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Presentation on theme: "IMPORT,EXPORT, DOCUMENTATION & FOREIGN TRADE POLICY"— Presentation transcript:

By Vaibhav Nagarkar Director, gNBC

2 Agenda Documentation: Overview – Commercial and Regulatory documents
Understanding - Invoice, Packing List, Inspection Certificate, Certificate of Origin, Shipping Bill, ARE-1, Mate Receipt, GR/SDF, Bill of exchange, Bank Realisation Certificate, Bill of Lading and Airway Bill, Bill of Entry etc. Incoterms Terms of payment Letter of credits - Concept, Types of L/C, Parties to L/C, L/C mechanism.

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

4 U N D E R S T A I G P O L I C Y

5 Understanding Policy Foreign Trade Policy :
Drafted by Director General of Foreign Trade under the Ministry of Commerce. Implemented with the help of various other Departments mainly Customs, Excise and RBI. In order to understand the co-relation, one must get familiar with the various laws and functions of various departments. As far as implementation is concerned, the co-relation of Foreign Trade Policy with the following Acts, Laws and Regulations must be taken into account :

6 Understanding Policy Foreign Trade Policy :
Customs Act, 1962 Customs Tariff Act, 1975 Foreign Exchange Management Act, 1999 Central Excise Act, 1944 Excise Tariff Act, 1985 Industrial Policy Resolution, 1956. Industries Development and Regulation Act, 1951 Laws of Weights and Measures While some of these laws would be specific in nature for certain commodities, the generic understanding should be based on the following :

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

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

9 RBI Coverage Monitoring Foreign Exchange
Inflow – on account of exports of goods and services Outflow – on account of imports of goods and services Governing Acts/Laws/Manual 1) Foreign Exchange Management Act 1999 2) Foreign Exchange Manual Tools: Master Circulars FEMA Notifications A.P. (DIR. Srs.) Circulars

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

11 Purview of Export-Import

12 FLOW CHART – I Knowledge of Market Knowledge of Product Knowledge of
Incentives Product Costing Proforma Invoice Sample if necessary Confirmation of Export Contract Payment terms Scrutiny of L/C Amendments if Necessary Preparation of Physical Exports Benefits & Execution Continued….

13 FLOW CHART – I (continue from the previous slide)
Pre Shipment Post Shipment Confirmation from Buyer of Receipt of Goods Payment Realisation Realisation of Benefits Statutory Records

14 Overview of Documentation

15 Significance of Documentation
Documents are important for the following reasons: (a) as an evidence of shipment and title of goods; (b) for obtaining payment; (c) to provide a specific and complete description of the goods; (d) for assessment of correct Duty for clearance purpose; (e) for obtaining Export Licences; (f) for obtaining export finance; (g) for completing Pre-shipment Inspection; (h) for claiming export benefits like Duty Drawback, etc.

16 Commercial / Regulatory Documents
Commercial set of documents are mainly used for Commerce. In other words these are documents normally exchanged between buyer and seller. Regulatory documents are required in dealing with various regulatory authorities such as customs, RBI, Excise, Licencing authorities Inspection and other Export Promotion bodies for availing incentives etc.

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

18 Commercial / Regulatory Documents
Referring to the Commercial set of documents, it may please be observed that these set of documents are prepared from other set of documents (some of these only). These are known as auxiliary documents. These documents may not be required by the foreign buyer, but these are must for preparation of main export documents, known as Principle Commercial Documents.

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

20 Export Sales Contract What is Export Sales Contract?
Agreement between buyer and seller, stipulating each and every details of the transaction. Legally binding document. It reduces the probabilities of disputes & differences as it fixes the role and responsibilities of each party.

21 Export Sales Contract Terms and Conditions:
While drafting the sales contract one must ensure the following:- 1. Coverage is complete. 2. Maximum clarity. 3. Future probability to be provided. 4. Trade practices. 5. Law of both countries 6. Need of both parties. There should not be any ambiguity regarding the exact specifications of goods and terms of sale including export price, mode of payment, storage and distribution methods, type of packaging, port of shipment, delivery schedule etc.

22 Export Sales Contract Following standard terms and conditions are covered in an Export Sales contract: - Name & address of both the parties. Contract Number & Date, place Description of goods, quantity and quantity Product Standards and Technical Specifications of goods. Inspection/certification Total Value of Contract Terms of delivery (F.O.B./C.F.R./C.I.F. etc.), Period of Delivery/Shipment, part shipment, Trans-shipment. Terms of payment:- L/C, D/A, D/P, advance payment, Amount/Mode & Currency Contd…..

23 Export Sales Contract Taxes, Duties and charges
Packing, Labeling, Marking, etc. Brokerage/commissions and discounts Licences and Permits Insurance Requirements, Certificates of Insurance Documentary Requirements Performance guarantee Signature by all parties to the contract. Force Majeure of Excuse for Non-performance of contract Remedies Arbitration. Standard Export Sales Contract forms are also available. These can be used as it is or with some modification as per individual need.

