Solution of Assignment Synopsis & Project Dissertation Report



Title Name Amity Solved Assignment for Export Import Documentation and Logistics
University AMITY
Service Type Assignment
Course PGDM-(International-Business)
Semister Semester-I Cource: PGDM-(International-Business)
Short Name or Subject Code Export Import Documentation and Logistics
Commerce line item Type Semester-I Cource: PGDM-(International-Business)
Product Assignment of PGDM-(International-Business) Semester-I (AMITY)

Solved Assignment

  Questions :-

                                                                                                                           Export Import Documentation and Logistics

Q .1 What are INCO terms? Explain all INCO terms indicating the responsibility of the buyer and seller at various stages of the export cycle.

Q .2 Examine the steps involved in processing of an export order.

Q .3 Examine the steps involved in Custom Clearance of Export Cargo. 

Q .4 Discuss various methods that are used for making payment in International Trade

Q .5 What are the features of Export Processing Zones / Special Economic Zones? How are they helpful in promoting export from India?

Q .6 What is EPCG scheme? What are the main provisions in the scheme? How has the scheme helped in promoting export from our country?

Q .7 Describe various principal and auxiliary documents used in International trade.

Q .8 Write short notes on any three of the following.

a) Bill of lading


c)    Types of Shipping Bill



         Case Study

                                                     Export Incentives

 You are an exporter of Gold and Diamond Jewellery in India. Approximately 85% of your product is sold in the domestic market and 15% is being exported. You are not availing any kind of incentive for your exports.

Now you want to upgrade your production facility and also wish to avail the incentives given to the exporter under FTP.

Ques. 1.Prepare a feasibility report to make your products more competitive in the export market by availing the provisions in the Foreign Trade Policy





  1. Special Economic Zones were created to—

A Boost manufacturing, Augment exports & Generate employment

B Promote production for consumption in the domestic market

C Promote import into the country

D Promote imports from some special zones

  1. Under Advance License goods imported cannot be used in the unit of –

A  License Holder

B Jobber

C Supporting manufacturer

D All of above


  1. Which of the following is not a major function of Export Promotion Council (EPC)? 

A Provide commercial information

B Organize trade fairs, exhibitions

C Promote interaction between trade and Government Determine Import duty

D Provide preshipment finance


  1. The WTO Agreement on agriculture provides for—

            A Reduction of domestic subsidies.

            B Reduction in expert subsidies

            C Binding to provide market access

            D All of above


  1. According to the Foreign Trade Policy of 2009-2014 Advance Authorizations necessitate exports with a minimum value addition of—

A 15 %

B 20%

C 25%

D 10%

  1. Sale by EOU to SEZ units is treated as—
  1. Physical Export
  2. Deemed Export
  3. Import
  4. Trading
  1. Which of the following is not a duty exemption / remission scheme?
  2. Advance Authorization
  3. DEPB
  4. EPCG
  5. Duty Drawback
  1. Foreign Trade Policy aims to act as an effective instrument of economic growth by giving thrust to –
  1. Enhance Trade
  2. Employment Generation
  3. Import
  4. Production
  1. Special Economic Zones will locate in areas which will be technically treated as –
  1. Foreign Territory for applicability of domestic legislations
  2. Financially independent
  3. DTA
  4. Custom Bonded Warehouse
  1. What does FOB stand for?
  1. free on board
  2. for billing
  3. free original barbecue
  4. for on board
  1. Free Alongside Ship (FAS) means --  
  1. The goods have to be delivered by sailboat.
  2. The seller has to pay for the transport until the goods are being unloaded at the port of destination
  3. The goods don´t belong to anybody as long as they are alongside the ship.
  4. The buyer is responsible for the transportation of his goods as soon as they are being loaded aboard.

