IMPORT,EXPORT, DOCUMENTATION & FOREIGN TRADE POLICY

1. IMPORT,EXPORT,DOCUMENTATION & FOREIGN TRADE POLICY By Vaibhav Nagarkar Director, gNBC

2. Agenda • Documentation: Overview – Commercial and Regulatory documents • Understanding - Invoice, Packing List, Inspection Certificate, Certificate of Origin, Shipping Bill, ARE-1, Mate Receipt, GR/SDF, Bill of exchange, Bank Realisation Certificate, Bill of Lading and Airway Bill, Bill of Entry etc. • Incoterms • Terms of payment • Letter of credits - Concept, Types of L/C, Parties to L/C, L/C mechanism.

3. Agenda • Export Procedures • Import Procedure • Export Promotion Schemes under Foreign Trade Policy

4. U N D E R S T A N D I N G P O L I C Y

5. Understanding Policy • Foreign Trade Policy : • Drafted by Director General of Foreign Trade under the Ministry of Commerce. • Implemented with the help of various other Departments mainly Customs, Excise and RBI. • In order to understand the co-relation, one must get familiar with the various laws and functions of various departments. • As far as implementation is concerned, the co-relation of Foreign Trade Policy with the following Acts, Laws and Regulations must be taken into account :

6. Understanding Policy • Foreign Trade Policy : • Customs Act, 1962 • Customs Tariff Act, 1975 • Foreign Exchange Management Act, 1999 • Central Excise Act, 1944 • Excise Tariff Act, 1985 • Industrial Policy Resolution, 1956. • Industries Development and Regulation Act, 1951 • Laws of Weights and Measures While some of these laws would be specific in nature for certain commodities, the generic understanding should be based on the following :

7. Ministry of Finance C o n t d…

8. Continued from the previous slide

9. RBI Coverage Monitoring Foreign Exchange Inflow – on account of exports of goods and services Outflow – on account of imports of goods and services Governing Acts/Laws/Manual 1) Foreign Exchange Management Act 1999 2) Foreign Exchange Manual Tools: Master Circulars FEMA Notifications A.P. (DIR. Srs.) Circulars

10. In order to understand full implications of Foreign Trade Policy one must get himself familiarized with all the above mentioned departments and their working

11. Purview of Export-Import

12. FLOW CHART – I Knowledge of Market Knowledge of Product Knowledge of Incentives Product Costing Proforma Invoice Sample if necessary Confirmation of Export Contract Payment terms Scrutiny of L/C Amendments if Necessary Preparation of Physical Exports Benefits & Execution Continued….

13. FLOW CHART – I (continue from the previous slide) Pre Shipment Post Shipment Confirmation from Buyer of Receipt of Goods Payment Realisation Realisation of Benefits Statutory Records

14. Overview of Documentation

15. Significance of Documentation • Documents are important for the following reasons: (a) as an evidence of shipment and title of goods; (b) for obtaining payment; (c) to provide a specific and complete description of the goods; (d) for assessment of correct Duty for clearance purpose; (e) for obtaining Export Licences; (f) for obtaining export finance; (g) for completing Pre-shipment Inspection; (h) for claiming export benefits like Duty Drawback, etc.

16. Commercial / Regulatory Documents • Commercial set of documents are mainly used for Commerce. In other words these are documents normally exchanged between buyer and seller. • Regulatory documents are required in dealing with various regulatory authorities such as customs, RBI, Excise, Licencing authorities Inspection and other Export Promotion bodies for availing incentives etc.

17. Commercial / Regulatory Documents • Documents are categorized into two categories, namely Commercial Documents and Regulatory Documents.

18. Commercial / Regulatory Documents • Referring to the Commercial set of documents, it may please be observed that these set of documents are prepared from other set of documents (some of these only). These are known as auxiliary documents. • These documents may not be required by the foreign buyer, but these are must for preparation of main export documents, known as Principle Commercial Documents.