24 Pre-shipment Documents
Documents at pre-shipment stage are those documents, which are required to be made, till the consignment is presented to the customs department for clearance. The following documents can, therefore, be treated as pre-shipment documents:- Proforma Invoice Confirmed order or contract Letter of Credit Pre-shipment Inspection Certificate Packing list Shipping Bill Export Declaration Forms (GR/SDF) ARE

25 Post-shipment Documents
Documents at Post-shipment stage are naturally those which are prepared after the shipment. These documents include the following:- Mate Receipt Bill of Lading Airway Bill Roadway/Railway Bill Post Parcel/ Courier Receipt Invoices (including consular invoice) Certificate of Origin Insurance Certificate or Policy Bill of Exchange BRC

26 Documents for availing various Export Benefits
Documents are also divided, depending upon, whether the benefit has to be claimed prior to exports or after the exports. For claiming benefits one has to make different applications with various government authorities. Contd….

27 Documents for availing various Export Benefits
At the pre-shipment stage the following documents are note-worthy. Application for pre-shipment finance from the bank. Application of Advance Authorization or Duty Free Import Authorisation with DGFT. Application for execution of Bond with Central Excise authorities. Application for obtaining CT-1 in case of a Merchant Exporter

28 Documents for availing various Export Benefits
At the post shipment stage, the following documents are note-worthy. Application of Duty Entitlement Pass Book. Application for Focus Market or Focus Product Scheme. Application for fixation of Brand rate of Drawback

29 Import Documentation

30 Important Documents–Imports
Invoice Packing list Bill of Lading or Delivery Order/Airway Bill GATT declaration form duly filled in Importers/CHA’s declaration Licence/Authorisations in original wherever necessary Letter of Credit/Bank Draft/wherever necessary Insurance document Import license Industrial License, if required Test report in case of chemicals Catalogue, Technical write up, Literature in case of machineries, spares or chemicals as may be applicable Separately split up value of spares, components, machineries Certificate of Origin, if preferential rate of duty is claimed under PTAs/FTAs etc. No Commission declaration

31 Understanding Documents

32 Understanding Documents
All documents whether it is for export or import transaction generally contain following information Name and address of the exporter and importer Document No. and date. Order No. and date Port of discharge Port of destination Country of origin Description of Goods Marks and nos., model nos. [if any] Weight ITC HS Code No. Value Currency Terms of payment Terms of shipment etc.

33 Understanding Documents
However, depending upon the nature of the document, specific information is to be mentioned. For e.g. apart from the above details, Shipping Bill will include what export benefit is being claimed against that particular shipment, etc. Similarly, Packing List will give information about how goods are packed. Let us now study each document in depth.

34 Invoice It is itemized statement prepared and issued by a seller at the time of dispatching the goods to the buyer. It helps the Customs Authorities to: ensure that goods shipped are permitted by the export policy. compute the customs duty, if any, payable on the export or the import. check the quantity of goods. They generally open a few packages at random and check the veracity of details in the invoice. check if there is any over-invoicing or under-invoicing (that may be resorted to by the importer to reduce the import duty payable).

35 Invoice Invoices are often called bills.
Various types of invoices used in International Trade are Proforma Invoice Commercial Invoice Consular Invoice Leagalized Invoice Customs Invoice

36 Packing List It is a consolidated statement in a prescribed format detailing how goods are packed, marked and numbered including weight and dimensions of each package.  It is useful for customs at the time of examination and warehouse keeper of buyer to maintain inventory record and to effect delivery. It have many details common from invoice but it does not indicate unit rate value of goods. The exporter or his/her agent, the customs broker or the freight forwarder, reserves the shipping space based on the gross weight or the measurement shown in the packing list.

37 Packing List Customs uses it as a check-list to verify:
the outgoing cargo (in exporting) and the incoming cargo (in importing). Basic functions of Packing List are: To confirm the contents of a shipment as it left the exporter’s premises. To indicate weights, measures and the piece count (i.e. the number of cartons or cases) in that shipment. It is prepared in 7-10 copies or as per the requirement.

38 Inspection Certificate
“Certificate of Inspection” is issued by the Inspection Agency concerned certifying that the consignment has been inspected before shipment as per the requirements of the Exports (Quality Control and Inspection) Act, 1963. It satisfies the conditions relating to quality control and inspection as applicable to it and is certified export worthy. This certificate is required: by customs before allowing shipment of goods or by a banker to negotiate the documents. This certificate bears cross references of invoice or contract number.

39 Inspection Certificate
Inspection can be done by Inspection Agency appointed by the Government of India, i.e. Export Inspection Agency, Textile Committee, Central Silk Board etc. Inspection Agency may also be nominated by importing countries’ Government i.e. SGS and OMIC by some African Countries. Sometimes buyer himself appoints an independent private inspector to inspect the goods. If an inspection is a part of transaction, then exporter is required to arrange for necessary inspection. It can be a certificate of quality, weight, analysis, or the like.

