drawback will be credited to the account of exporters directly.

        For availing brand rate, exporters should apply to the Drawback Directorate, Ministry of Finance within 60 days from the date of export.  An extension of 30 days will be allowed provided there is sufficient reason for not filing the application within 60 days.

        Exporters are expected to use the imported inputs as early as possible for the manufacture of exportable commodities.  The percentage of import duty to be paid as drawback to the exporters will depend upon the period between the date of clearance for home consumption and the date when goods are exported.

DRAWBACK ON DEEMED EXPORT

        Deemed export refers to goods which are not physically exported.  Deemed exports are also eligible for duty drawback.  The following supplies are considered as ‘Deemed Exports’ and they are listed in the Exim policy also.

i)        Supply of goods against duty free licenses issued under the Duty exemption scheme.

ii)       Supply of goods to export oriented units or units in export processing zones etc.

iii)      Supply of capital goods to holders of licences under the Export _Promotion of Capital Goods (EPCG) scheme.

iv)      Supply of goods to projects finance by multilateral or bilateral agencies/funds notified by the Department of Economic Affairs, Ministry of Finance, etc.

        The above supplies are eligible to avail the benefit of duty drawback on deemed exports.  The suppliers of goods can claim duty drawback.  Duty drawback on deemed export is granted by the office of the Directorate General of Foreign Trade, Ministry of Commerce.  All industry rates and brand rates are applicable to deemed exports.  The procedure for fixation of duty drawback and claiming duty drawback for deemed exports are the same adopted for physical exports.

INCOME TAX RELIEF TO EXPORTERS

1.       No tax on Export Profits

            Under the provisions of section 80 HHC of the Income Tax Act, 60 per cent deduction is allowed to the exporters for the profit derived from the export of goods to foreign countries.

            The essential requirements of section HHC are listed below:

a)       The assessee (exporter) must be an Indian company or a person resident in India.

b)      The assessee should be involved in the business of exporting goods at merchandise to foreign countries.

c)       Income tax deduction is also available to the suppliers of goods at merchandise to export houses/trading houses.

d)      Income tax deduction under section 80 HHC is allowed if the sale proceeds are receivable in convertible foreign exchange.  Deduction under this section will be allowed only if the sale proceeds are receivable in or brought into India within a period of six months from the end of the relevant previous year, with effect from the assessment year 1991-92.

2. Tax concession for the Export of Computer Software and for Import of system.

            Under section 80 HHE of the Income Tax Act, income tax concession is provided for the export of computer software and for the import of system.

            Indian companies and resident non-tax payers will be eligible for a deduction of an amount equal to the profits arised from the export of computer software.

            Any lumpsum payment for getting use of systems software supplied by a non-resident manufacturer along with hardware shall not be subjected to income tax.

            The approval of the central government about the agreement for applying the lowest rate of tax 30% shall not be applicable in cases where the royalty payment is for the use of software permitted to be imported under OGL.

50% tax exemption for the profits from overseas projects:  Under section 80 HHB, the Income Tax Act, 50 percent tax exemption is provided for the profits from the overseas projects.

Following are the conditions for availing the deduction:

a)             the sum equal to 50% of the profits is to be brought by the assessee within a period of six months from the end of the previous year in convertible foreign exchange.

b)            assessee should maintain a separate account for the overseas projects.

c)             assessee should create a ‘Foreign project Reserve Account’ equal to 50 percent of the profit derived from the overseas project.  It is to be utilised by the assessee for a period of 5 years next following for business purposes other than for distribution of dividends or profits.

d)            any break of the above conditions will  forfeit the benefit of income tax concession tax holidays for the Free Trade Zone/Export processing zone units and Software technology Parks.

Under section 10A of the Income Tax Act, a five year tax holiday is provided to the units in Free Trade Zone/Export Processing Zones and Electronic Hardware/Software Technology Parks.  The profits of the newly established industrial units in Free Trade Zones are not taxed for a period of five years, out of eight assessment years relevant to the previous year in which the industrial units begin production.

The tax holiday period for export processing zone/export oriented units is extended from five years to ten years as a package to boost export announced by the Commerce Ministry, Government of India on 4th August 1998.

Under section 10B of the  Income Tax Act, the 100% Export Oriented Units can avail tax holiday for a period of ten years.

MARKET DEVELOPMENT ASSISTANCE

Market Development Assistance (MDA) is one of the export promotion schemes of the Ministry of Commerce.  Under MDA, financial assistance is provided for sponsoring trade delegations abroad, market studies, publicity, establishing warehouses and show rooms abroad, research and development, quality control etc.  Market development assistance is available to approval organisations (Export Promotion Council) including personnel thereof, export houses, trading houses, association of small scale industries and individual exporters sponsored by the approved organisations/export houses/association of small scale industries.

Market development assistance grant is disbursed by two agencies.  They are federation of Indian Export Organisations, and Ministry of Commerce.

Federation of Indian Export Organisations provides and disburses MDA grant for the following activities.

a)             Participation  in fairs and exhibitions abroad

b)            sales teams

c)             combined proposals for participation in fairs/exhibitions followed or proceeded by sales teams

d)            broad publicity by means of catalogues, brochures, advertisements in foreign media.

