All Export

Documentation &
Procedures | Any
Origin

Dr. Vijesh Jain

 Copyright © 2023 Vijesh Jain

All rights reserved.

ISBN: 9798393925833
Imprint: Independently published
 DEDICATION

I wish to dedicate this book to my distinguished professors at IIFT, New

Delhi, who so passionately taught me theoretical aspects of business
management way back in 1980s. I also dedicate this book to my numerous
B School students, corporate students who have so passionately attended
my various lectures and workshops on especially the topics related to
International Trade Procedures and Documentation in last 20 years. I also
wish to dedicate this book to my wife and children who supported me
wholeheartedly and with contribution to write this book.
 CONTENTS

Acknowledgments i

Introduction 3

1 Chapter 1: Importance of accurate and timely exports documentation 6

and procedure

2 Chapter 2: A typical export transaction framework 17

3 Chapter 3: What all you need to know before understanding the 23

Documentation and Procedures

4 Chapter 4: Understanding export documents 50

5 Chapter 5: Transport Documents 94

6 Chapter 6: Marine Cargo Insurance 107

7 Chapter 7: Miscellaneous Documents 116

8 Chapter 8: Auxiliary Documents 125

9 Chapter 9: Regulatory Documents and Dealing with the local 138

authorities

10 Chapter 10: Understanding Post-Shipment Documents 163

11 Chapter 11: Common Mistakes Done By Exporters in Exports 170

Management

12 Chapter 12: Export Documentation Software 179

13 Chapter 13: Common difficulties faced by exporters from different 182

places

14 Chapter 14: Case Studies 194

15 Chapter 15: Winding Up 217

16 Annexure I 218
 Dr. Vijesh Jain

17 Annexure II 220

18 Annexure III 222

vi
 ACKNOWLEDGMENTS

This text is a result of inputs provided by several experts in the field of

exports and imports, from industry as well as from academic world. I
specially thank Shri Rakesh Roshan, Professor and Shri Amit Kumar Rajvanshi,
Chief Manager-Global Supply Chain, at Dabur India for showing the correct
path for contents formation for this book through valuable discussions. I
am also thankful to my student of International Business Arshvardhar for
arranging the text in correct order and seeing that layout is correct. Finally I
wish to acknowledge the frequent support of Shri Anil Kumar, Dr. Mukesh
Porwal, Prof Navneet Saxena and Prof. Deepak Tandon for their support and
constantly guiding me to fine tune the information provided in this book.

i
INTRODUCTION
I'm very happy that you have joined this course. It's a very exciting
course and I'm very, very sure that you will gain a lot from this course. If
you are interested in making a very exciting global career in global trade
and traveling abroad and selling your goods, you want to make a good
life. Very interesting life for yourself. The export business is for you and
this course will help you a lot in understanding everything that you need
to learn, especially focusing on the export documentation and
procedures. I will share with you in this topic what you can expect from
this course.

What are the things that I have covered in this course?

Starting with the question of getting export orders, dealing with export
inquiries, signing the export contract, and making the initial documents,
these things I will cover, including the Proforma invoice and the so-
called LC documents or shipping documents that are required by the
buyer. I'll be talking about that. I'll be talking about transport
documents. I'll be talking about the bank documents, I'll be talking
about the regulatory documents that are required to deal with the
customs in your own country, or the border control. And what are the
formalities and documents required for dealing with the shipping
company or any other agencies that are very, very important in this? For
example, port authorities or container yard management people.

I'll be covering all these aspects, but I will cover in this course things like
what are the different ways of receiving international payments, what
are international commercial terms, and how they are important in

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 Dr. Vijesh Jain

understanding the complete export documentation and procedure. all

these things I'll be covering in this course as well as I will give you the
basic concept of the requirement and the significance of these
formalities, and why they are needed.

If you are able to understand that concept if you are able to understand
the typical export framework what is the movement of the goods from
one country to another country, what is the movement of the
documents? Who are there as the middlemen in this movement of
documents and goods and the movement of the payment from the
buyer to the seller? These things, if you are able to understand the
concept, then the entire understanding of the export operations,
especially focusing on compliances, focusing on regulations, and legal
matters and documentation matters, procedural matters.

What all you have to do, you will be able to understand why you are
doing this. And that is very, very important. The basic concept
understanding is more important than what I will tell you the steps step
one, step two, step three. That is not that important. What is more
important is what is the logic behind it. What is the concept? if you are
able to understand the concept, you will understand that everything
that is required to be done for successful export shipment is based on
certain logic, certain needs, and certain significances is there.

My objective of this course is to tell you this concept, the linkages

between the different things that you should know in becoming a very
successful exporter. All this knowledge is very, very important for you
because even if you are a marketer, even if you think that your job is to
get business from the international market or to deal with the buyers,
the buyers will talk about these things. They will try to gauge whether
you know all these things or not because these are the things that are
covered in this course, especially focusing on the documentation and
procedural part that the buyer will look into you. All those things I will
be covering in this course. Please continue with this course. Read these
chapters very carefully. Give me feedback that what I have not covered
or anything you would like to be included. Do let me know about each
and every topic of this course.

Thank you very much.

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All Export Documentation & Procedures | Any Origin

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 Dr. Vijesh Jain

Chapter 1: Importance of accurate

and timely exports documentation
and procedure

We start the course with the first topic in this course which talks about
the importance of documentation and procedures. we start with that.
Before I tell you about the step-by-step process, it is important to
understand that what is the importance of accurate, timely, and
meticulous export documentation procedures. Before I do that, I want
to start with a small case study. I will tell you about this incident that is
based on a real event.

The opening case study

This case study is about one Mr. Malhotra, who is an exporter from
Mumbai. The company name is Malhotra Exports. This company enters
into a contract with a French company, the name of which is Saint
Laurent. Let me tell you that these names, the company names of the
exporter and importer, are fictional names because this case study I
have prepared is based on some real event but changed the names of
the exporter and importer. The idea is for education purposes. this case
study talks about the contract that was signed between Malhotra
Exports and Saint Laurent of France.

The contract was for exporting fashion garments worth around € 55,000
on the CIF Paris basis. the payment terms in this contract were not on
the letter of credit, but rather on bank collection. with the course, you
will understand, and later in this course, you will understand the
difference between a letter of credit and a payment by bank collection.
bank collection means document collection by the buyer either on a DP
payment basis or a DA payment basis. DP means documents against
payment and DA means documents against acceptance. I will tell you
more about it in the later topics of this course. this particular business
between Malhotra Exports and Saint Laurent was on DA terms. DA is a
little tricky because what you are doing, you are sending the shipment

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 All Export Documentation & Procedures | Any Origin

by air or by ship, whatever. In this particular case, it was by sea and you
are sending the documents to the bank for selling it to the importer that
is, in this case, Saint Laurent against not payment, but the letter of
accepting the documents against payment at a later date. it is a little
risky, but at the same time bank is involved. The letter is issued by the
importer to the bank. if there is no other major issue, there is no
bankruptcy of the buyer. chances are that the payment will be made
because the buyer is giving a local confirmation, guarantee to the bank
that he will pay. It is done. But definitely, it is much riskier because
anything can happen to the buyer.

What happened in this particular case was that the goods were
exported by Malhotra exports, the fashion garments to Saint Laurent in
Paris by sea, and Malhotra exports sent the documents through a local
Indian bank, the Bank of India, which was working as the negotiating
bank on behalf of the exporter that is the Malhotra exports. it sends the
documents to Saint Laurent on a bank collection basis, along with the
cover letter and the bill of exchange. Bill of Exchange I will make you
understand better in the later topics.

What exactly is the Bill of Exchange? It's a bank document. In the bill of
exchange, Malhotra exports just to be safe, he wrote that the
documents were to be given to Saint Laurent only if the overseas bank,
which is actually the bank that is going to sell the documents to Saint
Laurent, in this case, AXA Bank of Paris. If the bank accepts the co-
acceptance clause, only in that case are the documents to be given to
the buyer that is Saint Laurent, as per the Bill of Exchange instruction.

But this instruction was not given in the cover letter. The idea was that
co acceptance clause means that a bank that is a local bank in Paris, in
case anything happens, the commercial risk is there, which means the
buyer does not pay. After accepting the documents and giving the
guarantee in writing, that payment will be made after a certain date.
Paris Bank, that is, the AXA bank will pay on behalf of the buyer. It
means the AXA bank will guarantee the payment in case of non-
payment. If that co-acceptance clause is accepted by the overseas bank,
only then documents were to be given as per the instruction given in
the Bill of Exchange by Malhotra Exports.

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 Dr. Vijesh Jain

Now, the documents were sent by Indian Bank to the collecting bank.
That is the AXA bank in Paris. The bank saw the documents, cover letter,
and all the documents, and delivered the documents to the buyer. That
is Saint Laurent against acceptance of 30 days. That means the payment
will be made by the buyer in 30 days.

Now, what happened? That 30 days passed and the money did not
come. Now, Malhotra Exports approached the Indian bank. That is why
the money has not come. the bank approached an overseas collecting
bank. That is AXA bank that is why money has not come even after 30
days have elapsed. The bank checks with the buyer and finds that the
buyer has become bankrupt.

Now the unthinkable has happened. The buyer has become bankrupt.
And before the date when the guarantee was there that the payment
will be made, the company is no more existing in Paris now.

Now it's a very difficult situation for everybody. The bank says that we
will not pay because the buyer is not able to pay because there is no
such company. Now it is already bankrupt.

Now what happens? The exporter that is Malhotra Exports approaches

the Indian Bank and asks them that in the bill of exchange, that is the
bank document they had instructed for the Co-acceptance of the
collecting bank. Only then the documents were to be delivered. now the
buyer is not able to pay, the overseas bank should pay. And accordingly,
the Indian bank asked for this situation with the collecting bank which is
the Paris Bank. Bank says that in the cover letter, there was no clear
mention of this clause. It was only in the bill of exchange. And Bill of
Exchange is a part of the documents. they do not go deeper into the
documents. And as per UCP 500, that was applicable for this particular
case. They cited some clauses in UCP that are the uniform customs and
practices that I will tell you about later. They said that they are not
obliged to pay. They particularly mentioned that the Indian bank did not
clearly instruct the overseas bank that documents are to be given to the
buyer only if the collecting bank that is the overseas bank accepts the
co-acceptance clause and only then the documents had to be given.

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 All Export Documentation & Procedures | Any Origin

It appeared that the mistake was of the Indian bank that is, the
negotiating bank. They took the charges from the exporter for
negotiating and they should have instructed. But the Indian bank says
that in the cover letter given by Malhotra Exports, there was no such
mention. And they are not obliged to look into the bill of exchange. That
is a bank document, of course, but part of this document set. what
happened was that the Indian bank refused to pay.

It was quite a big sum, €55,000. Malhotra Exports approached the

Consumer Court in Delhi about this situation and they filed a case
against the services of the Indian Bank that they did not clearly mention
this particular condition to the collecting bank. If there is a mis-service,
the deficient service is there by the Indian bank, it should pay.
Consumer Court in Delhi accepted the plea of the exporter and they all
made a judgment that the services provided by the Indian Bank as
negotiating bank is faulty and the €55,000, along with the interest till
date, had to be paid.

Indian Bank was not happy with this judgment of the Consumer Court
and it filed an appeal to the Supreme Court of India. Supreme Court of
India looked at the matter and discussed it with the experts and
concluded that neither the overseas bank nor the Indian bank had to
pay anything to the exporter because it is the mistake of the exporter.
And the mistake was that the exporter should have either entered into a
contract, or pre-contract with the overseas bank for the co-acceptance
clause, or at least they should have written very clearly in the cover
letter given to the Indian Bank. And that cover letter would have been
endorsed by the Indian bank to the collecting bank and things would
have been not in the way it has happened now. it is actually the mistake
of the exporter and they concluded that none of the banks had to pay
anything to the exporter and the exporter is at fault in this whole thing.

The Supreme Court decision was out and there was no further way to
take it forward by the exporter. And the exporter lost the money.
Exporter lost its reputation, and business.

This particular case study clearly indicates that the Indian exporter that
is Malhotra exports was somewhere not very professional in
documentation part and procedure part, and it could have easily

9
 Dr. Vijesh Jain

avoided this situation by very, very clearly writing the condition of the
co-acceptance by the collecting bank before giving the documents to
the French buyer. And it was very obvious that just writing this
condition in the bill of exchange was not enough. Maybe the Indian
exporter thought that the Bill of Exchange being a bank document and
writing the condition in the bill of exchange would be enough. But
definitely, the exporter should have gone deeper into this particular
aspect and should have consulted with the experts before submitting
the documents to the Indian Bank, and they should have been careful
with the cover letter.

The idea of this case study is just to give you one example of why the
understanding of the whole process, different ways of receiving
international payment, the involvement of banks, the involvement of
the local bank and the overseas bank, the accuracy of the documents,
and the documentary strategy of claiming the payment against the
documents. there are many things, but everything boils down to the
fact that knowledge of the documentation, timely submission, accuracy,
meticulous preparation of the documents, and proper strategy for filing
the documents are very, very important.

That was my idea for this case study.

In the next topic, I will tell you why I say that accurate and timely
documentation is very, very important and who all are responsible for
this accurate and timely documentation in reasonably large to medium-
sized organizations. Who should be involved in the documentation
process and why? Do read the next topic. It will be very, very
interesting. Thank you.

The importance of accurate exports documentation and procedure

explained

In the last section, I shared with you one very interesting incident in the
opening case study of this course. From this case study, although a few
things you might not have understood because they were technical in
nature. But don't worry. In this book, I will tell you everything. at the
end of the book, you will understand all the terms that I have used in
the case study, don't worry about it.

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 All Export Documentation & Procedures | Any Origin

But the important point to understand from this case study is the
importance of understanding of the whole documentation and
procedure, the accuracy of the documents and procedure, and the
timely submission of the documents. These are very, very important
things. The other way is to hire consultants, which will cost you a lot,
and how much accurate and genuine information you get from the
consultants. That is almost very sure.

It is very, very important that you understand all the concepts that are
discussed in this book to understand the accurate and complete export
documentation and procedure. That is the purpose of this book. I have
tried in this book to include almost everything that you should know to
start making successful export transactions with the knowledge of the
complete export documentation and procedure.

The importance of complete and accurate documentation is not just

confined to the losses of the type that was encountered by Malhotra
Exports in the opening case study. They result in non-repeat orders
because if your documentation is incorrect and if it is deficient, you are
going to have a bad name with international buyers, and overseas
buyers who want to deal with such partners who have complete
knowledge of the documentation and procedure.

When you talk to them, when you interact with them, they should feel
that you know the concept threadbare. Not only, do you know, the
steps, but you understand the meaning of these steps, the concept
behind them, and the logic behind them. if you are able to impress in
this way with your foreign buyers, it will help you.

I want to tell you that the importance of accurate documentation and

procedures does not confine to just the people who are entrusted with
the job of filing the documents, but the marketing people, the accounts
people, and all the departments that are there in the organization. They
all should have complete knowledge because the buyers can interact
with anyone, depending on what kind of business association you have
with your overseas buyers. They want the complete team, all the
departments, to understand the complete procedures and
documentation.

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 Dr. Vijesh Jain

Why?

Because they don't want any non-compliance with the local or overseas
government regulations or any trouble with the shipping company or
the customs, border control, or banks. They do not want any problem.
They are ready to pay a premium on the price of the goods, but they
don't want any chances to happen. They don't want any disputes, they
don't want any conflict. They don't want any perils to happen in the
complete export transaction.

I'm just trying to impress upon the fact that you can do away with
certain half-baked knowledge in the domestic business, but it is not
possible to have this kind of half-baked knowledge in international
trade. It is very, very important that you have complete knowledge. You
understand this whole game, and that is my purpose in this course, to
make you understand and make you appreciate the importance of
accurate, timely, and complete export documentation and procedure.

That is the idea.

How to keep all stakeholders happy?

Another aspect of this understanding of the accurate and complete

export documentation and procedure is obtaining the capacity and the
skills to make all the stakeholders happy.

who are the stakeholders?

Your buyer, first of all, overseas buyer. Your employees who are
working with you in the team to make your export business successful.
And your suppliers who are providing you with either the raw material
or the inputs or maybe the completely finished products, you may be
trading those products. All these stakeholders, your suppliers, your
employees, and your overseas buyers, as well as the intermediaries like
banks or customs or border control or any regulatory body of the home
country as well as the host country. They all should be happy with your
export transaction. With every transaction, they should feel happy, not
just one transaction.

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 All Export Documentation & Procedures | Any Origin

That is only possible if you have very immaculate information,

knowledge, and understanding of your export transaction and you are
able to file your documents and complete the procedures step by step
in a very accurate and timely manner. That capability of keeping all the
stakeholders happy is the key to the export business's success.

What is the international legislation that governs int'l trade

documents?

Now friends in this book I will be sharing with you certain information in
subsequent topics about the knowledge you should have about how to
receive international payments and the understanding of the different
commercial terms that are understood internationally and how to deal
with shipping companies.

The reason why you have to understand these things is that all this
export documentation and procedure is based on certain legislations,
certain laws that are international in nature, many of which, but certain
laws of the local governments also. These regulations, these legislations
mainly are designed so that the international movement of goods can
happen by sea or by air, or any other mode of transportation. there are
various international legislations that are related to an agreement, a
multilateral agreement among the countries that how the movement of
goods will happen, under which legislation, which guidelines, and which
laws, Although there is no way to enforce these laws internationally, it is
not possible. when we say international legislation, we can only say that
they have to be followed by all the countries for their own benefit they
remain in the international trade.

These legislations are related to the movement of goods in any mode,

maybe by sea or by air. Or that are related to the commercial terms,
which means the different points of delivery and transfer of risk from
the seller to the buyer. Those commercial terms are called international
commercial terms, which I'll be discussing with you in my later topics.
The movement of goods, the commercial terms, and receiving
international payments through international banks. Again, they are not
under any umbrella of any international institution. It is not possible
because every country has its own applicable law. The law of the land.
They have to work under certain legislation that is traditionally and

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 Dr. Vijesh Jain

acceptably defined by an organization called ICC, International Chamber

of Commerce, based in Paris, France.

And for receiving international payments, there are the Uniform

Customs and Practices for Documentary Credit, which is related to the
involvement of the international banks in receiving the international
payment, either through a letter of credit or through bank collection or
different instruments, bank instruments that are available.

This UCPDC, in short, is called UCP-uniform customs and practices. The

different versions are announced by ICC Paris, France. In the resource
section of this topic, you will find a complete set of international
legislation that you can refer to which relates to either the movement of
goods or the receiving of international payments or commercial terms.
just have a look at that. You will have an understanding of the latest
international legislation related to your different aspects of doing
international trade.

Similarly, there can be certain local laws, and local acts regarding the
different governments. for example, in this resource section, I have
given you one document that contains similar local laws of the
government of India that relates to the movement of goods by sea or
any other transportation or related to the similar needs of the local
government. Just have a look at those local legislation and laws. You will
have an understanding that similar laws exist in many other countries,
in fact, most of the countries are members of WTO, that is the World
Trade Organization.

Role of WTO

Friends here, the role of WTO is very, very important. World Trade
Organization is the apex body that regulates international trade. And
their motto is to make sure that there is growth of international trade
internationally but in a free and fair manner. Free means bringing down
international trade barriers. Tariff as well as non-tariff barriers. One of
the major aims of the WTO World Trade Organization is to bring down
these trade barriers by monitoring the international trade policies of the
different governments, like the foreign trade policy of India, for
example. Every local government has some foreign trade policy which is

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 All Export Documentation & Procedures | Any Origin

monitored by the WTO arm under the multilateral agreements agreed

upon between the members of the World Trade Organization. That is
the role of one of the major roles of the World Trade Organization.

The second role is to make the international trade fair. how does it
become fair? That becomes fair by making sure that the local
governments do not subsidize their exports or provide any undue
advantages to the exporters to boost their international trade or allow
the dumping of goods in the destination countries. All these activities
make international trade unfair. That is another very major role of the
World Trade Organization.

My idea for this particular topic is to give you a synopsis of the

international regulations, international laws and the supporting local
laws because local laws are even stronger because they are enforceable
under the applicable law of the land of the local government. Those
laws are supported if they are aligned with international legislation.
That is the second layer of security and protection of international trade
to remain free and fair. And it supports the World Trade Organization,
which monitors the local laws that are related to any aspect of
international trade. In the context of these legislations and regulations
the importance of accurate and complete export documentation and
procedure, we will go further with this book.

In this next section, we will be talking about some of the things which I
just discussed with you and a few things you should know about
receiving international payment or related to the international
commercial terms, things which you should know before we talk about
the export documentation and procedure.

Thanks for reading this topic. Keep reading further.

Conclusion

So, friends, we had this set of topics in this section that were aimed at
understanding the role and significance of accurate and complete
export documentation. Now, the conclusion of this section from the
different sets of topics in this section, the things which we have very
clearly understood from this section that all members of the export-

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 Dr. Vijesh Jain

related team in an organization of them need to be fully conversant

with the complete procedures, what documents are required, what are
the requirements of the buyer, what are the requirements of all the
stakeholders which are involved in the export transaction.

It is not just one person. We cannot say that a particular commercial

manager or a particular middle-level manager is responsible. It is not so.
All are responsible, all need to be very much aware of the transaction-
to-transaction requirement of the documentation and procedure.

And we have very clearly understood from this section, from the
discussion we had in this section, that accurate and timely
documentation saves money, saves reputation and it saves the
business. it helps to keep the buyers happy, all the stakeholders happy,
and to retain the business to get repeat orders. Even marketing people,
have to be very, very concerned about accurate and timely export
documentation and they should be aware of every step in this.

In the case study that we had taken up in this section, Malhotra exports
exporting fashion garments to France. In this case study, it is very, very
clear that the company Malhotra Exports could have easily avoided the
disaster they faced if they had given the correct instructions and
accurate instructions to the local bank, the negotiating bank, and the
bank which sent the documents to the French bank. If they would have
been given the right instruction, written instructions, which were not
difficult to do. If they would have done that, this disaster could have
been easily avoided.

And we have understood from this section that there are certain
international and local laws that govern export-import transactions, and
these laws and regulations result in certain formalities, certain
procedures, certain documentation using which all the players,
intermediaries, buyers, sellers, have to comply with these laws and
regulations and with the help of the correct, timely, accurate and
complete documentation and procedure, this can be achieved very
easily.

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 All Export Documentation & Procedures | Any Origin

Chapter 2: A typical export

transaction framework
Now friends, in order to understand the whole concept of international
trade documents and procedures, it is very, very important to
understand what is this game plan. What are the rules of the game?
How this whole process has been organized internationally, what is the
flow of goods? So, what is the typical export-import framework
internationally, which is driving this whole process of export
transactions from the exporter to the importer? So, what are the typical
steps which are involved in this flow of goods, how do the goods flow,
how do the documents flow, how do the payment flow, and what is the
direction of these different aspects of a typical export framework that is
very, very important to understand. So, I will show you, as you can see
here that the typical export transaction framework of exporting and
importing, starts with the agreement between the exporter and the
importer. So, the importer is interested in the goods, and by paying the
price of the goods, he wants the goods in a timely manner, he wants the
desired goods, which are exactly as per the sample, which was provided
by the exporter or the promises which were made by the exporter,
those promises are met by the exporter.

So, that is the interest of the Importer. So, he wants goods in a timely
manner at the right price, and at the right time, in the right packing and
the goods should land to him in very heal and healthy conditions, in very
good conditions. So, the export packing has to be made by the exporter.
So, these are the major concerns of the importer.

Similarly, the exporter is looking for a fairly good return on his

investment in the goods, which he has manufactured or he has
procured from his home country, to be exported, he has carried out the
whole export process, and he wants the payment in a timely manner
and the complete payment, without any extra expenses or any hidden
cost involved in receiving the payment and very safely with the
assurance that if he supplies the goods, if he exports the goods, he gets
the payment at the right time and at the agreed and promised value
and in the promised manner. So, the concern of the exporter is that
there is some mechanism by which the payment is secured and with

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 Dr. Vijesh Jain

that payment, and with that security of the payment, he can freely
invest in the raw material of the goods or in procuring the goods,
packing them in the export worthy packing and making arrangement for
the formalities which are there, at the different points of the delivery of
goods from his warehouse to the warehouse of the exporter and the
agreed terms of delivery and the agreed terms of responsibility and the
agreed terms of payment. So, that is the concern of the exporter.

So, this typical export framework starts with the export contract
between the exporter and the importer. And the contents of the export
contract are such that they are mutually agreeable to both the importer
and the exporter. And these terms and conditions which are part of the
export contract, are in line with the expectations of the exporter and
the expectations of the importer. And both parties are satisfied and
their concerns have been taken care of, through this export contract.
this is the starting point of the typical export framework.

So, friends, as you can see here (see fig 1). This is the typical export
transaction framework. Just have a look at this figure and try to
understand how things are laid out in this diagram you have some idea
of what I'm trying to make you understand.

Figure 1: A typical export transaction framework

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 All Export Documentation & Procedures | Any Origin

You might have seen this diagram and probably have a little bit of you
are understanding of it. If you already do exports, you will understand
the concept of this diagram very easily. As you can see here, the
exporter is the seller and the importer is the buyer. They are the first
party and the second party in this whole game. And before the export
contract happens, you already know that there are many efforts by the
seller to compete, to do a lot of marketing, and to do a lot of research
and field research to get business.

And that part I'm not covering in this course. For that, I have another
course. you can look at how to get business in the international market,
how to get orders, and how to set up your export business. There is a
separate course that explains to you the whole process of marketing,
export marketing, getting export orders, identifying markets, identifying
products, and even which product to sell. All those things are covered in
that course. that part is not in the scope of this course.

I am talking about the export transaction when the business has been
received, the first order has been received by the seller from the buyer
international buyer and there is either an export contract that can be in
the form of an exhaustive, comprehensive written document, legal
document, or it can be just in form of a signed copy of the proforma
invoice, so-called proforma invoice, because Exporter, when he deals
with the export inquiries, it quotes the price to the importer, usually in
the form of a Proforma Invoice.

It is possible that there is no Proforma Invoice and simply the exporter is

just giving the quotation with certain basic conditions. But it is always
advisable to quote the prices against inquiries in the form of a Proforma
Invoice. Even if it is not there just when the business is going to happen
it is possible that the exporter will convert the quotation into a
Proforma Invoice which will contain all basic information, all payment
terms, the commercial terms, delivery terms, everything will be there
and the validity of the offer will be there.

the signed copy of the Proforma Invoice itself can serve as the export
contract. Whatever it is, it is an export contract. Based on that export
contract, the exporter sends a draft LC opening instruction.

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 Dr. Vijesh Jain

draft LC opening instruction means the different LC conditions, and

letter of credit conditions as understood by the seller from the export
contract.

· What are the LC conditions?

· How does the LC work?

Don't worry about it. I will take up this part later in this course based on
this draft LC opening instructions, the importer makes the final LC
instructions and approaches the local bank in his own country. That is
the overseas bank from the point of view of the seller. this overseas
bank which is the importer's bank based on the final LC opening
instructions opens a letter of credit and advises this letter of credit
through a local bank in the seller's country. That may be nominated by
the seller itself in the export contract. That bank advises the letter of
credit to the exporter and the exporter verifies all the conditions,
studies, all conditions which are given in the letter of credit, and if he
finds all the conditions are doable and as agreed, the seller will accept
or reject the letter of credit.

If the letter of credit is accepted by the seller, then the seller starts
preparing the documents. order is already there. until the letter of
credit is opened for the seller, the order is still not confirmed. Actually
speaking. Once the LC has been accepted, conditions are good. The
conditions are normally documentary conditions.

Basically, the bank deals with documents and documents only. They do
not deal with the shipment. They will write documentary conditions and
those documents have to be arranged by the exporter.

Exporter starts preparing the goods either manufacturing or procuring

from the market and packing them in a seaworthy export packing and
shipping the goods through the port of loading by handing over the
goods to the shipping company that takes the cargo, loads the cargo on
the ship, and carries the cargo either by sea or by air. most of the
international trade happens by sea and takes the cargo to the port of
discharge.

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Now, while the cargo is being taken from the port of loading to the port
of discharge immediately after the goods have been loaded on the ship,
the exporter obtains the transport documents from the courier shipping
company or the airline along with the other documents which are
required in the letter of credit like an invoice, packing List, Certificate of
Origin, Main documents, Quality Certificate. The exporter approaches
the local bank, which may be the same bank as the advising bank or
maybe a different bank, but in his or her own country. this local bank
now works as the negotiating bank, which negotiates the documents
against the letter of credit with the issuing bank, that is the overseas
bank.

The issuing bank receives the documents from the negotiating bank.
And if he finds all the documents are compliant with the letter of credit
releases the money in the prescribed

time period. if the letter of credit is payable at sight, it will release the
payment within 5 to 7 days, depending on what is the version of the
letter of credit. these versions can be UCP 500 or 600. whatever it is, the
payment is released via the negotiating bank to the beneficiary, that is
the seller. And in the meantime, the documents that are received by the
Importer's Bank, are sold to the buyer by the issuing bank.

And all the documents, including the transport documents, are handed
over to the importer after the money has been received by the
importer, complete money which was due to the buyer actually. Now
the NOC is issued to the importer for the transport documents so that
the importer can take possession of the goods at the port of discharge
from the carrier.

This is a very, very typical export transaction framework that is played

out throughout the world in international trade. if you have understood
this flow of LC or the payment, the flow of the documents, and the flow
of the goods, you will understand this whole game out here. Very
important is the role of the issuing bank, the role of the advising bank,
which I have already mentioned to you, the role of negotiating bank, the
role of the home country customs, and Border control. Because when
goods are loaded on the ship at the port of loading, the home, country

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Customs, and Border Control have a strong role to clear the goods, to
allow or not to allow the goods.

And similarly, the role of the host country's customs or border control,
which may levy certain taxes or import duties at the port of discharge,
and very importantly, the role of the shipping company or the airline,
the carrier that carries the goods from the port of loading to the port of
discharge. This whole typical transaction, once understood, will make
things very easy for you.

Conclusion

That was my purpose in this section. I hope you have understood

through this typical export transaction framework what are the roles of
the first party and the second party and the other parties we can say the
third party is the overseas bank, that is the issuing bank or the
intermediaries that are involved. they are the third, and fourth parties.
Once understood this whole thing, it will become very easy for you to
understand the whole concept of export documentation and procedure.

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Chapter 3: What all you need to

know before understanding the
Documentation and Procedures
Hello, friends. Welcome back to the course. In the last section, I
promised you that we would start with the documentation part. In this
section which is section four, I will not do that because when I start with
the documentation process to make you understand what documents
are required, at what stage, and what is the sequence. It is very, very
important to understand a few things beforehand. Otherwise, many of
the things that I will tell you about the documents and procedures you
will not understand.

To give you an example that if you want to sign a contract with an

overseas buyer based on which the documents will be prepared, you
should know what are the commercial terms you agree that up to what
point the responsibilities of the seller and after which point the
responsibility transfer from the seller to the exporter. those things, for
example, that are called commercial terms, you need to understand
those few things. Only then you will be able to understand the
documentation and procedures.

Let me share with you what you need to know beforehand before we go
to the documentation and procedure part. In this section, I will not
discuss the documentation and procedures. Rather, I will discuss things
that you should know before. At least two things you should know. One
is the international commercial terms. what are the different
international commercial terms and what is the latest version and what
are the different points at which the obligation of the seller transfers to
the buyer and the risk transfer from the seller to the buyer? What are
those points? that will be defined by Incoterms 2020. And I will tell you
what are these Incoterms. And all you need to know are the different
methods of receiving international payments. unless you know these
two things minimum, you will not be able to understand the overall
process of the documentation and what procedure drives these. These
two things are very, very important.

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 Dr. Vijesh Jain

In addition, a few more things are required to be discussed, like

· How do you deal with the shipping company?

· How do you deal with your local regulatory authorities, including

customs?

Those things also, you should know. What I will do that in this section, I
will discuss these things one by one.

INCOTERMS 2020

let us first discuss the Incoterms 2020.

· What are Incoterms 2020?

· What is its significance?

· What is the importance of knowing these terms for an exporter to

carry out successfully the documentation and procedures?

There is no doubt that this information will be very, very important for
you before you embark on understanding the documentation and
procedures.

So, friends, let us first discuss about the international commercial terms
INCOTERMS 2020. 2020 means this is the latest version of the
international commercial terms. International commercial terms are the
defining commercial points where the obligation of the seller transfers
to the buyer and the points at which the risk of the seller transfers to
the buyer. Basically, the title transfer takes place at certain places.
Those responsibilities, those obligations, and those transfers are
uniformly understood throughout the world through these international
commercial terms, which are announced by an organization based in
Paris, France, that is called ICC, International Chamber of Commerce.

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The latest version that is there internationally understood is Incoterms

2020, which defines the point of delivery and the transfer of risks which
may not be the same. the point of delivery may be different, but the risk
transfer may be different.

For example, I will give you one example. It is possible that the goods
are loaded on the ship and the seller pays for the freight, the seller pays
for the insurance, but the transfer of the risk happens as soon as the
goods are loaded on the ship. It is possible. What happens? The delivery
actually happens at the port of discharge, but the goods are loaded at
the port of loading, and at the port of loading, only the transfer of risk
has happened already.