  1. Which terms apply to DDP?
    1. The seller pays all costs, including customs duty.
    2. The seller pays all the costs and bears the risk until the goods have been delivered on his side of the border
    3. The buyer has to cover all the costs, including marine insurance and customs duty.
    4. The seller pays insurance and transport costs up to the port of destination
  1. Match the definition with the INCO terms.
    1. EXW
    2. FOB
    3. DDP
    4. FAS
  1. Which terms are cheapest for the seller?
  1. FAS
  2. EXW
  3. CIF
  4. DDP
  1. Which of the following statement about EXW is true?  
    1. The buyer pays transport costs from the seller´s premises on
    2. The seller makes the goods available at his premises.
    3. The buyer makes the goods available at his premises.
    4. The seller pays the transport costs up to the port of shipment
  1. Which of the following is a regulatory Document?
    1. Packing List
    2. Shipping Instructions
    3. Insurance Declaration
    4. GR Form
  1. In case of payment through open account, payment is made—
    1. on delivery of goods
    2. In advance before delivery of goods
    3. At a future date
    4. Through barter system
  1. When payment is made through Letter of credit—
    1. Exporter has minimum risk
    2. Exporter has maximum risk
    3. Importer has minimum risk
    4. Importer has maximum risk
  1. In case of payment under D/A, goods are delivered—
    1. Before payment is made
    2. After payment is made
    3. On maturity of draft
    4. None of above
  1. Which of the following document is issued by the Mate Chief Officer of the ship to acknowledge the loading of cargo on the ship?
    1. Mate’s Receipt
    2. Shipping Instruction
    3. Shipping Order
    4. Shipping Advice
  1. As per the provisions in the Foreign Trade Policy of India, Minimum size of the SEZ shall not be less than 1000 hectares accept—
    1. Existing EPZs converted into SEZs
    2. Product specific SEZs
    3. Port/Airport based SEZs, on a case to case basis
    4. SEZ set up by state government
  1. Unless otherwise specified in a Letter of Credit which is issued subject to UCPDC 500 and also UCPDC 600, documents must be presented for negotiation within ------ days from the date of shipment.
    1. 10 days
    2. 7days
    3. 15days
  1. Which of the following is not true regarding an AWB?
    1. It is prima facie evidence of receipt of cargo.
    2. It is a document of title to goods.
    3. The date of dispatch indicated on the AWB will be deemed to be the date of shipment
    4. AWB serves as an instruction sheet giving all the instruction needed for moving the goods
  1. Premier Trading House should have minimum export performance of Rs.________.
    1. 10000 Crs
    2. 7500 Crs
    3. 5000 Crs
    4. 9000 Crs
  1. Under Market Development Assistance Government does not provide
    1. Expenses for participation in trade fairs abroad
    2. Expenses for participation in buyer /sellers meet
    3. Foreign travel
    4. Importing Capital Goods
  1. Vitamin –A as a drug can be canalized through--.
    1. MMTC
    2. ITPO
    3. STC
    4. EPI
  1. Which of the following is not a type of letter of credit?
    1. Revocable Letter of Credit
    2. Standby Letter of Credit
    3. Moving Letter of Credit
    4. Back-to-back Letters of Credit
  1. Exports and Imports come under the purview of—
    1. Ministry of Finance
    2. Ministry of Commerce
    3. Ministry of External Affairs
    4. Ministry of Home Affairs
  1. Export Promotion Capital Goods scheme helps in promoting through—
    1. Import of Capital Goods
    2. Import of raw material
    3. Participation in trade fairs
    4. Export of capital goods
  1. Objective of DEPB is to –
    1. Allow duty free import of inputs which are physically incorporated in export product
    2. Neutralize incidence of customs duty on import content of export product
    3. Provide assistance to states for export promotion activities
    4. Control dumping in the India
  1. Tripur in Tamil Nadu is Town of Export Excellence for—
    1. Hosiery Products
    2. Sea food
    3. Handicrafts
    4. Coir Products
  1. Main objective of Served from India Scheme is to promote export of—
    1. Services
    2. Tea
    3. Coffee
    4. handicrafts
  1. Objective of VKGUY is to promote exports of—
    1. Engineering Products
    2. Minor Forest Produce and their value added variants
    3. Chemical Products
    4. Marine Products
  1. DGFT helps in promoting export from India by--  
    1. Implementing the Foreign Trade Policy/Exim Policy
    2. Collects foreign Trade statistics
    3. Issues licenses to exporters and monitors their corresponding obligations
    4. Facilitating exporters in regard to developments in international trade i.e. WTO agreements, Rules of Origin and SPS requirements, anti-dumping issues, etc
  1. Pro forma invoice describes—
    1. the type and quantity of the goods to be shipped
    2. value of the goods
    3. total cost of the transaction based on the terms of sale
    4. details that are required for negotiation / collection of the shipping document
  1. Consular Invoice is—
    1. verified by Embassy
    2. Prepared as per the format of the customs authority of the importing country
    3. Prepared in consultation with the bank
    4. Prepared for the Ministry of commerce
  1. An EOU may opt out of the scheme with approval of –
    1. Development Commissioner
    2. Commerce Minister
    3. Directorate General of Foreign Trade
    4. Governor, RBI
  1. Market Development Assistance is given to Exporters having annual Export turnover up to Rs.________.
    1. 5 Crs
    2. 10Crs
    3. 15 Crs
    4. 25 Crs


  1. A whole range of activities that can be funded under MAI scheme includes—
    1. Setting up of showroom / warehouse
    2. Sales promotion campaigns
    3. Import of capital goods
    4. International departmental stores


  1. To encourage State Governments to participate in promoting exports financial assistance is administered by Department of Commerce (DoC) to—
    1. Developing infrastructure such as roads connecting production centres with ports,
    2. Facilitate import from China
    3. Setting up of Inland Container Depots (ICD) and Freight Stations (CFS),
    4. Creation of new State level export promotion industrial / zones,
  Answers :-

                                                                                                                           Export Import Documentation and Logistics

Q .1 What are INCO terms? Explain all INCO terms indicating the responsibility of the buyer and seller at various stages of the export cycle.


The Inco terms rules or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) that are widely used in International commercial transactions or procurement processes. A series of three-letter trade terms related to common contractual sales practices, the Inco terms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods.

The Inco terms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide.

Rules for Sea and Inland Waterway Transport:

FAS - Free alongside Ship: Risk passes to buyer, including payment of all transportation and insurance costs, once delivered alongside the ship (realistically at named port terminal) by the seller. The export clearance obligation rests with the seller.

FOB - Free On Board: Risk passes to buyer, including payment of all transportation and insurance costs, once delivered on board the ship by the seller. A step further than FAS.

CFR - Cost and Freight: Seller delivers goods and risk passes to buyer when on board the vessel. Seller arranges and pays cost and freight to the named destination port. A step further than FOB.

CIF - Cost, Insurance and Freight: Risk passes to buyer when delivered on board the ship. Seller arranges and pays cost, freight and insurance to destination port. Adds insurance costs to CFR.

Rules for Any Mode or Modes of Transportation:

EXW - Ex Works: Seller delivers (without loading) the goods at disposal of buyer at seller´s premises. Long held as the most preferable term for those new-to-export because it represents the minimum liability to the seller. On these routed transactions, the buyer has limited obligation to provide export information to the seller.

FCA - Free Carrier: Seller delivers the goods to the carrier and may be responsible for clearing the goods for export (filing the EEI). More realistic than EXW because it includes loading at pick-up, which is commonly expected, and sellers are more concerned about export violations.

CPT - Carriage paid To: Seller delivers goods to the carrier at an agreed place, shifting risk to the buyer, but seller must pay cost of carriage to the named place of destination.

CIP - Carriage and Insurance Paid To: Seller delivers goods to the carrier at an agreed place, shifting risk to the buyer, but seller pays carriage and insurance to the named place of destination.

