EXIM & Cargo

APRESENTATION

ONEXPORT, IMPORT, CARGO

& LETTER OF CREDIT

CONTENTSINTRODUCTION TO EXPORT & IMPORT

IMPORTANCE OF EXPORT & IMPORT

INCOTERMS 2010

CARGO SHIPMENT PROCEDURES & ALLIED DOCUMENTATIONS

TERMS OF PAYMENTS

INTRODUCTION TO LETTER OF CREDIT

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INTRODUCTION TO LETTER OF CREDIT & ITS FEATURES

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INTRODUCTION TO EXPORT & IMPORT

To send goods or services across national frontiers for the purpose of selling and realizing foreign exchange.

EXPORT

To have a product (goods and services) shipped into a country or region in return of equivalent value (both money and goods).

IMPORT

In both the above scenarios…Seller (& his country) is known as ExporterBuyer (& his country) is known as ImporterExported goods or services or both are known as Product



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India's total merchandise trade stood at $794 billion in 2012, according to the Export-Import Bank of India (Exim bank).

ExportsA publication on India's trade and investment by Exim bank highlights the trend in exports moving towards southern countries, particularly in the Asia and Africa regions.India's key exports in 2012 were petroleum products which generated $56bn, followed by gems and jewellery with $47bn. Pharma products, transport equipment, machinery and readymade garments are also big exports for India. The 2012 data shows that the United Arab Emirates (UAE) was India's biggest export market, closely followed by the USA.

India’s total exports during the period from April 2011 to March 2012 stood at US$305,963.92 millions.

INDIA



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ImportsCrude petroleum is India's biggest import with $155bn spent on it in 2012. Imports of gold and silver amounted to $62bn and electronic goods and pearls and precious stones are also top import items for the country.India's top import source is China followed by the UAE, Switzerland and Saudi Arabia. The UK came in at 21st place in 2011-12 with India importing a total of $7.7bn. In the six months recorded so far for 2012-13, the UK has dropped a place and has a 1.4% share of the India's import sources.

India’s total imports during the period from April 2011 to March 2012 stood at US$489,319.49 millions.ConclusionIndia is an importing country with gross deficit of US$183,355.57 million.

INDIA



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1. A Competitive EdgeTrading your products internationally can give you an advantage over competition. This holds especially true for products that aren’t widely available overseas. As the international market for your good gets bigger, sales increase, giving you an advantage over others in your industry.2. Economies of Scale in ProductionCompanies engaging in international trade experience improved efficiency brought on by the presence of economies of scale in production. Simply put, more output can be created at lower costs bringing about major savings.3. New MarketsInternational trade can give you the opportunity to understand the varied market trends that can affect your business. It is common business saying that 95% of a company’s prospective market is situated out of the country. And it just won’t be wise to forego such a huge potential for business, leads, profits and thus business growth.



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4. Insulation From Seasonal Domestic SalesFor business concerns that offer season specific services or products, expanding operations to overseas is a perfectly viable way of staying busy and making money all year around. And staying in business all year round is a great way of outmaneuvering competitors. International trade can introduce a company to whole new foreign markets.5. Improved Return on InvestmentsSpreading your risk in foreign markets and companies means that your organization won’t only be subjected to the tribulations of the native economy. This diversification can shield their businesses from the investment risk of putting all their eggs in one basket.



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INCOTERMS 2010

International Chamber of Commerce, for the purpose of common understanding, came up with the eighth version of internationally accepted commercial terms which are still in use.These terms are known as INCOTERMS 2010, published on 1st January, 2011.



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INCOTERMS 2010

1. EXW – Ex Works (named place of delivery)The Seller makes the goods available at his/her premises. The risk of goods transfers to the Buyer from Loading onwards.

2. FCA - Free Carrier (named place of delivery)The seller delivers goods to a named airport, terminal, or other place where the carrier operates. Costs for transportation and risk of loss transfer to the buyer after delivery to the carrier.

