Solutions to Assignments
IBO - 04 - Export Import Procedure and Documentation
Master of Commerce (M.Com) - 1st Year
Question No. 3
(a) Describe the process of preparing goods for exports and their transit to the port of shipment along with documentation formalities.
Exports, like the import system, are held to be one of the major components of international trade. Moreover, after the LPG initiative, exporting and importing have heightened its pace of development. Exporting done by the country is bound to many formalities both legal and compulsory made by the exported nation.
In this section, we will know about these formalities that stimulate domestic economic activity. The business exports its goods and services to other nations by adhering to basic principles and law and thus this is very important in the study of export and import fields.
Export Procedure
In general, an export procedure initiates with the willingness to send the goods and services to other foreign nations at some price, these procedures of export are stated below:
Step 1: Receipt Order
The Indian exporter will receive the order either directly from the importer or through the indent houses.
Step 2: Obtaining License and Quota
After receiving the order from the importer, the Indian exporter is required to obtain an export license from the Government of India, for this the exporter needs to apply to the Export Trade Control Authority and get a valid license for this.
Step 3: Letter of Credit
The exporter then asks the importer for the letter of credit, if the importer does not send the letter of credit along with the order.
Step 4: Fixing the Exchange Rate
The rate at which the home currency can be exchanged with the foreign currency is then fixed. The foreign exchange rate fluctuates from time to time so they need to fix the rate of exchange.
Step 5: Foreign Exchange Formalities
As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to furnish a declaration in the form prescribed in a manner in the Act.
Step 6: Preparation for Executing the Order
The exporter should make the required arrangements to execute the order:
Step 7: Formalities by a Forwarding Agent
Then the formalities are to be performed by the agent which includes obtaining a permit from the customs department, preparing the shipping bill, paying the dues after disclosing the required details of the product being exported.
Step 8: Bill of Lading
The Indian exporter of the goods presents the receipt copy to the shipping company and issues the Bill of Lading.
Step 9: Shipment Advice to the Importer
The Indian exporter sends shipment advice to the importer of the goods to inform him about the shipment of the goods.
Step 10: Presentation of Documents to the Bank
The Indian exporter needs to confirm that he possesses all the necessary shipping documents.
Step 11: The Realization of Export Proceeds
The exporter of the goods needs to comply with banking formalities after submission of the bill of exchange.
Export Procedure and Documentation
In the previous section, we have learned about the export procedure formalities here we will know about the documentation necessary -
Step 1: Receive an Inquiry
The first step in the shipping documentation process is when someone urges them to buy products.
Step 2: Screen the Potential Buyer and Country
After you receive the inquiry from the buyer, the process is to check their business potentiality to do business with them.
Step 3: Provide a Proforma Invoice
After screening the buyer, we need to provide the proforma invoice for the transaction.
Step 4: Finalize the Sale
The buyer will either reject or accept your proposal thus finalizing the sale.
Step 5: Prepare the Goods and the Shipping Documents
Commercial Invoice, Packing List, Certificate of Origin, Shipper's Letter of Instruction, Bills of Lading all need to be prepared
Step 6: Run a Restricted Party Screening
Again, the process needs to be run, before the goods ship for export.
Step 7: Miscellaneous Forms and Ship Your Goods
There may be other documents that need to be prepared before exporting the goods.
Documents Required for Exporting
When deciding which documents are necessary for an export procedure, the best place to start is with your overseas customer/importer or a freight forwarder. You may help your customer in clearing items with customs in the target market by gathering precise information. Commonly used expert documents are:
Pro Forma Invoice- The document provides a description of the products, such as Price, quantity, weight, kind, and so on, and is a statement by the seller to provide the customer with the products and services at the given date and price.
Commercial Invoice- The commercial invoice is a legal document that is exchanged between the seller and the buyer that clearly outlines the items being sold as well as the price the customer is to pay.
Packing List- This list includes the invoice number, seller, buyer, shipper, carrier, date of shipping, mode of transport, itemized quantity, description, package type, package quantity, total net, and gross weight (in kilograms), packaging markings, and measurements.
