Summer Internship Project

Import and Export Documentation

At Shakti Bhog Foods Ltd.

Submitted in partial fulfillment of PGDM program

2013-15

Submitted by
Akshay Chugh
21/004
Corporate Mentor

Faculty Mentor

Mr. AnshuGautam
HOD, Import and Export Documentation

Ms. Manisha Bachhetti

Assistant Professor

Shakti Bhog Foods Ltd.

Apeejay School of Management,

NetajiSubhash Place, New Delhi

Apeejay School of Management

New Delhi
June 2014

Dwarka

CERTIFICATE

This is to certify that I Akshay Chugh Roll No. 21/004 have carried out my Summer
internship in Shakti bhog Foods Ltd. in the area of International Business. It is also
certified that the work done by me is original with due references of sources, and has not
been submitted elsewhere for the award of any diploma or degree.

_____________________
Signature
Name of the Student
Date :

_________________________
Countersigned by Faculty Mentor

Chapter 1
The Area of Internship and learning Objectives

The Area of Internship

India has 12 major ports and 185 minor/intermediate ports. Over 90 percent byvolume and 70
percent by value of Indias overseas trade, aggregate of exports andimports, is carried out
through maritime transport along its 7617 km long coast line. India has the largest merchant
shipping fleet among the developing countries and itsmerchant shipping fleet ranks 18thin the
world, in terms of fleet size. Another silver lining is the average age of the Indias merchant
shipping fleet is only 12.7 years ascompared to the international average of 17 years .but, Indias
share, sadly, constitutesonly 1.45% of the worlds cargo carrying capacity. As on April 1, 2005,
India has a total of 686 ships comprising 8.01 Million GrossTonnage (GT) and 13.28 Million
Dead Weight Tonnage (DWT). The shippingcorporation of India (SCI), the countrys largest
carrier, owns and manages 82 shipswith 2.54 million GT and accounts for 40 percent of national
tonnage. India is alsoamong the few countries that offer fair and free competition to all shipping
companiesfor obtaining cargo. There is no cargo reservation policy in India.Indian shipping has
remained a deferred subject till independence. Only after independence, the development of
shipping has attracted the state policy. The subjectof shipping, in the beginning, has been dealt
with by the ministry of commerce, till1949 and subsequently, in 1951, it has been shifted to the
ministry of transport andshipping. In 1947, the government of India has announced the national
policy onshipping, aiming at the total development of the industry. In order to accelerate
thedevelopmental efforts, the necessity for a centralized administrative organization has been
felt. Accordingly in September necessity for a centralized administrativeorganization has been
felt. Accordingly in September 1949, the directorate general of shipping with its headquarters at
Bombay has been established with the objectives of promotion and development of Indian
shipping industry.

The Import and Export Business

'Imports' means, bringing into India, of goods from a place outside India. In other words, it refers
to the goods which are produced abroad by foreign producers and are used in the domestic
economy in order to cater to the needs of the domestic consumers. India includes the territorial
waters of India which extend upto 12 nautical miles into the sea to the coast of India. Similarly,
'exports' of goods means, taking goods out of India to a place outside India. It refers to the goods
which are produced domestically and are used to cater to the needs of the consumers in other
countries. The country which is purchasing the goods is known as the importing country and the
country which is selling the goods is known as the exporting country. The traders involved in
such transactions are importers and exporters respectively.
In India, exports and imports are regulated by the Foreign Trade (Development and Regulation)
Act, 1992, which replaced the Imports and Exports(Control) Act,1947, and gave the Government
of India enormous powers to control it. The salient features of the Act are as follows:It has empowered the Central Government to make provisions for development and regulation of
foreign trade by facilitating imports into, and augmenting exports from India and for all matters
connected therewith or incidental thereto.
The Central Government can prohibit, restrict and regulate exports and imports, in all or
specified cases as well as subject them to exemptions.
It authorizes the Central Government to formulate and announce an Export and Import (EXIM)
Policy and also amend the same from time to time, by notification in the Official Gazette.
It provides for the appointment of a Director General of Foreign Trade by the Central
Government for the purpose of the Act. He shall advise Central Government in formulating
export and import policy and implementing the policy.
Under the Act, every importer and exporter must obtain a 'Importer Exporter Code Number'
(IEC) from Director General of Foreign Trade or from the officer so authorised.

The Director General or any other officer so authorised can suspend or cancel a licence issued
for export or import of goods in accordance with the Act. But he does it after giving the licence
holder a reasonable opportunity of being heard.
EXPORT
The term "export" is derived from the conceptual meaning as to ship the goods and services
outof the port of a country. The seller of such goods and services is referred to an "exporter"
whois based in the country of export whereas the overseas based buyers referred to as
an"importer". In International Trade, "exports" refers to selling goods and services produced
inhome

country

to

other

markets.In

economics,

an

export

is

anygoodor

commodity,transportedfrom one country to another country in a legitimate fashion, typically for

use intrade. Export goods or services are providedto foreignconsumersby domestic
producers.Export of commercial quantities of goods normally requires involvement of the
customsauthorities in both the country of export and the country of import. The advent of small
tradesover the internet such as through Amazon and e-Bay have largely bypassed the
involvement of Customs in many countries because of the low individual values of these trades.
Nonetheless,these small exports are still subject to legal restrictions applied by the country of
export. Anexport's counterpart is animport.
The definition of Export is when you trade something out of the country. In economics, anexport
is any good or commodity, transported from one country to another country in alegitimate
fashion, typically for use in trade.
IMPORT
The term "import" is derived from the conceptual meaning as to bring in the goods and
servicesinto the port of a country. The buyer of such goods and services is refered to an
"importer" whois based in the country of import whereas the overseas based seller is refered to as
an"exporter". Thus an import is anygood(e.g. acommodity) or servicebrought in from onecountry
to another country in a legitimate fashion, typically for use intrade.It is a good that is brought in
from another country for sale. Import goods or services are provided to domesticconsumersby
foreign producers. An import in the receiving country is anexportto the sendingcountry.Imports,
along with exports, form the basis of international trade. Import of goods normallyrequires

involvement of thecustomsauthorities in both the country of import and the countryof exportand
are often subject toimport quotas,tariffsandtrade agreements. When the"imports" are the set of
goods and services imported, "Imports" also means theeconomic value of all goods and services
that are imported. Themacroeconomicvariable usually stands for thevalue of these imports over a
given period of time, usually one year.
Import and export documentation
The process of import and export trade is very complex and to generate foreign exchange for a
country is even more complex. So it s important for economies to develop a process to simplify
and legalise the whole process of import and export transactions. And to do that certain
documents are required. This process is called import and export documentation.

Learning Objectives

To learn and understand the whole process and procedure of import and export
documentation and carefully study about how the whole business is carried out using
those documents.

To understand the relationships between banks, importers and exporters and understand
how bank and other parties deal and behave according to the different situations.

To understand the whole framework of generating foreign exchange for carrying out the
process as smoothly as possible.

To separately understand and learn what all different types of documents are needed for
the same.

