EXPORT DOCUMENTATION AND PROCEDURES
Posted on:1/2/2006
Written By: P.J. SAJI MON
| INDIAN RULES & PROCEEDURES OF EXPORT AND DESCRIPTIONS TO INTERNATIONAL BUSINESS TERMS FOR NEW EXPORTERS AND STUDENTS OF INTERNATIONAL BUSINESS. |
EXPORT DOCUMENTATION AND PROCEDURES.
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Author:
P.J. Sajimon. M.B.A, P.G.D.C.A, D.B.S
I.C.F.A.I UNIVERSITY, Campus Programs, 403-A, 4th Floor, Shyam Anukampa, Opp: H.D.F.C Bank, C-Scheme, Jaipur-1, India. Mobile: 98280-11760
TABLE OF CONTENTS
Contents Page
Acknowledgement 2
Introduction 4
1.New step to start an export business 5
2.The Sequential Steps Towards Export 11
3.Export Documentation 17
Commercial Docs 22
Insurance Docs 23
Financial Docs 25
Third Party Docs 28
Documents Required By Exchange Control 30
4. International Business & Containerisation 31
5. World and Indian economy 38
Indian economy 41
Appendix 45
INTRODUCTION
India, the world’s largest democracy with world’s second highest population and 7th largest area is also the 4th largest economy in terms of purchasing power. India ’s richness and diversity of culture, geographic and climatic conditions, natural and only few other countries in the world match mineral resources. One of India’s important assets is its vast reservoir of skilled manpower. India’s enduring institutions, rooted in the principles of democracy and justice.
India’s known strength in handicrafts, gems & Jewellery, Apparels, software and IT and tremendous e-commerce potential ensures progressive up trend in growth of the Indian economy. The Government’s current Import & Export policies offer a more investor friendly economic environment and are geared towards more investment in promoting Import and export Trade. These measures have had a significant thrust on promoting the development of infrastructure facilities in various parts of India , Like Export Promotion Zones etc.
CHAPTER-1
NEW STEP
TO START AN EXPORT BUSINESS
The first and foremost thing is that one has to form a Company as per the Indian Rules and regulations. The Company can be Proprietorship, Partnership, Co-operative society, Trust, Private limited Company or Public limited Company. A Brief description of different set-up is as under: -
PROPRIETORSHIP/SOLE TRADERSHIP:
The sole trader is a person who carries on business exclusively by and for him. The leading feature of this kind of concern is that the individual assumes full responsibility for all the risks connected with the conduct of the business. He is not only the owner of capital but is usually the organizer and manager and takes all the profits, responsibility for losses. There is no legal formality or need for registration to commence the business provided it is a lawful business.
PARTNERSHIP FIRM:
Partnership has two or members/persons but not more than 20 and 10 in the case of banking business. Each one has agreed to share the profit and loss of the business in a definite proportion. The business is carried on by all or any one of them acting for all. It is governed under the Indian Partnership Act, 1932. Partner should be a person competent to enter into a contract and business should be legal. Partnership can be created orally or written. Though the registration is not legally compulsory but registration can be effected at any time by sending a statement in the prescribed form with prescribed fee to the Registrar of Firms of the locality. Every partner is jointly and severally liable for all acts of the firm.
JOINT HINDU FAMILY FIRM (H.U.F):
A joint Hindu family carried on a business inherited from its ancestors. It is governed by Hindu Law. The head of the family, the Karta, has full authority. It does not require registration. The composition changes by births, deaths, marriages and divorces in the family. The shares of the members are not defined. The members are liable only to the extent of their share in the family business but the head of family has unlimited liability.
TRUST:
The business is carried on generally for the benefit of minors, persons of unsoundmind, handicapped etc. Two trustees are appointed. Trust deed is written and registered with the Registrar of Trust of the State.
CO-OPERATIVE SOCIETY:
Minimum 7/10 persons competent to enter into a contract are required to form a Co-operative society. It is a voluntary organization. It can be registered with the Registrar of Co-operative societies for carrying out lawful business. Co-operative Societies Act governs it. It is advantageous from taxation point of view, e.g. Profit is distributed amongst members in the predetermined ratio after transferring of 25% of profit to Reserves.
PRIVATE COMPANY:
A minimum of two and maximum of 50 persons are required to form a private company. It may commence business on grant of certificate of Incorporation by the Registrar of Companies on receipt of Memorandum of Association and Article of Association (with certain prescribed restrictions) along with prescribed fee. It needs to have two Directors. It may be limited by shares and or by guarantee. Company has separate entity from its members. The Companies Act, 1956, governs it.
PUBLIC COMPANY
A minimum of seven persons required forming a Public Company
After obtaining Certificate of Incorporation, it has to obtain Certificate of Commencement of Business for commencing business. These certificates are issued by Registrar of Companies on filling certain documents, such as Memorandum of Association and Article of Association, Address of Registered office, Approval for Name, Statutory declaration, along with prescribed fee, it needs to have a minimum of three Directors. It may be limited by shares and or by guarantee or with unlimited liability. The Companies Act, 1956, governs it.