40 Certificate of Origin [COO]
It is a certificate indicating the fact that the goods which have been exported have originated or manufactured in a particular country. So it is a sort of declaration testifying the origin of export. It is normally required by an importer to clear goods from the customs. For political and social reasons, it is insisted by Customs Authority of importing country before goods are allowed to enter in the country. It helps the importer to take an advantage in duty concession, if any. For e.g. goods imported under Free Trade Agreement.

41 Certificate of Origin [COO]
On the basis of COO, Customs can ensure that certain prohibited goods of particular countries are not imported. It also ensures that goods have not been reshipped by a seller who has brought them into his own country from some other place of origin. It is sent to the importer by the exporter. It is issued or signed by an independent official organization, such as a Chamber of Commerce, on prescribed form.

42 Certificate of Origin These are often required:
to meet Customs requirements in the importing state to comply with Banking requirements for other official and commercial reasons. There are two categories of Certificate of Origin : 1. Preferential Certificate of Origin and 2. Non-preferential Certificate of Origin

43 Preferential Certificate of Origin
It entitles preferential treatment in duty in the importing country. These certificates are governed by rules of origin which are always part of Preferential Trading Agreements entered into between two or more countries. As far as India is concerned the following agreements are noteworthy: Generalised System of Preferences (GSP) SAARC Preferential Trading Agreement (SAPTA) Asia- Pacific Trade Agreement (APTA) India-Sri Lanka Free Trade Agreement (ISLFTA)

44 Preferential Certificate of Origin
Some of the agencies which are authorised to issue PCOO are: Export Inspection Agencies – All products. Directorate General of Foreign Trade & its regional offices - All products. Spices Board, Ministry of Commerce & Industry - Spices and Cashewnuts Central Silk Board through 8 regional offices all over India - Silk Products. Coir Board – Coir and Coir Products. Textile Committee - Textiles and madeups

45 Non-preferential Certificate of Origin
It evidences the origin of goods and do not bestow any right to preferential tariffs. The Government has also nominated certain authorised agencies to issue Non Preferential Certificate of Origin in accordance with Article II of International Convention Relating to Simplification of Customs formalities.

46 Shipping bill Shipping Bill is an important document required to seek permission of customs to export goods by Sea/Air. It is prepared by the exporter and submitted to the Customs. The exporter of any goods has to file a “SHIPPING BILL” as an entry for the purpose of export by air or sea and a “BILL OF EXPORT” in respect of export by land. Cargo will be allowed to be carted to Dock/Port sheds only after stamping and passing of the shipping bill by customs authorities. The exporter has to sign a declaration in the Shipping Bill regarding the truth of its contents.

47 Shipping bill Shipping Bill normally contains:
the name and address of the importer/consignee and exporter, invoice number and date, name of vessel carrying the goods, name of master or agents, port at which goods are to be discharged, country of final destination, description of goods, quantity details of each case, value of the goods as defined in the Sea Customs Act, number of packages with total weight, marks and numbers, etc.

48 Shipping bill Types of Shipping Bills:
FREE SHIPPING BILL: Used for export of goods which neither attract any Export duty/cess nor entitled to any Duty Drawback DUTIABLE SHIPPING BILL: Used when export goods are subject to Export Duty/Cess. Duty is charged either on quantity basis (Fixed amount per kg. or per Metric tonne) or on certain percentage of assessable value. DRAWBACK SHIPPING BILL: Used when Duty Drawback is to be claimed. SHIPPING BILL FOR SHIPMENT EX-BOND: Used when the goods are to be exported which have been imported earlier and kept in bond prior to re-export.

49 Shipping bill Types of Shipping Bills:
DEPB SHIPPING BILL: When DEPB benefit is to be claimed. DEEC SHIPPING BILL: This shipping bill is used for export of goods under Advance Authorisation (Duty exemption scheme). DEEC CUM DRAWBACK SHIPPING BILL: This shipping bill is used for export of goods where both the schemes Duty Exemption as well as Drawback are to be taken into account.

50 Shipping bill Shipping bill is required to be submitted in quadruplicate. If Drawback/DEPB claim is to be made, one additional copy should be submitted. Copies of Shipping Bill are as under: Customs Copy: For record of Customs Exporter’s Copy: For record of Exporters/ Exporter may forward it to shipping company. Export Promotion Copy: For office of DGFT. This copy is the most important document for claiming duty Neutralisation/Exemption benefits plus export incentives wherever applicable. Exchange Control Copy: For negotiating the export documents in bank. It is Proof of export for exchange purposes. DEPB Copy: For use in the import cell of customs for registration of licence.

