Understanding Foreign Trade Documentation

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

gNBC
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.

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Agenda
 Export Procedures
 Import Procedure
 Export Promotion Schemes under Foreign Trade Policy

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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 :

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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 :

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Ministry of Finance
Customs Excise
Coverage Coverage
Validity of imports and exports Export
Assessment and valuation Under bond – clearance of
excisable goods for export under
bond
Determination of import /
export duty applicable
Rebate of excise duty post exports
where exports have been effected
after payment of excise duty
Collection of duty Monitoring factory stuffed
containers in certain cases
Inspection and supervision
of cargo
Import
Examining co-relation
and compliance with other laws
Monitoring CENVAT
C
o
n
t
d…

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Continued from the previous slide
Governing Acts/Laws/Manual Governing Acts/Laws/Manual
1. Customs Act, 1962 1. Central Excise Act, 1944
2. Customs Tariff Act, 1975 2. Central Excise Tariff Act, 1985
3. Customs Law Manual 3. Central Excise Law Manual
Tools : i) Notifications
ii) Public Notices
iii) Customs Circular
iv) General Exemption
Notifications
Tools : i) Notifications
ii) Central Excise Circulars
iii) General Exemption
Notifications

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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

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

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Knowledge
of
Market
Knowledge
of
Product
Knowledge
of
Incentives
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….
Product
Costing
FLOW CHART – I

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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

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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.

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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.

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Commercial / Regulatory
Documents
 Documents are categorized into two categories, namely
Commercial Documents and Regulatory Documents.
Commercial Regulatory
Commercial Invoice Shipping Bill
Inspection Certificate ARE1 from (Excise)
Insurance Certificate RBI Declaration Forms (GR/PP)
Bill of Lading / AWB Application for remittance of
currency
Certificate of Origin Various Licences
Bill of Exchange Bill of Entry
Shipment Advice
Packing List

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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.

Export Documentation
Export Sales Contract
Pre-shipment Documents
Post-shipment Documents

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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.

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 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.

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 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…..

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• 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.

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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

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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

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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….

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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

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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

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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

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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.

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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.

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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).

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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)

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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

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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.

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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.

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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.

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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.

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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.

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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.

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ARE
 ARE stands for application for removal of excisable
goods for exports by Air/Sea/ Post/Land.
 Goods which are sold overseas are exempted from
payment of excise duty or entitled for Rebate of Excise
Duty, if excise paid goods are exported. Under both
these circumstances, the document to be used is ARE.
 When goods are removed without payment of duty for
the purpose of export, they will get covered under the
provisions of Rule 19 of the Central Excise Rules.

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ARE
 When excise paid goods are exported and rebate of
Excise Duty is to be claimed, they will get covered
under Rule 18 of Central Excise Rules.
 ARE is prepared before clearance of goods from the
factory gate.
 ARE will specify whether goods are exported under Rule
19 or under Rule 18.

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ARE
 There are three types of ARE:
a) ARE 1: is used for physical export of goods.
b) ARE 2: is used when goods are removed for
manufacture and packing of the goods to be exported.
c) ARE 3: is used when goods are supplied as deemed
exports.

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Mate Receipt
 Mate’s receipt is a receipt issued by the Master or Mate of the
vessel stating that certain goods have been received on board his
vessel.
 It is prima-facie evidence that the goods are loaded in the vessel.
 It contains:
the name of shipping line and vessel,
port of loading, port of discharge and place of delivery,
marks and numbers,
number and kind of packages, gross weight,
description of goods,
container status/seal number,
shipping bill number and date and
condition of cargo at the time of its receipt on board the vessel.
 It is serially numbered.

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Mate Receipt
 Port authorities recover port dues from exporter on production of
this receipt.
 On payment of Dock dues, the exporter or his agent collects the
receipt from the Port-Trust authorities and hands over to shipping
company for preparing Bill of Lading.
 Bill of Lading is prepared on the basis of Mate’s Receipt.
 It is of a transferable nature.
 In case of ascertaining the exact date of shipment, the mate’s
receipt date is also very important.
 Normally, the date of Export is regarded as “the date of Mate
Receipt or the date of Bill of Lading, whichever is later”.

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Export Declaration Forms (GR/SDF)
 As per the exchange regulations, exporters, wishing to ship goods
abroad, are required to submit Export Declaration Forms to the
Customs authorities (whenever the value of the shipment exceeds
US $ 25,000) before any export of goods from India is made.
 It is to be filed by exporter stating that export proceeds would be
realized within 180 days for non-status holder exporters and 360
days for status holder exporters.

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GR
Form
: Used for exports to all countries made other than by
post including export of software in physical form i.e.
magnetic tapes/discs and paper media - When S/B is
filed manually. [prepared in duplicate]
SDF
Form
: Appended to the shipping bill, for exports declared to
Customs Offices notified by the Central Government
which have introduced Electronic Data Interchange (EDI)
system for processing shipping bills notified by the
Central Government. [prepared in duplicate]
Relevant Declaration Forms, as prescribed by RBI under
Foreign Exchange Management (Export of Goods and
Services) Regulations, 2000.

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 These forms normally contain:
 Name and address of exporter, IEC code number and description of
goods.
 Name and address of authorised dealer through whom the proceeds of
the exports have been, or will be, realised.
 Details of commission due to foreign agent or buyer should be
correctly declared. Otherwise, difficulties may arise at the time of
remittances of such commission/ payment. An exporter should note
this point very carefully.
 It should be clearly indicated whether the export is on “Outright Sale
Basis” or “On Consignment Basis”
 An exporter is required to give analysis of full export value, a break-
up of FOB value, freight, insurance, discount, commission, etc.
 An exporter has to mention the period within which he will realise full
export value of transaction. If the shipment is on DA terms, then an
exporter has to bring forex within that period. However, normally
maximum period allowed is 180 days.

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Statutory Declaration Form [SDF]
 Procedure for Distribution / disposal of copies of SDF
 The SDF form should be submitted in duplicate (to
be annexed to the relative shipping bill) to the
Commissioner of Customs concerned.
 After verifying and authenticating the declaration in
form SDF, the Commissioner of Customs will hand
over to the exporter, one copy of the shipping bill
marked ‘Exchange Control Copy’ in which form SDF
has been appended for being submitted to the bank
within 21 days from the date of export.

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Statutory Declaration Form [SDF]
 Banks should accept the Exchange Control (EC) copy
of the shipping bill and form SDF appended thereto,
submitted by the exporter for collection/negotiation
of shipping documents.
 The manner of disposal of EC copy of shipping Bill
(and form SDF appended thereto) is the same as that
for GR forms.

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Bill of Exchange
 Bill of Exchange [BE] is a document drawn and is an
order by the exporter to the buyer to pay the money in
specified exchange.
 It is also known as a draft.
 A bill of exchange is accompanied by commercial
documents which are presented by a bank and released
to the buyer either against payment (at sight) or
against a signature for payment on a specified future
date.
 It is an unconditional written order.

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Bill of Exchange
 When a BE is drawn on 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 the contract.
 Accordingly, the bill is known by the name of currency
in which it is drawn.
e.g. a bill drawn in US dollars is known as a “Dollar Bill”
and when drawn in Rupees, it is termed as “Rupees
Bill”.

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Bill of Exchange
 The most common versions of a bill of exchange are:
A) Sight Draft –
 When the drawer (exporter) expects the drawee
(importer) to make payment immediately upon the
draft being presented to him.
 Unless and until the Draft is received, the
Negotiating/ Collecting Bank does not hand over the
Shipping documents and the buyer cannot take
delivery of goods.

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Bill of Exchange
B) Usance Draft –
 When draft is drawn for payment at a date later
than the date of presentation.
 It may be a fixed future (specific) date or
determinable date according to the period of credit
viz. 30 days, 60 days or 90 days etc.
 It is presented to the drawee (importer) who will
retire the documents by accepting the draft by
putting his signature and date.

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Bill of Exchange
 When the payment is received in advance no Bill of
Exchange is required to be drawn.
 Parties to a bill of exchange
i. Drawer – who makes the order for making
payment.
ii. Drawee – whom the order to pay is made.
iii. Payee – whom the payment is to be made.

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Bill of Exchange
 Features of a Bill of Exchange:
 A bill must be in writing, duly signed by its drawer,
accepted by its drawee and properly stamped.
 It must contain an order to pay. Words like ‘please
pay US $ 5,000 on demand and oblige’ are not used.
 The order must be unconditional.
 The sum payable mentioned must be certain or
capable of being made certain.
 The parties to a bill must be certain.

