IBO04

Question 1. What are the objectives of Foreign Trade Policy of Government of India? Discuss the
general provisions regarding exports.

Answer: Government control import of non-essential item through an import policy. At the same time,
all-out efforts are made to promote exports. Thus, there are two aspects of trade policy; the import
policy which is concerned with regulation and management of imports and the export policy which is
concerned with exports not only promotion but also regulation. The main objective of the Government
policy is to promote exports to the maximum extent. Exports should be promoted in such a manner that
the economy of the country is not effected by unregulated exports of items specially needed within the
country. Export control is, therefore, exercised in respect of a limited number of items whose supply
position demands that their exports should be regulated in the larger interests of the country. In other
words, the policy aims at:

a) promoting exports and augmenting foreign exchange earnings; and

b) regulating exports wherever it is necessary for the purposes of either avoiding competition among
the Indian exporters or ensuring domestic availability of essential items of mass consumption at
reasonable prices.

The government of India announced sweeping changes in. the trade policy during the year 1991. As a
result, the new Export-Import policy came into force from April 1, 1992. This was an important step
towards the economic reforms of India. In order to bring stability and continuity, the policy was made
for the duration of 5 years. In this policy import was liberalized and export promotion measures were
strengthened. The steps were also taken to boost the domestic industrial production. The major aspects
of the export-import policy (1992-97) include: introduction of the duty-free Export Promotion Capital
Goods (EPCG) scheme, strengthening of the Advance Licensing System, waiving of the condition on
export proceeds realization, rationalization of schemes related to Export Oriented Units and units in the
Export Processing Zones. The thrust area of this policy was to liberalize imports and boost exports.

The need for further liberalization of imports and promotion of exports was felt and the Government of
India announced the new Export-Import Policy (1997-2002). This policy has further simplified the
procedure and reduced the interface between exporters and the Director General of Foreign Trade
(DGFT) by reducing the number of documents required for export by half. Import has been further
liberalized and efforts have been made to promote exports.

The new EXIM Policy 1997-2002 aims at consolidating the gains made so far, restructuring the schemes
to achieve further liberalization and increased transparency in the changed trading environment. It
focuses on the strengthening the domestic industrial growth and exports and enabling higher level of
employment with due recognition of the key role played by the SSI sector. It recognizes the fact that
there is no substitute for growth which creates jobs and generates income. Such trade activities also
help in stimulating expansion and diversification of production in the country. The policy has focused on
the need to let exporters concentrate on the manufacturing and marketing of their products globally
and operate in a hassle free environment. The effort has been made to simplify and streamline the
procedure.

The principal objectives of Export Import Policy 1994-2002 are:

1. To accelerate the country's transition to a globally oriented vibrant economy with a view to derive
maximum benefits from expanding global market opportunities.

2. To enhance the technological strength and efficiency of Indian agriculture, industry and services,
thereby improving their competitive strength while generating new employment opportunities. It
encourages the attainment of internationally accepted standards of quality.

3. To provide consumers with good quality products at reasonable prices.

The objectives will be achieved through the coordinated efforts of all the departments of the
government in general and the Ministry of Commerce and the Directorate General of Foreign Trade and
its network of Regional Offices in particular. Further it will be achieved with a shared vision
an8commitment and in the best spirit of facilitation in the interest of export.

GENERAL PROVISIONS REGARDING EXPORTS AND IMPORTS

1. Exports and imports free unless regulated: Exports and Imparts shall be he except to the extent they
are regulated by the provisions of this policy or any other law for the time being in force. The item wise
export and import policy shall be specified in ITC (HC) published by Director General of Foreign Trade.

2. Compliance with law: Every exporter or importer shall comply with the provisions of the Foreign
Trade (Development and Regulation) Act, 1992 and the rules and orders made thereunder. They are also
required to comply with the provisions of this policy, terms and conditions of any license granted and
provisions of any other law for the time being in force.

3. Interpretation of Policy: if any question or doubt arises in respect of the interpretation of any
provision of the. EXIM policy, it shall be referred to the Director General of Foreign Trade whose
decision shall be final and binding.

4. Exemption from Policy/Procedure: Any request for relaxation of the provisions of this policy or
procedure on the ground of hardships or an adverse impact on trade, may be made to the Director
General of Foreign Trade.