19. Export Documentation Export Sales Contract Pre-shipment Documents Post-shipment Documents

20. Export Sales Contract • What is Export Sales Contract? • Agreement between buyer and seller, stipulating each and every details of the transaction. • Legally binding document. • It reduces the probabilities of disputes & differences as it fixes the role and responsibilities of each party.

21. Export Sales Contract • Terms and Conditions: • While drafting the sales contract one must ensure the following:- 1. Coverage is complete. 2. Maximum clarity. 3. Future probability to be provided. 4. Trade practices. 5. Law of both countries 6. Need of both parties. • There should not be any ambiguity regarding the exact specifications of goods and terms of sale including export price, mode of payment, storage and distribution methods, type of packaging, port of shipment, delivery schedule etc.

22. Export Sales Contract • Following standard terms and conditions are covered in an Export Sales contract: - • Name & address of both the parties. • Contract Number & Date, place • Description of goods, quantity and quantity • Product Standards and Technical Specifications of goods. • Inspection/certification • Total Value of Contract • Terms of delivery (F.O.B./C.F.R./C.I.F. etc.), • Period of Delivery/Shipment, part shipment, Trans-shipment. • Terms of payment:- L/C, D/A, D/P, advance payment, Amount/Mode & Currency Contd…..

23. Export Sales Contract • Taxes, Duties and charges • Packing, Labeling, Marking, etc. • Brokerage/commissions and discounts • Licences and Permits • Insurance Requirements, Certificates of Insurance • Documentary Requirements • Performance guarantee • Signature by all parties to the contract. • Force Majeure of Excuse for Non-performance of contract • Remedies • Arbitration. • Standard Export Sales Contract forms are also available. These can be used as it is or with some modification as per individual need.

24. Pre-shipment Documents • Documents at pre-shipment stage are those documents, which are required to be made, till the consignment is presented to the customs department for clearance. • The following documents can, therefore, be treated as pre-shipment documents:- • Proforma Invoice • Confirmed order or contract • Letter of Credit • Pre-shipment Inspection Certificate • Packing list • Shipping Bill • Export Declaration Forms (GR/SDF) • ARE

25. Post-shipment Documents • Documents at Post-shipment stage are naturally those which are prepared after the shipment. • These documents include the following:- • Mate Receipt • Bill of Lading • Airway Bill • Roadway/Railway Bill • Post Parcel/ Courier Receipt • Invoices (including consular invoice) • Certificate of Origin • Insurance Certificate or Policy • Bill of Exchange • BRC

26. Documents for availing various Export Benefits • Documents are also divided, depending upon, whether the benefit has to be claimed prior to exports or after the exports. • For claiming benefits one has to make different applications with various government authorities. Contd….

27. Documents for availing various Export Benefits • At the pre-shipment stage the following documents are note-worthy. • Application for pre-shipment finance from the bank. • Application of Advance Authorization or Duty Free Import Authorisation with DGFT. • Application for execution of Bond with Central Excise authorities. • Application for obtaining CT-1 in case of a Merchant Exporter

28. Documents for availing various Export Benefits • At the post shipment stage, the following documents are note-worthy. • Application of Duty Entitlement Pass Book. • Application for Focus Market or Focus Product Scheme. • Application for fixation of Brand rate of Drawback

29. Import Documentation

30. Important Documents–Imports • Invoice • Packing list • Bill of Lading or Delivery Order/Airway Bill • GATT declaration form duly filled in • Importers/CHA’s declaration • Licence/Authorisations in original wherever necessary • Letter of Credit/Bank Draft/wherever necessary • Insurance document • Import license • Industrial License, if required • Test report in case of chemicals • Catalogue, Technical write up, Literature in case of machineries, spares or chemicals as may be applicable • Separately split up value of spares, components, machineries • Certificate of Origin, if preferential rate of duty is claimed under PTAs/FTAs etc. • No Commission declaration

31. Understanding Documents

32. Understanding Documents • All documents whether it is for export or import transaction generally contain following information • Name and address of the exporter and importer • Document No. and date. • Order No. and date • Port of discharge • Port of destination • Country of origin • Description of Goods • Marks and nos., model nos. [if any] • Weight • ITC HS Code No. • Value • Currency • Terms of payment • Terms of shipment etc.