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Bank Realisation Certificate
 Once the export proceeds are realised, the exporter has
to prepare Bank Certificate of Export and Realisation
for the purpose of claiming export benefits, incentives,
etc.
 It is prepared as per Form No.1, given in Appendix 22A
of Handbook of procedures 2004-09 (Vol. I).
 To prepare this certificate, the date of realisation is
most essential, as the exporters have to apply for the
export benefits, incentives, etc. within six months
following the month/quarter of the realization month.

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 It is signed by the authorized signatory of the
firm/company with full name in block letters with
designation, full official and residential addresses.
 Bankers attest this certificate as true and correct after
verifying the particulars, including the date of mate
receipt. This date is the most important, as this is the
actual date of export.

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 It is signed by an authorized signatory of the bank with
his name and designation.
 Bankers affix certificate number and date and also
mention the Authorized Foreign Exchange Dealer's Code
number allotted to Bank by Reserve bank of India.
 For this purpose, this certificate must be accompanied
with the following documents:-
 A copy of invoice,
 A copy of customs attested export promotion copy of the
shipping bill,
 A copy of Bill of Lading/ PP receipt/ Airway bill,
 A copy of the insurance certificate/Insurance policy/cover.

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Bill of Lading (B/L)
 Bill of Lading is the transport document associated with
Sea freight.
 It is issued by the Shipping Company or its agent or
master of a ship acknowledging that specified goods
have been received on board as cargo for conveyance
to a named place for delivery to the consignee who is
usually identified.
 It is a document of title to the goods and, as such, is
freely transferable by endorsement and delivery.

gNBC
 Bill of Lading serves three purposes as:
 Receipt given by Shipping Company as goods described on
document has been received by it/carrier.
 Evidence of the contract of carriage by sea between the
shipping company and the shipper (exporter or importer).
 Document of title to the goods and can be used to obtain
payment or a written promise before the merchandise is
released to the importer.
 For the bill of lading to be negotiable it must be:
1. made out to the order to the shipper.
2. signed by the steamship company.
3. endorsed in blank by the shipper.

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 It is the only evidence to file a claim against the
shipping company in the event of non-delivery,
defective delivery or short-delivery of the cargo at the
destination.
 For preparation of B/L the exporter should submit the
complete set of B/L together with mate receipt to the
shipping company which will calculate the freight
amount on the basis of measurement or weight.
 On payment of freight, the shipping company returns
the B/L duly signed and supported by requisite adhesive
stamps.

gNBC
 Generally made out in the sets of two or three originals
duly signed by the master of the ship or the agent of
the steamship company.
 All the originals are equally valid for taking the delivery
of the goods. Once one original is utilised the other
originals become null and void.
 Marked as ‘Non-negotiable copy’ cannot be utilised for
taking the delivery of goods.

gNBC
 Bill of Lading contains the following information:
 Shipping company’s name and address.
 Consignee’s name and address.
 Notify party
 Name of the vessel,
 Port of loading/Shipment and port of discharge.
 Shipping marks and Numbers, Cubic measurements, weights
 Description of the goods
 Number of packages.
 Shipped on board with date-rubber stamp.
 Gross weight and net weight.
 Freight details
 Signature of the shipping company’s agent.
 Container number if any.
 Shipper’s name and address.
 B/L Number and Date
 Originals
 Terms (on reverse)

gNBC
 Bill of Lading can be further described as under:-
 Shipped on Board :- When goods are actually shipped on
board.
 Received for shipment :- When goods have been handed over
to agent for shipment.
 Through B/L:- When two or more carriers/ different modes of
transport form i.e. road, rail, air, and sea employed to reach
goods to their final destination.

gNBC
 Transhipment B/L:- When there is no direct service between
the two ports and shipowner is prepared to tranship the goods
at an intermediate port.
 Stale B/L:- i.e. a late B/L that has been held too long before
it is passed on to a bank for negotiation or to the consignee.
 Clean B/L:- Where the carrier has noted that the goods have
been received or loaded in ‘apparent good condition’ (no
apparent damage, loss, etc.).

gNBC
 Claused B/L:- Which contains additional clauses/notations
limiting the responsibility of the shipping company which
specify deficient condition(s) of the goods and/or packaging.
 Combined Transport B/L:- When different modes of transport
are used; usually issued when goods stuffed at shipper’s
premises and delivered at consignee’s premises.

gNBC
 Charter Party B/L:- Where a shipper has contracted with a
shipping line to charter a vessel for the movement of cargo. It
is issued by the carrier or its agent in the charter shipping.
Unless otherwise authorized in the letter of credit (L/C), the
charter party B/L is not acceptable in the L/C negotiation.
 Freight Paid B/L:- When freight is paid at the time of
shipment or in advance, the B/L is marked, freight paid.
 Freight Collect B/L:- When the freight is not paid and is to be
collected from the consignee on the arrival of the goods, the
B/L is marked, freight collect.

gNBC
 Negotiable B/L:- It is a title document to the goods, issued
“to the order of” a party, usually the shipper, whose
endorsement is required to effect it’s negotiation. Thus, a
shipper's order (negotiable) B/L can be bought, sold, or traded
while goods are in transit and is commonly used for letter of
credit transactions.

gNBC
Airway Bill (AWB)
 Airway Bill is a transport document associated with Airfreight.
 It serves as a receipt for goods and an evidence of the contract of
carriage, but it is not a document of title to the goods. Hence,
the AWB is non-negotiable.
 It contains the following details:
 number of packages
 dimensions or volume
 gross weight
 shipping marks
 The goods in the air consignment are consigned directly to the
consignee.

gNBC
Airway Bill (AWB)
 On the reverse side of the airway bill are the airline’s terms and
conditions of carriage whereby an airline is obligated to transport
a consignment to its final destination once it has confirmed
receipt of the shipper’s consignment.
 Airway bill can be comprised in two parts:
 MAWB (Master Airway bill) – shipments sent on a direct basis,
not consolidated.
 HAWB (House Airway bill) – shipments sent on a consolidation
basis whereby grouping together various clients consignments
under one MAWB being issued by the freight forwarder.

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Bill of Entry
 The document on the strength of which clearance of
imported goods can be affected is known as Bill
Entry, the form of which has been standardized by
the Central Board of Excise and Customs.
 Every importer has to submit it under section 46 of
the Customs Act, 1962.
 Under EDI system, Bill of Entry is actually printed on
computer in triplicate only after ‘out of charge’
order is given. Duplicate copy is given to importer.

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Bill of Entry
 Salient features of a Bill of Entry which is to be
presented for clearance of goods for home
consumption are mentioned below:
 Origin & Vessels Particulars
 Particulars of the Goods
 Value
 Duties Leviable
 Code
 Declaration of Importers/Clearing Agents
 Types of Bill of Entry – There are three types. Out of these,
two types are for clearance from customs while third is for
clearance from warehouse.

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Bill of Entry
 BILL OF ENTRY FOR HOME CONSUMPTION - When the
imported goods are to be cleared on payment of full duty.
Home consumption means use within India.
 BILL OF ENTRY FOR WAREHOUSING - If the imported goods
are not required immediately, importer may like to store the
goods in a warehouse without payment of duty under a bond
and then clear from warehouse when required on payment of
duty. This will enable him to defer payment of customs duty
till goods are actually required by him.
It is also called ‘Into Bond Bill of Entry’ as bond is executed
for transfer of goods in warehouse without payment of duty.
 BILL OF ENTRY FOR EX-BOND CLEARANCE - It is used for
clearance from the warehouse on payment of duty.