The Ministry of Commerce provides and disburses MDA grant for the following activities:

a)             research and development

b)            establishing warehouse, show rooms or after sales service establishments abroad

c)             opening of foreign offices by export houses.

The activities covered by FIEO for MDA grant are also dealt by the Ministry of Commerce through the concerned export promotion council.

Individual exporters should send their applications to the Federation of India Export Organisations or Ministry of Commerce for obtaining MDA assistance at least 28 days before commencement of the activity i.e. the date on which export promotion activity is commenced. 

After completion of the export promotion activity, the exporters should submit a claim in the prescribed format for reimbursement of the expenses up to the admissible limit.  After verifying the claim, Federation of Indian Export Organisations/Ministry of Commerce will release the grant to the exporters.

MAXIMUM LIMIT FOR MARKET DEVELOPMENT

ASSISTANCE TO EXPORT HOUSES

A)            Sales cum study Tour grant one representative is permitted 

Air India Economy class is to be used

Two sales cum study tours only are permitted in one calendar year.  One additional tour will be permitted to Latin America/Caribbean countries.

Maximum limit for grant 

i)          Manufacturing small scale units/export houses/  60% of Air Fare and

trading houses/star trading houses.                                30% of Daily allowance  

ii)          Large Scale units/Merchant Export Houses                     25% of Air Fare and

                                                                                                12.5% of Daily Allowance

B)            Participations in Fairs/Exhibitions Abroad

One representative will be permitted for one export unit to participate in the fairs/exhibitions abroad.  Air India Economy Class is to be used.  Only three participations in fairs/exhibitions abroad and one additional participation to Latin America/Caribbean countries for one export unit in a calendar year will be permitted.

Rate of Grant

i)          Participation through Export Promotion                          1.  50% of Air fare

Councils                                                                                   2.  25% of Daily Allowance

                                                                                                                  for two days before the

                                                                                                                  fair plus duration of the

                                                                                                                  fair and one day after                                                                                                                the fair

                                                                        3.  25% of the expenditure                                                                                      incurred for publicity

                                                                                                                 (minimum Rs. 10000)

ii)          Participation through Indian Trade                                              In Addition to above three

Promotion Organisation                                                 incentives, the following is

                                                                                                            Also provided space rent @

                                                                                                            50% is allowed subject to

                                                                                                            submission of a certificate

                                                                                                            from the Indian Trade

                                                                                                            Promotion Organisation

                                                                                    that the space rent is not

                                                                                                            subsidised.

iii)         Direct Participation                                                                    In addition to above three

                                                                                                            (mentioned in (I), the

                                                                                                following incentives are also

                                                                                                            provided.

a)             Space rent @ 50%                                                                    (maximum of Rs. 2 lakhs

                                                                                                            only)

b)            Interpreter @ 50% or Rs. 2000 per day for the  period of the fair/exhibition         

c)         Water/Electricity charges  @ 50%. 

Grant for the repeated participations in the same fair/exhibition under market development assistance.

                                                                                    Participation                           

Particulars                                           1st                  2nd                  3rd                   4th                   5th                   6th                                                                                                                  

1.  Air fare                                             50%      40%      30%      20%      10%      Nil

2.  DA                                                   25%      20%      15%      10%      5%       Nil                   

3.  Publicity (Rs.10000)              25%      25%      25%      20%      10%      Nil

4.  Space rent                                       50%      40%      30%      20%      10%      Nil

5.  Interpreter                                         50%      40%      30%      20%      10%      Nil

6.  Electricity/Water                               50%      40%      30%      20%      10%      Nil                                                 

GRANT FOR ADVERTISEMENT IN FOREIGN MEDIA

A maximum grant of 25% or Rs. 2 lakhs in one calendar year will be allowed for publication and advertisement together  in foreign media.  This grant is given for brand publicity in foreign countries.

EXPORT FINANCE

Finance is the life blood of any business activity.  Finance is the most significant aspect in export trade.  Once the export order is received, production of exportable commodities should take in time.  It requires adequate finance for procuring the needed raw materials and other components.  In some case, materials are to be imported from foreign countries.  It requires foreign currency.  Unless the financial requirements for exports are fulfilled, export order cannot be met in the scheduled time.  Further getting payment for the export cargo will take sometime.  Adequate credit facilities are to be extended to the exporters till they receive export proceeds from foreign countries.  Realising the significance of export finance and to encourage exports, the Reserve bank of India has come forward to extend export finance to the Indian exporters at concessional rate. 

There are two types of export finance.  They are,

i)              pre-shipment credit (or) packing credit

ii)             post-shipment credit.

The Reserve Bank of India ha defined pre-shipment credit as, “ any loan to an exporter for financing the purchase, processing, manufacturing or packing of goods”.

Pre-shipment credit is given by the commercial banks for purchasing and processing of materials, manufacturing of exportable commodities and packing of such commodities.

Pre-shipment credit is given by the commercial banks for a period of 180 days from the date of sanctioning the credit.  Further extention will be given for a period of 90 days, provided adequate reasons are given by the exporters for such extention.

Interest rate for the Pre-shipment Credit is lower than the normal rate of interest.  Concessional interest rate is charged for pre-shipment credit in order to maintain price competitiveness in the overseas market and to reduce interest burden to the exporters.