Chapter 2
Profile of the Company

INTRODUCTION
Shakti Bhog is a familiar household name that spells quality and trust across millions
worldwide. Its leadership in India in the Branded Food Segment is driven by its
availability, quality and consumer awareness. The Group's mission and vision is to be
able to reach every household across the globe with its Quality Produce for a healthy
lifestyle. Shakti Bhog is a Brand Leader in India, in the branded wheat flour segment. The
company owns Asia's largest wheat milling automated facilities in Northern India. The
company has won many awards and recognitions for its quality and value added products
which focuses on Good Health.

It was in 1970 that the founder and passionate visionary, Shri K.K. Kumar began a
journey to create quality packaged food, following the footsteps of his father and
grandfather, who were into trading of food grains and pulses. Under his guidance, the
company scaled great heights and developed the branded packed food business, in such
commodities as whole wheat flour, and at a time national brands were not available. For
Mr. Kumar - convenience, good quality and trust coupled with easy availability is all that
drives a consumer. With feet in the ground, he dismisses all grandeurs I had a vision
to provide basic food products as packaged FMGC. Not so simple about 35 years back,
when the Country was still in the era of controlled economy & the benefits of Green &
White Revolutions had started to percolate. The pioneer was just doing the right thing; at
the right time in the right way. Mr. Kumar believes that nothing is better than the natural
product itself and therefore advises his team not to tamper with it.
In 2002, his eldest son Shri Siddharth Kumar, representing the fourth generation, joined
his father, and moved ahead to conquer the global arena.With a desire to enter the global
arena and a zeal for a global recognition of the brand, he set up the exports division and
started direct exports .He also expanded into other food segments like basmati rice, ready

to eat products tea, instant wheat meals and other value added products with a prime
focus on exports. He adopted latest technologies and new business models and has
aggressively spread the brand across many countries. Shaktibhog has an integral presence
in the food chain stores of the Gulf and Middle East, the USA, the UK Africa &
Australia. The legacy of simplicity continues. Says Mr. Siddharth Kumar-"in this age to
inter dependence, the Globe has shrunk to a village". Shakti Bhogs impeccable quality
products, cost effective production processes, voluminous experience of the market and
prompt deliveries has fetched the company, tremendous customer response from
overseas.

Shakti Bhog Foods Limited has grown from a family business into one of India's leading
food manufacturing and distribution company in the consumer packed food business.
With a turnover of USD 950 million, the products are available across 60 countries across
the globe, besides India. The company has diversified into 15 + food categories and is
continuously adding food products to its range for the health conscious consumers.
The current product range includes Whole Wheat Flour (Atta), Basmati Rice, Long grain
and medium grain Rice, Divss Biscuits and Cookies, Confectionery items- Choco bite,
Instant Wheat Meals, Tea, Ready to Eat Products, Clarified Butter (ghee), Gram Flour
(besan), Fine Wheat Flour (biscuit flour), Unroasted Porridge /cracked wheat, Semolina
(Sooji) and Rice Flakes (Poha).
The saga of improvement continues; better technology for quality control; better
infrastructure for market servicing & more products in the basket.
Mission To grow brands and continually provide its consumers with a range of
nutritious, tasty and quality products to help them lead healthier and happier lives.
Vision To be a world class food company with its products available to all consumers in
India as well as all countries around the world by developing a strong distribution
network and through continuous innovation, outstanding quality and service.

 Commitment to health and safety and to provide quality packaged products and
natural products to their valuable customers.
To provide basic food products as FMCG products.
Commitment to social responsibilities for a strong social fabric.
To create a culture of team work and deliver excellent products and services to the
people which would help in incremental growth of the employees and company
also.

KEY PERSONNEL:
Mr. KK KUMAR CEO and Chief Managing Director
Mr. SIDHARTH KUMAR Managing Director
Mr. SANJAY NAYYAR Senior Vice President

10

ABOUT THE CEO

He is perhaps one of the first Indian visionary entrepreneurs,who had taken up the
challenge of building a brand in the staples category at a time, when no other national
brands were available in this segment. He is Mr. K K Kumar, CEO and CMD -Shakti
Bhog Foods Limited.

Mr. Kumar, an economics graduate from Shri Ram College of Commerce in Delhi,
started his journey from his grandfathers wheat milling unit where he learned his basic
and mastered the art of milling. He observed how shopkeepers sold low quality loose
wheat flour to consumers and how some small local players had just started selling
packed wheat flour. He then decided to get into the packed food business and launched
the ShaktiBhog branded atta initially in North India. The brand picked up quite quickly as
the product was kept as natural as could be and appealed to the consumers .It out grew the
sales of even MNC s like Cargill and Hindustan Lever. Mr. Kumar rapidly extended the
product range and also manufactured gram flour(besan), semolina( sooji), porridge (
daliya), rice flakes(poha) and fine wheat flour (maida ). With a strong and loyal
distribution base, competitive margins to the trade and promotional schemes for both the
consumers and the trade, it has now spread over the whole country in the last 37 years.
Shaktibhog is now a well know household brand in India.

Mr. Kumar introduced his elder son into the business in the year 2002, who then took up
the distribution into the export markets. The NRI community abroad was a big scope
yearning for Indian made packed food products and thus Shaktibhog entered the export
market and is available in more than 50 countries. Keeping in mind the distribution
synergy, Mr. Kumar along with his team, introduced other products like Shaktibhog Tea,
Ghee, Divss range of biscuits and cookies, Shaktibhog basmati rice and started
distribution of the same in India and abroad. With an intention to make available healthy
food products to consumers who are mostly looking for easy and quick ways to fill their
stomachs , Mr. Kumar worked on developing and launching Divss biscuits and cookies -a
range of wheat and high fibre based eggless products, being distributed for the last 3 years

11

in India. Mr. Kumar has also actively participated in various social welfare causes and has
supported various NGOs working for old age homes and for the poor. He has also forayed
into the Indian electronic media with the broadcast of a health and wellness satellite
channel called the Shakti TV to guide viewers in India on their health related issues and
make them aware of the fact that -"Health is Wealth"
With a strong belief, where there's a will, there's a way - he plans to continue to introduce
new products under the Shaktibhog brand and guide the company to greater heights in the
years to come.
PRODUCTION UNITS
The company has various units of wheat flour milling, rice milling, Biscuits and Snacks
manufacturing unit, ready to eat manufacturing unit and tea manufacturing and packaging
unit. These ultra modern 'state of the art'multipurpose production facilities, located all
over India. The wheat and rice plants are fully automated and run by automated
controlled PLC process ensuring quality produce.

Shakti Bhog has Asia's largest fully automated wheat milling unit in North India. The
rice, wheat flour and biscuits and snacks plants' operations has been certified to a Hazard
Analysis and Critical Control Point (HACCP) Food Safety Program complying with the
Codex HACCP principles as well as to the ISO 9001-2008 Quality Management Systems
The rice and wheat flour plant is US FDA certified. In addition to this the rice plant is
also Kosher certified, The ready to Eat plant's operation has been certified to the Food
Safety and management System (ISO 22000).