DAT - Delivered at Terminal: Seller bears cost, risk and responsibility until goods are unloaded (delivered) at named quay, warehouse, yard, or terminal at destination. Demurrage or detention charges may apply to seller. Seller clears goods for export, not import. DAT replaces DEQ, DES.

DAP - Delivered at Place: Seller bears cost, risk and responsibility for goods until made available to buyer at named place of destination. Seller clears goods for export, not import. DAP replaces DAF, DDU.

DDP - Delivered Duty Paid: Seller bears cost, risk and responsibility for cleared goods at named place of destination at buyer’s disposal. Buyer is responsible for unloading. Seller is responsible for import clearance, duties and taxes so buyer is not “importer of record



Q .2 Examine the steps involved in processing of an export order.


The export cycle

  1. Setting up the deal

Once you have established your sales contract, by either being in possession of an international purchase order or a documentary credit stating you as the beneficiary, you are now in a position to process the order. There are a few steps you should go through when processing an export order. However, you must first wait until the deal has been properly established before committing your resources to the order.

  1. Shipping the goods

Once the deal has been set up, you should take the following steps:

  • Read the purchase order/documentary credit very carefully and take note of the requirements of the buyer. If there are any pre-shipment actions that must occur, these activities must take place before you book the freight and load the container. Pre-shipment activities could include pre-shipment inspections, health inspections or product analyses, all of which must be carried out before the goods have been packed for shipping. If any of these inspections are required, make arrangements with the appropriate service providers and obtain the necessary certification before shipping the goods.
  • You are now in a position to complete your F178 and have it attested with the bank. As an F178 declaration is a commitment by you to the Reserve Bank that funds will be brought into the country in exchange for goods, you should not make this declaration until you are sure the deal is going to happen.
  • You are now ready to pack and label the goods. At this point, you can contact your freight forwarder to make a booking on the next available carrier, or on the carrier offering the service you require. You will furnish your forwarder with a freight forwarders instruction and an attested F178, and request him to arrange for customs clearance and transport. He can also arrange for marine insurance if required. You will, at this point, arrange for him to collect the goods or deliver the goods to his warehouse yourself.
  • Your freight forwarder will deliver the goods to the carrier and obtain a transport document as proof of receipt. He is now in a position to arrange for customs clearance, which will require the submission of a customs bill of entry DA 550, an attested F178 and a transport document (in the case of air, road and rail exports). He will then hand over the transport and insurance documents to you.
  • You are now in a position to issue your commercial documents, namely, the commercial invoice and packing list and can assemble you export documentation. This will include your commercial documents, transport document, insurance document, as well as the verification documents issued by third parties
  1. Getting Paid

Once all documents are ready and completed in accordance with the documentary credit, (or if not using a documentary credit, in accordance with the purchase order), you are now in a position to present the documents for payment. In the case of documentary credits, you will submit the documents to the negotiating bank, (usually your bank), which will check the documents, ensuring that they are in accordance with the L/C, and make payment to you. Of course, if selling on an acceptance L/C, the bank will accept your drafts, and you will receive payment at maturity of the draft

Follow-up and service: The key to future success

The most important part of your export market development process has now arrived. It is sometimes more difficult to secure a follow-up order than it is to achieve the first order. It is vital, at this point, to get feedback from the buyer as to whether you have met his needs. It might be necessary, to plan a follow-up visit to secure your position with the buyer and check to see whether his needs have changed. The chances are that one of your competitors has taken action against your entrance by possibly offering the buyer better terms of payment. It is vital that you develop your market intelligence in order to take whatever action is necessary to keep your market and increase your market share.

The following set of documentation will assist you with completing the required documents for processing your export order:

  • Exchange control declaration
  • Phytosanitary certificate
  • Certificate of origin
  • Forwarder´s instruction
  • Air waybill
  • Certificate of Insurance
  • Bill of entry/export
  • Commercial invoice
  • Packing list



Q .3 Examine the steps involved in Custom Clearance of Export Cargo.


In India custom clearance is a complex and time taking procedure that every export face in his export business. Physical control is still the basis of custom clearance in India where each consignment is manually examined in order to impose various types of export duties. High import tariffs and multiplicity of exemptions and export promotion schemes also contribute in complicating the documentation and procedures. So, a proper knowledge of the custom rules and regulation becomes important for the exporter. For clearance of export goods, the exporter or export agent has to undertake the following formalities:

  • Registration

Any exporter who wants to export his good need to obtain PAN based Business Identification Number (BIN) from the Directorate General of Foreign Trade prior to filing of shipping bill for clearance of export goods. The exporters must also register themselves to the authorized foreign exchange dealer code and open a current account in the designated bank for credit of any drawback incentive.

Registration in the case of export under export promotion schemes:
All the exporters intending to export under the export promotion scheme need to get their licenses / DEEC book etc.

  • Processing of Shipping Bill - Non-EDI:

In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter need to apply different forms of shipping bill/ bill of export for export of duty free goods, export of dutiable goods and export under drawback etc.

  • Processing of Shipping Bill - EDI:

Under EDI System, declarations in prescribed format are to be filed through the Service Centers of Customs. A checklist is generated for verification of data by the exporter/CHA. After verification, the data is submitted to the System by the Service Center operator and the System generates a Shipping Bill Number, which is endorsed on the printed checklist and returned to the exporter/CHA. For export items which are subject to export cess, the TR-6 challans for cess is printed and given by the Service Center to the exporter/CHA immediately after submission of shipping bill. The cess can be paid on the strength of the challan at the designated bank. No copy of shipping bill is made available to exporter/CHA at this stage.

  • Quota Allocation

The quota allocation label is required to be pasted on the export invoice. The allocation number of AEPC (Apparel Export Promotion Council) is to be entered in the system at the time of shipping bill entry. The quota certification of export invoice needs to be submitted to Customs along-with other original documents at the time of examination of the export cargo. For determining the validity date of the quota, the relevant date needs to be the date on which the full consignment is presented to the Customs for examination and duly recorded in the Computer System.