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Bill of Entry
 Documents required by customs authorities are required to be
submitted to enable them to (a) check the goods (b) decide value
and classification of goods and (c) to ensure that the import is
legally permitted.
 Documents presented to customs along with the Bill of Entry
generally include:
• Invoice,
• Packing List,
• Bill of Lading or Delivery Order,
• Import Licence(s) / Customs Clearance Permit,
• Letter of Credit / Bank Draft wherever necessary
• Insurance Policy,
• Certificate of Origin etc.
• GATT declaration form duly filled in
• Importers / CHAs declaration duly signed

gNBC
Tips for Proper Documentation
 Implications of all Regulatory documents must be studied
carefully. For example; declaration on ARE1 forms.
 Filing of Shipping Bill electronically requires correct entries
including HS code for the product. Many times, small mistakes
are extremely difficult to correct later on.
 Shipping bills must be filed according to the scheme the
exporter wants to avail . For example; DEPB /DFIA/Drawback
etc.
 Extra care should be taken when combination of schemes is
intended to be used. For example; DEEC – Drawback.
 Co-relation between customs, excise and DGFT is extremely
important. Many times documents do not match with each
other, which results in delay or denying of some benefit under
one or the other scheme.

gNBC
Tips for Proper Documentation
 Each regulatory document is important from the point of view
of claiming various benefits associated with exports. Each
document therefore should be carefully looked into as to
correctness of the contents, description, quantity, weight,
currency, declaration etc.
 Maintenance of statutory records: Since most of the schemes
are in the nature of the exemption / remission of the duty,
documentary compliances are insisted upon by all the
government departments. For example; Appendix 23 –
Consumption register.

gNBC
INCOTERMS 2000
 INTRODUCTION
In their sales contract buyer and seller agree on the
conditions of sale : payment on the one hand and
delivery on the other. These terms determine at what
precise location the ownership of the goods is
transferred from seller to buyer and when/how
payment will be done. In international trade a
universal set of rules on delivery has been developed
over the years. It is called INCOTEMRS.

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
Incoterms 2000
Group E
Departure
EXW Ex Works
Group F
Main carriage unpaid
FCA
FAS
FOB
Free Carrier
Free alongside ship
Free on board
Group C
Main carriage paid
CFR
CIF
CPT
CIP
Cost and Freight
Cost, Insurance, Freight
Carriage Paid to
Carriage and Insurance Paid to
Group D
Arrival
DAF
DES
DEQ
DDU
DDP
Delivered at Frontier
Delivered Ex Ship
Delivered Ex Quay
Delivered Duty Unpaid
Delivered Duty Paid(Note, that when the Incoterms indicate a certain Point or “…..,” the point
of destination or origin must be mentioned)

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INCOTERMS 2000
 The Incoterms divide costs and risks
The Incoterms of trade have been designed to clarify
obligations of both parties, the buyer and the seller.
Principally, these are:
The seller must: The buyer must:
Provide the goods
according to the contract
Pay the price as agreed
upon
Contd….

gNBC
INCOTERMS 2000
In order to finalise the transaction, both parties will
have to perform certain tasks, like:
Arrange for licences, Arrange for licences,
Authorisation and formalities Authorisation and formalities
Arrange for shipment Arrange for shipment
Arrange for delivery Accept delivery
Bear the risks for his activities Bear the risks involved in his
contractual activities.
Source: Guide to Incoterms, ICC Paris

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INCOTERMS 2000
 EXW = EX WORKS (… named place)
Cost of Goods plus cost of Export packing and marking
In this term the seller delivers the goods by keeping it ready in
deliverable state at the seller's place or another named place. This
named place can be factory/godown or manufacturing unit. In this
term seller does not clear the goods for exports nor goods are loaded
on vehicle.
 FCA = FREE CARRIER (… named place)
Cost of Goods plus cost of Getting goods to railway station or
truck for transportation to port
This term refers to seller's responsibility to deliver the goods,
cleared for export, to the carrier appointed by the buyer at the
named place. In this term the place of delivery is very important. If
the delivery is at sellers place's then he is responsible for loading. If
the delivery occurred at any other place, the seller is not responsible
for unloading. This term can be used for all modes of transport as
well as multimodal.

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INCOTERMS 2000
 FAS = FREE ALONGSIDE SHIP (…named port of
shipment)
Cost of Goods plus cost of Transport to port and
getting goods alongside ship
In this term when the goods are placed alongside the
vessel at the named port of shipment it will be
considered that the seller has completed the delivery.
The buyer has to bear all risks of loss or damage to the
goods and all costs from this point of time. However
the seller must clear the goods for the purpose of
export. This term can be used only for inland waterway
transport or shipment by sea. It is not used when it is
air shipment.

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INCOTERMS 2000
 FOB = FREE ON BOARD (… named port of shipment)
Cost of Goods plus cost of Getting goods on board
and preparing shipping documents
This is the most popular term and is widely in use. FOB
means that the seller delivers when the goods pass the
ship's rail at the named port of shipment. Under this
term the buyer has to bear all costs and risk of loss of
damage to the goods from that point. This term
requires the seller to clear the goods for exports. This
term is used only for sea or inland waterway transport.
It is not suitable for shipment by air.

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INCOTERMS 2000
 CFR = COST AND FREIGHT (… named port of
destination)
Cost of Goods plus cost of Freight cost (port to port)
Earlier this term was popularly known as C&F or CNF.
CFR means the seller must pay the cost and the freight
necessary for the goods to reach at the named
destination. However, the risks of loss or damage to
the goods after the time of the delivery is on buyers
account. The seller is required to clear the goods for
exports. This term can be used only for sea and inland
waterway transport.

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INCOTERMS 2000
 CIF = COST INSURANCE AND FREIGHT (… named port of
destination)
Cost of Goods plus cost of Marine Insurance
“Cost, Insurance and Freight” means that the seller, delivers when
the goods pass the ship’s rail in the port of shipment. The CIF price
refers that it covers the cost of the goods, freight necessary to bring
the goods to the named port of destination and also marine
insurance. Compared to the previous term, CFR the seller contracts
for the insurance and pay the insurance premium. It will be
essential for the buyer to know that under the CIF term the seller is
required to obtain the insurance only on minimum cover. If the
buyer wishes to have more protection then he should make his own
insurance arrangement extra or should specify to the seller at the
time of contract.
In this term the seller must clear the goods for exports and the buyer
must arrange necessary clearance for import. This term can be used
only for sea and inland water transport.

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INCOTERMS 2000
 CPT = CARRIAGE PAID TO (… named place destination)
“Carriage Paid To” means the seller delivers the goods to the carrier
nominated by him but the seller must in addition pay the cost of
carriage necessary to bring the goods to the named destination. This
refers to the fact that all the risks and any other cost occurring after
the goods have been delivered will be on buyer’s account. This term
is used for all modes of transport including multimodal transport.
 CIP = CARRIAGE AND INSURANCE PAID TO (…named place of
destination)
“Carriage and Insurance Paid To” means that the seller delivers the
goods to the carrier nominated by him, but the seller must in
addition pay the cost of carriage necessary to bring the goods to the
named destination. This means that the buyer bears all risks and any
additional costs occurring after the goods have been so delivered.
However, in CIP the seller also has to procure insurance against the
buyer's risk of loss of or damage to the goods during the carriage.

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INCOTERMS 2000
 DAF = DELIVERD AT FRONTIER (… named place)
This term is used when goods are to be delivered at land frontier,
irrespective of the mode of transport. "Delivered At Frontier" means
the seller delivers when the goods are placed at the disposal of the
buyer on the arriving means of transport not unloaded, cleared for
exports but not cleared for import at the named point and place at the
frontier, but before the customs border of the adjoining country.
 DES = DELIVERD EX SHIP
Cost of Goods plus cost of Putting goods at disposal of customer on
board vessel at port of destination
“Delivered Ex Ship” means that the seller delivers when goods are
place at the disposal of the buyer on board ship not cleared for import
at the named port of destination. In this term all the cost and risk in
bringing the goods to the named port of destination before discharge is
on seller. This term can be used only when the shipment is by sea or
inland waterway or multimodal transport in the vessel at the port of
destination.

gNBC
INCOTERMS 2000
 DEQ = DELIVERED EX QUAY (… named port of destination)
Cost of Goods plus cost of Unloading charges at port of destination
“Delivered Ex Quay” means that the seller delivers when the goods are
placed at the disposal of the buyer not cleared for, import on the quay
(wharf) at the named port of destination. The seller has to bear costs
and risks involved in bringing the goods to the named port of
destination and discharging the goods on the quay (wharf). The DEQ
term requires the buyer to clear the goods for import and to pay for all
formalities, duties, taxes and other charges upon import.

gNBC
INCOTERMS 2000
 DDU = DELIVERED DUTY UNPAID
“Delivered Duty Unpaid” means that the seller delivers the goods to
the buyer, not cleared for import, and not unloaded from any arriving
means of transport at the named place of destination. The seller has to
bear the costs and risks involved in bringing the goods thereto other
than where applicable any duty for import in the country of
destination. Such duty has to be borne by the buyer as well as any
costs and risks caused by his failure to clear the goods for import in
time.

gNBC
INCOTERMS 2000
 DDP = DELIVERED DUTY PAID (…named place of
destination)
Cost of Goods plus cost of Payment of duties and
transport to customer
“Delivered Duty Paid" means that the seller delivers the
goods to the buyer, cleared for import, and not unloaded
from any arriving means of transport at the named place
of destination. The seller has to bear all the costs and
risks involved in bringing the goods thereto including,
where applicable, any duty for import in the country of
destination.