The Procurement, Production and Quality control divisions have a team of technically
qualified and highly experienced professionals who ensure adherence to strict quality
control and food safety norms at every stage there are staff trainings and internal and
external audits happening at regular intervals. Our ingredients and packaging material
supplies are tested against strict quality standards. Batch wise checks are also done to
maintain consistency in taste and quality for its consumers.

12

With the growing demand for its superior quality products, the company has plans to
extend its production capacity in the coming years.

CORPORATE SOCIAL RESPONSIBILITY

Shakti Bhog Foods Limited has taken up various Corporate Social Responsibility
activities as part of their commitment to work for the betterment of the lives of the people
here in India.

The company has given support to various Non Governmental Organizations in various
work related to the welfare of the poor community such as free dispensaries for health
and medical services, aid to old age homes, free meals to the needy and constructions of
schools and free education for children for a better future. Distribution of books to the
less fortunate children and providing free shelter and used clothes has also been arranged
for the needy.

The company has started running 5 computer centres in Delhi NCR, by the name Seva
Bharti, which gives free computer education to children who can't afford paid education.
Health, being a major issue of concern now in society the company decided to foray into
the Indian electronic media in 2005, with the broadcast of a health and wellness satellite
channel called the Shakti TV. The channel produces various health related programmes
which are highly informative and guide viewers in India on their health related issues.
Various renowned doctors, dieticians and fitness gurus are part of the team. Information
on treatments through the traditional medicinal system of Ayurveda is also been shared
with viewers.

There are special programmes related to women health related issues. Live question
answer sessions are conduced where viewers ask questions over the telephone which are
answered instantly by the doctors.This is just the beginning .The company will continue
to serve society in its own way to give people a better life.

13

PRODUCTS
Shakti Bhog offers a wide and comprehensive range of products, which includes :
Wheat Flour

Rice (Royal Swad, Authentic,

Premium Gold, Basmati & non
Basmati)

Poha

Garm Flour

Semolina (Suji)

Maida (White Wheat Flour)

Instant Daliya

Daliya

Biscuits

Cookies

PRODUCTS
1.
2.
3.
4.
5.

AGRO PRODUCTS
WHEAT FLOUR
COOKIES AND BISCUITS
COOKIES
RICE

BRANDS

14

PRODUCTS AVAILABLE IN INDIA

1.SHAKTI BHOG

15

2.SIDDHARTHA

3.DIVSS

PRODUCTS NOT AVAILABLE IN INDIA

16

IMPORT EXPORT IN SHAKTI BHOG LTD

Business Type

Exporter , Manufacturer , Supplier

No of Staff

2000

Year of
Establishment

1970

Export Markets

Export to :Europe :Middle East.:Asia Pacific :-

Africa :Austria :OEM Service

Provided

Yes

Production Type

Automatic and semi-automatic

USA, UK, Europe,

Germany, Spain, Switzerland,
Narway, Sweden, Denmark
Dubai, Saudi- Arabia, Kuwait,
Oman, Doha, Qater, Bahrain
Singapore, Bangladesh,
Hongkong, China, Japan,
Solemen, Island, Burnai, Congo
South Africa, Ghana,
Mozambique, Nigeria, Sudan
Perth, Adelaide, Sydney and
Melbourne

Monthly Production As Per Requirement

Capacity
Memberships
Product Range

APEDA
Wheat Flour

Poha
Semolina (Suji)
Instant Daliya
Biscuits

17

Rice (Royal Swad, Authentic,

Premium Gold, Basmati & non
Basmati)
Garm Flour
Maida (White Wheat Flour)
Daliya
Cookies

Shakti Bhog Foods Ltd. manufactures and exports milled food products. It offers wheat, corn,
gram, and maize flour; basmati and non-basmati rice; pulses and beans; atta; mustard oil;
pickles; maida; and samoline. The company offers its products through a network of distributors
and suppliers. It exports its products to the United States, the United Arab Emirates, Australia,
New Zealand, the Middle East, and Africa.

Exports of SHAKTI BHOG WHEAT FLOUR under HS Code 1101

India exported SHAKTI BHOG WHEAT FLOUR worth USD 1,438,521 under HS Code 1101
with total quantity of 3,315,928. United States is the largest buyer of SHAKTI BHOG WHEAT
FLOUR accounting for exports worth USD 244,368 followed by United Arab Emirates and
Thailand which imported SHAKTI BHOG WHEAT FLOUR worth USD 194,566 and USD
126,205 respectively Tughlakabad accounted for 97.2% of exports followed by Mundra and
NhavaSheva Sea which account for 1.5% and 0.5% of exports respectively.Average price of
SHAKTI BHOG WHEAT FLOUR per unit is USD 0.43 and average value per shipment is
4,146.

18

19

Competitors of Shakti Bhog Foods Ltd.

In the year 2009, Shakti Bhog Foods Ltd. Declared its intention to enter into the Indian biscuit
market .Its has now launched its media advertisement with Divss brands of Cookies with
slogan " For A Healthy Break ".
Shakti Bhog DIVSS has put money on the premium side of biscuit segment cookies which
are now more popular in upper middle class consumers.Its tag line highlights its premium
category the cookies are labeled "Biscotto Italia "The variants marketed by Shakti Bhog are
Butter egg less Cookies and Choco- Nut eggless Cookies, then you have High fibre
Digestives and Ginger cookies . Shakti Bhog is trying to garner the veggie markets which is
quite significant in Indian biscuit and cookies market .
Shakti Bhog is a major brand in branded flour which are used by millions of Indian . Forward
Integration with bakery business would help them to have cost advantage on other players .
Aggressive ad campaign can also been seen on bill boards splashed across bus stops in metros
,specifically in and around Delhi.
Major Competitors in the biscuit and cookies segment are:
Britannia
Parle
ITC
UB
Priya Gold
Anmol

The Ready-To-Eat Segment

Shakti Bhog, the Rs 1,600-crore company and a leading wheat flour brand, could not keep its
hands off the domestic ready-to-eat market which is growing at 20 per cent, according to Ernst &

20

Young.It is actually not a total stranger to this category as it has exported similar products under
its own brand name to over 40 countries in the last six months, while its atta, rice and besan have
found their way onto shelves abroad in the last four years
While health as a concept is increasingly becoming important, the company will have to be
careful that its health platform does not add on to the price of the product. Other players are
including the health plank within their regular products itself. Kumar of Shakti Bhog insists that
its ready-to-eat products will cost 10-15 per cent less than the existing products.
While venturing into ready-to-eat products in the domestic market will let the company both
leverage and fortify its supply chain since it will bring it directly in touch with more end
consumers in cities, Mishra feels Shakti Bhog should look out for competition from Hindustan
Unilever and Marico which also have similar products with a healthy tag. Get the pricing right
and the potential is huge, he reiterates.