3. CPT – Carriage Paid To (named place of destination)The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier at place of shipment in the country of Export. Buyer fully responsible for arranging carrier payment of freight for same Export clearance in Exporting country and Import clearance in Importing country.



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4. FAS – Free Alongside Ship (named port of shipment)The seller delivers when the goods are placed alongside the buyer's vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. The FAS term requires the seller to clear the goods for export.

5. FOB – Free on Board (named port of shipment)The seller must advance government tax in the country of origin as commitment to load the goods on board a vessel designated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel.

6. CFR – Cost and Freight (named port of destination)Seller pays the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is NOT included. This term is formerly known as CNF (C&F, or C+F).



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7. CIF – Cost, Insurance and Freight (named port of destination)Exactly the same as CFR except that the seller must in addition procure and pay for the insurance.

8. DAT – Delivered at Terminal (named terminal at port or place of destination)This term means that the seller covers all the costs of transport (export fees, carriage, insurance, and destination port charges) and assumes all risk until after the goods are import duty/taxes/customs costs. Buyer is responsible for unloading.

9. DAP – Delivered at Place (named place of destination)The seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place. Duties are not paid by the seller under this term.



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10. DDP – Delivered Duty Paid (named place of destination)Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading. With the delivery at the named place of destination all the risks and responsibilities are transfered to the buyer and it is considered that the seller has completed his obligations.



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CARGO SHIPMENT PROCEDURES AND ALLIED DOCUMENTATION

EXPORT-IMPORT PROCESS



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1. Contract/ Letter of Credit/ Purchase OrderThis is a document containing instruction to the exporter by the importer, and exporter’s acceptance on the same that, if the beneficiary fulfills the stipulated conditions of providing the goods under certain conditions and up to certain amounts, the importer shall purchase the exported goods.

2. InvoiceIt is a document which shows the total amount of the goods and the description of goods.

3. Packing listIt is a detailed document provided by the exporter that spells out how many containers there are in the shipment and which merchandise is contained in each container.

EXPORT DOCUMENTATION



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4. Forms AR-4/AR-4AThese forms are meant for applying for the removal of excisable goods for export by sea/post. Form AR-4 is used for applying for excise inspection at the factory and form AR-4A is used when goods are to be exported under a claim for rebate of excise duty or under bond.

5. Form SDFThis document is submitted to customs authorities by exporters verifying that shipping bills are accurate and complete. An exporter confirms on form SDF that the amount paid by the buyer is the same as the full export value stated on the shipping bill.




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6. Certificate of OriginA document provided by the exporter’s chamber of commerce that attests that the goods originated from the country in which exporter is located.

7. Inspection CrtificateThis is a document clarifying the goods have passed Indian customs department’s inspection.

8. Certificate of insuranceA document providing by the insurance company of the exporter that the goods are insured during their international voyage.




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9. Shipping billIt is issued by the custom authority. Shipping is the main document of the basic of which the custom permission is given. After the shipping bill is stamped by custom, then only the goods are allowed to be enter to the deck. It is prepared by EDI system or manually system.

10. Bill of lading A generic term used to describe a document issued by the carrier to the shipper.

11. Bank Realization CertificateAfter the payment is received in return for the exports made, BRC is submitted to the Exporter’s bank. It is a declaration to the RBI that such payment is received for exports made under such Shipping Bill.




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1. Bill of EntryBill of entry is one of the major import document for import customs clearance. Bill of Entry is the legal document to be filed by CHA or Importer duly signed. Bill of entry must be filed within thirty days of arrival of goods at a customs location.

2. Commercial InvoiceInvoice is the prime document in any business transactions. Invoice is one of the documents required for import customs clearance for value appraisal by concerned customs official. Assessable value is calculated on the basis of terms of delivery of goods mentioned in commercial invoice produced by importer at customs location.