gNBC
INCOTERMS 2000
 Incoterms 2000 – an example
A customer in Hanover, Germany, asks for a quotation for 3000
pairs of shoes, to be delivered DDP at his warehouse. You have
decided on a unit selling price of $2, giving a total nominal price
of $ 6000 for the goods when sold domestically. For export you
will have to calculate with an additional set of costs which are
involved in making them physically available to your customer.
What are the additional costs of getting the goods from your
factory in (e.g.) Agra, India, to the customer? How (*) is your
quotation affected by the terms of delivery?
(*) In this calculation example, all costs are hypothetical.

gNBC
INCOTERMS 2000
If you
quote:
Your price should
include:
Additional
costs:
Your total price
is:
EXW Ex-works Agra
Export packing, marking
crates with shipping
marks
300 6300
FCA Free on Carrier at Agra
station. Carriage and
insurance for delivery
to railway station by
road transport including
insurance
100 6400

gNBC
INCOTERMS 2000
FAS Free alongside ship at
JNPT port. Rail
transport to port
(including insurance)
and getting goods on
the quay alongside
ship.
310 6710
FOB Free on board JNPT
Port. Dock dues,
loading goods on board
ship. Preparing
shipping documents
100 6810

gNBC
INCOTERMS 2000
CFR Cost and Freight.
Sea Freight to
Hamburg (nearest
port to Hanover)
875 7685
CIF Cost, insurance,
freight. Sea freight +
marine insurance
(port to port)
100 7785
DES Delivered ex ship at
Hamburg.
Landing charges at
Hamburg port.
90 7875

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INCOTERMS 2000
DDP Delivery duty Paid at
customer’s warehouse
in Hanover. Import
duties for 3000 pairs
of shoes
1200 9075
Transport by rail
Hamburg to Hanover
150 9225
The buyer actually
pays **
1350 9225
(**) = ‘availability price’.

gNBC
Terms of Payment
 Types of International Trade Settlement:
 Advance Payment
 Open account
 Bills on collection basis
 Documents against Acceptance
 Documentary Credits (Letters of credit)
 Standby letter of Credit

gNBC
Advance Payment
 Seller may insist for advance payment :
• When he is not confident on the buyer’s financial position
• When the buyer’s Country is not stable.
 Under this method seller is able to secure his commercial risk on
the buyer by receiving the advance payment for his supply.
 While agreeing for advance payment buyer is exposed to a risk on
the seller and his capacity to supply the materials.
 In a competitive ‘buyer’s market’ seller may not be able to
receive advance payment.
 If it is the ‘seller’s market’ and if the seller has monopoly in
certain items, seller can insist for advance payment.

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Open account
 It is an arrangement between the buyer and the seller that
seller delivers the goods to the buyer directly or to his order
and the buyer agrees to pay on an agreed date.
 Under this method, the goods are with the buyer on trust and
the buyer is expected to pay the seller on the due date.
 Seller is exposed to a high degree of risk since the goods are
under the control of the buyer.
 This type of trading requires a high degree of trust between
buyer and seller and this method is more advantageous to the
buyer.
 This method is also known as consignment sale or on account
sales.

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Documents against payment
 It is an arrangement by which the seller after shipping the
goods submits the documents to his bank with a request for
collecting the payment from the buyer.
 Seller’s bank forwards the document to the buyer’s bank with
a request to collect the payment from the buyer against the
documents.
 Documents are presented to the buyer and if the buyer makes
payment, buyer’s bank collects the payment and remits to the
seller’s bank, which in turn will transfer the payment to the
seller.
 Under this method seller’s bank does not undertake any
responsibility for payment. It acts as agent for collection.
 If the payment is not received the documents are returned to
the seller.
 Payment risk is with the seller. If the payment is not
forthcoming, seller has to recall the documents or direct it to
a new buyer.

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Documents against acceptance
 Under this arrangement all the commercial documents are
forwarded by the seller’s bank to the buyer’s bank.
 Seller’s bank specifically instructs the buyer’s bank to deliver
all the commercial documents to the buyer only on
acceptance of the payment liability by the buyer on the bill of
exchange.
 Bill of exchange is drawn on the buyer demanding payment on
the due date.
 Buyer accepts his payment liability by signing on the bill of
exchange and collects all the original documents.
 With the original shipping document he is able to take delivery
of the consignment.
 Buyer goes to the bank on the due date and pays the dues
with or without interest as per the arrangement.

gNBC
Letters of Credit
 What is Letter of Credit [LC]?
 Under letter of credit mechanism the Bank lends its name to
the buyer’s reputation by undertaking on buyer's behalf that it
will pay the seller provided seller presents its claim/documents
strictly in terms of the undertaking given by the Bank on behalf
of buyer.
 As per the UCPDC 600 definition of LC is given as under
“Credit” means any arrangement, however name and
described, that is irrevocable and thereby constitutes a
definite undertaking of the issuing bank to honour a complying
presentation.

gNBC
Letters of Credit
 What is Letter of Credit [LC]?
 Honour means:
a. To pay at sight if the credit is available by sight payment.
b. To incur a deferred payment undertaking and pay at
maturity if the credit is available by deferred payment.
c. To accept a bill of exchange (‘draft’) drawn by the
beneficiary and pay at maturity if the credit is available
by acceptance.
 Presentation means either the delivery of documents under a
credit to the issuing bank or nominated Bank or the documents
so delivered.

gNBC
Letters of Credit
 Why an exporter should insist on LC as a payment
term?
 LC open doors to international trade by providing a secure
mechanism for payment upon fulfillment of contractual
obligations.
 A bank is substituted for the buyer as the source of payment
for goods or services exported.
 The issuing bank undertakes to make payment, provided all
the terms and conditions stipulated in the LC are complied
with.

gNBC
Letters of Credit
 Why an exporter should insist on LC as a payment
term?
 Financing opportunities, such as pre-shipment finance secured
by a LC and/or discounting of accepted drafts drawn under LC,
are available in many countries.
 Bank expertise is made available to help complete trade
transactions successfully.
 Payment for the goods shipped can be remitted to your own
bank or a bank of your choice.

gNBC
Letters of Credit
 How it is beneficial to the importer?
 Payment will only be made to the seller when the terms and
conditions of the letter of credit are complied with.
 The importer can control the shipping dates for the goods
being purchased.
 Cash resources are not tied up.

gNBC
Letters of Credit
 Who are the parties to the LC?
 Applicant/Buyer - on whose behalf LC is opened [importer]
 Beneficiary/Seller - in whose favour the LC is opened
[exporter]
 Opening Bank - which opens/establishes the LC
 Advising Bank - which advises the LC
 Confirming Bank - which confirms the LC
 Negotiating Bank - normally beneficiary's bank
 Reimbursing Bank - which normally maintains nostro account of
the opening bank and reimburses the negotiating bank.

gNBC
Letters of Credit
 Types of LC:
 Irrevocable LC:
• Cannot be amended or cancelled without the consent of the
issuing bank, the confirming bank, if any, and the
beneficiary.
 Confirmed Credit:
• When a confirming bank has added its confirmation by way
of an additional undertaking to make payment at the
specific request of the Issuing Bank, it becomes a confirmed
credit. All credits need not be confirmed credits.

gNBC
Letters of Credit
 Types of LC:
 Unconfirmed credit:
An unconfirmed LC is one to which the bank does not add its
confirmation, and thereby, does not accept liability to make
payment under the LC.
 Transferable credit:
• A LC is transferable only if the Issuing Bank expressly
designates it.
• The Beneficiary in such credit has the right to request the
nominated bank to transfer the credit in full or parts in
favour of one or more second beneficiaries if partial
shipment is permitted.

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Letters of Credit
 Types of LC:
 Back-to-Back Credit:
• In case if the exporter is not the actual manufacturer and
he gets his work done by the sub-suppliers and if the sub-
suppliers demands LC in their favour, the exporter who has
received a letter of credit for export, approaches his
banker to establish second set of letters of credit on the
basis of the export letter of credit received by him.
• The second set of Credit opened by a bank at the request of
the exporter is known as back-to-back credit.
• The beneficiary of the original letter of credit will become
the applicant for the second set of credit.

