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SUMMER INTERNSHIP REPORT – TATA INTERNATIONAL LTD., DEWAS (MADHYA PRADESH) CHAPTER 1 – INTRODUCTION 1.1 Industry Profile – Leather is a durable and flexible material created by tanning animal rawhide and skin, often cattle hide. It can be produced at manufacturing scales ranging from cottage industry to heavy industry. People use leather to make various goods—including clothing (e.g., shoes, hats, jackets, skirts, trousers, and belts), bookbinding, leather wallpaper, and as a furniture covering. It is produced in a wide variety of types and styles, decorated by a wide range of techniques. Due to its excellent resistance to abrasion and wind, leather found a use in rugged occupations. The enduring image of a cowboy in leather chaps gave way to the leather- jacketed and leather-helmeted aviator. When motorcycles were invented, some riders took to wearing heavy leather jackets to protect from road rash and wind blast; some also wear chaps or full leather pants to protect the lower body. Top- quality motorcycle leather is superior to any practical man- made fabric for abrasion protection and is still used in racing. Many sports still use leather equipment. Its flexibility facilitates forming and shaping it into balls and protective gear. Leather fetishism is the name popularly used to describe a fetishist attraction to people wearing leather, or in certain cases, to the garments themselves. Many rock groups (particularly heavy metal and punk groups in the 1980s) are well known for wearing leather clothing. Leather clothing, particularly jackets, are common in the heavy metal and Punk subculture. Extreme metal bands (especially black metal bands) and Goth rock groups have extensive leather clothing. Many cars and trucks come with optional or standard "leather" seating. These days most car manufacturers due to consideration of durability and cost 1

Transcript of ENTIRE PROJECT

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CHAPTER 1 – INTRODUCTION

1.1 Industry Profile –

Leather is a durable and flexible material created by tanning animal rawhide and skin, often cattle hide. It can be produced at manufacturing scales ranging from cottage industry to heavy industry. People use leather to make various goods—including clothing (e.g., shoes, hats, jackets, skirts, trousers, and belts), bookbinding, leather wallpaper, and as a furniture covering. It is produced in a wide variety of types and styles, decorated by a wide range of techniques.

Due to its excellent resistance to abrasion and wind, leather found a use in rugged occupations. The enduring image of a cowboy in leather chaps gave way to the leather-jacketed and leather-helmeted aviator. When motorcycles were invented, some riders took to wearing heavy leather jackets to protect from road rash and wind blast; some also wear chaps or full leather pants to protect the lower body. Top-quality motorcycle leather is superior to any practical man-made fabric for abrasion protection and is still used in racing. Many sports still use leather equipment. Its flexibility facilitates forming and shaping it into balls and protective gear. Leather fetishism is the name popularly used to describe a fetishist attraction to people wearing leather, or in certain cases, to the garments themselves. Many rock groups (particularly heavy metal and punk groups in the 1980s) are well known for wearing leather clothing. Leather clothing, particularly jackets, are common in the heavy metal and Punk subculture. Extreme metal bands (especially black metal bands) and Goth rock groups have extensive leather clothing. Many cars and trucks come with optional or standard "leather" seating. These days most car manufacturers due to consideration of durability and cost use synthetic PU leather, including luxury car brands like Mercedes-Benz, BMW, and Audi.

In religiously diverse countries, leather vendors typically clarify the kinds of leather in their products. For example, leather shoes bear a label that identifies the animal from which the leather came. This helps a Muslim not accidentally purchase pigskin, and a Hindu avoid cattle. Many vegetarian Hindus do not use any kind of leather. Such taboos increase the demand for religiously neutral leathers such as ostrich and deer. Judaism forbids the comfort of wearing shoes, belts, or any other items made with leather on Yom Kippur, Tisha B'Av, and during mourning. Jainism prohibits the use of leather, since it is obtained by killing animals. Some vegetarians, vegans and animal rights activists and groups such as PETA, boycott and promote the boycotting of all leather products, arguing that the use of leather is unjustifiable. They encourage the use of alternative materials such as synthetic leathers.

Many pseudo-leather materials have been developed. Some published claims assert that certain versions of artificial leather are stronger than real leather when manufactured with strength in mind. Ranges of synthetic polymeric materials provide features rivalling or

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exceeding those of various types of leather in particular applications; they include vegan microfiber, pleather and Naugahyde.

Leather Industry in Modern India –

Skin was a valuable material even from the time of God. There is a particular reference of the skin of elephant used as cloth by Lord Shiva in the Hindu epic Mahabharata. Again, Lord Shiva, the Greatest Destroyer in the Hindu Triad was used to sit on a tiger’s skin for his deep meditation and penance1. The Bible also says “Unto Adam also and to his wife did the Lord God make coats of skins and clothed them” The primitive man including dam and Eves used the skins of the animals for covering his body and it can be said that he use of skins began so early in the history of a human race. The deer skin was used as seat by the Brahmans of ancient India. According to Webster’s Encyclopaedia unabridged dictionary of the English language, the meaning of the term skin is the external covering or inducement of an animal separated from the body usually with its hair or feathers, especially when soft and flexible. Thus, Great Gods and very ancient and primitive man used the raw skin of animals for their day to day multipurpose activities. Many passages in the ancient literature of the Hindu Epics show that even in those early days, the use of skin had been discovered and a high value was set on them. It is evident from such writings that clothing was one of the earliest and principal items to which skins were used. However, it is also impossible to fix any date as to the commencement of the use of the skin in the universe Leather is made from raw skin of animals. The meaning of the term leather as given in the Webster’s Encyclopaedic Unabridged Dictionary of the English language is “the skin of animals prepared for use by tanning or similar process designed to preserve it against decay and to make it pliable of supple when dry”. The origin of the art of leather making from the skin cannot in anyway be calculated and the art may rightly be said to have sprung into existence from the misty depths of antiquity. However, when the history of mankind is traced back a number of references are such articles as quivers of leather, drums, leather armour, whips and even of leather bags. In the time of Rig-Veda written about 3000 B.C., leather mashaks for water were well known and Indra was praised as piercing the rain confining skins or mashaks of clouds. Bottles of the same materials also were evidently in common use during those days. traps and bands were manufactured with leather and hides and sails were also made of the same materials. In 2000 B.C. Agastia in his poison neutralizing mantra says, “I deposit the poison in the solar orb like leather bottle in the house of vendor of spirits. According to the Law books of Sankhya and Likhita in 2000 B.C., that water is declared pure which is kept in old leather bottles. Leather bags were universally used for raising water from wells. Atri in 2000 B.C. is likewise of the same opinion and adds that flowing water and that which is raised by machinery are not defiled”. The use of such words as charmanta, charmapath, varatra, chasabandha etc. in old Sanskrit works indicate that straps, bands and strings of leather were in common use and sails were also made of leather or hide. In the Laws of Manu in 800 B.C. mashaks for water are alluded to under the name of driti and its peculiar form with the four feet left intact is pointed out5. Directions are also

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given for the purification of leather articles. Leather shoes are mentioned in the code of Manu as a suitable gift for Guru. In another place in the same work the taking off leather sandles with hands is classified amongst prohibited acts. Other Smritis ordained that oleaginous articles preserved in leather bottles do not become impure by the contact of cow hide. Leather gauntlets, quivers and jewellery cases were found in Egyptian graves which date back to 300 B.C. They give some indication of the great age of the craft. The articles, which may be regarded as early leather goods, were manufactured by same craftsman who produced sandals and other footwear. Marco polo states that in 1290 A.D. that “the curing of hides and the manufacture of leather were two of the most important of Gujarat industries. Every year a number ships went to Arabia laden with the skins of goats, oxen, unicorns and other animals. The leather was used for sandals and was cleverly worked into red and blue sleeping mats exquisitely inlaid with figures, birds and beasts and skilfully embroidered with gold and silver wire.” Production of leather goods remained a part of the shoe maker’s work right up to medieval times when it was taken over by the book binding trade which was then growing in importance. Uttar Pradesh inIndia occupied a predominant position in the making of finely crafted ‘joothis’ and leather wear for Mughals and the elitist society of the Mughal Court. In the South leather formed one of the items of trade between the South Indian states and the Greek and the Roman kingdoms of Europe. Leather is a versatile, durable and prestigious material, with a wide range of desirable attributes - such as flexibility, strength, mould ability, breathability, friction resistance and with the possibility of being prepared in a way to be resistant to heat and water. Leather will retain its appearance and its functional properties if it is correctly handled and maintained. The correct method of care and handling will depend on the type of leather. Leather is generally more acceptable to the public than fur and many people buy it to wear as coats and shoes or for use as handbags, wallets and belts8. We’ve been told in the past that leather is healthier for our feet because it’s breathable and therefore cuts down on potential foot fungus or other problems.

Leather has had a universal appeal from time immemorial. The manufacture of leather is one of the oldest technological professions. Even before the beginning of recorded time, man has worked with hides and skins to make the earliest form of clothing. The leather making of primitive man was a race between his efforts and the destructive forces of nature. The tanner quickly became a specialist and tanning skills were passed from father to son and on these basis family fortunes and eventually, industrial empires were built. The concept of tanning and use of leather was prevalent from time immemorial. Between 5000 and 3000 B.C. the Sumerians of Southern Mesopotamia used leather to make women’s dresses and other items. Ancient Assyrians used leather to make wineskins which could be inflated to make floating devices for rafts. The Phoenicians made water pipes from leather. The Romans used leather for a wide variety of purposes and they became masters in the tanning process. During the middle ages, leather tanners gathered together and formed guilds, because the tanning process is so odoriferous that no one wanted them around. The ‘Cordovan’ leather, which is primarily used in shoe making, comes from horse hide, was first produced by the Moors when they ruled in Spain during the 8th century A.D. The history of leather manufacture in India can be traced back to

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ancient times as is evident from references to it in Vedic literature and reports from Marco Polo. The leather making activities were mainly in the hands of the village chamars and were sufficient to meet the local needs. International export started only during the 1880s. The history gives an account of the origin of tanning process. The tanning is a chemical that occurs in a wide variety of plants and trees, most notably, the oak. It is widely believed that man happened upon the sealing qualities of tannin by the most precise of scientific methods. In other words, it was discovered purely by accident.Early hide users were trying to dry the hides by smoking them. The tannins in the bark and leaves and leaves that were used to fuel the fire of the smoking process were released into the hides, thus helping to make said hides a pliable material.

