EXPORT MANAGEMENT

INTRODUCTION

nternational Trade consists of both exports and imports of a country. The health of a country's economy
can be diagnosed through the pulse of foreign exchange earned and paid. Although ndia possesses
excellent resources, her position in the international markets is very poor and she continues to face an
adverse balance of payment position, which indicates very high imports value and lower exports value.

onsidering this precarious position, the Government of ndia has introduced so many incentive schemes
and concessions to the exporting community in ndia for the purpose of earning foreign exchange for our
country. n the recent years, the government has been giving special impetus to Exports by preparing a
systematic export strategy. At present ndia's main exports have been classified into:

(a)Selective items which are developed, technology oriented and continuously undergoing changes and
modification (Non - traditional in character)

b) Non-selective items, which are traditional in character like jute, coir, otton, tea are coming under this
category.

Most of our traditional items have lost their old standing in the foreign markets. To compensate the loss,
the government is constantly encouraging our selective items like engineering, pharmaceuticals,
garments, chemicals and consultancy services. Before we go into every item in detail and complete
procedural parts, it is pertinent to understand the position of ndia in the international marketing scenario
and contemporary trade position in the world.


EXPORT PROCEDURES

REGISTRATION WITH REGIONAL LICENSING AUTHORITY
OBTAINING IMPORT EXPORT CODE NUMBER (IEC NUMBER)

To perform any Export and / or mport activity, it is absolutely necessary to obtain mporter Exporter code
Number from the Regional Licensing authority. As per the prevailing provisions of ustoms Act, the
ustoms Authorities will not permit any importer or exporter to import or export any goods into or from
ndia unless he holds valid mporter Exporter ode Number.

For obtaining E ode Number, an Application for grant of E Number is to be submitted by the
Registered/Head Office of the applicant to the concerned Regional licensing authority in the specified
Format, along with all the relevant documents and the requisite application fee of Rs.1000/- With the
application. An applicant is also required to furnish Profile of his ompany in the prescribed format.

An E Number allotted to an applicant will remain valid permanently for all its branches
/divisions/units/factories as indicated on the E number. The Licensing Authority will issue the E
Number in their Format in favour of an applicant, with a copy endorsed to the applicant's banker.

REGISTRATION WITH SALES TAX AUTHORITIES

The Products which to be exported are eligible for exemption from both State Sales Tax and entral
Sales Tax. For availing these benefits exporter should get him registered with the concerned Sales Tax
Authorities as per the procedures under the sales tax act applicable to the state.

Sales Tax Exemptions
As per the provisions of section 5 of central sales tax Act, any dealer who is registered with sales tax
authorities can claim the exemption from the Sales Tax in respect of his sales made in the course of
export out of the territory of ndia. The exporter may also buy the goods from dealers /manufacturers for
the purpose of export trade without payment of sales tax by issuing relevant forms to the selling dealer
from whom he purchased goods for exports. The basic condition to avail the Sales Tax exemption is that
the exporter should be registered with the Sales Tax Department

Procedure

The basic condition to avail of sales tax exemption is that the exporter should be registered with sales tax
department as a Registered Dealer. For registration an Application in the prescribed Form is to be
submitted to the sales tax office under whose jurisdiction the exporter's Head office /Registered Office is
situated. The Sales Tax Officer will visit the premises to check the relevant documents pertaining to
sales/purchase transactions of the company and on satisfaction the Sales tax Office will issue Sales Tax
Registration in favour of the Exporter.


REGISTRATION WITH EXCISE AUTHORITIES

Procedure

Rule 9 of the entral Excise Rules, 2002 lays down that every person, who produces, manufactures,
carries on trade, holds private store-room or warehouse or otherwise uses excisable goods shall get
registered with the jurisdictional range officer, unless exempted otherwise.

However, units manufacturing goods, which are chargeable to nil rate of duty or remain exempt from
whole of duty, are exempt from registration and such units shall file a declaration. But where exemption
from duty is based on clearances made in a financial year and the said clearance for home consumption
remains less than the specified limit of Rs.90 lakhs ( Rs. 100 lakhs fully exempt minus Rs.10 lakhs).
Under this provision of Rules, the Exporter is not required to file any declaration.
.
SS units having total clearance for home consumption including clearances to Nepal and Bhutan, up to
Rs.100 lakhs, during the current financial year are exempt from excise duty. These units need not file any
declaration so long as their clearance does not exceed the specified limit i.e. Rs.90 lakhs. Such unit is
also not required to follow regular ARE-1 procedure, if their clearance remains less than Rs.90 lakhs.

The Export Oriented Units / Export Processing Zone Units are deemed to be registered for the purpose of
entral Excise Rule 9. Hence, such units need not be registered separately under entral Excise Rules.

REGISTRATION WITH EXPORT PROMOTION COUNCILS

n order to enable exporter to obtain benefits or concessions under the export import policy, the Exporters
are required to register themselves with an appropriate Export Promotion ouncils (EP) by obtaining
Registration cum Membership ertificate (RM).

For this purpose the exporter should apply in the prescribed format to the concerned Export Promotion
ouncil relating to his main line of exports. However the Status Holder Export Houses have the option to
obtaining RM from Federation of ndian exporters organization (FEO). n addition, an exporter has an
option to obtain RM from FEO or any other EP, if the product exported by him relate to those Export
Promotion ouncils.

An application to EP for registration should be accompanied by a self certified copy of the E number
issued by the Regional Licensing authority, Registration Fee and Bank ertificate in support of the
applicant's financial soundness. f applicant is already registered with any other EP, a copy of RM
should be furnished.

n case an exporter desires to get registered as a Manufacturer Exporter, he should furnish relevant
documents such as copies of ndustrial Licence, SS ertificate etc.

On being admitted to membership, the exporter will be granted Registration-um-Membership ertificate
(RM) of the EP concerned in their format.

The RM is valid from 1
st
April of the licensing year in which it was issued and will remain valid for Five
years ending 31
st
march of the licensing year, unless otherwise specified.

The exporter is also liable to furnish Quarterly returns/details of exports of different commodities to the
concerned registering authority.


EXPORT OF FREE SAMPLES BY AIR / SEA OF NON-RESTRICED ITEMS

Export of trade samples (and not exhibits to be displayed in a trade fair or exhibition) supplied free of
payment is allowed without any value restriction, provided the customs authorities are satisfied about the
bona fide of the goods that these are trade samples for promotion of exports. The ustoms may ask for
correspondence between the exporters and overseas buyers to verify that the samples are being sent to
generate export business. No permission or certification from the RB or Authorised Dealer (Bank) is
necessary. Samples of any value can be sent freely by air or sea, if the ustoms Authorities are
otherwise satisfied.

Documents

The samples properly marked with regard to value, are to be sent by air or by sea, require the following
documents for submission to ustoms Authorities:

O Shipping Bill, since the samples neither attract any export duty nor entitled to duty drawback, a
Free Shipping Bill, in duplicate, is to be filled
O ommercial nvoice: A copy of Exporter's commercial invoice declaring the value of the parcel
O Packing List (one copy), if more than one packet being sent
O Justification showing the need for sending the sample. Usually, foreign buyer's letter asking for
the same should be sent in original.

Parcels packed and addressed in the prescribed manner may be sent along with the abovementioned
documents to the ustoms Authority. After their shipment by sea or air, Exporter will get a Bill of Lading or
Air Way bill, a copy of which should be sent to the addressee by the exporter for enabling the former to
take its delivery.

Export Of Samples / Exhibits Of Restricted Items:

An application for export of samples or exhibits of restricted items may be made to the DGFT in the
prescribed form for export licences in the prescribed format. The DGFT may consider the application on
merit and issue the licence

EXPORT LICENCE (ITEMS RESTRICTED FOR EXPORTS

Procedure

For obtaining an Export Licence /Permission/ertificate in respect of items restricted or allowed, under
specified conditions in the T (HS) lassification of Export and mport tems, an application is to be
made, in duplicate, in the appropriate form.

There are two different Forms prescribed for making applications for obtaining permission for export of
Restricted tems, one is for making application for export of all restricted items except for Special
hemicals And Special Materials, Equipments and Technologies and another for export of Special
hemicals/Materials.

The applications for obtaining Export Licenses for the restricted tems (other than Special
hemicals/Materials etc.), are to be sent to the Director General, Foreign Trade, Udyog Bhavan, New
Delhi - 110 011.


EXPORT PAYMENT TERMS


Export payment terms or the method of payment to be settled with the foreign buyer depend upon each
customer, the nature of business, customs of trade and above all on foreign exchange regulations of the
exporting country prevailing on the date of exports. .

Documentary credit or a Letter of redit as it is known, is one of the commonly used methods of payment,
for both Exports & mports, and has gained increased popularity in the international transactions.

MECHANISM OF LETTER OF CREDIT

















A letter of credit is a very common & familiar instrument in settling payments between the buyers the
seller. The Buyers & Sellers negotiate for purchase & sell of goods and once the deal is finalized the
seller ask buyer's banker to issue sort of a guarantee by way of establishing letter of credit in his favour to
ensure the receipt of the payment on the committed date against the goods shipped to the buyer.

A Documentary redit is a signed instrument giving an undertaking by the banker of the buyer to pay his
seller certain sum money agreed under the contract on due date against presentation of documents
confirming shipment of goods in compliance with terms & condition of the contract.

n order to bring uniformity in the matters pertaining to documentary credit, The nternational chamber of
ommerce have published set of rules (Uniform ustoms & Practices of Documentary redit-UPD). A
documentary credit generally requires that the Draft drawn there under must be accompanied with all the
documents asked for by the buyer.

When an exporter ships goods in reliance on a letter of credit issued by the buyer's Bank and in
accordance with the terms of the credit, the bank concerned is bound to honour his draft presented for
acceptance.

The parties to the Letter of redit are the mporter, the L/ opening bank, the negotiating bank (exporter's
bank) & the Exporter.

Exporter
(Beneficiary)

Importer

Shipment
Exporter's Bank
(Negotiating
Bank)
Importer's
Bank
(Opening Bank)

Documents Movement
L/C Movement
TYPES OF LETTER OF CREDIT

A) Revocable & Irrevocable Letter Of Credit

Basically, the credits are either revocable or irrevocable. The letter of credit once established cannot be
cancelled or amended by a single party, without the written consent of the other, is called irrevocable
letter of credit. Whereas the terms of credit, which can be amended or modified without, notice of the
beneficiary is called revocable letter of credit. An irrevocable letter of credit in fact protects the interest of
the beneficiary besides does not suffer from any disadvantages and hence widely accepted in
transactions.
If the credit does not indicate whether it is revocabIe or irrevocabIe it is considered to be
irrevocabIe Ietter of credit.