33. Understanding Documents • However, depending upon the nature of the document, specific information is to be mentioned. • For e.g. apart from the above details, Shipping Bill will include what export benefit is being claimed against that particular shipment, etc. Similarly, Packing List will give information about how goods are packed. • Let us now study each document in depth.

34. Invoice • It is itemized statement prepared and issued by a seller at the time of dispatching the goods to the buyer. • It helps the Customs Authorities to: • ensure that goods shipped are permitted by the export policy. • compute the customs duty, if any, payable on the export or the import. • check the quantity of goods. They generally open a few packages at random and check the veracity of details in the invoice. • check if there is any over-invoicing or under-invoicing (that may be resorted to by the importer to reduce the import duty payable).

35. Invoice • Invoices are often called bills. • Various types of invoices used in International Trade are • Proforma Invoice • Commercial Invoice • Consular Invoice • Leagalized Invoice • Customs Invoice

36. Packing List • It is a consolidated statement in a prescribed format detailing how goods are packed, marked and numbered including weight and dimensions of each package.  • It is useful for customs at the time of examination and warehouse keeper of buyer to maintain inventory record and to effect delivery. • It have many details common from invoice but it does not indicate unit rate value of goods. • The exporter or his/her agent, the customs broker or the freight forwarder, reserves the shipping space based on the gross weight or the measurement shown in the packing list.

37. Packing List • Customs uses it as a check-list to verify: • the outgoing cargo (in exporting) and • the incoming cargo (in importing). • Basic functions of Packing List are: • To confirm the contents of a shipment as it left the exporter’s premises. • To indicate weights, measures and the piece count (i.e. the number of cartons or cases) in that shipment. • It is prepared in 7-10 copies or as per the requirement.

38. Inspection Certificate • “Certificate of Inspection” is issued by the Inspection Agency concerned certifying that the consignment has been inspected before shipment as per the requirements of the Exports (Quality Control and Inspection) Act, 1963. • It satisfies the conditions relating to quality control and inspection as applicable to it and is certified export worthy. • This certificate is required: • by customs before allowing shipment of goods or • by a banker to negotiate the documents. • This certificate bears cross references of invoice or contract number.

39. Inspection Certificate • Inspection can be done by • Inspection Agency appointed by the Government of India, i.e. Export Inspection Agency, Textile Committee, Central Silk Board etc. • Inspection Agency may also be nominated by importing countries’ Government i.e. SGS and OMIC by some African Countries. • Sometimes buyer himself appoints an independent private inspector to inspect the goods. • If an inspection is a part of transaction, then exporter is required to arrange for necessary inspection. • It can be a certificate of quality, weight, analysis, or the like.

40. Certificate of Origin [COO] • It is a certificate indicating the fact that the goods which have been exported have originated or manufactured in a particular country. So it is a sort of declaration testifying the origin of export. • It is normally required by an importer to clear goods from the customs. • For political and social reasons, it is insisted by Customs Authority of importing country before goods are allowed to enter in the country. • It helps the importer to take an advantage in duty concession, if any. For e.g. goods imported under Free Trade Agreement.

41. Certificate of Origin [COO] • On the basis of COO, Customs can ensure that certain prohibited goods of particular countries are not imported. • It also ensures that goods have not been reshipped by a seller who has brought them into his own country from some other place of origin. • It is sent to the importer by the exporter. • It is issued or signed by an independent official organization, such as a Chamber of Commerce, on prescribed form.