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

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

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

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

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

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

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

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

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

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

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

62 Bill of Exchange When a BE is drawn on foreign firm it is termed as a foreign draft or bill of exchange. It is prepared either in an international currency or Indian rupees depending on the terms of the contract. Accordingly, the bill is known by the name of currency in which it is drawn. e.g. a bill drawn in US dollars is known as a “Dollar Bill” and when drawn in Rupees, it is termed as “Rupees Bill”.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

109 Terms of Payment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

132 Import Procedure

133 Customs Duty Calculation

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

135 List of Customs Rules and Regulations

136 List of main Acts, Rules and Regulations under Customs

137 List of main Acts, Rules and Regulations under Customs

138 Import Clearance Procedure

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

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

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

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

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

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

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

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

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

148 Export Clearance Procedure

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

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

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

152 Quadruplicate copy of ARE – [Green]
Types of ARE form and their relevance Quadruplicate copy of ARE – [Green] Retained by excise officers at range office, generally retained by them when they come for sealing of Export Cargo.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

171 Various Export Promotion Schemes

172 Export and Trading Houses

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

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

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

176 Focus Market Scheme [FMS]

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

178 Duty Exemption/ Remission Scheme

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

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

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

182 Advance Authorisation

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

184 Advance Authorisation
Exemption from payment of Basic Customs Duty Additional Customs Duty Education Cess Anti-dumping Duty if any Safeguard Duty if any

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

206 Corresponding Customs Notifications
91/2004-CUSTOMS dated 10th September, Advance Authorisation for deemed export 93/2004-CUSTOMS dated 10th September, Advance Authorisation 94/2004-CUSTOMS dated 10th September, Advance Authorisation for Annual Requirement

207 Duty Free Import Authorisation

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

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

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

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

212 Duty Remission Scheme

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

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

215 Duty Entitlement Passbook Scheme

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

217 DEPB Additional customs duty / Excise Duty and Special Additional Duty paid in cash or through debit under DEPB may also be adjusted as CENVAT Credit or Duty Drawback as per DoR rules The DTA supplier can claim DEPB, in case where supplies are made to SEZ Developer/SEZ units and payment received from Foreign currency account of SEZ Developer/SEZ unit. DEPB and/or items imported against it are freely transferable. Transfer of DEPB shall however be for import at specified port, which shall be the port from where exports have been made.

218 DEPB Transferable DEPB will be issued only where the payment is received or shipment is made against confirmed irrevocable letter of credit or bill of exchange is unconditionally Avalised/ Co-Accepted/ Guaranteed by a bank and the same is confirmed by the exporters bank and certified by the bank in the relevant Bank certificate of export and Realisation. In other cases, Non-transferable DEPB will be issued. Once the export proceeds received, the same DEPB shall be made transferable.

219 DEPB Time period: The application for obtaining DEPB shall be filed
within a period of twelve months from the date of exports or within six months from the date of realization or within three months from the date of printing/ release of shipping bill, whichever is later, in respect of shipments for which the claim have been filed.

220 DEPB Customs Verification:
Shipping bills issued before and non-EDI Shipping bills will be verified by Customs before allowing import. In case of EDI shipping bills issued on or after from EDI ports which are being transmitted electronically by Customs to DGFT, the DEPBs issued shall be sent to Customs at the port of registration through an electronic message exchange system and the DEPB shall be registered at the port of registration electronically. No verification of shipping bills against which such DEPBs have been issued, will be required before allowing imports against these DEPBs.

221 DEPB Present Market Value:
If DEPB rate is 10% or more, the amount of credit against export product should not exceed 50% of the Present Market Value (PMV) and a declaration to this effect has to be given on the Shipping Bill at the time of making the shipment under DEPB scheme. The PMV consists of applicable excise duties, sales tax, octroi, etc and therefore normally 30% more than FOB value of exports.

222 DEPB Value Cap: There is a system of value cap where irrespective of the value realized against per unit quantity of export product, the DEPB is given only upto a specified value. Let us say, the value cap is Rs. 30/kg and the rate of DEPB is 10%. Even if exporter achieves a rate of Rs. 40 FOB/kg, he would not be entitled to claim DEPB on Rs. 40/-as value cap restricts such entitlement at Rs. 30/kg.

The credit entitlement is expressed as a percentage of FOB value and therefore it represents the amount of duty credit available for debit in Rupee terms. Since DEPB is not a licence but an instrument of duty credit, it is free of nexus with respect to item exported and item imported. Contd……

It is also possible that an exporter of readymade garments gets his DEPB at a specified rate and sells it to another person who might import chemicals by using DEPB for debit of duty. Hence, acceptability of DEPB is higher compared to any other instrument. DEPB offers flexibility because it can be utilized for debit of duty against any freely permissible item.

Since calculation of DEPB rate is not based on the actual customs duty lost, it may not be compatible with WTO rules. With increasing exports the amount of DEPB also goes up. To this extent, the customs have to forego actual duty receipts in cash.