5. Trade with Neighboring Countries: The Director general of Foreign Trade may issue from time to
time, such instructions or frame such schemes as may be required to promote trade and strengthen
economic ties with neighbouring countries.

6. Trade with Russia under Debt Repayment Agreement: In the case of trade with Russia under the
debt repayment agreement, the Director General of Foreign Trade may issue from time to time such
instructions
7. Transit Facility: Transit of goods through India from or to countries adjacent to India shall be
regulated in accordance with the treaty between India and those countries.

8. Execution of Bank Guarantee/Legal Undertaking: Wherever any duty free import is allowed or where
otherwise specifically stated, the importer shall execute a legal undertaking or bank guarantee with the
Customs Authority before clearance of goods through the customs.

9. Free Movement of Export Goods: Consignments of items allowed for exports shall not be withheld or
delayed for any reason by any agency. In case of any doubt, the authorities concerned may ask for an
undertaking from the exporter.

10. Import/Export of Samples: import and Export of samples shall be governed by the provisions of
EXIM Policy.

11. Third Party Exports: A license holder may export directly or through third parties.

12. Clearance of Goods from Customs: the goods already imported/shipped/arrived in advance but not
cleared from customs may also be cleared against the license issued subsequently.

13. Green Card: All status holders and manufacturer exporter exporting more than 50% of their
production subject to a minimum turnover of Rs. 1 crore in preceding year, shall be issued a green card
by Directorate General of Foreign Trade. This card will also be issued to the service providers rendering
services in free foreign exchange for more than 50% of their services turnover, subject to a minimum
value of Rs.35 lakhs in free foreign exchange in the preceding year. This card provides automatic
licensing, automatic custom clearance and other facilities mentioned in the EXIM policy.

14. Electronic Data Interchange: In an attempt to speed up transactions and to bring about
transparency in various activities related to exports, electronic data interchange would be encouraged.
Applications received electronically shall be cleared within 24 hours.

Question 2. Distinguish between pre-shipment and postshipment finance. Explain various post-
shipment finances available to Indian Exporters.

Answer: Difference between Pre-shipment and Post-shipment Finance

Pre-shipment finance is provided to the exporters for the purchase of raw materials, processing them
and converting them into finished goods for the purpose of export while Post-shipment finance may be
defined as "any loan or advance granted or any other credit provided by a bank to an exporter of goods
from India from the date of extending the credit after shipment of goods to the date of realisation of
export proceeds. It includes any loan or advance granted to an exporter on consideration of or on the
security of, any duty drawback or any cash receivables by way of incentive from the government.

Packing credit, advance against incentives and pre-shipment credit in foreign currency are various pre-
shipment finances available to exporters. The basic purpose of pre-shipment finance is to enable the
eligible exporters to procure, process, manufacture or store the goods meant for export. It is a short-
term credit against exportable goods. The loan amount is decided on the basis of export order and the
credit rating of the exporter by the bank. The packing credit can be granted for a maximum period of
180 days from the date of disbursement. The banks are authorised by RBI to extend this period. This
period can be extended for a further period of 90 days, in case of nonshipment of goods within 180
days. The extension can be done provided the banks are satisfied that the reasons for extension are due
to circumstances beyond the control of the exporters. Preshipment credit may be given for a longer
period upto a maximum of 270 days, if the banks are satisfied about the need for longer duration of
credit.

While granting post-shipment finance, banks are governed by the guidelines issued by the RBI, the rules
of the Foreign Exchange Dealers Association of India (FEDAI), the Trade Control and Exchange Control
Regulations and the International Conventions and Codes of the International Chambers of Commerce.
The exporters are required to obtain credit limits suitable to their needs. The quantum of credit depends
on export sales and receivables.

Post-Shipment Finances available to Indian Exporters

Various types of post-shipment finances available to Indian Exporters

1. Negotiation of Export Documents Under Letters of Credit

Where the exports are under letter of credit arrangements, the banks will negotiate the export bills
provided it is drawn in conformity with the letter of credit. When documents are presented to the bank
for negotiation under L/C, they should be scrutinized carefully taking into account all the terms and
conditions of the credit. All the documents tendered should be strictly in accordance with the L/C terms.
It is to be noted that the L/C issuing bank undertakes to honour its commitment only if the beneficiary
submits the stipulated documents. Even the slightest deviation from those specified in the L/C can give
an excuse to the issuing bank of refusing the reimbursement of the payment that might have been
already made by the negotiating bank.