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Letters of Credit
 Types of LC:
 Revolving Credit:
• In a Revolving Credit the amount of drawing is re-instated
and made available to the beneficiary again unto the
agreed period of time on notification of payment by the
applicant or merely on submission of documents.
• The maximum value and period unto that the Credit can be
revolved will be specified in the Revolving Credit.
• The re-instatement clause and the maximum amount of
drawings under the credit should always be incorporated in
Revolving credit.

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Letters of Credit
 Types of LC:
 Deferred Payment Credits and Acceptance Credits:
Under Deferred Payment Credit the amount is payable in
installments for a stipulated longer period. Usually a part is
paid in advance and the balance is payable in agreed
installments in terms of conditions of the LC.

gNBC
Letters of Credit
 STANDBY LETTER OF CREDIT:
 Standby credit is payable only on default of the buyer.
 Undertaking of the bank will specifically commit payment only
in case of the default of the buyer. It can be treated as a
guarantee for payment only in case the buyer fails to pay.
 Standby credits are useful not only in trade related
transactions but in any of transactions where there is a
possibility of default like loan repayment.

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Procedure
 Buyer and seller agree to conduct business. The seller
wants a letter of credit to guarantee payment.
 Buyer applies to his bank for a letter of credit in favor
of the seller.
 Buyer's bank approves the credit risk of the buyer,
issues and forwards the credit to its correspondent bank
(advising or confirming). The correspondent bank is
usually located in the same geographical location as the
seller (beneficiary).

gNBC
Procedure
 Advising bank will authenticate the credit and forward the original
credit to the seller (beneficiary).
 Seller (beneficiary) ships the goods, then verifies and develops the
documentary requirements to support the letter of credit.
Documentary requirements may vary greatly depending on the
perceived risk involved in dealing with a particular company.
 Seller presents the required documents to the advising or
confirming bank to be processed for payment.
 Advising or confirming bank examines the documents for
compliance with the terms and conditions of the letter of credit.

gNBC
Procedure
 If the documents are correct, the advising or confirming bank will
claim the funds by:
 Debiting the account of the issuing bank.
 Waiting until the issuing bank remits, after receiving the documents.
 Reimburse on another bank as required in the credit.
 Advising or confirming bank will forward the documents to the
issuing bank.
 Issuing bank will examine the documents for compliance. If they
are in order, the issuing bank will debit the buyer's account.
 Issuing bank then forwards the documents to the buyer.

gNBC
Important Tips to the Exporter
 Upon receipt of the letter of credit, the credit professional should
review all items carefully to insure that what is expected of the
seller is fully understood and that he can comply with all the terms
and conditions. When compliance is in question, the buyer should
be requested to amend the credit.
 Communicate with your customers in detail before they apply for
letters of credit.
 Consider whether a confirmed letter of credit is needed.
 Ask for a copy of the application to be fax to you, so you can
check for terms or conditions that may cause you problems in
compliance.

gNBC
Important Tips to the Exporter
 Upon first advice of the letter of credit, check that all its terms
and conditions can be complied with within the prescribed time
limits.
 Many presentations of documents run into problems with time-
limits. You must be aware of at least three time constraints - the
expiration date of the credit, the latest shipping date and the
maximum time allowed between dispatch and presentation.
 If the letter of credit calls for documents supplied by third parties,
make reasonable allowance for the time this may take to
complete.
 After dispatch of the goods, check all the documents both against
the terms of the credit and against each other for internal
consistency.

gNBC
Sr.
No.
Particulars Amount in Rs.
1 Basic Cost (A) AV 100.00
2 Basic Customs Duty (B) 10.00
(A + B) = C 110.00
3 Rate of Excise (CVD) (a) 15.4
4 Rate of Education cess 2% on CVD (b) 0.308
Rate of High & Sec. Edu. Cess 1% on CVD (b1) 0.154
5 Rate of Excise cess (Additional Duty) (a+b+b1) =D 15.862
(C+D) Total 125.862
6 Total Customs Duty 25.862
7 Edu. Cess 2% on Total Customs Duty 0.51724
8 Higher & Sec. Cess @ 1% on Total Customs Duty 0.25862
9 Total Customs Duty Incl. Cess 26.63786
10 126.63786
11 Additional Customs Duty @4% 5.0655144
12 Grand DutyTotal After Adding Cus. Duty @ 4% 31.7033

List of Customs Rules and
Regulations

gNBC
List of main Acts, Rules and
Regulations under Customs
 CUSTOMS ACT, 1962
 CUSTOMS TARIFF ACT, 1975
 COMPUTERS (ADDITIONAL DUTY) RULES, 2004
 CUSTOMS (IMPORT OF GOODS AT CONCESSIONAL RATE OF DUTY
FOR MANUFACTURE OF EXCISABLE GOODS) RULES, 1996
 RE-EXPORT OF IMPORTED GOODS (DRAWBACK OF CUSTOMS DUTIES)
RULES, 1995
 CUSTOMS (PROVISIONAL DUTY ASSESSMENT) REGULATIONS, 1963
 CUSTOMS AND CENTRAL EXCISE DUTIES DRAWBACK RULES, 1995
 CEGAT (COUNTERVAILING DUTY AND ANTI-DUMPING DUTY)
PROCEDURE RULES, 1996
 BILL OF ENTRY (FORMS) REGULATIONS, 1976
 BILL OF ENTRY (ELECTRONIC DECLARATION) REGULATIONS, 1995
 UNCLEARED GOODS (BILL OF ENTRY) REGULATIONS, 1972

gNBC
List of main Acts, Rules and
Regulations under Customs
 COURIER IMPORTS AND EXPORTS (CLEARANCE) REGULATIONS, 1998
 CUSTOMS HOUSE AGENTS LICENSING REGULATIONS, 2004
 CUSTOMS REFUND APPLICATION (FORM) REGULATIONS, 1995
 CUSTOMS VALUATION (DETERMINATION OF PRICE OF IMPORTED
GOODS) RULES, 1988
 BAGGAGE RULES, 1998
 PROJECT IMPORTS REGULATIONS,1986
 CUSTOMS (ADVANCE RULINGS) RULES, 2002
 IMPORT MANIFEST (AIRCRAFT) REGULATIONS, 1976
 IMPORT MANIFEST (VESSELS) REGULATIONS, 1971
 CUSTOMS (SETTLEMENT OF CASES) RULES, 1999

gNBC
Import General Manifest
 Import General Manifest-Important Document
 To get an entry inward the Master of the Vessel or his agent is
required to submit to the proper officer in the Custom House a
document called ‘Import General Manifest’ or ‘Import
Manifest’ in a prescribed form.
 The manifest is nothing more than a list of all goods carried on
board including those meant for other ports in India or abroad
with all details like number of packages, marks and numbers,
description of the goods and the importer’s name. Except with
the permission of the proper officer, no import goods can be
unloaded at any Customs Station unless they are mentioned in
the aforesaid import manifest for being unloaded at that
Customs Station.

gNBC
Import Procedure – EDI
Submission of declarations in electronic format
containing all the relevant information
to the Service Centre of Customs House.
A signed paper copy of the declaration is taken by
the service centre operator
for non-repudiability of the declaration.
Continues….

gNBC
A checklist is generated for verification of
data by the importer/CHA.
After verification, the data is submitted to the system by the
Service Centre Operator and system then generates
a B/E Number, which is endorsed on the printed checklist
and returned to the importer/CHA.
No original documents are taken at this stage.
Continues….

gNBC
Assessing officer in the Appraising Group will scrutinize
various aspects of clearance such as classification, description of
Goods, valuation, duty liability etc.
In case assessing officer needs any clarification he raises query,
which is printed at the service centre and importer has to reply
such queries through service centre.
Continues….

gNBC
After assessment, a copy of assessed B/E is printed in the Service
Centre. Under EDI, documents are normally examined at the time of
examination of the goods. Final bill of entry is
printed after ‘out of charge’ is given by the Custom Officer.

gNBC
 Examination of Goods:
 In case the importer does not have complete information with
him at the time of import, he may request for examination of
the goods before assessing the duty liability. This is called First
Appraisement.
 The goods are examined subsequent to assessment and
payment of duty. This is called Second Appraisement.
 Examination is normally done on random basis.

gNBC
 Examination of Goods
 Under the EDI system, the bill of entry, after assessment by
the group or first appraisement, as the case may be, need
to be presented at the counter for registration for
examination in the import shed.
 A declaration for correctness of entries and genuineness of
the original documents needs to be made at this stage.
 After registration, the B/E is passed on to the shed
Appraiser for examination of the goods.