  • Arrival of Goods at Docks:

On the basis of examination and inspection goods are allowed enter into the Dock. At this stage the port authorities check the quantity of the goods with the documents.

  • System Appraisal of Shipping Bills:

In most of the cases, a Shipping Bill is processed by the system on the basis of declarations made by the exporters without any human intervention. Sometimes the Shipping Bill is also processed on screen by the Customs Officer.

  • Customs Examination of Export Cargo:

Customs Officer may verify the quantity of the goods actually received and enter into the system and thereafter mark the Electronic Shipping Bill and also hand over all original documents to the Dock Appraiser of the Dock who many assign a Customs Officer for the examination and intimate the officers’ name and the packages to be examined, if any, on the check list and return it to the exporter or his agent. The Customs Officer may inspect/examine the shipment along with the Dock Appraiser. The Customs Officer enters the examination report in the system. He then marks the Electronic Bill along with all original documents and check list to the Dock Appraiser. If the Dock Appraiser is satisfied that the particulars entered in the system conform to the description given in the original documents and as seen in the physical examination, he may proceed to allow "let export" for the shipment and inform the exporter or his agent.

  • Stuffing / Loading of Goods in Containers

The exporter or export agent hand over the exporter’s copy of the shipping bill signed by the Appraiser “Let Export" to the steamer agent. The agent then approaches the proper officer for allowing the shipment. The Customs Preventive Officer supervising the loading of container and general cargo in to the vessel may give "Shipped on Board" approval on the exporter’s copy of the shipping bill.

  • Drawn of Samples:

Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/E system. There is no separate register for recording dates of samples drawn. Three copies of the test memo are prepared by the Customs Officer and are signed by the Customs Officer and Appraising Officer on behalf of Customs and the exporter or his agent. The disposal of the three copies of the test memo is as follows:-

  • Original – to be sent along with the sample to the test agency.
  • Duplicate – Customs copy to be retained with the 2nd sample.
  • Triplicate – Exporter’s copy.

The Assistant Commissioner/Deputy Commissioner if he considers necessary, may also order for sample to be drawn for purpose other than testing such as visual inspection and verification of description, market value inquiry, etc.

  • Amendments:

Any correction/amendments in the check list generated after filing of declaration can be made at the service center, if the documents have not yet been submitted in the system and the shipping bill number has not been generated. In situations, where corrections are required to be made after the generation of the shipping bill number or after the goods have been brought into the Export Dock, amendments is carried out in the following manners.

  1. The goods have not yet been allowed "let export" amendments may be permitted by the Assistant Commissioner (Exports).
  2. Where the "Let Export" order has already been given, amendments may be permitted only by the Additional/Joint Commissioner, Custom House, in charge of export section.

In both the cases, after the permission for amendments has been granted, the Assistant Commissioner / Deputy Commissioner (Export) may approve the amendments on the system on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has already been generated, the exporter may first surrender all copies of the shipping bill to the Dock Appraiser for cancellation before amendment is approved on the system.

  • Export of Goods under Claim for Drawback:

After actual export of the goods, the Drawback claim is processed through EDI system by the officers of Drawback Branch on first come first served basis without feeling any separate form.

  • Generation of Shipping Bills:

The Shipping Bill is generated by the system in two copies- one as Custom copy and one as exporter copy. Both the copies are then signed by the Custom officer and the Custom House Agent



Q .4 Discuss various methods that are used for making payment in International Trade


Method of Payment in International Trade

Getting paid for providing goods or services is critical for any business. However, getting paid for an international transaction (also commonly known as “export receivables”) can be a very different experience from securing payment on business with other Canadian entities, due to the number of extra factors that can influence the process.

The main factor in considering how an exporter expects to be paid for a transaction is the potential risk that they and their customer are willing to face between them – don’t forget, there are always two sides to any situation. There are different types of risk that you will face as an exporter, this briefing will consider the payment risk.

·         Open Account

This is the least secure method of trading for the exporter, but the most attractive to buyers.  this method can be used by business partners who trust each other; the two partners need to have their accounts with the banks that are correspondent banks .Goods are shipped and documents are remitted directly to the buyer, with a request for payment at the appropriate time (immediately, or at an agreed future date). An exporter has little or no control over the process, except for imposing future trading terms and conditions on the buyer. Clearly, this payment method is the most advantageous for the buyer, in cash flow and cost terms. As a consequence, Open Account trading should only be considered when an exporter is sufficiently confident that payment will be received.

It should be noted that in certain markets, buyers will expect Open Account terms. The financial risk can often be mitigated by obtaining a credit insurance policy to cover the potential insolvency of a customer that provides reimbursement up to an agreed financial limit. There are a number of commercial insurers who specialize in this market – contact your insurance representative for details.

·         Advance Payment

The most secure method of trading for exporters and, consequently the least attractive for buyers. Payment is expected by the exporter, in full, prior to goods being shipped.

As one might imagine, having covered the two extremes of payment risk for both the importer and exporter, commercial decisions have to be made and this usually results in selecting one of the middle rungs of the ladder. This is where banking products such as Bills for Collection and Letters of Credit come in to play.

·         Bills for Collection

More secure for an exporter than Open Account trading, as the exporter’s documentation is sent from a Canadian bank to the buyer’s bank. This invariably occurs after shipment and contains specific instructions that must be obeyed. Should the buyer fail to comply, the exporter does, in certain circumstances, retain title to the goods, which may be recoverable. The buyer’s bank will act on instructions provided by the exporter, via their own bank, and often provides a useful communication route through which disputes are resolved.

The Bills for Collection process is governed by a set of rules, published by the International Chamber of Commerce (ICC) called “Uniform Rules for Collections” document number 522 (URC522). Over 90% of the world’s banks adhere to this document – pick up a copy from the ICC (See contact details below) or your bank and familiarize yourself with the contents.