The primitive method of preparing hides was first they soaked it then pounded. The skin was then placed over a plank and carefully scraped. After the fat and meat were removed, the hide was coated with urine or wood ash to aid in hair removal. Dung from carnivores, such as dogs’ was spread over the hide for bating. After bathing, finishing was done. For finishing hide was washed and hung over a pole that rested over clay lined pit. The pit was filled with a mixture of water and crushed oak bark. The alternative method involved was using a brain soup to coat the hide with. The brain soup is prepared from the brain of the animal that provided the hide. There were various emissions being generated in the leather tanning and finishing industry. VOC emissions may occur during finishing processes. Ammonia emissions may occur during some of the wet processing steps. Emissions of sulphide may occur during liming/un-haring and subsequent processes. Also alkaline sulphides in tannery waste water can be converted to hydrogen sulphide if the PH is less than 8.0, resulting in release of this gas. Chromium emissions may occur from chromate reduction, handling of basic chromic sulphate powder and from the buffing process.

The twentieth century marked a new period in the trade history of the Indian leather industry. During 1900-1914, the export scene was dominated by Calcutta and Madras with the former exporting raw goods and the latter tanned ones. In 1912-13, the total export of hides/skins amounted to Rs. 8 crores as against Rs. 4 crores from Madras. This was because 17 of the 22 organised tanneries were in Madras and the rest remained scattered in Bengal, Bihar, Orissa and Bombay. The outbreak of World War II gave an impetus to the development of leather and leather goods industry in India. While in 1913-14 only 25 large units, employing 2,753 workers, were established, by 1941, the number of units had increased to 114 and the workers to 26, 056. Before 1947, though the British had shown considerable interest in leather manufacturing in India and had even established some chrome tanning units in Bengal, India mainly exported raw hides and skins. After independence, planned efforts were made by the government of India to promote and develop export trade by the adoption of the Export Policy Resolution in 1970 and implementing the recommendations of the Seetharamiah Committee. This led to the standardization of material and the development of the tanning industry. The first and second migrations in the global tanning and finishing industry have had a definite impact on the Indian leather industry. The last two decades have marked the emergence of the

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leather products industry as one of the top five foreign exchange contributors to our country. The industry had undergone total metamorphosis, emerging as one of the significant competitors in the global market for leather and leather products. The image of the country as a supplier of raw hides and skins and tanned leather has been left far behind and our products, such as leather footwear, leather apparels and hand bags, have found wide acceptance even in quality conscious markets such as Germany, USA, Japan and France. This has been possible largely due to the far sighted policies of the Government of India and the initiatives from the industry.

The setting up of the Seetharamiah, Kaul and Pandey Committees proved to be watersheds in the history of the Indian leather industry. Conscious efforts were made to promote exports of value added leather products. The Seetharamiah Committee recommended a radical transformation of the existing structure of the industry by suggesting a ban on the export of raw hides and skins, with a gradual reduction in the export of wet-blue leather. The Kaul Committee’s recommendations helped in strengthening the industry’s production base, by providing a major thrust towards importing of capital goods. The Pandey Committee’s recommendations at accelerating the pace of change by mobilizing resources and creating facilities for manufacture and export of value added leather products. In the context of recent developments in the leather industry, both at the national and international levels, and recognizing the need to provide impetus to this sector for export promotion and growth, the government of India constituted the Murthy Committee, which went into the growth prospects of the Indian leather industry and submitted a number of recommendations aimed at capturing at least 10 per cent of the global market share by India. Salient recommendations of the committee include measures to encourage greater consumption of non-leather material in the domestic market, in order to conserve and divert leather for export production, promotion of strategic alliances with developed and developing countries through joint ventures with the Indian industry for material management, product selling, chemicals, machinery etc. According to the CLRI survey on capacity utilization, there are 2091 tanneries in the country out of which 1803units are in the small scale sector and 288 are DGTD units. Tamil Nadu with 934 units, West Bengal with 538 units and Uttar Pradesh with 378 units, account for 89 percent of the tanneries in the country. A survey of the growth of the Indian leather industry over the past four decades has revealed that, of the 1803 units under SSI sector that were surveyed, only 234 (13%) were set up before 1950; 126(7%) between 1951-60; 325 (18%) between 1961-72; 451 (25%) between 1973-1980 and 667 (37%) between 1981-88. In other words, 62% of the existing units were set up after 1973. Out of 288 units surveyed in the DGTD sector, 29% came into existence during 1961-72 and 39% during 1973-80. Only 9% were set up after 1980. It is very difficult to estimate the growth rate of the product sector since the size of the actual production units in the small and cottage are not known. The organized sector accounts for only a small percentage of the total production as shown in the subsequent chapters, though the trend in the next two decades may show a major shift in the leather product towards organized units with modernized production capabilities.

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The growth of Indian leather industry is of recent origin. Though leather processing and crafting have been practiced for many decades in the country, for a variety of reasons, such as the general aversion of majority of the population for the trade in hides and skins, low demand for leather products such as footwear (military or the uniformed forces were the major users of leather shoes, belts etc.), a substantial quantity of hides and skins produced in the country was exported as raw material, with little or no processing at all. The population engaged in the recovery and processing of hides and skins belonged predominantly to either the scheduled castes or Muslim Community. Accordingly, on theenunciation of the first industrial policy of the Government of India, after the independence, it was decided to protect this sector from the invasion of organized industry, so that the current employment in the industry, consisting of people belonging to the vulnerable sections of society, could be protected. The industry thus, came to be reserved for the small scale sector. The industry remained virtually confined to the cottage sector due to the excise duty regulations which required an industrial unit using more than 2 HP electric power, or employing more than 50 persons, to comply with the excise regulations. At the beginning of the 1970s, the bulk of the hides and skins produced was exported as raw material and whatever production of leather and leather products took place in the country was predominantly carried out in cottage level units.The industry attracted attention in the early 1970s when there was foreign exchange crisis caused by the oil price hike. Among the few industries identified as having export potential, leather was one. A government committee, after studying the then current status of the industry, recommended in 1973, that the export of raw hides and skins and pickled hides and skins be banned; that of semi-processed leather regulated and that of finished leather, encouraged. Import of technology, capital goods, chemicals and other inputs needed for making finished leather was allowed. Import duties were reduced. This resulted in the first flush of modernization of the industry, when a number of tanning and finishing facilities came up in the country with a good deal of support from foreign buyers of leather. Along with the tanning and finishing facilities, some footwear units also came up, but such units could not be in large numbers in the modern sector, as the licence was issued only if the licensee undertook to export 95% of his production. The situation at the end of 1970s was thus a growing modern tanning and finishing sector, exporting a good deal of finished leather and a vast network of cottage units for converting leather into footwear and products. Another committee in 1979 and a third committee in 1985, recommended further liberalization in import policy for import of capital goods, components, consumables etc. needed for converting leather into various leather products. Simultaneously, a set of incentives were also announced, encouraging export of value added products and discouraging export of leather. The export obligation on the licensees was reduced to 75%. The phase from 1984 to 1992 witnessed what may be described as the boom period for leather exports from India. The domestic market for leather and leather products reveals some characteristics. First, the domestic market is mainly for footwear, for sandals and chappals and very limited for shoes. It is extremely sensitive to price, the bulk of the requirements of the market is met by the output from cottage sector. It is not very alive to design and aesthetics. A little hike in price could drive people to cheaper substitutes. As the footwear produced in a modern factory cannot

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be sold in the domestic market for prices less than Rs.500 per pair currently, the market for such footwear is not very large. The youth, of late, seem to show preference for sports shoes and athletic shoes, but the number that can afford such shoes at prices above RS. 500 per pair is not large. There is mention about a large middle class in the country, of the size of 150 million, with purchasing power similar to that found in advanced countries, but it must be stated that in the footwear market the purchasing power of this so called wealthy middle class has not yet been exhibited. There is virtually no market for leather garments, basically because of the climatic conditions in most parts of the country. That such garments would be beyond the reach of most Indians is the other equally potent reason. Likewise, in respect of leather goods such as handbags, wallets and travel goods too, the domestic demand is small mainly on account of price consideration. Bulk of the domestic demand for such products is met by non-leather substitutes. The main factors that do have an impact on the demand pattern for footwear and leather goods are population, disposable personal income levels, climatic conditions, price levels, general economic condition, availability of attractive and competitive substitutes, religious considerations-in that order.

Importance of Leather Industry in Indian Economy –

The details about the investment in leather industry and the sales are given below:Investment details of Indian leather industry –

SectorNo. ofUnits

AverageInvestment per

unit*(in Rs. Crores)

Total Cost(inRs. Crores)

TanningSSI

Large / medium

107780

2.255.00

2423.25400.00

Sub – Total (I) 2823.25

Foot WearSSI

Large / medium

55050

0.803.78

440.00189.00

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Sub – Total (II)629.00

Leather goodsSSI

Large / medium

39010

0.501.68

195.0016.80

Sub – Total (III) 211.80

Leather Garments

SSILarge / medium

39010

1.004.00

390.0040.00

Sub – Total (IV) 430.00

Total(I+II+III+IV) 4094.05

Unorganised sector (@30% of total amount) 1228.21

Total Amount 5322.26

The ratio of investment: sales value is 1: 2.25, which is very low when compared to other industries. This is mainly due to low capacity utilization of the units. The capacity utilisation of units in respect of hides converting raw into unfinished leathers is estimated at 49%, raw to finished 60% and unfinished to finished 70%. In the case of skin based

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tanneries, the respective percentages are 64, 67 and 70. The main reasons reported for under utilisation of capacity are raw material shortage, high price of raw materials, and lack of modernisation, financial constraints, power constraints and stringent environmental regulations.

Industrial Processing –

In general, leather is sold in these four forms:

1. Full-grain leather refers to hides that have not been sanded, buffed, or snuffed (as opposed to top-grain or corrected leather) to remove imperfections (or natural marks) on the surface of the hide. The grain remains allowing the fiber strength and durability. The grain also has breathability, resulting in less moisture from prolonged contact. Rather than wearing out, it develops a patina during its expected useful lifetime. High quality leather furniture and footwear are often made from full-grain leather. Full-grain leathers are typically available in two finish types: aniline, semi-aniline.

2. Top-grain leather (the most common type in high-end leather products) is the second-highest quality. It has had the "split" layer separated away, making it thinner and more pliable than full-grain. Its surface has been sanded and a finish coat added, which produces a colder, plastic feel with less breathability, and it does not develop a natural patina. It is typically less expensive and has greater stain resistance than full-grain leather if the finish remains unbroken.

3. Corrected-grain leather is any leather that has had an artificial grain applied to its surface. The hides used to create corrected leather do not meet the standards for use in creating vegetable-tanned or aniline leather. The imperfections are corrected or sanded off, and an artificial grain embossed into the surface and dressed with stain or dyes. Most corrected-grain leather is used to make pigmented leather as the solid pigment helps hide the corrections or imperfections. Corrected grain leathers can mainly be bought as two finish types: semi-aniline and pigmented.

