288 33 Powerpoint Slides Chapter 18 International Trade Procedures Documentation

Copyright @ Oxford University Press Copyright @ Oxford University Press International Business R. M. JoshiInternational Business R. M. Joshi

Chapter 18: International Trade Procedures Chapter 18: International Trade Procedures and Documentationand Documentation

International BusinessInternational Business

Rakesh Mohan Joshi Rakesh Mohan Joshi

Professor & Chairperson, IIFT New DelhiProfessor & Chairperson, IIFT New Delhi

1



INTERNATIONAL TRADE INTERNATIONAL TRADE

PROCEDURES AND PROCEDURES AND

DOCUMENTATIONDOCUMENTATION

Chapter 18



Learning ObjectivesLearning Objectives

To outline the framework of international To outline the framework of international trade transactionstrade transactions

To elucidate the export-import proceduresTo elucidate the export-import procedures To explain the INCOTERMSTo explain the INCOTERMS To explicate the significance of To explicate the significance of

documentation in international trade documentation in international trade transactionstransactions

To discuss commercial and regulatory To discuss commercial and regulatory documents used in international tradedocuments used in international trade



Significance of International Trade Significance of International Trade Procedures & DocumentationProcedures & Documentation

Over a period of time, international trade Over a period of time, international trade transactions evolved a customary and transactions evolved a customary and regulatory framework so as to facilitate regulatory framework so as to facilitate smooth flow of cargo from exporter to smooth flow of cargo from exporter to importer and ensure receipt of payment from importer and ensure receipt of payment from the importer. In order to carry out cross-the importer. In order to carry out cross-country trade, a certain set of procedures are country trade, a certain set of procedures are followed with a wide range of documents. followed with a wide range of documents.



Export-Import ProceduresExport-Import Procedures Compliance with Legal Compliance with Legal

Framework Framework Concluding an export dealConcluding an export deal Arranging Export Finance Arranging Export Finance Procuring or Procuring or

Manufacturing of GoodsManufacturing of Goods Pre-shipment Inspection Pre-shipment Inspection Central Excise Clearance Central Excise Clearance

on Goods for Exports on Goods for Exports Packaging, Marking, and Packaging, Marking, and

Labeling of GoodsLabeling of Goods Appointment of Clearing Appointment of Clearing

and Forwarding (C & F) and Forwarding (C & F) AgentsAgents

Arranging Cargo Arranging Cargo Insurance Insurance

Booking Shipping Space Booking Shipping Space Dispatch of Goods to Dispatch of Goods to

Port Port Port Procedures and Port Procedures and

Customs Clearance Customs Clearance Dispatch of Documents Dispatch of Documents

to the Exporter to the Exporter Sending Shipment Sending Shipment

Advice Advice Presentation of Presentation of

Documents at the Documents at the Negotiating BankNegotiating Bank

Claiming Export Claiming Export Incentives Incentives



Compliance with Legal FrameworkCompliance with Legal Framework

Each country has its own legal framework Each country has its own legal framework

for export import transactions which need for export import transactions which need

to be complied by those entering into to be complied by those entering into

international trade. In India, exporters are international trade. In India, exporters are

requested to:requested to: Obtaining Import Export Code NumberObtaining Import Export Code Number Registration with Sales Tax and Central Excise Registration with Sales Tax and Central Excise

AuthoritiesAuthorities Registration with Export Promotion Registration with Export Promotion

Organisation Organisation



Concluding an Export DealConcluding an Export Deal

While concluding an export deal an exporter While concluding an export deal an exporter

should negotiate the terms of the deal in should negotiate the terms of the deal in

detail, including the price, the product detail, including the price, the product

description, packaging, port of shipment, and description, packaging, port of shipment, and

delivery and payment terms. delivery and payment terms.



Process of Concluding an Export DealProcess of Concluding an Export Deal

Identify and negotiate with importerIdentify and negotiate with importer

Confirm the export dealConfirm the export deal

Receive an export contractReceive an export contract

Examine the export contract thoroughly and ask for Examine the export contract thoroughly and ask for

amendments, if anyamendments, if any

Receive letter of creditReceive letter of credit

Scrutinize the L/C thoroughly, compare with terms of Scrutinize the L/C thoroughly, compare with terms of

contract, ask for amendments, if neededcontract, ask for amendments, if needed

Receive amended letter of creditReceive amended letter of credit



Arranging Export FinanceArranging Export Finance

The exporters may avail packing credit The exporters may avail packing credit

facility from commercial banks, generally facility from commercial banks, generally

at concessional rates to meet their working at concessional rates to meet their working

capital requirements for manufacturing, capital requirements for manufacturing,

purchasing, and packaging of goods. purchasing, and packaging of goods.



