Question No. 1 - IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 1
a) What were the distinctive features of Breton Woods System.

The Bretton Woods Agreement was negotiated in July 1944 by delegates from 44 countries at the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire. Thus, the name “Bretton Woods Agreement.

Under the Bretton Woods System, gold was the basis for the U.S. dollar and other currencies were pegged to the U.S. dollar’s value. The Bretton Woods System effectively came to an end in the early 1970s when President Richard M. Nixon announced that the U.S. would no longer exchange gold for U.S. currency.

Approximately 730 delegates representing 44 countries met in Bretton Woods in July 1944 with the principal goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth. The Bretton Woods Agreement and System were central to these goals. The Bretton Woods Agreement also created two important organizations—the International Monetary Fund (IMF) and the World Bank. While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have remained strong pillars for the exchange of international currencies.

Though the Bretton Woods conference itself took place over just three weeks, the preparations for it had been going on for several years. The primary designers of the Bretton Woods System were the famous British economist John Maynard Keynes and American Chief International Economist of the U.S. Treasury Department Harry Dexter White. Keynes’ hope was to establish a powerful global central bank to be called the Clearing Union and issue a new international reserve currency called the bancor. White’s plan envisioned a more modest lending fund and a greater role for the U.S. dollar, rather than the creation of a new currency. In the end, the adopted plan took ideas from both, leaning more toward White’s plan.

Following were the features of Bretton Woods Agreement: 

i Bretton Woods agreement was signed among the world powers in 1944. 

ii This agreement established IMF and World Bank to preserve economic stability in the world. 

iii Decision making in Bretton Woods Institutions was controlled by the Western Industrial powers. 

iv National currencies followed the fixed exchange rates. 

v It led to an era of unprecedented growth of trade and incomes.

b) Briefly discuss the various money market instruments with their purpose.  

The term ‘Money Market’, according to the Reserve Bank of India, is used to define a market where short-term financial assets are traded. These assets are a near substitute for money and they aid in the money exchange carried out in the primary and secondary market. So, essentially, the money market is an apparatus which facilitates the lending and borrowing of short-term funds, which are usually for a duration of under a year. Short maturity period and high liquidity are two characteristic features of the instruments which are traded in the money market. Institutions like commercial banks, non-banking finance corporations (NBFCs) and acceptance houses are the components which make up the money market.

The money market is a part of the larger financial market and consists of numerous smaller sub-markets like bill market, acceptance market, call money market, etc. Money market deals are not carried out in money / cash, but other instruments like trade bills, government papers, promissory notes, etc. Also, money market transactions cannot be done via brokers but have to be carried out via mediums like formal documentation, oral or written communication.

Types Of Money Market Instruments

1. Treasury Bills (T-Bills)

Issued by the Central Government, Treasury Bills are known to be one of the safest money market instruments available. However, treasury bills carry zero risk. I.e. are zero risk instruments. Therefore, the returns one gets on them are not attractive. Treasury bills come with different maturity periods like 3-month, 6-month and 1 year and are circulated by primary and secondary markets. Treasury bills are issued by the Central government at a lesser price than their face value. The interest earned by the buyer will be the difference of the maturity value of the instrument and the buying price of the bill, which is decided with the help of bidding done via auctions. Currently, there are 3 types of treasury bills issued by the Government of India via auctions, which are 91-day, 182-day and 364-day treasury bills.

2. Certificate of Deposits (CDs)

A Certificate of Deposit or CD, functions as a deposit receipt for money which is deposited with a financial organization or bank. However, a Certificate of Deposit is different from a Fixed Deposit Receipt in two aspects. The first aspect of difference is that a CD is only issued for a larger sum of money. Secondly, a Certificate of Deposit is freely negotiable. First announced in 1989 by RBI, Certificate of Deposits have become a preferred investment choice for organizations in terms of short-term surplus investment as they carry low risk while providing interest rates which are higher than those provided by Treasury bills and term deposits. Certificate of Deposits are also relatively liquid, which is an added advantage, especially for issuing banks. Like treasury bills, CDs are also issued at a discounted price and their tenor ranges between a span of 7 days up to 1 year. However, banks issue Certificates of Deposits for durations ranging from 3 months, 6 months and 12 months. They can be issued to individuals (except minors), trusts, companies, corporations, associations, funds, non-resident Indians, etc.

3. Commercial Papers (CPs)

Commercial Papers are can be compared to an unsecured short-term promissory note which is issued by highly rated companies with the purpose of raising capital to meet requirements directly from the market. CPs usually feature a fixed maturity period which can range anywhere from 1 day up to 270 days. Highly popular in countries like Japan, UK, USA, Australia and many others, Commercial Papers promise higher returns as compared to treasury bills and are automatically not as secure in comparison. Commercial papers are actively traded in secondary market.