This dichotomy is there. The delivery point is the port of discharge, the
transfer of the risk is happening at the port of loading, which is way
apart internationally also, geographically also. This is what is defined by
these terms.

There are 11 terms in Incoterms 2020.

EXW

That is EXW ex-works.

FCA

FCA is free career, which means the goods when loaded on the first
career after the goods have been gated out from the factory of the
manufacturer at any agreed place or at the gate of the factory first
career when picks up the goods, the transfer of the risk happens, and
delivery changes hand from the seller to the buyer.

FAS

Then another term is there. the third term is called FAS-free alongside.
here the transfer of the risk as well as delivery happens, as soon as
goods are kept alongside the ship unloaded, it is not loaded on the ship.
It is just that in the container yard at a certain point that is for FAS it is a
wet port because this is Sea Terms alongside the ship means the goods

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 Dr. Vijesh Jain

are actually at the wet port and goods have been kept outside the ship,
just near the ship, but it is not loaded. free alongside is the meaning of
this point.

FOB

And then FOB- free on board, which is the most popular term Incoterms
2020, which means the goods have not only reached the port, goods are
loaded onto the ship. that is the point where delivery has changed
hands from the seller to the buyer as well as the risk has transferred
from the seller to the buyer.

CFR

Then another term is there. That is called CFR, which means cost and
freight. Here what is happening, FOB is there free on board is there. The
goods have been loaded on the ship till that point. The responsibility of
the seller is there. After that, the only responsibility of the seller is to
pay for the freight from the port of loading to the port of discharge.
That is the only thing he has to just pay the cost. delivery will happen at
the port of discharge, but risk transfer will take place at the port of
loading itself. As soon as the goods are loaded on the ship.

CIF

Then another term is there, which is called CIF. That is cost insurance
and freight, which is very similar to CFR. That means cost means FOB
plus freight, but also insurance. The insurance cost has to be paid by the
seller, although the risk has already been transferred, as soon as the
goods are loaded on the ship at the port of loading delivery will take
place at the port of discharge, and freight will be paid by the seller, the
insurance cost will be paid by the seller, but the risk of the goods getting
damaged after the goods have been loaded onto the ship remains with
the buyer only.

CPT

Another term there is called CPT. That is the cost paid to, which means
the transfer of the risk will happen as soon as the goods are picked up

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by the first carrier. That may be a truck. That may be some kind of
another type of vehicle, or it can be the train. Any first carrier, whatever
is the first carrier, as soon as the goods are picked up at the agreed
place, the transfer of the risk happens. But the cost of movement of
goods from that pickup point to the destination is paid by the seller.
that is called CPT. That is the meaning of cost paid to.

CIP

Then another term is there. That is called CIP, which is carrier and
insurance paid to. Here all is the same as the CPT. The only difference is
that not only the freight from the first pickup point, that is the agreed
place to the destination point, that is the agreed place, the cost of
freight is already paid like CPT, but in addition, insurance for this
journey from the first agreed place to the destination agreed place is
paid. This is called CIP.

DPU

Another term is there that is called DPU which is delivered at a place

unloaded, which means at the destination place. Agreed Place, where it
has been agreed to deliver the goods to the country of the importer.
The goods are delivered and unloaded. The goods have not only
reached there but are unloaded from the carrier. that is the meaning of
DPU.

DAP

Then there is another term, the 10th term that is called DAP that is
delivered at place. Now, this place of destination actually is the actual
destination, the premises of the buyer. delivered at the premises of the
buyer, it is not something in between. It is not something agreed place.
But actually the Consignee's address. It is delivered at that place where
the premises of buyer is there.

DDP

And there is the last term which is called delivered duty paid. it is very
similar to DAP. Here both risk and the delivery happen at the place of

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 Dr. Vijesh Jain

the buyer. It may be the warehouse of the buyer, but the seller is
supposed to pay any taxes or import duties that are to be paid to the
customs in the country of destination.

These different points that define the point of delivery and the transfer
of risk are designed for different situations and different understandings
between the seller and the buyer. And these 11 terms are sufficient to
agree on certain commercial terms in a certain transaction, in a certain
export contract, it is possible to agree on any of these 11 terms, four of
which are actually the wet port terms, which are called the sea terms.
The rest seven are actually place-to-place terms. there we are talking of
the place where the pickup happens or the place which is agreed or the
place which is the warehouse of the buyer or the factory.

What is the meaning of this?

Those four terms are wet port terms and the rest are place-to-place.
Place-to-place terms have been used as seven different terms. Very
important because the most popular way of exporting has become now
multi-modal transport operations, which is the place to place. It's very
much similar to what happens in courier companies. They pick up your
goods or the packet from your premises and deliver them to the
premises of the receiver. Those kinds of multi-modal transport
operations have become very, very popular.

That's why out of these 11 terms, seven are place-to-place terms and
only four are port terms. That is seaport terms.

You can see here in this diagram (fig. 2), the blue portion is the seller's
obligation.

Star is the point where the transfer of risk happens because that is what
is the significance of the incoterms.

And the pink portion in this diagram is the buyer's obligation.

The point where the blue bar ends is the place of delivery.

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Figure 2: INCOTERMS 2020

The point of delivery has been defined by the Incoterms 2020 and these
are different points. Seller, First career, alongside the ship, loaded on
the ship, port of loading, destination port, agreed place in the country of
the importer and the buyer's warehouse. These are the points that are
referred to in the Incoterms 2020.

This is the first thing incoterms 2020 that is very, very important for you
to understand before we embark on our journey towards understanding
the documents and procedures. One very important thing we have
already covered in this section.

In the next section, I will talk about the different methods of payment.
You will become more and more confident when we go forward in the
next section. in this section, let us confine ourselves to these topics.

Thank you very much.

Different methods of receiving international payments

I hope you are liking this book and you are getting good information
about documentation and procedures. What are the required learnings
before you understand the complete export documentation and

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 Dr. Vijesh Jain

procedures? In the last topic I talked to you about, a very important

thing that you need to learn is about Incoterms 2020. those were the
international commercial terms.

Now, in this topic, I will share with you some information with respect
to what are the different methods of receiving international payments.
Without receiving the international payment safely. This whole business
has no meaning. Obviously, you would like to know what are the
different methods of receiving international payments and when are
they most suitable.

Which method to use when?

Those things I will talk to you about in this section. Let us look at this
payment risk ladder which talks to you about the different payment
methods like open account, collection through DA, collection, through
DP, documentary credit, confirmed documentary credit, and advance
payment.

What are these?

What exactly do they denote?

I will explain it to you. Here I am talking about the risk of the exporter,
the level of the risk. Here I'm talking about the risk of the importer for
the different payment methods.

But before I explain to you this payment risk ladder (figure 3), let me tell
you what is open account.

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 All Export Documentation & Procedures | Any Origin

Figure 3: Overseas Payment Risk Ladder

Open Account

I'm sure you already know what is open account. An open account
basically means that the goods are exported to the buyer by the seller
without any guarantee of payment. what happens? The payment comes
after the goods are received generally in a very periodic manner. So, for
example, the account has been created. You are sending goods as an
exporter to the importer and the importer will send the payment of
whatever has been agreed upon, maybe in three months or six months,
some kind of periodic installments. for example, the payment may be
made every two months, payment may be made every three months.
Like that. Basically, you are sending the goods at risk as a seller. This is
one method of receiving payment and it is very common. We will
discuss more about it.

Bank Collection

Now, bank collection, called bank collection, is very common and has
two methods. One is DA and the second is DP. What is bank collection?
In bank collection

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What do you do?

In the documents that I discussed in the earlier section, I told you about
the typical export transaction framework. The documents have to be
sent to the buyer, either through the bank or directly. In an open
account what you are doing. You are sending the documents to the
buyer by courier directly so that he can receive the goods and pay at the
periodic time frame that has been agreed upon. In the collection, the
documents are not sent directly to the buyer, but rather through the
bank. And through the bank, there are two methods of sending the
documents.

Bank Collection (DA)

One method is that the bank is directed to hand over the documents to
the buyer against an acceptance letter that he is accepting the
documents with the promise to pay after a certain agreed time, maybe
ten days, 15 days, or 20 days, whatever it may be. But the letter is being
issued to the overseas bank that is selling the documents, handing over
the documents to the buyer. that is called the bank collection through
the DA, documents against acceptance. documents are being given
against an acceptance letter by the buyer. this is one method.

Bank Collection (DP)

The second method is called the collection through DP, wherein the
instruction is given to the overseas bank to hand over the documents
against payment only. buyer has to pay. No acceptance letter, he simply
has to pay. That is called collection under DP, that is documents against
payment.

Documentary Credit (Letter of Credit)

The fourth method is documentary credit, which I discussed with you in

the earlier section where I told you that the bank takes over the risk of
payment. herein the letter of credit or called documentary credit is
issued by the issuing bank. That is the overseas bank, that is the local
bank of the importer, this bank issuing bank. Issues a letter of credit,
which is called documentary credit in favor of the exporter. That is the

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beneficiary. And the documentary conditions are there. If those

conditions are fulfilled by the exporter, payment will be made. that part
I had already discussed in the earlier section and I'm sure you know
about it.

Confirmed Documentary Credit

Now, there is the fifth method added to the documentary credit, and
that is the local confirmation for the exporter, which means
confirmation by a local bank of the exporter in the exporter's country.
confirmation is done by the local bank that he will take over the risk of
payment over and above the issuing bank. in case the issuing bank does
not pay, the local bank will pay if the documents are compliant, and
there is no discrepancy in the documents.

Advance Payment

And finally, the other method is the advance payment. That is the
prepayment. That is the 100% prepayment or partial prepayment. in
advance payment methods, what happens if the payment is made to
the seller by the buyer before the shipment?

Obviously, now that you understand what is an open account, what is

collection through DA, what is collection through DP and the
documentary credit, confirmed documentary credit or confirmed letter
of credit, and advance payment. You know about it. You can easily
understand that in this ladder, the topmost method is the least secure
for the exporter. You can see here that the goods are being sent at risk
to the exporter. the importer is at liberty to pay or not pay, in, for
example, an open account and in the case of the collection also. Since
the bank is not giving a guarantee of payment. risk is there for the
exporter, although less than the open account. As you go down the
ladder, you will find that the risk of the importer increases and the risk
of the exporter decreases. For example, in the extreme case of advance
payment, 100% advance payment, the exporter is most secure, but the
importer is least secure because the exporter may not send the goods.

This particular payment risk ladder explains to you the different ways of
getting the payment which payment method to be used in which

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 Dr. Vijesh Jain

situation will depend on the relationship between the seller and the
buyer, or whether the seller is dealing with the buyer for the first time,
or he has a regular business with the buyer, or what is the confidence
level between the two parties? all these things and the product
situation and the payment situation and the market condition will
decide which method to be used at what time.

These are different options that are available to the business people
who are selling goods internationally as well as the people who are
buying goods internationally. And they may decide in discussion with
each other which method to be used. Well, now that in this topic I
discussed to you the different payment methods.

I'm sure now you understand that what are the different ways of
receiving international payments and you understand the merits and
demerits of each method. in the next topic, I will share with you more
information about the letter of credit, and documentary credit.
Although I discussed about documentary credit in an earlier section, I
will give you more details about it.

Keep reading these topics. Thank you very much.

How does LC work?

Now we are slowly trying to understand what all you need to know
before you embark on your journey to understand the complete export
documentation and procedure. You already have understood the
different payment methods I discussed for the open account. I told you
about the documentary credit. I told you about the Advanced Payment,
Bank collection. Out of these, the most balanced, as I had mentioned to
you, is the documentary credit, which has a balanced risk for the
exporter as well as for the importer. And in my earlier section, when I
was discussing the typical export transaction framework, I was talking to
you about the framework based on a letter of credit which is the
documented credit that is supposed to be most typical. Although the
letter of credit payment method is a little costlier. The question arises
when to use the letter of credit.

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 All Export Documentation & Procedures | Any Origin

I would simply answer it by saying that if you are dealing with a

particular importer for the first time until you get full confidence in the
importer, work on documentary credit only, letter of credit only. And
that too from the first class reputed bank overseas bank that is able to
open an irrevocable letter of credit payable at sight.

Irrevocable means which cannot be revoked.

Payable at sight means the payment will be made as soon as the bank
accepts the document.

They are compliant documents and there is no discrepancy. if you think

that you can provide the right and accurate documents, you will
definitely get the payment from a first-class bank. That is for sure.
without this surety, doing international business is very, very difficult.
this is my advice.

Now let me explain to you how the LC works, although you already have
some idea how it works. I will just quickly review what we already
understand about the letter of credit. The two parties a seller that is the
exporter and the buyer that is the importer enters into a contract and
the buyer approaches the issuing bank that we have already discussed
and issuing bank (figure 4).

Figure 4: How does LC work?

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 Dr. Vijesh Jain

You can see here this red color arrow is the movement of the LC. issuing
bank issues, the letter of credit, and sending it to the seller through the
advising bank. The LC is advised through the advising bank, which is a
local bank for the seller, and the seller either accepts it or rejects it, and
if it accepts it, then he arranges the negotiable documents, including the
Commercial Invoice, Packing List, Certificate of Origin, Quality
Certificate, transport documents, phytosanitary certificate and ships the
goods through the carrier.

And you can see here this blue line arrow is given there, it is the
movement of the negotiable documents that are arranged by the seller
and sent through negotiating bank for negotiation to the issuing bank.
And if the issuing bank accepts the documents, the negotiable
documents, it pays within 5 to 7 days, depending on what is the version
of the letter of credit. There are two very common versions nowadays
UCP 500, and UCP 600.

In another course, I have discussed in detail the letter of credit and the
different versions of the letters of credit, including UCP 500 and 600,
you can explore that course.

This is how the letter of credit works.

Let us look at the steps that are involved in the letter of credit and
which are the parties involved in the letter of credit. you will have a
better idea.

Step 1: You have this buyer and you have the seller, two parties. You
have the issuing bank and the advising bank. there are all main four
parties or four pillars to this framework.

Step 2: Now sales contract is signed between the buyer and the seller.
Based on that, the buyer applies for the letter of credit, and the buyer's
bank, that is the issuing bank issues the LC and sends it to the seller's
bank which is the advising bank.

Step 3: Advising bank that the seller's bank authenticates the letter of
credit and sends it to the seller for their review whether to accept or
not.

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 All Export Documentation & Procedures | Any Origin

Step 4: Now seller after looking at the letter of credit and if he accepts
the letter of credit, makes the shipment ready and arranges the
negotiable documents based on the documentary conditions that are
given in the letter of credit and presents these documents under the list
that is provided in the letter of credit to its bank, which will now work as
the negotiating bank, which may be the same as the advising bank, or it
may be a different bank.

Step 5: Negotiating bank after scrutinizing the documents submitted by

the seller as per the documentary conditions of the LC, forwards them
to the issuing bank.

Step 6: Now the issuing bank debits the buyer's account for the
payment and releases the original documents to the buyer, if it has
already accepted the documents, it means the documents are
compliant.

Step 7: On checking for compliance with the LC terms, the issuing bank
reimburses the negotiating bank by debiting the buyer's account. it has
already sold the documents to the buyer after finding them in order.
Because this work has to be done very fast because the buyer has to
collect the shipment from the port of discharge with those documents.
Without those documents, the buyer cannot take possession of the
shipment.

Step 8: The negotiating bank on receiving the payments, credits the

same to the seller's account. You can see here how the letter of credit is
working. This is how the different parties are there.

The LC is operated in this way and this is how the risk of payment moves
from the buyer to the issuing bank and issuing bank being a first-class
bank has a better standing in the market. The seller can trust more to
this bank than to the buyer because the buyer's due diligence is not
easy in the export business. what the seller does, it prefers to go for the
third party mediation that is the issuing bank through the letter of credit
payment system.

This topic explains to you why the letter of credit is important, and why
international trade requires these kinds of instruments with the help of

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 Dr. Vijesh Jain

the third party that is the issuing bank and the different intermediaries,
including the advising bank, and the negotiating bank. This is how this
international trade happens.

And the example I have given for the letter of the credit payment
system, you can make use of this example to understand how the bank
collection works under DA or DP or any other methods that are there.

I think we have covered at least two major areas of understanding

before we try to understand the documents and procedures.

In the next topic, I will discuss some more information that you must
have before understanding the whole concept of documents and
procedures.

Procedure to Setup New Export Business

In this topic, I want to discuss one very important area, which is not
exactly part of this course. I will not go deeper into this particular aspect
of setting up your export business.

· How do you start your export business?

· What is the procedure involved?

I will just give you a passing reference and about how to get orders.
International orders. I have a separate module training module book on
this platform that talks about in detail in different countries,

· How do you set up your business?

· What are the different approaches to setting up your business?

· What are the costs involved to start your business export business in
different countries and

· How do you find information and do the desk research and the field
research to get complete knowledge of the international markets?

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That separate course is there you can explore that course. in this
course, our focus is more on export documentation and procedures. In
order to not make it too complicated, I will just give you a passing
reference before we go into the procedural cycle the procedures step
by step procedure of dealing with the already existing orders.

How do you deal with the existing orders that I will discuss in the next
topic? In this topic, I just want to tell you that in order to start your
business, invariably in different countries, you need a certain kind of
import-export license. For example, in India, it is called IEC, which
means importer-exporter code. In different countries, the names may
be different. The cost of getting it may be different, but the purpose of
this license or so-called code is for the central banks to monitor the
inflow and outflow of goods and foreign exchange for the purpose of
aligning the balance of payment. The current account is the capital
account.

How do you put the transactions?

What is being exported, and what money is coming to the country?

It requires individual codes for each and every exporter in any country.
This is the first step to start the business that you first set up your
company, which may be a proprietor company or maybe a partnership
company or a public limited company, or some kind of form, you have
to create. Most governments internationally, do not specify that for
export purposes, you have to have any specific kind of formation of the
company. You can form a company of any type and you have a business
account or bank account. In India, it is called a current account. In
different countries, the business account may be of a different type, but
you need a business account, you need some form of organization
which you start, and then you apply for this license, which in India, as I
just mentioned to you, is called IEC. And in India, IEC is given by an
organization called DGFT, which is the Directorate General of Foreign
Trade, which comes under the Ministry of Commerce, Government of
India. And this license can be applied online. And in many countries, this
kind of license can be applied online. And the process may be simple,
but in different countries, the cost may be quite a lot.

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In India, it is not very expensive, but in many countries like Japan or in

UAE, you will find that the cost of getting this kind of license can be
quite high. In some countries like the US. even your tax identification
number can work as the license for import or export. if you don't want
the importer exporter code number license, you can use your tax ID
number as your IEC importer exporter code. this facility is available in
some countries.

This is how you start your organization and you do the initial
compliances, so-called initial mandatory statutory compliances with the
local government that includes this code number as well as the
registration with the tax authorities in the country. For example, in
India, the tax is predominantly GST, that is the goods and services tax.
There is a single tax in the entire country and you need to register with
the GST council as an exporter. You fill in the details about your newly
formed company with the tax authorities and in different countries you
do something similar. There may be VAT there may be an excise
department. In India there is an excise department for certain items,
but very few items. you need to register with the excise department in
different countries. what you have to do that these formalities, these
compliances that are local in nature, that has to be done with the local
governments. You need to find out locally what are the compliances and
you do those compliances.

But what I have just mentioned to you, these are very common, very
typical types of processes that are done in order to start your export
business. Don't get too complicated on this. When you start your
business, you will find that you can do it in a few days or maybe a few
weeks, depending on which country you belong to. it can be done.
There is no problem.

Then the question comes that how you get the overseas orders. As I just
mentioned to you, this complete detail, the in-depth knowledge about
it, doing the desk research and the field research and different steps
that are involved in soliciting international orders, I have a separate
training module, but I just want to tell you that there are various
methods that actually all starts with the desk research and the field
research, many a time visiting the international markets alby visiting the
international trade fairs, and international buyer-seller meets, you need

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the support of the local trade promotion bodies. For example, in India,
you have trade promotion bodies like ITPO. That is the Indian trade
promotion organization that organizes the Indian pavilions at different
international trade fairs and business meets where you can get the
space at subsidized rates. this is how you showcase your goods
internationally. And then many new exporters start selling their goods
on digital platforms. There are many, many digital platforms that
provide you a window to test and sell your products on a B2C basis and
B2B basis also. One of the largest e-commerce platforms for
international trade is Amazon Global Selling which is provided by
Amazon. That is one of the largest e-commerce companies in the world.

This Amazon global selling platform has many marketplaces like North
American Market or Japanese market or the UK market or the Middle
Eastern market. These different marketplaces you can register on
Amazon Global selling and start selling your goods.

How do you do this?

For example, on Amazon Global selling, my separate training module is

there, you can go into in-depth knowledge of step by step.

How do you carry out your export business through Amazon Global
selling?

You can look at those training modules that are beyond the scope of
this course. I do not want to make this course too complicated to
explain you many things. My idea is that there are different avenues for
getting international orders digitally as well as offline mode. In offline
modes, your visits to different countries' market studies are very, very
important because ultimately large orders come through face-to-face
contacts. Even today, the importance of face-to-face contact you cannot
rule out. International marketing still requires your local knowledge. Is
still requires, your presence in those markets, still requires your having
the capability to gaze at the market, changing trends, changing fashions
in the international market, and different markets. I have a separate
training module on this platform that talks about focusing on a
particular market and creating an export marketing plan you can

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explore that course that how do you plan your selling of goods in a
particular specific market.

How do you create that plan, marketing plan you can go through that
training module also. My idea of this particular topic was that before we
learn about this procedure, post you get the order, you sign the export
contract.

How do you handle that?

Where do you go forward? Before we discuss this thing in the next

topic, I wanted to tell you how you set up your export business as a new
exporter and start getting overseas orders.

I hope you found this topic useful. Keep watching.

Understanding the Procedural Cycle of Export Transactions

So, friends, in this section, uh, I feel that we are progressing very well.
Two important things we have already understood. One relates to the
international commercial terms, without which it is very, very difficult to
appreciate the whole process of pricing, negotiating, signing the
contract, creating a Profroma invoice, and creating any other document
requires the basis of the business, and that basis is the terms, the
commercial terms that include what is the point of delivery and what is
the point of transfer of risk that we have already discussed.

The second thing in this section we learned about the different methods
of payment for receiving international payments and the significance of
involving the third party that is the bank. There are still a few things that
you should know before you discuss the different documents. One by
one we will discuss different documents step by step.

But what is the significance? Where the role of those documents

occurs?

That can only be understood if you understand the procedural cycle.

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What is the procedure, where it starts, where it ends, where it goes

through, and what kind of things it encounters on the way?

That thing I'm going to discuss now in this topic, let us look at the
procedure part step by step (see Figure 5). In this section, you will find
that some of the things will reflect the things we have already discussed
in the earlier topics. But there is no problem. I think if some of the
things are becoming repetitive, it will only strengthen your knowledge
about the whole procedure. When we say the typical export transaction
framework, we have discussed a little bit about the procedure.

Figure 5: Basic Steps in Export Clearance Procedure

But my purpose in sharing this current topic and talking about the step-
by-step procedure is to make you understand how from the perspective
of the exporter, how the flow of steps moves. Some of the things that
might not have been discussed in the earlier topics will come here. That
is the purpose that you are sure you understand the whole steps and
that any single document that we will talk about later is clear to you.
That is the purpose.

The basic steps in the export clearance procedure are, as I have already
discussed, the exporter and importer signing the contract. The importer
request for the LC issuance to the local bank, the local bank of the

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importer, based on the LC instruction drafted by the seller itself

generally that both parties are on the same page. based on that draft LC
instruction, the importer makes the LC opening instructions that are
final. By that document, it requests the issuing bank to issue the letter
of credit.

Now, the advising bank that is in the country of the exporter, that is the
seller which is generally called an advising bank is called notifying bank.
It receives the letter of credit and notifies or advises the seller that is
the exporter. Now The seller can himself or herself review the
conditions, documentary conditions, or he can take the help of a third
party.

Maybe the notifying bank itself by paying certain consultancy fees or

any third party because many letters of credit which are of high value
require the complex consultation that only certain specialized reviewing
consultants can advise you. And it is always better to use the third party
in this case because this is a very important point where the exporter
has to accept or reject the letter of credit.

This is a starting point because right now nothing has happened, and no
goods have been procured or manufactured. this is the point to be very
sure that the documentary conditions are doable and that it is in line
with the agreed terms in the export contract or in general
communication with the buyer. Reviewing institutions plays a very
important role. In our opening case study also, if Malhotra exports
would have taken the help of any third-party consultant, he might have
saved himself from financial loss and reputation loss, and business loss.
If the reviewing institutions are positive about the letter of credit and
the review of the exporter itself, looks good, the exporter may accept
the letter of credit and start securing the export goods. In the process,
the packing goes on. The other documentary acquisition goes on. The
space booking on the carrier is requested through the shipping
instruction given by the exporter or the freight forwarder that has been
already appointed by the exporter. And very importantly, depending on
the documentary conditions, the inspection process has alto start
because the inspection may be in-process inspection or maybe post-
process inspection. depending on the nature of the goods being
exported, the inspection point in the whole cycle may vary, but in most

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cases, the inspection is done post-process that is, even after packing the
goods for export many times. Assigned inspection authority that is
assigned by the importer, which has been requested by the importer,
that authority has to be notified and they have to be invited for the
inspection.

In addition, the local governments may have a mandatory inspection

requirement, depending on a case-to-case basis. For example, in India
after a certain value, it is mandatory to invite the government agency
which is called the Export Inspection Agency to come and inspect the
goods. Whether they come for the inspection or not, is the prerogative
of the inspection agency. But the application itself that you make for the
mandatory inspection, has nothing to do with the buyer. If the
particular agency, the assigned agency of the government of India, for
example, in this case, does not come, then automatically your
application that was used for inviting them for the inspection, serves as
the inspection certificate. this is the system that is followed in India and
similar types of systems may be there in other countries.

Then the customs office, the local customs office, or the border control
has to be notified about the upcoming shipment export shipment, For
example, in India it is done through something called export declaration
which is also called the shipping bill. we will talk about it later in the
next section where we will discuss the different documents. And
basically, what you are doing here you are reporting to Customs well in
time that the export shipment is pending, which will be exported on
approximate dates and schedule based on the shipping order issued by
the shipping company that was issued to you based on the shipping
instructions which were given by you to the shipping company, shipping
instructions that were given to the courier. They have to go in parallel to
the notification of the customs because basically, the shipping
instruction given to the carrier and the carrier's shipping order will tell
you what are the approximate time schedule within the dates, the latest
dates that are mentioned in the letter of credit.

 All these things have to be synchronized.

 All these things have to be aligned.

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Shipping instructions, notifying the customs or the border control, local

border control, or inviting the inspection agency, packing the export
material.

 All these things have to be synchronized.

 Timings have to be matched with each other.

It has to be very dexterous work to manage it on a project basis. It is

very, very important. depending on the documentary conditions and the
commercial terms, international commercial terms that have been
agreed, what international commercial terms have been agreed? There
may be a requirement for arranging the insurance by the seller itself,
that is the exporter. in this case, the request for ocean cargo insurance
or air cargo insurance has to go and synchronize with this whole process
and the insurance company has to be contacted.

A contract has to be signed with the insurance company and export

insurance, export cargo insurance policy or the certificate has to be
obtained depending on the documentary conditions.

Then when all these things are done, the goods have been loaded onto
the ship. The transport documents have been received in original.

The exporter has to approach the local negotiating bank in the country
of the exporter itself for the negotiation of the documents. All the
documents. Because these documents are supposed to meet the
documentary conditions of the letter of credit.

Now, this negotiating bank negotiates the documents with the issuing
bank, and if everything is in order, collects the payment in the
prescribed period, depending on the version of the letter of credit and
credits, this payment, which is received in the beneficiary's account,
that is the seller's account.

After all these steps, the exporter has to do the post-shipment

management, which includes dealing with the central banks of any
country which monitor the flow of the goods in exports and the inflow
of the foreign exchange. you have to provide evidence of remittance of
foreign exchange to your central bank. For example, in India, it is the

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Reserve Bank of India, which is done through your bank, which receives
the payment in the form of a bank remittance certificate.

We'll be discussing all these documents in the next section. you will
have a fairly good idea of what these documents look like. And in this
very process, which I just discussed, this whole cycle of starting with the
export contract requesting for the issuance, the receipt of the LC by the
notifying bank or the advising bank, review of the conditions by the
exporter, securing the export goods, assigning the inspection authority,
export reporting to the local customs or the border control, and giving
the shipping instructions to the carrier, which may be the shipping
company or the airline, and requesting ocean cargo or air cargo
insurance and the role of the negotiating bank to negotiate the
documents with the issuing bank and collect the payment in favor of the
beneficiary.

All this process has to be crystal clear to you before you talk about all
individual documents which will be done in the next section. With this
knowledge, the third knowledge that I have given to you in this section,
you will now appreciate exactly the concept, the very concept of this
whole export documentation and procedure. This is the crux and this is
the basis.

I think now you are getting a good heck of it. This is how your progress
will happen in this course. And I can assure you that if you listen to
these topics in the sequence which are given, you will be very, very
confident about the whole export documentation procedure.

Keep watching. Look for the next topic in this section because still a few
things are remaining that have still to share with you.

Thank you very much.

Conclusion

In this last topic of this section. I want to tell you that most of the things
you have already understood that you should know before we discuss
the different documents in detail.

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But I just want to tell you in this last topic that in order to understand
the documents, the purpose, the significance, you need to understand
that apart from dealing with the buyer and the bank or the banks, the
different banks which are involved in receiving the international
payment, you have to learn the process of dealing with the local
customs. That is the border control, shipping company, that is the
carrier. It may be the airline and how to deal with the port authorities or
container yard, dry port, or wet port.

What is the method of Gating In your products for exports?

These things we can leave for later. what we will do that First we will
talk about the different documents and in that process, we will be
talking about dealing with all these agencies that actually are part of this
whole game. you already have a fairly good idea what is the role of the
customs, that is border control, What is the role of the shipping
company or the airline? What is the role of port authorities or the CFS
or the container yard at the dry port or the wet port? These things will
be referred to many times in this course. wherever the reference is
there, you need not worry about it. After we complete all the
documents if anything is remaining.

Talking of these agencies, I will be giving you more details so you will
have a fairly good idea that how to deal with these agencies. that
knowledge as such is not necessary at this stage. let us now jump onto
the next section where we will be talking about the different
documents, the commercial documents, the auxiliary documents,
auxiliary documents, and the regulatory documents. these things we'll
be discussing, don't worry. I will tell you what all these documents are
and what is their significance, what they look like. I will show you some
samples of these documents. all these things we will be doing in the
next section, which is a very, very important part of this course.

In the next section, focus on the documents. Try to understand their

significance. Try to link the flow of the procedural cycle, and the
different steps there, and try to fit in those documents there.

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I think now you are fully equipped with the knowledge which is required
to understand the documentation part, which is the most exciting part
of this course.

Let's go to the next section.

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Chapter 4: Understanding export

documents
Welcome back to the course. And I'm very, very happy to start the new
section, the most exciting section of this course that deals with the
documentation part. in sections one, two, three, and four, my main
objective was to prepare you to be able to understand the concepts of
the documentation, the significance of each document, what these
documents look like, and why they are there.

What is the purpose?

In order to understand, you are already prepared in the earlier sections,

I congratulate you that you have reached this stage. Now I will be able
to discuss with you the individual documents.

But before I discuss with you, each and every document that is typically
used in export transactions, I would first like to give you a very brief
introduction to the different groups of these documents. What is called
a certain category of documents there what is their purpose? How do
we group all these documents that I will discuss before I start with
individual documents? let us look at this cluster of documents and what
they are called.

We generally categorize all the activities, documentary activities, which

are done for exporting into two different categories (see table 1), very
broad categories, and which are the documents that are to be worked
upon before the shipment happens. Because in export transactions, the
main point is the goods are loaded on the ship. Most of the goods, as I
mentioned to you, go by ship. The volume is very, very big. normally we
say whether it is air or sea when the shipment has happened, which
means the goods have been loaded on the main carrier, which goes
from one country to another country, whether it can be a ship or it can
be an aircraft. goods are loaded there and have already left the country.
that part of that shipment point is very, very important in the export
business.

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Table 1: Pre-Shipment Documents

Any activity, documentary activity before that is categorized as the pre-

shipment export documents (see table 1). that is to be understood and
anything that is to be done, any document to be arranged, any activity
to be carried out, whether it is documentary or procedural, that is after
the shipment we call it as post-shipment activity or post-shipment
documents.

These two categories in the pre-shipment documents, one category you

already know that is the LC documents, the letter of credit documents
which I had discussed with you several times in the earlier sections that
are, you know, the commercial invoice, the packing list, certificate of
Origin, certificate of inspection, which is called the quality certificate or
the transport documents like Bill of Lading, Air Way Bill, combined
Transport document. these are all transport documents.

Then the Bill of Exchange, which is a bank document, the shipment

advice that actually is not an LC document, but after the goods have
been shipped, it is mandatory to send it to the buyer. these documents,
along with the certificate of insurance, including the policy, insurance
policy, or even the freight certificate, depending on what is the
commercial terms, have been agreed upon with the buyer. These are
the LC documents.