4. Split leather is leather created from the fibrous part of the hide left once the top-grain of the rawhide has been separated from the hide. During the splitting operation, the top-grain and drop split are separated. The drop split can be further split (thickness allowing) into a middle split and a flesh split. In very thick hides, the middle split can be separated into multiple layers until the thickness prevents further splitting. Split leather then has an artificial layer applied to the surface of the split and is embossed with a leather grain (bycast leather). Splits are also used to create suede. The strongest suedes are usually made from grain splits (that have the grain completely removed) or from the flesh split that has been shaved to the correct thickness. Suede is "fuzzy" on both sides. Manufacturers use a variety of techniques to make suede from full-grain. A reversed suede is a grained leather that has been designed into the leather article with the grain facing away from the visible surface. It is not considered a true suede.

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Less-common leathers include:

1. Buckskin or brained leather is a tanning process that uses animal brains or other fatty materials to alter the leather. The resulting supple, suede-like hide is usually smoked heavily to prevent it from returning to a rawhide state, if wetted. It is easier to soften, and helps repel leather-eating bugs.

2. Patent leather is leather that has been given a high-gloss finish. Inventor Seth Boyden developed the original process in Newark, New Jersey in 1818. Patent leather usually has a plastic coating.

3. Fish leather is popular for its motifs and its pigmentation. Mainly used for making shoes and bags, the fish skin is tanned like other animal skins. The species used include salmon, perch, sturgeon, etc.

a. Salmon : farmed in Iceland and Norway, salmon skin has fine scales. Its strength and elegant look make it the most popular fish leather.

b. Perch : from the Nile, its skin is recognizable with large, round and soft scalesc. Wolf-fish : smooth, without scales, with dark spots, and stripes due to the friction of

marine rocksd. Cod : finer scales than salmon, but more varied texture, sometimes smooth and

sometimes roughe. Sturgeon : known for its eggs (caviar), its leather is quite expensivef. Eel : without scales, its skin is shinyg. Tilapia : originally from Africa and farmed in many places, tilapia leather is

beautiful, with resistant qualities similar to salmon and perchh. Shagreen is also known as stingray skin/leather. Applications used in furniture

production date as far back as the art deco period. The word "shagreen" originates from France. It is known as the most difficult leather to work due to dished scales of the animal, and it is one of the most expensive leathers.

i. Shark is covered with small, close-set tubercles, making it very tough. Shark skin handbags were once in vogue, but interest has fallen as the material and production costs are very high. Moreover, this skin is more difficult to work. (Do not confuse with sharkskin, a woven textile product).

4. Vachetta leather is used in the trimmings of luggage and handbags. The leather is left untreated and is therefore susceptible to water and stains. Sunlight makes the natural leather darken in shade (develop a patina).

5. Slink is leather made from the skin of unborn calves. It is particularly soft and is valued for making gloves.

6. Deerskin is a tough, water-resistant leather, possibly due to the animal's adaptations to its thorny and thicket-filled habitats. Deerskin has been used by many societies, including indigenous Americans. Most modern deerskin is no longer procured from the wild, with deer farms breeding the animals specifically for the purpose of their skins. Large quantities are still tanned from wild deer hides in historic tanning towns such as Gloversville and Johnstown in upstate New York. Deerskin is used in jackets and overcoats, martial arts equipment such as kendo and bogu, as well as personal accessories such as handbags and wallets.

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The leather manufacturing process is divided into three fundamental subprocesses: preparatory stages, tanning, and crusting. All true leathers undergo these subprocesses. A further subprocess, surface coating, can be added into the leather process sequence, but not all leathers receive surface treatment. Since many types of leather exist, it is difficult to create a list of operations that all leathers must undergo.

The preparatory stages are when the hide/skin is prepared for tanning. Preparatory stages may include: preservation, soaking, liming, unhairing, fleshing, splitting, reliming, deliming, bating, degreasing, frizing, bleaching, pickling, and depickling.

Tanning is a process that stabilizes the protein of the raw hide or skin so it does not putrefy, making it suitable for a wide variety of end applications. The principal difference between raw and tanned hides is that raw hides dry out to form a hard, inflexible material that, when rewetted (or wetted-back) putrefy, while tanned material dries to a flexible form that does not become putrid when wetted-back.

Many tanning methods and materials exist. The choice ultimately depends on the end application for the leather. The most commonly tanning material is chromium, which leaves the tanned leather a pale blue color (due to the chromium). This product is commonly called wet blue. The hides, when finished pickling, are typically between pH 2.8 and 3.2. At this point, tannery workers load the hides into a drum and immerse them in a float that contains the tanning liquor. The hides soak while the drum slowly rotates about its axis, and the tanning liquor slowly penetrates through the full thickness of the hide. Workers periodically cut a cross-section of a hide and observe the degree of penetration. Once the process achieves even penetration, workers slowly raise the float's pH in a process called basification, which fixes the tanning material to the leather—and the more tanning material fixed, the higher the leather's hydrothermal stability and shrinkage temperature resistance. Chrome-tanned leather pH is typically between pH 3.8 and 4.2.

1.2 Company Profile –

Tata Group is an Indian multinational conglomerate holding company headquartered in Mumbai, Maharashtra, India. It was founded in 1868 by Jamsetji Tata and gained international recognition after purchasing several global companies. It is one of India's largest conglomerates. In 2014-15, the revenue of Tata companies, taken together, was $108.78 billion. These companies collectively employ over 600,000 people. Each Tata company or enterprise operates independently under the guidance and supervision of its own board of directors and shareholders. There are 30 publicly-listed Tata enterprises with a combined market capitalisation of about $134 billion (as on March 31, 2015). Tata companies with significant scale include Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels Company.

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This section lists the Tata companies and details their business:

Chemicals -Tata ChemicalsRallis IndiaTata Pigments LimitedGeneral Chemical Industrial ProductsBrunner MondAdvinus TherapeuticsMagadi Soda Company

Consumer products -Tata SaltI-shaktiCasa DécorTata SwachTata Global Beverages, is the world's second largest manufacturer of packaged tea and tea products.Tata Starbucks, is a 50:50 joint venture company, owned by Starbucks Corporation and Tata Global BeveragesEight O'Clock CoffeeTetleyTata CoffeeHimalayan, mineral water brandLakmeTata CeramicsInfiniti Retail (Cromā)Tata IndustriesTitan IndustriesTrent (Westside)Landmark BookstoresTata SkyVoltas, consumer electronics companyTata International Ltd.TanishqFastrack, Youth Fashion BrandTitan Eye+, Optical Stores from Titan Industries

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Tata RefractoriesWestside

Energy -Tata Power is one of the largest private sector power companies.Tata Power Solar, started as a joint venture between Tata Power and BP Solar, now a wholly owned company.Hooghly Met Coke and Power CompanyJamshedpur Utilities and Services CompanyTata Power Delhi Distribution Ltd (Formerly Known as North Delhi Power Ltd)Powerlinks TransmissionTata Power TradingTata Projects

Engineering -TAL Manufacturing SolutionsTata AutoComp Systems Limited (TACO)Hispano CarroceraTata Motors, manufacturer of commercial vehicles (largest in India) and passenger carsJaguar Land Rover (Manager of Tata's British brands Jaguar cars and Land Rover)Tata Daewoo Commercial VehicleTata ProjectsTata Technologies LimitedTata MarcopoloTata Consulting Engineers LimitedTata CumminsTelco Construction EquipmentTRFVoltas Global Engineering CentreTata Advanced MaterialsTata Advanced SystemsTata Motors European Technical CentreTata PetrodyneTata Precision IndustriesTelcon Construction Equipment

Information systems and communications -Computational Research Laboratories

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INCATNelcoNelito SystemsTata Business Support ServicesTata Consultancy Services Ltd. (TCS) is one of the world's largest IT Services companies.Tata ElxsiNeotelTata Interactive SystemsTata TeleservicesTata Teleservices (Maharashtra)Tata DoCoMoTata CommunicationsCMC LimitedVSNL International CanadaTatanet, Managed connectivity and VSAT service provider

Services -Tata SonsTajAirMjunctionVistaraAir Asia India joint venture with Air AsiaThe Indian Hotels CompanyTaj HotelsVivanta By TajThe Gateway Hotels & ResortsGinger HotelsRoots CorporationTata Housing Development Company Ltd. (THDC)Tata LimitedTATA AIG General InsuranceTATA AIA Life Insurancee-Nxt Financials ltd.TKM Global, Logistics and Supply ChainTata AGTata Asset ManagementTata Financial Services

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Tata Capital Financial Services LimitedTata International AGTata Investment CorporationTata Advanced Systems LimitedDrive India Enterprise SolutionsTata Quality Management ServicesTata Realty and Infrastructure LimitedTata Interactive SystemsTata Africa HoldingsTata AutoComp SystemsTata Industrial ServicesTata NYKTata ServicesTata Strategic Management Group

Steel -Tata SteelTata Steel EuropeTata Steel KZNTata Steel Processing and DistributionJAMIPOLNatSteel HoldingsTata BlueScope SteelTata MetaliksTata Sponge IronTayo RollsThe Tinplate Company of IndiaTata BearingsTM International Logistics

Core sciences -Tata Institute of Fundamental ResearchTata Institute of Social Sciences

Acquisitions –February 2000 – Tetley Tea Company, $407 millionMarch 2004 – Daewoo Commercial Vehicle Company, $102 millionAugust 2004 – NatSteel's Steel business, $292 million

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November 2004 – Tyco Global Network, $130 millionJuly 2005 – Teleglobe International Holdings, $239 millionOctober 2005 – Good Earth CorporationDecember 2005 – Millennium Steel, Thailand, $165 millionDecember 2005 – Brunner Mond Chemicals, $10 millionJune 2006 – Eight O'Clock Coffee, $220 millionNovember 2006 – Ritz Carlton Boston, $170 millionJanuary 2007 – Corus Group, $12 billionMarch 2007 – PT Kaltim Prima Coal (KPC) (Bumi Resources), $1.1 billionApril 2007 – Campton Place Hotel, San Francisco, $60 millionJanuary 2008 – Imacid Chemical Company, MoroccoFebruary 2008 – General Chemical Industrial Products, $1 billionMarch 2008 – Jaguar Cars and Land Rover, $2.3 billionMarch 2008 – Serviplem SA, SpainApril 2008 – Comoplesa Lebrero SA, SpainMay 2008 – Piaggio Aero Industries S.p.A., ItalyJune 2008 – China Enterprise Communications, ChinaJune 2008 – Neotel, South AfricaOctober 2008 – Miljo Grenland / Innovasjon, Norway

1.3 Vision, Mission, Objective and Goal of the Company –

Their mission is to improve the quality of life of the communities we serve globally through long-term stakeholder value creation based on leadership with trust.