B) Confirmed Letter Of Credit

f an rrevocable Letter of redit is established by a banker in the buyer's country, whose credibility in not
known, the seller may require the credit to be confirmed by a reputed bank in his own country by which
the confirming bank undertakes the liability to honour the seller's draft drawn under the credit.

This additional confirmation ensures double protection to the seller since the credit is already irrevocable
on the part of buyer /his bank and additionally on the part of the confirming bank in his own country.

C) Transferable Letter Of Credit

A letter of credit is not a negotiable document & it is not transferable by delivery or endorsement except
the concurrence from the opener. When the business is transacted through the middleman credits is
sometimes marked transferable. This enables the middleman, in whose favour the original Letter of redit
has been issued, to ask for the transfer of the credit to another party who may happen to be a
manufacturer or the actual supplier.

A transferable credit should be clearly mentioned as "transferable by the opening bank on the
instructions from the buyer.

D) With Or Without Recourse Letter Of Credit

f the letter of credit is marked without recourse, no recourse can be had against the drawer. n other
words if the buyer fails to pay after the specified period or unduly delays his payment of the draft, the
Letter of redit opening bank can have recourse to exporter for payment of not only amount but expenses
in case of "with recourse Letter of redit

E) Revolving Letter Of Credit

Where there is a regular flow of trade between an exporter & importer, a revolving credit for specified
amount and for specific period is opened. The terms of Letter of redit may allow the exporter to draw up
to a specified amount, at any time, against the shipment of goods. A revolving credit may revolve with
reference to either its amount or validity period.

F) Back-To-Back Letter Of Credit

An intermediary may be reluctant for a transferable L/, as he does not wish to disclose the original
source of manufacturer to his buyer. Moreover the transferable L/ can be cumbersome when it comes to
obtaining amendments. To avoid such situation, the exporter can request his own bank to issue a new
credit in favor of his supplier on the strength of the letter of credit, which has been established in his
favour by the overseas buyer. Such credit is described as Back to back credit.

It wiII be therefore be observed that the best form of Letter of Credit, from the point of view of the
exporter, is to insist for a CONFIRMED, IREVOCABLE & WITHOUT RECOURCE from the overseas
buyer.

BILL OF EXCHANGE

A documentary Letter of redit results in locking up of funds of the mporter. Where he does not wish to
lock up his money, he adopts the practice of payment through bill of exchange.
A bill of exchange drawn on the buyer will grant an exporter protection against the payment. Moreover Bill
of Exchange is a legal document which allows time to take legal action in the event of the buyer fails to
make payments on due date.

A bill of exchange is an order in writing, requesting a Drawer (person drawing the bill mporter) to pay a
specified sum of money at the specified date. Three parties are involved in this transaction. They are The
Drawer (the person drawing the bill-Exporter's Bank), The Drawer ((mporter) and the Payee (Exporter).

The Bill of Exchange, also known as Draft, can be Sight Draft or a Usance Draft. n case of Sight Draft,
the drawer instructs the bank to hand over the relevant documents to the importer only against payment.
This is known as Documents Against Payment (D/P) or ash against Documents (/D).

n case of Usance Draft, the documents are handed over to the customer against his acceptance
obtained on the bill by the bank. The acceptance implies that he agrees to pay on the due date. This is
known as Document against acceptance (D/A).

ACCEPTANCE OF LETTER OF CREDIT BY EXPORTER

As the letter of credit is an important financial instrument in protecting the interest of the exporter in
realization of sales proceeds, it is absolutely necessary for the exporter to verify all the terms & conditions
of the same, particularly with reference to following

O The type of Letter of redit Established
O orrect name of the beneficiary & his address
O Expiry date of the credit
O Description of the products to be exported
O Quantity & Quality of the goods ordered
O Payment terms / Value of the letter of credit
O Validity date for shipment & for negotiation of documents
O Requirement of documents

t may be noted that in the Letter of redit business there is no distinction between major & minor
discrepancy, as the refusal of documents by the credit-opening bank on account of discrepancies, the
exporter runs the risk of the buyer using such discrepancies as an excuse to delay the payment or default
payment for the documents. t should be remembered that many overseas buyers often reject documents
on very flimsy ground by taking shelter of such discrepancies.

EXCHANGE RATES & PROTECTION AGAINST THEIR FLUCTUATION

IMPORTANCE OF EXCHANGE RATE

mport contracts are concluded either in ndian rupee or in foreign currency. Where the contracts are in
ndian rupees, the related documents are also prepared in ndian rupees and no conversion is involved.
However, where the bill is drawn in foreign currency, like us $, , EM etc., you will have to pay ndian
rupees (except where the payment is out of foreign currency account maintained by you in ndia and
abroad) equivalent to the amount of foreign currency. Applying suitable exchange rate arrives at the
equivalent ndian rupee. A favourable exchange rate will mean lesser rupees and vice versa.

MEANING OF EXCHANGE RATES AND METHODS OF QUOTATION

The rates applied by the bank for converting foreign currency into ndian rupees and vice versa are
known as exchange rates. n other words, exchange rate is the rate at which one currency can be
exchanged for another. There are two systems of quoting exchange rates:

Direct Quotation:

Where the price of foreign currency is quoted home or local currency. n this system variable units of
home currency equivalent to a fixed unit of foreign currency, are quoted. (For example: US $ = Rs.
48.20)

Indirect Quotation:

Where exchange rates are quoted in terms of variable units of foreign currency as equivalent to a fixed
number of units of home currency. (For example: US $ 2.5000 = Rs.l00.00)

Distinction between Spot Rates and Forward Rates

The Spot Rates are applicable on the day of transaction i.e. the same day, whereas Forward Rates are
the rates fixed in advance for a transaction, which will mature at a specified date or during a specified
period in future. The Quotation for spot rates only is generally available and the customers have to enter
into specific contracts for forward contracts.

Foreign exchange rates are always quoted as two-way price i.e. a rate at which the bank is willing to buy
foreign currency (buying rate) and a rate at which the bank is willing to sell foreign currency (selling rate).
Banks do expect some profit in exchange operations and there is always some difference in buying and
selling rates. However, the maximum spread available to bank is restricted in term5 of ceilings imposed
by Reserve Bank of all exchange rates by authorised dealers are quoted in terms of their capacity as
buyer or seller.

Different sets of exchange rates are applied for various types of foreign exchange transactions as under:

Buying rates

This rate is applied for all the foreign remittances inside ndia. ie for buying foreign currency from its
customer ( exporter ) by the authorized dealer on account of exports or any other services rendered by its
customers.

Selling Rate

This rate is applied for all foreign remittances outside ndia i.e., for selling foreign currency to its customer
by an authorized dealer such as for imports, issuance of bank drafts, mail / telegraphic transfers etc.


FORWARD FOREIGN EXCHANGE COVER FACILITIES

The Exchange risk arising on account of adverse movement of the exchange rates can be avoided by
entering into a forward exchange contract.

For booking a forward contract, you should approach your bankers who have opened L/. The bank will
book a forward contract only against genuine trade transaction. The bank will verify suitable documents to
ensure the authenticity and the amount of permitted currency of the underlying transaction. The amount,
date and number of the forward contract will be marked on such documents under the stamp and
signature of the bank to ensure that more than one forward contract is not booked in respect of the same
underlying transaction.

A transaction may be covered either in whole or in part. The period and extent to which an exposure is to
be covered is left to the choice of the customer. Normally the maturity of the forward contract matches
with that of the underlying transaction. However, contracts may be booked for even shorter maturities. f
the documents of import are not received within the agreed period of the contract, the contract needs to
be cancelled (and fresh contract booked if desired) for which the bank will levy cancellation charges as
per FEDA rules. n case the documents are received before the stipulated date and you desire early
delivery, the bank will again levy charges for early delivery, as per FEDA rules.

t is, therefore, extremely important that the period of forward contract is carefully chosen so that
unnecessary changes on account of early delivery or cancellation of forward contract are avoided.
However, substitution of an import order is permitted by RB on specific request, if the bank is satisfied
that the circumstances existed under which the contract could not be

To cover the risk involved as a result of fluctuation in exchange rate, forward cover facilities are available
from the Authorised Dealers (Banks) in foreign exchange. The essential conditions for this facility are as
under:

Exchange Risk

Forward contracts will be available in cases, which are, in fact, exposed to exchange risk in the currency
in which forward cover is desired. More than one forward contract in respect of the same transaction
should not be taken.

Documents

The Authorised Dealers in Foreign Exchange would verify suitable documents to ensure the authenticity
and the amount of permitted currency of the concerned transaction. All contracts will be booked only on
production of documents evidencing exposure.

Firm Commitments

Forward cover is available only where the underlying commitments are firm and not for anticipated trans-
actions.

Cross Currency Forward Cover

Forward cover is also available for currency cover exposures. n case of exposures in rupees against
currencies other than the dollar, if the currency of exposure is one that is usually covered through the
dollar, the exposure may be split into two components, both against the dollar and covered separately.
The Authorised Dealers may cover one component, the other being left exposed.

Amount And Period Of Cover

The period and extent to which an exposure is to be covered is left to the choice of the customer. Or-
dinarily, the maturity of customer forward contract should match that of the underlying transaction. f the
foreign currency amount to be covered can not be precisely quantified, as in the case of interest payable
on loans contracted on floating rate basis, forward contract can be booked for an amount arrived at on the
basis of a reasonable estimate.



Roll-Over Forward Cover

Forward cover on roll over basis as necessitated by the maturity dates of the underlying transactions,
market conditions and the need to reduce costs to the customer.

Procedure

The Exporter should approach the Authorised Dealer along with the original sale contract, telex, cable
received from the overseas buyer showing

1. Description and quantity of goods to be supplied;
2. Agreed Price
3. Approximate date of shipment

Where the deal is finalised by exchange of cable/telex, forward purchase contract may be booked on the
strength of cables so exchanged provided the cables indicate:

O Quantity
O Price/value of goods to be shipped
O Approximate date of shipment, and
O A written undertaking that the exporter will provide original sale contract within a month from the
date of booking of the contract.

Where shipment has already been effected and document handled by the authorized dealer, verification
of sale contract may be dispensed with. ontracts may also be fixed on the basis of irrevocable letters of
credit in favour of the exporter, indicating commodity, value and period of shipment, after obtaining from
exporter concerned a declaration that he has not entered into any other forward exchange contract in
respect of shipment in question. Where, however, letters of credit are incomplete in any manner such as
unit price or description or quantity, forward contract may be booked only after verifying the underlying
firm order or contract.