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These LC documents basically are part of these so-called commercial

documents. Commercial means those documents that are of the
interest of the buyer or the seller and have nothing to do with the
authorities, local authorities, or any direct need of any government
body or any particular agency. those are commercial documents that
are related to commerce. That is the business that you are doing with
the buyer.

Among those commercial documents, those LC documents are typically

referred to as the principal documents. what is the meaning of principal
documents in commercial documents, they are two categories. One
category is the principal documents, which are directly demanded by
the buyer through the letter of credit. That's why they are called
principal documents.

And those documents, actually help in opening these principal

documents which are commercial documents, obviously, because they
do not have any need to be provided to the agencies or the authorities.
those documents that help in obtaining the principal documents are
called auxiliary documents like proforma invoice, which I discussed with
you, because Proforma Invoice helps you in getting the business and
creating the first commercial invoice, then shipping instructions, which
are given to the shipping company to get the shipping order, which I'll
talk to you later about. a little bit I have already discussed it and
intimation for inspection that means to the inspection agency it may be
the third-party inspection, which is demanded by the buyer or the
mandatory inspection, which I told you earlier, you must be realizing
that in section four, whatever we discussed is having the echo here. you
are because of that understanding, you are able to understand the
concepts now.

Then the letter to the bank for collection of payment from the buyer.
covering letter basically. When you give the documents, you have to use
this cover letter, then the insurance declaration. Based on that only you
will get the insurance policy or insurance certificate. But then this
insurance declaration is required, depending on who buys the
insurance, depending on the international commercial terms, which we
discussed in section four.

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Then shipping order, which is issued by the shipping company, helps you
in getting your goods carried to the container yard. shipping order. Then
Mate's receipt which is issued by the captain of the ship, which I'll talk
to you later about, helps you in getting the transport documents and
application for the Certificate of Origin on the basis of which you get the
Certificate of Origin from the local industry bodies like Chamber of
Commerce or any approved body. In the case of the general system of
preferences, that is the GSP certificate of origin. we'll talk about it more.
Don't worry. We'll discuss the different types of certificates of origin.

Now my idea was to make you understand that these are the pre-
shipment documents and in that these are the commercial documents
and those documents that are of the nature of the documents are
needed to comply with the local regulations in the home country or the
host country. These are called regulatory documents. As an exporter,
you will be needing the regulatory documents mostly in your home
country only. And the most important of those documents is the
exchange control document. That is the document that is required by
the central banks.

There are two things here in the procedure cycle I did not discuss the
exchange control mechanism because that happens at the back of the
cycle. what actually happens is that you are not dealing directly with the
central banks. For example, in India it is RBI. Rather you are just doing
the export declaration with the local customs authorities in the form of
a shipping bill, which again is purely your declaration of the goods you
are exporting and the system generates this shipping bill. when it does
generate the shipping bill, it also generates the exchange control copy
which is sent to the central bank.

If it is India, like in India, automatically it is generated along with the

shipping bill, which is also called the exchange control copy of the
shipping bill and which is automatically sent via electronic means to the
central bank. In the case of India, it is RBI. These are the documents that
actually help you in satisfying the central banks that you have exported
something and money will come.

Now when money comes, the banks have to notify the central banks
that yes, money has come in the form of called the BRC, which is also

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electronic in India. the Icegate platform of the customs in India does all
these things, and the banking mechanism wherein they receive the
foreign exchange, informs the central bank in the case of India RBI,
about the remittance being realized.

And those two things have to be matched by the central bank. that
thing happens in the background. your purpose, your concern is to deal
with the customs and with the banks that exchange control mechanism
happens automatically.

Then you will be needing certified copies of the shipping bill also, once
the goods have been exported, proving that the indeed export has
happened, only then you can do the post-shipment activities. And the
drawback copy that is in duty drawback in the case of India. in different
countries, they have different schemes. this kind of export promotion
copy may be needed for some other type of measures in other
countries, maybe some other form, not drawback. In India, it is called a
drawback. And then also to claim the export incentives.

For example, in India, you need a document proving your membership

with the local export promotion body, which is in India called EPC, which
is the Export Promotion Council. every product group has a different
Export Promotion Council and you become a member of that and you
get the membership certificate, which is also called the RCMC. That is
the registration cum membership certificate in India. And this is
mandatory in order to obtain any government benefits and which is the
case in many of the other countries.

This way we have understood the two different categories of export

documents. One is the commercial document. And second, is the
regulatory documents. Don't worry, we'll be discussing these
documents threadbare in later topics in this section one by one, and you
will get an even better idea of these documents.

My idea was just to give you a broader perspective on these documents

you have an idea that what these documents are categorized as and
which family they belong to, which is very important.

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Overview of post-shipment documents

Friends, as had mentioned to you, there are two different categories of

these documents broadly. One is the pre-shipment document and the
second is the post-shipment documents (see Table 2). Even the
shipment advice, which I just mentioned to you in the pre-shipment
document, has to be prepared, but it has to be worked upon actually
post-shipment because the moment shipment happens, shipment
advice is used to inform the buyer that the goods have been loaded and
the ship has already sailed. And the container detail and all of the
details which are normally given in the export general manifest (EGM),
that is the EGM which is also used by the local customs to finally get
satisfied that yes, the goods have indeed been exported. this EGM
actually provides all this information which is to be incorporated in this
shipping advice to be sent to the buyer. A shipment advice document
which should be enclosed with the non-negotiable copies of the bill of
lading or the airway bill.

Table 2: Post Shipment Documents

The transport document, it can be CTD also, a combined transport

document and which I'll be discussing in more detail later. The
commercial invoice and packing list. these are the minimum documents
that together form the category of shipment advice documents which

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are categorized as the post-shipment export documents, and then all

those documents which you prepared before the shipment. We call
these as the commercial principal documents or the LC documents are
now ready with you all and all signed, whatever the way they had to be
prepared according to the LC.

Now this complete set along with the Bill of Exchange copy, which is the
bank document that has to be given to the bank as an unconditional
order to pay against the LC and other LC documents, is a complete set,
including the LC in the original. Original copy of the letter of Credit,
which you receive from the notifying bank or the advising bank.

All these documents and the cover letter are called negotiation
documents. these are as per the LC terms. these are the main
documents, main commercial documents, principal documents, and
principal commercial documents. this is the second category of the
post-shipment export document.

Then comes the third category. What are the incentives claim
documents, the documents that are required by the exporters to claim
any benefits being given to the exporters by their respective local
governments? Mostly these are the refunds of any direct or indirect
duties and taxes that are paid either in the advance authorization or in
the remission mode, which means to be remitted after the export has
happened.

Whatever the method is there, even if it is an advance payment, this has

to be resolved after the shipment. these documents have to be used in
all the countries of the world. Wherever such benefits are there are
from the local governments. for example, if we take the example of
India, these documents include documents for excise or GST. If there
are any GST matters or any VAT. In India, we do not have VAT now. But
few goods have excise duty, but most of the goods have GST, such
refunds would be required, for example, ARE1 and ARE2 forms in India
for excise purposes.

As I told you, very few items are there, but mostly you will be needing
the commercial invoice and the shipping bill, which is certified by the
local customs. That export has happened to get the GST refund and a

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non-negotiable copy of the bill of lading would be required in all such

claims, especially for duty drawback claims In India you would be
requiring a duty drawback claim proforma, which you have to create.
Certified copy of the commercial invoice certified by the local customs.
Non-negotiable copy of Bill of lading. Certified copy of the shipping bill.
That is the drawback copy of the shipping bill. It is also called. And of
course, you will need the RCMC and eBRC, as I mentioned to you, RCMC
and BRC. BRC would be obtained from the bank and RCMC will be
obtained from the EPC where you have become a member.

I hope in this topic you have got a very graphic idea of the different
categories of these documents, different clusters of these documents.
Now, having said that, if you have not understood any of these
documents, don't worry at all. I'll be discussing these documents one by
one in subsequent topics, and we'll be discussing all these things to your
entire satisfaction of yours. you will get an idea, a very clear idea of all
these things. Really thankful to you for continuously watching these
topics and trying to learn to your best.

Thank you very much.

Proforma Invoice

So, Friends, welcome back to the course. now I'll be starting this course
a discussion on individual documents. the most important document
that I would like to start with is the Proforma Invoice. Proforma Invoice
is very important, although it is not part of the commercial document,
or principal document, which I discussed with you. But Proforma Invoice
is the most startling document which actually gets you business. more
professional it is the chances of getting business are very, very high. it is
always recommended that whenever you receive an inquiry or so-called
letter of intent from a foreign buyer, you make a very professional type
of Proforma Invoice.I will show you what is there in Proforma Invoice
and why I say that it is always better to give the offer, the price offer to
the foreign buyer in the form of a Proforma Invoice, rather than just
giving the price and giving some conditions. It is always better to be
clear about all the conditions and that is where the importance of
Proforma Invoice comes. let us see.

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Let us look at one of the sample proforma invoices, which I have created
based on the opening case study of this course. Here, we are talking
about Malhotra Exports exporting fashion garments to France. I have
prepared a Proforma Invoice for that opening case study. Let us look at
this. This is the sample of the proforma invoice (see figure 6), which I
have created for this course, Actually, based on the opening case study,
which we had discussed about the Malhotra Exports exporting the
ladies' fashion garments to the buyer in France, St. Laurent.

And you can see that the exporter proposes the shipment by sea and
the quantity, which is 3500 sets of ladies, skirts, and blouses of 100%
cotton, assorted adult sizes, assorted color themes, each 2 pcs set. 3500
sets with the product code which is given here. The exporter is
expecting that it will make one full container load, one FCL and the
proposed port of loading obviously is Mumbai Port, and the proposed
port of discharge is Paris. Now it is up to the buyer to suggest some
other port of discharge, but it is obvious that the port of discharge will
be by default. Paris. In this case, if the buyer does not mention any
other port in the letter of intent. along with the details given by the
exporter, that is Malhotra Exports in this invoice.

He has proposed some Invoice no. which can always be changed later
on. The date of issue of the Proforma Invoice, the buyer's reference
number, and the letter of intent, which was received by the exporter on
a particular date. the proposed and possible delivery date by the
exporter which is given in the Proforma Invoice, is also mentioned here.
And the exporter also proposes that this whole offer is based on the
payment terms, which is a confirmed irrevocable letter of credit payable
at sight.

The price, which is offered by Malhotra Exports, is €15. The total

amount comes to €52,500. But not only this, the Proforma Invoice says
that there are some special payment charges also of €2500. the total
price becomes €50,000. here Incoterms is given, they are free on board
(FOB). Mumbai. Currency is also mentioned here. The signatory
company name, the authorized signatory, and the contact person are
given here. The expected time of dispatch is depending on the

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Figure 6: Proforma Invoice Sample Based on Opening Case study

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availability of the ship as per the information from the exporter and as
suggested by the C and F agents. The exporter has mentioned in the
offer the expected date of departure.

All these details you can see here are very, very clearly given in this
case. And it is also mentioned about the bank details that the LC that
the exporter is proposing in this price offer should be from a first-class
bank, an international bank advised through the International Bank of
India, Mumbai branch. what he's doing, he's nominating his own bank
with whom the exporter has dealt. he has mentioned this bank. This
Proforma Invoice is for sample purposes only. it is not any actual
Proforma Invoice, but the actual proforma invoice generally will be of
the same format because the world over

The exporters and importers follow something called ADS That is the
Aligned Document System which has got columns that are very similar.
The size of the document is very similar. more or less people use this
kind of format internationally.

You can see here one of the advantages of the Proforma Invoice is that
it is able to cover each and every piece of information, crystal clear
information, that the buyer understands that this price is based on what
thinking, what process, what conditions. that is the idea.

You just saw one sample of the Proforma Invoice and I showed you the
different entries, which you have to incorporate in the Proforma
Invoice, and what all is covered when you give the offer to the
international buyer. The Proforma Invoice takes care of everything the
buyer should know. that is a major advantage of giving the offer in the
form of a Proforma Invoice. You can always give the offer without the
need for Proforma Invoice. It is not a mandatory document, but it is
always better to use the Proforma Invoice format because it is
understood internationally in the same way. it helps you to make sure
that the price you are offering has got all the conditions attached to it
and how you arrive at the price. It also helps the international buyer to
compare your offer with the other suppliers if they also use the same
format, which most likely will be using the same format because these
conditions have to be conveyed to the international buyer. Only then he
can compare your prices with any other suppliers.

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I think this topic helps you to understand the true nature of the
Proforma Invoice. This Proforma Invoice will also help you in creating
your first commercial invoice when the order is finalized.

Keep reading these topics.

In the next topic, I will talk to you about the commercial invoice.

Thank you very much.

Sales Contract

In the last topic, I discussed with you the Proforma Invoice. Now, I
wanted to discuss with you the commercial invoice but thought that
before I talk to you about the commercial invoice, it is very much
required that I should talk to you about the export contract. in this
topic, I will discuss the export contract.

An export contract has to be signed at this point between the buyer and
the seller. Once the Proforma Invoice proposal, which means the price,
which means the packing, which means payment terms, the method of
payment, delivery terms, the date of delivery, and the nature of the
incoterms what will be the incoterms conditions? All these things are
discussed. And agreed between the buyer and the seller. Once that is
done, it means you have got the order.

Many times when the business is not very big, the buyer simply signs
the Proforma Invoice. If it contains all the conditions that have been
agreed upon between the buyer and the seller, or if it has not been
agreed upon, a new Proforma Invoice is created that contains the final
details that have been agreed upon, and many times the buyer simply
signs and confirms the performance invoice and that acts as the export
contract.

In a case where the nature of the transaction is a little complex, the

value is high. It is possible that the exporter and the importer may agree
to sign a comprehensive, detailed export contract and bring out and
prepare, sometimes professionally, sometimes by international lawyers

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even. To come out with a very professional-looking, detailed clause-by-

clause export contract. Many times it happens.

Let me share with you one sample of the export contract (see Figure 7)
and let us see what the common clauses are there in an international
export contract. Now, let us look into this sample for educational
purposes only of one sales contract that is very, very similar to the real-
life situation. And this sales contract copy as a sample is also available in
the resource section for your download. you can download this sales
contract and look into the different clauses and the structure of the
sales contract.

Let me explain to you the basic structure of the sales contract and the
main clauses that are there in the sales contract so that you have a good
idea of how the sales contract looks like in a real-life situation herein in
this sales contract as you can see here, the contract number is given
there. This is an example sales contract. it is not the real sales contract,
but just for an idea that what it looks like. This sales contract is entered
into, the effective date is given there. And the place where this contract
is signed is also given here.

Then the name of the seller and the name of the buyer is given there
with the address and the contact details of both parties. And this has
been mentioned here in this sales contract that the buyer and the seller
will be referred to as the party or the parties at different places in this
sales contract. this is how it starts.

If we look at the initial description that is given at the very start of the
sales contract, some very important information is given here, like this
contract is subject to the bankability of the seller's product and upon
mutual written agreement, some required amendments by the Buyer's
bank are allowed. Jinko is committed to receiving technical inspection
from a third party, the bank technical adviser, and has to bear the
relevant costs. This inspection has to be carried out by the date that has
been mentioned here.

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Figure 7: Sales Contract Sample

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Once the bank has accepted Jinko as the seller and the contract
amendment is complete, the seller will issue the commercial invoice
and bank guarantee in the amount of the percentage given here what
kind of percentage will be given as the bank guarantee of the total
contract's approximate value? Why approximate? I will explain this to
you in this contract.

This contract has multiple shipments. Those are to be carried out by the
seller in different months. what exactly do the actual shipments take
place in different months that will decide the total value? Exact value. in
this contract, the approximate values are given there. And I will explain
to you all these things again further in this contract so you will have a
better idea.

Further, it says that within ten working days of the document's issuance,
certain percentages will be given as advance payment by the buyer. that
percentage is given here.

The buyer and the seller agreed to conduct the following transactions
according to the terms and conditions that are given in this sales
contract. And certain confidential information has been omitted from
this sample. this is how the sales contract starts.

This particular example is a very detailed sales contract. I will not be

able to explain each and every line of this, but I will take up some
important parts of this sales contract that I will describe to you and
explain to you. In here first part of this sales contract, the product
description is given there. Since this contract is a technical contract.
Therefore, you can see here that the different descriptions on a monthly
basis are given there.

Each month,

· What kind of solar cells will be supplied by the seller to the buyer?

· What will be the different technical specs of that?

· What will be the wattage of each shipment?

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· Total wattage?

Therefore in this contract, the average price per watt is mentioned not
based on the quantity actually of the solar cells supplied, but rather on
the total wattage that has been supplied here. this is very technical in
nature and the requirement of this particular industry and the product.
As I was explaining to you, the prices may vary from month to month.
the June price is approximate, and July prices, August prices, and
September prices are mentioned. These are the approximate prices, the
expected prices that are given there. The actual prices may vary a little
bit according to the description that is explained and given in this sales
contract. And accordingly, the prices may vary. The total quantities of
the contract will be the approximate quantity because the actual
shipment will decide what is the total quantity.

But some idea is given here in this sales contract, what will be the total
quantity and approximate total price of the contract? what it mentions
here, is the price is in euros, and on Incoterms what has been decided is
CIF in this case Ravenna Port in Europe. It can also be any European port
because the contract is for multiple shipments and the requirement of
the port may vary from month to month many other details are given
here. For example, how the sales contract will look like for each
shipment because this particular sale contract is for the entire year.

What will happen about the purchase order on the month to month
basis?

What will be the individual sales contract or export contract of each

shipment on a monthly basis?

All those things have been explained here. For example, it mentions,
according to the shipment schedule, the seller shall issue a written
proforma invoice to the buyer by email or fax, email or any other means
within 45 days prior to the scheduled shipment date of each month
during the contract period and thereafter the buyer shall sign and
return the Proforma Invoice within five business days upon receipt. All
proforma invoices shall be subject to the terms and conditions set forth
in this contract.

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This is the master contract, sales contract, and all the monthly Proforma
Invoices that will be signed by the seller as well as the buyer will serve
as the individual sales contract of each month. this is how it will go
further. This process will be happening this way.

In the second clause that refers to the product's technical specifications,

all the technical information about the products is mentioned here, like
power tolerance, maximum system voltages, and any other details. It
mentions the details and technical details that refer to the product
technical specifications in Appendix A of this contract specifically deals
with the technical specifications.

In this third clause, the focus is on the terms of payment, and it talks
about the incoterms that are used and the effective latest incoterms
that have been used as a reference for any dispute that happens
between the buyer and the seller. the latest incoterms will be used.

Further details about the terms of payments are given there. For
example, what will be the percentage of the advance payment?

How the advance payment will be made by the buyer to the seller?

All those details are given there. The total purchase price for each
shipment will be calculated based on the nominal power of the solar
modules as recorded on the commercial invoice. As I had mentioned to
you, the average watts, per watt price, is given here in this contract, and
based on that advice, based on that reference, the actual shipment
price will be calculated for each shipment, monthly shipment, and
accordingly, the commercial invoice will be prepared by the seller.

Bank information is given here in this third clause. Subclause 3.4.

· What is the opening bank?

· What is the opening bank address?

· What is the swift code?

· What is the name of the beneficiary?

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· What is the address of the beneficiary and what is the bank account
number of the beneficiary?

Then clause number four refers to the title and risk of loss or the
insurance. it deals with the risk of loss or the insurance and the title
transfer. how does the title transfer according to the incoterms that
have been used? All those things have been described here. it is not
difficult to understand this because the CIF contract is there. We already
know the terms of trade, incoterms and accordingly, the title transfer
and the responsibility of the loss and the claim of insurance can be
easily understood. That has been described in this clause number four.

Further in clause number five, the terms of shipment are given there.
that is the focus. What will be the date of the shipment? And it has to
be according to the schedule that has been given in the Annexure. That I
will show you later in this particular contract. And what is the port of
loading? What is the port of destination? And things like prior to
packing and shipment, modules shall be arranged according to the
output power with a one-watt peak increment. All these process details
step by step are given here in this clause as things like notice of
shipment In case of shipment by CIF Ravenna, the seller shall inform the
buyer of the contracts of the forwarding agent and despatch date of the
relevant vessel by notice within two working days after the shipment. In
fact, it indicates the shipment advice that I had mentioned and
explained also that the seller is obliged to send shipment advice. this
notice of shipment refers to that shipment advice and that obligation is
of the seller.

Clause number six deals with packing. Here, a detailed description is

given there how the goods will be packed. The packing will be very
technical in nature. Some explanation is given here and that can be
reviewed by you by having a review and look at the sample contract
that is available in the resource section. You can download it and you
can review the packing details. You will have a fairly good idea about it.

Clause number seven deals with warranty and claims and this detailed
information on warranty and claims is included in Appendix B of this
contract. I will show you that. Then clause number eight refers to the
force majeure. The force majeure is a situation that is out of the control

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of any of the parties, and it describes what will be those situations

wherein the contract may cease to be applied due to the situations that
are the act of God or maybe war or warlike conditions or embargoes or
riots or strike or lockout and other events beyond the reasonable
control of any of the parties. all these details are given here in the force
majeure clause. That is a very, very important clause. there are two
subheadings in this clause one and two, and you can have a look at the
details that are given in this particular sales contract. You can review it.

Then clause number nine refers to the breach of liabilities, and breach
of the conditions of this sales contract by any of the parties. And those
different situations are mentioned here in sub-clauses one, two, three,
four, five, six. What will be the consequences of such a breach? Those
are mentioned here.

Then clause number ten deals with the contract disclosure. things like
the buyer agreeing that the seller can disclose the main content of this
contract to the State Security Commission of the country, where the
Seller is preparing for its listing affairs as required. That is case to case
basis. Generally, the approach is that neither of the parties would be
disclosing the contents of this contract to any competitors or any third
party or to any media companies or any platform where the business
may be affected. A detailed description of the contract disclosure are
required in many cases, depending on the situation. Those things can be
there. In this particular case, the seller needed an escape from the
contract disclosure in this situation as you can see here, and that has
been mentioned here.

Then clause number 11 refers to the non-transfer. That means non-

transfers of the rights. no right of transfer, any right or obligation of this
contract by any party without the express written approval of the other
party. The meaning of this is that neither party can transfer their
obligation to any third party. For example, Seller cannot transfer its
obligation to dispatch the goods to any third party or any third supplier.
that is not allowed without the consent of the buyer, for example.

Then clause number 12 refers to the applicable law. In this particular

sales contract, I had already mentioned to you in my earlier topics that
the laws of a third country are generally preferred by the parties. Herein

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in this contract, also, as we can see here, the choice of the law is
German law. That is the third country because the seller happens to be
from China and the buyer happens to be from Italy. The applicable law
is German law. As I had mentioned to you, the choice is the third
country law, in this case, German law.

Then clause number 13 refers to the arbitration and how the arbitration
will be carried out in case of any dispute. As has been mentioned,
German law will be applied. any dispute in this connection with or
arising from the contract shall be settled through friendly negotiations
first. If no settlement can be reached, the dispute shall be submitted for
arbitration to the Chinese European Arbitration Center in Germany.
these details are mentioned here. How it will be carried out depends on
the negotiations between the buyer and the seller.

Then clause number 14 deals with miscellaneous matters. Like, for

example, in this case, it is mentioned that each party shall ensure that
neither it nor Its affiliates and each of their directors, senior officers,
and employees have made or will make any disclosure or
announcements in respect of this contract. The transaction, the fact
that the parties are in negotiation with each other, or any other
matters, any miscellaneous matters, that cannot be included in other
clauses of this sales contract. Those things will be included in this
particular clause number 14. That is the miscellaneous section of this
contract. All these details will be here. You can review all these details in
the sample that is available and you can download it from the resource
section.

And then finally at the end of the sales contract, appendices are given
there. Basically in this contract, there are two appendices, appendix A
and Appendix B. Appendix A in this particular sales contract deals with
the technical specifications, and Appendix B deals with the limited
warranty for PV modules. we can have a look at Appendix A which deals
with the technical specifications and complete details are given here.

Similarly, appendix B is given here which deals with the warranty terms.
All those details are given in these appendices, as had been mentioned
in the sales contract, and the details included in these appendices will
depend on the case to case depending on what is the subject matter.

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The subject matter is very, very important. That is where the contract
started. In the very initial stages of this sales contract, the subject
matter was described. this is one example that I wanted to share with
you about a typical kind of sales contract that is signed between the
seller and the buyer.

Packing List

Welcome back to the course. now, slowly we are moving towards more
documents. Our progress is good in this course. I congratulate you on
this. We have already discussed a few documents, including Proforma
Invoice, export contract, and Commercial invoice.

Now, let us discuss one very, very important document that is called a
Packing list. The packing list is always attached to a commercial invoice.
If it is there many times Packing list is not there where the shipment is
very, very simple. Basically, a complex shipment requires definitely
requires a packing list because it tells you exactly what are the different
types of packing, what are the different types of pallets, and boxes, and
what contains what?

It completely identifies the actual physical nature of the shipment.

Generally, it is the practice that even if the shipment is simple, all the
same types of boxes, the packing list is still made.

Let us look at the packing list. (see Figure 8)

This is the packing list. You can see here that the header is very, very
similar to or almost the same as the commercial invoice. You can see
here the name of the exporter, and the consignee name, and all the
numbers you will find are almost the same, except for some columns
like packing information where you can put the marks which are there
on the cartons and how many cartons are there in those pallets. That
information will be coming in the description. it's quite similar to what is
there in the commercial invoice. what happens? This packing list comes

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Figure 8: Packing List

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with the data which has been obtained from the commercial invoice.
But you will see here that in the packing list, there is no mention of
financials which was there in the invoice. If you remember. In the
invoice, what we had given was the unit price and the total price, all the
break up was here where we had mentioned special packing charges.
those financials are missing. instead of those financials, what has
happened here, is we are having the things like kind and number of
packages, and net weight. GROSS weight measurement in cubic meters
of the different categories of the products, which has been mentioned
in the commercial invoice.

So, for example, in this case, I will explain to you there were one, two,
three, four, and five codes, and the different color sizes categories were
made in the commercial invoice and there were 700 sets of each. what
has happened that what we have done in this, we have taken one pallet
which is approximately five cubic meters for each category to pack the
material. One pallet is generally of the size. The standard size is 48
inches by 40 inches. This is the standard size. And accordingly, the
cartons were made to fit into that pallet size.

· And what actually happened?

· What became practical?

That's seven sets in each carton had been packed in this. for 700 sets,
we needed 100 cartons. 100 cotton in each carton is available with
seven sets of packing. when we put these cartons on the pallet, 48
inches by 40 inches, which is the standard pallet, we found that the net
weight came out to be approximately 980 kg and the gross weight came
out to be 1260 kg this was the gross weight that can easily be lifted by a
forklift and can be stuffed into containers. we have a total of five
pallets. Are there one, two, three, four, and five pallets are there in this
shipment and they have been stuffed in the container? This is a 20 feet
container and it can carry a total capacity of a maximum of 15 tons
approximately. this is this whole shipment is approximately around 6.5
tonnes. it can easily fit into this. Basically, it's the garments. Garments
take up more space. They can fit into the container, but the maximum
weight will not happen. 15 tons means if it is heavy machinery or some

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scrap material, then the question of the maximum capacity will come
here.

The volume will take care of the whole space in the container and the
maximum weight of that whole shipment for the 20-foot container is
coming to be 6.5 tonnes, which is very well within the permissible range
of the container. this is the way you plan it out.

And this packing list will have this kind of information, complete
information that the sets, if it is pieces, then how many pieces are there
in the carton? Here it is. Sets.

How many sets are there in the carton?

Seven sets in a carton And how many cartons per pallet? We have
written 100. for each category, we made one pallet and there are five
categories. we have five pallets, but it is not necessary depending on
what is the quantity. The pallets distribution has to be managed. It was
easy to manage here. That's why we have done it.

I hope you have understood these details which are given in the packing
list. And they are quite simple. Many times the information can be very,
very complicated and it has to be done very professionally. You may
have to take the consultation of professional packers to know how you
are to use it. Sometimes it is like this.

It all depends that how complicated is the shipment and if you need any
professional help, you may have to outsource this shipment.
Management.

· How many pallets?

· What will be the packing size, carton size, and how they will be packed
in the pallet?

· Whether it is shrink wrap or it is wrapped?

Mostly for seaworthy packing, shrink packing, and stretch wrap packing
is used. And for the standard pallet sizes, the stretch machines are

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normally available at the port itself, container yard, or the CFS -

container freight stations where you stuff your material in the
containers. Or you can call the professional packing people in your
factory to pack the material, make the pallets, and stuff those goods in
the factory itself, in which case the container will be stuffed in the
factory and will be proceeding to the container yard.

If it is a full container load, if it is not a full container load, if it is less

than a container load, generally, it is sent to the nearest CFS which is
the container freight station for consolidation that the professional
consolidators will consolidate the material and create the full container
load. And then only it will go to the container yard for the Gating In
process. This is the process that we use.

Don't worry, I'll be talking about this Gating In process in the later topics
also. I will make it more clear to you how it happens, But for packing list
purposes I give you this information so that you understand how the
packing list shipment distribution is done of the goods in different
cartons and pallets. this is one example I have given it to you.

You are seeing that the header and the footer are almost the same as
the commercial invoice, and it is the description and the packing details
which are there. And again, depending on how many categories are
there of the goods, the packing list itself can run into several pages. it all
depends on your total export shipment and the nature of the shipment.
But otherwise, you can see here all the information, exporter,
consignee, method of dispatch, type of shipment, vessel name, voyage
number, port of loading, port of discharge, country of origin, country of
final destination, buyer, if not the consignee.

Here in the commercial invoice, it was the letter of credit information

and the insurance policy number and the LC number. Those have been
omitted. And instead of that, a new column has been created that talks
about the packing information. In this column, if the material is
hazardous, then you have to declare that the material is hazardous this
thing can be done here.

Similarly, in this additional information also, if the marks and packing

details do not fit into that column, you can put it here also. here it is just

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written that the packing instruction please pack appropriately, but it

may be detailed information also, detailed instructions also. Generally,
this area is used for such instructions which are elaborate and
information which is elaborate. Generally, the declaration of the
hazardous material should be here and you can also put here the details
about the international labels which are used on the packs.

For example, there are United Nations numbers are there of different
labels. it comes under the labeling of the export shipment. All your
pallets and boxes have to be labeled, according to the United Nations
Charter of Labeling, especially the hazardous material. for different
hazardous and risky materials, there are labeling instructions and
internationally recognized instructions that have to be used for labeling
purposes. many times those have to be done by professional packers
and the details can be added here in this column.

This is what the packing list looks like. I hope you now have a better idea
about this packing list. You can download a copy of this packing list from
the resource section of this topic. This was all about the packing list I
wanted to talk to you about. You should also note that many times in
the letter of Credit Case Bank also ask for the packing list.

Why?

Because banks do not deal with the shipment. It deals only with the
documents. in order to keep a record of the shipment, they will ask for
the packing list. Even if it is not mentioned in the letter of credit. The
bank may need it for its own record, packing list can have many
ramifications. it is always advisable to have the packing list, even if it is
not required.

Certificate of Origin

Now let us look at the certificate of origin. This sample again, is based
on the opening case study of this course of Malhotra Exports, exporting
fashion garments to Saint Laurent of Paris, France. (See Figure 9)

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Figure 9: Certificate of Origin

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In this certificate of origin, you can see that the details are quite similar
to the commercial invoice, which contains the name of the exporter and
the consignee and buyer, if not consignee, method of dispatch, sea,
type of shipment, FCL, vessel name is there. Then the voyage number is
there. The port of loading is there. The departure date Is there. The Port
of discharge is there. The final destination is there. And if you
remember, this particular column was different in the commercial
invoice and the packing list here also, it has been kept open.

Here some of the things which are related to the manufactured goods
or features of the goods have to be mentioned here. For example, the
garments are being exported by Malhotra Exports to St. Laurent. They
have to declare that the garments are Azo dyes-free. when you do that,
this becomes a very important point for the issuing authority that is
issuing this certificate of origin, because the Certificate of Origin deals
with the manufacturing.

Any manufacturing feature like the requirement of the importing

countries that the garment should be AZO dyes free should be
mentioned here. Or for example, there may be, you know, some
requirements like pharmaceutical products wherein the importing
country may be having a requirement of the technical certificate of the
pharmaceutical product approved by an agency in the foreign country.
That means the importing country. that number, approval number, that
certificate number, if it is mentioned here, it will be very, very helpful
for the issuing authority which is issuing this certificate of origin.

Such kind of information has to be mentioned here. It can also be the

information related to some kind of certifications that the goods
conform to the EC certification or UL certification. those kinds of
information can be put here in this open column, which is blank
actually, which is kept blank. And that information can be put here.

Otherwise, if you look at the header, it is almost the same as the

commercial invoice. And if we look at the description where the
importance is given to the marks and numbers kind and number of
packages, description of the goods, tariff code, gross weight. here you
need not give a detailed description of the goods. Rather, you are to
give the summary. marks and numbers. For example, in this case, JAI

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HIND Mark was there and the kind and number of packages, as were
mentioned in the packing list, 500 cartons were there.

The cartons were of cardboard. And the general description of the

goods is ladies' garments. Two pieces set. The tariff code is mentioned
here and the gross weight, which was around 6.3 tons, not detailed. The
summary information has to be put here in this category.