The core idea of the Tata group of industries has always been to serve the society and its people for a better life style and prosperity.

The Tata Group has helped establish and finance numerous research, educational and cultural institutes in India. The Tata Group was awarded the Carnegie Medal of Philanthropy in 2007 for philanthropic activities.

Some of the institutes established by the Tata Group are:

Tata Institute of Fundamental ResearchTata Institute of Social Sciences

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Indian Institute of ScienceNational Centre for Performing ArtsTata Management Training CentreTata Memorial HospitalTata Centre for Technology & Design at IIT BombayTata Center for Technology & Design at Massachusetts Institute of TechnologyTata Football AcademyTata Cricket AcademyTata Trusts, a group of philanthropic organisations run by the head of the business conglomerate Tata SonsThe JRD Tata Ecotechnology CentreThe Energy and Resources Institute (earlier known as Tata Energy and Research Institute) – a non-governmental research institute.Tata Medical Center, was inaugurated on 16 May 2011, by Ratan Tata

The Tata Group has donated 2.20 billion ($50 million) to the Harvard Business School₹ (HBS) to build an academic and a residential building on the institute's campus in Boston, Massachusetts. The new building will be called the Tata Hall and used for the institute's executive education programmes. The amount is the largest from an international donor to Harvard Business School

One Tata project brought together Tata Group companies (TCS, Titan Industries and Tata Chemicals) was developing a compact, in-home water-purification device. It was called Tata swach which means "clean" in Hindi and would cost less than 1000 rupees (US$21). The idea of Tata swach was thought of from the 2004 tsunami in the Indian Ocean, which left thousands of people without clean drinking water. This device has filters that last about a yearlong for a family of five. It is a low-cost product available for people who have no access to safe drinking water in their homes. The advantage of this device is that it does not require the use of electricity.

TCS also designed and donated an innovative software package that supposedly teaches illiterate adults how to read in 40 hours. "The children of the people who have been through our literacy program are all in school", says Pankaj Baliga, global head of corporate social responsibility for TCS. In 1912, Tata Group expanded their CEO's concept of community philanthropy to be included in the workplace. They instituted an eight-hour workday, before nearly any other company in the world. In 1917, they recommended a medical-services policy for Tata employees. The company would be among the first worldwide to organise modern pension systems, workers' compensation, maternity benefits, and profit-sharing plans.The charitable trusts of Tata Group fund a variety of projects, for example the Tata Swach and the TCS project. They founded and still support such cherished institutions as the Indian Institute of Science, Tata Institute of Fundamental Research, the National Centre for the Performing Arts and the Tata

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Memorial Hospital. Each Tata Group company channels more than 4 percent of its operating income to the trusts and every generation of Tata family members has left a larger portion of its profit to them.After the Mumbai attacks, salaries of the attacked Taj Hotel employees were paid despite the hotel being closed for reconstruction. About 1600 employees were provided food, water, sanitation and first aid through employee outreach centres. Ratan Tata personally visited families of all the employees that were affected. The employee's relatives were flown to Mumbai from outside areas and were all accommodated for 3 weeks. Tata also covered compensation for railway employees, police staff, and pedestrians. The market vendors and shop owners were given care and assistance after the attacks. A psychiatric institution was established with the Tata Group of Social Science to counsel those who were affected from the attacks and needed help. Tata also granted the education of 46 children of the victims of the terrorist attacks.

In 2013, the Tata group, through the Tata Relief Committee and the Himmotthan Society, an associate organisation of the Sir Ratan Tata Trust, has been working in close collaboration with the Uttarakhand government to provide relief to the impacted local communities in three districts of the state. The relief activities, which include provision of food and household material, have so far covered over 65 villages and 3,000 families. In the first phase of relief, the group expects to reach over 100 villages. The Tata group also plans to implement long-term measures for the economic, ecological and resource sustainability of the affected communities and areas. The plan, currently under development, will be based on a baseline survey of impacted villages which is being carried out by teams from the Centre for Disaster Management at the Tata Institute of Social Sciences (TISS), Mumbai, in collaboration with local organisations and communities.

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CHAPTER 2 – ORGANIZATIONAL STRUCTURE (HIERARCHY) –

The Tata hierarchical structure is a lot more democratic and co-dependent than other structure, at the same time ensuring independent functioning. This provides for a very unique management and flow of power in the organization which helps to locate accountability for future scenarios.

Tata has always been a company which has strived for improvement in business 2nd but 1st in societal benefits. One of this includes betterment of their employees. The entire management hierarchy of the group is in accordance with that.

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Below given is the typical hierarchical structure of any Tata company –

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CHAPTER 3 – FUNCTIONAL AREAS (DIVISIONS) –

3.1 Finance-

The finance department at TIL looks after the total paperwork of the company and other such formalities. It also includes double checking customers and documents. Transactions are carried out directly through banks especially with foreign banks, hence a 24x7 work is required.

Some of them are-

1. Foreign Exchange –

Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction. Monetary items are translated at the rates of exchange prevailing at the date of the balance sheet. Gain/loss arising out of differences in foreign exchange rates on settlement/translation of monetary items are recognised in the statement of profit and loss.

The premium or discount arising at the inception of the forward exchange contract is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the reporting period in which the exchange rate changes. A profit or loss arising in cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

Even though it is assumed that transaction costs are greater for individuals rather than firms, it is still important for TIL to manage its foreign exchange risk. It does so by broadly two methods:

1. External hedging through exposure netting or currency invoicing

2. Internal hedging through forward contracts or futures and options

At the end of every month, TIL prepares exposure of net realizable amount from the customers, the outstanding amount to be recovered from the parties to whom the final dispatch of goods has been made and documents have been sent to the banks. TIL exposures prepared have been enclosed, which describes the whole procedure in a very befitting manner. These documents actually depict the net realizable amounts and the amount that need to be hedged against market volatility.

TIL Dewas, enters into forward contracts with its consortium banks like State Bank of India, ICICI Bank, IDBI and books the rates. The premium rate is added to the spot rate and a contract is booked with the specified bank at a pre reckoned rate.

In order to manage its exchange rate risk TIL does not conduct market selection which is a good option to boost the cash inflows of the company considerably. It could focus on

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countries facing appreciation as compared to INR and hence profit from exchange rate difference.

The premium rate or INR forward rate is assessed through ‘Reuters News Services’ which is updated every minute as soon as there is any fluctuation in the forex market. These rates keep on fluctuating with change in the forex conditions.

2.Buyer’s Credit –

It is a form of short-term borrowing taken at the time of import from overseas lenders such as banks and other financial institutions for goods they are importing. This helps achieve loans at lower rates i.e. rates that are closer to the LIBOR rates as against domestic sources of financing which are costlier. These stood at Rs. 6,764.37 lakhs as on 31st march 2013, out of which 4,034.95 were secured and the remaining unsecured. The secured buyer’s credit are against first charge by way of hypothecation of the Company’s entire stock of raw material, semi-finished and finished goods, consumable stores and spares and such movables including book debts, bills whether documentary or clean, outstanding monies, receivable, both present and futures, in a form and manner satisfactory by the bank, ranking pari-passu with other participating banks.

3.Import – Export Document –

In almost all countries, a onetime licensing procedure to act as an Exporter/Importer is required to be completed. In India, IEC number (Import Export Code number) is required to act as an Importer or Exporter.

If you are an exporter, you would have already set up an Export company by following necessary government rules and regulations. By choosing your export product, you would have sent export samples to your international buyer if required and got approved. After necessary communication with your overseas buyer on terms of payment and terms of delivery, you arrange to issue proforma invoice, in turn you receive export order followed by purchase order from your overseas buyer. The terms of payment for your export contract could be advance payment, Documents against Acceptance DA, Documents against Payments DAP, or under Letter of Credit LC. If you as overseas seller require to cover credit risk against your overseas buyer, you can approach concerned authorities to cover insurance. In India, ECGC is the authorized agency who covers such credit risks for Indian exporters. Being an exporter, you will have an idea about other risks involved in export. The terms of delivery could be EX-Works, FOB, CFR, CIF, DAP, DDP or any other Inco terms. If you would like to arrange finance against export , you can approach your bank for preshipmentor post shipment finance against export orders obtained by you.

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3.2 Marketing –

The marketing department has overall responsibility for growing revenue, increasing market share and contributing to company growth and profitability. In a small business, the marketing department may just be one person, or it may include a marketing director or manager plus marketing executives responsible for functions such as advertising, publications or events.

Strategy-

The senior member of the marketing department takes responsibility for setting marketing strategy in line with overall company strategy and objectives. The strategy may be to increase share in a specific market sector, for example, to enter a new sector, or to open a new channel of distribution, such as the Internet, to reach a wider geographical market. The marketing department reaches agreement on strategy with the board or senior management team before planning campaigns in detail.

Market Research-

Market research is a key responsibility for the marketing department. Research helps the company identify market opportunities and gain a better understanding of customer needs. It also helps them understand competitors’ strengths and weaknesses so they can take action to protect business with existing customers or win business from weaker competitors. The department can carry out its own research by studying industry reports, market data on websites, or by contacting customers and prospects to survey their needs and attitudes. Alternatively, they can brief a market research firm to carry out the research.

Product Development-

The marketing department works with Internal or external product development teams to develop new products or improve existing ones. The department analyzes sales of existing products and identifies gaps in the product range where there may be opportunities for the company. Marketing employees provide development teams with information on customer needs and preferences to help them identify the features or improvements to incorporate in new products. Later in the product development process, the marketing department sets prices and prepares plans to launch the product.

Communications-

Marketing departments plan campaigns and develop communications material to promote products and services to customers and prospects. Depending on their available budgets, they may plan advertising campaigns, develop e-mail marketing programs, create promotional content for the company website, write press releases or product publications, such as product leaflets, company brochures, product data sheets or customer newsletters. They may write and design the promotional material if they have skills within the department or they may appoint advertising agencies or design firms to produce the work.

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Sales Support-

Cooperation between the sales and marketing departments can improve sales performance and speed up business growth. The marketing department can provide sales teams with high-quality leads by running advertisements that include a reply mechanism, such as a coupon or telephone number, or by encouraging visitors to the company website to register their details in return for a free newsletter or special report. Marketing also prepares presentations for the sales team and supplies them with stocks of promotional material to give to customers and prospects.