Air Waybill- An air waybill is a document that accompanies goods carried by an international air carrier. The paperwork contains complete information about the package and enables tracking.
Export Licenses- A government document that allows the transfer of specified commodities in precise quantities to a specific destination for a defined end-use is known as an export license.
(b) Explain the customs clearance via sea along with documentation formalities.
Shipment of cargo is the culmination of the efforts of exporters which he undertook to process, the manufacturer got the pre-shipment quality certification done and pack and mark the consignment transport it to the port or deliver to the clearing and forwarding agent.
The procedure of customs clearance of export cargo are:
> The Shipping Bill and the other documents are submitted to the custom-house as soon as the Rotation Number has been given to the carrier.
> As soon as the documents are filed in the Customs House the receiving clerk will stamp the shipping bills with the date and time and number them according to their category.
> The Shipping Bill involving Foreign Exchange will be sent to the Apptaisment section where they are allotted to appraisers and examiners for scrutiny and giving examination order.
> While the Appraiser will examine the Dutiable and Drawback Shipping Bills.
> Free Shipping Bill will be examined by the Examiners.
> The verification of the Shipping Bill will be carried out with reference to the value and quantity of goods export license/quota/permit compliance with statutory requirements, rate and amount of export duty, etc.
> After verification of Shipping bill the customs Appraiser/Examiner will give an "examination order" on the Duplicate Shipping Bill. This order will enable the customs officer to carry out a physical examination of goods in the docks. The "examination order" will also be counter-endorsed by the principal Appraiser.
> After completion of formalities at the Appraisement Section, the documents are given to the GR form clerk who puts the Shipping Bill Number on the GR form and detaches the original to be sent to RBI.
> Further where export duty is to be paid, the documents are given to the exporter/CFA to pay it at the cash and accounts department. After payment of duty, Shipping Bill is detached and the other documents are given to the exporter/CFA. In other cases, Shipping Bill is retained at Customs House, and other documents are given to the exporter/Agent for bringing the goods to the shipment shed and make Shipment arrangement.
The second stage of Customs formalities is to carry-out the physical examination of goods in the shed. The goods can be brought into the shed only after completing port formalities once the goods have been brought in the exporter CFA will present the Shipping Bill to the custom shed Appraiser/Examiner along with the following documents:
(a.) Invoice
(b.) Packing List
(c.) AR4/AR5 Forms
(d.) Agmark Certificate, if applicable
After the physical examination report, the customs prevention officer at the docks gives permission for Shipment on the Shipping Bill(Duplicate) in the form of "Let Ship" order.
The master of the carrier, after receiving consignments on board issues "Mate's Receipt" which is obtained by the exporter or his CFA through shed Superintendent after paying port dues.
Documents Required :
Export is possible only with the help of documents for movement of goods by air or seat he customs permission for Shipment is given on a prescribed document known as Shipping Bill. There are four Shipping Bill as under:
1.) Dutiable Shipping Bill/Bill of Export: This is for those goods which attract the payment of duty/cess for exports.
2.) Drawback Shipping Bill/Bill of Export: This applies to those goods which are entitled to the Duty Drawback scheme.
3.) Free Shipping Bill/Bill of Export: These are those goods which do not attract Export Duty and are not eligible for Duty Drawback.
4.) Ex-Bond Shipping Bill/Bill of Export: This applies to these goods which are shipped from the customs bonded warehouse.
The exporter or his CFA has to submit the following documents to the Customs Department for Custom Clearance:
>Shipping Bill in duplicate, triplicate, quadruplicate duly filled, in signed and stamped.
> Declaration regarding the truth of the statement made in the Shipping Bill.
> Invoice Copy.
> GR Form.
> Export Licence, if required.
> Quality Control Inspection Certificate.
> Original contract of exports on correspondence leading to the contract.
> Contract registration certificate.
> Letter of Credit if applicable.
> Packing List.
> AR4/AR5 forms original and duplicate.
> Any other relevant documents.
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