Procuring or Manufacturing of GoodsProcuring or Manufacturing of Goods

After receiving the confirmed export order, the After receiving the confirmed export order, the exporting firm should make preparation for the exporting firm should make preparation for the procurement or production of goods, which procurement or production of goods, which include:include:

Send delivery note to factory/purchase departmentSend delivery note to factory/purchase departmentGoods manufactured/procuredGoods manufactured/procuredPre-shipment inspectionPre-shipment inspectionCentral excise clearanceCentral excise clearancePacking, marking or labellingPacking, marking or labellingDispatch of goods to the port Dispatch of goods to the port



Pre-shipment InspectionPre-shipment Inspection

At the time of exports before clearing the At the time of exports before clearing the

shipment, Customs authorities require shipment, Customs authorities require

submission of an inspection certificate in submission of an inspection certificate in

compliance with the rules and regulations compliance with the rules and regulations

of the exporting country regarding of the exporting country regarding

compulsory quality control and pre-compulsory quality control and pre-

shipment inspection. shipment inspection.



Central Excise Clearance on Goods for Central Excise Clearance on Goods for ExportsExports

The exports are free from the incidence of indirect taxes as The exports are free from the incidence of indirect taxes as per internationally accepted practice. Therefore, all goods per internationally accepted practice. Therefore, all goods exported from India are exempt from payment of central exported from India are exempt from payment of central excise duties for which exporters have following options: excise duties for which exporters have following options:

Export of goods under claim for excise duty rebateExport of goods under claim for excise duty rebateExport of goods under bondExport of goods under bond



Packaging, Marking, and Labeling of Packaging, Marking, and Labeling of

GoodsGoods Proper packaging of export cargo Proper packaging of export cargo

facilitates in minimizing transit and facilitates in minimizing transit and

delivery costs and losses. After packaging delivery costs and losses. After packaging

marking of the packages is done so as to marking of the packages is done so as to

facilitate identification of goods during facilitate identification of goods during

handling, transportation, and delivery. handling, transportation, and delivery.

Labelling contains detailed instructions and Labelling contains detailed instructions and

is carried out by affixing labels on the is carried out by affixing labels on the

packs or by stencils. packs or by stencils.



Appointment of C & F AgentsAppointment of C & F Agents

Services offered by C&F Agents:Services offered by C&F Agents: Advising exporters on choice of shipping routesAdvising exporters on choice of shipping routes Reservation of shipping spaceReservation of shipping space Inland transportation at portInland transportation at port Studying provisions of L/C or contract and taking Studying provisions of L/C or contract and taking

necessary action accordinglynecessary action accordingly Warehousing insuranceWarehousing insurance Port, shipping, and customs formalitiesPort, shipping, and customs formalities Arranging overseas transport serviceArranging overseas transport service Rendering assistance in filing claimsRendering assistance in filing claims Monitoring movements of goods to importerMonitoring movements of goods to importer General advisory services.General advisory services.



Arranging Cargo InsuranceArranging Cargo Insurance

The marine insurance cover is The marine insurance cover is arranged by the exporter based arranged by the exporter based on the conditions of the export on the conditions of the export contract. contract.



Booking Shipping SpaceBooking Shipping Space

The shipping space is reserved in the The shipping space is reserved in the

vessel by sending shipping instructions vessel by sending shipping instructions

either through the C&F agent or through either through the C&F agent or through

freight broker who works on behalf of the freight broker who works on behalf of the

shipping company. shipping company.



Dispatch of Goods to PortDispatch of Goods to Port

On receiving information on reservation of On receiving information on reservation of

shipping space, the production department shipping space, the production department

makes arrangements for transport of goods makes arrangements for transport of goods

to the port of shipment, either by road or to the port of shipment, either by road or

rail. The goods are generally consigned to rail. The goods are generally consigned to

the port town in the name of the C&F the port town in the name of the C&F

agent. agent.