There are two types of Bill for Collection, which are usually determined by the payment terms agreed within a commercial contract. Different benefits are afforded to exporters by each and they are covered separately below:

·         Documents against Payment (D/P)

Usually used where payment is expected from the buyer immediately, otherwise known as “at sight”. This process is often referred to as “Cash against Documents”.

The buyer’s bank is instructed to release the exporter’s goods only when payment has been made. Where goods have been shipped by sea freight, covered by a full set of Bills of Lading, title is retained by the exporter until these documents are properly released to the buyer. Unfortunately, for airfreight items, unless the goods are consigned to the buyer’s bank* no such control is available under an Air Waybill or Air Consignment Note, as these documents are merely “movement certificates” rather than “documents of title”. Similarly there is no such control available for road or rail transport.

·         Documents against Acceptance (D/A)

Used where a credit period (e.g. 30/60/90 days – ‘sight of document’ or from ‘date of shipment’) has been agreed between the exporter and buyer. The buyer is able to collect the documents against their undertaking to pay on an agreed date in the future, rather than immediate payment. The exporter’s documents are usually accompanied by a “Draft” or “Bill of Exchange” which looks something like a cheque, but is payable by (drawn on) the buyer. When a buyer (drawee) agrees to pay on a certain date, they sign (accept) the draft. It is against this acceptance that documents are released to the buyer. Up until the point of acceptance, the exporter may retain control of the goods, as in the D/P scenario above. However, after acceptance, the exporter is financially exposed until the buyer actually initiates payment through their bank.

Bills for Collection are used in certain markets (particularly Asian) to fulfill Exchange Control Regulations. They are a cost-effective method of evidencing a transaction for buyers, where documents are handled (and reported) via the banking system.

·         Letters of Credit (L/Cs), also known as Documentary Credits (DCs)

What is a DC?

A bank-to-bank commitment of payment in favor of an exporter, guaranteeing that payment will be made against certain documents that, on presentation, are found to be in compliance with terms set by the buyer.

This is an area in which financial terminology (and acronyms) really builds up a head of steam. It is probably worth explaining some commonly used terms, to provide a basic understanding.

Like Bills for Collections, DCs are governed by a set of rules from the ICC. In this case, the document is called; “Uniform Customs and Practice” and the latest version is document number 500. In short, it is known as UCP500 and, again, over 90% of the world’s banks adhere to this document.


The terms and conditions within a DC cannot be changed without the express agreement of the exporter (the beneficiary). Revocable DCs are very unusual, as the conditions can be changed unilaterally by the buyer, which is rarely acceptable to an exporter.


The payment commitment within the DC is provided by the buyer’s (Issuing) Bank.


If an exporter has any concerns about the circumstances which may prevent payment being made from either the Issuing Bank or buyer’s Country, the adding of “Confirmation” moves the bank/country risk issues to the bank which adds it’s confirmation (the Advising bank) and notifies the DC to the exporter. The price of such a confirmation will obviously depend upon the level of perceived risks to be covered. Banks can often provide indicative pricing for confirmations prior to the arrival of the DC, so that costs can be estimated.

What does all this mean?

The exporter and buyer can agree detailed terms, as part of the commercial contract. This can include exactly what documents need to be produced and precisely what detail such documents should quote.

DCs, as well as offering a bank’s commitment to pay, also offer benefits in terms of finance. Speak to your bank, or the Advising/Confirming Bank to see how they can help. Additionally, Commercial Insurers now offer an insurance-backed product that covers the same basic risks as confirmations. Please speak to your insurer for details.

Standby Letters of Credit (SBLCs) or Bank Guarantees

SBLCs are similar to Bank Guarantees, in that they sit behind a transaction and are only called upon if the buyer fails to pay in the normal course of business (which is often Open Account). They can be particularly useful to cover an underlying financial risk where multiple payments are to be made, possibly as part of an agreed schedule. However, they do not offer the documentary control of DCs to buyers and, as such they are an unconditional guarantee.

Other International Trade Risks

Customer Risks

Can they / will they pay? Exporters should find out everything they can about their buyers. Banks can help by contacting the buyer’s bank for a reference. There are many commercial organizations that can provide credit information at relatively little cost. Does the exporter have any local contacts or agents who might be prepared to find out what they can?

On the basis of the above information, the exporter can start to think about his stance in terms of the payment risk ladder.

Country Risks

There is no substitute for good information and many exporters will visit a new or potential export market before they begin trading, to try and understand “how it ticks”. If this is not possible, there are a number of Government agencies, business groups and banks that can provide much helpful information.

Key data subjects will include:

Economic, financial and political stability – at a National as well as financial institutional level;
Foreign Exchange availability and volatility – an exporter’s Canadian bank should be able to assist here also

Import restrictions/tariffs – Are there any?

Does the country have a habit of changing rules regularly or quickly?

Main Types of Money Transfers

SWIFT Inter-Bank Transfer -

Now firmly established as standard practice in the major trading nations. The buyer will instruct their bank to make payment to any bank account specified by the exporter. It is good practice, therefore, for the exporter to include their account details on their invoice heads.

Buyer’s Cheque -

An unsatisfactory method of settlement for the exporter as it carries the risk of dishonor upon presentation as well as the added inconvenience of being slow to clear. There is also the very real danger of the cheque being lost in transit as well. A cheque is also unsatisfactory if it is in the currency of the buyer, as this will take longer to clear and will involve additional bank charges. Exporters should only use this method if they have an established trading history with their customer or in cases where the profit margin has been increased to offset cash flow problems anticipated by the delay in receiving payment.

Banker’s Draft -

This is arranged by the buyer who asks their bank to raise a draft on its corresponding bank in the exporter’s country. Provides additional security to a buyer’s cheque, but they can be costly to arrange and they do run the risk of getting lost in transit.