226 Corresponding Customs Notification
89/2005-CUSTOMS dated 4th October, 2005

227 Duty Drawback

228 Duty Drawback Meaning & Scope
“Duty Drawback” in relation to the export of indigenously manufactured goods, means refund of duties paid on :- Raw materials, Component parts, and Packing materials. consumed in the production and export thereof and now also on goods processed or on which any operation has been carried out in India. These duties may be duties of Customs paid on imported materials and / or duties of Central Excise paid on indigenous materials. Drawback is not admissible in respect of duty paid on goods exported under claim of rebate of duty in terms of Rule 18 of Central Excise Rules, 2002.

229 Duty Drawback No Drawback where value addition is Negative
If the total foreign exchange spent on inputs used in the goods exported is more than the F.O.B. value of the exports, them no drawback will be paid. No Drawback if Sale proceeds not realised within Time Limit Newly inserted rule 16A of the Customs & Central Excise Duties (Drawback) Rules, 1995 has made a provision for recovery of amount of drawback where export proceeds are not realised within the period allowed under the Foreign Exchange Regulation Act, 1973 including any extension of such period.

230 Duty Drawback Drawback not Mandatory
Under Section 75 of the Customs Act, 1962, it is discretionary with the Central Government to allow drawback on goods manufactured in India and exported outside India. Therefore, it cannot be said that it is mandatory for the Government to grant drawback on all goods manufactured in India for export out of India. Drawback not Admissible if Cenvat Availed of In case where exporters has availed CENVAT credit under Rule of Cenvat Credit Rules, 2002, they will not get benefit of duty drawback on Central Excise Allocation.

231 Duty Drawback Types of Drawback Rate Determination
All Industry Rate of Drawback The one which is based upon determination of average incidence of duties suffered on inputs used in the manufacture of the product exported as manufactured generally, such rates of Drawback which are determined in terms of Rule 3 of Drawback Rules, 1995 are known as “All industry Rates” of Drawback.

232 Duty Drawback Types of Drawback Rate Determination Brand Rate
The second provision seeks to give relief of actual amount of duties suffered on the inputs (not rebated/ relieved otherwise) used in the manufacture of export product of specified description/ characteristics of a particular manufacturer. This rate determination is known as Brand Rate fixation.

233 Duty Drawback Types of Drawback Rate Determination Special Brand Rate
Where any manufacturer/exporter finds that the All Industry Rate of Drawback fixed for any class of goods is less than 4/5th of the duties paid on the materials or components used in the production/manufacture of the goods he can make an application for fixation of an appropriate rate of duty drawback for his product of specified description/characteristic.

234 Duty Drawback Procedure for fixation of Brand Rate
A new procedure has been introduced for fixation of brand rate via CBEC Circular No. 14 dtd Further amendments have been made to this circular via the following circulars: 83-CBEC dtd 89-CBEC dtd 97-CBaEC dtd 108-CBEC dtd

235 New Duty Drawback Rates
The New Drawback Rates have been notified vide Notification No. 68/2007-Cus. (NT) DTD As per Sr. No. 4 of this Notification, the new rates announced will come into force on 18th day of July, 2007. The rates which would be made applicable retrospectively w.e.f are only for specified entries and not for every single entry covered in the Notification. List of these entries is provided in the above Notification [Sr. No. 4].

236 Export Promotion Capital Goods Scheme

237 Export Promotion Capital Goods Schemes [EPCG]
This scheme allows import of capital goods and spares at concessional rate of duty of Customs Duty] coupled with export obligation equivalent to 8 times the duty saved amount to be completed in 8 years.

238 EPCG In case CVD is paid in cash on imports under EPCG, the incidence of CVD would not be taken for computation of net duty saved provided the same is not Cenvated.

239 EPCG Imports under EPCG: The capital goods, including
spares (including refurbished/reconditioned spares), tools, jigs, fixtures, dies and moulds. Second hand capital goods without any restriction on age may also be imported under the EPCG scheme.

240 EPCG Imports under EPCG: Import of Spares:
Spares (including refurbished / reconditioned spares), tools, spare refractories and catalyst for existing plant and machinery (imported earlier, under EPCG or otherwise) is allowed to be imported subject to an export obligation equivalent to 8 times of duty saved to be fulfilled in 8 years reckoned from Authorisation issue date.

241 EPCG Imports under EPCG: Import of spares:
The application shall contain list of plant/ machinery installed in the factory/ premises of applicant, duly certified by Chartered Engineer or Jurisdictional Central Excise Authorities. EPCG Authorisation must indicate the following: Name of plant/machinery for which spares are required. Value of duty saved allowed under the Authorisation. Description of product to be exported with value of export obligation as per the Policy.