2. Purchase/Discount of Foreign Bills

Purchase or discount facilities in respect of export bills drawn under confirmed export contracts are
generally granted to exporters who enjoy bill purchase/discounting limits sanctioned by the bank. As the
security offered by the issuing bank under letter of credit arrangement is not available, the financing
bank is totally dependent upon the credit worthiness of the foreign buyer. The documents, under the
Documents against Payment (D/P) arrangements, are released through foreign correspondent only
when payment is received. Whereas in the case of Documents against Acceptance (D/A) bills,
documents are delivered to the overseas importers against acceptance of the draft to make payment on
maturity. Since the financing banks are open to the risk of nonpayment, ECGC policies issued in favour of
exporters and assigned to banks are insisted upon.
 Under the policy, ECGC fixes limits and payment terms for individual buyer and the financing bank has
to ensure that the limit is not exceeded so that the benefits of policy are available. Banks also secure a
guarantee from ECGC on the post-shipment finance extended by them either on a selective or whole
turnover basis. Banks sometimes do obtain credit reports on foreign buyers before they purchase the
export bills drawn on the foreign buyer.

3. Advance against Bills Sent on Collection

Post-shipment finance is granted against bills sent on collection basis in the following situations:

a) when the accommodation available under the foreign bills purchase limit is exhausted

b) when some export bills drawn under L/C have discrepancies

c) where it is customary practice in the particular line of trade and in the case of exports to countries
where there are problems of externalization.

Under the above situation, the bank may send the bill on collection basis and finance the exporter to
some extent out of the total bill amount. The amount advanced will be liquidated out of the export
proceeds of the export bill and the balance paid to the exporter.

Exporters may avail themselves on the forward exchange facility where they do not wish to be subjected
to exchange risk on account of the new procedures for overdue export bills.

4. Advance against Goods Sent on Consignment

Sometimes exports are effected on consignment basis. In such condition payment is receivable to sale
of goods. Goods are exported at the risk of exporter for sale. The banks may finance against such
transaction subject to the exporter enjoying specific limit for such purpose. The overseas branch1
correspondent of the bank is instructed to deliver documents against Trust Receipt.

5. Advance against Export Incentives

Advances against the export incentives are given at the pre-shipment stage as well as the postshipment
stage. However, the major part of the advance is given at the post-shipment stage. The advance is
granted to an exporter in consideration of or on the security of any duty drawback incentives receivable
from the Government. The banks follow their own procedure in granting the advance. The most
common practice is to obtain a power of attorney from the exporter executed in their favour by the
banks. It is sent to the concerned government department like the Director General of Foreign Trade,
Commissioner of Customs, etc. These advances are not granted in isolation. It is granted only if all other
types of export finance are extended to the exporter by the same bank.

6. Advance against Undrawn Balances

In some of the export business, it is the trade practice that the bills are not drawn for the full invoice
value of the goods. A small part of the bills is left undrawn for payment after adjustments due to
difference in weight quality, etc. Advances are granted against such undrawn balances. In this case the
export proceeds must be realized within 90 days. The advances are granted provided the undrawn
balance is in conformity with the normal level of balances left undrawn subject to a maximum of 5% of
the full export value. The exporters are supposed to give an undertaking that they will surrender the
balance proceeds within 6 months from the date of shipment.

7. Advance against Retention Money

Banks grant advances against retention money, which is payable within one year from the date of
shipment. The advances are granted upto 90 days. If such advances extend beyond one year, they are
treated as deferred payment advance which are also eligible for concessional rate of interest.

8. Post-shipment Export Credit Guarantee and Export Finance Guarantee

Post-shipment finance given to exporters by banks through purchase, negotiation or discount of export
bills or advances against such bills qualifies for this guarantee. Exporters are expected to hold
appropriate shipments or contracts policy of ECGC to cover the overseas credit risks.

Export Finance Guarantee covers post-shipment advances granted by banks to exporters against export
incentives receivable in the form of duty drawback, etc.