And once you do that, the same information has to be in the form of a
declaration by the exporter. the same document can be used for the
declaration, which is here, which says that I the exporter understand
being duly authorized by the Consignor and having made the necessary
inquiries, hereby certify that based on the rules of the origin of the
country of destination, all the goods listed originate in the country and
place of the designated country, which has been mentioned here. it will
be mentioned here that designated country.

I further declare that I will furnish to the customs authorities of the

importing or their nominee for inspection at any time, such as evidence
as may be required for the purpose of verifying the certificate. So. This
authority has to be declared for the customs people of the importing
country if they wish to inspect because this particular certificate of
origin is targeted to the customs authorities of the importing country.
Border control. they have to be given this right to inspect the goods if
they wish. here the designated country has to mention that the goods
were produced, and manufactured in this case in India.

This declaration is the most critical point of this certificate of origin. This
declaration can be in a separate form also, whereby the declaration
form will be referred to as the auxiliary document. And the same format
can be. Now, in the Original certificate of Origin, which is to be issued by
the local authority, which is mostly the local industry body, like the
Chamber of Commerce or any nominated body in case of the certificate
of origin, which is not ordinary, which is bilateral or multilateral. As I had
mentioned to you, the designated authority will be issuing the
certificate of origin, and it will be in the form of the Declaration by the
Authority or the Chamber of Commerce or the industry body, or any
other body.

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It can be some association also of the industries, local industries. it

declares that the undersigned certifies on the basis of the information
provided by the exporter. To the best of its knowledge and belief, the
goods are of designated origin. That means in this case, the designated
origin is India, declared by the exporter, production or manufacture
point of view.

This is the declaration that is given by the issuing authority, the place
and date of the issue, in this case, Mumbai, the signatory company,
which is issuing in this case is International Chamber of Commerce.

The name of the authorized signatory is given here and the signature is
there. Maybe a stamp is also here. And many times these documents,
like certificate of origin, are on the letterhead of the issuing authority.
Or they have a standard format like this, along with the logo of the
Chamber of Commerce here many times. Or it may be just this simple
certificate of origin of this type, this format simply stamped and signed.

This is a most typical certificate of origin. The ADS is the aligned

document system, which is commonly used in several countries that
follow the ADS. That is the aligned document system.

I hope this sample of this certificate of origin gives you a fairly good idea
about the different entries which are to be made in the certificate of
Origin. And what is the significance of these entries and how Certificate
of Origin is issued?

Quality Certificate

Welcome back to the new topic in this course. in this topic, I'll be talking
about the quality certificate. The quality certificate is invariably required
by the overseas buyer. And it is mostly it is there in the LC documentary
conditions because the buyer wants to be sure that the goods which are
being exported are of the desired quality or the quality which has been
agreed upon.

This certification is given by a third party and there is no standard

structure or standard format of the quality certificate. there are
different types of quality certificates depending on what is the item. It

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can be in the form of a test report. It can be in the form of the

certification given by a representative of the buyer. It can be done by an
international testing agency.

There are different ways of getting this quality certificate and generally
in a little complex and larger export orders, a very detailed clause is
given for this kind of quality certificate. How the inspection will be done,
what will be the form of the quality certificate, and what will be the
process of doing this kind of inspection? sometimes it is explained even
in the form of an attached annexure in the export contract. For mainly
technical goods, it is a very, very elaborate type of testing procedure.

I will give you one sample of the quality certificate and I will try to
explain to you what it means and what is the significance of this quality
certificate. I will show you two certificates that are related to our
example. That is the exports of readymade garments by Malhotra
Exports to the party in Paris. although this test report is for another
party, these are the common quality certificates that are generally
required by international buyers. (see Figure 10)

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Figure 10: SGS certificate of conformity

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Apart from the inspection certificate that basically looks at the shipment
to test whether the goods are in conformity with the sample, which was
agreed upon between the buyer and the seller, the other quality
certificates are similar to the human safety angle of the garments (see
figure 11), that whether the garments are safe for the humans.

This kind of test report, done by SGS is given here. This particular quality
test relates to the safety of the textile garment for humans. it describes
the name of the exporter who has given the sample to SGS. Color, Fiber
contents, The name of the applicant, sample receiving date, and the
date of the performance of the test.

And what are the tests which are performed? One, two, three, four,
five, six. Tests were performed. What are the results? Has been
attached along with this certificate. this is the sample and the example
of the quality test done for the safety angle of the textile.

Another relevant certificate in this case refers to the certificate which

certifies that the garments are Azo Dyes free. Let us see that. (see
Figure 12)

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Figure 11: SGS quality certificate

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Figure 12: Quality certificate (test report)

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This is the test results. One example of the Azo Dyes free quality testing
and the certification where the different test methods have been used
and the results are given there, ND - that is Not Detected.

You can see that all these methods have been used and which says that
the Azo Dyes are not detected. this is the type of certificate that is
normally employed to find out whether the garments contain Azo Dyes
or not.

This is another example of a quality certificate.

And there can be an inspection certificate also wherein the SGS or any
other third party will be testing the random samples from the shipment
to find the conformity with the sample submitted, which means the
sample which was agreed between the buyer and the seller or the
description.

Based on the commercial invoice, whatever has been mentioned in the

inspection, the third party can test whether the shipment conforms to
the description or the sample which is submitted. these three types of
quality certificates may be required.

There may be many other types because quality certification is a very

complex procedure. depending on the country of destination, there can
be many, many different types of requirements of the buyer as well as
the importing country's government. For example, for textiles exports
to Saudi Arabia, there are certain mandatory tests that are prescribed
by the Saudi government.

This whole quality certification can be a very tedious and complicated

process depending on the country of destination.

This whole description of the quality certificate should be detailed in the

export contract threadbare. if it is not there in the export contract, then
through written emails the exporter should clarify from the buyer
before accepting the letter of credit.

· What are the test requirements? Quality test requirements?

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· What is the procedure expected by the buyer?

And if there is any mandatory requirement of the importing country, all

those things have to be clarified. This was all I wanted to talk about
regarding the quality certificate, although a lot can be discussed about
the quality certification because there are many complicated
requirements depending on the product, depending on the industry,
depending on the practices that differ from one country to another
country. this quality certificate matter has to be very clearly understood
depending on what item you are exporting. You have to understand
exactly the requirement of the buyer. What kind of quality certificate is
required by the buyer, as well as the regulatory requirement of the
importing country? this information has to be gathered very
meticulously.

I'm very sure that these topics are giving you a fairly good idea about
the type of documents, the type of input data, which is to be put in
these documents, and what is the significance of these documents. in all
these topics that I have taken in this section, you will find one sample
copy of the respective document in the resource section of that topic.

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Chapter 5: Transport Documents

Friends. Welcome back to the course. Your progress is very impressive.
You have now learned many, many commercial documents, the so-
called principal commercial documents or the letter of credit document
or the main documents, main shipping documents as they are also
called.

One by one in these topics we will be taking up various documents.

Even those documents, which are not very, very typically used, will try
to take up some of those documents also because you will at least have
an idea that if you require such documents, what to do. That will be
done in this course.

In this particular topic, I'll be talking about transport documents, the

documents that actually are negotiable or transferable, or which are
generally required by the buyer to take possession of the goods. these
transport documents are not created by an exporter, unlike many other
documents. like, for example, a Certificate of Origin is issued by a third
party that the authority, some agencies similarly transport documents
are issued by the shipping company or the airline. if the goods are being
transported by sea, they will be issued by the shipping company. The
transport documents are being shipped by air. It will be issued by the
airline. the complex nature of these transport documents, I will try to
make it very simple for you. I will try to explain to you the difference
between the transport document by sea and the transport document by
air.

What these documents can do, what these documents cannot do, and
what are the precautions you should take while making sure that you
get the right transport documents? Because this is the most important
document for the buyer to get possession of the goods. Before I share
with you, some of these documents, let me explain to you that the
transport document, which is issued by the shipping company for the
mode of transport by sea is called a Bill of Lading, a very commonly used
transport document, because 90% of the world cargo, it is said, is
shipped by sea.

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And the next most popular way of exporting goods is by air. And the
transport documents, which is issued by airlines, is called air waybill
(AWB) there are certain technical differences apart from the fact that
they signify the different mode of transportation. There are some
technical differences also between the bill of lading and the airway bill,
which I'll explain to you.

And in present times, what is happening is that there are freight

forwarders who are providing complete services. Door-to-door services
or warehouse to warehouse services or place-to-place services like
courier companies. these freight forwarders or operators are generally
referred to as the multimodal transport operator (MTO) because they
take the goods from one point and deliver them to the desired point.

And in between, there can be different types of modes of

transportation. It is possible that the transportation type, like trucks,
railways, by sea, or even by air, will be using the multiple modes they
are using. And in such cases, these operators can also issue one
transport document, which is called the Combined Transport Document
(CTD). the combined transport document means it is combined for any
type of mode of transportation. increasingly the buyers are agreeing to
accept the combined transport document or so-called CTD in the letter
of credit documentary conditions also. this you can check with your
buyer if he is agreeable to accepting the CTD instead of the bill of lading.
It can speed up your work and it can make your life much simpler,
especially when you are transporting goods through such multimodal
transport operators.

One example I will give you is of the multimodal transport operators in

India. One of the examples is Concor- Container Corporation of India.
And this Container Corporation of India is a state-owned company that
is the government of India-owned company. But there are private
players also from India as well as from abroad. From India, We have, for
example, companies like the MTO being run by Reliance Group or the
MTO being run by Adani Group, and we have several Chinese multi-
modal transport operators in India who are operating from different dry
ports as well as different wet ports.

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Let us look at one of the examples of the bill of lading. We start with the
bill of lading. Then we'll talk about the airway bill and we'll also talk a
little bit about the combined transport document. And we will also
discuss some of the technical differences between these documents.
Let's see that.

Bill of Lading

So, friends, this is one sample bill of lading, a very, very typical format.
(see Figure 13)

This format gives you an idea that how the bill of lading will look like,
although there will be little variations of the format in the bill of lading,
depending on which shipping line is issuing it, and they may have their
own company logo, they may have a company address and some more
details at the top right or on the top left, wherever it is, whatever the
design is there. I will also show you one bill of lading that is issued by,
originally issued by a shipping company. you will have an idea that what
it looks like. But the entries and the details will be the same. I'm just
going to show you in this format.

Here the shipper's name is given there. The contact person's name is
given there, as the shipper's reference and the carrier's reference. Both
are given here. The Bill of lading number is given. They're very, very
important. Then consignee's name is given there with the contact
details and in case the consignee and the buyers are different, then the
notify party will be the buyer. If there is any additional notify party,
maybe, for example, some agent in between maybe who is working as
the freight forwarder, or maybe any agent who is a broker for the
shipping company. And if their office at the destination port needs to be
notified, then it can come here. The carrier's name is given there. That is
the shipping line. the name details, address, contact details, and contact
person. All this information is given here.

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Figure 13: Bill of Lading

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The free carriage by truck, as was mentioned in the commercial invoice

also. Place of receipt of the goods. JNPT, Jawaharlal Nehru Port Trust in
Mumbai. The vessel name is given there, Voyage number is given there
as was given in the commercial invoice. Port of loading Mumbai. The
additional information contains some details about the shipment which
can be obtained from the packing list. In this case, it is five pallets, each
containing 100 cartons, and cardboard cartons, and the volume of each
valid is five cubic meters. The details of the port of discharge are given
here. Place of delivery at the destination port which is Paris. The final
destination is Paris, France.

This information is provided here and marks and numbers in this case
are given there, kind of number of packages, cartons, 100 cartons. A
description of the goods for each pallet is given here. Measurement,
gross weight. All these details are given here. Then total weight is given
there. That is approximately 6.3 metric tons and 25 cubic meters. There
seems to be some printing error. But don't worry, I will explain to you
what is written here.

Here it says the total number of containers or other packages or units in

words. it writes here one container, FCL, that is the one container full
container load. Then in the next row, it asks for the container number.
What is the number of the container? In this case, it is C S Q, h, I, and
whatever the number is there. Then it asked for the Seal Number. That
is the customs seal number. After Customs has verified the goods and
the goods have been appraised and the customs have already been
issued, Let Export. you will have this seal number. that is mentioned
here. Then the next column says - the size and type of the shipment.
here it writes 20 feet container, steel container, dry cargo, FCL. this is
how it is to be written here. This information is given here. Then the
number of original bills of lading, in this case, is three, which means the
shipping company will be issuing three original copies of the bill of
lading. Then the Incoterms 2020 is given here, which is as per the
commercial invoice that is FOB. And the freight is to be payable in Paris.
It is written here. And the terms of payment are freight charges on a
Collect basis, which means Freight Collect, or it is also called To Pay
basis.

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This bill of lading is on To Pay basis. If the payment would have been
already done by the seller, this bill of lading would have been
categorized as Freight Paid. But in this case, it is Freight Collect. Then
the shipped On Board date is given there. This means this bill of lading
specifies that the date of the loading of the goods on the ship is given
here.

And this is actually the bill of lading date. This has to be before or on the
latest date mentioned in the letter of credit. If this date is beyond the
latest date given in the letter of credit, then this bill of lading will be
regarded as the Stale Bill of Lading, Stale means the date of the
shipment is beyond what was allowed by the buyer. this has to be
understood. Then this column is given here for any terms and
conditions which may be there as imposed by the shipping line.

The place and date of the issue are given here. Usually, it will be one or
two days later than the Shipped On Board date, signatory company,
name of the authorized person, and signature. these things are already
given. Many times when the goods loaded on the ship are damaged or
there is some problem which will be reflected by the captain of the ship
on the MR, that is the Mate's receipt. that will be mentioned here.

In this case, if there is any damage, then this bill of lading will not be
Clean. You remember I told you that the bill of lading should be Clean
On Board. Bill of lading, Clean means while loading when the goods are
already loaded. The Captain of the ship should confirm that there is no
damage to the goods. then only it will be regarded as a clean bill of
lading. whether it is clean or dirty can be marked here in these terms
and conditions. the concept of this MR is like that. When goods are
received by the captain of the ship on On Board, he or she does not
issue the bill of lading. Rather, they issue an MR that is the mate's
receipt. Now, the mate's receipt is proof that the goods have been
loaded and also proof of whether the goods loaded are damaged or not.

Once you receive the MR, you need to enclose with this MR, NOC from
the Customs and the port authorities to ensure that you have already
paid any dues which are there of the Customs and Excise Department or
Border Control and the port authorities or the container yard with these
documents, three documents, you have to approach the shipping

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company on the basis of these documents. only, the shipping company

will issue you the bill of lading. this is the procedure that is followed in
order to ensure that the bill of lading is not issued before all the dues
are cleared. that is the purpose. in the next topic, I will talk to you about
the other variants of the bill of lading, as well as the Airway bill, which is
the transport document for shipment by air.

Other variants of the Bill of Lading

There are different variants of the bill of lading. The most common
being the Onboard or Shipped bill of lading, which signifies that the
goods have been loaded onto the ship. And this is the most common
type of bill of lading, a transport document.

There can be another bill of lading which is called Received For

Shipment, which means it is Free Alongside FAS, which means the goods
have not yet been loaded. And the bill of lading has been issued. In
certain cases where the arrangement between the exporter and the
importer is like that. The exporter is not obliged to load the goods on
the ship, and that loading is to be arranged by the consignee or the
importer. In that case, LC terms will define it and the importer will
accept it, and the bank, and issuing bank will accept that the bill of
lading is Received For Shipment and that is Free Along Side (FAS).

Then another very important part of the bill of lading is that it defines
also the status of the shipment which is received on the ship, whether it
is in good order and condition, in which case it is a perfect shipment, in
which case, the bill of lading will have this marking on it. And the status
of the bill of lading would be a Clean Bill of Lading. Clean means that the
shipping company certifies that the goods which are received for
shipment are in good order and condition.

And if they are not in good order and condition, the status of the Bill of
lading will not be clean, it will be Dirty. Or it is also called a Claused bill
of lading, which means that the shipment which has been received is
not in perfect condition. There are certain kinds of discrepancies or
certain kinds of damage or shortages or leakages. some kind of problem
is there with the shipment and in which case, the bill of lading will still
be issued, but it will not be a Clean bill of lading.

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So, for example, if the letter of credit says that the bill of lading should
be a Clean bill of lading On board bill of lading, then it is necessary that
the goods are received by the shipping company in good order and
condition and Onboard.

Now there is another variant of the bill of lading, which is called a Stale
bill of lading, which means that the goods have been received after the
due date, which is mentioned in the commercial invoice. commercial
invoice has a due date, the last date before which shipment has to be
effected. And if this date has been crossed when the goods have been
received by the carrier and as certified by the captain of the ship, in
which case the bill of lading that will be issued will be called a Stale bill
of lading. the status of the bill of lading will be Stale bill of lading.

Then there is another variant of the bill of lading, which is called

Through Bill of lading. this kind of bill of lading is issued when the
shipment is made by the carrier in multimodal transport mode.

There are different types of stages of the goods in the main journey of
the transportation of goods, where different types of modes are used,
in which case the bill of lading, which is issued by the shipping company,
the main carrier is Through bill of lading.

And then there is another very common variant of the bill of lading,
which is called the Trans-Shipment Bill of lading, which means the bill of
lading has been issued by the shipping company with the status that the
entire journey of the goods may not be on the same ship. the loading
and unloading of the goods may happen during the journey from one
ship to another on this trans-shipment point, which may be a third
country, which may not be the country of discharge of the goods. It may
be a third country where the transshipment will take place of goods
from one ship to another ship. This identifies that situation the type of
bill of lading that will be issued in this situation is called a Trans-
Shipment bill of lading.

Then we have some other types of variants of the bill of lading, which
are called house or freight forwarder bill of lading. It is mostly for the
purpose of the internal use of the freight forwarders and generally, it is

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used in multimodal transport operations where the requirement of the

bill of lading is not there.

And a combined transport document serves the purpose, and it can also
be the Charter Party bill of lading. This is mostly in the case when the
ship is completely chartered or the part of the ship has been chartered
for the shipment. this is called the Charter Party bill of lading.

And then there are two variants of the bill of lading, most of the bill of
lading, Freight Paid or Fight To Pay. It is also called Freight Collect.
Freight Paid means it signifies that the freight of the shipment has been
already paid to the carrier, either by the exporter or by the importer. if
freight has been paid, the bill of lading will be Freight Paid. And if the
freight has to be collected at the port of discharge, then the status of
the bill of lading will be Freight To Pay.

Then bill of lading is issued by the shipping company. Only when the
captain of the ship has received the goods and the status has been
identified and fixed by the captain of the ship because he is the
authority on the ship. And a receipt has been issued by the captain of
the ship, which is called a Mate's Receipt. MR, MR it is called in short
form. Mate's Receipt along with the no-objection certificate from the
port authorities and the no objection from the customs authorities
obtained by the exporter along with this Mate's Receipt. These three
documents help the exporter obtain the bill of lading from the shipping
company. The carrier. Main carrier.

Air Way Bill

This is the sample of the airway bill which is issued by this by My

Forward Company Ltd, (see figure 14) based in Malaysia, and the
exporter, the shipper's name is given there, from Malaysia. The
consignee's name is given there, which is based in Germany, and all the
names and addresses, and telephone numbers. All these things are
given

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Figure 14: Air Way Bill

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And the airway bill says that it has got three copies and all three are
originals and have the same validity. all this information is given here.

The issuing carrier's name is given there. The city is given there, My
Freight Forwarding Company, Malaysia. And if the agent has an IATA
code, it could have been given, their account number could have been
given there, account information could have been given there, airport of
departure is given there, which is Kuala Lumpur International Airport,
and it is being shipped to Frankfurt. And the airport information is given
there. Frankfurt International Airport, the amount of insurance is nil
here.

Here, the declared value of the carriage has to be given. there, the
declared value for the customs purpose is to be given there. The
number of pieces, gross weight, in kgs, is given there, then rate as
agreed, total as agreed, have to be mentioned here, nature and
quantity of goods, shipper's load, stow, and count. Foodstuff and the
cubic volume have to be given there.

This is the volume that has to be mentioned here. Dimensions could

have also been mentioned. here you can find the total quantity, total
gross weight, and the date given there. The place of issue and the
forwarder's name is given there.

This is a very simple format that is mostly used for the air waybill.

Conclusion

So, Friends, this was all about the different transport documents we
discussed the bill of lading, which is issued for the sea shipment. And we
talked about the air waybill, which is issued for air shipments. And the
difference between the airway bill and the bill of lading should be very
well understood.

The airway bill is not a negotiable instrument because if it is a

negotiable instrument, the time taken to reach the original airway bill to
the buyer through the banks will be much which will impact the
congestion of the goods on the airports because air shipment is very,
very fast. in a negotiable document like Bill of Lading, which is for the

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sea shipment, it is possible to move the original documents to the buyer

through banks. And the buyer only gets possession against the original
documents, which is not possible in the case of Air. For this reason, an
airway bill is just the document of receipt of the goods. even an email
copy of the airway bill is enough for the buyer to take possession of the
goods by showing their identity.

Basically airway bill is more like a consignee-named transport document

that the consignee can take possession of the goods just by giving the
identity proof. this difference should be well understood.

We have not discussed in this section the documents which are similar
in nature for the transportation of goods by road, through trucks from
one country to another country. For example, the goods are transported
from India to Bangladesh by road, by trucks through the Benapole
border, or by train. Many countries in European Union, for example,
supply goods from one country to another country by train, even in
South Asia. The goods are supplied from one country to another country
by train, for example, between India and Nepal, between India and
Bangladesh, and India and Pakistan. Transportation by train is also
there. the documents, for example, similar to the bill of lading and
airway bill by train, are referred to by many names in different
countries. For example, in India, it is called an RR railway receipt. It
works like any other transport document. The same is the case of
transportation by road which is called LR for example, in India that is the
lorry receipt. the names are different, but the purpose is the same.

Whether the transport is by sea, by air, by road, or by train, the

understanding of transportation, the requirement of transportation
plays a very, very important role. As I explained to you, that in Air Way
Bill, the requirement is that the shipment is fast, goods have to be
cleared at the destination airport in a very quick manner. transport
documents by air can only be the consignee named only the consignee
can claim the goods at the airport. The original document is not
required. every other type of transport document requires a similar kind
of treatment as the nature of the transport requires it.

I hope this section was able to give you a conceptual knowledge of how
the transport documents work, and why they are important. And we

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focus more on Sea transportation because as I have mentioned earlier

also, transportation by sea is the most prominent way of sending goods
from one country to another country. And it is the cheapest method of
sending goods from one country to another country. in this section, I
hope you became more and more confident about the export
documentation. You got the logic behind it. You understood the whole
game plan which is there, why documents are there, what they signify,
and how they work.

This thing is now becoming more and more clear to you. keep watching
these different sections. You will learn a lot about the export
documentation and procedure. You will become confident and you will
be able to impress your overseas buyers with this knowledge and save a
lot of money for yourself and increase your business.

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Chapter 6: Marine Cargo

Insurance
Friends, in the last section, we talked about the transport documents.
I'm very sure, friends, that you are feeling very confident now as far as
the transport documents are concerned, whether by sea, by air or any
of the means, you understand the concept. Now in this section, my
focus would be to talk about the insurance part which is the risk
management of the cargo during the movement within the country,
inland transport, as well as international waters, transport, which
means the transport in the oceans. which is also called Marine
insurance for which we take a marine insurance policy. in the Incoterms
when it is mentioned that the insurance certificate is required, normally
the buyer is talking of the ocean insurance. He is talking of the marine
insurance cover, whether policy or certificate, depending on case to
case. But that is what he's talking about.

The other aspect of this is that what is the coverage type, whether it is
maximum coverage or minimum coverage or optimum coverage, that
depends on the needs of the buyer as well as the needs of the
shipment, what type of goods you are exporting, where you are
exporting, from where you are exporting. there are many factors when
you talk of the insurance part.

A very deep knowledge is required as far as the insurance part is

concerned. All of it cannot be covered in this course. But I will tell you,
very important and basic things which relate to the risk management of
the goods during the movement of the cargo. those are things I will be
discussing in this course.

Let's see this.

The Origins of International Cargo Insurance

In this topic, I want to share with you one interesting story, which is
related to export cargo insurance that how it originated. What were the
historical origins of export cargo insurance? you'll get a good feel that
how it works and what is the basis of the cargo insurance and what is

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the logic behind it. these things will be very clear to you in this story. I
hope you will find this story interesting.

In the 17th century, the London Port, which was quite a busy port, it
was a logistics hub of that time. And seafarers from different countries
were converging at London Port, which was also the gateway to Europe
at that time. And those times, it was quite a different type of
environment. The ships were taking berth at the port for a very long
time because it was not like the present times. You have the birthing
times of the ships for three-four days maximum. equipment was not
that fast. The loading and unloading were not that fast. The ships were
there for a long time and generally, the ship owners who were
accompanying the ships normally or the supervisors who are heading
that particular voyage, were there in the port and they had not had
much work to do because the common labor was involved in loading
and unloading and the role of the seafarers, the owners of the ship or
the people who were the main supervisor was not much. they needed
some activity to kill time.

There was a coffee shop in London Port, a very famous coffee shop. All
these people were killing time spending time in this coffee shop, and it
was kind of a cultural hub meeting point for many people. The seafarers
and the ship owners. They were talking to other ship owners from
different countries and trying to understand their experiences. And
some people were dancing, some people were having alcohol also. And
this coffee shop was owned by one, Mr. Lloyd.

Mr. Lloyd was a very popular person there, and this coffee shop was a
very successful place, a very popular place with the seafarers, and along
with the seafarers, there was another set of people who were senior
citizens from London only. The people who were residing in London, the
senior citizens. They found this place very interesting to spend time in
their retirement life. They wanted to see some activities, something
going on in one place. It was the happening place actually of London.
they used to come there.

They had a lot of money. They had made a lot of money in their life.
they really wanted some excitement in life, they wanted to spend time

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in that place. Other senior citizens were there. They used to talk to
them, make network with them.

But these senior citizen people in the coffee shop were also observing
the seafarers, this group, and they were trying to understand what are
their life type and their experiences. They used to sometimes hear the
stories of the seafarers about their adventures in the sea and
adventures with even sea pirates. And all those kinds of stories were
very, very common. And the senior citizens really liked to hear these
stories. That's why they were actually coming to that place.

But what they noticed, these senior citizens, very rich people, that these
seafarers were not very happy, deep within their thinking. They are not
very happy with their business which they were doing in spite of the fact
that the general idea of the people was that they really make good
money moving goods from one country to another country. The prices
are highly inflated and they make really good margins. many of these
people found it very intriguing why they feel that their business is not
good, Sometimes they look very sad and most of the time they are very
edgy about talking about their business and about their finances. they
used to ask these senior citizens used to ask, that why you are not
happy with their business. It's such a profitable business and it is a
glamorous and exciting and adventurous kind of job. But you are still
not happy.

What is the main reason for that?

Some of the seafarers shared with these senior citizens that in spite of
all the glamour and the profit so-called profit and the movement of
goods from one country to another country, their visits to many
countries, and their knowledge about many places, they lose money in
one go. If any disaster happens on the sea. They make a profit in ten
trips. On the 11th or 12th trip, they lose money. The whole ship is gone
sometimes. And whatever profits they had made in ten shipments goes
away in one disaster. that's why they were feeling that the business is
very difficult and in the long run, the profit is not there. And it was very
common, as they said.

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Senior citizens who are listening to them, some of them thought that
there can be a solution to that. And they asked some of these seafarers
to provide them with a complete list of the goods which are there on a
particular voyage with their valuation and complete details, the total
value of the goods. And if nothing happens, if everything is fine, they
should share some part of the profit with this group of senior citizens or
some senior citizens who are interested. And they will guarantee that if
anything wrong happens in any of the trips, any disaster happens. They
will pay for the losses. And for that, they were ready to underwrite the
document which contains the complete list. Underwriting means they
will sign on the back of that document. This is how it started. this is how
the concept of underwriter came actually friends. This very important
concept of underwriting in insurance started from there. It is popularly
agreed.

The seafarers found this idea very good. The senior citizens were
looking for some excitement in life and some income sources for
themselves. They had a lot of money and they were reliable, they were
dependable. They lived there in London, they were always there at that
place. And London Port was the hub merging point and the meeting
point of the various voyages which were there in the world.

The convergence was there. seafarers found it very, very useful and to a
great extent, it mitigated their suffering from the sea perils or the sea
disasters or even pirates. different types of perils, different types of
disasters, and damages were very common. The people out there, the
senior citizens, understood because of their interaction with these
seafarers, listening to their stories. they had become experts, these
senior citizens and they were able to give these services of underwriting
the losses and the damages, which happens.

It was observed by Mr. Lloyd, who was the owner of the coffee shop,
that this kind of business was emerging in his coffee shop. And a lot of
seafarers and the many underwriters, so-called underwriters, were
making a lot of money. Mr. Lloyd provided more facilities to them. He
provided the right ecosystem so that those kinds of transactions can
grow further. And the expectations of the underwriters and the
seafarers are met in his coffee shop. the coffee shop itself became the

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place for doing these kinds of transactions and activities apart from the
other activities, other cultural activities that were happening.

Mr. Lloyd kept on building upon the facilities of that type. It even
provided the services of matchmaking between the seafarers and the
senior citizens, and the coffee shop grew very big. Ultimately, it became
one of the top cargo insurance companies in the world that we now
know as the Lloyd insurance company, which is a very, very big
company in the top ten cargo insurance companies. The same company.
The same. Mr. Lloyd started that company and it is a very big company
now. it is very popularly believed.

This story gives you an idea that how the whole system of cargo
insurance originated and later on in London. The London Institute also
intervened in this whole process to make it more organized and
professional by suggesting the Institute Cargo Clauses, which became
very, very popular. there were three clauses Institute Cargo Clause A,
Institute Cargo Clause B, and Institute Cargo Clause C, the meaning of
which was that these clauses contained all types of perils which are very
common, and the maximum coverage of the different types of perils
was covered under A, moderate coverage was included in clause B and
the minimum required sea perils coverages was included in the clause
number C. that was the minimum coverage, which was definitely
required by any general cargo insurer.

The premium decided how much coverage will be there using these
clauses. the maximum premium was to be paid for ICC clause A, and the
minimum premium had to be paid for ICC clause C more you pay, the
more coverage you add. And later on, new clauses came into these ICC
clauses A, B, and C, which included the SRCC that is the strikes, riots,
and communal commotion. That can be further added, which were not
included earlier in the Institue cargo clauses or the war clauses. those
clauses could be added later on. This is how this whole cargo insurance
business came along and developed. It is popularly believed. I hope this
story gives you some idea of the origins of cargo insurance.

And what is the concept? What is the logic behind cargo insurance?,
which is done on an international level without the comfort of a
common legal system or common constitution on this planet? Every

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country has its own laws, the laws of its own land. And this system still
works because of the origins of this type.

This is what I wanted to share with you in this story. The idea was to
give you a fairly good insight into the origins of export cargo insurance.

Cargo Insurance Discussed

Then friends, depending on the arrangement between the exporter and

the importer and the export contract and the terms of delivery and the
terms of payment and the International commercial terms, the exporter
may be required to arrange for the Insurance Policy or Insurance
Certificate for the individual insurance policy for the consignments.

The policy document has to be arranged by the exporter in the case of

an insurance policy, which is of an open nature, which is the open policy
for certain limited or recurrent export shipments, the insurance
certificate is required in which for every shipment policy document is
not required. And generally, the nature of such policy depends on the
varying degree of insurance cover, the maximum cover being the ICC,
that is the Institutional Cargo A + cover with Institute War Clause and
Institute strike Clauses (ICC). So, ICC A + cover with these two clauses,
and additional clauses is the maximum cover possible in the
international insurance regime.

Now, the minimum cover is the bare minimum and again it depends on
the arrangement between the exporter and the importer and the
agreed mutually agreed export contract. The minimum cover is the
Institutional Cargo Clause C, and as I have already mentioned to you, an
insurance certificate is required in the case of open insurance cover,
wherein the insurance policy is available for multiple shipments

Cargo Insurance Policy Sample Explained

So, friends, this is one typical sample of the cargo insurance policy (See
figure 15).

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Figure 15: Insurance Policy

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As you can see here, this policy has been issued in Vietnam by Baoviet
insurance company. the policy number is written here. in this cargo
insurance policy, the name of the assured is given, which is Importado
Valencia, which is based in Spain, which means the assured person is
the importer.

Why?

Because this policy is issued for the CIF. contract, in which case when
the goods are loaded on the ship, the moment goods are loaded on the
ship, the risk transfers from the exporter to the importer. And in this
case, the importer is based in Spain. since the risk is of the importer,
while the policy has been bought by the exporter and that's why it is
issued in Vietnam, because the exporter belongs to Vietnam, the risk is
now of the importer who is based in Spain. That's why the name of the
assured here is the importer, not the exporter. This has to be very
clearly understood.

And this policy has been issued for exports of 424 bundles, almost
84,000 pieces of bamboo baskets, the total weight of which is about 6.5
metric tons, 40-foot container. One 40-foot container is there for which
this cargo policy has been issued.

In this policy, the vessel details are also given for which this policy has
been issued, the LC number is also given there, the bill of lading number
is also there, the contact number is also there and the port of loading
and the port of discharge is also there. these are very essential pieces of
information that are required in an insurance policy. Now the sum
assured is 10% extra, which means 110% of the CIF value. This is the CIF
contract. That's why this insurance has to be taken by the exporter.