EXPORT FINANCE


Financial assistance to the exporters is generally provided by the commercial banks before and after
shipment of the products. The assistance provided prior to shipment of products is called Pre-shipment
Finance (Packing redit) and provided after shipment of products is known as Post-shipment Finance.

Pre-shipment finance is given for working capital required by the exporter for purchase of raw materials,
processing, packing, and transportation etc in connection with export of the products. Post-shipment
finance is provided for bridging the gap between the shipment of products and realization of export
proceeds. The Banks through purchasing does the later or negotiating the export documents or by
extending advance payment against exports bills accepted on collection basis.

AVAILING PRE-SHIPMENT FINANCE (PACKING CREDIT)

Procedure

For obtaining Packing redit, a formal application giving details of redit Requirements is to be made to
the Banker. While some Banks have involved special Forms for the purpose, others either accepts the
application on general loan Forms or on a Plain paper.

The application is processed taking into consideration the following points:

O Whether the demand for load is genuine. The assessment is based on the Letter of redit/Export
Order or orrespondence exchanged between the applicant & foreign buyer.
O redit worthiness of the borrower
O n case of Manufacturer applicants, whether they have adequate manufacturing facilities of the
goods to be exported and within stipulated time.
O Organisational set up of the exporter, his quality control systems, packing / transportation
facilities etc.

Documents

1. onfirmed export order or Letter of credit, in original.
2. An undertaking that the advance will be utilised for the specific purpose of
procuring/manufacturing/shipping etc of the goods meant for exports only as indicated in the
confirmed order/Letter of redit
3. Where the applicant is a sub-supplier & wants to supply the goods to the Status Export Houses,
an undertaking from such export House stating that they have not/will not avail the packing credit
facility against the same transaction for the same purpose. The Bank advising Letter of redit
should countersign such letter.
4. Audited /Final Financial Statement for the past 3 years.
5. opy of valid RM held by the exporter
6. Appropriate policy/guarantee of EG
7. Any other document required by the Bank

Packing credit advances are normally granted on secured basis. Nevertheless lean Packing advances
are also granted. Once the goods are acquired and are in the custody of exporter, Banks usually convert
clean advances in to hypothecation/pledge. n such case, exporter is required to comply with rules
regarding Stocks & insurance.

On receipt & scrutiny of the application, Banks fix the credit limit, which is "Need Based. The credit will
not be denied as long as the requirement of credit limit is justified on the basis of exporter's performance&
track record.

The packing credit will be released in lump sum or in stages as per the requirement for executing the
order/Letter of redit.

AVAILING POST SHIPMENT FINANCE

The Post Shipment Finance is the financial help provided by the Bankers against the shipping documents
for following purposes:

O Purchase Of Export Documents Drawn Under Export Order
O Advance Against Export Bills Sent For ollection
O Advance Against Goods Sent On onsignment Basis
O Advance Against laims Of Duty Drawback

Rates Of Interest

The Rates of nterest charged for extending the Post-shipment financial Assistances by the Banker,
depend on the nature of the bills raised / presented, whether Sight Or Usance Bill. The Post-shipment
finance is also available at very concessional rate of interest.

Procedure

For availing himself of Post Shipment Finance, he Exporter should enclose the documents with the
covering letter indicating:

1. The type of facility required for negotiations, purchase, discount etc,
2. Any forward rate to be applied for the transaction,
3. nstructions pertaining to collection charges from overseas,
4. The Documents to be released against payments /acceptance etc.
The documents should be correctly drawn & authenticated

Post shipment finance given to exporters by banks through purchase, negotiation or discount of export
bills or advances against such bills qualifies for export credit guarantee. t is necessary that the exporter
concerned should hold appropriate policy of EG to cover the overseas credit risks.


COMPULSORY QUALITY CONTROL & PRE-SHIPMENT INSPECTION


Procedure

The units, which are exercising adequate in-process quality control and approved, as Export Worthy Units
have to only submit their application known as "intimation for inspection" in the prescribed form. The
necessary pre-shipment inspection certificate is issued by the concerned agency on the basis of a unit's
performance as reported by EA's officials during the checks carried out by them at all levels of production
according to specifications prescribed for each level. Spot checks of the consignments may, however,
also be carried out.

Consignment-Wise Inspection

The units not approved under PQ or Self-certification system, should apply in the prescribed form (in
duplicate) in the prescribed format, submitting the original to EA and duplicate to E, seven days in
advance, or as the case may be, of the expected date of shipment/ despatch for shipment, with the
following documents.
O rossed cheque /demand draft / lndian Postal Order (PO) /Deposit A/ passbook showing the
necessary deposit of stipulated inspection fee in favour of EA.
O Five opies of ommercial invoice
O Declaration regarding importer's technical specifications, if any,

Issue Of Certificate

f the consignment is found in order, certificate of inspection is issued in triplicate. While the original
(white) copy is to be submitted to the ustoms, the duplicate copy is for the overseas buyers and the
triplicate for the exporter.

Appeal Against Rejection

f the consignment is not approved for export, the concerned Export nspection Agency (EA) will issue a
'Rejection Note'. The exporter if not satisfied with the decision of the nspection Agency, can file an
appeal within 10 days of the receipt of the Rejection Note.

On the receipt of such appeal, the EA will convene a meeting of the Appellate Panel. The Panel will
review inspection report, hear the exporter, if necessary, and examine the consignment concerned. f
called for, their decision is final and binding on both the parties i.e. EA and the exporter.






EXPORT CREDIT & GUARANTEE CORPORATION (ECGC


There are many risks, involved in trading with overseas buyers on credit terms. These risks may be
commercial as well as political. The overseas buyers may not accept exporters' goods or go insolvent or
default in payment. There may be war, revolution or civil disturbances, restrictions on remittances and
moratorium on payment, thereby, blocking or delaying of export proceeds. Even there might be export
restrictions in ndia affecting timely supply of goods to overseas buyers. The exporter has to bear all
these risks while trading with overseas buyer who is thousands of miles away and of whom he has at best
imperfect knowledge. Besides bearing these risks, the exporter has to find finance not only to offer liberal
credit terms to his overseas buyer but also to smoothly carryon his production schedule.

To help the exporter to cover his credit risks and find finance, the Government of ndia has established
the Export redit Guarantee orporation of ndia Ltd, (EG) with its headquarters at Express Towers
(10th Floor), Nariman Point, Mumbai-400021 and having regional offices at all the major cities throughout
the country.

Cover / Guarantees Issued

To suit the varying pattern of trade, the EG issues cover/guarantees, which are broadly divided into
four groups:
1.Standard policies issued to exporters to protect them against the risk of not
receiving payments while trading with overseas buyers on credit terms.
2. Policies designed to protect ndian firms the risk of not receiving payment in
respect of: a) Services rendered to foreign parties & b) onstruction works undertaken abroad.
3. Financial guarantees ssued to banks against the risks nvolved in providing credit to exporters at pre-
shipment and post-shipment stage.
4. Special schemes e.g. transfer guarantee issued to protect banks.

A) Standard Policies

The EG issues four types of standard policies, which provide cover to exporter up 90% for a minimum
period of one year. (This is only short term credit) on account of ommercial and Political risks:

Commercial Risks:

O nsolvency of the buyer.
O The buyers defaulting to pay within 6 month of the due date for goods
accepted by him.
O The buyer's failure to accept the goods, when such non-acceptance is
not due to the exporter actions.

Political Risks:

O Restrictions on remittances in the mporters/buyers country or any other government action,
which may delay the payment to the exporter.
O War or civil disturbances communal riots etc. in the buyer country
O New import licensing restrictions or the cancellation of a valid import
license in the buyer country.
O ancellation of export license in ndia.
O Payment of additional handling Transport / nsurance charges due to the diversion of the
ship/voyage which cannot be recovered from the buyer.
O Any other cause of loss occurring outside ndia, which is not normally
insured by commercial insurers and it is also beyond the control of the

The standard policy does not cover the risk of loss due to:
O Disputes arises due to quality
O auses inherent in the nature of the food itself (e.g. fruits)
O A buyers failure to obtain import or exchange authorisation from the
O nsolvent or default of the exporter or his agent.
O Default of the collecting bank.
O Risks of loss, damage or destruction of goods which are covered by
commercial insurers.
O Exchange fluctuations.

Types Of Standard Policies:

Contracts Shipment Policy

An exporter may either take a comprehensive risks policy covering both political and commercial risks or
against political risks alone. n either case he can secure cover from the date of the contract or the date of
the shipment. Accordingly, he will either be issued a contract (comprehensive or political) Risks Policy or
a Shipments comprehensive or Political) Risk policy.

Consignment Exports:

Exports made on a consignment basis may be covered under the corporation's policies by a special
endorsement. This would provide cover against political risks from the date of shipment against
commercial risks from the date of sale of the overseas stock to a buyer, subject of course to the terms
and conditions of the policy

- Shipments (omprehensive Risks) Policy.
- Shipments (Political Risks) Policy.
- ontracts (Political Risks) Policy.
- ontracts (omprehensive Risks) Policy

Whole Turnover Policy:

n a whole turnover policy, the exporters are obliged to insure under this policy all the shipments that may
be made by him during the period of policy. The E expects a fair spread of risks it insures. The
exporter is required lo nsure all his exports except those made against advance payment or irrevocable
letter or credit confirmed by the banks in ndia. The exclusions are:
O tems, which are not of an allied nature when an exporter deals in different commodities.
O Shipment against letters of credit not condoned by the banks in ndia, if the exporter does not
want lo cover them against political risks.

Procedure To Obtain A Policy

An intending exporter should file in a proposal form available at any EG office and submit it back lo
them. After examining the form, the EG will send him an acceptance letter staring the terms that it will
cover and the premium rates it will change. The policy will be issued after the exporter will convey his
consent. The exporter should state in the proposal form whether he is excluding business with any
country or countries and also the scope of the EG cover. t is generally advisable for the exporter to
get the export business with all countries insured.

Maximum Liability

t is the limit the EG will accept liability under the policy for shipments made during the period of the
policy. The policy may be for one, three or five years, it will be advisable for exporters to estimate the
maximum outstanding payments due from overseas buyers at any time during the policy period and
obtain the policy with maximum liability of equal value. The maximum liability fixed under the policy may
be enhanced later on, if required.

Exporter A Co-Insurer

t is a custom in credit nsurance to make the insured share a small percentage of the risks. EG pays
90% of the losses, which arise out of the political and commercial risk. Recoveries made after the
payment of claim is shared with the insured in the same proportion in which the risk was borne.