gNBC
 Examination of Goods:
 Along-with the B/E, the CHA is to present all the necessary
documents. After completing examination of the goods, the Shed
Appraiser enters the report in System and transfers first
appraisement B/E to the group and gives 'out of charge' in case of
already assessed B/E.
 Thereupon, the system prints Bill of Entry and order of clearance (in
triplicate).
 All these copies carry the examination report, order of clearance
number and name of Shed Appraiser. The two copies each of B/E and
the order are to be returned to the CHA/Importer, after the
Appraiser signs them. One copy of the order is attached to the
Customs copy of B/E and retained by the Shed Appraiser.

gNBC
Checklist
 While filing of Bill of Entry, one must always comply with following
details:
 HS Code – proper classification
 Declarations
 Valuation as per CUSTOMS VALUATION (DETERMINATION OF
PRICE OF IMPORTED GOODS) RULES, 1988
 Authorisation No. & Date
 Customs Notifications No. & Date
 Rate of Duty and Duty calculations
 Foreign Exchange Rate
 Country of Origin
 IGM No. & Date
 Container No.

gNBC
Types of ARE form and their relevance
Original copy of ARE - [White]
 Original copy is to be sent with the Cargo for signature of
Customs Authorities.
 The same is to be received back from Customs after their
signatures.
 Main original document - considered by Excise Authorities for
sanctioning the rebate claim, because this is the only original
document signed by customs all other documents are the copies
only .

gNBC
Duplicate copy of ARE – [Buff]
 To be sent with the Cargo for signature of Customs
Authorities and is to be received back.
 It is received in Sealed cover from Customs, required to
be submitted to Excise at the time of Rebate Claim.

gNBC
Triplicate copy of ARE – [Pink]
 It is to be sent to the officer to whom Excise rebate is to
be filed (generally the division office of Excise who has
Authority to sanction rebate) either by post or by handing
over to exporter in tamper proof sealed cover.
 Generally Range Inspector asks exporter to keep it safe
and submit together with the rebate claim application.

gNBC
Quadruplicate copy of ARE – [Green]
 Retained by excise officers at range office, generally
retained by them when they come for sealing of Export
Cargo.

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Quintuplicate copy of ARE – [Blue]
 Earlier it was required to be submitted to DGFT for the
claim of Export Benefit, Since the pre-audit is no more
required, this copy is not to be submitted any where, can
be retained by Exporter for their own records.

gNBCClearance of Export Cargo under Excise Supervision
Excise invoice is to be made in terms of Rule 11 of the CE
Rules, 2002
Application in Form ARE-1
Intimation to Excise before 24 hrs or less as agreed
Contd………

gNBC
Clearance of Export Cargo under Excise Supervision
Export Documents to be sent along with the Cargo :
• Invoice
• Packing List
• Excise Invoice
• SDF Form
• Shipper’s Declaration Form
• Inspection Certificate / Test Report
• Export Licence if any
• Copy Of Export Contract / Letter of Credit / Export Order
• ARE-1 ( 4 Copies )
(Mentioning LUT reference no. if cleared under LUT/ or RG
entry no. if duty is debited)
Contd………

gNBC
Clearance of Export Cargo under Excise Supervision
Physical Inspection of container by Excise Superintendent & Inspector
or under specific Circumstances, only inspector can also sign the
documents under specific permission of AC/DC of Central Excise:
They emphasize on the following points:
• Goods are Exportable in accordance of law (not prohibited or
restricted for Exports )
• Check for the identity of Goods
• Verify the Quantity being Exported, is properly accounted in Daily
Stock Register [DSR]
• Assess duty (paid/payable)
• Verify Duty Exemption Scheme and check for correct Licence No.
• For FCL they Check for Container No. and Seal No. on the
documents and put Bottle Seal / One time lock on the Container.
• For LCL they use wire & Lead Seals for Sealing
• Monitor loading of Cargo
Contd………

gNBC
Clearance of Export Cargo
Under Excise
Supervision
Self Sealing by the
Manufacturer
Exporter
Obtain Factory stuffing
permission from Customs, if
factory is located at more than
one places combined permission
can be obtained with the
endorsement of factory
addresses.
Copy of the permission is
forwarded to the respective
Excise Authorities having the
Jurisdiction.
Obtain permission from Excise
Authorities having the
Jurisdiction.

gNBC
Registration Formalities at customs if claiming Export
benefits under FTP
Exporter has to register the Authorisation / Licences with
Customs for the following schemes :
1) Advance Authorisation
2) EPCG Licence
Bulletin – It is verification of Signatures of Authorised persons
at DGFT who has issued the Licence / Authorisation.
Details of Licence to be registered in the EDI system, so that
it reflects the same at the time of generation of Shipping
bill.

gNBC
Clearance of Export Cargo by Self-Sealing
Contd………
Authority – Owner, Working Partner, Managing Director or
the company secretary, or a person who is permanent
employee of the company and holding reasonably high
position authorised by the Owner/working partner/ Board
of Director has Authority to certify the Export Documents
and Seal the Cargo

gNBC
Contd………
Key Points to remember while certifying such documents & loading
of Export Cargo:
• Valid Authority letter
• To check description of goods
• Verify whether the Quantity being Exported is properly accounted
in DSR.
• If cleared against LUT, check for the validity of the same
• If under Duty Exemption Scheme check for correct Licence No.
• Consumption Register [Appendix-23] is maintained and proper
accounting of duty free material has been done.
• For FCL Excise Authorities check for Container No. and Seal No. on
the documents and put Bottle Seal / One time lock on the
Container.
• For LCL Excise Authorities use Wire & Lead Seals for Sealing
• Monitor the loading of Cargo

gNBC
Contd………
All export documents are to be sent along with the cargo for custom
clearance, similar to loading of cargo under excise supervision.
Only difference here will be that documents will not be certified by
the Excise Superintendent, hence there is chance of opening the
container at the port by Custom Authorities.
Once the cargo is moved to port exporter has to send the relevant
documents together with Third & Forth copy of ARE to the Excise
Superintendent or Inspector having jurisdiction over the Factory
within 24 hours of removal of goods.

gNBC
Clearance of Export Cargo by Self Sealing
Excise Inspector shall verify the correctness of documents, if he is
satisfied, will endorse his signatures on the ARE and forward Third
copy to the officer with whom rebate claim is to be filled either by
post or by handing over to the exporter in the temper proof sealed
cover.

gNBC
Customs Clearance of Export Cargo
Processing Of Shipping Bill .
Draft of Shipping Bill is known as Checklist of Shipping Bill
(Familiar word in Customs), this can be done much prior to
the physical movement of cargo from the Factory gate.
Timely generation of Checklist helps avoid the problems.
Following are the documents required by CHA at this stage:
1) Invoice
2) Packing List
Contd………

gNBC
Arrival of Cargo at the Container Yard of the Shipping Line:
CHA has to do proper planning for the target vessel, check for the Cut
off time and accordingly advice the exporter to load the cargo.
Before the Cargo leaves from factory gate, CHA should take the
Container No. & Bottle Seal No. CHA has to punch these two particulars
to generate the Shipping bill No.
By the time cargo reaches at the Port Gate CHA should be ready with
the Shipping Bill (not the Checklist).
If the shipping bill is ready at the time cargo reaches at port gate, CHA
can immediately let the cargo get into the container yard of the
shipping liner.
This can avoid demurrage/ detention of trailor and additional cost of
Buffer yard.
Contd………

gNBC
CHA receives the following Export Documents along with the Cargo:
• Invoice
• Packing List
• Excise Invoice
• Shipping Bill (Exchange Control Copy )
• SDF Form
• Shippers Declaration Form
• Inspection Certificate / Test Report
• Export Licence if any
• ARE (Original – White & Duplicate - Buff colored) (Mentioning LUT
reference no. if cleared under LUT/ or RG entry no if duty is debited)
• Copy Of Export Contract / Letter of Credit / Export Order
• Customs generally is not much bothered about last two points
Contd………

gNBC
Customs Appraiser, examines the export documents, particularly the
Shipping bill & ARE
Contd………
Cargo cleared form
factory under Excise
supervision :
Customs Appraiser
normally check for
Signature of Excise
superintendent / Inspector
and confirms the Container
no. and bottle seal no. on
the Shipping Bill & ARE. As
all other aspects has
already been checked by
Excise.
Cargo Cleared from factory
under Self-Sealing:
Customs appraiser makes an
endorsement of examination
indicating the extent of
examination necessary at
docks.