Commercial banks charge a rate of 10 per cent of pre-shipment credit up to 180 days.  Pre-shipment credit between 180 to 270 days will cost exporters 12 percent.  The interest rate for post-shipment credit on usance bills beyond 90 days is 11 percent.  The concessional rate of interest is one of the important incentives provided by the Government for export trade.  In order to reduce the interest rate for export credit, the RBI has reduced the export refinance rate from 9% to 7%.  Exporters should fulfil all the procedures prescribed by the commercial banks for export credit.  Exporters should submit export order or letter of credit along with the application form for pre-shipment credit.  Exporters should give an undertaking that the advance will be used exclusively for the purposes of procuring/manufacturing/shipping of commodities meant for export as given in Export Order or letter of Credit.  Banks will sanction the pre-shipment credit after verifying all the documents required for it.  The credit worthiness of the exporters, their capacity to produce exportable commodities and the reputation of the organisation are also assessed by the banks before sanctioning pre-shipment credit.  Exporters are advised to get appropriate insurance policy for export credit from the Export Credit Guarantee Corporation (ECGC).  Exporters should get Packing Credit Guarantee also from the ECGC.  Insurance Policy and guarantee from the ECGC are insisted by the commercial banks for sanctioning pre-shipment credit.  Exporters can avail pre-shipment credit in foreign currency also.

Post-shipment credit refers to any loan or any other credit provided by any institution to an exporter of goods from India from the date of extending the credit after shipment of goods to the date of realisation of export proceeds and includes any loan or advance granted to an exporter, on consideration of or on the security of any drawback or any cash receivable by way of incentives from the Government.

Post-shipment credit is classified into the following categories:

i)              negotiation/payment/acceptance of export documents under the Letter of Credit

ii)             Purchase/discount of export documents under confirmed order

iii)            advances against bills sent on collection basis

iv)            advances against export on consignment basis

v)             advances against undrawn balances

vi)            advances against cash incentives

vii)           advances against duty drawback entitlement

viii)          advances against retention money

ix)            financing exports under Deferred Payment Arrangements, turnkey projects, construction contracts etc.

 

EXPORT PROMOTION OF CAPITAL GOODS SCHEME (EPCG)

Export Promotion of Capital Goods Scheme has been introduced for the purpose of encouraging exports.  Under this scheme capital goods import is permitted with concessional import duty.  Modern textile mills and readymade garment units are in need of modern machineries and improved equipments available in the developed and newly industrialised nations.  International market concentrates on quality.  Modern advanced and updated technology oriented plant and machineries contribute quality which is insisted in the international market.

In order to help the Indian exporters to import advanced machineries form the developed countries, the Government  of India introduced a novel scheme, ‘Export Promotion of Capital Goods (EPCG) Scheme from the year 1990-91.  While introducing this scheme 15 percent import duty was charged for the capital goods import up to Rs. 20 crores.  Import above Rs. 20 crore, import duty was nil.

EPCG scheme is totally export linked.  If the capital goods import is made under 15 percent import duty (up to Rs. 20 crore), the export commitment is 4 times of the CIF value of import during 5 years, from the date of license to import is given under the EPCG scheme.  If the capital goods import is made under zero duty scheme, the export commitment is 6 times of the CIF value of import during 8 years.  This scheme is an incentive to the exporters to import capital goods at concessional duty which are needed to produce exportable commodities.

The percentage of meeting the export commitment by the exporters under the EPCG scheme is getting down since 1992-93.  Under this scheme, exports are not increased up to the expected level.  In the year 1990-91 and 1991-92, 90 percent of the export commitment was met by the exporters.  In the year 1992-93, exporters met only 53.5 percent of their export obligation and it is reduced to 28.70 percent in 1993-94 and 14.50 percent in 1994-95.  The poor performance of the EPCG scheme is also one of the reasons for the sluggish export growth.

In the year 1995, the import duty of this scheme was reduced from 15 percent to 10 percent.  Import duty 10 percent was levied for the import of capital goods up to Rs. 20 crore.  Capital goods import above Rs. 20 crore, the same zero import duty continued.  Zero import duty was applied to the equipments import up to Rs. 5 crore for agriculture operations.

In the year 1998, the Commerce Ministry, Government of India modified the EPCG scheme.  Under the modified scheme, no import duty is charged for the import of capital goods above Rs. 1 crore.  Zero import duty is applicable for the import of equipments up to Rs. 10 lakhs for the manufacture of computer software.

This scheme facilitates small exporters.  Zero import duty was applicable for the import of capital goods above Rs. 20 crore.  The small exporters are not in a position to avail this scheme.  Their import of capital goods requirement is not above Rs. 20 crore. So they do not avail the zero duty benefit.  Only the large exporters utilised the zero duty scheme.  In order to help the small exporters, the Government of India reduced the capital goods import limit for zero duty above Rs. 20 crores to Rs. 1 crore, for computer software it is Rs. 10 lakh.