9. Post-shipment Credit in Foreign Currency

The exporters have the option of availing of exports credit at the post-shipment stage either in rupee or
in foreign currency. The credit is granted under the Rediscounting of Export Bills Abroad Scheme (EBR)
at LIBOR linked interest rates. The scheme covers export bills with usance period upto 180 days from the
date of shipment. Discounting of bills beyond 180 days requires prior approval from RBI. The exporters
have the option to avail of pre-shipment credit and post-shipment credit either in rupee or in foreign
currency. If pre-shipment credit has been availed of in foreign currency, the post-shipment credit has
necessarily to be under the EBR scheme. This is done because the foreign currency pre-shipment credit
has to be liquidated in foreign currency.

Question 3. Distinguish between :

(i) Liner and Tramp Shipping Services

Answer: Liner Shipping Service

1. It is designed to carry a variety of cargo, with spaces for bales, bundles, boxes, barrels, drums, etc, as
well as for reefer (refrigerated) cargo. The designs of the holds and number of decks will be different
from those of a tramp. With the increased share of containerized cargo, specially designed container
ships for carrying different categories of containers operate.
2. The cargo handling equipment on a liner will be varied and sophisticated for quick loading and
unloading of cargo to ensure quick turn-round. A quick turn-round means that the ship spends the least
possible time in the port and most of its time in transit.

3. It operates regularly between fixed ports and normally loads in several ports. It serves a number of
discharging ports along a predetermined route.

4. In order to ensure speedier carriage, it is fitted with sophisticated and expensive propelling
machinery.

5. It provides pre-announced scheduled services on given terms and conditions of carriage. These terms
and conditions mostly relate to the responsibilities and liabilities of the shipowners in receipt, carriage
and delivery of cargo. Liners, thus, provide services on terms and conditions, which are not negotiable.

6. It generally offers carriage on fixed and stable freight rates.

Tramp Shipping Service

1. It is primarily designed to carry the more simple and homogeneous cargo in large quantity. It is,
therefore, designed to fully utilize its carrying capacity for carriage of one type of cargo. For example, a
grain-carrying ship will be designed in such a way that a full cargo of grains in bulk can be
accommodated in the lower holds, feeders and bins.

2. Since one kind of homogeneous cargo is to be handled, a tramp will have comparatively simple
equipment. Bulk cargos are normally loaded and discharged by mechanical equipment, elevators,
pumps, etc.

3. Because of the comparatively low unit value of commodities carried, a tramp will be operated at the
lowest possible cost. This objective can be achieved by operating ships having relatively less speed by
fitting less expensive propelling machinery

4. A tramp generally carries cargos of one or two ship users. Hence, loading and discharging are confined
to a few ports.

5. It does not have a fixed route and predetermined schedule of departure as it is to be engaged by
one/two users as and when their need arises.

6. It offers services at terms and conditions, including freight/hire charges, which are not fixed and given
but are negotiable.

Question 3. Distinguish between :

(ii) Total loss and particular loss

Answer: Total Loss

There are 2 types of losses which are as follows:

Actual Total Loss (ATL): An actual total loss may occur in three ways. Firstly when the insured cargo is
physically destroyed, when fire in the hold of the ship destroys completely a consignment of paper or
when a ship sinks in deep water and the ship with cargo is destroyed and there is no possibility of
salvage (recovery). Secondly the insured cargo is so damaged that it ceases to be a thing insure. Thirdly
actual loss also occurs when the insured cargo is irretrievably lost beyond a reasonable time period.

Constructive Total Loss (CTL): CTL may be defined as a total loss when the cost of saving, repairing or
reconditioning the insured goods is more than the value of goods. CTL may also be claimed when an
actual total loss seems unavoidable. While claiming CTL, the insured is required to abandon (or leave)
his interest in the insured cargo in favour of the insurance company. This is because the insured cannot
retain the goods as well as claim total loss and he has, therefore, to forego his rights in the goods.

Particular Loss :

There are two types of partial losses as explained below:

General Average: Sometimes a ship-owner either sacrifices some cargo the ship is carrying or incurs
some expenditure, which becomes necessary to save the journey. Such a sacrifice or expenditure will
have to be shared by the interests in the saved journey. Thus, the insured will be protected from paying
for the loss. Partial loss or Average of this nature is known as General Average or GA and comes into
being only when the ship carrying cargo arrives safely. If a ship is lost and does not, therefore, arrive at
the ultimate destination, there can be no GA.