In this CIF contract, the CIF price, 110% value has been assured and the
premium amount is not mentioned here, which can be mentioned. The
premium rate could also have been mentioned, which is not given here,
but this might be between the exporter and the insurance company.
And it is not essential to have this information on the policy. If the
importer wants this information to be there, then only it is to be put.
Otherwise, it is not required because it is private information between
the insurer and the exporter.

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Now, the very important thing is what is the coverage type. in this case,
because these are bamboo baskets and it is a containerized cargo. what
it covers is ICC clause A plus SRCC, that is the strikes, riots, and
communal commotion. this is very strong coverage. Now, the policy
further states that in the event of loss or damage, apply for a survey to
the company that is mentioned here in Spain, the claim is payable in
Spain. As you know that in Incoterm CIF, the responsibility of claiming is
of the buyer, not of the exporter. that's why this information is given
there because it is a CIF contract.

The claims and all details have to be worked out in Spain, which is the
port of discharge. this is a very, very typical type of insurance policy. It
provides you a good knowledge about the cargo insurance processes. it
all depends on the Incoterms of who is to buy it and who is responsible.
this is how it works out.

the companies know it, and once they know what is the Incoterm,
accordingly they issue the insurance policy.

Conclusion

So, Friends, this was all I wanted to talk about the insurance policy. I
showed you one sample, a Marine cargo insurance policy also. Air
shipment policies are also very, very similar in nature. The processes
same. The companies that offer these kinds of policies are also the
same.

In the case of open insurance policy for several shipments, generally,

the insurance certificate is issued and accordingly, the letter of credit
demands the certificate rather than the policy. I hope you will feel now
confident about the export cargo policies for the insurance. keep
reading.

In the next section, we will be going to discuss some more documents.

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Chapter 7: Miscellaneous
Documents
In the earlier sections, we talked about some very important main
documents, the transport documents, and the cargo insurance
documents. A few documents are remaining. When we talk about the
pre-shipment documentation.

In this chapter, we will try to discuss a few documents which may be

required by the buyer or which are required within the country for
commercial purposes. in this section, whatever commercial documents
are still remaining? I will discuss this.

Miscellaneous Documents

Friends, one of the commonly used documents which may be

sometimes required by the buyer, is called the Certificate of Free Sale.
let's understand what is a certificate of free sale.

In products like food items, medical devices, cosmetics, and biologics,

the customer may require a certificate of free sale. what is this
certificate of free sale? This certificate of free sale is required for
allowing the legal and free sale of the goods in the open market.

What is the meaning of this? The meaning of this is that the certificate is
a declaration by the government of the originating country, that is the
country from where the goods have originated or exported, that this
item is free for marketing in that country. And it has no enforcement
issues with the government or local government. it means that legally it
is allowed to be exported. It is eligible to export from that country. And
it can be freely sold as far as the local government originating
government is concerned. obviously, it is approved by the local
government agencies in the originating country. this is the meaning of
this certificate of free sales.

It is also called the certificate of exports or certificate to foreign

government because it is issued by the originating country's
government. this is why it is called like that. It may be sometimes used

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by the buyer for registering a new product in his own country. And
sometimes importing country customs may also require it. this is called
the certificate of free sale.

It is not a very common certificate that is demanded by the buyer. there

is no specific sample or format available for this certificate. One
example of this certificate is that suppose somebody is exporting goods
from USA. the certificate may be required from the Food and Drug
Administration of the USA that that particular product is allowed to be
marketed in the US and is eligible for export.

That's why I told you that some of these items are covered by these
kinds of specialized departments, the buyer may require this kind of
certificate. this is one certificate that one should know about. That is the
idea.

Now, let me tell you about one more document, which is generally not
required by overseas buyers (see Figure 16).

This document is used for the movement of goods in DTA. That is the
domestic tariff area. Or it also means we are talking about the inland
within-country, movement of the goods within the country. we are
talking of the goods which are meant for exports. this inland bill of
lading may have different names in different countries, for example, in
India, it is called Builty it's a contact of carriers between the exporter
and the shipper. Shipper means here, shipper means the transport
company, which is transporting goods from the factory of the exporter
to the dry port or the wet port. And sometimes it is also used by the
manufacturers if they are not the exporter. somebody else is exporting.

The goods are being moved from the factory of the manufacturer to the
exporter. this document, although is not concerned with the documents
in the letter of credit or the main documents which are required by the
buyer, but is a commercial document. One should know about it and it
can be quite important actually.

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Figure 16: Inland Bill of Lading

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Then one more document I want to show you. This document is called
the Dangerous Goods Documents or Form (see Figure 17).

Figure 17: Dangerous Goods Form

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What is the dangerous goods form? suppose you are exporting some
item that may be hazardous, that may be dangerous for the other goods
which are being exported by the same vessel or by aircraft. this is the
requirement of IATA and IMO. IMO means international maritime
operations. this requirement says that the declaration of the goods
being hazardous or dangerous has to be accompanied by the shipping
documents which are being collected by the shipping company or the
airline. this dangerous or hazardous goods certificate or form or
document is required for shipping purposes. Basically, it is also the
shipper's that is the exporter's declaration of the dangerous goods. he
has to declare what kind of danger these goods can pose. And the level
of danger specified by the United Nations Codes is there. According to
them, the goods have to be labeled. The shipment has to be labeled
accordingly. these numbers will tell what is the hazard. And what type
of hazard it is.

This is the shipper's declaration, which has to be there in the form of a

document. And it should also declare that the shipper has made all
efforts to do a very scientific and professional packing to mitigate the
risk of the danger and the hazards which are posed by this particular
shipment. this special packing declaration has to be given by the
exporter. this is what is the dangerous goods document.

Then there is one more document, which again is not required by the
buyer (see Figure 18 and Figure 19).

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Figure 18: Shipper’s Letter of Instructions

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Figure 19: Shipper’s Letter of Instructions based on the opening case

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It is required by the freight forwarder because these are the middlemen

who are providing you with the services to clear your goods, to deal
with the shipping company, to deal with the customs, to deal with the
port authorities, and sometimes to deal with the destination country
customs also. depending on the Incoterms. For example, in the DDP that
they delivered duty paid Incoterm, the freight forwarder may have to
deal with the destination country's customs also and regulatory
authorities. it relates to the freight forwarders and it contains
information to successfully allow the freight forwarder to move goods
across the borders. this works like a cover memo for the export
documents submitted to different regulatory authorities in the home
country and sometimes in the host country also. And generally, it may
include a limited power of attorney for the freight forwarder by the
exporter to allow the freight forwarder to sign on behalf of the
exporter.

Many times in regulatory authority filings and declarations, signatures

are required. It is not practical every time the freight forwarder will
come to the exporter to get the document signed. this limited power of
attorney is required for freight forwarders to act on behalf of the
exporter. And obviously in the online filing of the documents. For
example, I will discuss one document which is called the Shipping Bill,
which is nothing but the export declaration. And every country, local
customs require an export declaration by the exporter, which is done by
the freight forwarder.

This is generally done online, either through an electronic data interface

or the so-called AES automated export system in the USA. it will be very,
very important at that time to have this kind of limited power of
attorney to sign the declaration of the documents by the freight
forwarder. this is called the shipper's letter of instructions. one copy
sample copy of the shipper's Letter of Instruction I have given in the
resource section of this topic. If you want, you can download it just to
have a look at one example of the shipper's letter of instruction.

There can be very different types of such documents because it is not a

very regular kind of document that is required by the buyer. it is not
such kind of document. it can have many different formats. there is no
standard format, but I've given you one or two samples. I have given the

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download section you can download it and just have a look at what it
looks like and what kind of information is contained in it.

Conclusion

So, friends, we had taken up this section to talk about some of the
pending documents, which I had not talked about. The so-called
miscellaneous documents, some of which may be required by the buyer
also.

These documents are also very, very important documents to make the
export shipment transaction successful, to move the goods across the
border successfully and alto move the goods within the country that is
the inland transportation of goods.

I'm confident that in this section, whatever documents I discussed with

you, you had an understanding of the significance of those documents.
And in case these are required, in your case, you will be able to deal
with these documents successfully and you will understand the
background of these documents.

In the next section, we'll be discussing some of these supporting

documents which have to be filed to different authorities in order to
obtain the main principal commercial documents. what are those
documents which we had discussed, the list which we had discussed?
We'll take up one by one those documents, and I'll explain to you how
they are to be dealt with in order to obtain the main commercial
principle documents.

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Chapter 8: Auxiliary Documents

So, friends, welcome to yet another new topic of all about export
documentation book. And as you can see here that we'll be taking up
today's topic. Our focus will be on the auxiliary export documents. I will
tell you what is the export documents and the course is meant for the
exporting community. We took up different topics in different sessions.
I have planned for today this very interesting topic which we had not
covered actually we had in the past sessions, we discussed the main
commercial principal documents. when we talk of commercial
documents, they are two categories of documents that I discussed
earlier also. One category is the commercial principle documents, and
another category is the commercial auxiliary documents.

Auxiliary documents are also commercial documents. Their purpose is

to do international commerce and to make the shipment smooth,
export shipments smooth. The main purpose of the auxiliary
documents, Friends, is to make it possible to get the main documents,
that is the commercial invoice, the packing list, the certificate of origin,
and the quality certificate. these are the documents that have to be
filed in order to obtain the main documents. One by one we'll be
discussing the different auxiliary documents, which you can say are
supporting documents.

These documents, once filed, lead to the main documents. If the

process which has been used to file these documents, is correct and in
line with the requirement of the agencies which are issuing the main
documents. there are certain procedures, and there is a purpose of
these procedures. We'll try to discuss that purpose also. you will get an
idea that what is the reason for these auxiliary export documents or is it
just for the ritual?

No, it is not for the ritual. There are definite purposes for these auxiliary
export documents to be filed in order to obtain the main commercial
documents or the so-called LC documents. letter of credit asks for
generally such documents, which are the main documents and which
are required for getting the shipment from one country to another
country across the borders, clearance, and for taking the possession of
the goods by the buyer.

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In order to obtain those documents, some formalities are there, some

procedures are there. Under those procedures and formalities, these
documents, which are called commercial auxiliary documents, have to
be filed.

I will share with you one list of such documents and I will try to explain
to you how they work and what are the things which the exporter
should know about the auxiliary documents.

Although these aux documents are not required by the buyer, they are
very important documents. With the help of these documents, only the
exporter is able to get the main documents. I will just share with you the
list of these documents so you will have an idea. I had shared this list
earlier also, but we had not discussed that list, we'll be discussing the
same today. I'm sure now you can see these documents.

Auxiliary Documents

So, friends, I told you that commercial documents can be of two types-
principal and ordinary. And these documents we had already discussed
individually, all these documents we had discussed individually. And if
any of these documents we have not discussed in detail, maybe we can
discuss any particular document, the main document in future Sessions.
But today, we'll be discussing the auxiliary documents (see Figure 20).
these are the documents that are to be focused upon in order to obtain
the principal commercial documents.

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Figure 20: Auxiliary Documents

Proforma Invoice

Proforma invoice, as we have already discussed in very detail and you

already know, I had shown you one sample also of the proforma invoice
in the earlier session, and I explained to you that the proforma invoice,
which is a precursor to the commercial invoice, contains all the
information which the exporter wants the importer to know, the
description, the type of description which it wants. the idea is to give a
screenshot of what is going on in the mind of the exporter, about the
description, about the price, about the total price, what quantity he's
talking about, and when he wished to supply them. The delivery terms,
the commercial terms, and the payment terms.

All this information is there in the proforma invoice. It works like the
highlight of the possible export contract in the future. this proforma
invoice we have already discussed and it leads to obtaining the final
commercial invoice. Once the proforma invoice has been approved by
the importer and possibly signed also, in which case it becomes the
export contract also, in many cases, it leads to the creation of the
commercial invoice that we have already discussed.

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Shipping Instructions

Now let us talk about another document which is called the Shipping
Instructions. you should not get confused with this document, with
another document which is called the Shipper's Letter of Instruction,
which is actually meant for the freight forwarder. But for this shipping
instruction is to be given to the shipping line or the airline, either it is
given by the freight forwarder or it is given by the exporter himself.
Whoever gives this shipping instruction is a very, very important
document because it contains some very important information. I'll just
show you that.

What is the significance of this shipping instruction?

I'll just explain to you that this contains information like shipment
number, the container number may not be at the start (see Figure 21).

Figure 21: Check List for Shipping Instructions

Some of this information is not available at the very start of giving the
shipping instructions, which are to be given to the shipping company.
whatever information is not available, the shipping company will give
that information and will complete the shipping instructions. The total
number of packages. The very important thing is to write the

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description of the shipment, the total number of packages, the size, and
the gross weight. Payer parties, type of packages being shipped,
whether they are in pallets, if they are pallets, what are the dimensions
of the pallets, are these standard pallets.

How many pallets are there, whether it is likely to be FCL or LCL?

Cargo Description, Shippers Name and address, consignee name and

address, and other mandatory details under local customs and
regulations. in different countries, there are certain local customs and
regulations which has to be included in this shipping instruction.
whatever information is not available, obviously that information will be
given by the shipping company. But this shipping instruction becomes a
document in order to ensure that you get the shipping space either on
the ship or on the aircraft.

Shipping instruction is like applying for the shipping space which can be
applied by the freight forwarder also, or it can be applied by the
exporter also. But this kind of information should be ready with you.
Whatever is available you have to give the best of your information has
to be given in the shipping instructions every shipping company or
airline will have its own format of shipping instructions. But the basic
information will be this checklist. this should be very clear to you.

Shipping instruction in such a case becomes a kind of request for

booking shipping Space based on which the shipping company or the
airline will book the space for you and will issue you the documents
accordingly. I will tell you what documents are issued by the shipping
company or the airline for this.

Intimation for Inspection

Then friends There is another document which is called the Intimation

for Inspection. here I'm talking about the two types of intimations for
inspection. One type is for the third-party inspection, which is desired
by the buyer and which is mandated by the buyer in the letter of credit.
It wants the inspection certificate or the quality certificate from a third
party and the procedure of which has been already explained by the
buyer.

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You have to intimate at least seven days before the scheduled

inspection, which is the requisite time, time for inspection according to
the goods, the process, the packing, and the whole strategy of
shipment. whatever is the suitable date at least seven days before this
intimation has to be given to the third party.

The other type of intimation for the inspection relates to the intimation
for inspection to, for example, local authorities in many countries, the
local governments want the goods to be inspected by the government
agencies in order to ensure that the goods which are being exported
are. Genuine goods and they are bona fide and quality is good. Of these
goods, the name of the country is not diminished. to improve the
reputation of the country. These kinds of regulatory requirements are
there in many countries.

For example, in India, we have an agency called EIA, Export Inspection

Agency which has to be intimated at least seven days before the
requisite date suitable date for inspection. Unless the exporter is
registered under self-certification, the procedure has to be followed.
Certain documents have to be filed to the export inspection agencies,
which include the packing list, which include the commercial invoice,
the LC, and the export contract.

These documents, along with the application for inspection, which is

also the intimation for inspection which has to be filed by the exporters.
And even if you are registered with the self-certification, you have to
intimate to the EIA and inspection may happen, may not happen even in
the case when the exporter is not registered with EIA for the self-
certification and intimate for the inspection. The inspection is done
randomly it is not necessary that the inspection will be made. If an
inspection is made, they will issue the inspection certificate. If it is not
made then this intimation itself will serve as the inspection certificate.
this thing I had given a passing reference in the earlier sessions. the idea
was just to give you more details about this inspection. In different
countries, the agencies may be different.

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Letter to the bank for collection

Then another auxiliary document, which is very important in this regard,

is the letter to the bank for the collection of the payment from the
buyers. do not get confused with another document which is called the
Bill of Exchange or Bank Draft. Bill of exchange or bank draft is a bank
document that is an unconditional order to the bank, to the issuing
bank, which has issued the letter of credit to pay against the documents
which are given. this is the letter which is a kind of covering letter or the
letter which may be used in the case of non-LC cases where the
payment is under the collection. you are giving a letter to the bank with
complete information about the documents which you are submitting
and how these documents have to be sold to the buyer, whether on a
DP basis or on a DA basis.

This has to be very clearly mentioned whether the payment has to be

received against the document or against the acceptance of the
document for the usance period of the payment, which means there is a
time gap between the collection of the documents by the buyer and the
actual payment. those instructions have to be very clearly given in this
letter to the bank for the collection of the payment from the buyer.

In the non-LC cases.

In the LC cases also you have to give the Bill of Exchange and the bank
draft to tell the bank to pay against these documents against the letter
of credit even there a covering letter has to be given to the bank where
absolutely clear instructions have to be given to the bank. This letter is
the most important document, a bank document in the case of bank
collection, where the LC is not involved, where the bank's involvement
is, just to take the documents and negotiate with the buyer. this letter is
the most important document. You have to be very, very clear and
specific about this letter. And sometimes this letter has to be drafted
very professionally.

Insurance declaration (DEC page)

Then there is another document which is called the Insurance

declaration. It is also called the Insurance Declaration page or DEC page,

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a very popular document. It is. I will tell you the significance, of this
document, but in a very broad sense, the insurance declaration is a kind
of application for the issuance of an export cargo insurance policy. but
this document is very, very significant. It has a lot of implications for
exports because I will just explain to you the reasons for this. this
insurance declaration page, basically sums up what is in the Insurance
policy.

Whatever you think that the insurance policy should cover, like, for
example, it should very clearly indicate that. What are the Incoterms?
And if it's for example if it is CIF, then why the exporter is buying
Because it is a CIF contract. And who is the person to be insured and
assured is the importer? all these things have to be given very clearly,
including the value of the shipment.

What is the shipment?

What is the subject matter of the shipment and any details which can be
given by the exporter?

All those information has to be given. The insurance policy sometimes is

very difficult to read. once you give this insurance declaration page,
which sums up all the information, once the insurance policy is issued,
this declaration page has to be updated further so that this serves as a
template for you to understand what is there in the insurance policy in
case of any peril, in case of any disaster or any damage to the goods. If
the claim insurance claim has to be filed, this page is going to help you
because it contains not only what you had written, but it also contains
the information which was given after the issuance of the cargo
insurance policy by the insurance company. this DEC page becomes a
page to be given to different authorities because policy, it is very
difficult to read the policy. This is very technical in nature, but this DEC
page contains all this information. It comes at the start of the policy
paperwork and contains information such as your deductible, coverage,
discounts, and more.

And as an exporter, you should check your DEC page for errors as soon
as you get the final DEC page, once the policy is issued, The DEC page
will contain the highlights of the policy and the best way to check

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whether the marine insurance or the air insurance policy is correct. You
can check the DEC page, which is updated and given by the insurance
company along with the insurance policy, and if there is any error, it
may create a problem to you while filing the claims if it is required in the
future. no error should be there. This can only be checked with this
insurance declaration page. You may need to show this page to your
lender in case you have availed of any packing credit or pre-shipment or
post-shipment credit from the bank. This declaration page may be
required to be shown to the lender that the lender knows that the
insurance has been duly bought for this shipment. this is very, very
important.

This DEC page is very, very significant, Policy is very difficult. Even the
lender may find it difficult to understand the policy document. this is
actually an official document. Your insurance declaration becomes an
official document, which is vetted by the insurance company and
updated by the insurance company. And it reflects the information
which is there in the cargo insurance policy. that's why it is very
important. There's the thing which the exporter should know the
significance of this document, insurance declaration page, or DEC page.
this is very, very important.

Shipping Order

Then Friends, based on the shipping instruction which you give to the
shipping line or the airline, the company issues you the shipping order,
which is a confirmation that space has been booked. this shipping order
is a kind of license for you to take your goods in the container yard and
avail of this slot which is given in the shipping order. When you can take
your goods, your container in the container yard, and your transporter
can take it inside and do the Gating In process. This Gating In process, is
done for getting the goods loaded on the ship or the train in the case of
dry port, this container yard Gating In process is done based on this
shipping order, which is a confirmation that the space has been booked
by the shipping company. I will give you some more information with
respect to this shipping order.

A shipping order is a document which is issued by the carrier that

confirms a shipment's booking on a vessel, will contain the location of

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the empty container also, from where to pick up the empty containers
for stuffing purposes, and may also contain booking details like vessel
number and sailing time, and will also contain the time slot for the
Gating In process. it's a very detailed shipping order and a very
important document for further steps involved in making the shipment
enter the container yard and carrying out the customs clearance and
loading of the goods on the ship. this is also a very important, shipping
order.

Mate’s Receipt (MR)

Then we had, I think, already discussed in the earlier session what is a

Mate's Receipt. This again is a document which is very, very important,
required for obtaining the transport document. Mate's Receipt is issued
by the captain of the ship. it is a confirmation that the goods have been
loaded onto the ship. And what is the condition of the goods? Whether
they are in good order and condition, they are not damaged? In this
case, the information will be mentioned in the Mate's Receipt, which
will help you to get the Clean Onboard bill of lading. If the Mate's
Receipt does not specify that the goods are in good order and condition
or it mentions that goods are damaged or some comments are there
about the goods which are loaded but may be damaged. if that
information is there, then it is not possible for you to get the Clean
Onboard transport documents.

This Mate's Receipt along with the no objection certificate (NOC) from
the port authorities and the customs will help you in obtaining the
transport document. this is the concept that is used in the case of
shipping goods by sea. there is no MR in the case of an airway bill, which
means the shipment by air, you do not have any such Mate's Receipt.
this is only valid for sea shipment.

Application for the Certificate of Origin

Then finally, the very important document to obtain the certificate of

origin is the application for the Certificate of Origin, which is nothing but
your declaration about the goods, and where they originate from.
without this declaration, the issuing authority, which is usually the
Chamber of Commerce, cannot really issue the Certificate of Origin

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because the Certificate of Origin is issued purely on the documentation

which is provided by you along with this application. And the main
element of this application is the declaration. You yourself are declaring
that yes, these goods have the requisite value addition or they
originated from the country which is mentioned, which you want to be
mentioned in the certificate of Origin. Based on your declaration and
the documentation which you give only the certificate of origin is
issued.

In this session, my main idea was to discuss these auxiliary documents.

some of which we had already discussed. I wanted to give you some
more details so you are better equipped for handling these documents.
You understand the significance of these documents. And therefore,
you will be able to carry out the complete export documentation very
smoothly. That was the purpose.

Conclusion

I hope you found this session interesting as well as informative. From

the point of view of understanding what are the supporting documents
which have to be filed in order to obtain the main commercial principal
documents?

These documents, which are called the Auxiliary commercial export

documents, this expertise has to be with the exporter only because the
main role is of the exporter. even the shipping instructions, even if it is
being given by the freight forwarder, freight forwarder would like you to
make sure that you understand what is given in the shipping instruction.
And only then the freight forwarder will transfer that document to the
shipping company or the airline.

Whatever topics did we take up in these sessions? The idea is to equip

you with the proper and accurate knowledge of the documents. At least
you understand the concepts and you are able to be confident about
the entries which you make in these documents and your ability to
check the documents, whether they are correct or not correct before
they are filed. That is very, very important.

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One very common question which is generally asked is what is the

difference between the shipping instruction (SI) and the shipper's letter
of instruction (SLI) to the freight forwarder? The main difference
between SI and SLI is that SI is to be given to the shipping company or
the airline and SLI is the document that is given to the freight forwarder.
The main purpose of SLI is to provide a limited power of attorney to the
freight forwarder and to make him aware of the requirements of the
export contract, who is the shipper. Similar information, to what you
give in the shipping instruction. But there is a possibility that in SLI,
some of the information may not be there, which may be necessary for
the shipping instruction because shipping instructions are in a format
that is specified by the shipping company.

While SLI is a very general document, which is based on a very standard

format, and contains very basic information, in order for the freight
forwarder to understand the job, understand the shipment, to
understand who is the exporter and who is the importer, and what are
the payment terms? All those information. It is important for the freight
forwarder to understand, work on behalf of the exporter, and get the
limited power of attorney to sign on behalf of the exporter, including
the signing for the filing of the export declaration with the customs.

SI is meant for the shipping company. SLI is a very general document

that may be required for the freight forwarder to deal with not only the
shipping company but also with the customs or any of the regulatory
authorities. the idea of SLI is very broad. The shipping instruction is very,
very specific to the requirements and the information which is required
by the shipping company, which may also include the ITC HS code or the
details about the Gross Mass Volume (GMV), which I had mentioned to
you, which has to be given in the shipping instructions, which is not may
be required in SLI, but Gross Mass Volume is to be included in shipping
instructions for the shipping company to decide how to calculate the
freight for your shipment, whether on volume or on weight. your Gross
Mass Volume figure will give that idea. there are certain entries that are
different in SI, which are not there in SLI, or some entries which are
there in SLI and may not be there in SI. Both are different documents,
but very similar, many similarities are there.

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I hope you understand the difference between SI and SLI. One of the
reasons for today's session was also, to make you understand that the
shipper's letter of instruction is not shipping instruction. It is different.
many times the exporters get confused between shipping instructions
and SLI. I hope the concepts which I discussed today in this section were
useful. For the audience. And I had planned to include all these
documents and some of the deeper information which you should
know. Thank you very much.

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Chapter 9: Regulatory Documents

and Dealing with the local
authorities

In this course, we have tried to discuss the different procedures and

documentation of different types. And presently we are talking about
the pre-shipment documents. therein we have discussed the principal
commercial documents, We have discussed the auxiliary documents.
And before we discuss the regulatory documents, let us talk about the
different types of dealings that have to be done with the regulatory
authorities, the local regulatory authorities. In every country, The local
regulatory authorities are also the stakeholders in any export shipment
which happens.

In this section, we will try to understand that which are the touch points
where the local authorities look for and expect the exporters every
transaction they want to know about and the implications of those
transactions, which relate to the movement of the goods outward as
well as the money coming inside the country. that is true for every
country.

In this section, we'll be talking about regulatory documents. Also, we'll

be talking about the different touch points where the local authorities
have to be touched upon. all of these things we'll be discussing in this
section. I'm sure that this section will make things even better for you.

Before I start on this section, I want to tell you that the local authorities
throughout the world are trying their best to minimize the formalities
and to make the procedure simple and make it online, especially in most
of the countries that are trying to make all the applications and
deliverables to be communicated online that the complications are less
for the exporters and there is an incentive to the exporters to deal with
the local authorities and comply with all requirements of the local
authorities. that has to be kept in mind.

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The role of regulatory authorities

Friends, the local authorities that have to be involved in every export

transaction in most od the countries, are normally the authorities which
are concerned with regulating the movement of the goods and the
money coming into the country. That is foreign exchange. And
generally, it is the role of the central banks. For example, the central
bank in India is called the Reserve Bank of India. Now Reserve Bank of
India directly or indirectly intervenes in every export transaction
without really creating any complication for the exporters by having
these so-called importer Exporter Code to be given to each exporter
who is doing any kind of export from India through the Ministry of
Commerce. DGFT is the Directorate General of Foreign Trade

Similar things are done by these central banks all over the world. They
provide some kind of code number, some kind of import license, some
kind of import export license, something some kind of formality is
involved that these central banks know what kind of activities are being
done by exporters without creating any hassles for the exporters by
online means mostly. getting the data from the customs, that is the
border control, getting the data from the authorized dealers, that is the
banks, the commercial banks which are dealing with your transactions,
getting money from outside the country. they collect data from
different authorities who already have touchpoints with the exporters.
that is the most important authority in any country. That is the central
bank.

Then the second most important local authority to be dealt with is

customs or border control. Every country has customs and border
control which regulates exports as well as import transactions. In most
countries, what happens that if you want to export anything to the
international market well in advance, you have to give a kind of export
declaration that you are expecting some goods to be exported from
your country and you have to file some kind of export declaration with
the local customs or border control. For example, in India, it is called the
shipping bill. the shipping bill has to be filed well in advance to the
Customs department in India, and it is done through electronic means,
online electronic data interface. This facility is available in India and the
Customs has its own portal in India, which is called the IceGate. And

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using the IceGate, the exporters, what they do, they have to visit the
Customs service centers and then they have to provide the export
details, the details of the goods to be exported, the nature of the goods,
the value of the goods. The harmonized system classification is the HS
classification of the goods.

The minimum data has to be provided to the customs service operators

and they will generate the shipping bill for the exporters. this
procedure, I'll explain a little bit in more detail in the subsequent topics.

Very similar processes are used in most of the countries. I will give you
an example of how it is done in India. A similar thing has to be
understood to be done in other countries. That is the second very
important local authority that has to be involved for the purpose of the
rationalization of the taxes and the internal charges which government
takes generally in the domestic market, DTA, that is the domestic tariff
area and most of the governments, world over. they want to refund any
direct or indirect taxes which are charged on any inputs or intermediate
goods that are used for the manufacture of the exports.

Every government has got these policies of giving back any such direct
or indirect taxes. sometimes it is called the incentives or the benefits
which are given by the governments, local governments to the
exporters. in order to provide that, requisite registrations are required
for fixing the bona fide nature of the exporters and looking at their past
performance, categorizing them. for that, most governments have
export promotion bodies where certain things are mandatory or
statutory.

For example, most of the exporters in most of the countries, they have
to have some kind of membership. With any of such organizations,
especially those organizations that are directly related to the core
business of the exporters. So, for example, in India, these are called the
EPCs Export Promotion Council, which deals with specific products
which are exported. we have got the Engineering Export Promotion
Council. We have got the Apparel Export Promotion Council in India. We
have the Handloom and Handicrafts Export Promotion Council. We have
got PLEXCONCIL which deals with the plastics and linoleum products

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which are exported. depending on what is the core area of exports, the
exporters are supposed to get the membership.

And for example, in India, they issue a document called RCMC, which is
the registration cum membership certificate. using this certificate, the
exporters can avail of any refunds or any incentives or benefits that are
given logically and justifiably by the local governments. These are the
incentives or the benefits which are actually should align with the
guidelines of the World Trade Organization.

The World Trade Organization does not encourage any undue

advantages to be given to exporters in the form of subsidies. that has to
be avoided. in order to rationalize this system of benefits and
justifiability and the return of the undue taxes or the charges in the
form of some internal or domestic levies, the indirect impact of these
steps taken by the governments increases the cost of exporting or
manufacturing for the export.

Those kinds of benefits and incentives are allowed actually, which are
justifiable. And to rationalize all these efforts, and all these anomalies,
certain kinds of local restrictions are required in each country. That is
another part of the local regulatory bodies.

And then registrations with the local sales tax authorities or the excise
departments are also required in order to ensure that the exporters are
under the monitoring of these organizations and they are exporting
goods without paying any local taxes on the product also, and their
ability to get refunds of the direct purchases of the inputs by paying the
local sales taxes directly or indirectly. such kinds of registrations with
the local sales tax authorities as well as the GST Council in some
countries or wet council in some countries or excise departments in
different countries. Those kinds of registrations are required. these are
some of the touchpoints that local authorities have to be dealt with.
Complying with the requirements of these local authorities becomes
important for the exporters and not to forget about the mandatory local
inspections by the government authorities in most countries in order to
ensure that the goods which are exported from any country by any
exporter, are of good quality. They meet the safety standards for the
consumers of different countries and maintain the reputation of the

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country in terms of their export efforts. These mandatory inspections

are required in many countries. this can be in the form of some self-
certification for certain categories of exporters. But most of the
exporters, have to invite the local authorities for inspection, which have
nothing to do with the buyer or the buyer's quality control or the
buyer's requirement for the quality certificate or the inspection.

This has to do with the inspections which are done locally by the local
governments so that they are able to keep the reputation of the country
intact. for example, in India, we have got an organization called Export
Inspection Agency. this agency is entrusted with the job of inspecting
the export shipments, which are done randomly. not to make things
complicated and difficult and tedious for the exporters. These are done
randomly on a very small sampling basis. the requirement of the
exporter is to invite the agency for inspection and apply for it or give the
intimation for the inspection. these are some of the things which have
to be complied with as also the declaration of any dangerous goods or
Hazardous goods to the local authorities wherever required. Especially,
Transport associations like IATA or the International Maritime
Organisation.

These are all the regulatory requirements and the same goes true for
also with dealing with banks, for which I'll be having a separate section
where I'll explain to you what the dealings have to be done. What are
the touch points for the exporters with the banks and what all
formalities have to be complied with by the banks?

In the next topic, I will share with you some of the very common
documents that do this job of dealing with the local authorities.

Regulatory Documents

Now, friends, let us discuss the regulatory documents (see Figure 22).
we have in the pre-shipment discussed already the principal documents,
and the auxiliary documents.

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Figure 22: Regulatory Documents

Exchange Control Declaration

Now talking of the regulatory documents, the most important

document is the document that relates to the central bank. As I had
mentioned to you, in its physical form, this particular document is called
the Exchange Control Declaration, like the export declaration to the
customs, you have the exchange control declaration to the central
banks. For example, in India, you make this declaration and exchange
control declaration to the central bank that is the RBI. And in India, in
physical form, it is called the GR form. That is the Guarantee Remittance
form or in the case of exports of software, it is called the SOFTEX form.

If you are exporting goods by post, speed, post, or by courier, it is called

the PP which is the Post Parcel. And if you are sending the goods that
are by post parcel and which are already paid, it is called VP and if it is
to be paid, it is called the COD, which is the cash on delivery. These are
the exchange control declaration forms in the physical format, but most
of the filing of the exchange control declaration is combined with the
shipping bill that is the export declaration to the customs.