42. Certificate of Origin • These are often required: • to meet Customs requirements in the importing state • to comply with Banking requirements • for other official and commercial reasons. • There are two categories of Certificate of Origin : 1. Preferential Certificate of Origin and 2. Non-preferential Certificate of Origin

43. Preferential Certificate of Origin • It entitles preferential treatment in duty in the importing country. • These certificates are governed by rules of origin which are always part of Preferential Trading Agreements entered into between two or more countries. • As far as India is concerned the following agreements are noteworthy: • Generalised System of Preferences (GSP) • SAARC Preferential Trading Agreement (SAPTA) • Asia- Pacific Trade Agreement (APTA) • India-Sri Lanka Free Trade Agreement (ISLFTA)

44. Preferential Certificate of Origin • Some of the agencies which are authorised to issue PCOO are: • Export Inspection Agencies – All products. • Directorate General of Foreign Trade & its regional offices - All products. • Spices Board, Ministry of Commerce & Industry - Spices and Cashewnuts • Central Silk Board through 8 regional offices all over India - Silk Products. • Coir Board – Coir and Coir Products. • Textile Committee - Textiles and madeups

45. Non-preferential Certificate of Origin • It evidences the origin of goods and do not bestow any right to preferential tariffs. • The Government has also nominated certain authorised agencies to issue Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to Simplification of Customs formalities.

46. Shipping bill • Shipping Bill is an important document required to seek permission of customs to export goods by Sea/Air. It is prepared by the exporter and submitted to the Customs. • The exporter of any goods has to file a “SHIPPING BILL” as an entry for the purpose of export by air or sea and a “BILL OF EXPORT” in respect of export by land. • Cargo will be allowed to be carted to Dock/Port sheds only after stamping and passing of the shipping bill by customs authorities. • The exporter has to sign a declaration in the Shipping Bill regarding the truth of its contents.

47. Shipping bill • Shipping Bill normally contains: • the name and address of the importer/consignee and exporter, • invoice number and date, • name of vessel carrying the goods, • name of master or agents, • port at which goods are to be discharged, • country of final destination, • description of goods, quantity details of each case, • value of the goods as defined in the Sea Customs Act, • number of packages with total weight, • marks and numbers, etc.

48. Shipping bill • Types of Shipping Bills: • FREE SHIPPING BILL: Used for export of goods which neither attract any Export duty/cess nor entitled to any Duty Drawback • DUTIABLE SHIPPING BILL: Used when export goods are subject to Export Duty/Cess. Duty is charged either on quantity basis (Fixed amount per kg. or per Metric tonne) or on certain percentage of assessable value. • DRAWBACK SHIPPING BILL: Used when Duty Drawback is to be claimed. • SHIPPING BILL FOR SHIPMENT EX-BOND: Used when the goods are to be exported which have been imported earlier and kept in bond prior to re-export.

49. Shipping bill • Types of Shipping Bills: • DEPB SHIPPING BILL: When DEPB benefit is to be claimed. • DEEC SHIPPING BILL: This shipping bill is used for export of goods under Advance Authorisation (Duty exemption scheme). • DEEC CUM DRAWBACK SHIPPING BILL: This shipping bill is used for export of goods where both the schemes Duty Exemption as well as Drawback are to be taken into account.

50. Shipping bill • Shipping bill is required to be submitted in quadruplicate. If Drawback/DEPB claim is to be made, one additional copy should be submitted. • Copies of Shipping Bill are as under: • Customs Copy: For record of Customs • Exporter’s Copy: For record of Exporters/ Exporter may forward it to shipping company. • Export Promotion Copy: For office of DGFT. This copy is the most important document for claiming duty Neutralisation/Exemption benefits plus export incentives wherever applicable. • Exchange Control Copy: For negotiating the export documents in bank. It is Proof of export for exchange purposes. • DEPB Copy: For use in the import cell of customs for registration of licence.