Where the cargo-owners has an insurance policy, he will recover the GA contribution or the loss
suffered by him from the insurance company. All marine policies cover GA loss and sacrifice and the
insurance companies settle claims for GA contribution and normally refund GA deposits.

Particular Average: It is defined as partial loss or damage caused accidentally by a peril insured against.
Thus, when such a loss takes place, there is to be no contribution from other interest in the journey, as
in the case of General Average loss. It becomes payable only when it is covered in the policy.

Question 4. Comment on the following statements.

(i) Documentation formalities are not necessary to enable the importer to get the contracted goods
and the exporter to get sale value as well as to secure export incentives.

Answer: Export documentation is commonly considered to be the most complex and difficult part of
overseas marketing. You may have come across such comments as such comments tend to discourage
people from entering into export business. It is therefore, necessary to emphasize that documentation is
as much of an important activity as the conclusion of an export order and its fulfillment.
Why is documentation needed in export business? Answer to this question lies in the nature of the
business relations between the exporter and the importer, who are operating from two Countries. If one
is doing domestic business, one knows or can easily know the commercial practices, which bind the
buyer and the seller. Similarly, the possibility of business disputes is reduced since both the buyer and
the seller know or can easily know laws governing contracts. However, when the buyer and the seller
are operating in two countries, the business practices and legal systems are different. Thus, for ensuring
that the respective interests of the buyer and the seller are protected, certain documentary formalities
become essential. Similarly every country has its own laws governing imports and exports.
Consequently, the exporter has to comply with laws in his country through Documentary formalities. At
the same time, he has to send some documents to the importer, which will enable him to take
possession of the goods after getting permission from the concerned Government department (i.e. the
customs authorities). There is yet another reason for documentation in export trade. Such
documentation is linked with the claim of export incentives given by almost all countries world over.
Since most of these incentives are to be claimed after shipment, the exporter has to give documentary
proof of the fact of shipment.

Documentation formalities are necessary to enable the importer to get the contracted goods and the
exporter to get sale value as well as to secure export incentives. In other words, export documents are
needed to comply with commercial, legal and incentive requirements.

Question 4. Comment on the following statements.

(ii) There are no difference between documents against payment and documents against acceptance.
Answer: Documents against Payment Under this exporter draws a bill of exchange on the buyer payable
at sight. The exporter hands over the bill to his bank together with the documents of title of goods.
These bills are presented to the buyer for payment through his banker, the buyer makes the payment,
gets the title document and take delivery of goods. The biggest risk is refusal by the buyer to make
payment.

Documents against Acceptance

This method has more risks involved as it is an unsecured credit being extended to the importer who has
been authorized to take delivery of goods through documents of title without making actual payment
and by just signing his acceptance the bill to be paid at a later date.

Question 4. Comment on the following statements.

(iii) The insurance contract is not in the nature of indemnity.

Answer: The insurance contract is in the nature of indemnity. The literal meaning of indemnity is
protection against loss or making good the loss. The object of an insurance contract is to place the
insured, after a loss, in the same relative position in which he would have stood had no loss occurred. In
other words, an insured can claim only that much that he has suffered (or lost). If cargo has been
damaged by 10 percent of the insured value, the insured will be paid only that much amount, even
though he has paid premium on the total insured value. But it must also be understood that the
indemnity undertaking of the insurance company is only a "commercial" indemnity. The insurance
company will place the assured in the same "financial" position as he was before the loss, since the
insurance companies cannot undertake to reinstate or replace cargo. In the event of a loss, they pay a
sum of money, agreed in advance, between the insured and the insurer, called "insurable value".
Insurable value is calculated with reference to the "market value" of the insurance goods to which is
added an agreed percentage to cover general overheads as well as to provide a margin of profit on the
transaction. From this range, an indemnity in insurance does not cover either a gambling loss or a
sentimental loss (if tangible loss). Consequently, over-insurance i.e., insurance more than the market
value plus a certain percentage is not the principle of cargo insurance.

In practice, the amount of loss payable is based on the c.i.f. value of goods to which is added an agreed
percentage. According to prevailing practice in India, maximum insurable value for export cargo is equal
to c.i.f. plus 15 percent. Generally, the percentage added to c.i.f. value is 10. It is customary in the
insurance business to issue "duty" policies to cover duty payable on the imported goods. In such cases,
claims are payable either on the basis of actual duty paid or on the basis of the sum insured, whichever
is less. Thus, the sum payable cannot exceed tile actual loss of the duty amount paid by the insured. It is
also implied that the sum insured in the "duty" policy would not include ally percentage to cover general
overheads and the margin of profit.