Under the ‘EPCG’ scheme, the importers should fulfil the export commitment.  The export commitment is given below:

                                                                                                Export Commitment 

 

Import duty 10% scheme (Capital goods                                    4 times of the CIF

Import below Rs. 1 crore)                                                           value of import within

                                                                                                5 years

Zero import duty scheme (Capital goods                                    6 times of the CIF

import   above Rs. 1 crore)                                                         value of import within

                                                                                                8 years

Capital goods import above Rs. 10 lakh

for computer software)

The exporters are directed to pay normal import duty as penalty if they fail to honour their export commitment under the EPCG scheme.  In some cases the imported capital  goods may be confiscated by the Government and the import license may be withdrawn.

CASH COMPENSATORY SUPPORT

It is one of the incentive schemes introduced by the Government of India for the benefit of the Indian exporters.  This scheme was introduced in the year 1972.  The basic objective of this scheme is to compensate the Indian exporters for the loss incurred in the export of non-traditional goods.  This scheme encouraged the export of non-traditional goods in the overseas market so as to increase the volume of exports in India.  The losses covered under the cash compensatory support are related to the competition faced by the Indian exporters in the overseas market.  The compensation will be based on the declared FOB value of the export goods or per unit of goods exported.  The rates for the compensation is fixed by the Government.  It is fixed commoditywise and amended from time to time.

The price  of the Indian products and the price of the same products of the foreign competitors in the internal market is compared and reasons are ascertained for the high cost of the Indian products and the Indian exporters are compensated for the high costs incurred by them through the cash compensatory support scheme and Indian prices are made at par with the foreign competitors.  Thus the Indian exporters could compete with the price competition.  The following may be the reasons for the higher cost incurred by the Indian exporters:

-           higher domestic cost of input

-                      higher interest on export credit

-                      costs of delays at port and

-                      higher product promotion costs

The Alexander Committee (Export-Import Policies and Procedures Committee) has identified the following as the basic principles of cash compensatory support.

This scheme should compensate fully the indirect taxes paid by the exporters for the inputs imported or procured domestically but which are not refunded.

This scheme must be adequate enough to encourage the Indian exporters while taking suitable marketing strategies to face competition in the export market and to compensate the disadvantages of freight, inadequacy of port facilities etc to compete in the export market.

The cash  compensatory scheme should cover the costs incurred by the exporters to promote new products in the export market.  The cash compensatory support scheme has been criticised in the following aspects:

The exporters do not give adequate and correct information while availing the support under this scheme.  The data given by the exporters are inadequate and manipulated to show higher domestic resource cost than what is actually incurred.  It is done to get more compensation than what they actually deserve.

The Public Accounts Committee of the Government of India directed the Central Government in the year 1983 to review the scheme to plug the operational problems of the scheme.

The cash compensatory support scheme will not help the exporters in the long run and it will not make them self-reliant.

The scheme encourages commercially non-viable units also be compensating their higher input costs and promotion costs.

The rates for compensation and the procedure for implementation under this scheme are subject to change in the policies of the Government.

AIR FREIGHT SUBSIDY

Air Freight Subsidy is one of the incentives provided by the Government to the exporters of flowers and spices.

The following subsidies are provided by the Government of India for encouraging exports:

(i)             Concessional  finance for both pre-shipment and post shipment credit

(ii)            Duty Drawback (customs and excise)

(iii)           Income tax concession for export profit.

(iv)          Export Promotion of Capital Goods Scheme – facilitating duty free import of capital goods

(v)           Market Development Assistance – providing financial assistance for trade delegation and organising trade fairs abroad.

EXPORT PROCESSING ZONES/FREE TRADE ZONES

Export processing zones are the accelerators for the growth of exports in our country.  In Export Processing Zones, basic infrastructure facilities such as developed land for construction of factory sheds, specific designed factory buildings road, power, water supply and drainage are provided to the industrial units.  In additional to the infrastructure facilities customs clearance is also made available in the EPZ.  Service centre is also located in the EPZ.  The centre provides postal devices and banking services.  The office of the clearing and forwarding agents is also made available in the service centre.

The export processing zones are established as enclaves separated from the Domestic Tariff Area by Physical barriers, and are intended to create an internationally competitive duly free environment for export production, at low costs.  Export processing zones help the industrial units to keep their products competitive, both quality wise and price wise in the overseas market.

Export processing zones have been established by the Government of India and they are managed by the Ministry of Commerce.  Each zone is headed by the Development commissioner.  He takes care of processing applications and issuing licences for clearing the import of raw materials, components and capital goods.  The development commissioner takes steps in time in providing infrastructural facilities to the industrial units.  The administrative machinery of the EPZ provides customs clearance and regulations with regard to labour, export incentives, foreign exchange, corporate tax etc.  A separate customs department is placed in the EPZ to take care of the customs formalities for the units functioning in the zone.

Each EPZ there is a Board to monitor the overall administration.  The Board is headed by the Secretary/Additional Secretary., Ministry of Commerce, Government of India.  The Board is a policy making body deciding the investments the investments in the zone, the nature of the industrial units and financial and other incentives to the investors.  The Board takes decisions relating to starting up industries with zone, import of capital gods and other raw materials, disposal of water and by-products, procedural formalities for foreign investments in the zone etc.