4. Repurchase Agreements (Repo)

Repurchase Agreements, also known as Reverse Repo or simply as Repo, loans of a short duration which are agreed upon by buyers and sellers for the purpose of selling and repurchasing. These transactions can only be carried out between RBI approved parties Repo / Reverse Repo transactions can be done only between the parties approved by RBI. Transactions are only permitted between securities approved by the RBI like treasury bills, central or state government securities, corporate bonds and PSU bonds.

5. Banker's Acceptance (BA)

Banker's Acceptance or BA is basically a document promising future payment which is guaranteed by a commercial bank. Similar to a treasury bill, Banker’s Acceptance is often used in money market funds and specifies the details of the repayment like the amount to be repaid, date of repayment and the details of the individual to which the repayment is due. Banker’s Acceptance features maturity periods ranging between 30 days up to 180 days.

IBO-06 - INTERNATIONAL BUSINESS FINANCE - Master of Commerce (M.Com)

Solutions to Assignments 

IBO-06 - INTERNATIONAL BUSINESS FINANCE

Master of Commerce (M.Com) - 1st Year

Question No. 1

a) What were the distinctive features of Breton Woods System.

b) Briefly discuss the various money market instruments with their purpose.     

                                                    CLICK HERE

Question No. 2

a) Explain the mechanism of money market hedge for managing transaction exposure.

b) What is economic exposure and transaction exposure? How is economic exposure different from transaction exposure?                CLICK HERE

Question No. 3

a)What are the different ways of managing political risk? Discuss.

b) What are foreign bonds and eurobonds. What are the advantages of eurobonds owner foreign bonds.

                                                    CLICK HERE

Question No. 4

a) Discuss the factors that influence the design of world wide corporate capital structure.

b) Describe adjusted present value method?

                                                        CLICK HERE

Question No. 5

a) Discuss the merits of foreign direct investment, portfolio investment and short term investment.

b) Write short notes on for forfaiting.    CLICK HERE

Question No. 5 - IBO - 04 - Export Import Procedure and Documentation - Master of Commerce (M.Com)

Solutions to Assignments 

IBO - 04 - Export Import Procedure and Documentation

Master of Commerce (M.Com) - 1st Year

Question No. 5 Write notes on the following: 
(a) General Provisions for imports.

The Ministry of Commerce and Industry and Directorate General of Foreign Trade and Investment (DGFT) implemented the foreign trade policy of the year 2015-2020, which contains the general provisions for import and export in Chapter 2. They are as follows:

1. Exports and imports are free unless regulated– Exports and Imports shall be free, except in cases where they are regulated by the provisions of this Policy or any other law for the time being in force. The item-wise export and import policy shall be, as specified in ITC(HS) published and notified by the Director-General of Foreign Trade, as amended from time to time.
2. Laws are to be complied– Every exporter or importer shall comply with the provisions of the Foreign Trade (Development and Regulation) Act, 1992, the Rules and Orders made thereunder, the provisions of this Policy, and the terms and conditions of any license/certificate/permission granted to him, as well as provisions of any other law for the time being in force. All imported goods shall also be subject to domestic Laws, Rules, Orders, Regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods. No import or export of rough diamonds shall be permitted unless the shipment parcel is accompanied by Kimberley Process (KP) Certificate required under the procedure specified by the Gem & Jewellery Export Promotion Council (GJEPC).
3. Procedure– The DGFT specifies the procedure that has to be followed by the exporter and importer or by any other authority to follow any of the procedures which are laid down in any Acts, handbooks, etc. Once the procedure is being established it has to be published on public notice, and these procedures can be subjected to change as well.
4. Exemption- If due to any genuine reason, relaxation is needed in any procedure, the request can be made to the DGFT, who can pass orders on the same. The DGFT can relax certain procedures for public interest as well, such request may be considered only after consulting Advance Licensing Committee (ALC) if the request is in respect of a provision of Chapter-4 (excluding any provision relating to Gem & Jewellery sector) of the Policy/ Procedure. 
5. Restriction principles- The DGFT on notification can enforce any decision that is necessary for (a) protection of public morals (b) Protection of human, animal, or plant life or health (c)Protection of patents, trademarks, and copyrights and the prevention of deceptive practices (d) Prevention of use of prison labour (e) Protection of national treasures of artistic, historic or archaeological value (f) Conservation of exhaustible natural resources (g) Protection of trade of fissionable material or material from which they are derived (h) Prevention of traffic in arms, ammunition, and implements of war.
6. Goods which are restricted- Any goods which are restricted can only be imported and exported if there is a license for the same and a public notice has to be issued as well on this behalf.
7. Terms and conditions- There are certain terms and conditions which have to present while obtaining a license or a certificate, they include:(a) The quantity, description, and value of goods (b) Actual user condition (c) Export obligation (d) The value addition to be achieved (e) The minimum export price.
8. Penalty- If a license/certificate/permission holder violates any condition of the license/certificate/ permission or fails to fulfill the export obligation, he shall be liable for action in accordance with the Act, the Rules and Orders made thereunder, the Policy and any other law for the time being in force.
9. Permission to get license etc.- No person may claim a license/certificate/ permission as a right and the Director-General of Foreign Trade or the licensing authority shall have the power to refuse to grant or renew a license/certificate/permission in accordance with the provisions of the Act and the Rules made thereunder.
10. Import on export basis- New or second-hand capital goods, equipments, components, parts and accessories, containers meant for packing of goods for exports, jigs, fixtures, dies and mould, may be imported for export without a licence/certificate/permission on the execution of Legal Undertaking/Bank Guarantee with the Customs Authorities provided that the item is freely exportable without any conditionality/requirement of license/ permission as may be required under ITC (HS) Schedule II.