Port Procedures and Customs Port Procedures and Customs ClearanceClearance

Exporters generally avail the services of Exporters generally avail the services of

C&F agents to comply with procedures for C&F agents to comply with procedures for

the Customs clearance and other port the Customs clearance and other port

formalities at the port town. formalities at the port town.



Dispatch of Documents to the ExporterDispatch of Documents to the Exporter

Soon after obtaining the B/L from the Soon after obtaining the B/L from the

shipping company, the C&F agent sends the shipping company, the C&F agent sends the

documents to the exporter.documents to the exporter.



Sending Shipment AdviceSending Shipment Advice

Soon after the shipment, the exporter sends a Soon after the shipment, the exporter sends a

Shipment Advice to the importer intimating the Shipment Advice to the importer intimating the

importer about the date of shipment, name of the importer about the date of shipment, name of the

vessel, and it’s ETA at the port of discharge. The vessel, and it’s ETA at the port of discharge. The

Shipment Advice is accompanied by commercial Shipment Advice is accompanied by commercial

invoice, packing list (if any), and a non-negotiable invoice, packing list (if any), and a non-negotiable

copy of B/L so as to enable the importer to take copy of B/L so as to enable the importer to take

delivery of the shipment. delivery of the shipment.



Presentation of Documents at the Presentation of Documents at the Negotiating BankNegotiating Bank

The exporter has to present the foolowing The exporter has to present the foolowing documents to the negotiating bank after the documents to the negotiating bank after the shipment:shipment:Bill of Exchange (first and second of original)Bill of Exchange (first and second of original)Commercial invoice (two or more copies as required)Commercial invoice (two or more copies as required)Full set of ‘clean on board’ B/L (all negotiable and Full set of ‘clean on board’ B/L (all negotiable and non-negotiable as required)non-negotiable as required)GR Form (Duplicate)GR Form (Duplicate)Export order/contractExport order/contractLetter of Credit (Original)Letter of Credit (Original)Packing listPacking listMarine insurance policy (two copies)Marine insurance policy (two copies)Consular and/or Customs invoice, if requiredConsular and/or Customs invoice, if requiredBank certificate (in the prescribed form)Bank certificate (in the prescribed form)



Claiming Export IncentivesClaiming Export Incentives

The exporter files claims for getting export The exporter files claims for getting export

incentives after the shipment as follows:incentives after the shipment as follows:

Claiming excise rebateClaiming excise rebate

Receiving duty drawbackReceiving duty drawback



Terms of Delivery in International Terms of Delivery in International Trade TransactionsTrade Transactions

The International Chamber of Commerce The International Chamber of Commerce

(ICC), Paris has developed the uniform (ICC), Paris has developed the uniform

rules for interpretation of International rules for interpretation of International

Commercial Terms (INCOTERMS) defining Commercial Terms (INCOTERMS) defining

the costs, risks, and obligations of buyers the costs, risks, and obligations of buyers

and sellers in international transactions.and sellers in international transactions.



INCOTERMS 2000 INCOTERMS 2000

EXW (Ex works) EXW (Ex works) named placenamed place: Any mode of : Any mode of

transport is used; seller makes goods available to transport is used; seller makes goods available to

buyer at seller’s premises or other location, not buyer at seller’s premises or other location, not

cleared for export and not loaded on a vehicle.cleared for export and not loaded on a vehicle. FCA (Free carrier) FCA (Free carrier) named placenamed place: Any mode of : Any mode of

transport used; seller delivers goods, cleared for transport used; seller delivers goods, cleared for

export, to the carrier named by the buyer at the export, to the carrier named by the buyer at the

specified place.specified place. FAS (Free alongside ship) FAS (Free alongside ship) named port of named port of

shipmentshipment: Seller delivers when the goods are : Seller delivers when the goods are

placed alongside the vessel at the named port of placed alongside the vessel at the named port of

shipment and clears the goods for export.shipment and clears the goods for export.