21

Chapter 3
Job Description and Functional profile

Import and export documentation

As an intern I was responsible for carefully studying and learning about the import and export
procedure and what all documents are required to carry out the same. I was assigned to learn and
scrutinize different types of import export documents to get a briefer and broader understanding
on how the whole procedure is carried out.
Apart from this I was assigned to learn about how the foreign exchange market works and my
corporate mentor provided further information and shared his insights with me over the same.
In import and export documentation process I was responsible to read about the import
documents first which included documents like:

Bills of Exchanges

Various Letter of Credits

Notices about arrival and dispatch of goods

Most of the work was to learn about the documentation process in an office atmosphere and
learning what all legal clauses are associated with the import and export business.
My corporate mentor was dedicated to teach me about various topics related to foreign exchange,
which included topics such as hedging, arbitrage etc.
I was given an opportunity to share my skills and insights about import export business after
carefully reading and learning about it.

22

Foreign exchange
As an intern I was given an opportunity where my corporate mentor taught me about foreign
exchange market and how to deal with various parties involving foreign exchange transactions.
I was responsible to learn about the process of how foreign exchange is generated for a country
and is used to make international transactions.
I was assigned to learn about foreign exchange dealing and how the rates are hedged and decided
to carry out the operations.
I was responsible to learn about how to tackle various import and export tasks carried out on a
daily basis.
I was responsible to learn about how to keep up with the suppliers to manage these tasks.
Was responsible to learn about how the documents and various bills are prepared and recorded in
an organization and worked with my corporate mentor on learning about various customs
procedures and learnt about how the goods can have a faster clearance.

Banking Procedures
I was responsible to learn about various banking process and my mentor helped me develop a
mindset on how to actually work with the banks. As the banks only deals with credibility and
documents, and it was important to learn about how to carefully prepare and arrange those
documents within the time period and that too with accuracy so that there should not arise the
need to pay extra charges to again prepare and file those documents.
I was responsible to learn about various banking terms related to the import and export procedure
and learnt how to communicate with overseas banks so as to get the job done swiftly.
I was responsible to learn about what different types of bank accounts are associated with this
business and learnt what all formalities can be full filled using those bank accounts. Learnt about

23

managing those accounts with banks in other countries so as to effectively carry out the business
activity.
International Laws
I was responsible to learn about different laws and regulations related to the business of import
and export and foreign exchange and learnt and gained insight about various bodies governing
them.
Learnt about bodies like FERA and FEMA which are responsible to protect the interests of
different parties associated with international business and is responsible to make sure that the
whole process goes on smoothly.

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Chapter 4
Learning Insights and Experience Gained

In the development of any countrys economy, exports play a crucial role. Export is the most
important aspect of earning foreign exchange. A country should have to be equipped with natural
resources, so that it can sell these resources into the international market.With the opening up of
the Indian economy, the international trade has been increased significantly as there are less
restriction on exports and imports. More and more multinationals are registering their entry into
the Indian market. The imported products are now in well reach of Indian customers. The living
standard has been improved. This results in substantial amount of growth in both exports and
imports.The procedure of both the exports and imports are time consuming and complicated. In
this regard there are several logistic companies and custom house agents providing their services
on the behalf of the exporters and importers to facilitate the trade between them. These custom
house agents and logistics companies take over the responsibility of sending the goods from the
exporters premises to the importer premises, which also includes the most important aspect of
custom clearance. Shakti Forwarders Pvt. Ltd. is a leading name for custom clearance. Over the
years they have operated smoothly with their wide spectrum of personalized services.
What is import and export documentation
Certain documents are required for the smooth flow of international transaction of any trade and
the process for the same is called import and export documentation.
Export procedure describes the documents required for exporting from India. Special documents
may be required depending on the type of product or destination. Certain export products may
require a quality control inspection certificate from the Export Inspection Agency. Some food
and pharmaceutical product may require a health or sanitary certificate for export.
Same goes for the import procedures as well. Import of products also requires certain documents
for smooth flow of the transaction and also it requires certain documents such as various bills,
transportation documents and documents that declare the authenticity of the product and
shipment and on the whole the complete transaction.
Importers and exporters must agree in advance on their respective roles and the terms, conditions
and definitions of the sale. A buyer and seller should know where a risk begins and ends, who is
responsible for what (e.g., costs and documentation), who owns what and at what geographical
point. And while there are a whole host of international terms in use, we'll focus on the most
commonly used foreign trade terms provided by the International Chamber of Commerce's
Incoterms rules.

25

Some common shipment terms are as follows:

CIF (cost, insurance and freight): The seller is responsible for paying the freight and insurance
costs in advance. You will collect these later when you invoice your customer. Normal practice
is to insure a shipment for 110% of its CIF value. Let's say you are insuring a shipment to the Far
East (Japan, Korea, Taiwan) at a rate of $.6175 per $100 (which includes war and all risk
coverage). For example:
Invoice Value: $12,000.00
Freight: $ 1,200.00
Clearance/Handling: $ 100.00
TOTAL: $13,300.00
110% of TOTAL: $14,630.00
INSURANCE: $ 90.34
CIF TOTAL: $14,720.34

CNF/CFR (cost and freight): you are responsible for paying the freight costs and collecting
from your customer later. In other words, the title of goods, risk and insurance cost pass to the
buyer when delivered on board the ship by the seller. The seller pays the transportation cost to
the port of destination.

FOB (free on board): you (as a buyer) must take care of all paperwork and/or expenses
necessary (including insurance) to collect the goods from the supplier (seller) and place them on
an international carrier.

EX (Ex Factory, Ex Door or Ex Dock): Terms beginning with "EX" indicate that the price
quoted to your customer applies only at the specified point of origin (your or your supplier's
factory or a dock at the import/export point). This term of shipment means that you agree to
place the goods at the disposal of the customer at the specified place within a fixed period of
time.

26

In order to accommodate the increasing use of electronic data interchange (EDI), Incoterms have
been revised to reflect new shipping methods such as carrier paid to (CPT), carriage and
insurance paid to (CIP), delivered at frontier (DAF), delivered ex ship (DES), delivered ex quay
(duty paid) (DEQ), delivered duty unpaid (DDU) and delivered duty paid (DDP).

Some common payment terms are as follows:

Clean Payments
In clean payment method, all shipping documents, including title documents are handled directly
between the trading partners. The role of banks is limited to clearing amounts as required. Clean
payment method offers a relatively cheap and uncomplicated method of payment for both
importers and exporters.
There are basically two type of clean payments:
Advance Payment
In advance payment method the exporter is trusted to ship the goods after receiving payment
from the importer.
Open Account
In open account method the importer is trusted to pay the exporter after receipt of goods.
The main drawback of open account method is that exporter assumes all the risks while the
importer get the advantage over the delay use of company's cash resources and is also not
responsible for the risk associated with goods.

Payment Collection of Bills in International Trade

The Payment Collection of Bills also called Uniform Rules for Collections is published by
International Chamber of Commerce (ICC) under the document number 522 (URC522) and is
followed by more than 90% of the world's banks.
In this method of payment in international trade the exporter entrusts the handling of commercial
and often financial documents to banks and gives the banks necessary instructions concerning
the release of these documents to the Importer. It is considered to be one of the cost effective
methods of evidencing a transaction for buyers, where documents are manipulated via the
banking system.