LETTER HEAD:
Once the type of set up has been decided, the next step is to print letterhead. The entrepreneur may entrust the job to commercial artist to design the letterhead and logo of the company. The size of the letterhead should be “A-4” as per international practice.
RUBBERSTAMP:
As soon as the name of the company is decided, a Rubber Stamp of the company is to be made.
BANK ACCOUNT:
The Company now has to open a Current Account in any Commercial Bank. While opening account, the entrepreneur may see the facilities, particularly Foreign Exchange transaction facilities in the Bank. The selection of bank is very important, particularly keeping in view of the long-term relations to be established not only with the concerned heads of the Foreign Exchange Department but also with the staff for getting prompt services.
PERMANENT ACCOUNT NUMBER (P.A.N ):
The Company now has to apply for a permanent (Income Tax) number from the local office or via designated agencies of Income tax department, in the prescribed format along with necessary documents and Fee. It will help you to forward with a smooth business without any type of taxation related problems.
IMPORTER- EXPORTER CODE NUMBER (IEC):
Every person (whether an individual or firm or company etc.) importing or exporting goods into or from India will require a Code Number unless specifically exempted by the Chief Controller of Imports and Exports. The customs authority will not allow any person to import or export goods into or from India unless such person holds a valid Importer-Exporter Code Number. The Concerned Regional Licensing Authority, under whose jurisdiction the applicant’s firm is located, will allot code number.
Application for allotment of IEC should be made in triplicate in the prescribed form duly accompanied by Bank receipt/Demand draft evidencing payment of fee along with the following documents:
A) A) Xerox of income tax PAN.
B) B) Certificate from the banker in the form as mentioned in the IEC application form.
BUSINESS IDENTIFICATION NUMBER (BIN):
Application for allotment of BIN should be made in duplicate in the prescribed form duly to the Concerned Regional Licensing Authority, under whose jurisdiction the applicant’s firm is located or also can made the application online directly trough the website DGFT to have BIN.
S.S.I REGISTRATION (TINY UNIT):
All exporters engaged in manufacturing process and whose investment in plant and machinery is less than five lakhs can file an application for Registration as a Small Scale Industrial unit. The SSI unit registration benefits you in many kinds in your future business. It attracts levies and priority in bank loan interest/electricity rates etc.
SALES TAX REGISTRATION (TIN):
For producing export goods, manufacturers exporters/traders, should get themselves registered with the Local Sales Tax Department of the State/Union Territory where they are located.
CENTRAL EXCISE (RBA):
All manufacturer-exporters and merchant-exporters engaged in exporting excisable goods under “bond” are required to open and maintain a Running Bond Account (RBA) with the Maritime Collector of Central Excise. However, SSI units whose clearances don’t exceed Rs.25 lakhs consequently are exempt from excise duty.
REGISTRATION WITH EXPORT PROMOTION COUNCILS:
The general policy in respect of the role and functions of the Export promotion Councils is given separately.
An exporter may obtain Registration-Cum-Membership Certificate (RCMC) from any one-export promotion council (EPC) relating to his main line of business. However, if the export product is such that it is not covered by any
EPC, the Regional Licensing Authority concerned thereof may issue RCMC in respect. The Federation of Indian Export Organization (FIEO) shall issue the RCMC.
The Chief Controller of Imports and Exports may, on his own motion or otherwise, direct an EPC or FIEO to register or de-register an exporter of otherwise issue such other direction to them consistent with and in order to implement the provisions of the Act, the rules and orders made in the Import and Export Policy of Ministry of Commerce, Government of India .
CLEARING AND FORWARDING AGENT (C&F/C.H.A):
Clearing and forwarding agents offer a host of services like preparation of shipping bill, getting the documents authenticated at customs after getting the consignments checked by customs officers. Some other services them are as under: -
a) a) Door to door services
b) b) Warehousing facilities
c) c) Regular air consolidation services in India
d) d) Booking of shipping space
e) e) Arrangements for insurance policies
f) f) Arrangements for shipping on board
g) g) Handling of exhibition goods, its clearance & display at pavilion.
h) h) Preparation and processing of all kinds of shipping documents
i) i) Efficient shipment tracking systems like availing of Flight details with routes and date etc.
Now the exporters have to take special attention to submit the necessary post shipment documents with his bank and concerned customs/ licensing authority for getting Licenses/drawback claims if any.
CHAPTER-2
THE SEQUENTIAL STEPS TOWARDS EXPORT OPERATIONS
1. Preliminary Stage: Procurement of all kinds of registration as mentioned above.
2. Procurement of an export order and its processing: -
a) Terms & conditions of Contract
b) Mode of payment
c) Confirmation of the order by exporter.