EPZ – Development and Administration

APPROVAL OF INDUSTRIAL UNITS IN THE ZONE

The units seeking permission to establish their industrial activities in the zone, should undertake production or manufacturing activities.  The criteria for permitting an industrial unit in the zone are given below:

a)             The unit should be 100% export oriented,

b)            The unit should achieve minimum value addition prescribed in the EXIM policy,

c)             The unit should possesses certain improvement in industrial technology,

d)            The unit should be capable to capture overseas market for its products,

e)             The unit should have the potentials to utilize skilled manpower in its manufacturing operations,

f)             The process of production of the unit should be pollution free.

PROCEDURE FOR APPROVAL

Industrial units fulfilling the conditions prescribed by the Government, will be given automatic approval to set up manufacturing production operations in the zone.  The development commissioner of the zone is empowered to grant automatic approval.  This approval will be given within a period of 15 days from the date of application.

Industrial units do not fulfil the conditions prescribed by the Government will be referred to the Board of Approvals for granting permission to set up industrial activity.  The Board of  Approvals will gave permission to said industrial units within a period of 45 days from the ate of application.  Industrial units should submit their applications to the development commissioner of the zone and the letter of intent and Letters of Approval will be provided by the Development Commissioner.

EXPORT PROCESSING ZONES IN INDIA

There are eight free trade and export processing zones in India.  They are given below:

1.             Cochin Export Processing Zone, Kerala

2.             Falta Export Processing Zone, West Bengal

3.             Kandla Free Trade Zone, Gujarat.

4.             Madras Export Processing Zone, Chennai.

5.             Noida Export Processing Zone, Uttarpradesh.

6.             Santacruz Electronic Export Processing Zone, Bombay.

7.             Visakapatnam Export Processing Zone, Andhrapradesh.

8.             Surat Export Processing Zone, Gujarat.

INCENTIVES TO THE EXPORT PROCESSING ZONES 

•           Duty free import of all types of raw materials, components and capital goods (Items mentioned in the degative list of imports are not permitted to import).

•           Units in the EPZ enjoy tax holiday for the period of ten years.

•           Units in the EPZ are exempted from the minimum alternate tax.

•           Units in the EPZ can import second hand capital goods duty free.

•           Units in the EPZ, can purchase capital goods from the domestic industries and such industries can import capital goods duty free and supply to the units of the EPZ.

•           Developed plots and standard design factory buildings are provided to the units at the concessional sent.

•           100 percent foreign equity is permitted in the EPZ; no restriction on foreign holding.

•           Units functioning in the EPZ can add the foreign exchange earnings by their DTA   industrial houses with their foreign exchange earnings for obtaining the export houses status.

•           Units are exempted for excise duty on specified materials used for export production.

•           Units are exempted from import license.

•           Units are exempted from stamp duty, registration charges, etc.

•           Units in the  EPZ are exempted from sales tax.

•           Automatic approval for the medium projects to be set up in EPZ is given by the development commissioner within two weeks.

•           Units are given State investment subsidy ranging from 5% to 15% of fixed assets.

•           Deemed export benefits are given to the DTA suppliers of the units of the EPZ.

•           Units in the EPZ are eligible for 100% convertibility of their export earnings.

•           Single window is in practice for the clearance of proposals.

•           Units in the EPZ can sell 25 percent of their production in the Domestic Tariff Area.

•           Full and free repatriation of profit and divedered is allowed to overseas investors invested in the EPZ.

 

The concerned State  Government provide a lot of incentives and concessions to the unit functioning in the EPZs for the purpose of encouraging exports.  Electricity subsidy, capital investment subsidy, captive power generation subsidy, seed capital assistance, subsidy of 75% of cost of preparation of feasibility study for an approved project subject to a maximum limit of Rs. 50,000 concession to promoters contribution for commencing new projects etc. are the incentives offered by the State Governments to the industrial units of the EPZs.


Commercial banks, state financial corporations and other development bans provide financial assistance (term loans per shipment credit and working capital assistance) to units functioning in the EPZs.  The Export-Import Bank offers re-financing facility on concessional terms to the commercial banks for the terms loan extended to the units in the EPZs.  The export credit and Government corporation insures the export procees and provides guarantees for getting financial assistance from banks.

ADMINISTRATION

COMPOSITION OF THE BOARDS OF FREE TRADE ZONES AND EXPORT

PROCESSING ZONES

For Kandla Trade Zone Board

Chairman

1.             Additional Secretary, Ministry of Commerce.


Members

2.             Joint Secretary (FTZ), Ministry of Commerce.

3.             Joint Secretary, Department of Economical Affairs.

4.             Joint Secretary, Department of Industrial Development.

5.             Director (Commerce Division), Ministry of Finance, Department of Expenditure.

6.             Chairman, Kandla Port Trust.

7.             Collector of Customs and Central Excise Ahmedabad (as representative of Department of Revenue and Insurance.

8.             Director General, DGTD, or his nominee.

9.             Joint Secretary, Department of Industrial Development.

10.          Joint Secretary, Department of Heavy Industry.

11.          Industries Commissioner, Department of Industries, Government of Gujarat.

12.          Economic Adviser, Ministry of Industry & Civil Supplies.

13.          Development Commissioner, Kandla Free Trade Zone, Gandhidham (Kutch).

 

Member Secretary

14.          Deputy Commissioner, Kandla Free Trade Zone, Ministry of Commerce.

The Kandla Free Trade Zone shall exercise the powers of the Licensing Committing in relation to Industrial undertaking in the Free Trade Zone Kandla.