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There are two methods of collections of bill :

Documents Against Payment D/P
In this case documents are released to the importer only when the payment has been done.
Documents Against Acceptance D/A
In this case documents are released to the importer only against acceptance of a draft.

Letter of Credit or L/c

Letter of Credit also known as Documentary Credit is a written undertaking by the importers
bank known as the issuing bank on behalf of its customer, the importer (applicant), promising to
effect payment in favor of the exporter (beneficiary) up to a stated sum of money, within a
prescribed time limit and against stipulated documents. It is published by the International
Chamber of Commerce under the provision of Uniform Custom and Practices (UCP) brochure
number 500.

Various types of L/Cs are :

Revocable & Irrevocable Letter of Credit (L/c)
A Revocable Letter of Credit can be cancelled without the consent of the exporter.
An Irrevocable Letter of Credit cannot be cancelled or amended without the consent of all parties
including the exporter.
Sight & Time Letter of Credit
If payment is to be made at the time of presenting the document then it is referred as the Sight
Letter of Credit. In this case banks are allowed to take the necessary time required to check the
documents.
If payment is to be made after the lapse of a particular time period as stated in the draft then it is
referred as the Term Letter of Credit.
Confirmed Letter of Credit (L/c)
Under a Confirmed Letter of Credit, a bank, called the Confirming Bank, adds its commitment to
that of the issuing bank. By adding its commitment, the Confirming Bank takes the responsibility

28

of claim under the letter of credit, assuming all terms and conditions of the letter of credit are
met.

The export import flow chart

29

EXIM Procedure and documentation

30

The import procedure

Step 1: Obtaining import license and quota

In all countries there are many government regulations to be followed. Sanction of government is
necessary. Importer has to apply to the controller of imports for getting necessary permission.
Importer has to attach the following documents to his application form :Receipt which shows that import license fee has been paid.
Certificate from a Chartered Accountant showing the total value of goods to be imported.
Verification Certificate for income tax.
An import license may be general or specific. A general license allows imports from any
country. But specific license allows imports from specific country only.
The importer also has to obtain import quota certificate from the concerned authority. It
mentions the maximum quantity of goods which can be imported.

Step 2: Obtaining foreign exchange

Before placing any order, the importer must apply to the Exchange Control Department (ECD)
of RBI (India's Central Bank) for the release of requisite foreign exchange. The importer should
forward the application through his bank. The ECD verifies the application of the importer, and
if found valid, sanctions the foreign exchange for the particular transaction.

Step 3: Placing an order

The importer may either place the order directly or through the indent house (Agent). In case of
canalised items, he obtains the imports through the canalizing agency. (Canalisation means
channelisation of goods through a government agency like MMTC). The importer cannot
directly import such canalized items. They have to place an order with the canalizing agency
who shall import and supply the same.

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Step 4: Dispatching letter of credit

After getting the confirmation from the supplier regarding the supply of goods, the importer
requests his bank to issue a Letter of credit in favour of supplier. It can be defied as "an
undertaking by importer's bank stating that payment will be made to the exporter if the required
documents are presented to the bank".

Step 5: Appointing clearing and forwarding agents

The importer makes arrangement to appoint clearing and forwarding agents to clear the goods
from the customs. Since clearing of goods is a specialized job, it is better to appoint C & F
agents.

Step 6: Receipt of shipment device

The importer receives the shipment advice from the exporter. The shipment advice states the date
on which the goods are loaded on the ship. The shipment advice helps the importer to make
arrangement for clearance of goods.

Step 7: Receipts of documents

The importer's bank receives the documents from the exporter's bank. The documents include
bill of exchange, a copy of bill of lading, certificate of origin, commercial invoice, consular
invoice, packing list, and other relevant documents. The importer makes payment to the bank (if
not paid earlier) and collects the documents.

Step 8: Bill of entry

This is a document required in case of import of goods. It is like shipping bill in case of exports.
A Bill of Entry is the document testifying the fact that goods of the stated value and description
in specified quantity are entering into the country from abroad. The customs office supplies this
form which is prepared in triplicate. Three different colours are used to prepare bill of entry.One
copy is retained by custom department, other is retained by port trust and the third is kept by the
importer.

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Step 9: Delivery order

The clearing agents obtains the delivery order from the office of the shipping company. The
shipping company gives the delivery order only after payment of freight, if any.

Step 10: Clearing of goods

The clearing agent pays the necessary dock or port trust dues and obtains the port Trust Receipt
in two copies.
He then approaches the Customs House and presents one copy of Port Trust Receipt, and two
copies of Bill of. Entry to the customs authorities. The customs officer endorses the Bill of Entry
Forms and one copy of Bill of Entry is handed back to the importer. The importer then pays the
customs duty and clears the goods. In case, the customs duty is not paid, then the goods are
stored in the bonded warehouses. As and when the duty is paid, the goods are cleared from the
docks.

Step 11: Payment to clearing and forwarding agent

The importer then makes the necessary payment to the clearing agent for his various expenses
and fees.

Step 12: Payment to exporter

The importer has to make payment to exporter. Usually, the exporter draws a bill of exchange.
The importer has to accept the bill and make payment.

Step 13: Follow up

The importer then informs the exporter about the receipt of goods. If there are any discrepancies
or damages to the goods, he should inform the exporter.

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Documents required for import procedure

#1: Bill of Entry

Bill of entry is one of the major import document for import customs clearance. As explained
previously, Bill of Entry is the legal document to be filed by CHA or Importer duly signed. Bill
of Entry is one of the indicators of total outward remittance of country regulated by Reserve
Bank and Customs department. Bill of entry must be filed within thirty days of arrival of goods
at a customs location.
Once after filing bill of entry along with necessary import customs clearance documents,
assessment and examination of goods are carried out by concerned customs official. After
completion of import customs formalities, a pass out order is issued under such bill of entry.

#2: Commercial Invoice

Invoice 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. I have explained about the
method of calculation of assessable value in another article in same web blog. The concerned
appraising officer verifies the value mentioned in commercial invoice matches with the actual
market value of same goods.

#3: Bill of Lading / Airway bill

BL/AWB is one of the documents required for import customs clearance.
Bill of lading under sea shipment or Airway bill under air shipment is carriers 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 License

This license may be mandatory for importing specific goods as per guide lines provided by
government. Import of such specific products may have been being regulated by government

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time to time. So government insist an import license as one of the documents required for import
customs clearance to bring those materials from foreign countries.
#5: Insurance certificate
Insurance certificate is one of the documents required for import customs clearance procedures.
Insurance certificate is a supporting document against importers 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 Credit

Purchase order is one of the documents required for import customs clearance. A 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.

#7: Technical write up, literature etc. for specific goods if any
Technical write up, literature of imported goods or any other similar documents may be required
as one of the documents for import clearance under some specific goods. For example, if a
machinery is imported, a technical write up or literature explaining its function can be attached
along with importing documents. This document helps customs official to derive exact market
value of such imported machinery in turn helps for value assessment.