Premium Rates;

Premium rates are closely related to the risks nvolved and also vary according to the country to which
the goods are being exported to and also the payment terms. The exporter can get a quotation for his
business by filling in a confidential proposal form without being under any obligation to take up the
nsurance.

The premium rates charged by the EG on its insurance policies and guarantees have not been
increased since its inception and are amongst the lowest in the world. e.g. the premium rate for a Packing
redit Guarantee and Export Finance Guarantee is 7.5 paise per Rs. 100 per month or part theirof
e.g.The premium rate for Post-Shipment Export redit Guarantee is 5 paise for Rs. 100 per month.

Declaration Of Shipments:

An exporter who has taken out a shipments policy has to send form No. 203 by the10th of each month, a
declaration of shipments made in the previous month.
An exporter who obtains a contracts policy has to send a declaration of all the transactions covered
therein.
An outstanding contract immediately after the policy is issued. After that he must send a declaration of all
the contracts entered into shipments made by him during the previous month by the 10th of the next
month. The premium should be paid along with the declaration.

Settlement Of Claims

A claim arises when any of the risks insured under the policy materializes. n case the foreign buyer goes
insolvent, the ndian exporter is eligible for a claim one month after his loss in admitted or 4 months from
the due date whichever is earlier. n the event of default die claim is paid by the EG within 4 months
from the due dale, the claims regarding transport or insurance charges are paid after proof of payment is
allowed

Specific Policies

The standard policy is designed to provide a continuing insurance. For the regular flow of an exporters
shipment of raw materials, consumer goods and consumer durables for which the credit period does not
exceed 180 days.
ontracts for the export of capital goods and construction works or turnkey projects or rendering services
abroad are not of a repetitive nature. Such transactions are hence issued by the EG on a case-to-case
basis under specific policies.

t is advisable for exporters negotiating export of capital goods to contact the EG at the beginning
stages of negotiation with the foreign buyer. Then only EG will say whether cover is available in that
country in question, they also check the creditworthiness of the foreign buyer and state whether the
proposed credit terms are agreeable.

A specific policy is of four types:
i) Specific Shipments (omprehensive Risks). Policy to cover both commercial and political risks at the
post shipment stage.
ii) Specific Shipment (Political Risk). Policy to cover only potential risks at the post shipment stage in
cases where the buyer is an overseas government
iii) Specific ontracts (omprehensive Risks) Policy.
iv) Specific ontracts (Political Risk) Policy.

Financial Guaranties

Exporters require adequate financial support from 'banks n order to carry out their export contracts. The
EG guarantees protection to the banks from the losses incurred because of their lending to these
exporters.
Five guarantees are:

1. Packing redit guarantee.
2. Export Production finance guarantee.
3. Post-Shipment Export redit guarantee
4. Export Finance Guarantee
5. Export Performance Guarantee.

The guarantee gives protection to risks against losses arising out of non-payment by exporters by reason
of their insolvency or default.

The EG thus paid 3/4th of the loss under the scheme. They are also willing to pay a higher percent of
loss to banks, which offer to cover all their pre-shipment advances under the whole turnover packing
credit guarantee. Under Export Performance Guarantee the EG pays 90% of the loss of payment and
of course charge a higher premium for the same.



CARGO (MARINE) INSURANCE

rrespective of the terms of the export sale contract and mode of transportation, all export consignments
should be insured. The contract or the terms, on which goods are sold overseas, usually indicate which
party is to bear the cost of insuring the goods.

Export shipments are mostly effected on FOB, &F or F terms. Under a FOB & &F contract, the
exporter is under the obligation to insure the goods sold, or to bear the cost of insurance. The use of & .
or F cause in a sales agreement, however, imposes on the exporter the duty to insure the goods sold.
All goods shipped on consignment basis are under F contract and, hence, must be insured by the
exporter only.

Section 3 of the Marine nsurance Act, 1963 defines a contract of marine insurance as an insurance cover
for marine cargo, air cargo and post parcels. Thus, marine insurance is used to cover transportation of
the goods by any mode of transit singly or jointly i.e. transportation by sea, air or land inland water
voyages rail/road / air / post. t provides insurance or protection to the goods in transit and also extends
to, 'storage of goods', if such storage is incidental to transportation.

Risks Covered

The risks covered by marine insurance depend upon types of insurance policy represented by 'lauses'.
For many years, exporters have been familiar with clauses like FPA (Free of Particular Average) not
cover partial loss and WA (With Particular Average) covering partial loss. Other clauses such as "A!
Risks" were also used. Over a period of time, these types of terminology became very complex on
account of which the UNTAD (United Nations onference on Trade and Development) has introduced
"Marine All Risks Policy with series of restructured risk clauses.

There are now five sets of argo lauses:
O nstitute argo lause (a) (b) and (c),
O nstitute War lause (argo)
O nstitute Strike lause (argo)
And also specially designed clauses covering requirements of specified trades.

Amount Or Extent Of Insurance Coverage

Since the cost of contracting the insurance (the amount of the premium) increases with the scope of risks
covered. The concerned parties should make clear what type of insurance the exporter should obtain and
specify its coverage, when the exporter is required in the sales agreement to purchase the insurance.

t is customary to nsure for an agreed value, which is about 10 to 15 % above the F value n order to
cover incidental loss, occur. Sometimes, the insured value might well be much higher than the F value
plus the 10 to 15% figure. This is because there might be possibilities of duty payments being made and
then loss or damage being sustained on long inland trucks after the discharge of goods & clearance at
the destination port.


Premium Payments

Payments of premium on Marine nsurance Policy can be made in rupees, on exporter furnishing to
insurer a certificate to the effect either (a) that insurance charges on the shipment in question have to be
borne by him in terms of contract with overseas buyer and that he is not making the payment on behalf of
any non-resident and (b) that he is defraying insurance charges on the shipment in question on account
of overseas buyer of the goods and he undertakes to add the amount on the invoice and recover the
payment so made from the buyer in an approved manner.

EXEMPTION FROM PAYMENT OF EXCISE DUTY

A) REMOVAL OF GOODS UNDER BOND

The units manufacturing goods attracting Excise duty and desiring to export the same without payment of
excise duty can do so after execution of the requisite Bond in With the concerned Excise Authorities.

As per the prevailing excise procedure, before clearing the goods from the plant, the exporter should get
the goods examined by the central excise authorities or can remove without such examination.

For the purpose of removal of the goods for Exports, the exporter is required to prepare certain
documents for furnishing it to the excise Authorities:

Documentation:

FORM ARE 1 is an application for removal of excisable goods, whether duty paid or not, i.e. either under
claim for rebate or under Bond. n general, it is to be filed in quintriplicate.

Form ARE 2 is a combined application for removal of goods for export under claim for rebate of duty paid
on excisable materials used in manufacture & packing of such goods and removal of dutiable excisable
goods for export under claim for rebate of finished goods.

Form UT 1 is a letter of undertaking for removal of excisable goods for export without payment of excise
duty, by a manufacturer exporter.

Form T 1 is a certificate for a procurement of excisable goods for export without payment of duty from
manufacturer by a Merchant Exporter.

Form T 3 is a certificate for removal of excisable goods under bond.

The Exporter's nvoice indicating the goods offered for an assessment by excise authorities.

Time Period

The goods should be exported within six months from the date on which the those were cleared for export
from the factory / plant or warehouse

When the export is from place other than the registered place of manufacture or storage, the excisable
goods should be in original packed condition and identifiable as to their origin.

Procedure

The exporter should present the goods along with the above-mentioned documents to the Excise
Authority for verification of goods mentioned in the application & the particulars of the duty paid or
payable.

f the details furnished by the exporter are found in order, Excise Officer will seal each and every package
or the container and accordingly endorsement will be made on all the copies of application as a token of
having examined the goods.

The Excise Authority will return original & duplicate copies of the application to the exporter and retain
third copy with them for further processing.

Where the Exporter desires self-sealing and self-certification for removal of goods he should certify on all
the copies of the application that the goods have been sealed. Under this provision, the exporter is
required to send original & duplicate copies along with the goods to the Port from where the goods will be
shipped.

The Exporter should forward triplicate & Quadruplicate copies of the application to the concerned excise
authorities having jurisdiction over the plant/warehouse, within 24 hours of removal of the goods.

B) EXPORT UNDER CLAIM FOR EXCISE DUTY REFUND / REBATE

As per the prevailing Excise Rules, rebate or refund of whole of excise duty is permissible on all the
exports to any country other than Nepal & Bhutan. The claim for amount of rebate should not be less than
Rs.500/-

The Refund / Rebate of Excise Duty will be allowed, provided that:
O The goods are exported after payment of excise duty
O Export is affected within 6 months from the date clearance of goods from plant /warehouse
O Market price of excisable goods at the time of export is not less than the amount of rebate of duty
claimed.
O Export goods are not prohibited for exports under the prevailing export policy.

Procedure

The exporter should present the goods along with four copies of ARE 1 form to the concerned excise
authorities.

On verification of the goods offered for inspection, Excise Authority will seal each package and
endorsement will be made on each copy of the ARE1 and will return original & duplicate copies to the
exporter.

After sealing the consignment in the presence of Excise Officers and obtaining Form ARE1 from excise,
the exporter should move the goods to the Port from where they will be shipped.

The exporter is required to present the copies of ARE1 form to the custom authorities and on examination
of the consignment/documents, the ustom Officer will allow export of the consignment and will certify the
same with the remarks on the copies of application.

The ustoms Officer will forward original copy to the exporter and send duplicate copy to the Excise
Authority from which the exporter will be availing the rebate.

Claim / Sanction Of Rebate

There is no specified form for claiming the rebate of entral Excise Duty. The Exporter should file the
claim by furnishing following documents under his covering letter:

1. ARE1 Form Numbers & date
2. orresponding nvoice numbers & dates
3. Amount of rebate on each ARE1 form and its calculations
4. Original copy of ARE1
5. nvoice issued under entral excise rules
6. Self attested copy of Shipping Bill
7. Self attested copy of Bill of Lading

The laim for Rebate is to be filed with the Asst./Deputy commissioner of entral Excise having
jurisdiction over the plant/warehouse of the exporter.



SALES TAX EXEMPTION ON EXPORTS

There is No Sales Tax on sales made for export purpose. n other words it means that an Exporter need
not pay any Sales Tax either on the goods manufactured by him or purchased from the other
manufacturer for Export Purpose.