(b) Foreign Currency Account. 

A ‘Foreign Currency Account’ means an account held or maintained in a currency that is not the currency of India or Bhutan, or Nepal. Any person who is residing in India can open, hold and maintain a foreign account. ‘Person Resident in India’ is defined under Section 2(v) of the Foreign Exchange Management Act, 1999 (FEMA). 

‘Person resident in India’ means—

1. Every person residing in India for more than one hundred and eighty-two days during the preceding financial year but does not include –

• a person who has gone or stays outside India for taking up employment or carrying a business or vocation outside India or any other purpose where he/she indicates their intention to stay outside India for an uncertain period,
• a person who has come to or stays in India, otherwise than for taking up employment or carrying on business or vocation in India or any other purpose where he/she indicates their intention to stay for an uncertain period in India.

• Every person or body corporate incorporated or registered in India,
• An office, agency or branch in India that is owned or controlled by a person resident outside India, 

• An office, agency or branch outside India that is owned or controlled by a person resident in India.

(c) Financing under Deferred Payment Arrangement. 

Under Section 34 of the Care Act a universal Deferred Payment scheme has been established. A deferred payment scheme allows the person entering into it to delay making some or all of their payments to the Local Authority for the Care and Support services they receive. It allows them time to come to terms with their situation and consider their options without having to rush into selling their home. Some people enter into a deferred payment agreement until they die but others use it as a 'bridging loan' while they decide what best to do and explore options available for meeting the cost of care (for example, they may be able to arrange the release of another asset to meet the cost). How long a person has a deferred payment agreement for is entirely up to them.

When a Deferred Payment agreement is entered into the Local Authority usually secures its interests by arranging for a land registry charge to be placed upon the person's property for an amount known as the Equity Limit. They then defer all payments until this amount is reached or the agreement is terminated, whichever comes first. At this point the person's home is sold and the Local Authority receives payment for the care costs it has deferred under the agreement.

Payments that can be deferred

The person can defer the full amount of their care costs or an element of their care costs (if they choose to make a contribution from another source).

Payments must be deferred up to the personal budget amount (or what that amount would be likely to be where people have not been assessed by the Local Authority). If the person wishes to defer less than the personal budget amount this can be agreed but they need to be able to pay the difference between what is being deferred and the personal budget amount.

If a person has chosen to live in a care home that costs more than the personal budget amount the Local Authority does not have to defer the 'top-up' amount payable, although it has the power to do so if it wishes to. If the Local Authority does not decide to defer the top-up amount then top-up remains payable.

Payments relating to interest and charges made by the Local Authority can also be deferred if the person requests it and the Local Authority is in agreement.

Payments can only be deferred for costs charged by the Care and Support provider for services provided. Where the person lives in a care home provision this is likely to include associated accommodation costs but where the person lives in supported living and pays rent to a landlord (who may or may not be the care provider) these rental payments cannot be deferred.

(d) ISO 9000. 

ISO 9000 is a set of standards for quality management, developed as an internationally-acceptable baseline for performance by businesses and other organizations. It was created by the International Organization for Standardization (ISO) with input from standards professionals from many nations.

Quality management is the act of overseeing all of the processes that go into achieving and maintaining the desired level of excellence in the creation and delivery of a product or service. This includes the determination of a quality policy, creating and implementing quality planning and assurance, and quality control and improvement. It is also referred to as total quality management (TQM).