IMPORT DOCUMENTATION



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3. Bill of Lading / Airway billBill of lading under sea shipment or Airway bill under air shipment is carrier’s document required to be submitted with customs for import customs clearance purpose. Bill of lading or Airway bill issued by carrier provides the details of cargo with terms of delivery.

4. Import LicenseImport license may be required as one of the documents for import customs clearance procedures and formalities under specific products.




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

6. Purchase order/Letter of CreditA purchase order reflects almost all terms and conditions of sale contract which enables the customs official to confirm on value assessment. If an import consignment is under letter of credit basis, the importer can submit a copy of Letter of Credit along with the documents for import clearance.




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




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TERMS OF PAYMENTS1. Payment In AdvanceThis method does not involve any risk of bad debts, provided entire amount has been received in advance. At times, a certain per cent is paid in advance, say 50% and the rest on delivery.

2. Documentary Bills:Under this method, the exporter agrees to submit the documents to his bank along with the bill of exchange.

3. Documents Against Payment (D/P): The documents are released by Bank to the importer against payment. This method indicates that the payment is made against Sight Draft.

4. Documents Against Acceptance (D/A): The documents are released by bank against acceptance of the Time Draft i.e. credit allowed for a certain period, say 90 days.

5. Letter Of Credit (L/C):This method of payment has become the most popular form in recent times, it is more secured as company to other methods of payment (other than advance payment).

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1. Applicant (Opener)Applicant which is also referred to as account party is normally a buyer or customer of the goods, who has to make payment to beneficiary. LC is initiated and issued at his request and on the basis of his instructions.

2. Issuing Bank (Opening Bank)The issuing bank is the one which creates a letter of credit and takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker. The payments has to be made to the beneficiary within seven working days from the date of receipt of documents at their end, provided the documents are in accordance with the terms and conditions of the letter of credit.

PARTIES OF LETTER OF CREDITINTRODUCTION TO EXPORT & IMPORT


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3. BeneficiaryBeneficiary normally stands for a seller of the goods, who has to receive payment from the applicant. A credit is issued in his favour to enable him or his agent to obtain payment on surrender of stipulated document and comply with the term and conditions of the L/c. If L/c is a transferable one and he transfers the credit to another party, then he is referred to as the first or original beneficiary.

4. Advising BankAn Advising Bank provides advice to the beneficiary and takes the responsibility for sending the documents to the issuing bank and is normally located in the country of the beneficiary.



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5. Confirming Bank : Confirming bank adds its guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment/negotiation acceptance under the credit, in additional to that of the issuing bank. Confirming bank play an important role where the exporter is not satisfied with the undertaking of only the issuing bank.

6. Negotiating BankThe Negotiating Bank is the bank who negotiates the documents submitted to them by the beneficiary under the credit either advised through them or restricted to them for negotiation. On negotiation of the documents they will claim the reimbursement under the credit and makes the payment to the beneficiary provided the documents submitted are in accordance with the terms and conditions of the letters of credit.



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7. Reimbursing BankReimbursing Bank is the bank authorized to honor the reimbursement claim in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank. It is normally the bank with which issuing bank has an account from which payment has to be made.

8. Second BeneficiarySecond Beneficiary is the person who represent the first or original Beneficiary of credit in his absence. In this case, the credits belonging to the original beneficiary is transferable. The rights of the transferee are subject to terms of transfer.



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LETTER OF CREDIT



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LETTER OF CREDIT

1. Buyer and seller agree to terms including means of transport, period of credit offered (if any), and latest date of shipment acceptable.

2. Buyer applies to bank for issue of letter of credit. Bank will evaluate buyer's credit standing, and may require cash cover and/or reduction of other lending limits.

3. Issuing bank issues LC, sending it to the Advising bank by airmail or electronic means such as telex or SWIFT.

4. Advising bank establishes authenticity of the letter of credit using signature books or test codes, then informs seller (beneficiary).