Events-

In some companies, marketing departments are responsible for organizing events, such as exhibitions, seminars, sales conferences or customer hospitality events. They plan the logistics of the event, booking exhibition booths or meeting facilities, for example, and provide event material, such as displays, presentations or handouts. They also promote external events to customers and prospects to ensure successful attendance.

3.3 Production –

1. Raw Material Purchase Unit- First of all we went to the department of RMU and met the area In-charge Mr. Chaman Singh (Goat); Mr. Arvind Singh (Sheep); Mr. Naveen Kumar (cow). Mr. Chaman wasn’t available to guide and facilitate us hence the same was provided by one of his assistants. He explained to us about all the information related to raw material for example-from where the raw material is to be imported and of which animals, grain, texture etc.

The animal skins used for the production of leather are Goat, Sheep and Cow & they are being imported mainly from Saudi Arab, local sourcing is done from Kolkata, Punjab etc. and after that all the leather is being preserved with timely spraying of water. There are three kinds of raw material processed at TIL, Dewas

Goat Skins

Sheep Skins(wool sheep & red hair sheep)

Cow Hides

In India approximately 50% of cow hides come from dead animals. In Leather Finishing Unit, Dewas the raw material arrives after tanning in wet blue condition. The tanning operations are done in various small tanneries in Chennai, Kolkata, Mazuffarpur, Delhi etc. The sorting is very important in LFU and is done according to area, substance, thickness.

2. Safety Dept.- After that we went to the safety dept. to meet the area In charge of this dept. Mr. Bharat Singh. But unfortunately he was busy and thus the meeting couldn’t take place

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3. Dye House – In this dept. we meet to the Mr. Sanjeev Gupta. He explained whole procedure of his department. The major three operations are done in this dept.

Mechanical Operations

Drum Operations

Mechanical Operations after Dyeing

Mechanical operation-

a. Sammying- Excess water must be removed from wet blue leather to make it suitable for splitting & shaving. Sammying is done by Sammy machine.

b. Splitting- The objective of splitting is to adjust the thickness of leather as required by the client.

c. Shaving- The objectives are-

i. To reduce the thickness.

ii. To make the thickness uniform all over.

iii. To make the flesh side clean & level.

d. Trimming & Weighing –The Purpose is to avoid wastage of chemicals. After that the skins are weighed & this shaved weight is used to calculate the chemicals required for the further processing.

Drum Operations-

e. Neutralising-The object is to remove extra chemicals from the leather.

f. Dyeing – The purpose is to give the leather proper base colour and make it even all-over so further treatment processes are easy to achieve.

g. Re-Tanning and Fat Liquoring- The object of re-tanning is to make the leather full & tight and object of fat liquoring is to make the leather soft & stretchy &waterproof by coating and lubricating the fibres of leather with oil.

Mechanical operation after dyeing-

h. Sammying- The purpose is to remove excess of moisture and fat liquor to the leather.

i. Setting- The purpose is to make the leather absolutely flat by removing wrinkles & folds.

j. Drying- After setting the leather are either hung to dry or dried in tunnel dries & then hooked to dry.

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4. Setting & Crust yard- In this dept. we meet to the Mr. Deependra Singh he explained all the procedure of this dept.

a. Conditioning- This is the procedure of providing good conditioning of the leather according to the temp. required by leather.

b. Staking- The purpose of staking is to soften the leather by staking machines.

c. Toggling & Trimming- In this process the leather is being stretched with the help of toggling machines. This gives the leather a nice flat appearance & a good pattern and then the unwanted edges of the leather are trimmed.

d. Buffing- In this process leather are buffed on the flesh side by a buffing machines which gives velvety feel.

e. Snuffing- The opposite side of flesh is snuffed after buffing.

f. Deducting- In this process dust is removed which provide clean dust free leather surface for further operations.

g. Sorting- After the mechanical operations are finished leather are sorted according to the customers’ requirements. For e.g. - area, color, thickness of the leather etc.

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5. Finishing Yard- In this dept. we approached Mr. Pawan Vishal but due to some previous works he was pre-occupied and thus we were told to approach his assistant, we met him & he was kind enough to explain all the procedure. This too is a very important process which is used for final touches and finishing to the leather skin. For ex- spraying, glazing, ironing, re-snuffing, measuring etc.

Since Mr. Kundan Singh and Mr. Pankaj Saxena of Finished Goods and Warehouse department, in-charge of goat and bovine division were not available too hence he was gracious enough to guide us through those sections also.

6. Finishing Goods & Warehouse- Mr. Pankaj Saxena explained about this dept. for all 3 divisions i.e. goat, sheep & bovine.

a. Sorting- In this dept. the finished leather are sorted to check whether the material conform to the customer/ order specification w.r.t. the grade, grain, substance, size, color & quality of finish. After that to give a neat shape to the leather avoiding raw edges the leather are trimmed.

b. Trimming & Measuring- The leather are then finally measured in an electronic or pinwheel measuring machine & the area is recorded on the flesh side of leather.

c. Packaging & Dispatch- After that the measured leathers are made into bundles of 6,10,12,24 skins based on customer demands. Total area of each

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bundle is printed out on a paper which is then pasted on the respective bundle. These bundles are packed in the large cardboard box, properly sealed & wrapped. Then the boxes are shipped out to different destinations.

3.4 Human Resources –

For interns the contact with the HR department at the plant was Mrs. Anita Chauhan.

The HR department is quite literally the life of the organisation and for the entire group of industries since it lies in their core.

1. Compensation management

Compensation expense is typically the second largest business expense next to raw materials or purchased goods. Competing for talent on the basis of wages alone is no longer cost-effective, and HR department must determine the right mix of base pay, variable pay and benefits that motivates and retains high performers, and aligning the salary program (as well as incentive programs) to performance markers for the Company, teams and individuals.

2. Benefits evaluation and administration

Managing and controlling the increasing costs of employee benefits while balancing the needs of the employees has become a very sensitive issue, especially with respect to health insurance. There are basic questions to answer, such as whether to offer multiple benefit options, how funding for the plans should be split between employer and employee contributions, and how much of the benefit plan administration should be handled internally.

3. Recruitment/talent acquisition

Declining interest in the manufacturing sector among the younger generations is partly due to the perception that manufacturing is not as cutting edge as other industries. The need to balance a permanent “core” full-time work force with temporary workers required to meet seasonal or periodic spikes in demand also makes manufacturing jobs look less secure to young people.

These are industry-wide challenges and it will take an imaginative, well-connected, persuasive HR leader to give your company an advantage. The ability to effectively recruit talent at all levels of the organization in a cost-effective and timely manner is critical.

4. Training and development

The degree to which employees are “engaged” (that is truly committed to an organization’s success vs. “doing a job”) has a direct impact on profitability. HR leaders need to effectively manage all areas of training and development, whether by mentoring, contracting for off-the-shelf programs and study courses, hiring outside consultants, or leveraging train-the-trainer programs offered by suppliers.

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5. Performance appraisal and management

HR can design and implement the formal employee appraisal programs internally or use outside consultants to assist with the process to insure that the process and tool are aligned with the organization’s goals and draw upon current best practices. In addition HR can provide line managers with the support and skills they need to effectively engage in these processes so the organization can achieve the desired results.

Effective performance management supports employee engagement; in turn, an engaged workforce is positively correlated to company financial performance.

6. Employee and labor relations

HR leadership in employee and labor relations is especially important in manufacturing companies. If the company is non-union, it typically takes much time and effort to sustain this status. If unionized, labor negotiations and on-going relations with the union have a key impact on company financials as many budget items are items for negotiation (benefits, merit, lay-off provisions, etc.). Company management should evaluate how well their HR function is prepared to deal with such circumstances.

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CHAPTER 4 – ANALYSIS AND INTERPRETATION –

4.1 SPECIALIZATION-

Preface to International Trade –

International trade is the exchange of capital, goods, and services across international borders or territories, which could involve the activities of the government and individual. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout history (for example Uttarapatha, Silk Road, Amber Road, salt road), its economic, social, and political importance has been on the rise in recent centuries.

Characteristic of global trade -

Trading globally gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewellery, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.

Industrialization, advanced technology, including transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders. International trade is, in principle, not different from domestic trade as the motivation and the behaviour of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture.

Another difference between domestic and international trade is that factors of production such as capital and labour are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labour or other factors of production. Trade in goods and services can serve as a substitute for trade in factors of production. Instead of importing a factor of production, a country can import goods that make intensive use of that factor of production and thus embody it. An example is the import of labour-intensive goods by the United States from China. Instead of importing Chinese labour, the United States imports goods that were produced with Chinese labour. One report in 2010 suggested that international trade was increased when a country hosted a network of immigrants, but the trade effect was weakened when the immigrants became assimilated into their new country.

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International trade is also a branch of economics, which, together with international finance, forms the larger branch called international economics.

The history of international trade chronicles notable events that have affected the trade between various countries. In the era before the rise of the nation state, the term 'international' trade cannot be literally applied, but simply means trade over long distances; the sort of movement in goods which would represent international trade in the modern world. In the 21st century, the European Union, United States and China are the three largest trading markets in the world.

Procedure & Documents –

Import –

An import is a good brought into a jurisdiction, especially across a national border, from an external source. The party bringing in the good is called an importer. An import in the receiving country is an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited by import quotas and mandates from the customs authority. The importing and exporting jurisdictions may impose a tariff (tax) on the goods. In addition, the importation and exportation of goods are subject to trade agreements between the importing and exporting jurisdictions.

"Imports" consist of transactions in goods and services to a resident of a jurisdiction (such as a nation) from non-residents. The exact definition of imports in national accounts includes and excludes specific "borderline" cases. A general delimitation of imports in national accounts is given below:

“An import of a good occurs when there is a change of ownership from a non-resident to a resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place (e.g. cross border financial leasing, cross border deliveries between affiliates of the same enterprise, goods crossing the border for significant processing to order or repair). Also smuggled goods must be included in the import measurement.”

“Imports of services consist of all services rendered by non-residents to residents. In national accounts any direct purchases by residents outside the economic territory of a country are recorded as imports of services; therefore all expenditure by tourists in the economic territory of another country are considered part of the imports of services. Also international flows of illegal services must be included.”

Basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts:

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1. Data on international trade in goods are mostly obtained through declarations to custom services. If a country applies the general trade system, all goods entering the country are recorded as imports. If the special trade system (e.g. extra-EU trade statistics) is applied goods which are received into customs warehouses are not recorded in external trade statistics unless they subsequently go into free circulation of the importing country.