#8: GATT/DGFT declaration

As 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.

#9: Certificate of Origin

Certain bilateral agreements and multi lateral agreements would enjoy favorable tariffs for
import duties. In such cases when the consignments are exported from such member countries,

35

the designated Export Agency issues Certificate of Origin to the importer for submission to
Customs. Based on this certificate the Customs Department of the Importing Country classifies
the cargo under specific schedule.
Certificate of Origin also helps to avoid third party countries from routing imports through
member countries and effecting third party exports to avoid duty, quantity or license restrictions.

#10: Packing List

It is mandatory to put the shipping marks on all the cargo covering each and every individual
piece or parcel. The details of the number of parcels in the consignment, their dimension, the
shipping marks, the gross and net weights of each of the parcels along with the number of units
contained in each parcel is catalogued in the form of packing list.
Packing List is used to identify the parcels as belonging to the particular consignment under the
said Invoice.

Customs Clearance process requires set of documents to be submitted by the Importer, By the
airline, shipping line or concerned Freight Forwarder as well as the Customs documentation
prepared and submitted by Clearing Agent on behalf of the Importer. And these are the
documents required for the same.

The Export Procedure:

Processing of an export order-----

1. Exporter operation starts with the receipt of enquiry by the exporter from importer. Bar
on the enquiry exporter submits his offer giving complete details of products technical
specific price delivery payment terms etc.
2. After the process negotiations importer sends a purchase order follow by letter of credit
(if applicable).
3. The exporter manufactures the goods according to the specification given in purchase
order.

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4. As soon as the goods are ready the exporters invites the representative of Export
inspections agency (EIA) for pre shipment inspection and obtain the certificate of
inspection.
5. After that, the exporter prepared following documents:----

INVOICE
PACKING LIST
ARE1 FROM EXSICE DEPARTMENT
MARINE INSURANCE POLICY
COPY OF PURCHASE ORDER / L/C

6. Above those documentation sends to CHA by exporter.

7. Based on these documents CHA agent completes the octroi formalities, obtain port
permit and prepare shipping bill which is a customs documents.
8. Custom department check the export cargo on the basis of information provided on the
shipping bill. If satisfy then cargo allow to loaded on the board of ship.
9. The shipping line gives mate receipts to CHA agents after the payment of ocean freights
and port due obtains the bill of lading(B/L) from shipping line .B/L is a proof of dispatch
of cargo and also a negotiable document.
10. After that, CHA agent send various documents back to exporter which is
Customs attested invoice
Copy of shipping bill
Full set of non board bill of lading.
Copy of purchase order or L/C
Copies of ARE1 Form
SDF form
11. After that the exporter submitted above these documents for negotiation to the bank
which include :--- Commercial invoice
Packing list
SDF form
Original copy of purchases order

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Certificate of origin
Bill of exchange
Shipment advice

After that, bank scrutinizes these documents and if found correct make payment to exporter
against documentations.

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INVOICE

CERTIFICATE
CUSTOMS DOCUMENT

EXPORT
DOCUMENTATION

TRANSPORT DOCUMENT
EXCHANGE CONTROL
DOCUMENT.
PAYMENT
DOCUMENT.
MISCELLANEOUS DOCUMENT

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Steps involved in export transaction:

Step 1: in case of first time exporters, they need to apply to the director general of foreign trade
and regional office for getting importer-exporter code (IEC) number.

Step 2: the exporter has to register with the concerned export promotion council in order to
obtain various permissible benefits given by the government, they need to get registered with
sales tax office and even export credit guarantee corporation.

Step 3: the exporter can go in for procuring orders, by first sending a sample, if required. The
importer sends a purchase order once both exporter and importer have agreed upon the terms and
conditions of the contract like pricing, documents, freight charges, currency etc.

Step 4: With the export order in hand the exporter start manufacturing goods or buying them
from other maufacturers.

Step 5: The exporter make arrangements for quality control and obtains a certificate confirming
the quality of goods from inspector of quality control.

Step 6: goods or exportables are then dispatched to ports/airline for transit.

Step 7: The export firm has to apply to an insurance company for marine/air insurance cover (the
exporter asks the importer to take insurance under cost on freight and free on board etc.

Step 8: the exporter contacts the clearing and forwarding agent (C&F) for storing the goods in
warehouses. A document called shipping bill, required for allowing shipment from customs
authority is presented by the agent.

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Step 9: Once the goods are loaded onto the ship a receipt called Mates receipt is issued by the
captain to the ship superintendant of the port.

Step 10: the supreintendant calculates port charges and handover to the exporter C/F agent.

Step 11: after making the port payments the c and f agent or the exporter gets the bill of lading or
the airway bill from the official agent of the shipping company or the airline.

Step 12: The exporter then applies to the relevant chamber of commerce for obtaining certificate
of origin stating that the goods were originated from that particular region.

Step 13: the exporter sends the set of documents to the importer stating the date of shipment,
name of the vessel.

Step 14: within 21 days from the shipment the exporter must present all the documents at his
bank which scrutinizes these documents against the original letter of credit.

Step 15: the exporter bank sends these documents to the importers bank which should make the
payment on or before the due date.

Documents required for the export procedure:

Proforma invoice: proforma invoice as the name suggests is the performa of the invoice it is
prepared by an exporter and sent to importer for necessary acceptance. It suggests to the buyer
what the actual invoice would look like and is sent to him when he is ready to purchase the
goods.

Packing list: this statement give the packing details of the goods in a prescribed format. It is a
very useful document for customs at the time of examination and warehouse keeper to the buyer
to maintain a record of inventory and to effect delivery.

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Commercial invoice: Commercial Invoice - This is the most important document that certifies
the sale as well as gives the description of the items as well as reflects the pricing or the value of
the cargo.
Customs valuation is based on the value reflected on the Commercial Invoice. Customs also
verifies the rates charged in the commercial invoice and can question the rates applied incase it
has sufficient cause to believe that the rates charged as not as per international market rates or
the invoice is under valued to avoid duties.

Certificate of origin: Certain bilateral agreements and multi lateral agreements would enjoy
favorable tariffs for import duties. In such cases when the consignments are exported from such
member countries, the designated Export Agency issues Certificate of Origin to the importer for
submission to Customs. Based on this certificate the Customs Department of the Importing
Country classifies the cargo under specific schedule.
Certificate of Origin also helps to avoid third party countries from routing imports through
member countries and effecting third party exports to avoid duty, quantity or license restrictions.

Bill of lading: this document is issued by the shipping company acknowledging the receipt of
goods mentioned in the bill for shipment on board of the vessel. The b/l is the legal document to
be reffered in the case of any dispute over the shipment. It contains:

Shipingcompanys name and address

The consignee name and address
The port of loading and port of discharge
Shipping marks and particulars
Number of packages and the goods
Gross weight and net weight
Freight details and name of the vessel

Endorsed Bills of Lading

Bills of lading can only be issued with the words "shipped on board", if the cargo has actually
been loaded onto the named vessel at the port of loading. By insisting that the exporter supplies
the importer with a "shipped on board" bill of lading, the importer obtains conclusive evidence
that the goods have been loaded on board the intended vessel.