242 EPCG Imports under EPCG: Import of spares:
The installation certificate shall be submitted by the importer within a period of three years from the date of import. [provision inserted vide PN NO. 22/2007 (RE) DTD ]. At the time of final redemption of export obligation Authorisation holder will have to submit certificate from the Independent Chartered Engineer confirming the use of spares, tools, spare refractories and catalysts in the installed capital goods on the basis of stock & consumption register maintained by Authorisation holder.

243 EPCG Eligibility: The scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. Conditions for import of Capital Goods: Import of capital goods is subject to Actual User condition till the export obligation is completed.

244 EPCG Incentives for Fast Track Companies:
In cases where the Authorisation holder has fulfilled 75% or more of the export obligation under the Scheme (including average level of exports) in half or less than half the original export obligation period specified in the Authorisation, the remaining export obligation is condoned and the Authorisation redeemed by the licensing authority concerned.

245 EPCG Indigenous Sourcing of Capital Goods
A person holding an EPCG Authorisation may source the capital goods from a domestic manufacturer instead of importing them. The domestic manufacturer supplying capital goods to EPCG Authorisation holders are eligible for deemed export benefits Advance Authorisation for critical components or raw materials or Deemed Export Drawback. and Refund of terminal excise duty. The domestic sourcing from EOU unit is also permitted. Such supply by EOU will be counted for the purpose of fulfillment of NFE.

246 EPCG Fulfillment of Export Obligation:
Export Obligation is 8 times of duty saved amount and it is to be fulfilled over a period of 8 years. Block-wise maintenance of minimum export obligation has been dispensed with in the recent Annual Updation of FTP.

247 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Following exports is to be considered for fulfillment of EO Export obligation shall be fulfilled by export of goods, manufactured / services rendered by the applicant. [There is no co-relation to be established] Production co-relation with imported plant and machinery under EPCG under EPCG is no more required. Direct and third party exports. Export proceeds to be realized in freely convertible currency except for deemed exports. Contd………

248 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Maintenance of Average: The export obligation under the scheme has to be, over and above, the average level of exports achieved by Authorisation Holder in the preceding three licensing years. Such average would be the arithmetic mean of export performance in last 3 years. However, certain categories such as handicraft, handlooms, cottage and tiny industries, agriculture, etc. except services are exempted from maintenance of average as per the provision of Para of HBP V1. Contd………

249 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Export obligation may also be fulfilled by exports of group company which has EPCG Authorisation. However, in such cases, additional export obligation imposed shall be over and above average exports achieved by unit / company / group company in preceding three years, despite exemption in Para of HBP v1. For this purpose, average would be based on previous export of goods and services put together. Contd………

250 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Shipments under Advance Authorisation, DFRC, DFIA, DEPB or Drawback scheme would also count for fulfillment of EPCG export obligation. The supplies made to the Oil and Gas sector can be counted towards discharge of EO provided the Authorisation has been issued on or before and no deemed exports benefit has been claimed on such supplies. Contd………

251 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Foreign exchange counted towards fulfillment of export obligation (over and above the average) shall not be eligible for incentives / rewards under promotional measures / schemes. Wherever more than one EPCG authorisations are issued simultaneously or concurrently, fresh EPCG authorisation would build upon last average export obligation only, notwithstanding actual achievements. Contd………

252 EPCG Conditions for Fulfillment of Export Obligation [EO]:
Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG. Payment received in rupee terms for port handling services, in terms of Chapter 9 of FTP shall also be counted for export obligation discharge. Contd………

253 EPCG Maintenance of Average Export under EPCG: Example: Let us say:
Average Exports – Rs. 20 crores Duty saved amount – Rs. 10 crores The EO is in addition to maintaining the annual average for the same or similar product. If your average is Rs. 20 crore and duty saved amount is Rs. 10 crore your total obligation would be as under: Contd…….

254 a) Average Exports X 8 (20 X 8)
Contd……. a) Average Exports X 8 (20 X 8) b) 8 times the duty saved amount (10 X 8) Total : Rs. 160 crore Rs. 80 crore Rs. 240 crore ========= To be completed in 8 years Every year you will first discharge average and then the additional EO. For e.g. – please refer following Table.

255 Contd……. Year Average to be maintained Rs. In crore
Additional export obligation Rs. in crore Actual Exports say Total exports Offered towards annual average Offered towards additional EO 1 20 22 2 25 5 40 21 4 30 10 31 11 6 35 15 Total 120 ======= 44 ======

256 Contd……. From this table you will understand that average has to be discharged first and whatever exports you do additionally, those exports would be counted towards discharge of additional EO. Suppose, you complete entire 240 crore in first six years, you will not be required to maintain annual average subsequently. There is also another provision where if you export 75% of your total exports in 4 years or less than 4 years (including average), you will not have to complete balance 25%. [Please refer para 5.11 of Foreign Trade Policy.] The following table shows how it can be done:

257 Contd……. Year Total exports effected by you say [Rs. in crore] Calculations 1 30 Average for 4 years (20 X 4) = Rs. 80 crore 75% of additional EO = Rs. 60 crore (75% of 80 crore) _____________ Total = Rs. 140 crore ======== 2 3 4 50 ----- 140 ==== If your EO is discharged as above, you can redeem your case in the 5th year itself.