2. A special case is the intra-EU trade statistics. Since goods move freely between the member states of the EU without customs controls, statistics on trade in goods between the member states must be obtained through surveys. To reduce the statistical burden on the respondents small scale traders are excluded from the reporting obligation.

3. Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means (e.g. internet) the related international flows of services are difficult to identify.

4. Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities.

There are two basic types of import:

1) Industrial and consumer goods2) Intermediate goods and services

Companies import goods and services to supply to the domestic market at a cheaper price and better quality than competing goods manufactured in the domestic market. Companies import products that are not available in the local market.

There are three broad types of importers:

1) Looking for any product around the world to import and sell.2) Looking for foreign sourcing to get their products at the cheapest price.3) Using foreign sourcing as part of their global supply chain.

Direct-import refers to a type of business importation involving a major retailer (e.g. Wal-Mart) and an overseas manufacturer. A retailer typically purchases products designed by local companies that can be manufactured overseas. In a direct-import program, the retailer bypasses the local supplier (colloquial middle-man) and buys the final product directly from the manufacturer, possibly saving in added cost data on the value of imports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental

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organisations (e.g. UNSTAT, FAOSTAT, OECD), supranational statistical institutes (e.g. Eurostat) and national statistical institutes for Industrial and consumer goods.

Import Procedure:

Import trade refers to the purchase of goods from a foreign country. The procedure for import trade differs from country to country depending upon the import policy, statutory requirements and customs policies of different countries. In almost all countries of the world import trade is controlled by the government. The objectives of these controls are proper use of foreign exchange restrictions, protection of indigenous industries etc. The imports of goods have to follow a procedure. This procedure involves a number of steps.

The steps taken in import procedure are discussed as follows:

(i) Trade Enquiry:

The first stage in an import transaction, like any other transaction of purchase and sale relates to making trade enquiries. An enquiry is a written request from the intending buyer or his agent for information regarding the price and the terms on which the exporter will be able to supply goods.

The importer should mention in the enquiry all the details such as the goods required, their description, catalogue number or grade, size, weight and the quantity required. Similarly, the time and method of delivery, method of packing, terms and conditions in regard to payment should also be indicated.

In reply to this enquiry, the importer will receive a quotation from the exporter. The quotation contains the details as to the goods available, their quality etc., the price at which the goods will be supplied and the terms and conditions of the sale.

(ii) Procurement of Import Licence and Quota:

The import trade in India is controlled under the Imports and Exports (Control) Act, 1947. A person or a firm cannot import goods into India without a valid import licence. An import licence may be either general licence or specific licence. Under a general licence goods can be imported from any country, whereas a specific or individual licence authorises to import only from specific countries.

The Government of India declares its import policy in the Import Trade Control Policy Book called the Red Book. Every importer must first find out whether he can import the goods he wants or not, and how much of a certain class of goods he can import during the period covered by the relevant Red Book.

For the purpose of issuing licence, the importers are divided into three categories:

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(a) Established importer,

(b) Actual users, and

(c) Registered exporters, i.e., those import under any of the export promotion schemes.

In order to obtain an import licence, the intending importer has to make an application in the prescribed form to the licensing authority. If the person imported goods of the class in which he is interested now during the basic period prescribed for such class, he is treated as an established importer.

An established importer can make an application to secure a Quota Certificate. The certificate specifies the quantity and value of goods which the importer can import. For this, he furnishes details of the goods imported in any one year in basic period prescribed for the goods together with documentary evidence for the same, including a certificate from a chartered accountant in the prescribed form certifying the c.i.f. value of the goods imported in the selected year.

The c.i.f. value includes the invoice price of the goods and the freight and insurance paid for the goods in transit. The quota certificate entitles the established importer to import upto the value indicated therein (called Quota) which is calculated on the basis of past imports. If the importer is an actual user, that is, he wants to import goods for his own use in industrial manufacturing process he has to obtain licence through the prescribed sponsoring authority.

The sponsoring authority certifies his requirements and recommends the grant of licence. In case of small industries having a capital of less than Rs. 5 lakhs, they have to apply for licences through the Director of Industries of the state where the industry is located or some other authority expressly prescribed by the Government.

Registered exporter importing against exports made under a scheme of export promotion and others have to obtain licence from the Chief Controller of Exports and Imports. The Government issues from time to time a list of commodities and products which can be imported by obtaining a general permission only. This is called as O.G.L. or Open General Licence list.

(iii) Obtaining Foreign Exchange:

After obtaining the licence (or quota, in case of an established importer), the importer has to make arrangement for obtaining necessary foreign exchange since the importer has to make payment for the imports in the currency of the exporting country.

The foreign exchange reserves in many countries are controlled by the Government and are released through its central bank. In India, the Exchange Control Department of the Reserve Bank of India deals with the foreign exchange. For this the importer has to submit an

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application in the prescribed form along-with the import licence to any exchange bank as per the provisions of Exchange Control Act.

The exchange bank endorses and forwards the applications to the Exchange Control Department of the Reserve Bank of India. The Reserve Bank of India sanctions the release of foreign exchange after scrutinizing the application on the basis of exchange policy of the Government of India in force at the time of application.

The importer gets the necessary foreign exchange from the exchange bank concerned. It is to be noted that whereas import licence is issued for a particular period, exchange is released only for a specific transaction. With liberalisation of economy, most of the restrictions have been removed as rupee has become convertible on current account.

(iv) Placing the Indent or Order:

After the initial formalities are over and the importer has obtained the licence quota and the necessary amount of foreign exchange, the next step in the import of goods is that of placing the order. This order is known as Indent. An indent is an order placed by an importer with an exporter for the supply of certain goods.

It contains the instructions from the importer as to the quantity and quality of goods required, method of forwarding them, nature of packing, mode of settling payment and the price etc. An indent is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and Confirmatory indent.

In open indent, all the necessary particulars of goods, price, etc. are not mentioned in the indent, the exporter has the discretion to complete the formalities, at his own end. On the other hand, if full particulars of goods, the price, the brand, packing, shipping, insurance etc. are mentioned clearly, it is called a closed indent. A confirmatory indent is one where an order is placed subject to the confirmation by the importer’s agent.

(v) Despatching a Letter of Credit:

Generally, foreign traders are not acquainted to each other and so the exporter before shipping the goods wants to be sure about the creditworthiness of the importer. The exporter wants to be sure that there is no risk of non-payment. Usually, for this purpose he asks the importers to send a letter of credit to him.

A letter of credit, popularly known as ‘L/C or ‘L.C is an undertaking by its issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer, on the importer will be honoured on presentation up to a specified amount.

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(vi) Obtaining Necessary Documents:

After despatching a letter of credit, the importer has not to do much. On receipt of the letter of credit, the exporter arranges for the shipment of goods and sends Advice Note to the importer immediately after the shipment of goods. An Advice Note is a document sent to a purchaser of goods to inform him that goods have been despatched. It may also indicate the probable date on which the ship is expected to reach the port of destination.

The exporter then draws a bill of exchange on the importer for the invoice value of goods. The shipping documents such as the bill of lading, invoice, insurance policy, certificate of origin, consumer invoice etc., are also attached to the bill of exchange. Such bill of exchange with all these attached documents is called Documentary Bill. Documentary bill of exchange is forwarded to the importer through a foreign exchange bank which has a branch or an agent in the importer’s country for collecting the payment of the bill.

There are two types of documentary bills:

(a) D/P, D.P. (or Documents against payment) bills.

(b) D/A, D.A. (or Document against acceptance) bills.

If the bill of exchange is a D/P bill, then the documents of title of goods are delivered to the drawee (i.e., importer) only on the payment of the bill in full. D/P bill may be sight bill or usance bill. In case of sight bill, the payment has to be made immediately on the presentation of the bill. But usually a grace period of 24 hours is granted.

Usance bill is to be paid within a particular period after sight. If the bill is a D/A bill, then the documents of title of goods are released to the drawee on his acceptance of the bill and it is retained by the banker till the date of maturity. Usually 30 to 90 days are provided for the payment of the bill.

(vii) Customs Formalities and Clearing of Goods:

After receiving the documents of title of the goods, the importer’s only concern is to take delivery of the goods, when the ship arrives at the port and to bring them to his own place of business. The importer has to comply with many formalities for taking delivery of goods. Unless the following mentioned formalities are complied with, the goods lie in the custody of the Custom House.

(a) To obtain endorsement for delivery or delivery order:

When the ship carrying the goods arrives at the port, the importer, first of all, has to obtain the endorsement on the back of the bill of lading by the shipping company. Sometimes the

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shipping company, instead of endorsing the bill in his favour, issues a delivery order to him. This endorsement of delivery order will entitle the importer to take the delivery of the goods.

The shipping company makes this endorsement or issues the delivery order only after the payment of freight. If the exporter has not paid the freight, i.e., when the bill, of lading is marked freight forward, the importer has to pay the freight in order to get green signal for the delivery of goods.

(b) To pay Dock dues and obtain Port Trust Dues Receipts:

The importer has to submit two copies of a form known as ‘Application to import’ duly filled in to the ‘Lading and Shipping Dues Office’. This office levies a charge on all imported goods for services rendered by the dock authorities in connection with lading of goods. After paying the necessary charges, the importer receive back one copy of the application to import as a receipt ‘Port Trust Dues Receipt’.

(c) Bill of Entry:

The importer will then fill in form called Bill of Entry. This is a form supplied by the custom office and is to be filled in triplicate. The bill of entry contains the particulars regarding the name and address of the importer, the name of the ship, packages number, marks, quantity, value, description of goods, the name of the country wherefrom goods have been imported and custom duty payable.

The bill of entry forms are of three types and are printed in three colours-Black, Blue and Violet. A black form is used for non-dutiable or free goods, the blue form is used for goods to be sold within the country and the violet form is used for re-exportable goods, i.e., goods meant for re-export. The importer has to submit three forms of bill of entry along-with Port Trust Dues Receipt to the customs office.

(d) Bill of Sight:

If the importer is not is a position to supply the detailed particulars of goods because of insufficiency of information supplied to him by the exporter, he has to prepare a statement called a bill of sight. The bill of sight contains only the information possessed by the importer along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry.

(e) To pay Customs or Import Duty:

There are three types of imported goods:

Non dutiable or free goods, Goods which are to be sold within the country or which are for home consumption,

and

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Re-exportable goods i.e. goods meant for re-export. If the goods are duty free, no import duty is to be paid at the custom office.

Custom authorities will permit the delivery of such goods after usual examination of the goods. But if the goods are liable for duty, the importer has to pay custom or import duty which may be based on weight or measurement of goods, called Specific Duty or on the value of imported goods Ad-valorem Ditty.