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Export declaration to the customs (Shipping Bill)

when we talk of the export declaration to the customs, one copy of the
shipping bill, which actually is the document in India, is called a Shipping
bill, one copy of the same shipping bill is called the Exchange Control
Copy and you need not make the exchange control declaration
separately. In the EDI the copy of the shipping will automatically be sent
to the RBI. this is a kind of simplification, simplification of the document.
requirement of the document is less in India.

When the shipping bill is created by the Customs Service Center, the
service center operator, automatically the exchange control copy for the
central bank is created, which works as the GR form. this is how it is
done and this Shipping Bill copy is also there for the Port Trust purpose.
That means one copy for the port trust is also there. in a way you are
making three kinds of declaration, one for the central bank which is the
exchange control.

Then you are making the export declaration to the customs, which is
called the shipping bill, which is the customs declaration. And third copy
of the shipping bill is for the port. You are making a declaration to the
port also that you are exporting. well in advance, all these three
authorities, local authorities are being informed that the export
shipment is being expected from you for a particular order, the export
order, the details of the goods, the value of the goods, and requisite
details. this is how it is done and the same shipping bill copy certified by
the customs has different significance and importance for different
authorities, for example, for the bank, for the authorities, which are
providing the export incentives to the exporters.

This certified copy of the shipping bill is required for post-shipment

when the export has been already done or the shipping bill copy for the
export promotion for getting the drawback. there is a separate copy of
the shipping bill for Drawback in India. in most countries, there will be
some kind of export promotion copy which would be common for any
kind of export incentives being given by the government.

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Port Trust Copy of Shipping Bill

As I already mentioned to you, the Port Trust copy is also there of the
shipping bill or it can be the export application also in some cases or the
dock challan. apart from the port trust copy of the shipping bill for
dealing with the port, you require one export application and dock
challan, for which I will explain to you in a subsequent topic how to deal
with the Port Trust authorities.

In a separate topic, I will explain this process. these are very important
regulatory documents. which includes the exchange control declaration,
the export declaration to the Customs, and the declaration to the port
authorities. these are very, very important things where you are dealing
with the central banks, you are dealing with the customs, you are
dealing with the Port Trust, with a single document in the EDI system
that is the electronic data interface.

Post Charges Receipt

And then the importance of the post charges which you are given to the
shipment which you are sending by post becomes very strong evidence
that is equivalent to the certified copy of the shipping bill. in the case of
Post Parcel, when you are shipping the goods by post, You do not have a
shipping bill. here you have the post charges receipt, which works the
same thing in India, at least in different countries. Some differences may
be there in how to deal with the goods which you are sending by post.

Insurance Premium Payment Certificate

And then in many of the countries, the insurance premium payment

certificate may be required by some of the governments who insist that
the main insurance that the main carriage insurance is done in that
country. But it is also required for the banks because banks who give
you the packing credit or the post-shipment credit, require this
insurance premium payment certificate to ensure that due diligence has
been done. whether the payment of the insurance is done by you or by
the buyer, it doesn't matter whether it is done by the exporter or the
buyer. What is important for these banks is that you have to have this

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insurance premium payment certificate, whoever has paid it to be

produced.

If the bank asks for it ensure that the due diligence has been done for
the shipment for which the bank has provided you the packing credit or
the pre-shipment credit, or the post-shipment credit.

Regulatory document for dealing with local tax authorities

Then you have some regulatory forms in different countries for dealing
with the excise department, which is a local authority, with nothing to
do with the buyers. you are removing the goods from your factory
without paying the excise duty wherever it is applicable. In India still, for
very few items, excise is still payable, you remove the goods from the
factory without paying the excise duty. you use some regulatory
documents. In India, these documents are generally called, as are ARE1
or ARE2 forms. very, very few items. These documents may be required.
In most of the countries, excise duty is not generally charged. It is
generally a single tax system like VAT or GST, goods and services tax. for
sale tax purposes also some regulatory documents will be required. for
which I will explain to you how it is done for the Goods and Services Tax,
for example, in India. In a subsequent topic, I will explain this.

Vehicle Ticket

Then you need a vehicle ticket. What is a vehicle ticket? It is the

document which is generated by the exporter for the purpose of moving
the goods inside the Port Trust or the container yard. it is working like a
gate pass. vehicle ticket is a very important document, which is a
regulatory document from the point of view of the Port Trust, because it
contains the details of the goods which are entering the port against
which commercial invoice, against what is the vessel details, what are
the dates and what are the slots available to you for the Gating IN
process. all this information is there in the vehicle ticket. it works as a
regulatory document from the point of view of the entry of the goods in
the Port Trust area or the container yard.

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Freight Payment Certificate

And then a freight payment certificate may also be required like an

insurance premium certificate by banks who are giving you some kind of
packing credit or some financing is involved. there you need the freight
payment certificate again for the due diligence purpose.

these are some very, very common regulatory documents that are to be
produced and generated by the exporter or obtained by the exporter in
the respective countries. And some of them are self-certified, and some
of them are certified by the requisite authorities, especially the Customs
and Border Control, which is evidence that the export has happened.

So, for example, a certified copy of the shipping bill by the customs is
very good proof that the export has happened and many times non-
negotiable copies of the transport documents are also required. For
example, in India, when you are filing for a drawback claim, you need
not only the shipping bill, and the drawback copy of the shipping bill,
but you also need the commercial invoice and the transport document.
Non-negotiable copy

There are a plethora of regulatory documents which are required to

deal with the local authorities. These are the documents that I have just
discussed, which are very, very common documents.

Dealing with customs/border control

Okay. Friends now let us talk about the customs process. What all has to
be done with the customs? you already know that the process of
customs starts with the export declaration. the name of this declaration,
this document is different in different countries.

In India, it is called a shipping bill. normally in most of countries,

including India, the export declaration is filed online. In India, it is called
EDI, an electronic data interface. And in the US, for example, it is called
the automated export system. That is AES.

And normally the export declaration is filed by the C & F agent or the
freight forwarder. But it can be filed in the self mode also. the exporter

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can also file it because it is an online process for this the Exporter or the
freight forwarder's representative has to visit the Customs Service
Centre, at least in India.

In different countries, the system may be different, but in India to start

with, to generate the export declaration document, that is the shipping
bill, the exporter or the freight forwarder or its representative has to
visit the Customs Service center, which is located in all dry and wet
ports and in different designated places. there the Customs service
operators are there who will collect the basic data. I will just show you
what data is required. (see Figure 23)

Figure 23: Export Declaration Details

This is the data that normally is required export declaration details.

· What is the destination country?

· What is the exporting country?

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· And number of packages.

· ITC HS code or HS code,

Whatever code is there in that country that is prevalent generally, it is

HS code only harmonized system, because all the customs in the world
use harmonized system. There may be little differences in the ten-digit
or the 12-digit number, but eight digits are the same. the terms of
trade, the currency of the export and what is the exchange rate going
on? What is the currency of the contract, the quantity, price, and the
total value of the contract and very minimum details, as you can see
here, which refers to the nature of the goods, The good's description
also has to be mentioned here and the shipping marks.

These are the minimum information that is to be filed in Customs Portal

by the Customs Service operator. it will create a document like this,
which I'm just showing you. And this document is not the shipping bill.
Actually, this is not the document. This document serves as the
checklist.

This sheet will be created by the service center operator and the
representative or the exporter, whoever is authorized to sign it, will sign
it. And once it is signed, then the same data will be again fed or checked
by the Customs Service Center operator and the shipping bill will be
generated.

Now, the name of this document can be different in different countries.

this is the shipping bill number on the ICEgate portal for all reference
purposes, this number, which is shown here. As you can see here, this
number has to be used in all communication with the Customs
Department or border control. this is how it is done.

As I've just mentioned to you, in the non-EDI filing that is in the physical
format, this document is called the guarantee remittance. GR form, the
main document is GR form. Now in EDI because it is a shipping bill. what
happens is that the same copy in two more sets is referred to as the EC
copy. That is the exchange control copies.

What is the meaning of this?

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That this is for the purpose of the exchange control by the central
banks. In the case of India, it is RBI, Reserve Bank of India. One copy
goes to RBI and another copy is meant for the bank because the bank
will receive the remittance of the foreign exchange when it comes this
copy after endorsement by the bank will be sent to RBI for matching
purposes so that RBI knows that this shipping bill was generated at
customs and the same copy has been endorsed by the bank, confirming
that the payment has come it will be matched by the RBI.

That's where two sets are required and one set of this same shipping bill
is for the Port Trust Authority purpose. it's a kind of exchange control
declaration as well as the Port Trust declaration. along with the export
declaration. this is how the whole system has been made simple for the
exporters, they have to just generate one shipping bill. And that too, in
this method of visiting the Customs Service Center and the operator will
do the whole job. You only have to give the data, that's all. it's quite
simple actually, that way.

This shipping bill that is the main document has to be categorized also
when it is to be filed, whether it is under dutiable exports, which means
the export shipment has got some export duty involved, or is it duty-
free or is it duty-free because of the bond filed by the exporter? it may
be, you know, some kind of bank guarantee. The exporter has given that
it will be exported and that's why it is duty-free and it can be against
such kind of shipment where the drawback claim is there, duty
drawback claim in case of India. Different countries, have different
export incentives.

In India, I'm just talking about these four categories are there

· dutiable,

· duty-free,

· duty-free ex-bond, or

· goods under a claim of drawback.

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This has to be specified at the time of generation of the shipping bill.

this is very, very important that the customs understand that this export
declaration is under what head and accordingly they have to do their
internal formalities. Other documents are not generally required at the
time of EDI at the start, but later on in the process, customs process,
may be required.

Other documents which are required are the commercial invoice and
packing list. These are very usual documents which we have discussed
many times earlier. Indian government Inspection certificate. That is the
EIA certificate. In case the inspection has not been conducted by the
Export Inspection Agency in India, for example, the intimation for the
inspection itself, serves as the inspection certificate which I had
mentioned to you earlier, and the export license, if it is applicable or
certificates, LC copy if it is against LC, Proforma invoice or the export
order, Proforma Invoice if it is a signed copy of the buyer. that serves as
the export order or otherwise the exporter order or any export contract
it may have, and technical brochure in case of exports of such goods
where there are accompanying technical brochures and it is useful to
the customs for the clearance purpose. these documents may be
required in case the customs want to do the physical exam.

I'll just share with you what exactly is the process and the role of
customs in this whole process. I'll just show you how it works. in the
customs, there are four things. (see Figure 24)

The role of customs is in four categories. That is, the first is the paper
verifications. That means the export declaration. This data has to be
verified. Customs officers check the description of the goods, whether
any duties are to be paid or any charges are to be paid, and any kind of
dues, which may be there. the customs officer will check that and the
payment of any charges, duties, penalty by the exporter or the freight
forwarder. And finally, the release of the shipment. this whole basic
customs clearance process is conducted.

I'll just show you what is the flow of this (see Figure 24). what happens,
is the exporter or the broker or the freight forwarder forwards the
export declaration, which I have just explained to you by going to the
Customs Service Centre and giving the data, giving the input data which

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is required and based on which the customs do the paper verification,

the data verification. Mostly it is automated and the shipping bill
number is generated by the system and it may be called the payment
number also.

Figure 24: Customs clearance process

But whatever. In different countries, they have different names and in

case of any payment has to be made, the freight forwarder or the
exporter pays the customs. And once it is done at the port of exit in the
customs bonded area, which is managed by the custodian, some private
custodian, which means the warehouse or the container yard, wherever
it is, the goods have reached there. And at that time, either they are
giving the green signal to go ahead without any inspection or giving the
red signal, in which case the physical examination will take place. these
two possibilities are there.

The red line is given to a very small percentage and it is system

generated. The system will use the shipping bill number to say whether
the inspection is to be done, or the physical inspection is to be done or
not. it is not the discretion of the customs people. It is generated by the
system. Once it is given the green signal, the cargo is loaded. It is

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removed from the customs border area to be loaded on the carrier. this
is how it is done.

And in the meantime, the verification of data and the customs report is
generated. It will help in getting the certified copies of the shipping bill
or the EC copy or the export promotion copy. That is the duty drawback
claim copy.

all this will be given in this verification and the reporting by the customs
and the freight forwarder takes over the removal of the goods from the
Customs border area and for the loading of the goods on the carrier.
this is a very typical kind of method which is used in this.

Dealing with the Shipping Company

And friends after the customs process is done, the way I had mentioned
in the last topic, the shipping company comes into the picture. The
shipping company had already got the shipping instructions based on
which the shipping company had issued the shipping order.

Now, the shipping order contains the slot when the goods have to reach
the container yard. That is the custom bonded area first. And after the
customs clearance, which I just explained in the last topic, it is removed
from the customer bonded area in the container yard to be loaded on
the ship. The shipping company has already given this slot. The timings
are there. And once the goods are unloaded, then the freight forwarder
or the exporter contacts the shipping company and obtains the Mate's
receipt first from the captain of the ship.

The captain of the ship confirms whether the goods are loaded,
damaged, or undamaged. whether it is clean or not. And accordingly,
the bill of lading will be issued later after obtaining the no objection
certificate from the customs and the port authorities. this is generally
done by the freight forwarder. this is nothing but the no-dues
certificate. And these three documents, the MR that is the mate's
receipt issued by the captain of the ship, the NOC from the Customs,
and the NOC from the port authorities, will help you in obtaining the bill
of lading. In the case of sea shipment or airway bill, in this case of the air
shipment and all of this process.

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Once done, the goods are loaded, the ship sails, and then the export
general manifest is issued by the shipping company. That is the
confirmation that the goods are on the ship and they have already
sailed out of the port. Only then, based on the export general manifest
that is the EGM only, the customs will issue the certified shipping bill
copies once it is confirmed that the goods have indeed been exported. it
has not only been removed from the customs border area but actually
loaded. And the ship has already sailed.

EGM has been announced and the customs will check the shipment in
the EGM and then they will issue the certified copies of the shipping bill,
both for the RBI as well as for the bank. That is the EC copies and the
export promotion copy which is the duty drawback and the port trust
copy also.

This is how the touchpoints are there with the customs. In the last topic,
I discussed with you and with the shipping company these are the
formalities that have to be done by either the exporter or the freight
forwarder, or the custom house agent (CHA) whoever it is.

Dealing with the Banks

Now let us talk about the different types of touchpoints with

commercial banks. You already have the idea that there are banks
having different roles, like the bank that issues the letter of credit. The
bank advised the letter of credit. The bank that will be negotiating your
documents with the issuing bank.

there are different banks that have to be dealt with. And the major very
important area to start with, the bank is getting the AD number which is
the authorized dealer's number, at least in India.

The situation may be different in different countries. In most countries,

they need an AD number in order to link the foreign exchange receipt
for the goods which are being exported. every port, whether it is a dry
port or whether it is a wet port, would be requiring an AD number,
which has to be registered with the respective port, which you want to
use for export purposes. this is the starting point when we talk of
dealing with the banks.

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Second touchpoint with the bank would be arranging the finance, which
I had discussed with you also that commercial banks are mandated in
many countries to provide finance at concessional interest rates, this
can be in the form of the pre-shipment credit, which is also called the
packing credit, or it can also be in the form of the post-shipment credit.
post-shipment credit is required in cases where the payment terms are
with the Usance. it means that whether it is through LC or any other
means, there is a gap between the receipt of the documents with the
buyer and the actual payment by the buyer. there may be a gap. It may
be 30 days, 40 days, 60 days, whatever the gap is there. To that extent,
you need money, finances. that is called the Post-shipment credit.

Banks provide that facility. And whatever the loss is there of the
commercial bank on the interest rates generally, it is compensated by
the local governments, the same facility is available in India in the
interest subvention scheme, which is WTO compliant and there is no
problem with that.

And because the interest rates in India are much higher than the
international rates, that gap between the international interest rates
and the financing costs that are there in India, that gap is fulfilled by this
scheme. Interest subvention scheme. Otherwise, the Indian exporters
will not be able to compete with the other players in other countries
because they are enjoying better interest rates. Lesser cost of financing
for the export to bring the level playing field for the Indian exporters.
This scheme is there. Many countries provide this kind of scheme where
such situations exist.

The documents as per the letter of credit, or if it is being sent by bank

collections, have to be provided and submitted to the negotiating bank,
which will further negotiate those documents with the issuing bank.
what happens along with these documents which are given in the letter
of credit, that list of the documents, generally it is a commercial invoice
or the packing list, the certificate of Origin, quality certificates, freight
certificates, insurance certificates, and transport documents. These are
the most common documents which are required by the LC.

Apart from that, you have to also give a bank document which is called
the Bill of Exchange or Bank Draft. I will tell you a little bit about this

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document, which is called the Bill of Exchange or Bank Draft. Let's see
that. This bank draft is also called the documentary collection, in the
case of the payment by bank collection. In the case of LC, it is just the
bank draft or the bill of Exchange. It is attached with all commercial
documents and the cover letter along with the documents which are
mentioned in the letter of credit.

A cover letter has to be given. This cover letter has to be prepared very
professionally, which contains what you are attaching and any
instructions which you are to give to the negotiating bank directed
toward the issuing bank. You can give that instruction in the cover
letter. If you remember in our opening case study, we had discussed this
covering letter and the importance of this covering letter.

This bank draft helps in the transfer of title and the responsibilities of
the different parties involved because this establishes the international
commercial terms which have been decided. It mentions the terms of
the trade and it helps in important, The most important thing is that it
helps in the release of the funds to the exporter.

In the case of LC, It is an unconditional order to the bank to pay against

the LC, or in the case of documentary collection, It is an unconditional
order to the negotiating bank and the collecting bank to collect the
payment from the overseas buyer and pay to the exporter. And it may
contain some kind of payment instructions or the transmittal letter.
how the money will be transmitted, That information may be there, but
as far as the collecting bank in case of bank collection or the negotiating
banks is concerned, they will be more focused on the cover letter that
we had discussed in the opening case study. This is basically the role of
the bank draft.

I will also show you one sample of the bank draft (see Figure 25).

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Figure 25: Bill of Exchange (Bank Draft)

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Let's look at this sample of the bank draft. This is the sample of the bill
of Exchange or Bank draft. It contains the reference number. It contains
the amount and figure which is given in our example, our opening case
study. The amount was 55,000 euros. That information has been given.

The bill of lading date is given there, as the place of issue, date of issue,
and the payment, is it with some Usance period or it is payable at sight?
That is the most important thing.

If it is at sight, it will be according to the letter of credit. If LC is payable

at sight the bank bill of exchange will albe at sight. If the LC is with the
Usance period involved, It will be payable with the Usance period. And
pay to the order of ourselves because it is being created by the
exporter.

Since it is being prepared by the exporter, and generated by the

exporter, it is written here. Pay to the order of ourselves. Then some of
the amounts have to be mentioned here in words like Euro 55,000, only
drawn under the LC number.

LC number has to be given.

The date of the LC has to be given.

Issued by which bank? The bank is AXA Banque. this bank is basically the
drawee, in the case of LC. it is signed for and on behalf of the drawee.
this particular bill of exchange has to mention the bank which has
opened the letter of credit and in the case of the collecting bank, the
collecting bank detail will come here where it will be written on behalf
of the collecting bank.

And the bank name will be here and signed for on behalf of the drawer.
The drawer is the exporter with the beneficiary of the money. the name
of the exporter will come here.

Name the authorized signatory and the name of the authorized

signatory of the exporter will come here. Signatures will be here. This is
a very simple document, but it is a very powerful document. It is just

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like a bank cheque. when you give a cheque it is nothing but the bill of
exchange or the bank draft. Same thing.

This is prepared in two copies, as you can see here. The same copies are
there too, that have to be sent separately to the bank. Your negotiating
bank will send it to the issuing bank in two separate airmail or the
courier. This is a very traditional, very old method of sending the bill of
exchange. The idea is that the bill of exchange definitely reaches the
issuing bank or the collecting bank. It cannot say that it has not received
the bill of exchange. Separately, it has to be sent two times. this is a
very, very old practice in the banking system and as per the UCP
different versions. This is the process that has to be adopted for the Bill
of Exchange.

In the case of the documents which are submitted to the bank,

Negotiating Bank for forwarding to the issuing bank or the collecting
bank, these are the common documents- commercial invoice, packing
list, certificate of origin, bill of lading or airway bill, transport
documents, inspection certificate, quality certificate and shipping bill EC
copy- Exchange Control Copy also has to be provided to the bank. You
remember we discussed the export declaration Shipping bill, which may
have a different name in different countries.

Four copies are generated by the system and the certified copies, 4
copies, 2 sets are for the banking purpose, one for the RBI and another
for the commercial bank. that copy has to be given to the bank also and
bill of exchange, Bank draft, which I just mentioned to you. Insurance
and freight payment certificates as the case may be. Consular invoice if
it is required by the buyer and the phytosanitary certificate. in the case
it is applicable. The phytosanitary procedure is required depending on
the pests involved, the nature of the packing, or the goods involved. A
phytosanitary certificate may be required. These are the other bank
formalities.

Apart from that, the other touch point with the bank is that the bank,
negotiating bank may write you back if there are some discrepancies in
the documents before it is sent to the issuing bank. With the help of the
bank, You remove these discrepancies if it is possible to remove them at
that stage and also obtain the bank remittance certificate. Generally, it

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is eBRC, an electronic bank remittance certificate that is issued by the

bank confirming that the foreign exchange, the money against the
export order has been received. Based on this eBRC only the bank
endorses the EC copy of the shipping bill and sends it to the central
bank. In the case of India, it is RBI. And thereby ensuring the exchange
control compliances as guided by these central banks. So, friends, these
were the bank formalities that have to be done by the exporters.

These are the touchpoints with the bank which every exporter has to be
aware of.

Conclusion

Now friends in this section. There were certain takeaways and certain
conclusions. The very important thing, that we understood from this
section is that a commercial invoice is the main document that identifies
the export shipment. this is a very, very important document. This is
actually the first document after receipt of the order, which has to be
prepared. And it is the most updated summary of the sales contract. It
contains almost all the highlights of the sales contract. That's why it acts
as a summary of the sales contract.

We also learned from this section that the bill of lading and Airway bill
differs in their nature and features that we have discussed in this
section, and I'm sure you now fully understand the difference between
our Bill of lading and the airway bill. In spite of the fact that both are
transport documents, they differ from each other. A bank draft is an
unconditional order by the exporter to pay for the export goods to the
LC issuing bank and LC issuing bank releases the payment on behalf of
the buyer based on the letter of credit. bank draft, which is also called
the Bill of Exchange, is an unconditional order by the exporter.

From this section, One major takeaway is that export declaration serves
as a common document, mostly when it is filed electronically in the
form of a shipping bill, and is accepted by several local authorities like
the Port Trust or the bank or the central bank for exchange control
purposes. One single document is in the form of a shipping bill, which is
called a Shipping Bill in India, but in many countries, it is just mentioned
as an export declaration. This is a very, very important document, a

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regulatory document required for the local authorities actually, and

every exporter must file this before shipping the goods. This common
document can serve many, many functions.

A typical export process requires a number of documents required by

different authorities, which we have identified in this set of topics. Then
not all documents are to be sent to the buyer. Many documents are
required by the authorities. Those have nothing to do with the buyer.

The Bill of lading differs from the Air Waybill. This we have discussed
many times in this course and that the Airway bill is not a document of
title and it is non-negotiable.

And finally, dangerous goods shipping requires extra care, documents,

and special packing declarations.

The export documents are required before the export shipment

happens, which means the goods are loaded on the ship. These mainly
form the most common documents, the most important documents are
the pre-shipment documents. this is very, very clear why we say the
main documents because these are the documents that are generally
required by the buyer, which is required by the intermediaries involved
in the movement of the goods from one country to another country, or
it is required by the bank for processing payments.

Some of the documents which are required by the buyer and the LC
opening bank are commonly known as commercial documents.
commercial documents also sometimes called LC documents are very,
very important. And we have discussed these commercial documents,
the main documents which actually move with the shipment.

Then there are certain documents that are required for compliance with
the local government laws and regulations, which means the local
government requirements. these documents are generally called
regulatory documents. That is also we discussed in this section.

And then there are certain secondary documents which are popularly
called auxiliary documents, which help in obtaining the main
commercial documents. These are the documents that have to be

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prepared in order to obtain the main documents. These are some of the
important understandings which we had, which are our takeaways from
this section.

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Chapter 10: Understanding Post-

Shipment Documents
In the earlier chapters, we talked about everything about pre-shipment
documents, including all the commercial principal documents,
commercial auxiliary documents, and regulatory documents. Now, in
this section, we'll talk about the post-shipment documents, which are
also lvery, very important. Although the bulk of the documentation and
procedures comprise the pre-shipment documents because we want to
understand each and every document threadbare. That's why more
time is required to understand the pre-shipment documents.

In the post-shipment documents, our knowledge base is better. You are

more confident about the documents we spend less time. But the post-
shipment documents are equally important. These are important
because they get you international money for the goods which you have
exported because these get you export incentives, any kind of tax
refunds, and remissions from the local governments. these are very,
very important and these are very, very important from the buyer's
point of view, to maintain good relationships with the buyers and to
inform the buyers in time that goods have been shipped.

We will now look into these post-shipment documents in this section.

Let's do that.

Post Shipment Documents Explained

Now we are talking about the post-shipment documents or post-

shipment export documents (see Figure 26).

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Figure 26: Post Shipment Documents

There are three categories we had discussed earlier also of the

shipment documents that include the shipment advice documents, the
purpose of which is to inform the international buyer about the dispatch
of the goods. Dispatch details, the vessel name, and very essential
things like the tracking number of the shipment. Or sometimes you can
also attach the export general manifest. alif you have a copy of that.

Shipment Advice

But generally, if the shipment advice is in a standard format that has to

be filled, the shipment advice has to be sent by either fax or through
email And the proof of sending the shipment advice is required by the
bank in the case of a letter of credit. Banks will only accept the
documents if you provide proof that you have already sent the
shipment advice along with certain documents which I just mentioned
to you, that you can attach to the export general manifest also, the
export general manifest that is the EGM. Also, if you have a copy, it is
not necessary. It is not mandatory.

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Non-negotiable copy of transport documents

What is mandatory documents that have to be attached with the

shipment advice are non-negotiable copies of the bill of lading or the
airway bill which is the transport documents, commercial invoice, and
packing list. These documents, along with the shipment advice, have to
be either faxed or sent by email and this sent email copy has to be
produced along with the documents which you submit to the bank for
getting the payment against the letter of credit.

For getting the payment against a letter of credit from the bank, You
submit what? You submit negotiation documents. As per the LC. what
the LC demands, those documents have to be presented to the bank.

Negotiation Documents

Now which bank? The LC issuing bank. But it is not done directly. It is
done through a negotiating bank. Negotiating bank generally is in the
exporter's country and invariably the issuing bank LC issuing bank is in
the buyer's country. this is the situation. it has to be sent through a
negotiating bank. The role of negotiating bank is also to check the
compliance of the documents. If there is any discrepancy, it has to be
red-flagged by the negotiating bank. If it can be rectified, it will be
rectified before the documents are sent to the issuing bank.

In the negotiation documents, you have to submit documents like a

commercial invoice. Then there is a document which is called a Bill of
Exchange, which we have discussed also, which is the bank document,
which is also called the Bank draft or the bank collection document.
Depending on what is the payment term, sometimes this bill of
exchange is not mentioned in the letter of credit because it's a bank
document, but it has to be attached to the negotiation documents. And
then the certified copy in duplicate of the GR form, GR form or
whatever is the export declaration form. In different countries that
name may be different.

In India, it is called a shipping bill in the EDI system, i.e. electronic data
interface. you get the EC copy, certified copy, and exchange control
copy, which has to be given to the bank. one duplicate of that also has

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to be attached with the documents and full set of Clean Onboard bill of
lading.

What is the meaning of a full set? in the bill of lading, there is a column
that says how many original transport documents are there. Generally,
it is three. full set means all three. original bill of lading or airway bill,
whatever may be the case.

Generally in the airway bill, you normally do not go through a letter of

credit because the airway bill is not a negotiable instrument, which we
have already discussed. all negotiable and non-negotiable copies should
also be attached. three negotiable copies of the transport document bill
of lading as well as whatever non-negotiable copies are available you
can attach.

Now, that will also be mentioned in the letter of credit how many copies
of the non-negotiable transport documents are required? Then the
export order or contract copy. Sometimes it can be in the form of just
the signed copy of the Proforma invoice, which works as an export
contract and very important packing list, even if it is not mentioned in
the letter of credit.

Banks invariably ask for the packing list. Why? Because, as you already
know, banks deal with documents and documents only and therefore
do not inspect the shipment. at least they want to have the packing list
which describes the shipment. packing list is a document which is
directly describing the shipment. It makes a lot of sense to the bank to
have a packing list. It becomes very, very important In most cases, Bank
will ask for it, even if it is not mentioned in the letter of credit.

The insurance policy may be two copies or one copy. Whatever has
been asked if it is applicable depends on what is the Incoterms. In the
FOB case, an insurance policy copy will not be required.

Then, in many cases, a consular copy of the commercial invoice may be

required if it is required by the local customs of the host country which
is the importing country. And sometimes they also require a certified
customs invoice that is for the purpose of customs. They require this
commercial invoice which is certified and signed as a customs invoice by

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the local custom of the exporting country. And finally, the copy of the
Letter of Credit in Original. These are the negotiation documents and
the post-shipment export documents.

Incentives Claim

And then in different countries, different types of export incentives are

there and therefore different types of documents are required. But in
most cases, wherever in whichever country there are the cases of the
rebate or the refund of the taxes, any taxes, local taxes like excise duty
or the goods and services tax or the value-added tax. There in the case
of excise duty, for example, in India, what document is required is the
duplicate certified copy of the ARE1 and ARE2 forms. certified by
whom? Certified by customs.

It means the copy has reached the customs for exports and they have
certified that the export has indeed happened, which will be certified by
the customs. I am talking about the example of India. In different
countries, there may be slight differences. And the name and the
system which is used for this purpose. Generally, it will be certified by
customs only after they receive a copy of the EGM. That is the export
general manifest. Then for the GST VAT refund commercial invoice and
the certified Shipping Bill copy are required because again here for the
refund or the rebate of the GST or VAT, obviously the organization or
the agency which is refunding the money need, the proof of exports,
evidence of export which is the certified copy of the shipping bill in the
case of India. In different countries, this system may be very, very
similar. The names may be different for the export declaration
document, which is an India is called shipping bill.

Then along with these documents, non-negotiable. copy of the Bill of

Lading transport document is also required, as you can see here, that
the non-negotiable copies of the Bill of Lading will be required at all
places because that is another very good supporting evidence of the
export in many countries. The duty drawback system is there, which
means most of the duties are charged by the local governments in the
indirect form, maybe in the inputs or in some indirect way. The taxes
have been charged by the local governments and there are systems,
commodity-wise ITC HS code wise that

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What are the duty drawback rates?

Duty drawback means duty refund those duties which you cannot
directly indicate you do not have a direct invoice for it. for example, if
you have imported some product and you have the invoice of import
and you have paid the import duties, that can be done. But if you have
procured the item, any imported item from the local market might have
been imported and some taxes might have been paid. In such a case,
you have no way to give direct evidence of payment of any import
duties. in such cases, most of the local governments in different
countries, have a system of duty drawback for this.

Invariably, to get this refund to claim duty drawback you need drawback
claim proforma. There is a format. It is there which varies from country
to country. In India it is called the duty drawback claim proforma. In
different countries, the names may be different. Then a certified copy of
the commercial invoice is required certified by Customs. Commercial
Invoice. Customs also provides certified copies of the Commercial
invoice. Then a non-negotiable copy of the Bill of lading is required here
also for claiming the duty drawback and very very importantly this
certified copy of the Shipping Bill EP copy which is the export promotion
copy that is meant for the duty drawback. In India. Also, another
document is required that evidences your registration with the local
export promotion body in India. These bodies are generally called the
EPCs Export Promotion Councils and their membership registration cum
membership, RCMC is required along with the evidence of receipt of the
foreign exchange in the authorized dealer's account. That is the bank
account. Your bank account. The evidence of the receipt of the
remittance, against the goods which you have exported. it is called the
Bank Remittance Certificate, BRC.

There may be slight changes in these procedures and documents in

several different countries, but more or less the system will be very
similar. Some names may be a little different. Otherwise, this whole
system will be quite similar in different countries. With this slide, I have
been able to give you a graphic understanding of the post-shipment
export documents, I hope this slide was useful to you and it was
appropriate for your understanding of the post-shipment export
documents.

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Conclusion

Apart from these documents, Friends, in post-shipment activities, you

also have to do the record-keeping of all the things which you have
done. Once everything has been done, the payment has been received,
the incentives have been received, everything has been taken care of,
The buyer has been duly informed and the feedback has been received
from the international buyer about the shipment. You need to have the
record-keeping in your office, record keeping requires having individual
files of each shipment, along with copies of all the documents, pre-
shipment as well as the Post-shipment.

This was all I wanted to talk to you about the post-shipment, export
documents. I hope you now understand the critical role of post-
shipment export documents. In the overall export documentation and
procedures. There can be some more activities that I have not covered
in this section, which may relate to the resolution with the banks for the
credits, which have been taken. There may be some more activities,
winding up activities with banks, with some of the local authorities in
different countries. That is case to case basis.