Duty Entitlement Passbook (DEPB) Scheme

It is a new scheme introduced in EXIM policy, 1997-2002 effective from April 1, 1997.  It combines the former Passbook Scheme and VABAL (Value-based  Advance Licence) Scheme.  The credit shall be available on post-export basis against specified products at a specified percentage of FOB. value of exports made in freely convertible currency and also under counter-trade agreement and export-proceeds realised through escrow account in US dollars.

The scheme of Pre-export DEPB has been discontinued with effect from April 1, 2000.

Under the Duty Entitlement Pass Book (DEPB) Scheme, an exporter shall be eligible to claim credit at a specified percentage of FOB value of exports made in freely convertible currency and also under counter-trade agreement and export proceeds realised through escrow account in US dollars.  The credit shall be available against such export products and at such rate as may be specified by the Director General of Foreign Trade by a Public Notice(1) issued in this behalf.

Coverage:  Wherever any  product is specifically covered under any serial number of DEPB rate, the same shall not be covered under any generic entry.  For example, manhole cover covered under S. No. 405 of ‘engineering product’ should not be classified under S. No. 78 of the same goods which relates to pig iron products.

Credit Rates 

DEPB shall  be granted against exports already made, as announced from time to time.

However, exporter may export product for which credit rate is not notified, provided that such export products are covered under Standard Input Output Norms which are listed in  the Handbook of Procedures (Vol. 2), 1997-2002.  In case the credit rate for such product is notified, the exporter shall be entitled for DEPB.  However, such exports shall be made, entirely on the risk and responsibility of the exporter.

Value  Cap/Reduction:   DEPB credit rates for some products are subject to value cap.  The value cap imposed on any product shall be applicable to exports made on  or after the date of Public Notice notifying the value cap for calculation of DEPB entitlement restriction on account of Present Market Value, if any, shall be applicable in such cases.  Wherever value cap exists for DPEB entitlement, the export product shall include ‘with or without embroidery’.  The value cap imposed on various types of garments are applicable both to woven as well as knitted garments.  Wherever the DEPB rate has been reduced or value capping has been imposed, the reduction of rate or imposition of value cap shall not be applicable wherever the consignment of exports under DEPB has already been handed over to the Customs prior to the date of  notification for examination and clearance for exports.

The export of such products which are recognised as branded by an inter-Ministerial Committee shall not  be subject to any value cap for the purpose of DPEB.

Minimum Purety:  Wherever any purety has been specified in a DEPB rate, the same shall refer to ‘minimum purety’ and the exporter exporting the product having higher purety than the prescribed one shall also be entitled for the DEPB rate given for the product with specified purety.

Credit under DEPB and Present Market Value

 In respect of products where the rate of credit entitlement under DEPB scheme comes to 10% or more the amount of credit against each such export product shall not exceed 50% of the Present Market Value (PMV) of the export product.  At the time of export, the exporter shall declare in the shipping bill that the benefit under DEPB scheme against the export product would not exceed 50% of the PMV of the export product.  Such a declaration shall be required only in cases where rate of credit under DEPB is 10% or more.  But PMV declaration shall not be applicable for product for which value cap exists irrespective of the DEPB rate of the product.

PMV will be inclusive of excise duty, sales tax and other local taxes.

Verification:  At the stage of processing of SB, the correctness of PMV will be examined having regard to the description and specification of export product declared with reference to AR4 or excise invoice (in case of factory cleared goods).  For export goods procured from the market, PMV will be with reference to the sale invoice of authorised dealers or any other evidence based on enquiries.  In case of well-known brands the market price of goods will form the basis of ascertaining PMV.

But where a FOB value cap has also been notified along with DEPB rate, PMV will not be verified by the Customs House.

Types of DEPB

DEPB shall be issued on Post-export basis against exports already made.

Shipping Bill

DEPB can be granted against a Shipping Bill, irresepctive of its colour, having a endorsement that exports are effected under the DEPB scheme.  This clarification has been issued with regard to SBs generated through the EDI system in Customs.

But DEPB exports should be made on blue colour SB, through any means other than EDI system.

DEPB-cum-Drawback SB:  Exporters wishing to file application for brand rate fixation, will be permitted to file “DEPB-cum-Drawback Shipping Bill” to export goods under the DEPB scheme.  Its 3rd copy is the EP copy.

Ports of Imports/Exports

The exports/imports made from the ports as for Duty Exemption Entitlement Scheme, alone shall be entitled for DEPB.  Blue colour DEPB SB is to be filed for exports.  Imports are also permitted through Customs-bonded warehouses under TRA facility.

Eligibility

The DEPB covers all exporters except EOUs/EPZ units.  Third party exports are also admissible for grant of credit under DEPB.

EOUs/EPZ Units:  Exports effected by these units, whether directly or through third party, are not entitled for DEPB benefits, as stated above.

Imports Permissible:  Any item except those Imports of which are restricted in terms of the EXIM Policy book ITC (HS) Classifications of Export-Import Items, shall be allowed for import.