gNBC
Customs officer makes endorsement of the Examination order and
instructs for the payment of Export Duty / Cess (If Applicable).
Contd………
Once appraiser approves the Shipping bill, CHA approaches to Port
Authorities for Carting order, given by the Superintendent of Port
Trust.
CHA approaches docks appraiser for physical examination of cargo.
CHA has to present all export documents. Physical verification is done
as per Examination report of Customs Appraiser.
Customs examiner if satisfied records manually on the shipping bill as
well as in the System and passes LET EXPORT ORDER. For the purpose
of claim of Export benefits like Excise rebate Claim, the date on which
LET EXPORT ORDER is passed is known as date of Exports.

gNBC
CHA has to further approach to Preventive Officer, if he finds
everything in order will pass ‘LET SHIP ORDER’
Contd………
Physical Loading of Cargo at docks takes place after obtaining ‘LET
SHIP ORDER’, and Bill of Lading can be issued by the shipping liner on
the same day when the Vessel is sailed.
After the Vessel is sailed respective shipping company has to file EGM
(Export General Manifest) with the Customs maximum within 7 days of
sailing the vessel.
EGM is a container-wise/shipper-wise/Shipping Bill no.-wise list of
cargo loaded into a particular vessel. CHA can obtain a copy of EGM
from the System.

gNBC
Contd………
CHA gets the Mate Receipt only after the EGM is filed with Customs. CHA has to
again approach to the Customs Appraiser with all export documents together
with Mate Receipt & the copy of EGM for his signatures on the following
documents :
EP copy of the shipping bill – Required for DGFT as proof of completion of
Export Obligation.
ARE – Original (White) Copy of the shipping Bill – Required for filing the Rebate
claim to the Excise Authorities.
ARE – Duplicate (Buff) – Required for claiming Rebate claim benefit / as a proof
of Export to Excise Authorities. It is handed over by Customs in Tamper proof
sealed cover, which is to be submitted as it is to Excise Authorities.
Exporter must insist CHA to get the above said documents maximum within 30
days so as to close the Advance Authorisation and claim Export benefits like
DEPB/DFIA/Duty Drawback at DGFT & Excise Rebate Claim from Excise Dept.

gNBC
Check Sheets
While filing of Shipping bill one must
always comply following details:
 HS Code – proper classification
 Declarations
 Licence No. & Date
 Customs Notifications No. & Date
 Terms of Payment
 Foreign Exchange Rate
 Country of Origin

Various Export Promotion
Schemes

gNBC
Export House
 Export Performance based
Scheme.
 Merchant, Manufacturer, Service
Provider, EOUs, EHTPs, STPs,
BTPs, SEZs, AEZs can apply for Star
Export House Certificate.
 The applicant has to make
application depending on his total
FOB/FOR export performance
during the current plus the
previous three years (taken
together) upon exceeding limit
[given in the table at right].
 For Export House (EH) Status,
export Performance is necessary in
at least two out of four years (i.e.,
Current plus previous three
years).” The criteria is

gNBC
Export House
 A Status Holder shall be eligible for the following
facilities:
 Authorisation and Customs clearances for both imports
and exports on self-declaration basis;
 Fixation of Input-Output norms on priority within 60 days;
 Exemption from compulsory negotiation of documents
through banks. Remittance / Receipts, however, would
be received through banking channels;
 100% retention of foreign exchange in EEFC account;
Contd……

gNBC
Export House
 Enhancement in normal repatriation period from 180 days
to 360 days;
 Exemption from furnishing of BG in Schemes under FTP;
and
 SEHs and above shall be permitted to establish Export
Warehouses, as per DoR guidelines.
Maintenance of Accounts:
 True and proper account of exports and imports are to be
maintained during the validity period and three years
thereafter.

gNBC
Focus Market Scheme [FMS]
 Introduced in the Foreign Trade Policy 2006-2007
[Annual Updation].
 Export of all products to the notified countries.
 Entitlement – 2.5% of the FOB value of exports.
 List of Countries eligible for benefit under this scheme
is given in Appendix 37C of HBP Vol.I.
 In the annual updation of the FTP, 16 new countries
have been notified.

Duty Exemption/
Remission Scheme

gNBC
Duty Exemption/Remission Scheme
Exemption from payment
of duty on inputs-prior or
after to Exports/
Deemed Exports
Remission of duty on inputs -
Post-Exports by way of
Duty Credit Entitlement
DEPB Scheme
Adv. Autho./DFIA for
1) Phy. Exports
2) Deemed Exports
Annual Adv. Autho.
1) Phy. Exports
2) Deemed Exports
Duty Drawback

gNBC
Duty Exemption Scheme
The Duty Exemption Scheme enables duty free
import of inputs required for export production.
Duty Exemption Scheme consists of:
 Advance Authorisation Scheme
 Duty Free Import Authorisation Scheme [DFIA]

gNBC
Duty Exemption Scheme
 The facility of Advance Authorisation entitles exporter to
import required inputs for export production without payment
of duty subject to export obligation to be completed within
prescribed time. This scheme reduces burden of customs
duties on the inputs and thereby facilitates cost-
competitiveness.
 The facility of newly introduced Duty Free Import Authorisation
entitles exporter to avail the benefit of duty free import of
inputs plus transferability after the exports have been
completed.
The Scheme has been operationalized by issue of Customs Ntfn
No. 40-Cus. Dtd. 01.05.2006.

gNBC
Advance Authorisation
 SION/Adhoc Norm: Ratio of input and output which
permit allowable wastages – mainly related to
production process.
 Wastage: Recoverable/Non-recoverable – effect of
wastage in fixing of norms.
 Value addition: Positive Value Addition – Value addition
is a concept where it is expected that the exports
against Advance Authorisation should result in
additional earning of foreign exchange.

gNBC
 Exemption from payment of
 Basic Customs Duty
 Additional Customs Duty
 Education Cess
 Anti-dumping Duty if any
 Safeguard Duty if any

gNBC
 Advance Authorisation can be issued either to a
manufacturer exporter or merchant exporter tied to
supporting manufacturer(s):
i) for Physical exports (including exports to SEZ);
and/or
ii) for Intermediate supplies; and /or
iii) for deemed exports
iv) supply of ship stores on board of the foreign going
vessel/aircraft subject to the condition that there is
specific SION in respect of the item(s) supplied.
 Subject to actual user condition

gNBC
 Transferability:
 Advance Authorisation and/or materials imported there
under will be with actual user condition.
 It will not be transferable even after completion of
export obligation.

gNBC
 Export Obligation [EO]:
 EO is imposed to Safeguard Revenue foregone by way of giving
exemption.
 Two limiting factors – Quantity and Value.
 To be fulfilled in 24 months
 Any shortfall is required to be regularized by paying applicable
duty plus interest on unutilised inputs and penalty if any.
 Import Entitlement:
 Limited by Quantity and Value.
 Import is to be completed in 24 months.
 Actual User Condition applied.

gNBC
 Port of Registration:
 To facilitate accounting of duty exempted.
 Authorisation need to be registered at the specified port
 The authorisation holder is permitted to import only through
registered port unless permission [TRA] is taken from the
Customs Authority.
 Exports can take place from any port.
 Port of registration is specified in Para 4.19 of the HBP.

gNBC
 Enhancement or Reduction in the Authorisation Value:
 The reason of
• Enhancement – sudden increase in export order
• Reduction - Export order may get cancelled
 Provision is made for enhancement or reduction on pro-rata basis
 Extension of Export Obligation Period [EOP]:
 The period of fulfillment of export obligation under an Advance
Authorisation will commence from the authorisation issue date.
Contd……

gNBC
 Extension of Export Obligation Period [EOP]:
 1st Extension for 6 months – subject to payment of composition
fees of 2% of the duty saved on all the unutilized imported items
as per authorisation.
 2nd Extension for 6 months – subject to payment of composition
fees of 5% of the duty based on all unutilized imported items as
per Authorisation.

gNBC
 Revalidation:
 Only one revalidation of 6 months is allowed
 Fulfillment of Export Obligation:
 Export obligation is to be fulfilled by the Advance Authorisation
Holder.
 Once the export obligation is fulfilled in terms of value and
quantity both, the licence holder needs to submit documents as
per ANF 4F of Handbook of Procedures Vol.I (HBP) in support of
having fulfilled the EO.
Contd…..