The only condition is that the exporter must be a Registered Dealer with the Sales Tax Department. f he
is not Registered Dealer, he cannot avail the facility provided for export of goods without payment of sales
tax under Form H (for procurement of goods from another state) or Form ST 49 (for procurement of goods
from same state).

Registration Procedure

n view to get registered with Sales tax authorities, the exporter should apply for the registration to the
sales tax office under whose jurisdiction his Registered/Head office is located in the prescribed form. On
verifying the details furnished by the exporter, sales tax officer will issue Sales Tax Numbers; valid for
both the local and inter- state sales in his favour.

Having got registered with Sales Tax Office, the Exporter has to observe following procedure for
procuring goods from the indigenous sources for onward exports, without payment of Sales Tax:

The Exporter for obtaining the Form H / ST 49, should apply with a copy of export order or Letter of redit
along with Export invoice, where the goods have already been purchased and the prescribed ourt Fee
stamp on them.

On receiving the application and verifying the details, Sales Tax Officer will endorse the name of the
exporter on the Form H/ST49.

The Form H / ST 49 is to be filed in Triplicate. While the exporter will retain one copy, the remaining two
copies will be given to the seller of the goods (from whom the goods are procured for exports).

No additional document is required to be attached by the exporter with Form H while submitting to Sales
Tax office along with the Sales Tax return. n case of procurement of goods from the same state & free of
tax, exporter has to obtain Form ST 49 from the sales tax authorities by furnishing them a copy of export
order / Letter of redit and the copy of bill or cash memo .n this case also, the exporter will have to retain
two copies of the Form issued by the Sales Tax Office and the third copy to be given to the seller, who in
turn will furnish the same to Sales Tax Office along with his Sales Tax Return.



SHIPPING OF CARGO FOR EXPORT


A) Reservation Of Shipping Space

The process of argo shipment starts with reservation of shipping space in the vessel sailing to desired
destination on or before the "validity date for shipment indicated in letter of credit. Reservation should be
done immediately after the confirmation of the export order.

The Exporter will have to approach the Shipping ompany or its Agent for reservation of necessary
space. Reservation commences generally six to eight weeks before the ship's arrival at the Port of
shipment. For booking the space, the exporter has to furnish the details of the cargo to be carried, such
as the nature of the product, quantity, Port of loading, port of destination etc. to the shipping company.

Depending upon the availability, the shipping company will book the desired space and issue a shipping
order in favour of exporter.

B) Transportation To Port

After reservation of shipping space, the goods are required to be transported from the plant/warehouse to
the port by the available mode of transport.

C) CUSTOM & SHIPMENT PROCEDURES

The different stages are involved in shipment of goods and which include

Custom Verification Of Shipping Bill

Shipping bill is the main document required by the customs authorities for allowing shipment. Basically
shipping Bills are of Five types. The major distinction between one type and another lies with regard to
the goods being subject to:
1. Export Duty
2. Entitlement of the credit of duty under DEPB Scheme
3. Free of Duty
4. Entitlement of Duty Drawback
5. Re-export of mported Goods.

Free shipping Bill is used for export of goods, which neither attracts any export duty nor entitled for any
duty drawback. n case of exports under Duty drawback Shipping Bill, on exportation of the goods, the
shipping Bill itself serves as a laim document for claiming Duty drawback from the ustoms authorities
(Export Department).

For the purpose of getting necessary permission for Exports, the shipping bill is to be passed by the
ustoms Authorities and for which the exporter is required to furnish following documents with the
Shipping Bill

1. GR Form, n Duplicate
2. ommercial nvoice, Four opies
3. Packing List, Four opies
4. opy of Letter of redit, Purchase Order
5. nspection ertificate
6. Excise Form ARE 1

The ustoms Appraiser examines the shipping documents and appraises the value having regard to 1)
That the value & quantity declared in the shipping bill is in conformity to the export order/Letter of credit,
2) That the formalities regarding exchange control, pre-shipment quality inspection etc. have been duly
completed

After examining the documents, the ustom Appraiser makes an endorsement on the duplicate copy of
the shipping bill thereby giving direction to the Dock Appraiser about the extent of physical examination of
the cargo to be carried out at the docks.

All the documents except GR (Original), the original Shipping bill & a copy of the ommercial nvoice are
returned to the exporter or his clearing agent to be presented to the Dock Appraiser.

Carting & Receipt Of Cargo In Docks

After taking delivery of documents from the export department of ustoms, exporter is required to present
the documents to the Shed Superidentent of the Port and obtain "arting Order for bringing the export
cargo to the transit shed for physical examination by the dock's appraiser and for the shipment.

Cargo Examination In Docks

On bringing the cargo into the Port Trust Shed, the exporter is required to present the following
documents to the Dock Appraiser for conducting physical examination of cargo:

1. Duplicate/ Triplicate & Export Promotion opy of shipping bill
2. ommercial invoice
3. Packing list
4. ARE1 (Original & Duplicate)
5. nspection ertificate
6. GR Form (Duplicate)

The dock appraiser after conducting physical examination, records examination report and makes "Let
Export endorsement on the duplicate copy of the shipping bill and hands in over to the exporter along
with other documents for presentation to the Preventive Officer of the ustoms who supervises the
loading of the cargo on board of vessel.
The Preventive Officer makes an endorsement of "Let Ship on the duplicate copy of the shipping bill,
which is then handed over to the exporter. This constitutes the authorization by the customs to the
shipping company to accept the cargo on board of vessel.

Issue Of Mate Receipt

After the goods are loaded on the vessel, the captain of the ship issues a receipt called "Mate Receipt to
the shed superintendent of the port. The exporter then makes payment of the port charges and takes
delivery of the Mate Receipt.

The exporter then presents the Mate Receipt to the preventive officer who records the ertificate of
Shipment on all the copies of shipping bill, original & duplicate copies of ARE1form and return the export
promotion copy, a copy of drawback shipping bill and duplicate ARE 1 Form to the exporter.

The Exporter then presents the Mate Receipt to the shipping company and obtains Bills of lading,
negotiable & non-negotiable copies.

Octroi / Entry Tax Exemption

The Export consignments brought from the outside in to Mumbai & Kolkata Ports are subject to Octroi
Duty and Entry Tax at respective places. However the exporter should obtain exemption there from by
moving an application in the prescribed manner.

f the Octroi Duty is paid, its refund can be claimed after exportation of the consignment. Since the refund
of the amount paid may involve some time, it is better to seek exemption from payment duty itself.

For obtaining exemption from Octroi Duty, Form N along with a Port Trust copy of Shipping bill is required
to be filed with concerned Octroi heck Post. This procedure presupposes that the shipping has already
been processed before moving the goods in the city limit.

Where the Octroi Duty has been paid and its refund has to be claimed, the Exporter should fill in Form
in duplicate and register it with the Octroi Office inside the Docks as well as with Port Shed n-charge. The
Form will be duly endorsed after loading the cargo in the vessel.

Application for refund of Octroi Duty has to be filed within 45 days of the date of loading to the Octroi
refund section with the following documents:

O Form , duly endorsed by the Octroi Post in docks
O Octroi hallan, the proof of having paid the Octroi Duty
O Form B, in duplicate

On being satisfied with the documents, Octroi Duty paid, with a deduction of 2 % towards administrative
expenses, will be refunded to the exporter.



RELISATION OF EXPORT SALES PROCEEDS


Procedure

n terms of Foreign Exchange Management Act, (FEMA) 2000,all payments for export of goods &
services must be realized by exporters through the medium of an Authorised dealer (Bank) in foreign
exchange, unless permitted otherwise.

After the despatch of export consignment to foreign destination, the Exporter should approach his
bankers with a formal letter requesting it to realize the sale proceeds from his foreign buyer. t is
obligatory for the Exporter to submit the shipping documents to an Authorized Dealer within 21 days from
the date of shipment of the goods and full value of the exports should be realized on due date for
payment or within 6 months from date of shipment whichever is earlier. However in case Status Holder
Export Houses, the payments can be realized within 12 months.

Where it is not possible to realize the sale proceeds within the prescribed period as mentioned above, an
application for extension of period has be made through the Bank to the concerned Regional Office of
Reserve bank of ndia.

Documents Required

The letter to the bank should enclose documents as prescribed in the Letter of redit or Export Order,
which will enable the overseas buyer to take delivery of goods and as also the documents required by
exporter to claim various export incentives.

The documents generally required by the Bank to negotiate for or collect necessary payment from abroad
are as follows:


1. Bill of exchange (First of exchange & second of exchange)
2. Full set of negotiable copies of Bill of Lading/Airway Bill
3. ommercial invoice including one copy duly certified by the customs authority
4. Original letter of credit
5. ustoms invoice
6. ertificate of Origin
7. A complete set of nsurance Policy / ertificate
8. Packing List
9. Foreign Exchange Declaration Form (Duplicate copies of GR/PP)
10. Exchange control copy of Shipping Bill
11. Bank ertificate of export realization in the prescribed form
12. Other documents like certificate of Analysis/nspection etc.
13. Original Sales ontract between exporter & overseas buyer

Despatch Of Documents

Before the transmission of documents to their counterpart for negotiation/collection, the bank examines
them thoroughly with reference to the terms & conditions of the Buyer's order, letter of credit & the laws
relating to foreign exchange management.

f after scrutiny, the documents are found in order, the bank dispatches them to its overseas branch
/correspondent as early as possible.

Realisation & Payment Of Export Sale Proceeds

On receipt of Bill of Exchange & other documents, the importer's bank presents the same to his client for
payment in case of "Sight Draft and acceptance in case of "Usance Draft. The shipping documents
against consignment exports are, however delivered to the consignee only against a trust receipt or
undertaking to deliver the sale proceeds by a specified date.

As soon as the payment is received or documents are accepted, the foreign bank conveys this fact to the
exporter's bank. While exporter receives payment against Sight Draft immediately on the receipt of
advice, the payment against duly accepted Usance Draft is made on its date of maturity.

Payment To Exporter

Pending the confirmatory advice from the overseas branch of the bank, the banks make payment to
exporter through the method of negotiations of the bills drawn in the home currency.

Claim For Drawback

The procedure for claiming drawback is different for (a) export by sea or air; (b) export by post and (c)
export by surface (land route). A new simplified and uniform procedure has been put into effect from 1-2-
86 and revised from 26/5/95. The procedure is also different for claim against exports under ustoms ED
system.

Export By Sea Or Air

Bank Account

To claim drawback, exporters should open an account in any nationalised / Private/ foreign bank in the
places of their station. They should intimate in advance, the name and address of such bank and A/.No
.to the Drawback Dept. of the concerned ustom House through which exports is effected.

Drawback Ledger And Account No.