There are three types of import duties. On some goods quite low duties are levied and they are called revenue duties. On some others, quite high duties are charged to give protection to home industries against foreign competition. While goods imported from certain nations are given preferential treatment for the levy of import duties and in their case full protective duties are not charged.

(f) Bonded and Duty paid Warehouses:

The port trust and custom authorities maintain two types of warehouses-Bonded and Duty paid. These warehouses are situated near the dock and are very useful to importers who do not have godown of their own to store the imported goods or who, for business reasons, do not wish to carry them to their own go-downs.

The goods on which the duty has already been paid by the importer can be kept in the duty paid warehouses for which a receipt called ‘warehouse receipt’ is issued to him. This receipt is a document of title and is transferable. The bonded warehouses are meant for goods on which duty has been paid by the importer. If the importer cannot pay the duty, he may keep the goods in Bonded warehouses for which he is issued a receipt, called ‘Dock Warrant’. Dock Warrant, also like warehouses receipt, is a document of title and is transferable.

The bonded warehouses are used by the importer when:

(i) He has no godown of his own.

(ii) He cannot pay the duty immediately.

(iii) He wants to re-export the goods and thereby does not want to pay the duty.

(iv) He wants to pay the duty in instalments.

A nominal rent is charged for the use of these warehouses. One special advantage of these warehouses is that the importer can sell the goods and transfer the title of goods merely by endorsing warehouse receipt or dock-warrant. This will save the importer from the trouble and expenses of carrying the goods from the warehouses to his godown.

(g) Appointment of clearing Agents:

By now we understand that the importer has to fulfil many legal formalities before he can take delivery of goods. The importer may take the delivery of the goods himself at the port.

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But it involves much of time, expenses and difficulty. Thus, to save himself from the botheration of complying with all the complicated formalities, the importer may appoint clearing agents for taking the delivery of the goods for him. Clearing agents are the specialised persons engaged in the work of performing various formalities required for taking the delivery of goods on behalf of others. They charge some remuneration on performing these valuable services.

(viii) Making the Payment:

The mode and time of making payment is determined according to the terms and conditions as agreed to earlier between the importer and the exporter. In case of a D/P bill the documents of title are released to the importer only on the payment of the bill in full. If the bill is a D/A bill, the documents of title of the goods are released to the importer on his acceptance of the bill. The bill is retained by the banker till the date of maturity. Usually, 30 to 90 days are allowed to the importer for making the payment of such bills.

(ix) Closing the Transactions:

The last step in the import trade procedure is closing the transaction. If the goods are to the satisfaction of the importer, the transaction is closed. But if he is not satisfied with the quality of goods or if there is any shortage, he will write to the exporter and settle the matter. In case the goods have been damaged in transit, he will claim compensation from the insurance company. The insurance company will pay him the compensation under an advice to the exporter.

Documents –

(i) Bill of Entry –

Bill of entry is one of the major import document for import customs clearance. As explained previously, Bill of Entry is the legal document to be filed by CHA or Importer duly signed. Bill of Entry is one of the indicators of ‘total outward remittance of country’ regulated by Reserve Bank and Customs department. Bill of entry must be filed within thirty days of arrival of goods at a customs location.

Once after filing bill of entry along with necessary import customs clearance documents, assessment and examination of goods are carried out by concerned customs official. After completion of import customs formalities, a ‘pass out order’ is issued under such bill of entry. Once an importer or his authorized customs house agent obtains ‘pass out order’ from concerned customs official, the imported goods can be moved out of customs. After paying necessary import charges if any to carrier Documents required for import customs clearance

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of goods and custodian of cargo, the goods can be taken out of customs area to importer’s place.

(ii) Commercial Invoice –

Invoice is the prime document in any business transactions. Invoice is one of the documents required for import customs clearance for value appraisal by concerned customs official. Assessable value is calculated on the basis of terms of delivery of goods mentioned in commercial invoice produced by importer at customs location. I have explained about the method of calculation of assessable value in another article in same web blog. The concerned appraising officer verifies the value mentioned in commercial invoice matches with the actual market value of same goods. This method of inspection by appraising officer of customs prevents fraudulent activities of importer or exporter by over invoicing or under invoicing. So Invoice plays a pivotal role in value assessment in import customs clearance procedures.

(iii) Bill of Lading / Airway bill –

BL/AWB is one of the documents required for import customs clearance. Bill of lading under sea shipment or Airway bill under air shipment is carrier’s document required to be submitted with customs for import customs clearance purpose. Bill of lading or Airway bill issued by carrier provides the details of cargo with terms of delivery. I have discussed in detail about Bill of Lading and Airway bill separately in this website. You can go through those articles to have a deep knowledge about documents required for import customs clearance.

(iv) Import License –

As I have mentioned above, import license may be required as one of the documents for import customs clearance procedures and formalities under specific products. This license may be mandatory for importing specific goods as per guide lines provided by government. Import of such specific products may have been being regulated by government time to time. So government insists upon an import license as one of the documents required for import customs clearance to bring those materials from foreign countries.

(v) Insurance certificate –

Insurance certificate is one of the documents required for import customs clearance procedures. Insurance certificate is a supporting document against importer’s declaration on terms of delivery. Insurance certificate under import shipment helps customs authorities to verify, whether selling price includes insurance or not. This is required to find assessable value which determines import duty amount.

(vi) Purchase order/Letter of Credit –

Purchase order is one of the documents required for import customs clearance. A purchase order reflects almost all terms and conditions of sale contract which enables the customs official to confirm on value assessment. If an import consignment is under letter of credit

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basis, the importer can submit a copy of Letter of Credit along with the documents for import clearance.

(vii) Technical write up, literature etc. for specific goods (if any) –

Technical write up, literature of imported goods or any other similar documents may be required as one of the documents for import clearance under some specific goods. For example, if a machinery is imported, a technical write up or literature explaining it’s function can be attached along with importing documents. This document helps customs official to derive exact market value of such imported machinery in turn helps for value assessment.

(viii) Industrial License (if any) –

An industrial license copy may be required under specific goods importing. If Importer claims any import benefit as per guidelines of government, such Industrial License can be produced to avail the benefit. In such case, Industrial license copy can be submitted with customs authorities as one of the import clearance documents.

(ix) RCMC. Registration cum Membership Certificate (if any) –

For the purpose of availing import duty exemption from government agencies under specific goods, production of RCMC with customs authorities is one of the requirements for import clearance. In such cases importer needs to submit Registration Cum Membership Certificate along with import customs clearance documents.

(x) Test report (if any) –

The customs officials may not be able to identify the quality of goods imported. In order to assess the value of such goods, customs official may draw sample of such imported goods and arranges to send for testing to government authorized laboratories. The concerned customs officer can complete appraisement of such goods only after obtaining such test report. So test report is one of the documents under import customs clearance and formalities under some of specific goods.

(xi) DEEC/DEPB /ECGC or any other documents for duty benefits –

If importer avails any duty exemptions against imported goods under different schemes like DEEC/DEPB/ECGC etc., such license is produced along with other import clearance documents.

Documents required for import clearance

(xii) Central excise document (if any) –

If importer avails any central excise benefit under imported goods, the documents pertaining to the same need to be produced along with other import customs clearance documents.

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(xiii) GATT/DGFT declaration –

As per the guidelines of Government of India, every importer needs to file GATT declaration and DGFT declaration along with other import customs clearance documents with customs. GATT declaration has to be filed by Importer as per the terms of General Agreement on Tariff and Trade.

NOTE

Apart from the above mentioned documents, importer has to file additional documents if any required as per the guidelines of government / customs department under import of specific goods.

Export –

The term export means shipping in the goods and services out of the jurisdiction of a country. The seller of such goods and services is referred to as an "exporter" and is based in the country of export whereas the overseas based buyer is referred to as an "importer". In international trade, "exports" refers to selling goods and services produced in the home country to other markets.

Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon and eBay has largely bypassed the involvement of Customs in many countries because of the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An export's counterpart is an import.

The theory of international trade and commercial policy is one of the oldest branches of economic thought. Exporting is a major component of international trade, and the macroeconomic risks and benefits of exporting are regularly discussed and disputed by economists and others. Two views concerning international trade present different perspectives. The first recognizes the benefits of international trade. The second concerns itself with the possibility that certain domestic industries (or labourers, or culture) could be harmed by foreign competition.

Methods of export include a product or good or information being mailed, hand-delivered, shipped by air, shipped by vessel, uploaded to an internet site, or downloaded from an internet site. Exports also include the distribution of information that can be sent in the form of an email, an email attachment, a fax or can be shared during a telephone conversation.

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India –

The import or export of any & all foreign products in India is regulated under the Foreign Trade (Development and Regulation) Act. Under this act the Central government of India can make the provisions for development and also regulates the foreign trade. Also the Central government can prohibit, restrict and regulates the export activities. Under this act every importer or exporter must obtain an Importer Exporter Code number 'IEC' code number from Director of General of Foreign Trade.

United States of America –

The export of defence-related articles and services on the United States Munitions List (USML) is governed by the Department of State under the International Traffic in Arms Regulations (ITAR). The Bureau of Industry and Security (BIS) is responsible for implementing and enforcing the Code of Federal Regulations Title 15 chapter VII, subchapter C, also known as Export Administration Regulations (EAR), in the United States. The BIS regulates the export and re-export of most commercial items. Some commodities require a license in order to export. There are different requirements to export lawfully depending on the product or service being exported. Depending on the category the 'item' falls under, the company may need to obtain a license prior to exporting. EAR restrictions can vary from country to country. The most restricted destinations are countries under economic embargoes or designated as supporting terrorist activities, including Cuba, North Korea, Sudan, Syria and Iran. Some products have received worldwide restrictions prohibiting exports. If any items would support a proliferation activity, such as nuclear, chemical/biological, or missile proliferation activities in a country of concern, a license would be required. Part 744 of the Export Administration Regulations spells out the specific regulations related to end-user and end-use controls. There are many prohibited end users.

An item is considered an export whether or not it is leaving the United States temporarily, if it is leaving the United State but is not for sale (a gift), or if it is going to a wholly owned U.S. subsidiary in a foreign country. A foreign-origin item exported from the United States, transmitted or transhipped through the United States, or being returned from the United States to its foreign country of origin is considered an export. How an item is transported outside of the United States does not matter in determining export license requirements.

Barriers –

Trade barriers are generally defined as government laws, regulations, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.