ISO 9000 standards were developed to help manufacturers effectively document the quality system elements that need to be implemented to maintain an efficient quality system. They are increasingly being applied to any organization or industry.

ISO 9001 is now being used as a basis for quality management—in the service sector, education, and government—to help organizations satisfy their customers, meet regulatory requirements, and achieve continual improvement.

The ISO 9000 series, or family of standards, was originally published in 1987 by the International Organization for Standardization (ISO). They first gained popularity in Europe, and then spread to the U.S. in the 1990s. As the world’s view of quality assurance has evolved, the standards have been revised.

Current versions of ISO 9000 and ISO 9001 were published in September 2015.

Question No. 4 - IBO - 04 - Export Import Procedure and Documentation - Master of Commerce (M.Com)

Solutions to Assignments 

IBO - 04 - Export Import Procedure and Documentation

Master of Commerce (M.Com) - 1st Year

Question No. 4 Comment on the following statements: 
(a) Export houses do not get any strategic advantages through EDI. 

While Electronic Data Interchange (EDI) has been in use since the late 1960s, there are still many organizations that use their existing legacy systems for processing B2B transactions. Traditional B2B transactions like Purchase Order, Sales Order, Invoice, Advance Ship Notice, and Functional Acknowledgement often involve a series of steps to process. And processing these transactions involves many paper documents and a great deal of human intervention, which makes them prone to mistakes and human errors. But with the use of EDI, paper documents are eliminated and human intervention is minimized.

EDI enables organizations to automate the exchange of data between applications across a supply chain. This process ensures that business-critical data is sent on time. According to a market report by Dart Consulting, the estimated market size of EDI is expected to reach $1.68 billion by 2018, with projections reaching as high as $2.1 billion by 2020. But what are the advantages of EDI over traditional forms of business communication and information exchange?

To better understand these benefits, let’s take a look at some of them:

Benefits of EDI

Lower operating costs

EDI lowers your operating expenditure by at least 35% by eliminating the costs of paper, printing, reproduction, storage, filing, postage, and document retrieval. It drastically reduces administrative, resource and maintenance costs. EDI support can lower other costs as well, such as Matson Logistics who reduced their ASN fines 12% by switching to a more efficient EDI solution.

Improve business cycle speeds

Time is of the essence when it comes to order processing. EDI speeds up business cycles by 61% because it allows for process automation that significantly reduce, if not eliminate, time delays associated with manual processing that requires you to enter, file, and compare data. Inventories management is streamlined and made more efficient with real-time data updates.

Reduce human error and improve record accuracy

Aside from their inefficiency, manual processes are also highly prone to error, often resulting from illegible handwriting, keying and re-keying errors, and incorrect document handling. EDI drastically improves an organization’s data quality and eliminates the need to re-work orders by delivering at least a 30% to 40% reduction in transactions with errors.

Increase business efficiency

Because human error is minimized, organizations can benefit from increased levels of efficiency. Rather than focusing on menial and tedious activities, employees can devote their attention to more important value-adding tasks. EDI can also improve an organization’s customer and trading partner relationship management because of faster delivery of goods and services, as well as

Enhance transaction security

EDI enhances the security of transactions by securely sharing data across a wide variety of communications protocols and security standards.

Paperless and environmentally friendly

The migration from paper-based to electronic transactions reduces CO2 emissions, promoting corporate social responsibility.

(b) Documents against acceptance do not have a usage period. 

Under Documents Against Acceptance, the Exporter allows credit to Importer, the period of credit is referred to as Usance, The importer/ drawee is required to accept the bill to make a signed promise to pay the bill at a set date in the future. When he has signed the bill in acceptance, he can take the documents and clear his goods.

The payment date is calculated from the term of the bill, which is usually a multiple of 30 days and start either from sight or form the date of shipment, whichever is stated on the bill of exchange. The attached instruction would show "Release Documents Against Acceptance".

Risk

Under D/A terms the importer can inspect the documents and, if he is satisfied, accept the bill for payment on the due date, take the documents and clear the goods; the exporter loses control of them.

The exporter runs various risk. The importer might refuse to pay on the due date because :

- He finds that the goods are not what he ordered.

- He has not been able to sell the goods.

- He is prepared to cheat the exporter (In cases the exporter can protest the bill and take the importer to court but this can be expensive).

- The importer might have gone bankrupt, in which case the exporter will probably never get his money.

Documents against Acceptance Collection

With a documents against acceptance collection, the exporter extends credit to the importer by using a time draft. The documents are released to the importer to claim the goods upon his signed acceptance of the time draft. By accepting the draft, the importer becomes legally obligated to pay at a specific date.