On receipt of intimation about the bank's name and account number, a drawback ledger is opened and
account number allotted to the exporter. The Drawback Dept. intimates it to him. The Drawback Ledger
Account Number is to be noted on all documents relating to drawback claim.

Renewal

The Drawback Ledger Account Number is required to be renewed, if it was allotted before 1.1.1988. The
application for renewal is to be sent in the prescribed format to the drawback department.

Drawback Shipping Bill / Drawback Claim

Triplicate copy of the shipping bill for export of goods under a claim for drawback shall be deemed to be a
claim for drawback filed on the date on which the proper officer of ustoms makes an order permitting
clearance and loading of goods for export. The said claim i.e. the proper officer making such order shall
retain triplicate copy of shipping bills.

Therefore, the Exporter should file the shipping bill, in triplicate, well in advance, in the Export Dept. or
entral Registration Unit, if any functioning at the port or at D / ontainer Freight Station/Air argo
omplex, etc. t should contain necessary declarations which are normally printed on the Shipping Bill or
as are indicated against a particular sub-serial number in the Drawback Table and/or brand rate letter etc

The manufacturer-exporter, who intends to avail of the simplified procedure of fixation of DBK rate prior to
verification of data, should make a specific mention to the effect that the DBK claim is filed in pursuance
of Government's Simplified Procedure of DBK fixation.

Depb-Cum-Drawback Shipping Bill

This S/ B is to be filed in case of exports under DEPB scheme of those products which can not avail
ENVAT credit of Additional or ountervailing Duty (VD) of ustoms paid in cash on imported inputs or
excise duty paid on indigenous inputs, since no excise duty is payable on export goods. Such exports will
be eligible for payment of brand rate of drawback against additional customs duty/excise duty suffered on
inputs, on submission of proof of payment of duty. To enable the exporter to file applications for brand
rate, they will be allowed to file DEPB-cum-Drawback Shipping Bill.

The photocopy of the SB duly attested by a DGFT officer, will be accepted as a drawback copy where the
3rd copy of DEPB Shipping Bill is file with the licensing authority.

Documents

The Drawback Shipping Bill, as above, should be sent with the following documents (in duplicate)

1. nvoice i.e. commercial invoice or any other document giving particulars of the description,
quantity and value of the goods to be exported
2. Export Licence / quota endorsement certificate, if any
3. Packing list
4. Overseas buyers' orders/contracts/letter of credit or bank attested invoice, if export order/ L/ not
available.
5. ARE-1 form of central excise, wherever necessary.
6. nsurance certificate wherever applicable.
7. opy of brand rate letter
8. Test Report, if already available
9. Freight and / or insurance amount paid, where export is not on FOB basis
10. opy of DEE book where export made under DEE-cum-DBK Shipping Bill
11. Any other relevant document and Declarations, as applicable

The Exporter should attest all the above documents & the same will be authenticated by the ustoms at
the time of scrutiny under the signature and official stamp of the ustoms officials.

Scrutiny Of Application

The shipping bills, thus, filed would be given a running serial No. This number will also be known as
drawback claim number.

On presentation, the shipping bills will be scrutinised and examined in the Export Department from both
export and drawback angles. mmediately after scrutiny and completion of the shipping bill by the As-
sessing Officer, the duplicate and triplicate copies of the shipping bills with suitable examination order
would be returned to the exporter for presenting the same to the Docks appraising/examining staff.

Examination Order

The examining officer also known as Assessing Officer, shall give the examination report on duplicate as
well as triplicate copy of the shipping bill clearly indicating:

O F.O.B. value of goods
O Net weight of the goods
O Rate of drawback
O Drawback amount

The examining officer shall give the examination report in his own hand. Wherever a sample is drawn for
analysis, this fact will also be indicated clearly by the examining officer. There is also a provision to get
the export goods examined at the factory instead of at D and/or the port of shipment as follows.

Let Export Order

The duplicate and triplicate copies of the shipping bills duly scrutinised and completed by the Assessing
Officer should be presented to the Docks appraising/examining staff along with the export goods. After
scrutiny and examination of the goods in the light of the examination report/order on the shipping bill, the
Docks appraising/examining officer will endorse his examination report on both the duplicate and triplicate
copies of the shipping bill. He will also endorse the "Let Export Order" on both the copies, if the goods are
found in order. There after, the proper officer permitting clearance and loading of goods shall retain the
drawback i.e. the triplicate copy of the shipping bill.

Payment Of Drawback

laims upon being found admissible, shall be sanctioned and credit of the amount given in the ledger
account of the exporter maintained in the Drawback Section. Payment shall be made on fixed dates, i.e.
every fortnight through an A payee cheque to the exporter's bank, under intimation to the exporter.

Interest On Delayed Payment

The Exporter will be entitled to interest at the ratespecified on the drawback amount where the drawback
is not paid to him within two months from the date of filing his claim.

EXPORT PROMOTION SCHEMES

To facilitate and assist export production in order to promote exports from the country, the Ministry of
commerce has extended various schemes under the existing Export mport Policy thereby allowing an
exporter to obtain his requirements of apital Goods as well as necessary nputs required for the export
production with concessions in the ustoms Duties.

. ADVANCE AUTHORISATION SCHEME

The Scheme

An advance license is issued to allow duty free imports of inputs, which are physically incorporated in the
export products. n addition, other consumables, which are consumed in the course of their use to obtain
the export product, may also be allowed under the scheme. Duty exemption schemes enables exporter to
import inputs required for export production without payment of ustom Duties.

Where the Standard nput Output Norms (SON) have been published, an application in the prescribed
Form, along with relevant documents should be submitted to concerned licensing authority.

n case where SON are not fixed, an application in the prescribed Form along with annexure & specified
documents, should be furnished to Advance licensing ommittee (AL) for fixation of SON. n such
cases, the original copy of the application with the prescribed application fee should be filed, with the
concerned Regional Licensing Authority and self-attested copy of the same should furnish to AL. The
Regional Licensing Authority on the basis of recommendation of AL will issue the Advance License in
favour of the exporter.

The Licensing Authority may also issue Advance Licenses where SON has not been fixed, based on the
self-declaration and the undertaking by the applicant exporter for a final adjustment against the SON,
which will be fixed by AL later on.

Cif Value Entitlement

The F value of one or more such licences issued under the scheme will be Rs.50 lakhs or 100% of
FOB value of the last year's exports whichever is more. However, Status Export Houses can claim one or
more such licences up to 200% of the FOB value of the last year exports. Such licences, subsequent to
fixation of norms by AL, will be enhanced to a F Value originally applied for or as decided by the
competent authority.

The new exporters will also be entitled for Advance Licenses in this category up to their entitlement or for
F value not exceeding Rs.50 Lakhs whichever is more and subject to furnishing a Bank Guarantee of
100 % of amount of ustom duty payable to the ustoms Authority, to cover the exemption from custom
duties together with 15 % interest. However, a specific endorsement to that effect required to be made on
the Advance license

Procedure

The original application, in the prescribed format, with the relevant documents should be furnished to the
concerned Regional Licensing Authority. The Licensing Authority will forward a copy of the application
within 7 days from the date of issue of such licenses issued on the provisional basis to AL for fixation of
norms within the prescribed time.

The applicant is also required to furnish an undertaking for abiding the norms fixed by AL and
accordingly pay custom duty, together with 15% interest on the un-utilized mports, in line with the norms
fixed by AL. n cases, where the norms are not fixed by AL within 6 months from the date of issue of
the licenses, the norms as applied for shall be treated, as final and no adjustment will be made.

The concerned Regional Licensing Authority is authorised to issue the Advance Licenses under these
categories for a F value up to Rs.50 rore whereas for F value above Rs.50 rore the Regional
Licensing Authority, only on recommendation of AL is authorised to issue the licenses


EXPORTS IN ANTICIPATION OF LICENSE

Exports made from the date of receipt of an application for an advance license by the licensing authority,
will be accepted towards discharge of export obligation against the License issued. f the application is
approved, the license shall be issued based on the SON in force on the date of receipt of the application
by the licensing authority, in proportion to the provisional exports already made till any amendments in the
SON are made.

At the time of issue of Advance Licence, the acceptance of undertaking given by the applicant to the
licensing authority concerned in the prescribed form will be endorsed on the reversed side of the advance
license.

PORT OF REGISTRATION

The advance license will be issued for the purpose of imports and exports through one of the nominated
Seaport or Airport. The license holder should register the license, at the port specified in the license and
thereafter all imports against the said license should be made only through that port. However, exports
may be made through any of the specified ports.

EXPORT OBLIGATION

The period of fulfilment of export obligation under the advance license will commence from the date of
issuance of the licence. The export obligation should be fulfilled within a period of 18 months. However
the request for extension in export obligation period may be made in the prescribed form to the Regional
licensing authority. The authority may grant one extension of six months from the date of expiry of the
original export obligation period, subject to the payment of composition fee of 1% of the unfulfilled FOB
value of export obligation.

FULFILLMENT OF EXPORT OBLIGATION

The license holder will have to furnish following documents in support of having fulfilled export obligation:
1. Bank certificate of exports & realization in the prescribed format
2. Export promotion copy of shipping bill
3. A statement of exports giving details of shipping bill wise exports indicating the description
products exported & FOB value thereof.
4. A statement of mports indication bills of entry wise items of imports, quantity & F value thereof

On fulfillment of the export obligation, the licensing authority will redeem the case and forward a copy of
redemption letter indicating all the details of Exports made to the ustoms authority at the port of
registration. The customs authority will verify the details and discharge the Legal undertaking furnished by
the exporter.

REVALIDATION OF LICENSES

The regional licensing authority may consider a request from the eligible exporter for revalidation made in
the prescribed format and may grant one revalidation for period of 6 months from the date of expiry of the
original license.

2. DUTY ENTITLEMENT PASS BOOK SCHEME

THE SCHEME

The objective of DEPB is to neutralize the incidence of ustom Duty on the import content on the export
product. The neutralization shall be provided by way of grant of duty credit against the export product.

Under the DEPB scheme an exporter may apply for credit as a specified percentage of FOB value of
exports made in a free convertible currency. The credit shall be available and at such rate as specified by
DGFT for import of raw materials, components, parts, packaging materials etc.

PROCEDURE

The Duty redit under the scheme will be calculated by taking into account the deemed import content of
the said export product as per SON and the Basic ustom Duty payable on such deemed imports. The
value addition achieved by export of such product shall also be taken into account while determining the
rate of duty credit under the scheme.