If somebody has taken the pre-shipment or post-shipment credit, that

has to be resolved with the commercial banks at this stage or some
other compliances in different countries may be there. With respect to
the export shipment, those are all to be done by the exporters in the
post-shipment activities.

This is all I wanted to discuss in this section.

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Chapter 11: Common Mistakes

Done By Exporters in Exports
Management
Let us talk about the six common mistakes which are made by exporters
while doing export documentation. in this particular chapter, my
objective is to explain what are the common mistakes which are done in
export documentation as well as in procedures.

One by one, we will discuss these common mistakes and what can be
the consequences of such mistakes. these things we are going to discuss
in this topic.

Six Common Mistakes Done in Export Documentation

Giving Wrong Information in Documents

The biggest mistake, which is done by exporters while creating export

documents, is giving the wrong information knowingly or unknowingly.
Information like contact details of the buyer especially, and sometimes
even of the exporters and wrong details about the packaging, the
markings on the packages or the number of packets, the net weight and
gross weight, and some details about the identification of the packages.
mistakes are possible and these are very, very common. And wrong
information with regard to payment information. What exactly are the
payment terms, the dates, and when payment has to be made? In
different documents, these kinds of mistakes are very, very common.

Identifying wrongly the classification of the goods

Then one of the major mistakes sometimes done by exporters while

making export documents is to identify wrongly the classification of the
goods. for customs purposes, the main classification is the ITC HS code.
For example, for Indian exporters, it is the Indian trade classifications,
and harmonized system code, which has to be put on the documents,
especially for the documents which are meant for the customs. On the
invoice also, international trade classifications, and harmonized system

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code has to be put in the case of online filing of the export declaration.
Any error in this can be really very serious. Even if it is by mistake, there
are chances the customs may assume that you have done it
intentionally. It can create distrust between the exporter and the
customs and it may also be categorized as a fraud.

What happens? The consequence can be a delay in customs clearance.

It can be fined, it can be some major penalties also. Financial loss will be
there for the exporters. And in these wrong classifications, sometimes
you'll end up in a situation where you fail to know if there were many
rejections, were there for the export of particular goods and you
actually were requiring an export license and because of the wrong
classification, you fail to identify this requirement. these kinds of
problems are very, very common.

Let us take one example. In this example, Messrs. Sparkle Exports gets
an order to supply cut diamonds from a buyer in Belgium. Now, the
exporter writes in the export declaration, which is filed online to the
Indian customs, that the Indian Trade Classification HS code for the item
is 71051000, which actually is for the natural diamonds instead of the
correct ones, which was supposed to be 71049010, which is actually for
the laboratory-created diamond custom tests the goods and it finds in
the physical examination that these diamonds are not natural
diamonds, although they are of high quality, they are laboratory
created. the correct ITC HS code was different. What was written by the
exporter? In such a case what happens is that the customs do not reject
the shipment because it was not clear from the LC documents, an
export contract which was submitted on whether the ordered goods are
to be supplied out of natural diamonds or not.

It was not clear. Nevertheless, customs levied heavy fines on the

exporter for miss declaration because the actual goods were not natural
diamonds. They were laboratory-created diamonds. in this case, the
documents did not mention the requirement of the buyer to a natural
diamond or not, this party managed with some fines, but. If the
requirement of the buyer would have been for the natural diamonds,
then it would have come in the category of fraud and it could have led
to very serious consequences.

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Writing the wrong value in documents

Now, another very common mistake, which is done by exporters while

creating export documents, is to write the wrong value. When you write
the wrong value in the export documentation, the general inference of
the evaluating authorities, assessing authorities is that you are either
doing undervaluation or you are doing overvaluation. errors in value do
not match with the LC documents or the database is maintained by the
customs about the classification provided by you for the product. For
such classifications, the customs have an international database of
pricing. If the mismatch is very Huge, the customs will further
investigate and try to find out the actual value of the consignment, and
it may be declared as undervaluation or overvaluation and it may be
akin to be declared as committing fraud. In case there is a major gap
and the consequences, of course, can be the loss of reputation and
financial penalties. These kinds of mistakes are very, very common.
these kinds of mistakes have to be avoided at all costs.

Giving the wrong product description

Now, another very common mistake done by exporters while creating

export documents is giving the wrong product description. The product
description in the documents should match the LC description and the
export contract or whatever purchase order you have from the buyer,
which obviously will very much match the LC description. it should
match that. Failure to do that could lead to delays in shipments,
problems in customs clearance, or delay in the payments by the issuing
bank against the LC.

Wrongly and inappropriately filling out the dangerous goods form

Another very common mistake which is done by exporters while

creating export documents is to wrongly and inappropriately fill the
dangerous goods form. Because the dangerous goods form has to be
filled by a responsible, knowledgeable person who has knowledge about
the product, its consequences if it is in the dangerous category, and how
to pack it. What are the markings which are required? a professional
person who is in this field has to be involved. Smaller exporters
generally make this mistake that they try to do it themselves. It is

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always better to contact a professional agency for filling out the

dangerous goods form, and accordingly, the goods should be packed
and they should be fully protected. Right labeling has to be done for
such boxes. Very professional work is required for this. Mislabeling of
the goods can create havoc and it can lead to the delay in shipments or
the stoppage of the shipments, and it can actually lead to a lot of
financial losses.

Provide wrong instructions in the cover letter to the bank

Another very common mistake, which is done by exporters, especially

when presenting the documents to the bank for payment, is to provide
the wrong instructions in the cover letter to the bank, instructions to
negotiating bank. Either lacks clarity or it is wrong information that spills
over to the documents and the covering letter and the instructions sent
by the negotiating bank to the issuing bank. it can also lead to the
wrong interpretation by both banks. If it is not very clear, if the clarity is
not there, or if it is ambiguous, the instruction is not properly made.

Sometimes the exporters assume that the instructions are already given
there and inbuilt into the bank draft or any other main LC documents.
That's a myth because generally, banks do not go into the bank detail of
the conditions therein or in the LC documents. Normally they do not go
to that level, they mostly rely on the cover letter.

Eight Common Mistakes Done By Exporter In Export Process

In this topic, I will talk about eight common mistakes done by exporters
in the export process. The objective of this topic is to understand what
these common mistakes are done by exporters in export procedures
and what can be the consequences of such mistakes.

Not doing the homework before soliciting the business

One of the very important and most commonly done mistakes,

especially by the new entrants in the export business, is to not do the
homework before soliciting the business. lack of preparation before
soliciting the export orders can lead to major problems which
sometimes may lead to early losses and the failure of the new company

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to survive. The consequences of such mistakes can be that the exporter

may be not able to execute the export order in the stipulated time.
There can be quality issues, there can be poor delivery, and the
customer may feel frustrated with the exporter. It can also lead to
financial losses.

To give you an example, in this example, Pashupati Exports. A new

entrant in the rice exports received an export order for five containers
of basmati rice from UAE on LC terms. After receipt of the order, the
client sent the artwork to print rice bags. The exporter realized that
before doing that he needs to arrange for a food safety license, which
he was not aware of. Which he came to know only after getting the
order. And he also came to know from the C and F agent appointed
later by the exporter that there are certain bank formalities that must
be done before being able to book the shipping space, which was to be
done very fast because the time period required was not sufficient.
Also, for rice exports, the exporter had to arrange for a LUT- the letter
of undertaking for GST waiver, and that has to be obtained, which
would take a good amount of time, maybe one week, or ten days time,
and time was at a premium at this stage.

Further, the Miller of the rice was based around 600 kilometers from
the head office of the Exporter, and Third Party Inspection, which was to
be done by SGS, required coordination of the exporter, and since the
exporter was not having a good number of employees, he had to run
around himself for this coordination. this required a lot of time and the
bag printing company had to be arranged near the Miller and that was
not done earlier. which further required a good amount of time.

Overall, buyers' inquiries and monitoring indicated that the buyer was
already getting panicky as the progress of the work was delayed and the
buyer had his own commitments with his own forward clients in UAE to
whom the buyer was supplying these rice bags. finally, the delay was
much that the exporter had to ask for an extension of the LC from the
buyer, which the buyer refused. And the exporter had already spent a
lot of money on different aspects of the order. There was a big financial
loss for the exporter.

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Failure to screen the buyer or the country

Another very common mistake done by exporters in a typical export

procedure is the failure to screen the buyer or the country, whether the
due diligence has been done properly. such failures are very, very
common. lack of sources or methods of getting the data on the buyer
and about the country, the right information is not there with the
exporter or he is not yet prepared to find such information. these things
lead to the failure of the exporter to screen the buyer and the country.
And the lack of awareness of the local and overseas regulations
governing a product, export, or destination. These kinds of things lead
to such failures.

Failure to negotiate the right Incoterms

Now, another very common mistake done by the exporters in this

regard is failure to negotiate the right Incoterms, international
commercial terms. The reason for this kind of situation may be the lack
of bargaining power or poor negotiation by the exporter. Generally, the
most balanced Incoterm is the FOB which is Free Onboard. And
sometimes to get the business, the exporter agrees to the D terms
without realizing the additional costs which involve taking the goods to
the overseas market, getting them unloaded at the destination market,
getting them cleared from customs, and moving from the port to the
party, and paying the import duty. the total cost incidence of such kinds
of Incoterms can be very, very high because of the lack of bargaining
power, the party is not able to even increase the price to that extent.
The failure to negotiate the right Incoterms can also be the result of the
lack of knowledge about all the different Incoterms, the latest ones, and
how these work.

Failure to secure the correct LC terms

Another common mistake done by the exporter is the failure to secure

the correct LC terms. Now, LC is a very complicated banking process of
documents and payments, it can be in the form of the failure to secure
the right payment terms itself. whether it is LC terms, whether it is DA
terms, whether it is DP terms, or what kind of terms are there for the
payment, The party may not be able to negotiate for different reasons.

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this has to be avoided, especially if you are dealing with the buyer for
the first time. And even if he is able to secure LC terms, the party may
be unable to secure the correct LC terms which I'm talking about, and
failure to identify common problems with LC conditions. when LC is
open and the situation comes when the beneficiary that is the exporter
has to accept or reject the letter of credit, it may fail to identify the in-
built or inherent common problems, prohibitive problems that can
prohibit the exporter to be able to execute the export order. the failure
of the knowledge of the LC conditions and the right advice from the
local bank. In the absence of such advice, problems can be there of this
type.

Failure to choose the right currency for the LC

And sometimes it is also the failure to choose the right currency for the
LC. generally, in order to protect against the foreign exchange
fluctuation risk, it is always advised to secure the LC currency as the
home country currency of the exporter, so that the exporter is
protected from the foreign exchange fluctuation risk. But many times it
is very, very difficult. And generally what happens is that the exporter
and the importer agree on a third country's hard currency.

Failure to book the shipping space in a timely manner

Then another common mistake or the common failure of the exporter

in the process is the failure to book the shipping space in a timely
manner. Because the shipping space timing has to be matched with the
LC's latest date of getting the bill of lading which is the transport
document. this kind of failure can lead to delays in shipments or delays
in payments by the banks. Loss of future business, and cost of transport,
which may get increased due to the failure to book the shipping space in
a timely manner well in advance. If that is not happening, the cost of
transport is likely to increase drastically.

Picking a wrong service provider

Then very commonly if the exporter is not experienced enough and for
various reasons, he is picking the wrong service provider. service
providers can be the local bank or it can be the freight forwarder

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selected by the exporter, Shipping Lines. If it has not been nominated by

the buyer, which actually has to be avoided, generally the shipping line
has to be selected by the exporter only and it should be independent of
the control of the buyer. failure to understand the consequences of the
control of buyers on the intermediaries can also lead to major problems
and picking the wrong service providers or the intermodal transport
provider. any of the service providers if picked up wrongly or. Some
party that is influenced by the buyer is picked up by the exporter. It can
lead to major problems or it can sometimes also lead to buyer fraud.

In this example, Messrs. Ricela Exports from Raipur India received an

order from Singapore to supply six containers of Basmati rice bags on
the LC terms. Ricela Exports appointed a new C and F agent to handle
the shipment of export clearance and to arrange the sea shipment of
the consignment. Now, the company arranged very good quality
basmati rice and packs as per the requirement of the buyer and well in
time, and handed over the shipment to C and F agent. The goods left
Vizag port for Singapore. The exporter received payment also against
the letter of credit issued by the Buyer's bank. But on reaching
Singapore, goods received by the importer were found to be damaged
due to the water seepage. during this sea journey, since containers
were damaged. Now buyer asked for compensation failing which it
refused to deal with the exporter in the future. It was the failure of the
C and F agents to get good quality proper containers for the rice bags
because rice bags are normally jute bags or such bags where the
seepage of any water can damage the product. And that is what exactly
happened.

It was a new C and F agent. The exporter selected this kind of agent
probably for saving some price or in a routine manner, and the service
provider chosen was not correct. It was not experienced enough and it
could not provide good services. And ultimately it was the loss of the
export, loss of the future business, loss of the reputation.

Failure to do sufficient risk management of the shipment

Finally, one of the major mistakes which are done by exporters in the
typical export process is the failure to do sufficient risk management of
the shipment. this management of risks like transportation risks, not

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having sufficient insurance coverage or commercial risk, and not having

the ECGC cover if required, depending on the situation. Failure to
protect itself from the foreign exchange fluctuation risk, for example, by
negotiating its own currency contract or hedging through banks or swap
contracts. any failure to protect the shipment from such risks of foreign
exchange fluctuation can also lead to major losses. Or overall
inadequate protection of the different processes which are involved in
the export process.

These are the common failures of the exporters. And seven major
mistakes which are done by exporters in a typical export transaction.

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Chapter 12: Export

Documentation Software
Export documentation management can be made very easy using
export documentation software. in the market, you have some free
export documentation software also. And there are certain very
reasonably priced export documentation softwares.

I will just show you what they can do if we take one example of one of
the available paid export document software, which is called the Expo
Master (see Figure 27).

Figure 27: Export Documentation Software

Buyer orders, import-export documentation, sampling and costing, MIS

and alert reports, photo catalogs, shipment reports, and purchase
orders. all these things can be done.

A lot of different types of features are available. Look at some of the

features, things, and what this product can do. they have different
versions of the software. the standard version of the software can

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create commercial invoice, packing list, Proforma invoice, special

custom invoice, shipping instruction, GSP Certificate of Origin, Bill of
Exchange, form SDF. That is the statutory declaration form. That is the
GR form actually and period-wise shipment register, export order-wise
shipment register, country-wise shipment register, currency-wise
shipment register, drawback received and due statement, export
turnover report, and export payment realization status.

This software can be used as multi-company software. It has an in-built

data backup and restore facility. It has a daily organizer You can email
documents from within the software also. You can update through
Internet. You can print and save documents in MS Word or in PDF or
Excel format.

It does have some more options and features. this is a standard one,
which is good enough. If you need more features, you can go for the
other versions, which will have the automatic generation of invoices and
packing list from the packing details and buyer's order tracking, as many
other useful features can have. As you go for the higher versions of the
software, which are the pro version of the software, you will find that
the features will increase. The features like MIS reporting, future-ready
options, and purchase order tracking.

Different types of features will keep on adding as you go for the higher
versions. these are all paid versions of the software. Similarly, if you
have the free software also available, you can go through it and I'm
taking the example of the requirement of Indian customs, and this
software is suitable for exports from India. Similar software is available
in different countries depending on the requirement of the local
government and the local customs. The software will be specific to
countries, although the main documents remain very similar.

Still, it is better to use software that is prepared for local purposes. my

recommendation is to explore the number of different types of
software that are available for different countries, for the local
conditions, and they may have different local prices. I would
recommend going for any of these good software which can cover many
features which are to be managed in the documentation, and these
documents can be easily managed through these software.

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These software not only make life easy for the exporters, they not only
result in accurate and complete documentation, they also serve as their
record keepers. using this software, you can keep a record of all the
documents in electronic form and they are very easy to manage for
future use. And for review at any future date when it is required.

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Chapter 13: Common difficulties

faced by exporters from different
places

Here are the excerpts of the conversation of the trainers with a group of
exporters sharing their concerns.

Exporter 1:

we had we had some bad experience using D**.

I mean, we have I mean, we are working with D**, FedEx and other
companies, specifically with D**, especially because some of our
products we have been shipping from India.

And it happened that initially when we started some of our customers in

Europe, they they kind of had had asked for some samples.

It was not even the real shipment.

we were sending samples of foxnuts or Makhana there and samples are

samples.

I mean, we didn't we quoted a very basic value for that.

And as it turned out, all seven or eight customers that we had shipped
to, were asked to pay ten times the value of the shipment, as duty or
whatever.

I mean, D** never explained it to us.

I asked the customers to refuse it because I had other other means of

sending it to them.

I mean, exactly. Right.

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we had disclosed around $20 and they were asked to pay around $200
plus.

it doesn't.

Yeah.

So, I mean, what I was trying to say that even though in in the bill we
disclosed the bare minimum value, the value which is in, in India, I mean
not the international value and then they were taking us for ride.

Right.

sometimes that happens, I don't know.

I checked with the customs as well and there were no customs charges
actually.

And for samples, what customs charges are obviously, I mean, normally
the samples which are sent, it is written that the sample has no
commercial value, the customs value is there like for the purpose of
customs.

Yeah, but then, but then ten times the value doesn't make any sense is
actually out of it.

yeah, it happened that once we said once we ask our customers do not
accept it, then D** started chasing us.

But now you have to pay us the backward like from from the destination
less in Germany or Portugal or Spain or wherever.

We'll bring it back to India.

Then you have to pay us.

Okay.

So, I mean, it was a very I mean, we haven't we have not faced such a

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scenario with FedEx or UPS or any other carrier.

this is this is the this is specifically the problem of D**.

Yes.

Because, I mean, it's it's bad service, basically.

It's very bad service.

I mean, after that, I canceled my membership.

we are not working with D** anymore in any of the countries.

But I mean, this is really surprising.

Very surprising.

Yeah.

I mean, I mean, that that those were the samples.

It was the first time that you were sending any product to the
customers.

And it leaves a very bad impression from India.

Trainer:

If you send samples through speed post international speed post, it

takes slightly more time, maybe one or two days extra.

But but the price is low of sending.

And that's my clients have never faced any problem.

Exporter 1:

what I have, what I have experienced is when you use the India post or

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the government post, it's better.

And I asked my customers, for example, or one of my suppliers or the

suppliers to send through their government post.

Yeah

what happens is that at least there's no hanky panky.

Yeah, definitely.

No, definitely.

that's what we are following.

And far, even when we use FedEx or UPS, it's still okay.

Yeah, you know, we never had to pay any, any extra or the customers
didn't have to pay anything extra.

Okay.

Trainer:

Also, another problem being faced by new exporters, by D** and even
other courier companies, that the moment anybody starts business in
India, generally, they do not have the GST number, they do not take the
consignment, even samples they don't take.

Exporter 1:

besides the GST, they ask for many other documents, for example, food.

If it's food products, then they'll ask for the FASAI number.

Then of course the GST is there.

Then IEC code they ask for.

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Trainer:

These are the mandatory. IEC is fine.

IEC even a new exporter can afford because it just costs INR 500 in India
for example.

But the GST, the problem is that the new exporters, if they take GST, it's
a big headache first of all because they are not sure. They will really be
successful in their business.

Secondly, they have to pay some monthly charges to the CA or

somebody.

Right.

Exporter 2:

I have a question.

I had read somewhere, I mean, a long time back when you started the
company, that the government offers the options of the amount that
the startup spends on samples, it can be reimbursed.

Is that true?

Trainer:

Yeah.

I need to check.

I think maybe in MDA they have this option which I have not explored
because normally the market development assistance is meant for
visiting abroad.

Exporter 2:

My question here is that, you know, the recently the Government of

India has launched various schemes for the MSMES, you know.

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There is a credit guarantee fund trust which has been announced, which
says that in plant or machinery from 25 lakhs to five crores of rupees of
loan can be made available to small industries. MSMEs.

You know, I mean, it is called Laghu Udyog.

My question here is that when we have, you know, these different

schemes and policies which are announced by the government and
along with that, you alhave a foreign trade policies.

It might be a little tough and difficult for the MSMEs businesses to,
number one, know of all these policies.

And secondly, if in absence of a single window availability, they might

run from pillar to post.

So, you know, there are many policies that the government is
announcing like there is this credit card scheme.

Then there is this credit linked capital subsidy scheme.

But PM Mudra Yojana, you know, there are many different schemes for
the MSMEs, but somehow appears to me that because you have many
different schemes and maybe these schemes are given to the MSMEs
from different departments, they might find it a little tough to sort of
manage it all and if you want to say anything, please speak on this.

Trainer:

The biggest problem which MSMEs have been always facing to be a

major contributor to the export from India is the non-availability of
credit lines and the kind of banking system, the kind of financial
mechanism which we have.

We have adapted from the West and the concept of this, the micro and
small and medium enterprises is not very, very common in the Western
countries, except for countries like Italy, where they have very
exhaustive kind of MSME ecosystem.

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India is unique.

India has adopted this banking system, this financial system which is
more suited to the Western countries, not to the Indian conditions.

So, for example, I'll just give you an example that Bangladesh did better
than India by really doing great things in the area of microfinance.

India should have done something similar to what Bangladesh has done.

Exporter 2:

And alnow in 2022, recent Laghu Udyog Yojna

Now, I'm pretty sure if it is implemented well, it is going to be

tremendously beneficial to MSMEs.

That's great if it is implemented.

That was the idea because you try many things for micro, small and
medium.

What are the categories of how much of loan they can get?

Exporter 1:

If you and alif you have rightly said that if there is alsome provision of
I'm not I'm not privy to that scheme in detail but if there are provisions
of very small loans, like somebody might just be wanting 50,000 credit.

If that can be done fast to MSMEs, it can provide a lot of breather to

them.

it's related to the import.

You know, like we've spoken mostly about export.

But, you know, when we are dealing in an international scenario, it can

be one-way traffic, right?

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you alhave to the government should althink about giving some

incentives or rather promote import as well.

I can give example from my side.

We are a foodtech company and from India, we're not doing much
business from our other locations.

It's much more profitable for us to export and import as well because
we are getting a lot of raw materials from even

We have our you know, we have a we have a JV in Spain, Canada and in

South America as well.

it's much easier for me to import stuff in Vietnam, for example.

Right.

And then we can manufacture there and we can ship.

But in India, the duty is pretty higher.

For example, we were thinking of diversifying and we were planning to

get into like generic medicines.

We were planning to get into AyurVedic things.

Plus alwe were planning to import something related to furniture and

something related to food foodstuff.

But it gets really complicated.

what are the ways?

I mean, are there any ways through which we could avoid these pitfalls?

Trainer:

And as I had already mentioned, now there is an understanding of these

things, and difficulties, and I don't know it will take some time, but

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personally, I feel that it will happen very fast because that's a need idea.

The geopolitical changes which are happening in the world are now all
in favor of India.

world companies are looking to invest in India and they're dictating

their terms to the Indian government.

You do this, you do that.

You have these kind of ports.

You have these kind of infrastructure ready.

Do it fast.

Get the private people to invest in these infrastructures, Have fast

trains, the fast highways, the movement of the trucks, dedicated freight
corridors.

these are being dictated to the Indian government.

And Indian government is listening because otherwise, India is slowly

would be losing the opportunity.

new port, for example, is being made in Kozhikode where the mother
ships will come, which is the private sector.

Exporter 1:

Just a quick one.

in terms of, let's say, importing technology or knowledge transfer, for

example, you know, in terms of I can give you an example like earlier,
we were trying to like, you know, my company has got some a few
patents that we have under our belt in terms of technology, in terms of
equipments that we have made.

Rather, we are still in the process of fine tuning it.

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when we started our business at the first stage, we were trying to, you
know, we were trying to import certain machines for vacuum.

Vacuum cooked, for preparing vacuum-cooked fruits and things like that
and freeze-drying.

At that time, the technology was not available.

Still, it is not available.

And, you know.

The the the cost was very high.

I would not say the cost, but the import duty was very high.

And despite talking to several government agencies, we didn't get much

help.

So. Even if even if you see now there are very few companies which is
into.

I can give example from my sector, which is food technology.

The government is not doing much.

what happens for somebody like me?

I mean, it didn't make any sense for me to I mean, from a dollar dollars
and cents value.

we moved to Vietnam and it was much cheaper.

We could get machines from China and we could set up our plants.

Initially, we started with joint venture, but subsequently, we realized

that what could be done, what should be done?

And China was very smart in that they imported machines from Dubai
quickly and started manufacturing.

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China is very good in copying, right?

they imported and then they started first and then.

Absolutely.

So, I mean, for for for for for companies like us in India, we are very
small.

We hardly do much business from India, which is sad.

But for companies like us to, to to help.

You know, I mean, what is the government or rather, let me put it this
way, whom should we contact that we could grow and alhelp the export
from India grow?

Trainer:

my take on this is that now that government have fizzled out on the last
policy, the government has realized there is definitely a realization that
something has to be done.

Otherwise government will not be able to give the results and deliver
the goods, which actually I'm very sure that the government wants that
India should benefit.

Actually, the intentions are not bad.

it is just that the the right people are not told about the difficulties
being faced by the grassroots people.

if you can, you know, share those concerns with the right people in EPCs
or in FIEO or the organizations which are there.

not everybody will listen to you.

Not everybody will pass on your information to the right people.

But there are people you can use social media also, you can tag the

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ministers concerned.

You can tag the governors or the people at the helm.

You can tag them and put your suggestions and put your use your social
media to share your concerns.

I think it is not that.

The people out there are not interested. They are interested.

They alneed to show the results to the government ultimately.

And it is just the question of that. What is the focus areas? India has its
own focus areas.

It's a democracy that requires people to know the pressing things.

But at the same time, I'm very, very sure if you share your concern to
the right people at the right time, there is a possibility and it will make
things better.

this is my view.

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Chapter 14: Case Studies

Hello, friends. Welcome back to the course. in this section number 14,
we are going to discuss a few very selected case studies which have
been specially prepared for this course.

The two case studies refer to two different situations of dealing with
international clients and what kind of negotiations take place, what kind
of interaction happens, and how the knowledge of export, and import
documentation, and procedures can help in these negotiations and in
deciding the terms of business.

The objectives of the lessons in this section are to how the export-
import procedures work in the real world. To understand that with the
help of the real situation, real case studies, case studies based on real
events, and how to analyze the first offer of the importer terms and
conditions which the clients generally offer.

· How do you manage that?

· How do you react to that?

· And how do you finally decide on the terms of business offered by the
client whether to negotiate or leave it like that, or simply agree or reject
what is to be done?

· How do you decide all these things?

These are the objectives of this particular section, and these case
studies which are explained in this section. It comes with interesting
assignments. Let us look at these two very interesting case studies.

Case Study Cum Assignment 1

Welcome to the course again. I'm now sharing with you one very
interesting incident, a case study, which is based on my own experience.
I really want to share it that you have a good idea that what kind of
challenges one faces in practical life when you deal with foreign buyers,

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what kind of conversation happens, and how do you deal with the
inquiries. How do you deal with the terms and conditions which are
offered by overseas buyers? I really want to share this thing with you.
Let's see if you really find this case study useful.

This case study relates to one of the companies I started long back
based out of Delhi, which is the capital of India. The company's main
objective was to export handicrafts and handlooms manufactured by
very small artisans in India in different parts of India, in small villages,
and towns, they make really beautiful handicrafts and handlooms items.
I was very much fascinated by one of the ranges of items, which were
cotton rugs and carpets. in India, it is called dhurries. I was really
fascinated with the different varieties, designs and kinds, and styles of
the Handloom products of this type, which were made in small pit
looms using very unsophisticated wooden equipment they used to
manufacture. But the product which came out was really beautiful.

I gathered a lot of information about these types of floor coverings from

all over India. I visited different parts of the country and collected a lot
of samples, took photographs of the dhurries and carpets of especially
of cotton, but also of woolen fiber. with all this information and
knowledge, I did my desk research and international market research,
which are the countries that are likely to buy these products and which
were already buying? How to enter those markets? I studied all that
about this item and its possibility of exports.

With all this information and the offers of the different types of dhurries
and carpets, I realized that one of the top international trade fairs,
where I can definitely start my business and get some good orders, at
least the trial orders was an exhibition which is held in Frankfurt, the
name of this international trade show is Heimtextil, which is organized
by Frankfurt, Messe world's top international exhibitions organizer from
Germany. I visited Germany and took my samples there.

I took a booth to display my samples with the help of Indian trade

promotion organization in India, ITPO, which has its own Indian pavilion
in many of these exhibitions, and they provide the space at subsidized
rates. I displayed my samples there.

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I got a lot of good inquiries. I got contacts from many, many different
importers from different countries. And I want to share with you one
particular case where, you know, I was dealing with an Italian importer,
this importer was interested in a particular type of cotton dhurries, very
basic dhurries, but very beautiful rugs, so-called rugs. he was keen, but
he was not sure about the terms and conditions. he went back to Italy
and he promised to host me if I visit him in Italy at his office after the
exhibition.

When the trade fair was over, I went to his place in Turin, near Milan in
Italy, and I talked to him at great length about the different products
which I can supply from India I found that this importer was also not
very, very regular in the import of such items. Probably he was trying
this particular item at least for the first time from India. but he had fairly
good knowledge about it. he showed me one sample which actually was
incidentally, very much like what was carrying the sample. It was very
similar because this particular rug, which he wanted, is very, very
common, which is manufactured in India in a very, very small place,
almost like a village which is Fatehpur Sikri, which is near the city of
Agra, the city of Taj Mahal in India, a very famous city.

This very small town, which is Fatehpur Sikri very historical town, is
specialized in manufacturing this type of cotton dhurries which are
made by many, many artisans in that particular village. In almost every
second or third house, it is made of a particular type only. It's like a
commoditized kind of rug in different sizes and many times particular
standard sizes are available on the shelf also.

I was very keen on this product because it was easy to procure and very
fast. this importer from Italy was interested in a particular size and the
variety of the rug which was easily available. I could see that he offered
me some price CIF Italian port, the terms, and conditions, and the
documents which he required.

He told me about it, what documents will be required of him. And he

was ready to work on the letter of credit because we were dealing for
the first time and it was a trial order.

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At first look I found that the terms and conditions were good, the price
was good. I did not actually react immediately. I took one day's time. I
stayed back in Italy for one day and I pondered over all the information
which I collected from the importer, his sample also, I took it to my
hotel and I did my inquiries on the phone with the suppliers whom I had
met earlier in my research.

I found out about the sizes which were easily available on the shelf and I
checked the price also of those rugs of that particular size. With that
information, I went to his office the next day and discussed further all
the terms and conditions, price, and everything. Packing, documents
requirement, the mode of letter of credit, the type of LC, all these things
I discussed with the importer.

In the next section, I will tell you what exactly I discussed with the
importer, I will show you what were the expectations of the importer, of
the price, of the documents, the delivery, and all the commercial terms.
INCOTERMS? What were the expectations of the importer and what
were my expectations? where I needed some tweaking and all.

But I also request you, as the audience of this course and the participant
of this course to see the sheet (see annexure 1), which I have prepared
based on the expectations of the importer which is available in the
resource section of this topic, you download it, study it and try to find
out whether the price, whether the terms and conditions, especially the
LC conditions, the documentary requirements, do you find that they are
good, they are suitable and what do you think about it? And if you were
in my place at that time, how would you have reacted to the
expectations of the importer? once you are ready with your answer,
then you go through the next topic of mine, which is there in this
course, and try to see what you found out and what is your reaction to
the reaction I displayed there the next day when I went to the importer
and how I finalized the business.

What were the things which I had expected that the buyer would not be
very strict about some things and he would be ready to compromise on
a few things? What were those things? Try to see what you found in this
particular expectation sheet and what I did. That will be very, very
useful to you.

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This particular assignment will be interesting to you to check whether

you are learning the concepts which are discussed in this course. please
carry out this assignment. Thank you.

So, friends, I hope that you saw this expectation sheet of the overseas
buyer from Italy and tried to understand the needs of the buyer and the
significance of the different terms and conditions regarding payment,
commercial terms, the requirement of the freight to be paid and the
insurance to be paid. I hope you saw this and tried to find that if you
would have been in my place, what you would have done.

My approach to dealing with the situation

In this topic, I will tell you what I did about this expectation of the buyer.
And as a seller, I was interested in my first order from Europe for the
new range of items that I started with for exports from India, and to get
good prices and profit for the Indian artisans, poor people who had
been making such beautiful handloom items in their small villages and
they had been really looking at me to get them a good price for their
product that the profit benefit can be transferred to them. that was my
approach.

I wanted a good price to be given to the suppliers, the price better than
the expectations of the supplier. I had to meet the expectation of the
buyer alas well as the manufacturers. that was my approach in this case.
Just tell you step by step what I thought about the different points
which were raised by the Italian buyer and how I reacted the next day.

Buyer’s Expectations

So, friends, first of all, I will explain to you what were the expectations
of the Italian importer. The first thing refers to the price, which was in
the mind of the client and it was $15 US dollars CIF Italian port. this has
to be checked up. I could easily do it in the evening time after talking to
my manufacturers, and my suppliers from Fateh Pur Sikri.

As such, I did not see a major issue with the price because it seemed to
be quite a comfortable price. I will tell you why I'm saying this.

