Question

Explain steps of Export procedure.

Answer 1

Export procedure:

• When a merchant sells the goods to someone outside his country it is called export trade or export.
• A company which specializes in the export of goods manufactured by other companies is called export house.
• Procedure of export in India is as follows.

1. Getting an order:

• The exporter receives order from importer. The exporter then obtains information related to economic capacity, credit worthiness, reliability etc. of the importer.
• Once he gets the assurance he examines the details mentioned in the export order. These details are quantity of goods ordered, pride as decided earlier with importer, type of packing, expected date of delivery, details of insurance, details of transporter through which goods will be sent, amount of bill, mode of payment and terms and conditions finalized before placing the order.

2. Obtaining export license:

• The exporter then needs to obtain an export license so that he can export the goods. The exporter needs to obtain license which comes under Imports and Exports Control Act.
• An exporter can easily obtain a general license for those goods/services whose list is published by the government of India.
• Items not mentioned in the list can also be freely exported but one needs to apply for a specific license to the trade department of government.
• Along with the license form the exporter needs to provide clear identity of the exporter, detail of exporter, assurance of regular payment of income tax and other tax.

3. Manufacturing or procuring goods:

After obtaining the export license if the exporter is a manufactures he starts producing the goods as per the order. However, if the exporter is just a trader he starts procuring goods from the market as per the order specifications.

4. Foreign exchange activity:

• Importer’s make payment to exporters in exporter’s currency or in American dollars. However, the exporter does not get the money directly.
• Although many controls related to foreign exchange have been liberalized after economic corrections of 1991, still the export needs to follow some. To keep a watch on export income, it is compulsory for the exporter to apply to RBI and ask it to convert the foreign exchange it received in his local currency.
• The exporters provide complete details about how much foreign exchange he will obtain from importer.
• The exporter needs to submit a copy of this application to the bank or institution through which he will perform this financial transaction.

5. Obtaining letter of credit:

• To make sure that the importer is financially capable to make payment, the exporter demands a letter of credit from the importer before exporting the goods. The importer gets this from his bank.
• Sometimes, if the bank of exporter has its branch in importer’s country then the exporter’s bank may ask that branch to provide the letter of credit of the importer.

6. Obtaining shipping order:

• When an exporter instructs a shipping company to deliver goods to the importer the shipping company provides a copy called shipping order’ to the exporter. To obtain a shipping order the exporter writes an application to the shipping company asking it to deliver the goods at a certain date. The application contains all the details of goods such as quantity, weight, sending date, cost, etc. based on the application the shipping company prepares a shipping order and gives it to the exporter.
• If the exporter wants to rent whole ship for sending the goods it is called ‘charter’. The agreement between the shipping company and the exporter to rent the whole ship is called ‘Charter party agreement’.

7. Payment of excise duty:

• Excise duty is levied on products manufactured in India.
• The exporter prepares a shipping bill that contains details such as name and address of importer, price of goods, quantity, weight, name of the port where goods will be boarded, name of ship and the shipping company, etc.
• Based on these details and inspection of goods if necessary the excise officer calculates the amount of duty.
• Once the exporter pays the excise duty he gets permission to bring the goods on the port.
• If a product comes under duty-free category then the exporter needs to fill a form containing public notification certifying that the goods are duty-free and submit it to the excise officer. The excise-officer than gives certificate to the exporter for exemption of duty.

8. Packing and marking of goods.

• The exporter needs to properly pack and mark the goods before shipping.
• The goods in long distance transit should be properly packed to prevent their damage in moist air of the sea. An exporter also needs to follow any specific packing instruction mentioned by the importer.
• Based on the size, weight and other factors the shipping company decides its shipping charge.
• The exporter also marks important details like name and address of importer and exporter, name of destination port, weight of goods, etc. on the goods.

Answer 2

9. Taking insurance of goods:

• To protect goods against the possible risks in the sea like cyclone, damage due to weather getting robbed by pirates, sinking of ship, etc. the goods must be insured.
• The exporter approaches an insurance company, pays the said premium and obtains a cover-note from the company. Based on the cover-note the insurance company then issues insurance policy to the exporter.

10. Obtaining carting order:

• Carting order is the final clearance given by the customs department to either load the goods or to transport the goods after import clearance.
• To obtain carting order the exporter needs to make an application to the port authority informing them the location from where the goods are to be exported. The exporter in this application mentions all the details of the shipping bill and also details of payment of excise.
• The exporter then pays port related expenses such as bringing the goods at the port, boarding them on the ship, etc. and obtains carting order.

11. Mate receipt:

• The chief officer of the ship or representative of the captain of the ship is called ‘mate’. Mate checks whether the goods loaded on the ship are as per the shipping bill or not. If details and packing of goods are proper the captain or his representative issues ‘mate-receipt’ certifying that they accept the goods.
• If the captain finds that the goods are not packed properly and hence not suitable for transportation he makes a mark in the mate’s receipt. Such receipt is called ‘foul receipt’ or ‘dirty chit’. The exporter then settles the matter and obtains a ‘clean chit’ to export the goods.

12. Obtaining bill of lading:

• A bill of lading is a legal document between the shipper (i.e. exporter) of the goods and the carrier i.e. the transporter. If contains details like quantity of goods, destination, etc. It is issued by the carrier to the exporter.
• The exporter when produces mate receipt to the shipping company, the company provides him the insurance of the goods during transport through the document called ‘Bill of Lading’.
• The bill of lading contains details like name of exporter, name of ship, fare, details of goods, price, weight, name of exporting port, terms and condition of export, etc.
• The shipping company makes three copies of bill of lading. It keeps one copy and gives the other two to the exporter. The exporter sends one copy to the importer to enable him obtain the goods.

13. Certificate of origin.

• A certificate obtained by exporter certifying that the products to be exported are wholly procured or produced or manufactured in India is called the certificate of origin.
• Various countries have made agreements to provide concession on import excise. An exporter must have certificate of origin in order to get concession under this agreement.
• The exporter can obtain this certificate from Trade’ Association, Chamber of Commerce or Government.

14. Consular invoice:

• When goods reach to the importer, he needs to pay excise on the goods.
• To simplify the payment of excise some countries demand consular invoice.
• Consular invoice is a document certifying shipment of goods and shows details of exporter, importer, quantity of goods and their price, etc. calculating and collecting excise becomes easy on the basis of this invoice.
• The exporter can obtain consular invoice from the consular of importing country located in exporting country.

15. Sending documents:

The exporter sends ‘Documentary bill containing important documents like invoice, insurance policy or cover-note, bill of lading, certificate of origin, consular invoice, bill of exchange, etc. to the importer’s foreign exchange bank via. his foreign exchange bank.

16. Collection of money:

• The exporter advises his bank to collect money from the importer. The exporter then writes Bill of Exchange for the amount mentioned in the export invoice.
• This bill of exchange may be of the type:
  1. Document against acceptance i.e. D/A bills or
  2. Document against payment i.e. D/P bills.
• If the Bill of Exchange is a D/A bill, then the documents of title of goods are released to the drawee i.e. importer only when he accepts the D/A bill.
• If it is a D/P bill, the documents of title of goods are given to the drawee i.e. importer only when he makes full payment.
• The bank collects money on behalf of exporter as per the maturity date of the D/A bill. In case of D/P bill the bank sends the amount to the exporter.