All application for fixation of DEPB rates should be made in the prescribed form and should be routed
through the concerned Export Promotion ouncil, who will verify the FOB value of exports as well as the
international price of inputs covered under SON.

No exports will be allowed under DEPB scheme unless the DEPB rate of the concerned export product is
notified.

The Exports & mports made only through the specified Ports will be entitled for DEPB. The DEPB will be
issued with Single Port of Registration, which will be the Port from where the exports have been made.

The credit obtained under DEPB is also allowed to be utilised for payment of custom duty on any item,
which is freely importable except capital goods.

An application for grant of credit under DEPB may be made to the licensing authority concerned in the
prescribed form (Appendix-10 ), along with the necessary documents.

The FOB value of exports realized in free foreign exchange will be converted into ndian Rupees, as per
the exchange rate prevailing on the date of "Let Export" order issued by the ustoms.

n cases where the applicant applies for DEPB after realization or shipments are made against
irrevocable letter of credit as certified by the bank in the relevant Bank certificate of export and realization,
the DEPB shall be issued with transferable endorsement. n other cases, the DEPB shall be initially
issued with non-transferable endorsement. However, upon receipt of realization, the DEPB shall be
endorsed transferable.

The Regional Licensing Authorities shall monitor the cases where the DEPB has been granted prior to
realization of export proceeds (except the cases where shipments are made against irrevocable letter of
credit). By doing so they want to ensure that realization takes place within the prescribed time, failing
which they will initiate action for recovery of an amount equivalent to DEPB credit granted with 15%
interest thereon.

f the export proceeds is not realized within six months or such extended period as may be allowed by
RB, the DEPB holder will have to pay in cash an amount equivalent to the duty free credit utilized on
imports, including Special Additional Duty (SAD) against such exports with 15% interest from the date of
import till the date of deposit.

n cases, where the amount realized in foreign exchange is less than the amount on which DEPB credit
has been obtained, the holder of DEPB is required to pay an amount proportionate to the duty free credit
utilized on imports, including SAD with 15% interest from the date of imports till the date of deposit.

RESTRICTION ON USE OF DEPB CREDIT

The F value of imports affected under the DEPB shall not exceed the FOB value of exports against
which the DEPB has been issued. The licensing authorities shall incorporate an endorsement to this
effect on DEPB and shall also mention the FOB value in (ndian rupees) on the DEPB.

The application for obtaining credit shall be filed within a period of six months from the date of exports or
within three months from the date of realization, whichever is later.

Wherever the ustoms Authorities have allowed provisional shipment, DEPB against such exports shall
be issued only after the release of the shipping bill by the ustoms. n such cases, application for DEPB
shall be filed within six months from the date of release of such shipping bill or three months from the date
of realization, whichever is later. The application for issue of DEPB will be entertained after applying 10%
late cut.

FREQUENCY OF APPLICATION

The applicant may file one or more applications subject to the condition that each application shall contain
not more than 25 shipping bills. All the shipping bills in any one application must relate to exports made
from one ustom House only. This limit shall not apply to the applications filed through ED mode.
However, under the same/one day licensing scheme, a manual DEPB application would be restricted to
10 shipping bills. The DEPB benefit can be allowed against a Shipping Bill having an endorsement on the
Shipping Bill that the exports are made under the DEPB Scheme

The licensing authority shall ensure that while issuing DEPB, the details of shipping bills are endorsed on
DEPB. Before allowing imports against DEPB, the ustoms authorities will verify the details of exports as
given in DEPB with their records.

Under no circumstances, revalidation of DEPB will be granted beyond its original validity period.

3. EXPORT PROMOTION CAPITAL GOODS SCHEME

THE SCHEME

The scheme allows Exporter to mport New apital Goods including KD/SKD thereof as well as
omputer Software Systems at 3 % custom duty subject to an export obligation equivalent to 8 times
ustom Duty oncession Obtained & to be fulfilled over a period of 8 years, counted from the date of
issuance of license.

However, in respect of EPG licenses for F value of Rs.100 cores or more the same export obligation
shall be required to be fulfilled over a period of 12 years.

PROCEDURE

An application for grant of mport license under EPG Scheme to be made to the concerned Licensing
Authority in the prescribed form. The applications for EPG Licenses of F value up to Rs.50 rore are
to be made to the Regional Licensing Authorities, whereas applications for F value above 50 rore to
be referred to Headquarters, EPG ommittee at New Delhi.

The Regional Licensing Authority after issue of the licenses on provisional basis, will forward copy of the
application along with a copy of the license issued to the Headquarter EPG ommittee for its approval
within 7 days of the issuance of the licence except for the cases where Norms have already been
communicated by the EPG ommittee or the Licenses have been issued in the past by the Regional
Licensing Authority.

n response, EPG ommittee will finalize the norms within 6 months from the date of issue of license
failing which the norms as applied for by the applicant will be treated as final. The applicant is also
required to give an undertaking that in case the Headquarter EPG ommittee disallows the license, the
holder shall pay custom duty together with 15% interest on such goods

The Applicant may apply for EPG licenses to the competent authority on the basis of self-declaration
subject to final fixation norms by Headquarter of EPG ommittee as per the financial authorities given to
them.

FULFILLMENT OF EXPORT OBLIGATION

The license holder under EPG scheme is required to fulfill the export obligation over the specified period
in the following manner

Period from the Date of Proportion of Total
ssue of License Export Obligation
Block of 1
st
to 6
th
Year 50 %
Block of 7
th
& 8 th Year 50 %

n respect of licenses of F Value of Rs.100 rore & more, the export obligation to be fulfilled over a
period of 12 years in the following manner

Period from the Date of Proportion of Total
ssue of License Export Obligation
Block of 1
st
to 10 th Year 50 %
Block of 11 th & 12th Year 50 %

However, the export obligation of a particular block of the year may be set off by the excess exports made
in the preceding block of year.

Where export obligation of any particular block of the year is not fulfilled in terms of the above proportion,
such license holder shall within 3 months from the expiry of the block of years, pay duties to customs plus
15% interest of an amount equal to that proportion of duty applicable on the goods, which bears the same
proportion as the unfulfilled portion of the export obligation bears to total export obligation.

As evidence of fulfilment of export obligation, the license holder is required to furnish a consolidated
statement of exports made, as per the prescribed format, duly certified by chartered accountant and
bank's confirmation on realization of exports sales proceeds.

Every EPG license holder is required to maintain, for a period of 3 years from the date of redemption,
proper records of the exports made towards fulfillment of export obligation under the scheme.

DUTY DRAWBACK SCHEME

THE SCHEME

n the manufacture of many Export Products imported & indigenous raw materials & components are
used on which the ustoms (mports) & Excise duty has been paid. On the exportation of finished
products in which duty paid inputs are used, a part or full of the amount of such duty is allowed to be
drawn back by the exporter. This refund is known as ustoms & entral Excise Duty Drawback.

DRAWBACK RULES

The scheme of drawback on manufactured products is presently contained and administered in
accordance with ustoms & entral Excise Duty Drawback Rules, 1995.Under the duty drawback
scheme the export products get relief in respect of ustom & Excise Duties paid on inputs used in their
production

There are two types of Rates of Duty Drawback
O All ndustry Rate
O Special Brand Rate

The Ministry of Finance, Govt. of ndia every year, normally in the month of June, publishes all ndustry
Rates and these rates are valid for one year. The All industry Rates are fixed on the basis of averaging
principle.

Special Brand Rates are fixed on specific request from the Exporter where All ndustry Rate does not
exist for goods exported by him or when the All ndustry Rate is less than 80% of the duties paid on the
materials /components used in the production of the exported goods by the Exporter.


PROCEDURE

Fixation of Special Brand Rates is done under simplified Procedure or Normal Procedure as may be
applicable. Where exported Goods are excisable, the manufacturer exporter has to furnish his Application
along with all the relevant justifications for higher rate of drawback to the Jurisdictional Asst.
ommissioner of entral excise where the goods are manufactured.

As per the prevailing ustoms Rules, For claiming the Duty Drawback on exported goods, the exporter is
not required to file a separate application for granting the amount of drawback, as the Drawback Shipping
Bill, presented at the time of clearing the goods for exports, itself is treated as a claim and it is finalized
after ensuring that the goods have been presented for examination to customs and cleared for loading on
the board.

The payment of drawback is made directly by the ustom House commissioner having jurisdiction over
the port through which export has been made.

EXPORT HOUSE STATUS

The service providers shall be eligible for recognition as Service Export House, nternational Service Ex-
port House, nternational Star Service Export House and nternational Super Star Export House, on
achieving the performance level as laid down for Export House, Trading House. Star Trading House and
Super Star Trading House respectively for each category in services sector.

ategory Average FOB/FOR Value During
Last Three Licensing Years,
(n Rupees)
One Star Export House 15 rore
Two Star Export House 100 rore
Three Star Export House 500 rore
Four Star Export House 1500 rore
Five Star Export House 5000 rore

PROCEDURE

Registering Authority

The application for grant of Service Export House, international Service Export House status is to be sent
to the Regional Licensing Authority headed by a Joint DGFT, but application for nternational Star Service
Export House and nternational Super Star Service Export House is to be sent to the DGFT, New Delhi.

AppIication Forms
Apply in the prescribed format (in duplicate) to the Regional Licensing Authority headed by Joint DGFT/
DGFT at headquarters, New Delhi. The applications should be submitted by Registered Office in the case
of a company and head office in the case of others.

DOCUMENTS

The application should be accompanied with the following documents:

1. Self certified copy of a) project approval or b) classification approval of Department of Tourism or
any other registration.
2. A certificate from hartered Accountant/ost and Works Accountant certifying the export/import
3. Export Performance in the prescribed format.
4. opy of the FR issued by the Bank in respect of foreign exchange received from service
rendered. This is not applicable to the hotel industry.
5. opy of the balance sheet filed with ncome Tax Authorities for the relevant year or A certificate
from the statutory authorities.

DEEMED EXPORTS

For the purpose of claiming deemed export benefits, if any, the indigenous supplier shall produce
documentary evidence substantiating the realisation of proceeds from the recipient through the normal
banking channel in the prescribed form as well as a Non-negotiable copy of Back to Back nland Letter of
redit.

THE PROCEDURE FOR CLAIMING BENEFITS

An application in the prescribed Form, along with the documents prescribed therein shall be made to the
Regional Licensing Authority concerned.

The claim shall be filed against payment certificate received on monthly basis/quarterly basis/half yearly
basis, except for supplies under paragraph 8.2 (d), (e), (f), (g) and (J) of the EXM Policy 2002-07, where
it may be filed either on the basis of payment certificate or on the basis of proof of supplies effected.