FOB (Free on board) FOB (Free on board) named port of shipmentnamed port of shipment: Maritime and : Maritime and

inland waterway only; seller delivers when the goods pass inland waterway only; seller delivers when the goods pass

the ship’s rail at the named port. The seller clears the the ship’s rail at the named port. The seller clears the

goods for export.goods for export. CFR (Cost and freight) CFR (Cost and freight) named port of destinationnamed port of destination: Maritime : Maritime

and inland waterway only; seller delivers when the goods and inland waterway only; seller delivers when the goods

pass the ship’s rail at the port of export and pays cost and pass the ship’s rail at the port of export and pays cost and

freight for bringing the goods to the foreign port and clears freight for bringing the goods to the foreign port and clears

the goods for export.the goods for export. CIF (Cost, insurance, and freight) CIF (Cost, insurance, and freight) named port of named port of

destination:destination: Maritime and inland waterway only; seller Maritime and inland waterway only; seller

delivers when the goods pass the ship’s rail at the port of delivers when the goods pass the ship’s rail at the port of

export and pays cost and freight for bringing the goods to export and pays cost and freight for bringing the goods to

the foreign port, obtains insurance against the buyer’s risk the foreign port, obtains insurance against the buyer’s risk

of loss or damage, and clears the goods for export.of loss or damage, and clears the goods for export.



CIP (Carriage and insurance paid to)CIP (Carriage and insurance paid to) named place of named place of

destination:destination: Seller delivers the goods to a carrier it nominates Seller delivers the goods to a carrier it nominates

and pays the cost of bringing the goods to the named and pays the cost of bringing the goods to the named

destination and obtains insurance against the buyer’s risk of destination and obtains insurance against the buyer’s risk of

loss or damage during carriage and clears the goods for loss or damage during carriage and clears the goods for

export.export. CPT (Carriage paid to)CPT (Carriage paid to) named place of destination: named place of destination: Any mode Any mode

of transport; seller delivers goods to carrier it nominates and of transport; seller delivers goods to carrier it nominates and

pays costs of bringing goods to the named destination and pays costs of bringing goods to the named destination and

clears the goods for export.clears the goods for export. DAF (Delivered at frontier)DAF (Delivered at frontier) named place: named place: Any mode of Any mode of

transport to a land frontier; seller delivers when goods are transport to a land frontier; seller delivers when goods are

placed at the buyer’s disposal on the ‘arriving means of placed at the buyer’s disposal on the ‘arriving means of

transport’ (not unloaded), cleared for export but not cleared transport’ (not unloaded), cleared for export but not cleared

for import before the Customs border of the destination for import before the Customs border of the destination

country.country.



DESDES (Delivered ex ship) (Delivered ex ship) named port of destination: named port of destination: Maritime Maritime

and inland waterway only; seller delivers when goods are at and inland waterway only; seller delivers when goods are at

the buyer’s disposal on board the ship not cleared for import. the buyer’s disposal on board the ship not cleared for import.

The buyer pays discharging costs.The buyer pays discharging costs.

DEQDEQ (Delivered quay) (Delivered quay) name port of destination:name port of destination: Maritime and Maritime and

inland waterway only; seller delivers when the goods are inland waterway only; seller delivers when the goods are

placed at the buyer’s disposal, not cleared for import, on the placed at the buyer’s disposal, not cleared for import, on the

dock (quay) at the named port of destination and pays dock (quay) at the named port of destination and pays

discharging costs, but the buyer pays for import clearance.discharging costs, but the buyer pays for import clearance.

DDUDDU (Delivered duty unpaid) (Delivered duty unpaid) named place of destination: named place of destination:

Any mode of transport, seller delivers the goods to the buyer Any mode of transport, seller delivers the goods to the buyer

not cleared for import and not unloaded from the arriving not cleared for import and not unloaded from the arriving

means of transport at the named destination, but the buyer is means of transport at the named destination, but the buyer is

responsible for all import clearance formalities and costs.responsible for all import clearance formalities and costs.



DDP (Delivered duty paid) DDP (Delivered duty paid) named place of destination:named place of destination:

Any mode of transport; seller delivers goods to the Any mode of transport; seller delivers goods to the

buyer, cleared for import (including import licence, buyer, cleared for import (including import licence,

duties, and taxes) but not unloaded from the means of duties, and taxes) but not unloaded from the means of

transport.transport.