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Some importers insist that the exporter presents "shipped on board" bills as a condition for
payment. "Received for shipment", bills of lading can be issued as soon as the goods have been
delivered into the custody of the carrying shipping company or its agent either at the point of
receipt or at the port of loading. Thus, a 'received for shipment", bill of lading will only indicate
the ship in which the cargo is intended to be loaded on. The risk remains that the loading may,
for many reasons delayed or the cargo may not be loaded at all.
Banks responsible for the payment of funds in payment for goods under letters of credit will not
release the funds if the bill of lading has been endorsed "received for shipment".

Airway bill: Air way Bill is the negotiable transport document issued by an Airline or a Freight
Forwarder who consolidates the airfreight cargo.
Consular invoice: A document certifying a shipment of goods and shows information such as
the consignor, consignee and value of the shipment. A consular invoice can be obtained through
a consular representative of the country you're shipping to. The consular invoice is required by
some countries to facilitate customs and collection of taxes.

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Exim Terms Learned During the Internship Process:

Acceptance: A time draft (or bill of exchange) which the drawee has accepted and is
unconditionally obligated to pay at maturity. Drawee's act in receiving a draft and thus entering
into the obligation to pay its value at maturity. An agreement to purchase goods under specified
terms.
Advance Against Documents: Load made on the security of the documents covering the
shipment.
Advising Bank: A bank that receives a letter of credit from an issuing bank, verifies its
authenticity, and forwards the original letter of credit to the exporter without obligation to pay.
cargo. He usually consolidates the air shipments of various exporters, charging them for actual
weight and deriving his profit by paying the airline the lower consolidated rate. He issues his
own air waybills to the exporters, is licensed by the CAB (Civil Aeronautics Board) and has the
status of an indirect air carrier (See also Air Cargo Agent, Forwarder, Freight Forwarder, Foreign
Freight Forwarder.)
Air Waybill: A bill of landing that covers both international and domestic flights transporting
goods to a specified destination. This is a non-negotiable documents of air transport that serves
as a receipt for the shipper, indicating that the carrier has accepted the goods listed and obligates
itself to carry the consignment to the airport of destination according to specified conditions.
Arbitration Clause: Is a standard clause to be included in the contracts of
exporters and importers, as suggested by the American Arbitration Association. It states that any
controversy or claim will be settled by arbitration in accordance with the rules of the American
Arbitration Association.
Balance of Trade: The difference between a country's total imports and exports; if exports exceed
imports, favorable balance of trade exists, if not, a trade deficit is said to exist.
Beneficiary: A firm or person on whom a letter of credit has been drawn. The beneficiary is
usually the seller or exporter.
Bill of Lading: A document that establishes the terms of a contract between a shipper and a
transportation company under which freight is to be moved between specified points for a
specified charge. Usually prepared by the shipper on forms issued by the carrier, it serves as a
document of title, contract of carriage, and a receipt for goods. Also see Air Waybill and Ocean
Bill of Lading.

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Bonded Warehouse: A warehouse storage area or manufacturing facility in which imported

goods may be stored or processed without payment of customs duties.
CAD: The acronym meaning "cash against documents," a method of payment for goods in which
documents transferring title are given to the buyer upon payment of cash to an intermediary
acting for the seller.
Carrier, Common: A public or privately owned firm or corporation that transports the goods of
others over land, sea, or through the air, for a stated freight rate. By government regulation, a
common carrier is required to carry all goods offered if accommodations are available and the
established rate is paid.
Cartel: Is an association of several independent national or international business organizations
that regulates competition by controlling the prices, the production, or the marketing of a product
or an industry.
Cash in Advance (C.I.A.): Payment for goods in which the price is paid in full before shipment is
made. This method is usually used only for small purchases or when the goods are built to order.
Cash Against Documents (CAD): Payment for goods in which a commission house, or other
intermediary, transfers title documents to the buyer upon payment in cash.
Certificate of Origin: A statement signed by the exporter, or his agent, and attested to by a local
Chamber of Commerce, indicating that the goods being shipped, or a major percentage of them,
originated and were produced in the exporter's country.
CES: Is a Customs Examination Station
C&F: Is a quoted price includes cost of goods and freight.
C & I: Is a quoted price includes cost of goods and insurance.
CFS (Container Freight Station): The term CFS at loading port means the location designated by
carriers for the receiving of cargo to be packed into containers by the carrier. At discharge ports,
the term CFS means the bonded location designated by carriers in the port area for unpacking
and delivery of cargo.
CFS/CFS (Pier to Pier): The term CFS/CFS means cargo delivered by break bulk to Carrier's
CFS to be packed by Carrier into containers and to be unpacked by Carrier from the container at
Carrier's destination port CFS.
CFS/CY (Pier to House): The term CFS/CY means cargo delivered break-bulk to Carrier's CFS
to be packed by Carrier into containers and accepted by consignee at Carrier's CY and unpacked
by the consignee off Carrier's premises, all at consignee's risk and expense.

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CFS CHARGE (Container Freight Charge): The term CFS Charge means the charge assessed for
services performed at the loading or discharging port in packing or unpacking of cargo into/from
containers at CFS.
CIF (cost, insurance and freight): Seller is responsible for inland freight, ocean/air freight, and
marine/air insurance to the port of final entry in the buyer's country. The buyer is responsible for
inland transportation to his or her location.
Charter: Originally meant a flight where a shipper contracted hire of an aircraft from an airline.
Has usually come to mean any non-scheduled commercial service.
Charter Party: The contract between the owner of a ship and the individual or company
chartering it. Among other specifications, the contract usually stipulates the exact obligations of
the ship-owner (loading the goods, carrying the goods to a certain point, returning to the
charterer with other goods, etc.); or it provides for an outright leasing of the vessel to the
charterer, who then is responsible for his own loading and delivery. In either case, the charter
party sets forth the exact conditions and requirements agreed upon by both sides.
Charter party Bill of Lading: A bill of lading issued under a charter party. It is not acceptable by
banks under letters of credit unless so authorized in the credit.
Chassis: A wheel assemble including bogies constructed to accept mounting of containers.
CIA: The acronym meaning "cash in advance," a method of payment for goods whereby buyer
pays seller in advance of shipment of goods.
C.I.F.: Is a quoted price includes cost of goods, insurance and freight.
Claused Bill of Lading: Is a bill of lading which has exemptions to the receipt of merchandise in
"apparent good order" noted.
Clean Bill of Lading: Is a bill of lading which covers goods received in "apparent good order and
condition" and without qualification.
Confirmed Letter of Credit: A letter of credit, issued by a foreign bank, with validity confirmed
by a U.S. bank. An exporter who requires a confirmed letter of credit from the buyer is assured
of payment by the U.S. bank even if the foreign buyer or the foreign bank defaults.
Consignee: Person or firm to whom goods are shipped under a bill of landing.
Consular Invoice: A document, required by some foreign countries, describing a shipment of
goods and showing information such as the consignor, consignee, and value of the shipment.
Certified by consular official of the foreign, it is used by the country's customs official to verify
the value, quantity, and nature of the shipment.