258 EPCG Extension of Export Obligation Period:
1st Extension up to 2 years – subject to payment of composition fees of 2% of the total duty saved. OR an enhancement in EO imposed to the extent of 10% of the total EO. 2nd Extension up to 2 years – subject to condition that 50% of duty payable in proportion to the unfulfilled export obligation is paid by the Authorisation holder to the Customs authorities before an endorsement of extension is made on the EPCG Authorisation by the Regional authorities.

259 EPCG In case the firm is still not able to complete the export obligation the duty already deposited will be deducted from the total duty plus interest to be paid for EO default. Waiver of EO may be considered where, because of force majeure or other unforeseen circumstances / reasons, exporter is unable to fulfill export obligation. Such requests shall be considered by a committee comprising representative(s) of DoC and DoR under DGFT. Decision of this committee shall be notified by DoR for implementation.

260 EPCG Monitoring of Export Obligation:
Progress report on fulfillment of EO is to be submitted by 30th April every year. Regional authority will issue partial EO Fulfillment Certificate to the extent of EO fulfilled in a particular year.

261 EPCG Maintenance of Records
Every EPCG Authorisation holder will have to maintain, for a period of 3 years from the date of redemption, a true and proper account of the exports/supplies made and services rendered towards fulfillment of export obligation under the scheme.

262 Corresponding Customs Notification
97/2004-CUSTOMS dated 17th September, 2004.

263 Export Oriented Units [EOUs]

264 Export Oriented Units [EOUs]
Units undertaking to export their entire production of goods and services except permissible sales in Domestic Tariff Area (DTA) are known as Export Oriented Units (EOUs). EOUs are allowed to manufacture goods including repair, re-making, reconditioning, re-engineering, and rendering of services wherever applicable.

265 Export Oriented Units [EOUs]
Trading activity is however, not permitted under EOU scheme. Only project having a minimum investment of Rs.1 crore and above in plant and machinery shall be considered for establishment under EOU scheme.

266 When one should set up an EOU
Raw materials/components are mainly imported. New capital goods or second hand capital goods are to be imported/purchased and installed. Where the orientation of the company is towards export and not towards DTA sale as under the new policy DTA sale permission is limited to 50% of physical exports in value terms and therefore in order to enjoy the benefits of DTA the company must export physically. IT benefits for a New unit and IT benefits for Conversion of DTA into EOU (as per CBDT Circular No. 1 Dtd ) are to be considered. When hassle free operations are desired. (Since there is no need of applying for Authorisations like Advance Authorisation etc.)

267 Benefits of EOUs Duty free import/procurement of Raw materials
Capital goods Second hand capital goods without age limit Except items prohibited under ITC (HS) EOUs operate under system of no licence. Hence, there is no need of making separate application for Advance Authorisations, which ultimately results into hassle free operations.

268 Local Procurement under EOU
EOUs are allowed to source the materials, capital goods etc. from local supplier. The procedure to be followed is laid down in Excise Notification 22/2003-CE Dtd EOU Unit will have to obtain CT-3 to procure excise duty free materials from DTA. The local supplier will get Deemed Export Benefits. Interest on delay in refund of CST would be paid, as notified. New Appendix “14-I-O” has been added. It contains procedure in respect to outstanding export commitment under EPCG and Advance Authorisation Scheme.

269 Important Notifications
Notification No. 52/2003-Cus. dtd Exemption to specified goods imported or procure from Public/Private warehouse or from International exhibitions held in India by EOU for production or packaging or job work for export of goods and services Notification No. 22/2006-Cus. dtd Additional duty in lieu of Sales Tax/VAT – Exemption to specified goods

270 Important Notifications
Notification No. 22/2003-CE dtd Exemption to goods brought into EOU units Notification No. 23/2003-CE dtd Exemption to DTA Clearances of specified goods produced in EOU

271 Deemed Exports

272 Deemed Exports This is a special facility provided for supplies of indigenous products which can be consumed ultimately in the production of goods to be exported. The conditions are that supplied goods as it is do not leave the country but get consumed in the process of manufacture, payment for which is received in Indian Rupees or in foreign exchange. The categories eligible for deemed exports benefits are given in Para 8.2 of Foreign Trade Policy which are listed here below:


274 Important Provisions Benefits: or
These benefits are covered under Para 8.3 of Foreign Trade Policy which are as under: Advance Authorisation/Advance Authorization for Annual Requirement/DFIA. or b) Deemed Exports Drawback. c) Exemption from terminal excise duty where supplies are made against International Competitive Bidding. In other cases, refund of Terminal Excise duty will be given.