International Money Orders -

These are similar in nature to postal orders. They are pre-printed therefore cheaper to obtain than a Banker’s Draft, although again there is the risk of loss in transit.



Q .5 What are the features of Export Processing Zones / Special Economic Zones? How are they helpful in promoting export from India?


A Special Economic Zone (SEZ) is a geographical region that has economic and other laws that are more free-market-oriented than a country´s typical or national laws. "Nationwide" laws may be suspended inside these special zones. The category ´SEZ´ covers many areas, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial parks or Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC). These are designated areas in which companies are taxed very lightly or not at all in order to encourage economic activity. Free ports have historically been endowed with favorable customs regulations, e.g., the free port of Trieste. Very often free ports constitute a part of free economic zones.

Provisions under SEZ

  • 100% FDI for manufacturing sector
  • No caps on foreign investments for SSI reserved items
  • Income tax benefit
  • Duty free import of domestic goods
  • Exemption from CST
  • Exemption from Income tax on investments
  • Enhanced limit of 2.4 crore for managerial remuneration
  • Applicability of labor laws

Advantages of SEZ

  • Growth and development
  • Attracts FDI
  • Exposure to technology and global markets
  • Increase in GDP and economic model
  • Employment opportunities are created

Disadvantages of SEZ

  • Exploitation of laborers
  • Women exposed to sexual harassment
  • Loss of revenue for Government
  • Fertile lands being used for establishing industrial units

Exemption on duties on Indian capital goods and inputs are offered as per the requirements of the approved business activity.

Taxes are either exempted or waived and even reimbursed in case they are paid in advanced to the concerned authority.

Duty-free imports of spares, raw materials, capital goods, and consumables are offered as per the requirements of the approved business activity.

Preferential treatment of these units to the Indian market for easy dissemination of their products and / or service.

BTP units may sell their finished products or services (excluding pepper and pepper products and marble) Units manufacturing electronics hardware and software, the NFE and direct tariff area (DTA) sale entitlement shall be judged separately for its hardware and software products. Facilitated to retain 100 % in foreign currency in EEFC account of the said trader.

Tax waiver of dividends and profits for repatriates, without any application of repatriation tax. Total tax exemption on corporate incomes as per the provisions of Section 10 A and 10 B of the Indian Income Tax Act.

Easy and automatic acceptance system for use of existing trademarks, brand names and technological know-how. Facilitated with out-sourcing of subcontract capacities for export production against orders secured by other SME units. All SEZ units, (excluding gems and jewellery units) may sell goods up to 50% of FOB value of exports subject to fulfilment of positive NFE on payment of concessional duties.

Within the entitlement of domestic tariff area (DTA) sale, the unit may sell in DTA its products similar to the goods, which are exported or expected to be exported from the units. Facilitated with outsourcing of subcontract of production or part of production process to Indian or any foreign units.

Sale to direct tariff agreement is subject to mandatory requirement of registration for pharmaceutical products and inclusive of bulk drugs. For Software services units, the sale in the DTA in any mode, including on line data communication shall be permitted up to 50% of FOB value of exports and / or 50% of foreign exchange earned through exports of such services, where the payment of such services offered to its overseas clients, is received in foreign exchange.

If the end products is a by-product and it is included in the LOP, then it may also be sold in the direct tariff area, subject to achievement of positive NFE on payment of applicable duties within the provisions of such laws. The sale of such by-products by units those are not entitled to direct tariff area sales. Facilitated with outsourcing of subcontract capacities for export production against orders secured by other units.



Q .6 What is EPCG scheme? What are the main provisions in the scheme? How has the scheme helped in promoting export from our country?


gEPCG is a term used in India under exports and imports. EPCG means, Export Promotion Capital Goods. EPCG is one of the schemes provided by government of India to importers and exporters to promote exports.

In simple and easy language, EPCG is a scheme related to machinery, machinery parts and similar goods.

The capital goods shall include spares (including refurbished/ reconditioned spares) , tools, jigs, fixtures, dies and moulds. EPCG license may also be issued for import of components of such capital goods required for assembly or manufacturer of capital goods by the license holder.

Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.

Spares (including refurbished/ reconditioned spares), tools, refractories, catalyst and consumable for the existing and new plant and machinery may also be imported under the EPCG scheme.

India had two variants of EPCG Scheme viz. Zero Duty EPCG for few sectors and 3% Duty EPCG for all sectors. On 5th June, 2012, a new Post Export EPCG Scheme was also announced which was notified on 18 February, 2013 by the CBEC. From April 2013, the government has merged Zero Duty EPCG and 3% EPCG Scheme into one scheme which is now known as Zero Duty EPCG Scheme covering all sectors.

Salient Features

  • Authorization holders will have export obligation of 6 times the duty saved amount. The export obligation has to be completed in a period of 6 years.
  • The period for import under the Scheme would be 18 months.
  • Export obligation discharge by export of alternate products as well as accounting of exports of group companies will not be allowed.
  • The exporters, who have availed benefits under Technology Up gradation Fund Scheme (TUFS) administered by Ministry of Textiles, can also avail the benefit of Zero duty EPCG Scheme.
  • The import of motor cars, SUVs, all purpose vehicles for hotels, travel agents, or tour transport operators and companies owning/operating golf resorts will not allowed under the new Zero Duty EPCG Scheme.


Reduced EO for Domestic Sourcing of Capital Goods

  • The quantum of specific Export Obligation (EO) in the case of domestic sourcing of capital goods under EPCG authorizations has been reduced by 10%. This would promote domestic manufacturing of capital goods.

As I have explained previously, government supports exporters who earn foreign currency in various levels of financial assistance, exemption of import duty etc.

However, you need to pay good amount at a time and you will get benefit of the imported machineries in coming years only.