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Strategic –

International agreements limit trade in and the transfer of, certain types of goods and information e.g. goods associated with weapons of mass destruction, advanced telecommunications, arms and torture, and also some art and archaeological artefacts. Examples include Nuclear Suppliers Group - limiting trade in nuclear weapons and associated goods (currently only 45 countries participate), The Australia Group - limiting trade in chemical & biological weapons and associated goods (currently only 39 countries), Missile Technology Control Regime - limiting trade in the means of delivering weapons of mass destruction (currently only 34 countries) and The Wassenaar Arrangement - limiting trade in conventional arms and technological developments (currently only 40 countries).

Tariffs –

A tariff is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade. Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there are existing strategic reasons for retaining a domestic production capability.

Some failing industries receive a protection with an effect similar to a subsidy in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff involves addressing the issue of dumping. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose and expected outcome of the tariff is to encourage spending on domestic goods and services.

Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies.

Tariffs can create tension between countries. Examples include the United States steel tariff of 2002 and when China placed a 14% tariff on imported auto parts. Such tariffs usually lead to filing a complaint with the World Trade Organization (WTO) and, if that fails, could eventually head toward the country placing a tariff against the other nation in spite, to impress pressure to remove the tariff.

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Subsidies –

To subsidize an industry or company refers to, in this instance, a governmental providing supplemental financial support to manipulate the price below market value. Subsidies are generally used for failing industries that need a boost in domestic spending. Subsidizing encourages greater demand for a good or service because of the slashed price. The effect of subsidies deters other countries that are able to produce a specific product or service at a faster, cheaper, and more productive rate. With the lowered price, these efficient producers cannot compete. The life of a subsidy is generally short-lived, but sometimes can be implemented on a more permanent basis.

The agricultural industry is subsidized in countries such as the United States, Japan, and many nations located in the European Union (EU). Critics argue such subsidies cost developing nations $24 billion annually in lost income, according to a study by the International Food Policy Research Institute, a D.C. group funded partly by the World Bank. In 2000, the U.S. spent $32.3 billion on the agricultural industry. The EU spends about $50 billion annually, nearly half its annual budget on its common agricultural policy and rural development.

Exports and free trade –

The theory of comparative advantage materialized during the first quarter of the 19th century in the writings of 'classical economists'. While David Ricardo is most credited with the development of the theory, James Mill and Robert Torrens produced similar ideas. The theory states that all parties maximize benefit in an environment of unrestricted trade, even if absolute advantages in production exist between the parties. In contrast to Mercantilism, the first systematic body of thought devoted to international trade emerged during the 17th and 18th centuries in Europe. While most views surfacing from this school of thought differed, a commonly argued key objective of trade was to promote a "favourable" balance of trade, referring to a time when the value of domestic goods exported exceeds the value of foreign goods imported. The "favourable" balance in turn created a balance of trade surplus. Mercantilists advocated that government policy directly arrange the flow of commerce to conform to their beliefs. They sought a highly interventionist agenda, using taxes on trade to manipulate the balance of trade or commodity composition of trade in favour of the home country.

LETTER OF CREDIT

The L/C is the guarantee provided by the bank of the beneficiary to the exporter the amount according to the L/C as per the given conditions after the delivery has been done.

The letter of credit states what documents the Beneficiary must present, what information they must contain, and the place and date it expires. Beneficiaries who sell goods and utilize a letter of credit as the method of payment have the assurance of the issuing bank that if they

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present the documents stated in the letter of credit, the issuing bank will honour their demand for payment.

The letter of credit is used often in international transaction to make assure seller gets paid. There are more risk in international transaction like economic factors, government intervention, and commercial bank bankruptcy.

The parties to a letter of credit are the supplier, usually called the "beneficiary", "the issuing bank", of whom the buyer is a client, and sometimes an advising bank, of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or cancelled without mutual consent of all parties.

ECGC -

Export credit Guarantee Corporation of India in Mumbai, Maharashtra. It gives insurance covers to the organizations involved in export business especially international. This helps organizations to export without hesitation of losses.ECGC is known to provide a range of credit risk insurance covers to exporters against loss in export of goods and services as well.

Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them.Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan and advances.

15 CA Forms/ 15 CB Forms-

Income tax forms which are to be submitted to the government of India when dealing with any foreign company or involved in any foreign transaction.

This form is directly related to the process of making a payment to a Non Resident entity and deduction of Tax Deductible at Source (TDS) on the payment made, at the rates in force at the time.

15 CA form filing is only processed, if it is accompanied by a 15CB certificate from an authorized chartered accountant (CA) in practice.

Form 15CA is required to be duly filled out, signed, and submitted to the Reserve Bank of India or an authorized dealer before the remittance mentioned is made.

How a 15cb form can be is shown by an image of ABC Company.

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Cover Letter -

A cover letter also known as covering letter gives an overall view of the documents attached inside. It is made mandatory to make clear of the contents inside with the total no. of copies required to attach and the copies to be present as according to the given conditions of the beneficiary or to give it to the government as a proof of transactions.

A cover letter has been shown by an example for a company.

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FEMA Declaration-

On every transaction by the organization there is a FEMA declaration which states the government permission of approval. This permission involves the telling to the government of the FOREX transaction taking place.As a proof in the FEMA declaration the invoice no. associated with the transaction of the company is mentioned and the amount with the currency on which the transaction is done is also mentioned. This document is attached to the other documents including 15cb and 15ca forms with the marine insurance to form a file to be submitted to the government. All the legal documents are used to show the transparency of the business. For eg TATA INTERNATIONAL is dealing with all the products allowed by the government of the country and no void or illegal transferring is done.An example of FEMA declaration is shown for a company –

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CHAPTER 5 – SWOT ANALYSIS –

Strengths-

•Existence of more than sufficient productive capacity in tanning.

• Easy availability of low cost of labour.

• Exposure to export markets.

• Managements with business background become quality and environment conscious.

• Presence of qualified leather technologists in the field.

• Comfortable availability of raw materials and other inputs.

• Massive institutional support for technical services, designing, manpower development and marketing.

• Exporter-friendly government policies.

• Tax incentives on machinery by Government.

• Well-established linkages with buyers in EU and USA.

Weakness-

• Low level of modernisation and upgradation of technology, and the integration of developed technology is very slow.

• Low level of labour productivity due to inadequate formal training / unskilled labour.

• Horizontal growth of tanneries.

• Less number of organised product manufacturers.

• Lack of modern finishing facilities for leather.

• Highly unhygienic environment.

• Unawareness of international standards by many players as maximum number of leather industries are SMEs.

• Difficulties in accessing to testing, designing and technical services.

• Environmental problems.

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Opportunities-

•Abundant scope to supply finished leather to multinationals setting up shop in India.

• Growing fashion consciousness globally.

• Use of information technology and decision support software to help eliminate the length of the production cycle for different products .

• Product diversification - There is lot of scope for diversification into other products, namely, leather garments, goods etc.

• Growing international and domestic markets.

Threats-

• Entry of multinationals in domestic market.

• Stiff competition from other countries.(The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz, China, Indonesia, Thailand, Vietnam and Brazil, which are more competitive than India.)

• Non- tariff barriers - Developing countries are resorting to more and more non – tariff barriers indirectly.

• Improving quality to adapt the stricter international standards.

• Fast changing fashion trends are difficult to adapt for the Indian leather industries.

• Limited scope for mobilising funds through private placements and public issues, as many businesses are family-owned.

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CHAPTER 6 – RECOMMENDATIONS AND SUGGESTIONS –

Tata as a company is very much up-to the mark when it comes to pretty much anything, the testimonial being, its huge customer base and business out-reach, however here are a few findings and suggestions from my side –

Findings of the internship programme are as under –

Cattle hides and skins occupies the first place in trading followed by goat skins and cattle hides and skins in the 2nd and 3rd place respectively.

Majority of the dealers prefer a wide area which may extend to other districts while 23% prefer reasonably accessible area.

The prices of cattle and buffalo hides and skins increase with the increase in weight of the raw material and the prices decrease with the decrease in the weight of hides and skins

The dealers prefer to have six classes of weight ranges each for cattle hides and buffalo hide and skins and three classes of size ranges for goat skins.

The total cost comprises of material cost, curing charges, labour, transportation cost and overhead.

The working culture is very calm and cool and microscopic management is strictly avoided.

There is a huge presence of senior staff members who are well experienced. Employees are taken care off a lot. There is a family like culture in the office despite being a humongous plant that it is,

making it the only one-of-its-kind in the world.

Suggestions and Recommendations –

Employ even more computers and keep a digital record of ; records older than 7 years. An entire separate department just for data entry would reduce work stress per desk. Refurbish or finish the office once again, a dull office isn’t really helpful for

motivation. A clear demarcation of different sections of the office and the factory itself would

help a lot. An office separate from the factory would be preferred, as it disturbs the

concentration of workers and employees.

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CHAPTER 7 – CONCLUSION –

This report is made as a result of 45 days summer internship program by me. It involved a lot of hard work, some mishaps, some mistakes, a lot of headache but more than anything, lots and lots of learning. However that being said if I had to pin-point the best part of this internship, it would be me meeting and getting to know new people and making new friends across a range of colleges, who not only value added to my existing knowledge but also helped me push ahead.

TATA International exports pure leather products to several countries mainly Europe and Africa. It is situated in two parts of the country - Dewas and Chennai.

The objective of the report was to list down the past, present and future of the business while making me understand what I underwent. Surely not everything can be written down or pointed at, but the entire experience was so flabbergasting that it is impossible to forget it. Be it catching the bus early morning or running for lunch after some work, it was an experience that I will cherish for life.

At the end I would wish to conclude by saying that, if there was ONE thing that I learned then it would be knowing that theoretical and practical knowledge are 2 completely different things and as I have already done the former, getting to the latter was an opportunity I would like to thank any and everyone involved, whether directly or indirectly.

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REFERENCES –

BibliographyLeather. (2016, June 5). Retrieved from Wikipidea: https://en.wikipedia.org/wiki/Leather

Leather in India. (2016, June 7). Retrieved from india exports: http://www.india-exports.com/leather.html

Leather Production Process. (2016, June 5). Retrieved from Wikipidea: https://en.wikipedia.org/wiki/Leather_production_processes

Leather Products. (2016, June 7). Retrieved from Leather Panel: http://leatherpanel.org/publications-categories/leather-products

Overview Of Leather Industry in India. (2016, June 5). Retrieved from gfe: http://shodhganga.inflibnet.ac.in/bitstream/10603/25914/11/11_chapter2.pdf

Tata Group. (2016, June 8). Retrieved from Wikipidea: https://en.wikipedia.org/wiki/Tata_Group

TATA International. (2016, June 7). Retrieved from TATA International: http://tatainternational.com/

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