Imports under EPCG/Project Import Schemes

Since there is no restriction on the nature of goods to be imported under DEPB Scheme, goods which are being imported under other schemes like EPCG Schemes and Project Import can also be cleared against DEPB Scrips.  In such cases, the exemption from Special Additional Duty of Customs of 4% value vide Notification No. 48/98-Cus. Dated 17/7/98 will also be admissible to goods imported against DEPB Scrips.

Duty Exemption:  Imports under DEPB will be cleared without payment of basic customs duty, special duty of customs as well as additional duty of customs and special additional duty of customs against the credit under a Duty Entitlement Pass Book (DEPB).  The holder of Duty Entitlement Pass Book  shall have the option to pay additional customs duty, if any, in cash as well.

Credit Utilisation

 The credit under DEPB may be utilised for payment of customs duty on any item which is freely importable, except Capital Goods.

Validity

The DEPB scrip is valid for a period of 12 months from the date of its issuance.  However, where the date of expiry of DEPB falls before the last day of the month, the DEPB shall be deemed to be valid till the last day of the said month.

However, DEPB scrip being in the nature of a duty credit entitlement, it must be valid(1) on the date on which actual debit of duty is made in the scrip.

Revalidation: No revalidation shall be granted beyond the original period of validity of DEPB.

Duplicate Copy

Duplicate copy of DEPB shall be issued on an application made to the licensing authority concerned

Procedure

An application (2 copies) for grant of credit under DEPB may be made tom the licensing authority concerned in the form given in Appendix-11C of aforesaid Handbook of this book, along with the documents detailed below.

Time Limit

The application for obtaining credit shall be filed within a period  of 180 days from the date of exports.  In cases where the application for obtaining credit is filed after realisation of export proceeds. Such application may be filed within 90 days from the date of realisation or 180 days from the date of export whichever is later, reckoned from the last date of realisation export in respect of shipments for which the claim has been filed.

 Wherever exports are made on provisional basis, applications shall be filed within 180 days from the date of release of Shipping Bill.

Wherever provisional shipment has been allowed by the Customs authorities, DEPB against such exports shall be issued only after the release of the shipping bill by the Customs.  In such cases, application for DEPB shall be filed within 90 days from the date of release of such shipping bill.

Late Cut:  Wherever any application is received after the expiry of the last date for submission of such application but within six months from the last date, such application may be considered after imposing a late cut fee of 10% on the entitlement.

 

Number and Frequency of Applications

The applicant may file one or more applications subject to the condition that each application shall contain not more than 25 shipping bills.  All the shipping bills in any one application must relate to exports made from one Custom House only.  This limit shall not apply to the applications filed through EDI (Electronic Data Interchange) mode.

Ports/Airports/ICDs, etc:  The DEPB shall be issued with single port of registration, which will be the port from where the exports have been effected.  All Ports/Airports/ICDs in one place shall be considered as single port as e.g.  Mumbai sea port, Nhava Sheva and Mumbai airport are one or single port.  However, Telegraphic Release Advice (TRA) facility is permissible.

Documents

1.             Exporter-Importer profile

2.             Bank Receipt (in duplicate)/Demand Draft evidencing payment of application fee.

3.             E.P.  Copy of DEPB Shipping Bills with a photocopy(5) of SB in case an RLA attested copy is required back for submission to the Customs authorities for fixation of brand rate of drawback.

4.             Bank certificate of exports

5.             Self attested copy of valid RCMC to be submitted only once in four years.

6.             NOC from either of the party where applicant and exporter are different.

7.             An affidavit in case of exports of bulk drugs (S. No. 40 of PN 10 dt. 21/5/97) in ‘Chemicals’ product group, on a stamp paper.

Shipment Procedure

Only blue colour Shipping Bill in quadruplicate, i.e. white SB with blue strip or printed in blue colour (or Drawback SB, with necessary modifications as stated below for Mumbai customs) is to be filed for exports under DEPB scheme, for exports other than those under EDI systems.

(i)             The exporter shall prominently mention in the Shipping Bill, Pass Book Section Computer Registration Number for exports under DEPB Scheme.  The exporter shall obtain this number from the Computer Cell of the Pass Book Section.  Mumbai Customs,  when the exporter presents his first Shipping Bill for export under the Scheme.  Thereafter, this number shall be invariably inscribed on the succeeding Shipping Bills.  For obtaining this registration number the exporter shall furnish his profile (in duplicate).

(ii)            At the bottom of the Shipping/Bill there shall be following declarations:

(a)           I/We am/are exporting these goods under DEPB Scheme in terms of Para 7.25 of the Exim Policy (1997-2002).

(b)           I/We shall not claim any duty drawback or benefit of duty free licence under the Duty Exemption Scheme in respect of exports made against this Shipping Bill.

(c)           The goods are covered by Sr. No. ___________ of DEPB rate list under the product Group Code ______________.

(d)           I/We declare that all particulars given herein are true and correct.

(iii)           The reverse side of duplicate Shipping Bill will be the same as Shipping Bill for export of duty free goods (except that details related to drawback shipments would not be mentioned).