 Apart from other financial assistance for exporters, you can get exemption of 100% import duty amount while importing such machineries.

When obtaining EPCG license from government, you guarantee that you will export required amount or quantity of goods for next 5 years. EPCG is a good facility provided to exporters and importers by government on exemption of import duty amount.

How to obtain an EPCG License

The importer has to approach for EPCG license from licensing authority – Director General of Foreign Trade (DGFT).

Application for EPCG with necessary supporting documents is filed with DGFT.

 Based on the amount of import duty exemption, the value addition is fixed up and export obligation has to be fulfilled accordingly.

If you could not complete the export obligation in time specified by licensing authority, you may be permitted to get extended the export obligation period for further period of time. However, if you have already finished export obligation, you can sell the manufactured goods locally also in domestic tariff area (DTA).

You can add below about the functions of EPCG – Export Promotion Capital Goods - and the procedures to obtain EPCG License..

The following conditions shall apply to the fulfillment of the export obligation:-

The export obligation shall be fulfilled by the export of goods capable of being manufactured or produced by the use of the capital goods imported under the scheme.

The export obligation may also be fulfilled by the export of same goods, for which EPCG license has been obtained, manufactured or produced in different manufacturing units of the license holder/specified supporting manufacturer.

The import of capital goods for creating storage and distribution facilities for products manufactured or services rendered by the EPCG license holder would be permitted under the EPCG Scheme.

The export obligation under the scheme shall be, over and above, the average level of exports achieved by him in the preceding three licensing years for same and similar products except for categories mentioned in Handbook.

Alternatively, export obligation may also be fulfilled by exports of other good(s) manufactured or service(s) provided by the same firm/company or group company/ managed hotel which has the EPCG license.

However, in such cases, the additional export obligation imposed under EPCG scheme shall be over and above the average exports achieved by the unit/company/group company/ managed hotel in preceding three years for both the original and the substitute product(s) /service (s) even in cases where the average is exempt for the substitute product (s)/ service (s) 

The incremental exports to be fulfilled by the license holder for fulfilling the remaining export obligation can include any combination of exports of the original product/ service and the substitute product (s)/ service (s). The exporter of goods can opt to get the export obligation refined for the export of services and vice versa.

The licensee can also opt for the re-fixation of the balance export obligation based on 8 times of the duty saved amount for the CIF value in proportion to the balance Export obligation under the scheme.




Q .7 Describe various principal and auxiliary documents used in International trade.



Documents required for an international sale can vary significantly from transaction to transaction, depending on the destination and the product being shipped. At a minimum, there will be two documents: the invoice and the transport document. The buyer will usually provide the seller with a list of documents needed to get the goods into his country as expeditiously and inexpensively as possible. Some documentary requirements are not open to negotiation, as they are needed by the importer to clear customs at the port of destination. This presentation discusses
documentation in relation to export letters of credit. When the letter of credit payment method is used for an export sale, each document presented under the terms and conditions of the letter of credit must:

1) Conform to all L/C terms and conditions.

2) Comply with the UCP 500.

3) Agree with the data content of every other document.

For the following documents listed, the number in parenthesis
refers to the relevant UCP 500 article.


Almost every letter of credit presentation and documentary collection is accompanied by a draft. This demand for payment is drawn by the seller on the payee. The payee on a letter of credit
draft is almost always a bank. For a documentary collection it would be the buyer.


The accounting document claiming payment from the buyer. Normally an export invoice would include:

- Seller’s name and address

- Buyer’s name and address

- Issue Date

- Invoice Number

- Shipping marks and numbers

- Term of Sale: e.g. FOB, etc.

- Shipping information

- Info required by L/C

- Country of Origin

- L/C number

- Merchandise description, P.O. number, unit price, and total price


For exchange control and balance of payments reasons, some countries do not allow the import of merchandise unless accompanied by a certificate issued by one of its officials in the exporter’s country. These certificates evidence that the shipment meets certain statutory or other regulations of the importing country. A visited invoice is an original or copy of an invoice, which has been originally signed and/or stamped by a consulate official.


Every export sale should be covered by insurance. Who provides the coverage depends on the INCOTERM used. Insurance coverage on exports is a complicated issue that we cannot fully
cover on this site. For more information on export insurance, we suggest that you contact your business insurance agent or freight forwarder as to who can provide insurance on an as needed
basis” or “by blanket policy” on an annual basis.


when a letter of credit calls for a document to be issued as a “certificate”, that document must be signed. Certificates come in a many different forms depending on the product and the country of destination. L/C’s often require that certificates be issued by reputable third party inspection surveyors such as the Society General de Surveillance (SGS) or the US Department of Agriculture. It is important to remember that each certificate
required by an L/C will increase the cost of goods sold. Some of the most common certificates are discussed below. Certificates should always be issued before the goods are
shipped. Certificates issued after the goods arrived in the country
of import defeat the purpose of the letter of credit.


A signed statement certifying the country of origin of the goods being sold is sometimes required by regulation in the buyer’s country. This document may be as simple as a certificate signed by the seller. Certain countries may require it to be issued by a third party such a Chamber of Commerce, or be notarized, legalized, or visited by their Embassy or Consulate.


An independent firm would usually conduct the inspection to ensure that the merchandise conforms to the buyer’s criteria. Inspection certificates should be based on quantifiable criteria. When an L/C is the method of payment, the criteria should be specifically spelled out in the letter of credit.


Not synonymous to a packing list. This document breaks down the shipment by weight. This is generally needed only if a “certificate” is required.


This certificate is issued by the US Department of Agriculture and covers grade and condition for agricultural products. It provides evidence that the produce was in good condition at the date and time of inspection and can be useful in the event of a damage claim.


Numerous foreign governments and buyers require a “phyto” for fresh plants and plant products. This certificate states that the product has been inspected and is free of harmful pests and plant
diseases. They are issued by the USDA Animal and Plant Health Inspection Service.