PROCESS



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LETTER OF CREDIT

5. Seller should now check that LC matches commercial agreement and that all its terms and conditions can be satisfied.

6. Seller ships the goods, then assembles the documents called for in the LC (invoice, transport document, etc.).

7. The Advising bank checks the documents against the LC. If the documents are compliant, the bank pays the seller and forwards the documents to the Issuing bank.

8. The Issuing bank now checks the documents itself. If they are in order, it reimburses the seller's bank immediately.

9. The Issuing bank debits the buyer and releases the documents (including transport document), so the buyer can claim the goods from the carrier.

PROCESS

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1. Revocable Letter of Credit L/cA revocable letter of credit may be revoked or modified for any reason, at any time by the issuing bank without notification. It is rarely used in international trade and not considered satisfactory for the exporters but has an advantage over that of the importers and the issuing bank.

2. Irrevocable Letter of Credit L/cIn case of L/C with Irrevocable clause, it is not possible to revoke or amend a credit without the agreement of the issuing bank, the confirming bank, and the beneficiary. From an exporter’s point of view it is believed to be more beneficial. An irrevocable letter of credit from the issuing bank ensures the beneficiary that if the required documents are presented and the terms and conditions are complied with, payment will be made.

FEATURES/CLAUSES OF LETTER OF CREDITINTRODUCTION TO EXPORT & IMPORT


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3. Confirmed Letter of Credit L/cConfirmed Letter of Credit is a special type of L/c in which another bank apart from the issuing bank has added its guarantee. Although, the cost of confirming by two banks makes it costlier, this type of L/c is more beneficial for the beneficiary as it doubles the guarantee.

4. Sight Credit and Usance Credit L/cSight credit states that the payments would be made by the issuing bank at sight, on demand or on presentation. In case of usance credit, draft are drawn on the issuing bank or the correspondent bank at specified usance period. The credit will indicate whether the usance draft are to be drawn on the issuing bank or in the case of confirmed credit on the confirming bank.



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5. Back to Back Letter of Credit L/cBack to Back Letter of Credit is also termed as Countervailing Credit. A credit is known as back to back credit when a L/c is opened with security of another L/c.

The parties to a Back to Back Letter of Credit are:1. The buyer and his bank as the issuer of the original Letter

of Credit.2. The seller/manufacturer and his bank.3. The manufacturer's subcontractor and his bank.

The practical use of this Credit is seen when L/c is opened by the ultimate buyer in favour of a particular beneficiary, who may not be the actual supplier/ manufacturer offering the main credit with near identical terms in favour as security and will be able to obtain reimbursement by presenting the documents received under back to back credit under the main L/c.



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6. Transferable Letter of Credit L/cA transferable documentary credit is a type of credit under which the first beneficiary which is usually a middleman may request the nominated bank to transfer credit in whole or in part to the second beneficiary.

The L/c does state clearly mentions the margins of the first beneficiary and unless it is specified the L/c cannot be treated as transferable. It can only be used when the company is selling the product of a third party and the proper care has to be taken about the exit policy for the money transactions that take place.

This type of L/c is used in the companies that act as a middle man during the transaction but don’t have large limit. In the transferable L/c there is a right to substitute the invoice and the whole value can be transferred to a second beneficiary.



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6. Transferable Letter of Credit L/cThe first beneficiary or middleman has rights to change the following terms and conditions of the letter of credit:

1. Reduce the amount of the credit.2. Reduce unit price if it is stated3. Make shorter the expiry date of the letter of credit.4. Make shorter the last date for presentation of documents.5. Make shorter the period for shipment of goods.6. Increase the amount of the cover or percentage for which

insurance cover must be effected.7. Substitute the name of the applicant (the middleman) for

that of the first beneficiary (the buyer).



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ANY QUESTIONS?PLEASE ASK………



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THANK YOU!

M A D E B Y : G H A N S H Y A M D A S S H A R M A

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