3. Procurement/Manufacture of goods, as per the specification of the importer, by securing Pre-shipment finance from your bank on the basis of security of L/C or Confirmed Export Order or Personal bond along with ECGC policy.
4. Clearance of Excise Authorities, from the premise of the exporter after physical verification:
a) On payment of duty and subsequent rebate or
b) Clearance under bond.
5. To fulfill the requirement of quality control and pre-shipment Inspection.
6. Dispatch of goods to the gateway port for shipment by road or Rail and requisite application to be made to the insurance company for obtaining insurance cover for various risks.
7. Completion of formalities relevant to MEP or floor price regulation, canalization, certificate of origin, ECGC cover, consular invoice, export license etc. wherever required.
8. Forwarding of shipment documents to C&F /CHA agent, along with requisite instructions including booking of space with sea-carrier whose sailing schedule and ports of call suits the exporter’s delivery commitment. The documents required by C&F agent for processing prior to shipment are: -
a) a) Commercial invoice.
b) b) Original export order.
c) c) Original copy of L/C.
d) d) Original G.R form /SDF (It is now waived off by R.B.I for shipments values less than US$ 25000).
e) e) Original AR-4A/AR-4 form with duplicate copies.
f) f) Original excise gate pass.
g) g) Packing and weight lists.
h) h) Certification of inspection.
i) i) Declaration form in triplicate.
j) j) Consular invoice where necessary.
k) k) Export license where necessary.
l) l) Endorsement regarding floor price, canalization etc. where necessary.
m) m) Purchase Memo on demand where necessary.
n) n) Railway or Lorry receipt.
o) o) Certificates of origin.
9. 9. The C&F agent takes delivery of the goods from the rail or road carrier and arranges for storage in a warehouse, till carting order is received from port authorities. In the meantime prepares the shipping bill with requisite details for customs clearance. Shipping bill along with other documents mentioned above is submitted to the export department of the Customs House, for examination.
10. 10. On clearance of the shipping bill by the Customs Authorities, the C&F agent presents the port trust a copy of the shipping bill to Shed Superintendent of the port authorities and obtains Carting order for bringing the export consignment in the transit shed for physical examination. Thereafter Dock Challan with requisite details along with assessment of Dock charges payable is prepared.
11. 11. Dock Challan and the Shipping Bill are forwarded to the preventive officer for physical examination of the goods and “Let Ship/Let Export” endorsement.
12. 12. The Stevedore, and issue of Mate Receipt by the Master or the Mate of the ship bring the cargo alongside the vessel with the help of port labour for loading on the ship.
13. 13. On payment of port charges, C&F agent obtains the Mate Receipt from the port authorities. It is then presented to the Customs Preventive Officer for certifying the fact of shipment on all copies of Shipping Bill. AR-4A/AR-4 form and other
Documents requiring post-shipment endorsement from the Preventive Officer.
14. 14. The Mate Receipt is presented usually to the Agent of the shipping company for obtaining requisite number of originals and copies of the Bill of Lading.
15. 15. The C&F agent then forwards to the exporter the following documents: -
1. 1. Full set of Bill of lading.
2. 2. Export Promotion copy of the shipping bill.
3. 3. Copies of customs invoice.
4. 4. Duplicate copy of AR-4A/AR-4 form.
5. 5. Duplicate copy of GR /SDF form (where necessary).
6. 6. Copies of commercial invoice duly attested by customs.
7. 7. Original export order.
8. 8. Original L/C.
16. 16. On receipt of these documents, the exporter sends to the importer the shipment advice and forward the following documents: -
1. 1. Non-negotiable copy of the Bill of Lading.
2. 2. Customs invoice.
3. 3. Commercial invoice.
4. 4. Packing list.
17. 17. He also files a claim with the Maritime collector of Central excise in the port town for rebate of central excise duty or for getting credit in the bond account.
18. 18. The exporter secures payment for the value of the export consignment on presentation and processing of the following documents to the negotiating bank.
1. 1. Duplicate copy G.R/SDF form.
2. 2. Bill of exchange, first and second exchange.
3. 3. Full set of Bill of Lading (clean on board), all negotiable copies and one non-negotiable copy.
4. 4. Original copy of L/C.
5. 5. Two copies of commercial invoice.
6. 6. Two copies of customs invoice, if necessary.
7. 7. Two copies of Certificates of Origin.
8. 8. Two copies of Packing list.
9. 9. Two copies of Marine Insurance Policy.
10. 10. Four copies of bank certificate.
11. 11. Additional copies of commercial invoice to be certified by the bank and returned to the exporter.
12. 12. Consular invoice, where necessary.
19. 19. The negotiating bank transmits/sent the following documents to the banker of the importer by first air mail/express courier followed by a second set of these documents by the second air mail/courier to ensure receipt of at least one set, if the other is lost in transit or delayed. (Now a day Messages through SWIFT are authorized).
1. 1. &n