275 Important Provisions As far as (a) and (b) are concerned, these are mutually exclusive because if exemption from duty is claimed, refund cannot be claimed. Hence, deemed exporter will either claim Advance Authorisation for Intermediate supply/ Advance Authorisation for deemed exports/ DFIA or deemed exports duty drawback. Deemed exports duty drawback can be claimed on the basis of All Industry rate or on the basis of Brand rate following the procedure for fixation of brand rate. The deemed exports duty drawback is refunded by DGFT.

276 Important Provisions As far as claiming of refund of Terminal Excise Duty (TED) is concerned, the same principle applies. Terminal Excise Duty need not be paid by the deemed exports supplier if the supplies are given to EOU units under exemption notification no. 22 dtd (which is commonly known as CT-3 procedure) or when supplies are made to Advance Licence holder under excise notification no. 44 dtd In all other cases, deemed export suppliers have to pay Terminal Excise duty and claim refund, except when supplies are made against international competitive bidding. If the recipient units take CENVAT credit of terminal excise duty, then also the Govt. will not grant refund.

277 Important Provisions In case of deemed exports duty drawback as well as refund of terminal excise duty, both are to be claimed from licensing authorities alone. Deemed exports, per se, are monitored by DGFT and Excise and not by Customs. In case of EOU, Refund of Terminal Excise Duty and Duty Drawback must be claimed from the concerned Development Commissioner.

278 Supply to SEZ Developer/SEZ Unit

279 Supply to SEZ Developer/SEZ Unit
Rule 30 - Procedure for procurements from the DTA: The supplies from DTA to a SEZ unit, or to SEZ developers for their authorized operations inside a SEZ, may be treated as physical exports. Supplies from DTA to SEZ are exempted from payment of any Central Excise duty under Rule 19 of Central Excise Rules, [Under Bond] Similarly, such supplies are eligible for claim of rebate under Rule 18 of Central Excise Rules, 2002 subject to the fulfillment of conditions laid there under. The provisions relating to exports under Central Excise Act, 1944 and rules made there under may be applied, mutatis-mutandis, in case of procurement by SEZ units & SEZ developer from DTA for their authorized operations.

280 Procurement within India [Rule 30] From DTA unit [Sub-Rule 1 to 11] International Exhibition held in India [Sub-Rule 13] Other SEZ Unit [Sub-Rule 15] (1) (3) (5) Bonded Warehouse [Sub-Rule 12] Procurement From EOU/ STP/EHTP/BTP [Sub-Rule 14] (2) (4)

281 DTA unit will clear the goods from his premises:
Step 1: DTA unit will clear the goods from his premises: Where export benefits are not availed Where export benefits are availed On the basis of ARE-1 Clearance will be on the basis of 1. ARE-1, 2. Bill of Exports

282 Contd……… Step 2: Execution of Bond/LUT as applicable in case of normal exports Step 3: Before arrival of goods, Authorised Officer [AO] assess the ARE-1 and/or Bill of Exports, as per the instructions, procedures, including examination norms applicable to export goods. It is mandatory at this stage to check whether goods are required for authorised operations by the SEZ unit or SEZ Developer with reference to the Letter of Approval [LOA].

283 Contd……… Step 4: On arrival of goods into from DTA to SEZ Gate,
Authorised Officer will examine the goods in respect of particulars given in the ARE-1, invoice, Bill of Export and packing list and also as per the examination norms laid down in respect of export goods in cases where the goods are being procured under claim of an export entitlement.

284 Contd……… Step 5: ARE-1 and/or Bill of Exports, as endorsed by AO is
treated as ‘proof of export’. After the goods are admitted in the SEZ, the copy of such ARE-1 and/or Bill of Export is to be submitted to the Juris. Central Excise Officer of DTA supplier, within 45 days.

285 Supply to SEZ Developer/SEZ Unit
Procedure in case where goods are procured from a DTA, who is not registered with the Central Excise authorities, or is a trader or merchant exporter: The above procedure will be applicable mutatis mutandis, except that the goods are to be brought to the SEZ under the cover of an Invoice and the ARE-1 will not be required. The SEZ Unit/Developer may also procure goods from DTA without availing exemptions, drawbacks and concessions on the basis of invoice or transport documents, issued by the supplier; In this case, invoices or transport documents are to be endorsed to the effect that no exemptions, drawbacks and concessions have been availed on the said supplies.

286 “Where ignorance is our master, there is no possibility of real peace”
Thought for the Day… “Where ignorance is our master, there is no possibility of real peace” Shri Dalai Lama

287 Thank You Thank You Vaibhav Nagarkar
Generation Next Business Consulting Mumbai: A-203, Everest Chambers, Next to Star TV Office, Near Marol Naka, Andheri-Kurla Road, Andheri (East), Mumbai – Tel: / / Fax: Pune: EPI Centre, Opp. Indsearch, Law College Road, Pune Tel:(+91) Fax: (+91) Thank You Thank You


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