Documentation for International Documentation for International Trade TransactionsTrade Transactions

Trade documentation is considered a critical Trade documentation is considered a critical

constituent of international sales as export constituent of international sales as export

transactions involve much complex documentation transactions involve much complex documentation

work. It facilitates international transactions, work. It facilitates international transactions,

protecting interest of exporters and importers located protecting interest of exporters and importers located

in two different countries governed by different in two different countries governed by different

statutory and legislative frameworks. statutory and legislative frameworks.



Commercial DocumentsCommercial Documents

Those documents which, by customs of trade, are Those documents which, by customs of trade, are

required to be prepared and used by exporters and required to be prepared and used by exporters and

importers in discharge of their respective legal and importers in discharge of their respective legal and

other incidental responsibilities under the sales other incidental responsibilities under the sales

contract. These are required for effecting physical contract. These are required for effecting physical

transfer of goods and their title from exporter to transfer of goods and their title from exporter to

the importer and realization of exports sales the importer and realization of exports sales

proceeds. proceeds.



Commercial InvoiceCommercial Invoice

The key documents for an export transaction prepared The key documents for an export transaction prepared

by the exporter serves three main functions:by the exporter serves three main functions:

As a document of contentAs a document of content

As a seller’s billAs a seller’s bill

As apacking listAs apacking list



Packing ListPacking List

Provides details of how the goods are Provides details of how the goods are

packed, the contents of different boxes, packed, the contents of different boxes,

cartons, or bales, and details of the cartons, or bales, and details of the

weights and measurements of each weights and measurements of each

package in the consignment. It is used by package in the consignment. It is used by

the carrier while deciding on the loading of the carrier while deciding on the loading of

the consignment. the consignment.



Transport DocumentsTransport Documents

All the documents that evidence shipment of goods, All the documents that evidence shipment of goods,

are collectively known as transport documents such are collectively known as transport documents such

as: as:

Ocean (marine) bills of lading (in ocean transport),Ocean (marine) bills of lading (in ocean transport),

Way Bill or Consignment Note (for rail, road, air or Way Bill or Consignment Note (for rail, road, air or

sea transport) sea transport)

Combine or multimodal transport document (in Combine or multimodal transport document (in

multimodal transport), multimodal transport),

Receipt (in postal or courier delivery)Receipt (in postal or courier delivery)



Certificate of OriginCertificate of Origin

Used to establish evidence of origin of Used to establish evidence of origin of

goods into the importing country. It is used goods into the importing country. It is used

for deciding whether the import from the for deciding whether the import from the

country of origin is partially or completely country of origin is partially or completely

prohibited and also for deciding the prohibited and also for deciding the

liability and rate of import duty in the liability and rate of import duty in the

importing country. importing country.



Inspection CertificateInspection Certificate

In India, under the Export (Quality Control and In India, under the Export (Quality Control and

Inspection) Act 1963, it is mandatory to obtain Inspection) Act 1963, it is mandatory to obtain

an export inspection certificate for a number of an export inspection certificate for a number of

products by the notified agency such as Export products by the notified agency such as Export

Inspection Agency (EIA), BIS (Agmark), CDSCO, Inspection Agency (EIA), BIS (Agmark), CDSCO,

Tea Board, Coffee Board, etc. To ensure quality Tea Board, Coffee Board, etc. To ensure quality

of goods exported, importers often insist upon of goods exported, importers often insist upon

inspection from a nominated private agency.inspection from a nominated private agency.



Insurance Policy/CertificateInsurance Policy/Certificate

In order to provide protection to the cargo-In order to provide protection to the cargo-

owner, an insurance cover is necessary while owner, an insurance cover is necessary while

the cargo is in transit from consignor to the cargo is in transit from consignor to

consignee. Risks covered under a cargo consignee. Risks covered under a cargo

insurance policy is governed by international insurance policy is governed by international

practices.practices.



Mate’s ReceiptMate’s Receipt

On receipt of cargo on board, the master of On receipt of cargo on board, the master of

the vessel issues mate’s receipt to the port the vessel issues mate’s receipt to the port

authorities which is required by the shipping authorities which is required by the shipping

company for issuing bills of lading.company for issuing bills of lading.