(iv)          The triplicate copy of the Shipping Bill will be called as DEPB copy, the reverse side of this copy as well as duplicate copy shall bear the examination order and examination report along with Customs ‘Let Export Order’.

(v)           The quadruplicate copy shall be used as Export Promotion copy.

FOB Value for Calculation of DEPB Credit

For calculation of the DEPB credit, the FOB value of export, as given in bank certificate of export, is to be taken into account, as the exporter would be realising the FOB value as per the bank certificate of exports, except in cases where the customs have reduced the FOB value of the Shipping Bills on account of value cap/Present Market Value (PMV) or for any specific reasons recorded in writing.

FOB Value of Export Made through Land Customs Stations: will be taken to include the cost of domestic transportation from the point of loading of export goods, any where in India, up to the land Customs Stations from which export is effected.  The cost of international transportation beyond  the Land Customs Stations into the neighbouring country, will be excluded from the FOB value.

The FOB value given in the Shipping Bill is endorsed on the DEPB only with a view to enable the Customs authorities to verify the details of the Shipping Bills against which DEPB is issued/offsetted before allowing import.

 Exchange Rate for FOB Value:  The FOB value in free foreign exchange shall be converted into Indian rupees as per the authorised dealers (banks) T/T buying/on demand buying rate, prevalent on the date of negotiation/purchase of document the DEPB rate of credit shall be applied on the FOB value so arrived.

Transferability

The DEPB shall be initially issued with non-transferable endorsement in cases where export proceeds realisation has not taken place, to enable the exporter to import for his own use.  However, upon receipt of realisation, the DEPB shall be endorsed transferable.

The DEPB and/or the items imported against it are freely transferable.  The facility of transferability may be allowed even without insisting upon realisation of export proceeds if the shipments are made against irrevocable letter of credit and the same is certified in column 14/15 of the Bank Certificate of Exports.  The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made.  However, imports from a different port may also be allowed.

Drawback Admissibility

The exports made under the DEPB Scheme shall not be entitled for drawback. The additional customs duty paid in cash on inputs under DEPB shall be adjusted as MODVAT Credit or Duty Drawback as per Rules framed by the Department of Revenue.  Further, exports made under DEPB Scheme of those products which cannot avail modvat credit of the additional duty of Customs (CVD) paid in cash on imported inputs, or excise duty paid on indigenous inputs, will be eligible for payment of Brand Rate of Drawback to be fixed by the Directorate of Drawback against additional customs duty/excise duty suffered on inputs, on submission of proof of payment of duty.

The photocopy of the shipping bill duly attested by a DGFT officer of respective licensing office may be accepted as Drawback copy for claiming drawback.

EOUs:  The duty paid on inputs (shrimps) by EOUs in aquaculture sector to do job work for shrimps obtained from DTA. And exported directly by EOUs, shall be refunded back by way of brand rate of duty drawback.

Fixation of Brand Rate of Drawback

Application

Application for fixation of brand rate of drawback is to be sent to the Directorate of Drawback, Ministry of Finance, Jeevan Deep, Parliament Street, New Delhi – 110001.

Time Limit

Applications for drawback fixation is to be filed within 90 days (60+30 days on permission by Customs) from the date of ‘Let Export’ order on the Shipping Bill relating to exports under the DEPB scheme.

Loss of EP Copy of SB and Original Bank Certificate.

1.             Loss of EP Copy of Shipping Bill

Claim

In cases where EP copy of the Shipping Bills has been lost, the DEPB claim can be considered subject to submission of the following documents.

Documents

1.             A duplicate certified copy of the Shipping Bill issued by the Customs authority in lieu of original lost.

2.             An application fee equivalent to 10% of the DEPB entitlement in respect of lost Shipping Bills.  However, no fee shall be charged when the SB is lost by the Customs and a documentary proof to this effect is submitted.

3.             All the prescribed documents in original.

4.             An affidavit by the exporter about the loss of Shipping Bills and promising that the same would be surrendered to the concerned licensing authorities immediately, if the same is subsequently found.

5.             An indemnity bond is to be executed by the exporter to the effect that he would indemnify the Government for the financial loss if any on account of DEPB issued against lost Shipping Bills.


Time  Limit

The claim against the lost Shipping Bill shall be preferred within a period of six months from the date of export.  Application received thereafter will be rejected.

2.  Loss of Original Bank  Certificate

 

Claim

In cases where original bank certificate has been lost, the DEPB claim can be considered subject to submission of following documents.

1.             A duplicate copy of the Bank Certificate issued by the bank authority in lieu of lost original bank certificate.

2.             An application fee equivalent to 10% of the DEPB entitlement in respect of lost bank certificate.

3.             All the prescribed documents in original.

4.             An affidavit by the exporter about the loss of Bank Certificate and promising that the same would be surrendered to the concerned licensing authorities immediately, if it is subsequently found.

5.             An indemnity bond executed by the exporter to the effect that he would indemnify the Government for the financial loss if any on account of DEPB issued against lost Bank Certificate.


Time Limit

The claim against the lost Bank Certificate shall be preferred with a period of six months from the date of export.  Application received thereafter will be rejected.

3.  Where both EP Copy of SB and Original Bank Certificate are Lost

In cases where both the documents have been lost, the exporter shall follow the procedure outlined above for both.

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