Question 4. Comment on the following statements.

(iv) Self sealing and certification facility by exporters are not allowed for claiming rebate/refund of
Central Excise Duty.

Answer: Exporters have been granted option of claiming rebate either from Maritime Collector or
Jurisdictional Assistant Collector of Central Excise. The exporters are required to file the claim within six
months from the date of export. The claim should be filed in the prescribed form along with original
copy of the AR4 form duly endorsed by the custom officer certifying the export of the goods. Maritime
Collector of Central Excise or Jurisdictional Assistant Collector will compare the original AR4 form with
the triplicate copy of AR4 form received from the Superintendent, Central Excise. If he is satisfied he
shall sanction the rebate either in whole or in part as the case may be.

Documents: Following documents are required to be filed for claiming rebate:

a. Application in prescribed form

b. Original copy of AR4 form
c. Duplicate copy of AR4 form in sealed cover received from custom officer, if required.
d. Duly attested copy of Bill of Lading
e. Duly attested copy of Shipping Bill (Export Promotion Copy)
f. Disclaimer Certificate in case claimant is other than exporter.
Question 5. Write notes on the following? (i) EDI and Bar Coding
Answer: A bar-code is a machine readable representation of human readable information. They are
printed symbols consisting of bars and spaces that contain coded information which can quickly read by
scanning equipment. Depending on which bar code language or symbology is being used, the
information can be made up of letters, numbers and special characters. The information is generally
printed in human readable form under the bar code for visual checking. Alternatively it may be omitted
from printing to provide a form of security.
The bar coding exercise normally starts by looking at a specific problem associated with either internal
or external data capture. Mention the possible role of bar coding in an EDI project and you are likely to
be met with a blank stare or even a look of horror. Venturing into EDI for the first time, organizations
concentrate their minds on the possible changes to business processes and procedures, and the
technology required to send messages from one company to another. The thought of considering the
role of a further technology is all too ' much. However, this ought to be a short term view, as many of
the more established EDI communities see bar coding and automatic identification as an integral part of
their EDI operation.
A bar code is a series of parallel bars with intervening spaces. The arrangement of the bars and spaces is
determined by the encoding rules of the symbology used. It is not an expensive technology and
developments over the years have ensured that a high level of accuracy in information gathering, can be
achieved.
The technology required to support bar coding is well established. Although high quality precision
artwork and printing may be required for the length of run normally associated with the retail sector, for
short runs a bar code printer may be appropriate. There are a wide range of both printers and bar code
readers with the latter being typically hand held or fixed. With a hand held device the bar code is read
by passing a light pen or wand reader over the label. Fixed scanners are used where the item is
automatically passed in front of the scanner, such as on a conveyor belt.
When a company decides to start an electronic data interchange (EDI) or bar code system, it can expect
to go through the following steps:
 Gather information about EDI and Bar coding applications from industry sources.
 Make decisions about computer hardware and software for the EDI system. Options for hardware
may include personal computers (PCs) or mainframes. Most businesses already have the hardware
available when they decide to implement EDI and bar codes,
 A modem is needed to connect the systems direct or through a Value-Added Network (VAN). A VAN is
a third-party service provider that coordinates the exchange of documents between businesses.
 Also needed is software that translates documents into electronically transmittable formats. PC
software packages are available as well as those for the mainframes.
 Bar code scanning equipment and software is readily available "off the shelf" for PCs and mainframe.
 Get connected to a Value-Added Network (VAN)
 Most PC based translation software has VAN software included.
 Mainframe system will have to purchase additional VAN software.
 The monthly cost for using the VAN varies depending on the number of customers and transactions
 Train employees to manage and monitor the EDI and bar code systems.
 Work with trading partners to fully implement the EDI and bar code programmes.
Question 5. Write notes on the following?
(ii) Export Declaration Forms
Answer: All exports to which the requirement of declaration applies must be declared on appropriate
forms. These forms are as follows:
 GR Form (in duplicate): It is used to export to all countries other than Nepal and Bhutan
 PP Form (in duplicate): It is used to export to all countries other than Nepal and Bhutan by parcel post.
 SOFTEX Form (in triplicate): It is used to export computer software in non- physical form.
 SDF Form: The statutory Declaration Form (SDF) is required in case of exports where shipping bills are
electronically processed.