PACKING LIST (UCP Articles 20, 21)

A mirror of the merchandise covered by the invoice, the packing list omits prices, but itemizes the merchandise by number of cartons, packages, etc., and the contents of each. It generally does not have to be signed unless called for in the L/C.



Q .8 Write short notes on any three of the following.

  1. a) Bill of lading

Definition of ´Bill Of Lading´

A legal document between the shipper of a particular good and the carrier detailing the type, quantity and destination of the good being carried. The bill of lading also serves as a receipt of shipment when the good is delivered to the predetermined destination. This document must accompany the shipped goods, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver.

For example, suppose that a logistics company must transport gasoline from a plant in Texas to a gas station in Arizona via heavy truck. A plant representative and the driver would sign the bill of lading after the gas is loaded onto the truck. Once the gasoline is delivered to the gas station in Arizona, the truck driver must have the clerk at the station sign the document as well.

·         What is in a bill of lading?

    • Shippers and receivers / consignee’s names and complete addresses.
    • PO or special account numbers used between businesses for order tracking.
    • Special instructions for the carrier to ensure prompt delivery.
    • The date of the shipment.
    • The number of shipping units.
    • Type of packaging, including cartons, pallets, skids and drums.
    • A note if commodity is a Department of Transportation hazardous material. Special rules and requirements apply when you are shipping hazardous materials.
    • A description of the items being shipped, include the material of manufacture and common name.
    • The NMFC freight classification for the items being shipped.
    • The exact weight of the shipment. If multiple commodities are being shipped, then the weight of each commodity is listed separately.
    • The declared value of the goods being shipped


  1. b) FEMA


The Foreign Exchange Management Act (FEMA) is a 1999 Indian law "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India". It was passed in the winter session of Parliament in 1999, replacing the Foreign Exchange Regulation Act (FERA). This act seeks to make offenses related to foreign exchange civil offenses. It extends to the whole of India., replacing FERA, which had become incompatible with the pro-liberalization policies of the Government of India. It enabled a new foreign exchange management regime consistent with the emerging framework of the World Trade Organization (WTO). It is another matter that the enactment of FEMA also brought with it the Prevention of Money Laundering Act of 2002, which came into effect from 1 July 2005.

Unlike other laws where everything is permitted unless specifically prohibited, under this act everything was prohibited unless specifically permitted. Hence the tenor and tone of the Act was very drastic. It required imprisonment even for minor offences. Under FERA a person was presumed guilty unless he proved himself innocent, whereas under other laws a person is presumed innocent unless he is proven guilty.

Main Features

- Activities such as payments made to any person outside India or receipts from them, along with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central government the power to impose the restrictions.

- Restrictions are imposed on people living in India who carry out transactions in foreign exchange, foreign security or who own or hold immovable property abroad.

- Without general or specific permission of the MA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India – the transactions should be made only through an authorized person.

- Deals in foreign exchange under the current account by an authorized person can be restricted by the Central Government, based on public interest.

- Although selling or drawing of foreign exchange is done through an authorized person, the RBI is empowered by this Act to subject the capital account transactions to a number of restrictions.

- People living in India will be permitted to carry out transactions in foreign exchange, foreign security or to own or hold immovable property abroad if the currency, security or property was owned or acquired when he/she was living outside India, or when it was inherited by him/her from someone living outside India.

- Exporters are needed to furnish their export details to RBI. To ensure that the transactions are carried out properly, RBI may ask the exporters to comply to its necessary requirements


  1. d)    Types of Shipping Bill


Shipping bills have to be filed mandatory for every goods moved for exports.

Shipping bills are filed as per the guidelines of customs department of each country. Before introduction of electronic filing system with customs department, documents are filed manually.

Why different types of shipping bills?

Let us discuss the reason for introducing different types of shipping bills for exports. As you are aware, most of the exports attract different incentives, duty exemptions or other export benefits. In some other types of exports, the exporter needs to pay duty to government of exporting country. Categorizing them at the time of filing documents for export is an easy task for customs to identify easily, under which category of exports fall under – whether duty to be paid, any export benefits availing etc.etc.

Types of shipping bills.

There are four main types of shipping bills in India. Duty free shipping bills, Dutiable shipping bill, shipping bill under Duty drawback, Ex-bond shipping bills.

Colors of shipping bills:

Before introduction of electronic filing of shipping bills, these types of shipping bills are identified in different colors - Duty free shipping bill in White color, Dutiable shipping bill in yellow color, shipping bill for drawback in Green color and Ex-bond shipping bill in pink color. These colors help all concerned authorities to identify the exports under which type of shipment those export taken place.

Most of the customs locations in India have been introduced electronic filing of shipping bills. Manual filing of shipping bills also takes place in some of the customs locations where in electronic filing facility not available. Under special cases, some of the exports need physical verification of goods and valuation of goods manually. In such cases, customs higher authorities insist to file shipping bills manually to ascertain value of goods than declared value by exporter. In such cases, exporters file manual shipping bills







         Case Study

                                                     Export Incentives

 You are an exporter of Gold and Diamond Jewellery in India. Approximately 85% of your product is sold in the domestic market and 15% is being exported. You are not availing any kind of incentive for your exports.

Now you want to upgrade your production facility and also wish to avail the incentives given to the exporter under FTP.

Ques. 1.Prepare a feasibility report to make your products more competitive in the export market by availing the provisions in the Foreign Trade Policy


  1. What You Should Know Before Getting Started
  2. Why Compete Globally?

Becoming involved in international trade can help your business:

  • Enhance domestic competitiveness by finding less-expensive suppliers
  • Increase sales and profits
  • Gain global market share
  • Reduce dependence on existing markets and suppliers
  • Extend the sales potential of existing products with relatively low development costs
  • Stabilize seasonal or cyclical market fluctuations
  • Enhance potential for corpor


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