At maturity, the collecting bank contacts the importer for payment. Upon receipt of payment, the collecting bank transmits the funds to the remitting bank for payment to the exporter. Table 2 shows an overview of this type of collection:

(c) Credit is a major weapon of international competition but it involves risk. 

Competition in foreign markets is more keen than in the domestic market. Overseas customers are sought after by exporters from many countries. Competition is getting keener still due to an all round effort on the part of all countries to increase their exports', Indian exporters have to compete with exporters from other countries not only in respect of quality, price, delivery schedules, etc., but also in respect of payment terms. Their success would depend upon the ability to offer competitive terms of credit to the foreign buyer's terms of credit on par with Export Credit on par with those offered by exporters from competing countries. Risks are inherent in all credit transactions but more in export transactions. The fact that the buyer may not pay either due to insolvency or for any other reason exposes the exporter to the credit risk. Credit risk may arise even in cases where the buyer's credit standing has been thoroughly investigated. Too cautious an attitude in evaluating buyers may result in loss of hand to get business opportunities. Hence, credit risk is unavoidable specially in export business.

Credit risk is greater in export transactions because reliable information about foreign buyers is difficult to obtain and hence, it is difficult to evaluate their credit worthiness. Credit risk has assumed large proportions today not only because the volume of export transactions has become larger but also because far-reaching political and economic changes that are sweeping the world. An outbreak of war, civil war, coup or an insurrection may block or delay the payment for goods exported. Balance of payment difficulties may lead to transfer delays. And all this is possible even when the buyer is fully in a position to pay. In addition, one has to contend will1 the possibilities of the insolvency or protected default of the buyers. In recent years there has been a significant increase in insolvencies and business failures even in many developed countries. In such a high risk situation export credit insurance can be of immense help to (i) exporters and (ii) the banks who provide finance for the export transactions.

(d) Export incentives do not promote export.

Export incentives are certain benefits exporters receive from the government as acknowledgement for bringing in foreign exchange and as compensation for the costs they incur on sending goods and services out of the country. Export incentives can take the form of:      

• Subsidies that lower export prices
• Tax concessions such as duty exemptions (which enable duty-free import of inputs for export production) and duty remissions (which enable post-export replenishment of duty on inputs used in export product)
• Credit facilities such as low-cost loans
• Financial guarantees such as provisions covering bad loans

In India, export incentives are in line with the government’s flagship “Make in India” and “Atmanirbhar Bharat” (Self-sufficient India) programmes. The former aims to transform India into a manufacturing major while the latter advocates self-sufficiency. These incentives are highlighted in a document called the foreign trade policy, which is a set of guidelines and strategies for the import and export of goods and services. The policy is formulated for a period of five years. The current one is valid till March 31. A new one will come into effect from April 1.

In India, the foreign trade policy and many of the export incentives it highlights are formulated and implemented by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry. Then there is the Central Board of Indirect Taxes and Customs (CBIC), which devises policy regarding the levy and collection of customs duty, central excise duties and Goods and Services Tax (GST). One of its arms, the Directorate General of Export Promotion (DGEP), deals with “refund issues arising out of export”, “looks into policy issues relating to export promotion schemes”, and recommends changes/improvements in customs-related procedures and policies. Furthermore, some financial incentives are implemented by the Reserve Bank of India, the country’s central bank.   

A country’s export incentives might be considered as unfair trade practice by another country. When disputes arise between countries over the level of government involvement in foreign trade, these are settled by the World Trade Organisation (WTO). As a rule, the WTO discourages (even prohibits) government incentives barring those implemented by least-developed countries.

Why are export incentives important?

‍

China’s success as an exporting nation lies in its manufacturers receiving a wide range of government incentives (including hefty tax rebates) to produce almost exclusively for foreign markets. Here’s how export incentives benefit countries and exporters:

• They bring in foreign exchange. Countries need foreign exchange reserves to make international trade transactions easier, pay for imports, pay back foreign loans, use as a cushion against economic collapse, currency devaluation and other such events, etc 
• They create jobs by helping businesses grow and expand their workforce
• They create higher wages (especially for skilled, experienced and urban workers in India, as per this World Bank report)    
• They lower the current account deficit, which is the deficit caused when a country imports more than it exports. India’s current account deficit has averaged 2.2% of GDP in the past decade (worth around $15 billion in July-September 2020)
• They encourage self-reliance by reducing dependence on foreign goods
• All of this means export incentives contribute to overall economic growth

Question No. 3 - IBO - 04 - Export Import Procedure and Documentation - Master of Commerce (M.Com)

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.