The claim foe availing benefits may be filed either covering the payment certificate received for the
supplies against a particular project or supplies to all the projects made during the month/quarter/half year
as per the option of the applicant. n addition, the applicant shall also have the option to file claim
covering all the supplies to a project.


EXPORT-ORIENTED UNITS (EOUS) / EXPORT PROCESSING ZONE (EPZ) UNITS/ SPECIAL
ECONOMIC ZONE (SEZ) UNITS AND ELECTRONIC HARDWARE/ SOFTWARE TECHNOLOGY
PARK UNITS (EHTP/STP UNITS)


The scheme of allowing "Manufacture in Bond of goods from indigenous / imported raw materials &
components without payment of ustoms/Excise duty has now been extended to Export Oriented units to
be set up any where in the country. According to a Resolution No, 8(15)/78-EP dated 31.12.1980 of the
Ministry of ommerce, a single point clearance with regard to industrial licensing, foreign collaboration,
imports of capital goods and raw materials, etc. will be given to 100% export-oriented units, The facilities
and assistance to be provided to such units and those in Electronic Hardware/ Software Technology
Parks and the manner ofoperation of the scheme are as stated below.

DEFINITION

Export Oriented Unit would imply a unit offering forexports its entire production excluding permitted level
of rejects and domestic sale. An agreed time-phasing for achieving 100% exports will be permissible on
merits ofeach case. Such unit may be set up for any item except prohibited items in the T (HS)
classifications of Export mport tems.

An EPZ / SEZ or EHTP/STP Unit is that which is set up in an Export Processing Zone, Special Economic
Zone or Free Trade Zone or Electronic Hardware/ Software Technology Parks. Other conditions are same
as applied for EOU stated above.

MINIMUM EXPORTS

The minimum f.o.b. value ofexports is required to be US $ million or three times the c.i.f. value of
apital Goods including indigenously procured whichever is higher, for all products in general. For units
wherein investment in plant and machinery both imported or indigenous, exceeds Rs. 5 crore, the
minimum Export Performance forfive years is US $ 3.5 million or three times the F value of apital
Goods whichever is higher.

APPROVAL PROCEDURES

Authority
The authority for approval of proposals to set up an EOU/EPZ unit fall into two categories a) units fulfilling
criteria for automatic approval and b) for cases not fulfilling the automatic approval.

AUTOMATIC APPROVAL

EOU / EPZ UNITS
Development ommissioner of the concerned Zone is the authority for giving approval to a unit to be set-
up as an EOU or in an EPZ
.


EHTP/STP UNITS

The Dept. of nformation Technology, Govt. of ndia, New Delhi is the administering authority for
EHTP/STP schemes. Hence, application for setting up a unit in EHTP or for establishing in STP is to be
sent to the Department of nformation Technology.

APPROVAL THROUGH BOARD OF APPROVAL / FOREIGN INVESTMENT PROMOTION BOARD

The cases not falling within the criteria of automatic approval shall be considered by the Board of
Approvals or Secretariat for ndustrial Assistance / FPS in case of EOU / EPZ units and by the nter-
Ministerial Standing ommittee (MS) for EHTP/STP units.

PROCEDURE

An application form for EOU and EPZ unit is for securing both types of approvals (automatic or through
BOA). t is known as "Application for Setting Up EOU or Units in EPZ / SEZ" Three copies of the form are
to be sent to the D of the EOU or EPZ concerned, with necessary application fees, in respect of all
cases i.e. automatic approval or approval through BOA.

Application for setting up EHTP/STP units shall be in the format prescribed by the Dept. of nformation
Technology, and submitted to the officer designated in that Dept. for the purpose.

AppIication Fee

t is Rs. 5.000/- for all applications payable through a crossed Demand Draft drawn in favour of Pay &
Accounts Officer, Department of ndustrial Development, Ministry of ndustry and payable at the State
Bank of ndia. Nirman Bhavan, New Delhi- 110011.

Automatic ApprovaIs / ApprovaI of New Units

Proposals for setting up units under EOU/EPZ/SEZ scheme under automatic route shall be considered by
the Development ommissioner taking into account the following:

1. Proof of Residence in respect of individuals/ partnership firms (Passport/ration card/driving
licence /voter identity card or any other proof to the satisfaction of Development ommissioner)
2. ncome-tax return of the promoters for the last three years;
3. Experience of the promoters
4. Marketing tie-ups
5. n case of EOU, inspection of the project site by an officer;
6. A report fromthe other EPZ/SEZ as to whether any case under EOU/EPZ scheme in regard to
diversion of goods etc. is pending.

The omplete applications in the prescribed form (3 opies) are to be submitted to the Development
ommissioner of the concerned EPZ. Or to the Dept. of nformation Technology for EHTP/ESTP units,
duly accompanied by a crossed Demand Draft towards application fee. All imports should be mentioned
in FE and rupee terms and the list of imported capital goods should be enclosed f the application is found
to satisfy the required conditions of the above Letter of Approval shall be issued within two weeks by the
D to the entrepreneur enlisting the parameters of the approved project and setting out the obligations
and conditions.

f the application does not satisfy the conditions of automatic approval it will be reffered to Board of Ap-
provals.

BOARD OF APPROVAL / FOREIGN INVESTMENT PROMOTION BOARD


PROCEDURE

All cases not falling within the scope of automatic approval as above shall come before the Board of
Approvals. The Board, wherever applicable, shall also consider applications for grant of industrial licence,
wherever such licence is compulsory. Minutes in such cases will be issued after approval of Department
of ndustrial Policy and Promotion. Based on the approved minutes, the Development ommissioner will
issue the Letter of ntent and upon fulfillment of conditions therein, convert the same into industrial
licence. The Development ommissioner along with his comments would submit all cases before the
Board so that the units have a single interface at the level of Development ommissioner.

PROCEDURE FOR SALE IN DOMESTIC TARIFF AREA (DTA)

DTA SaIe EntitIement

The Export and mport Policy & Handbook of Procedures both for 2002-07 provide for sale of goods in the
DTA by EOU, units in EPZ, and EHTP/STP units.

Such sales in the DTA will be governed by the following guidelines:

The sale of goods in the DTA will be subject to the payment of the applicable duties as notified from time
to time by the Department of Revenue, Ministry of Finance, Government of ndia

DTA sale includes clearance to any other unit within ndia.

DTA sale entitlement will be applicable only to those goods and services that are permissible as per EXM
Policy. No DTA sale will be permissible if such sale is specifically prohibited in the EXM Policy or in the
Letter of Permission/ Letter of ntent.

Units may opt for DTA sale on a quarterly, half yearly or annual basis by intimation to the Development
ommissioner of the EPZ/SEZ concerned.

The DTA sales entitlement shall be availed of within three years of the accrual of entitlement.

An application for DTA sale of goods should be submitted to the D concerned, in the prescribed form.
The application shall be certified by an independent hartered/ost and Works Accountant and endorsed
by the Bond Officer of ustoms/entral Excise having jurisdiction over the unit.

The Development ommissioner of the EPZ concerned will determine the extent of the DTA sale
admissible in. terms of Value and issue a goods removal authorisation in terms of value. An EPZ unit may
make sale in DTA on the basis of records maintained by it with prior intimation to ustoms Authorities.

Advance DTA sale permission in respect of trial production shall not exceed the entitlement accruable on
the exports envisaged in the first year and such sale shall be adjusted against the subsequent
entitlements in a maximum period of two years.

However, drugs and pharmaceuticals units can make advance DTA sale of trial production on the exports
envisaged in the first two years adjustable against subsequent entitlements in a maximum period of three
years from the date of commencement of production by the unit. The unit shall be required to execute a
Bond with the Asst. ommissioner of ustoms/entral Excise concerned to cover the difference between
the amount of duties paid on the advance DTA sale and the full duties applicable on such goods.

Advance DTA Sales permission would also be admissible in respect of trial production in cases of
capacity expansion/product diversification. n such cases, the unit would be entitled to advance DTA
sales linked to the expanded capacity created by establishment 41new production streams, or through
product diversification. However, no advance DTA sale would be admissible to a DTA unit converted into
EOU except in respect of new production stream or trial production as a result of change of technology.

The DTA sale entitlement would accrue if the Net Foreign Exchange Performance (NFEP) achieved by
the unit were not less than the minimum stipulated level on cumulative basis.

EOU engaged in the manufacture of perishable items like floriculture, horticulture could also avail the
facility of simultaneous sale in DTA of such perishable items on quarterly basis, while earning DTA
entitlement on exports made during the said quarter. Such permission can be granted in advance by the
D concerned subject to the condition that the unit has achieved positive NFE up to the previous quarter.

SPECIAL ECONOMIC ZONE (SPZ)

Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be
foreign territory for the purposes of trade operations and duties and tariffs,

Goods going into the SEZ area from DTA shall be treated as deemed exports and goads coming from the
SEZ area in to DTA shall be treated as if the goods are being imported,

ApprovaI by DeveIopment Commissioner

The D is empowered to approve applications for setting up of units in SEZ other than the proposals for
setting up the units in the services sector (except software and T enabled services, trading or any other
service activity as may be delegated by the BOA), provided that the item of manufacture does riot require
an industrial ssued to SEZ Units by the Development ommissioner licence under the ndustries
(Development & Regulation) Act, 1951.

ApprovaI by Board Of ApprovaI

Approval by the BOA (Board of Approval) will be granted in cases not falling within the purview of the
Development ommissioner, as above.

AppIications

For setting up a unit in a SEZ, three copies of the application in the same form as is for EOU/EPZ etc.
units and is to be sent to the Development ommissioner, SEZ concerned, along with a Demand Draft for
Rs. 5000/-as an application fee, in the same manner as for EOU etc,

Grant of ApprovaI

Proposals for setting up units in SEZ other than those requiring industrial licence may be granted
approval by the Development ommissioner within 15 days from the date of application.

Proposal for setting up units in SEZ requiring ndustrial Licence and conversion of EOU in to SEZ unit
may be grated approval by the development commissioner after clearance of the proposal by the SEZ
Board of approval & Dept. of ndustrial Policy & Promotion within 45 days.

VaIidity of Letter Of Permission / Letter Of Indent

Letter of Permission or Letter of ndent issued to SEZ Units by the Development ommissioner will be
valid for a period of 3 Years only and would be construed as licence for all the purposes.

Opting Out Of the SEZ Scheme

On completion of Five Years approval period, it is up to the unit to continue under the Scheme or opt out
of it. Where the units opt to continue under the scheme, concerned Development ommissioner may
extend the period of approval.