gNBC
 Redemption:
 In case the export obligation has been fulfilled, the Regional
Authority will redeem the case.
 After redemption, the Regional Authority will forward a copy of the
redemption letter to the Customs Authority at the port of
registration.
 Discharge of BG/LUT:
Before discharging BG/LUT,
• in case of physical exports, Customs will verify all the details as
given in Redemption Letter as per their records.
• in case of intermediate supplies and deemed exports, Customs
will verify details of supplies from the Central Excise
Authority/Bond Officer.
 After verification, Customs will discharge BG/LUT within 30 days of
issuance of EODC/bond waiver by the Regional Authority.

gNBC
 Penalty for Shortfall:
Contd…..
Situation Penalty
EO is fulfilled in terms
of Value but shortfall in
quantity
A. Customs duty on unutilized imported
material along with interest as notified.
B. If the unutilized material is restricted for
imports as per ITC(HS) on the date of
imports then the Authorisation holder has
to pay an amount equivalent to 3% of CIF
value of unutilised imported material.
Authorisation holder shall also be required
to obtain a separate authorisation for
regularisation of excess imported input.
No such penalty in case of imported item is
freely permissible.

gNBC
Situation Penalty
EO is fulfilled in terms of
Quantity but shortfall in
value
A. No penalty is imposed if the licence
holder has achieved positive value
addition.
B. In case if positive value addition falls
below the minimum VA - amount equal to
1% of shortfall in FOB value in Indian
Rupee through TR in authorised branch of
Central Bank of India as above or through
EFT mode.
Contd…….

gNBC
Contd…..
Situation Penalty
EO is fulfilled in
terms of Quantity
but shortfall in
value
Value wise shortfall shall be calculated with
reference to actual quantity of exports and FOB
value of realisation with reference to prorata
quantity of imports and CIF value.
E.g. if export performance is only 50% quantity
wise but import has been for complete CIF
value permitted, then value addition would be
calculated on a prorata basis, i.e with
reference to 50% of CIF value of imports.
This would accordingly imply that where
Authorisation holder is unable to export, no
penalty on value wise shortfall shall be
imposed.

gNBC
Situation Penalty
In case where EO is not
fulfilled in terms of value
and quantity both
As per the above provisions.
Where no export and import
is done against Authorisation
Authorisation holder can cancel the
Authorisation and apply for Drawback
after obtaining permission from
Customs Authority for conversion of
DEEC Shipping bills into Drawback
Shipping Bills.

gNBC
Indigenous Procurement
 Reasons for opting out in favour of indigenous
procurement:
 Shorter delivery time
 Logistical advantages
 Financial ease (local supplier may not insist on letter of credit)
 The same material may be available at cheaper cost if the
supplier is in a position to claim benefits available under
deemed exports.
 Possibility of inspecting the cargo (since the supplier is within
the country, there is comparative ease to inspect the cargo)
 Indigenous procurement is free of currency risk since payment
can be made in Indian Rupees.

gNBC
Indigenous Procurement
Instruments:
 Advance Authorisation [for Intermediate Supplies]
 Advance Authorisation [for Deemed Exports]
 Advance Release Order
 Back-to-Back Letter of Credit

gNBC
Maintenance of Proper Account -
CONSUMPTION REGISTER
 True and proper account of consumption and utilisation of duty
free imported / domestically procured goods against each
authorisation is to be maintained as prescribed in Appendix-23.
 These records in Appendix 23 are mandatory to be submitted
for authorisations issued on or after 13-05-2005.
 Records is to be preserved for a period of atleast 3 years from
the date of redemption.
Ref: Public Notice No. 08/2005 (RE) dtd. 13.05.2005

gNBC
Other Provisions
 Fixation of Norms:
 Where SION for export product is not fixed, advance
authorisation can be obtained on self-declaration basis.
 The norms are fixed by Norms Committee [based on Chartered
Engineer’s certificate] with or without modification.
 In case where Norms Committee has already ratified norms for
same export and import products in respect of an Authorisation
obtained under paragraph 4.7, the RA will issue Authorisation
under ‘Ad hoc Norms fixed’ category.

gNBC
Other Provisions
 Standardisation of Norms:
 Norms are fixed by Norms Committee and circulated to
industry by way of public notice.
 Standard norms are applicable to entire industry.
 Such norms are fixed normally when atleast three applications
are received from different entities for the same export
product.
 Such norms are fixed on an average wastage basis.
 However, the authorisation holder has to account for actual
consumption.

gNBC
Other Provisions
 Modification of Norms:
 Authorisation Holder can modify the existing SION.
 The reasons for modifications are
• Due to inclusion of inputs not available under SION.
• Difference in Consumption ratio – more/less wastages.
• Due to greater efficiency in the manufacturing process.
• Where manufacturing is possible by using alternate inputs.

gNBC
Other Provisions
 Facility of Clubbing:
 The facility of clubbing shall be available only for
redemption/regularisation of the cases.
 No further import or export is allowed.
 For this facility, authorisations are required to have been
issued under similar Customs notification even pertaining to
different financial years.
 However in case of authorisations issued in 2004-09 period,
Advance Authorisations of different customs notification can be
clubbed.

gNBC
Advance Authorisation for Annual
Requirement
 Advance Authorisation can also be issued on the basis of
annual requirement for physical exports, intermediate
supplies and / or deemed exports.

gNBC
Advance Authorisation for Annual
Requirement
 The entitlement in terms of CIF value of imports under
this scheme is upto 300% of the FOB value of physical
export and / or FOR value of deemed export in the
preceding licensing year or Rs 1 crore, whichever is
higher.
 Advance Authorisation can be issued with a positive
value addition.
 Validity : 24 months. One revalidation for six months is
granted.
 Extension of Export Obligation : Same as Advance
Authorisation.

gNBC
Corresponding Customs
Notifications
 91/2004-CUSTOMS dated 10th September, 2004 -
Advance Authorisation for deemed export
Advance Authorisation for Annual Requirement

Duty Free Import
Authorisation

gNBC
Duty Free Import Authorisation
 New instrument to replace DFRC scheme introduced in
the Foreign Trade Policy 2006-2007 [Annual Updation].
 Import of duty free inputs subject to export obligation.
 Minimum Value Addition required – 20%
 Material imported under the Authorisation and
Authorisation itself is transferable once export
obligation has been fulfilled and the case is redeemed
by Customs Authority.

gNBC
Duty Free Import Authorisation
 Once transferability is endorsed, imports against
authorisation or transfer of imported inputs shall be
subject to payment of applicable additional customs
duty / excise duty.
 Such additional customs duty / excise duty would be
reimbursed to exporter as drawback.
 In case of local sales by excisable unit, CENVAT credit
would equal excise duty already paid.
 CENVAT credit facility shall be available for inputs
either imported or procured indigenously.
 Corresponding Customs Notification - 40/2006-CUSTOMS
dated 1st
May, 2006.

gNBC
Corresponding Customs Notification
 40/2006-CUSTOMS dated 1st
May, 2006.

gNBC
Comparison between Advance
Authorisation and DFIA
Advance Authorisation DFIA
Non-transferable instrument. Transferable instrument after
fulfillment of 100% EO and
redemption is obtained.
Positive Value Addition. 20% Value Addition.
Cenvat can be claimed. Controversies related to Cenvat-
particularly for DFIAs issued upto
31.03.2007.
Application can be made for
existed SION or for Adhoc norms.
Application can be made on the
basis of existed SION only.
Subject to Actual User Condition. Subject to Actual User Condition
till EO is discharged 100% and
redemption obtained.

gNBC
Duty Remission Scheme
 The Duty Remission Scheme enables post export
replenishment/ remission of duty on inputs used in the
export product.
 Duty Remission scheme consist of:
(a) Duty Entitlement Passbook Scheme [DEPB].
(b ) Duty Drawback Scheme
 Earlier DFRC Scheme is now discontinued w.e.f.
01.05.2006.

gNBC
Duty Remission Scheme
DEPB is towards neutralization of basic customs duty on
the inputs. DEPB, per se, is duty credit instrument and
therefore allows import of any permissible input
irrespective of the fact whether the same input has
been utilized in the export product or not. DEPB is,
therefore, more flexible in nature.
Both DEPB are transferable instruments and hence they
are equally easy to operate.

Duty Entitlement
Passbook Scheme

gNBC
Duty Entitlement Passbook Scheme
[DEPB]
 Objective of DEPB is to neutralize incidence of customs
duty on import content of export product.
 Component of Special Additional Duty and customs duty
on fuel shall also be allowed under DEPB (as a brand
rate) in case of non-availment of CENVAT credit.
 Credit may be utilized for payment of Customs Duty on
freely importable items.
 The DEPB is valid for a period of 24 months.

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