Bill of Exchange (draft)Bill of Exchange (draft)

An unconditional order in writing prepared and An unconditional order in writing prepared and

signed by the exporter and addressed to the signed by the exporter and addressed to the

importer requiring the importer to pay on importer requiring the importer to pay on

demand (Sight Bill of Exchange) or at a future demand (Sight Bill of Exchange) or at a future

date (Usance Bill of Exchange) a certain sum of date (Usance Bill of Exchange) a certain sum of

money ( contract value) to the exporter or his money ( contract value) to the exporter or his

or her nominee (or endorsee). or her nominee (or endorsee).



Shipment AdviceShipment Advice

Soon after the shipment has taken place, Soon after the shipment has taken place,

the Shipment Advice is sent to the importer the Shipment Advice is sent to the importer

informing him or her of the details of the informing him or her of the details of the

shipment such as vessel or flight number, shipment such as vessel or flight number,

port of discharge and destination, export port of discharge and destination, export

order or contract number, description of order or contract number, description of

cargo, quantity, etc. cargo, quantity, etc.



Regulatory DocumentsRegulatory Documents

Those documents which are required to Those documents which are required to

fulfill the statutory requirements of both fulfill the statutory requirements of both

importing and exporting countries. These importing and exporting countries. These

documents are related to various documents are related to various

government authorities, such as the government authorities, such as the

relevant department or its principal agency relevant department or its principal agency

controlling foreign trade. controlling foreign trade.



Exchange Control Declaration FormsExchange Control Declaration Forms

Under the Foreign Exchange Management (Export Under the Foreign Exchange Management (Export

of Goods and Services) Regulations, 1999, for of Goods and Services) Regulations, 1999, for

every export taking place out of India, the every export taking place out of India, the

exporter has to submit an exchange control exporter has to submit an exchange control

declaration form in the prescribed format such as declaration form in the prescribed format such as

:: GR formGR form SDF form SDF form PP formPP form SOFTEX SOFTEX



Shipping Bill/Bill of ExportShipping Bill/Bill of Export

It is the main document required by the It is the main document required by the

customs authorities which mentions the customs authorities which mentions the

description of goods, marks, numbers, description of goods, marks, numbers,

quantity, FOB value, name of the vessel or quantity, FOB value, name of the vessel or

flight number, port of loading, port of flight number, port of loading, port of

discharge, country of destination, etc. discharge, country of destination, etc.



Bill of EntryBill of Entry

It is required to get customs clearance on imported It is required to get customs clearance on imported

cargo.cargo.

Types of Bill of Entry:

Bill of Entry for home consumption (white)

Bill of Entry for warehousing (yellow)

Ex-bond Bill of Entry (green)



Documents Required for Central Excise ClearanceDocuments Required for Central Excise Clearance

Invoice Invoice

Personal ledger account (PLA)Personal ledger account (PLA)

ARE-1 (application for removal of excisable goods-ARE-1 (application for removal of excisable goods-

1) 1)

ARE-2 (application for removal of excisable goods-ARE-2 (application for removal of excisable goods-

2)2)

CT-1CT-1



Black List CertificateBlack List Certificate

Countries which have strained political Countries which have strained political relations or at war require the Black List relations or at war require the Black List Certificate as evidence thatCertificate as evidence that

The origin of goods is not from a The origin of goods is not from a particular countryparticular country

The parties involved, such as the The parties involved, such as the manufacturer, bank, insurance manufacturer, bank, insurance company, shipping line etc. are not company, shipping line etc. are not blacklisted blacklisted

The ship or aircraft would not call at The ship or aircraft would not call at ports of such country unless forced to ports of such country unless forced to do so do so



Health/Veterinary/Sanitary CertificateHealth/Veterinary/Sanitary Certificate

To ensure that imported cargo is not To ensure that imported cargo is not

contaminated by any disease or health hazard contaminated by any disease or health hazard

the importer or the importing county’s the importer or the importing county’s

customs department sometimes requires such customs department sometimes requires such

certificate for export of foodstuff, livestock, certificate for export of foodstuff, livestock,

marine products, hides and skins, etc., from marine products, hides and skins, etc., from

health, veterinary, or sanitary authoritieshealth, veterinary, or sanitary authorities

288 33 Powerpoint Slides Chapter 18 International Trade Procedures Documentation

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Transcript of 288 33 Powerpoint Slides Chapter 18 International Trade Procedures Documentation