46

Commercial Invoice: An itemized list of goods shipped, usually included among an exporter's
collection papers.
Confirmed Letter of Credit: A letter of credit, issued by a foreign bank with validity confirmed
by a U.S. bank.
Consignment: Is the physical transfer of goods from a seller (consignor) with whom the title
remains, to another legal entity (consignee) who acts as a selling agent, selling the goods and
remitting the new proceeds to the consignor.
Consignor: A term used to describe any person who consigns goods to himself or to another
party in a bill of lading or equivalent document. A consignor might be the owner of the goods, or
a freight forwarder who consigns goods on behalf of his principal.
Correspondent Bank: A bank that, in its own country, handles the business of a foreign bank.
Countertrade: Is a reciprocal trading arrangement, which includes a variety of transactions
involving two or more parties.
accepted by consignee a t Carrier's CY and unpacked by consignee off Carrier's premises, all at
the risk and expense of cargo.
DDP: Delivered duty paid. Also known as "free domicile."
DDU: Delivered duty unpaid. Reflects the emergence of "door-to-door"
Demurrage: A penalty for exceeding free time allowed for loading or unloading at a pier or
freight terminal. Also a charge for undue detention of transportation equipment or carriers in port
while loading or unloading...
DOT: Department of Transportation
Draft (or Bill of Exchange): An unconditional order in writing from one person (the drawer) to
another (the drawee), directing the Drawee to pay a specified amount to a named Drawer at a
fixed or determinable future date.
Drawback: A U.S. customs law that permits an American exporter to recover duties paid on
imported foreign raw materials or components included in products that are subsequently
exported out of the United States.
Drawee: The individual or firm on whom a draft is drawn and who owes the stated amount to the
drawer.

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FOB (free on board): Seller is responsible for inland freight and all other costs until the cargo has
been loaded on the vessel/aircraft. Buyer is responsible for ocean/air freight and marine/air
insurance.
Foul Bill of Landing: A receipt for goods issued by a carrier with an indication that the goods
were damaged when received.
Free Trade Zone: A port designated by the government of a country for duty-free entry of any
non-prohibited goods. Merchandise may be stored, displayed, used for manufacturing, within the
zone and re-exported without duties being paid. Duties are imposed on the merchandise (or items
manufactured from the merchandise) only when the goods pass from the zone into an area of the
country subject to the Customs Authority.
Harmonized Code: An internationally accepted and uniform description system for classifying
goods for customs, statistical and other purposes.
Harmonized Systems: A key provision of the recently signed trade bill, effective Jan. 1, 1989,
that establishes international uniformity for product classifications. Most U.S. Trading partners
adopted it a year earlier, and it was drafted in Brussels a decade ago with U.S. representatives'
input. In essence, it is a new tariff schedule in that it changes methods of rating some items.
Irrevocable Letter of Credit: A letter of credit with a fixed expiration date that carries the
irrevocable obligation of the issuing bank to pay the exporter when all of the terms and
conditions of the letter of credit have been met.
L/C - Letter of Credit: A document issued by a bank per instructions by a buyer of goods,
authorizing the seller to draw a specified sum of money under specified terms. Issued as
revocable or irrevocable.
Lagan: Cargo or equipment to which an identifying marker or buoy is fastened, thrown overboard in time of danger to lighten a ship's load. Under maritime law if the goods are later found
they must be returned to the owner whose marker is attached; the owner must make a salvage
payment.
Port of Discharge: Port where vessel is off loaded and cargo discharges.
Port of Entry: A port at which foreign goods are re-admitted into the receiving country.
Port of Loading: Port where cargo is loaded aboard the vessel lashed and stowed.
Power of Attorney: A document that authorizes a customs broker to sign all customs documents
on behalf of an importer.
Prepaid Freight: Generally speaking, freight charges both in ocean and air

48

transport may be either prepaid in the currency of the country of export or they may be billed
collect for payment by the consignee in his local currency.
However, on shipments to some countries freight charges must be prepaid because of foreign
exchange regulations of the country of import and/or rules of steamship companies or airlines.
Red Clause Letter of Credit: A letter of credit that allows the exporter to receive a percentage of
the face value of the letter of credit in advance of shipment. This enables the exporter to purchase
inventory and pay other costs associated with producing and preparing the export order.
REFG.: Refrigerating; Refrigeration
Regs.: Registered Tonnage
Retaliation: Action taken by a country to restrain its imports from another country that has
increased a tariff or imposed other measures that adversely affects the firsts country's exports.
Warehouse Receipt: A receipt of commodities deposited in a warehouse, identifying the
commodities deposited. It is non-negotiable if permitting delivery only to a specified person or
firm, but it is negotiable if made out to the order of a person or firm or to a bearer. Endorsement
(without endorsement if made out to bearer) and delivery of a negotiable warehouse receipt
serves to transfer the property covered by the receipt serves to transfer the property covered by
the receipt. Warehouse receipts are common documents in international banking.
Warehouse-to-Warehouse: A clause in marine insurance policy whereby the underwriter agrees
to cover the goods while in transit between the initial point of shipment and the point of
destination, with certain limitations, and also subject to the law of insurable interest. When it was
first introduced, the warehouse-towarehouse clause was extremely important, but now its
importance is diminished by the marine extension clauses, which override its provisions.

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Chapter 5
Recommendations and Conclusions

CONCLUSIONS
My internship was in SHAKTI BHOG, NEW DELHI. I worked in the import and export
department and Documentation department of the company. SHAKTI BHOG has many
manufacturing units spread across the Delhi and NCR. The office where I worked is the
corporate office and the recently shifted head office. All the documentation work is done from
here , while all the HR and finance process is also done from the same building .

BUSINESS UNIT & ITS CONCENTRATION

SHAKTI BHOG is a family owned business by Mr. K.K KUMAR, who is the Chief Managing
Director of the company . It is not listed in the stock exchange. The company was incepted in
1972 .
Shakti bhog has asias largest fully automated wheat milling unit in North india. There
production units are spread across the north india. The major exports comprise Wheat , rice ,
buiscuits . The export is mostly done to USA, Gulf , Africa and Australia
The company initially worked in the American market . However, a decade ago, it started
exploring the gulf and African market which offers them the growth. The company started from
single milling/manufacturing unit and has moved on to multiple locations with the passage of
time.
The company is not only an exporter of agro products , but it is also an importer as it imports
crude palm oil from the asia pacific countries which is use in the refinery process . The company
also has an in-house lab testing for the grade of rice and wheat. The company also has state of
art in-house computerized packaging designing machines
The company is rapidly growing year after year and has a modern manufacturing facilities spread
over 800000 sq. ft. area in 17 factories in and around Delhi.
The present factories are now running beyond the rated capacity to adhere to the customer's
delivery schedule.

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