Procedures for Furnishing the Forms

The declaration form GR (in duplicate) shall be submitted in duplicate to the commissioner of Customs.
After duly verifying and authenticating the declaration form the Commissioner of Customs will forward
the original form to the nearest office of the Reserve Bank. The duplicate form is handed over to the
exporter for being submitted to the authorised dealer with whom the export documents are negotiated.

The declaration form PP (in duplicate) shall be submitted to the authorised dealer in foreign exchange
named in the form. The authorised dealer shall countersign on the form and hand over the original form
to the exporter. The exporter will submit the form to the postal authorities through which the goods are
being despatched. The postal authorities after despatch of the goods, shall forward the declaration form
to the nearest office of the Reserve Bank. On realisation of export proceeds the authorised dealer shall
after due certification submit the duplicate form to the nearest office of the Reserve Bank.

Question 5. Write notes on the following?

(iii) Need for cargo insurance

Answer: There are two reasons for securing the insurance cover. The first reason concerns the legal
dimension of limited liability of the carriers and other intermediaries. The second reason concerns
commercial considerations

1. Legal Dimension

When the goods are ill transit from the exporter to the importer, they are, at different stages. in the
custody of different agencies and authorities including the clearing and forwarding agents, carriers, port
and customs authorities, etc. If there is any loss or damage to the goods, while in their custody the
concerned intermediary may be held liable to pay damages to the cargo owners. The nature and extent
of liabilities of various intermediaries have been defined in the respective laws enacted by the
government all over the world. According to these laws, the intermediaries cannot be held liable for loss
to the cargo, if it was caused by reasons or events beyond their control. Further, if the loss has occurred
even after the concerned intermediary has exercised reasonable care in keeping the goods, it is legally
exempted from the liability. In such situation, the cargo owners who suffer the loss cannot recover it
from the intermediaries and they have no other option but to obtain appropriate insurance cover. The
laws also state that where the carriers or other intermediaries are liable for loss or damage, the
maximum amount of recovery is limited to the sum stipulated in the respective laws.

2. Commercial Dimension

From the point of view of an exporter, a transaction is complete as soon as the importer either pays for
the Bill of Exchange on its presentation or he undertakes to make payment at a future date by accepting
the Bill. Sometimes even before the Bill of Exchange is presented to the importer, he gets to know about
the loss of goods in transit and does not accept the Bill when presented. In such a situation, the exporter
is compelled to bear the loss. Prudent exporters, when dealing with unknown customers on DP or DA
payment terms, prefer to get cargo insured. Further, as a commercial practice, cargo insurance makes it
possible for the exporter to get post-shipment finance from the negotiating bank because the insurance
policy is one of the required documents under a CIF contract. If on the other hand, the contract is on
FOB terms with payment on DP or DA basis, the negotiation bank may advance money immediately
after shipment (provided the shipping documents are in order and the bank is favoured with an
appropriate insurance policy.)

Question 5. Write notes on the following?

(iv) Government Policy Making and Consultation for Export Promotion in India.

Answer: Appropriate government policies are important for successful export effort. In view of the
increasingly important and critical role of foreign trade in economic development, a separate Ministry of
Commerce has been entrusted with the responsibility of promoting India's interest in international
market. The Department of Commerce, in the Ministry of Commerce has been made responsible for the
external trade of India and all matters connected with the same. The main functions of the Ministry are
the formulation of international commercial policy, negotiation of trade agreements, formulation of
country's export-import policy and their implementation. It has created a network of commercial
sections in Indian embassies and high commissions in various countries for export- import trade flows. It
has set up an "Exporters Grievances Redressal Cell" to assist exporters in quick redressal of grievances.
With a view to achieve the export objectives the Government of India has set up the following
institutional authorities:

1. Board of Trade
2. Cabinet of Committee on Exports
3. Empowered Committee of Secretaries
4. Grievance Cell
5. Director General of Foreign Trade (DGFT)
6. Director General Commercial Intelligence & Statistics (DGCI&S)
7. Ministry of Textiles
8. State Cell