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LC Conditions were very important in this. The first condition was that
partial shipment was not allowed. this had to be checked. Partial
shipment was not allowed and the expected quantity in the mind of the
importer was somewhere around 10,000 pieces.

I had to check whether these pieces will fit into a 20-foot container or a
40-foot container, whether it will be FCL or it will be LCL. this has to be
checked up because if it is LCL, the cost-benefit will be less. my ability to
give the profits to the manufacturers will be inhibited. I really wanted
the quantity to be such that it should fit into our FCL maybe 20 feet or
40 feet. This I had to check.

Another LC condition was that trans-shipment was not allowed. The

meaning of this is that the consignment, whether it is FCL or LCL, should
leave the Indian port and directly reach the Italian port without any
change of ship in between. that is the trans-shipment not allowed. That
is the meaning of trans-shipment not allowed. I was a little bit
concerned about this shipment also because in present times when the
sea freights are quite high after the COVID pandemic and competitive
prices will be available only with those lines which may change the ship
in between, maybe via Dubai or maybe some other port where the
trans-shipment would happen. In such cases, my chances of getting a
better price will be more I will be able to save on the shipping cost. As
such, Chindi Dhurries are commodity-type items and they are not
fragile. even if the trans-shipment is there, it wouldn't impact the
shipment as such. No damage or anything is possible in this case. this I
was a little bit concerned about the expectation of the importer, I will
tell you more about it.

Delivery time in the mind of the supplier was two months, which could
be checked easily. And the LC terms he was agreeing under UCP 600 the
latest version. And LC would have been opened by his regular bank,
which is BNP Paribas, BNL d'Italia. And the documentary conditions in
the LC are given here, which. Talks about the clean onboard bill of
lading. Commercial Invoice, Packing list. Certificate of Origin. Ordinary,
then Quality Certificate. Insurance Certificate. Freight Certificate.
Shipment Advice. these are the documents that are required by the
importer.

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And the size of the piece which was the requirement of the importer is
60 by 90 centimeters. this is a standard size and the chances of getting
this size are very high. Thickness approximately was one centimeter. I
checked at the office also of the importer's office. I checked with the
sample approximately one centimeter and the weight per piece was
around 1.2 kgs 10,000 pieces would mean somewhere around 12,000
Kgs

That was in the mind of the importer. I had to check whether this
quantity is feasible, whether it is right. these things I had to work out.
On this basis, I thought over and tried to make my strategy.

My Analysis of The Situation

Friends You just saw the expectations of the importer in Italy. My first
reaction after seeing all these expectations was that even if the price is
okay because I could easily see that price was very comfortable, there
were profit margins. My major concern was to be able to create a
Proforma Invoice because that was my immediate step. I needed I really
wanted to give a document to clarify exactly what are the terms and
conditions. And I really wanted to be sure that whatever is in the mind
of the importer, the terms and conditions. I really wanted to check
whether those conditions can be met. Documentary conditions as well
as the shipment conditions, and commercial terms, which were CIF
Napoli, And the trans-shipment question.

The question of trans-shipment was very, very important in the current

scenario when the prices of the containers are very, very high, it is very
difficult to get a direct ship from Mumbai port to Italian port. It will be
very, very costly. the point of contention was about the trans-shipment.

And another point that I noticed in this particular expectation of the

Italian importer was his insistence on the quality certificate related to
the Azo dyes. I just wanted to tell you that, as I had mentioned to you,
that the variety of these there are many methods of manufacturing that
are not based on industries or machines. They are handmade. And this
Chindi Dhurrie was hand-made out of the waste of cotton pieces, which
are the byproduct of the readymade garment industry. the cloth pieces
which are coming from the garment export factories, it was quite clear

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that the leftovers of the cuttings of the readymade garment industry,

those cotton pieces would be definitely Azo Dyes Free because the
production was happening for the export purpose only. But making sure
that all this waste, which is coming from a very complicated supply
chain, from the readymade garment factories, not only from India but
maybe from neighboring countries like Bangladesh, these so-called
Chindies, these are coming from many, many sources and are getting
consolidated and clubbed together in bundles.

It was almost impossible to control whether the Azo dyes can be

avoided in these leftovers of the garment industry. these cut pieces of
fabrics of different colors, multi colors. This is multicolored chindi
dhurrie this was the main point, the main technical point, which was not
possible. And because it was a floor covering. it was not really very, very
important. And there was no government regulation that for the floor
coverings, this Azo Dyes point had to be ensured through some
certification.

These things I wanted to discuss with the importer when my next

meeting would have happened the next day. And these points I made, I
really want to tell you exactly what are the things to see when you
receive an offer from the importer and you have to take some time to
think over it, ponder over it, see step by step where there can be
problems.

Now the next thing was that the part - shipment was not allowed in this
particular expectation of the Italian importer. That is only possible when
the idea of the importer, which was 10,000 pieces, whether it fit into
some full container load, 20 feet container or a 40-foot container. I will
show you a few calculations. I did. I will show you one Excel sheet (See
annexure II). I'll show you some calculations that how many pieces
should come. I did these calculations before meeting the importer the
next day, I will show you this and look at this that whether to agree on
the condition that part shipment is not allowed or not. That has to be
checked.

And once those things are clear, then you can make the Proforma
Invoice ready on the conditions which are agreed between the importer
and the exporter in this case me and Luigi. I will show you what

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calculation I did and how you should do this. Look at this calculation
sheet. You'll get very good ideas.

My Calculations and Proforma Invoice

So, Friends, I'll just show you what kind of calculation I did. I've used this
Excel sheet where I started with that.

What is the available loadable volume in a 40-foot container? we'll start

with 40 feet container because 40 feet container is the most commonly
available container. And my target was to find out how much quantity I
can fit into 40 feet container. I find that the available loadable volume is
approximately 65 cubic meters and the size of the doormat is already
we have discussed it was available with us. Thickness was approximately
an average of one centimeter. These thicknesses things should be very
accurate. The average should be accurate.

What has to be done is that you have to fold the doormat five, six,
seven, eight times and take the full thickness and divide by the number
of layers. This is how it has to be done. If you just calculate the thickness
of one layer, it will make the calculation go haywire. the average has to
be found out. about eight, nine, ten layers you make and take the
thickness. This is how it has to be done.

Weight also has to be done the same way. you try to have as many
samples as you have. If you have three-four samples, you take the
weight and take the average. But I could easily find out that the average
weight of every piece of this doormat, this particular there is 1.2 kg

And the price also, roughly, I found out it hovered around anything
between 600 to 650 or 675 maximum per piece. quantity per container
per bundle in the bundle in the sense that you make the layers of the
doormat folded layer one fold and you make the box-type bundles
there, which can be in the cardboard boxes also.

But better packing would be in this case jute packing. you have a very
strong jute packing that is the best thing to do. what I could find out
with this calculation is that the total number of bundles will be anything
between 235 to 212. 212 will be more safekeeping the breathing space,

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leaving the breathing space in the container. 50 pieces in each jute

bundle will have approximately a 0.3 cubic meter size. what do you do?
You divide this by 65 cubic meters and you will get the approximate
number of bundles. total pieces come out in this case, because of these
calculations, according to this calculation, they come to around 10,000
pieces.

It is well on target. You know, like what the buyer was asking was
10,000 pieces. Probably he was told by somebody or he had some
earlier experience. he probably knew that this particular sample will be
able to fit into the 40-foot container with 10,000 pieces.

And the total weight, as I had already mentioned, will be something

between 12 to 13 tons, metric tons.

Basically, the price, which I told you anything between ₹600 to 675. The
total purchase price will be something around 7 million Indian rupees.

Packing cost. From my own experience with this type of jute bundle,
box-type bundles will be approximately 2 to 2.5%. it would be some
100,000 Indian rupees or a little more. Inland transportation cost. Again,
I checked up. It is not difficult to check up online. You can easily check-
up.

It will be another ₹100,000. Documentation cost and other costs will be

another 150,000 Indian rupees and the 40-foot container from Mumbai
to Napoli in case of the direct shipment without transshipment will be
something like 10,000 US dollars, and it can be negotiated drastically if
the transshipment is there.

I had already made the strategy to get this relaxation from the buyer
that in present times, which are very unprecedented times, the freight
costs are very high. And I really wanted the buyer to agree.
Transshipment to be allowed, in which case I will definitely save money
on this $10,000. I can definitely bring it to something like $6000 or
$7,500. I will definitely be able to bring it.

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The insurance cost will be approximately 1500 US dollars. This

information is easily available online for the containers 40-foot
container. You can find out this information very easily.

With this calculation, the landed cost per piece, inboard comes out to
be approximately 11 USD. which is very comfortable. And I already
guessed this I had already mentioned to you that the price seems to be
quite good. The price which is USD 15, is very comfortable.

But that is not our objective. Our objective is to be able to create the
Proforma Invoice. Things like partial shipment are not allowed. That is
also fine because now these 10,000 pieces will be very comfortable. We
have kept very good breathing space also. we can actually go for
another maybe 1000 pieces, but we will not do that.

We'll keep the breathing space since the partial shipment is not
allowed. it is very important that we keep the breathing space that we
are able to fit in the complete shipment without reducing or increasing
the quantity. 10,000 pieces will be sacrosanct and will definitely fit into
the 40-foot container. this condition need not be relaxed. I'll not talk
about the partial shipment not being allowed, but I will talk to the buyer
regarding the shipment, which I would like him to be flexible with, and
delivery times. Two months.

As I told you that this size, 60 by 90 centimeters is a regular size and it is

generally made very commonly out there in Fateh Pur Sikri. I checked
with my manufacturers and it can be easily procured on the shelf from
many manufacturers. Within one month it can be procured. this two
months is a very comfortable delivery time and the details about the LC
had to be checked with the client, wherein I wanted to be very, very
particular about the quality certificate, I told you that the Azo Dyes
certificate will not be a good idea for this item.

The rest of the things are okay. Insurance and freight certificate because
it is a CIF contract and shipment advice I can create my self, a packing
list alI can create I know the details about the box-type bundles of jute
which with one fold of the doormat and accordingly the packing list can
be made with the gross weight and gross sizes, I will be able to create

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the right number of pallets for the shipment and it can be created
easily.

Now, I had a very clear idea and Bill of lading clean on board, bill of
lading will be freight paid already. These are not a problem.

Ultimately now with this calculation sheet, the outcome is that the price
is okay, the delivery time is okay, we could see it and we can definitely
save money on the freight cost because 10,000 pieces now we are sure
is the right figure. From this calculation, it is very, very clear.

The only things that remain are two things. One is the transshipment
part where the buyer needs to be flexible. It should be allowed and the
quality certificate conditions which the buyer should agree to just the
SGS inspection of the goods. The Azo Dyes certificate is not a good idea
for this item. these two things I had to discuss with the client and I could
easily see that I would definitely be able to convince the buyer. And he
will have no problem with this because it's a trial order. He is also very
much interested in the goods, I'm sure he would be agreeing.

I created the Proforma Invoice (see figure for this shipment based on
the information. Now I have all these calculations, all the discussions I
had with my manufacturers in the evening. I went to the office of Luighi
next day with my Proforma Invoice.

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Figure 28: Proforma Invoice for the buyer

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Case Study 2: Export of Premium Quality Tuna Fish

From India to Japan
Hello, Friends Welcome back to the course. I really want to congratulate
you that you have reached far in this course. And friends, these
learnings, these topics which I had shared with you in this course if you
have grasped these topics, these topics are really going to help you a lot
in building up your career, in growing, in your career.

In this course, I have taken up different topics in different topics and

tried to give you the minimum knowledge which you need actually in
order to understand this whole concept. If I go too much deeper into
the topics, then it may become too complicated for you. And this whole
course will become bulky that you may lose interest in learning in this
course.

My idea was that you learn these topics the way I have given in the
topics and build upon that. Use the resources, use the information
which is available from different sources, and try to build upon that. Try
to build your knowledge, your database, and your collection of
information on the foundation of whatever I have taught you in this
course. that will be very, very helpful to you.

Now, I want to take up one very interesting case study. Again, the idea
of taking this case study is to make you appreciate the complications
which are involved in export documentation.

In this case study, I will talk to you about the exports of such
merchandise, which has to be supplied by air, which has to be shipped
by air, and which requires to be shipped on a daily basis, almost on a
daily basis. And extreme case is required in the packing and handling of
the commodity which is being exported. these are perishable items I'm
talking about.

This particular case study deals with premium quality tuna fish, which is
being exported from India to Japan. This case study is based on the real
events. you will be able to understand that from the example which I'm
giving you in this case study.

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· You will be able to understand how to ship goods by air.

· What is documentation which is required to ship goods by air, and

· What are the complications which are involved in making such kinds of
shipments on a daily basis?

· What are the implications on the transport documents?

· What are the implications on the payment terms?

· What are the implications on the commercial terms?

· What type of terms do you have to agree on such transactions?

All these things I will be discussing in this case today. let's go a little
deeper into this case. In the next topic, I will give you a little
introduction to this case study.

Introduction to the case study

So, friends, I want to discuss with you one very interesting case study
which relates to the export of tuna fish from India to Japan. I have made
this case study based on real events, but the name of the exporter and
the importer and some very critical details have been changed in order
to maintain the privacy of the business and the trade requirement. I
hope you understand that the idea of this case study is for educational
purposes only and to understand the concepts which are there in this
course.

This is about Mr. Gupta, based in Mumbai, India, who is in the business
of exports of tuna, and he was exporting tuna fish of different varieties.
Generally, the very common varieties of tuna fish are mostly available in
India for around 100 and ₹125 per kg, although the prices fluctuate very
commonly. And he was mainly exporting to USA and UK. Mr. Gupta was
always intrigued that the biggest market for tuna in the world is Japan.
But Japan never gave orders to Mr. Gupta. he was intrigued. That is why
Japan is not interested to buy tuna from India. He was very much
satisfied with his business, which he was doing with US and UK. The

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volumes were good. He was making good money out of the business,
but somehow he was not able to crack the Japanese market.

I just want to tell you that tuna fish exports are little difficult export. It
requires a lot of knowledge and experience. Tuna fish is very difficult to
handle. What happens when you catch tuna fish Immediately I mean,
without wasting any time, the fish has to be refrigerated. If you do not
do that, the color of the skin changes, and the customers are not
interested in that kind of variety, especially the Japanese customers.

Mr. Gupta was having the idea that the Japanese customers were not
very sure and confident about exports from India, that the quality, the
type of quality which will be supplied by the Indian exporters would be
suitable for the market. Although some business was happening, not to
that extent what the potential was. But Mr. Gupta was not able to
export anything to Japan, he was really looking for an opportunity to
enter into the Japanese market. He knew some importers there. He had
been in touch with some of the importers there, and he was trying to
understand what is happening there and what is the game of exporting
tuna fish to Japan.

As Mr. Gupta was looking for an opportunity, he was studying the

market also the Japanese market. And what he was realizing that the
prices of tuna fish in Japan, retail prices, wholesale prices, as well as
buying prices were a little higher. The Japanese customers had no
problem giving good prices, but they really wanted good quality tuna
fish. They wanted to be sure that the tuna fish is of higher quality and
they were not sure about the Indian brand. he was not able to
understand how to get the type of fish that can be exported to Japan.

For a long time, he was talking to his suppliers of tuna fish and trying to
understand the tuna market. One of the days he saw one advertisement
from the Fisheries Department of the Lakshadweep State in India. This is
a group of around 30 plus islands, and most of the islands are not
inhabited by the people. Out of these, only ten islands are inhabited and
most of the people total about not more than 70,000 people are living
in these islands, inhabited islands, the main island of which is Agatti
Island, a very small island. The total area of these islands is not much

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Agatti Island itself is just seven kilometers long and the maximum width
of the island is 1.5 kilometers. it's a very small state. India has.

But the fisheries department wanted to promote the exports of tuna

fish which is caught in and around the Lakshadweep islands. Mr. Gupta
had some idea that the quality of tuna fish from Lakshadweep is of very
high quality. And the government that is administration was very much
interested to promote tuna fish and help the exporters with knowledge
and research and training in order for the upliftment of the people who
are living in Lakshadweep because they are totally dependent on the
fisheries and similar types of professions.

They are no industries there. They are no modern types of businesses

on these islands. it was purely a natural place. Natural kind of work has
to be done by the people there to sustain life and to make a living. He
really got the details which were there in the advertisement and he
visited. Agatti island in Lakshadweep for the interaction with the
Fisheries Department and talked to them and he understood and found
that really the quality of the tuna fish which is caught in Lakshadweep
Islands and around the islands, there is a lot of potential and the quality
is really good. And the reason for that is because there are no industries
there. the sea waters around Lakshadweep are virgin in nature and
there is no chemical or industrial effluent which is going to the sea. the
quality of the tuna fish is absolutely organic and another feather in the
crown of the business of catching tuna fish there is that the people
there for generations are catching tuna fish by the traditional methods
and they have international recognition and tag for the traditional
methods which are the sustainable methods of catching tuna fish and
organic in nature. this international tag was there with the fish.

What he talked to the people out there and learned about the whole
thing He felt very excited that probably he will be able to make a
breakthrough in the Japanese market in the recent time. Also, the
Fisheries Department, in order to promote the exports of tuna, they had
imported refrigeration equipment also from Germany for the storage,
the cold storage of the catch of tuna by the fishermen there.

There were a lot of positive things about the whole game. he really did a
lot of research there, tried to understand the business there, and he

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found that the prices were a little higher than the normal tuna fish,
which is available from other places in India. So, for example, if the price
of tuna fish was around 100, 125 Indian rupees per kg in other places
the price of the Lakshadweep type of tuna was around ₹200 per kg he
was not much worried about that because he knew that the Japanese
importers would be able to give good price.

It is just that he has to sell this idea of premium quality tuna fish to
Japanese people. with all the research work and the information he
gathered from there, he took a lot of videos and photographs also and
shared all this information with some of the very large importers of
premium quality of tuna fish in Japan and with whom he was in touch
earlier also. But he was not able to make a breakthrough.

Out of these several importers are mostly based in Tokyo and operating
from the world's biggest food market, especially the fish market, which
is called the Toyusu market in Tokyo. he sent this information to the
potential importers and one of the importers showed interest in doing
business with Mr. Gupta. He understood the whole concept. He invited
Mr. Gupta alto the Toyusu market in Japan, and they had a
presentation, discussion, and a lot of brainstorming about the whole
thing. They agreed to test the possibilities for exports of premium
quality tuna fish from Lakshadweep to Tokyo, Japan for the Japanese
market and offered some good prices, something around ¥1,000 per kg
price they offered, which seemed to be a good price to Mr. Gupta.

He had to really work out the whole pricing thing and the
documentation requirements for shipping the tuna fish by air from
Agatti airport to the Indian mainland, a major international airport, and
from there to Tokyo. he found that he did not have the experience of
exporting from a place like Lakshadweep, having a very small airstrip on
the island. There are some flights of Indian Airlines, he was not sure
whether he will be able to strike the right price of transporting tuna fish
on a daily basis from Agatti island to the mainland international airport
in India.

And of course, the forward journey from the international airport,

mainland to Tokyo would not be a major problem. The only problem

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seemed to be the exports or daily exports of tuna fish from Agatti island
to the main Indian airport.

He collected all the details and information, and one offer sheet was
given by the Tokyo importers. 2-3 importers, they teamed up for the
importation of tuna fish and they offered him to buy for 90 days trial
order around five tons of tuna fish on a daily basis from India to Japan.
And Mr. Gupta knew that the quantities were not a problem. He could
easily export on a daily basis something like 20- 25 tons. five tonnes was
the trial order.

He was not sure. he took some time to do some home research and to
find out what are the possibilities of the logistics, because logistics was
very important, the documentation was very important in this case. he
took the complete offer from the Tokyo importers and jotted down all
the terms and conditions, documentary conditions, the payment
conditions.

In the next topic, I will share with you the complete document which
Mr. Gupta prepared about the expectations of the Japanese importers
and whether those expectations can be met by Mr. Gupta. What
tweaking may be required in order to finalize the order? in the next
topic, I will share with you this sheet and I will make you understand
what were the different conditions and barriers to exports and whether
these could be complied with and solved and done by Mr. Gupta. Let's
see that.

About the offer given by the buyers

So, friends, this is the offer sheet that was prepared by Mr. Gupta based
on the discussions with the importers in the Toyosu market in Tokyo,
Japan (see Annexure III).

The CnF price, which was offered, was approximately yen 1000 per kg.
Net weight of tuna fish of the Lakshadweep variety. Now the quantity
which is suggested by the importers is five tons per day. That had to be
sent by air with a direct flight from Indian Airport to Tokyo.

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But it should be noted the goods have to first be transported from

Agatti island because the airstrip is there only. goods had to be moved
from Agatti to the main international airport in mainland India. Then
only it can be exported. That leg is there. This is a little complicated
part, which Mr. Gupta was not sure he really wanted to research on
this.

The validity of the contract is six months. Daily supply is valid for 90
days, which is extendable. Payment terms were 15 days supply value to
be paid in advance. the value of the five tonnes daily tuna fish for 15
days, that total amount will be paid as advance balance by the bank
transfer after the shipment 15 days after the last AWB of the 30 days
supply. once the 30 days supply is over, the last air waybill of the 30th
day supply that date and you add 15 days, then the balance payment
will be made by the importers. The other conditions were there,
according to Mr. Gupta's discussions and brainstorming with the
Japanese importers, that the use of straw packing material is prohibited,
which Mr. Gupta knew very well because he was already exporting to
UK and US. He knew about this requirement.

Proposed packaging should be cleared with the importers as they have

to have the approval of their preferences of the packaging. this was a
little complicated in the sense that how the importers will be clearing
the packaging. For that, Mr. Gupta had talked to the importers and they
suggested that he can send the video, just the video part of the
packaging, and there shouldn't be any problem. They will approve it
because Mr. Gupta knew this business quite well. As far as the
packaging is concerned, Mr. Gupta had explained to them the type of
packaging he was using for the current exports to the UK and USA, and
more or less that packaging was acceptable to the Japanese importers.
goods to be marked according to normal commercial practices with
metric weight and measurements.

Whatever the practices were being used by Mr. Gupta for its Tuna
exports to UK and USA, similar commercial practices were to be used for
the marking and to make sure that the metric weights and
measurements are used. Japanese translation text is required to be
faxed or emailed about the markings, whatever the marking is there,
that has to be translated into Japanese language and sent beforehand.

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Certificate issued by an approved authority in the country of origin that

is India stating that the animals, the fish in this case were free from
designated infectious diseases. whatever the common infectious
diseases are prevalent in these kinds of fishes, this variety of fishes has
to be certified that it is free from those.

Another condition was that the typing and other errors in

documentation should be avoided at all costs, as these often result in
serious delays and complications at the point of entry in Tokyo because
it was a daily supply to Tokyo. these kinds of errors can create really big
problems for the importers. that was very, very critical actually.

And the documentary requirement, as suggested by the importers and

which is actually a statutory requirement, that is the commercial
invoice, a minimum of three copies are required and must be signed by
the supplier and include the following details, marks, and serial
numbers of the packages, Description, and quantity of the goods. CnF
value. As for the Incoterms 2020. Place and date of preparation of the
commercial invoice, the destination, and the consignee name. Name of
the vessel. In this case. Air flight. Flight number. Import. License
number. Which has to be provided by the importers beforehand.

Conditions of the contract relating to the determination of the value as

discussed and as given in the contract as per the price which is agreed
between the buyer and the seller. It is strongly recommended wherever
possible to include the HS commodity classification of the goods to be
imported.

Complete invoices and packing lists should be forwarded promptly to

the importer by airmail. before the airmail, obviously, the scanned
copies have to be sent by email. Details about the insurance Air
insurance from Indian International Airport to Tokyo. Not to be paid by
the seller, which will be paid by the insurance part of the domestic leg
that is from Agatti islands to the mainland international airport that will
be borne by the exporter. insurance part in the main leg from the
Mainland International Airport in India to Tokyo will be paid by the
buyer. This is the requirement of the Japanese government. That is the
reason why this contract is C and F, not CIF. A copy of the insurance
certificate against the recurring insurance policy will be provided by the

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importer. in case it is required by the exporter, it will be provided by the

importer.

More details were given about the airway bill. Ten copies, one original,
and nine copies of the airway bill are required to be sent by airmail to
the importer. Fax copy to be sent without delay after the shipment. this
is very, very important because, with this fax copy, only the
consignment will be taken in possession of the Importer's packing list.
Two copies.

A certificate of Origin is required for GSP concessions and that has to be

issued by the diplomatic officer in the Japanese consulate in India. that
was usual. Mr. Gupta knew how to do that. He was already doing the
same thing for UK and USA from the requisite authority.

Other requirements are health certificates from the country of origin by

an approved authority. In this case, it was the Fisheries Department of
Lakshadweep Administration. it is an approved agency that can provide
the health certificate because it's a government body and it is approved.

Complete text and representative videos of the fish catch and the
handling catch. Because if you remember I told you about this, that
post-catch handling is very, very important. Otherwise, the skin color
can change, and the fish can become unsellable. This has to be done
one time only by Mr. Gupta in order to assure the importer that the
handling is proper and the proper training has been given to the
fishermen and the supervisors.

No food additives are to be used at any stage in the product. Chemicals

present in the fish should be certified that whether they are in
permissible quantity or they do not exist, whatever it is that has to be
provided that fish certificate.

One copy of a similar fish certificate was shown by Mr. Gupta, the
earlier fish certificate, which indicated a very good position of the non-
existence of the chemicals which are commonly found in the seawater
fishes wild catch.

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Conclusion

In this section, we discussed and analyzed the two case studies, very
interesting case studies, which related to different situations and clients
from different countries. The highlights of the learnings from these case
studies are that international trade deals may look very complex and
risky at first glance.

For the newcomers with the people who are new in the field, they will
find that international trade deals, as shown by the clients look very,
very complex. But the proper knowledge of the procedures and
documentation can help mitigate the perceived risk and complexity of
the situations which are visible at first glance and the proper knowledge
of the procedure and documentation can also help in deciding whether
to go ahead with the deal or not. this is the learning which we had in
this particular section.

We also learned that unprecedented situations like the current COVID

pandemic have very strangely made the international movement of
goods very expensive. containers rates are at their peak at present, and
for the foreseeable future, the reduction in price is not visible.

What we learned from these two case studies was that it is not always
necessary and possible to involve the banking documentary credit,
although it is one of the safest ways of receiving international
payments. But it cannot be guaranteed and it cannot be forced upon
the buyer. And in a particular situation as the principal mode of
international payment. it is a very important mode of payment. It is very
safe. It takes care of the interest of both the buyer and the seller, but it
is not always possible to make the client agree on the LC terms.

But the effort should be made by the exporter If they are dealing for the
first time with the overseas party, then they should make sure unless
there are certain very compelling reasons, the exporter should insist on
the payment through the bank documentary system.

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Chapter 15: Winding Up

Hello, Friends Welcome back to the course. I'm really very happy that
you have reached the end of this course. And I wish to congratulate you
with all my deepest regards for completing this amazing course.

I'm very sure that you like the contents of this course. And you found
those contents quite exhaustive. The very important thing is that the
concepts are clear to you. You understand this whole game of dealing
with the buyers moving goods from one country to another country,
understanding what are formalities and compliances required and very
importantly, why they are required.

I'm sure that you will appreciate the fact that the conceptual
understanding is better than the actual step-by-step methods. that is
more important.

Although I have tried to give you the step by step understanding of the
documents, pre-shipment documents, shipment documents, all types of
export documents, and their procedures dealing with customs, dealing
with shipping companies, dealing with banks, dealing with buyers, and
any other intermediaries are there in this whole typical export
transaction? I am sure that you like the case studies which were taken
up in this course, which are based on my own research and experiences,
practical exposure to such incidents, and the examples which I had
taken in this course.

I'll be very, very happy to know your feedback, how you found this
course, what are the things which are good? What are the things which
need improvements?

You write to me If you have any queries you write to me. I will definitely
respond to you. Do share this course with your friends, colleagues, and
contacts.

I'm sure this course will be useful for many, many people wishing you all
the best in your future career. Thank you very much.

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Annexure 1: Expectation of the foreign buyer of Rag Rag

CIF 15 $
Price offered by the client Napoli

LC Conditions

Partial Shipment not allowed

Trans Shipment Not allowed

2
Delivery time Months

UCP 600

BNP Paribas BNL D'Italia

Documents required

B/L, Clean Onbard, Paid

Invoice
Packing List
Certificate of Origin (Ordinary)
Quality Certificate
Insurance Certificate
Freight Certificate
Shipment Advice

60 X
Size of door mat 90 CM

Thickness (average in bundle) 1 cm

Weight 1.2 Kg

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Annexure II: Costing Sheet Giving Calculation By the

Exporter

Available
loadable
volume in
a 40 feet Cu
container 63.5 M

Size of
door mat 60 X 90 CM

Thickness
(average
in bundle) 1 cm

Weight 1.2 Kg

Average
Price in
India 675 INR

Qty per
container 23 Bund
(Bundles) 5 212 les

50 pieces
in each
jute 0.60 X0.90 0. Cu
bundle X 0.50 27 m

Total 1060 Piece

pieces 0 s

Total 1272
weight 0 Kg

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Total
Purchase 7155 71,55,00
Cost 000 INR 0

Packing
Costs @ 2 1431
% 00 INR 1,43,100

Inland
Transporat 1,00,
ion costs 000 INR 1,00,000

Document
ation, C &
F costs,
Quality 1,50,
Inspection 000 INR 1,50,000

40 feet
container
from
Mumbai 10,00
to Napoli 0 $ 7,30,000
Insurance
Cost 1,500 $ 1,09,500

8278100

Landed
cost per 780.952
piece CIF Napoli 10.70 $ 8302

Price
offered by
the client CIF Napoli 15 $

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LC
Conditions

Partial
Shipment
not
allowed

Trans
Shipment
Not
allowed

Delivery
time 2 Months

UCP 600

BNP
Paribas
BNL
D'Italia

Document
s required

B/L, Clean
Onbard,
Paid
Invoice
Packing
List
Certificate
of Origin
(Ordinary)
Quality
Certificate

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Insurance
Certificate
Freight
Certificate
Shipment
Advice

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Annexure III: Sales cum Offer Sheet Prepared by Gupta

C&F price: Yen 1000 per Kg (net weight) of Tuna fish to Lakshadweep
Variety

Qty : 5 Tons per day, sent by air with direct flight from Indian airport to
Tokyo

Validity of the contract:

6 months

Daily supply valid for: 90 days, which is extendable

Payment Terms: 15 days supply value to be paid as advance. Balance by

direct bank transfer, 15 days after last AWB of 30 daily supplies.

Other Conditions

 Use of straw packing materials is prohibited.

 Proposed packaging should be cleared with importers as they
have definite preferences.
 Goods should be marked according to normal commercial
practice with metric weights and measurements only.
 Japanese translation text to be faxed about the markings.
 Certificate, issued by an approved authority in the country of
origin, stating that the animals were free from designated
infectious diseases.
 Typing and other errors in documentation should be avoided at
all costs, as these often result in serious delays and
complications at point of entry in Tokyo.

Documentary requirements:

Commercial Invoice

A minimum of three copies are required and must be signed by the

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supplier and include the following details:

 marks and serial numbers of packages

 description and quantity of goods
 C&F value (Incoterms 2020)
 place and date of preparation
 destination and consignee
 name of vessel
 import license number (if provided by the importer/s)
 conditions of contract relating to determination of the value

It is strongly recommended, whenever possible, to include the HS

Commodity Classification of the goods to be imported. Complete
invoices and packing lists should be forwarded promptly to the importer
by airmail.

Insurance

Air insurance from main Indian International Airport to Tokyo not to be

paid by the seller. The copy of the insurance certificate against recurring
insurance policy will be provided by the importer/s.

Air Way Bill

10 copies (1 original and 9 copies) of AWB required to be sent by airmail

to the importer. (fax copy to be sent without delay after the shipment)

Packing list

2 copies

Certificate of Origin

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 All Export Documentation & Procedures | Any Origin

Required for GSP concessions, issued by the diplomatic officer in the

Japanese consulate in India.

Other requirement

 Health certificates from the country of origin, by approved

authority, in this case, it is fisheries department of Lakshadweep
Administration
 Complete text and representative video of the fish catch and
handling post catch needed. One time only.
 No food additives to be used at any stage
 Chemicals presence in the fish certificate

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 ABOUT THE AUTHOR

Dr. Vijesh Jain is a corporate trainer, management consultant, and instructor of VJ

Global MBA Knowledge Courses Series on UDEMY. He already has more
than a quarter million of student enrollments on Udemy. He is an MIB,
IIFT, New Delhi, B.E.BITS, Pilani, Phd from University of Mysore and a
Certified Global Business Professional by NASBITE, USA. He is the first
ever recipient of the best PhD thesis award conferred by BIMTECH, Delhi
NCR. He has written several books in the areas related to international
trade, management and business. He has also contributed several research
papers, those are published in top international research journals. He is
widely travelled abroad, having worked with top multinational companies
involved in global business and has attended several international
conferences and presented papers there. He has trained 1000s of working
executives in India and abroad in the area of Management, Foreign Trade,
Blockchain and Metaverse. With a total work experience of more than 35
years with global companies, he has also worked as Dean/Director with
several reputed B Schools.

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