IBO 04
Export Import Procedure and Documentation
IBO 04 Free Solved Assignment
IBO 04 Free Solved Assignment July 2021 & Jan 2022
Q. 1. What are the steps involved in the processing of an Export order? Explain them briefly.
Ans. Processing of an export order needs a lot of effort and attention as to products to be exported, the capacity of production available with the producer, availability of raw material, machine time, labour time and the required amount of finance the export order.
The process involves lot of preparation and lot of government approvals and help.
NATURE AND FORMAT OF EXPORT ORDER
Nature and format of an export order is in the form of sales contracts which contain all details regarding the supply of goods; its quantity, quality, price per unit.
It is basically an agreement between the buyer and the seller to supply goods on agreed terms. The export order is usually in form of:
(a) Performa invoice aceepted and signed by the importer
(b) Purchase order accepted and signed by the exporter.
(c) Letter of Credit opened by the importer in favour of the exporter.
All these form the part of the sales contract which is in written form and duly signed and accepted by both parties. The export order has the following information:
(i) Name of the seller and buyer.
(ii) Description of the product and its quality.
(iii) The quality of the goods to be supplied/purchased.
(iv) The rate per unit and the total amount.
(V) The time of delivery with date.
(vi) The mode of transport viz., air/ship/road/ combined Port of Loading.
(vii) Port of discharge/destination.
(viii) Terms regarding freight/Insurance expenses.
(ix) Documentation required. IBO 04 Free Solved Assignment
(x) Name of the bankers of the Importer.
EXAMINATION AND CONFIRMATION OF EXPORT ORDER
On receipt of an export order form an importer and the exporter should acknowledge its receipt to the importer through fax, phone telex or e-mail.
The exporters must critically examine the export order to ensure that it has all the basic information as given below: IBO 04 Free Solved Assignment
(a) Product description including specifications style colour, packing conditions etc.
(b) Marking and Labelling requirements as desired.
(c) Forms of payment including currency, nature of Letter of Credit (Revocable, Irevocable, confirmed, uncontirmer restricted, unrestricted) credit period, if any.
(d) Terms of shipment including choice of carrier mode of carriage, place of delivery, date of shipment or delivery port of shipment, Transhipment etc.
(e) Inspection requirements including type of inspection and the inspecting agency.
(f) Insurance requirement including risk to be covered and insurable value.
(g) Documents of realising payments including the nature and number of invoices, certificate of origin, certificate of inspection, certificate of value, bill of exchange, insurance policy, transport documents and document of title.
(h) Last date of negotiation of documents with the bank.
The exporter must ensure on the receipt of export order that the type of inspection being asked for in the exporter is possible at his without much extra cost and if the type of inspection being asked for is not possible, IBO 04 Free Solved Assignment
he should get back to the importer and inform him that what kind of inspection is available and ask for confirmation in writing from the importer otherwise this can put the exporter at great loss because after manufacturing the goods it will not be possible to export them without proper inspection.
Further more if there is any other descripancy on the export order it must be brought to the notice of the importer and a proper correction be made duly confirmed by the importer in writing to avoid any legal breach of the contractual obligations.
Q. 2. Distinguish between:
(a) Insurance Policy and Insurance Certificate.
Ans. There are three types of cargo insurance documents available in the international maring cargo insurance market. These are insurance policy, insurance certificate and declaration under an open cover.
Declaration under an open cover is not used so frequently in daily practice compared to remaining two insurance document types. IBO 04 Free Solved Assignment
For this reason knowing details of insurance policy and insurance certificate is very important not only for exporters and importers but also other foreign trade participants.
Insurance Policy: Insurance policy is a legally binding written document, which is issued by insurance company underwriter to policy holder or insured assured.
Just like bills of lading (Bill of lading states terms and condition of the carria, as a transport document), insurance policies define the terms and conditions of the insurance contract and serves as a legal evidence of the insurance agreement.
International marine cargo insurance policies are generally issued subject to ICC Cargo clauses such as Institute Cargo Clauses (A), Institute Cargo Clauses (B) and Institute Cargo Clauses (C). IBO 04 Free Solved Assignment
An insurance cargo policy should specify the terms on which the indemnity cover has been provided by giving an express reference to one of above mentioned ICC cargo clauses.
Furthermore, an insurance cargo policy may mention additional risks covered such as war risks and strike risks. In some occasions, insurance cargo policies indicate that the cover is subject to a franchise or excess (deductible).
Other information that could be mentioned on cargo insurance policies are:
• Amount of insurance premium
• Shipment details such as port of loading, port of discharge, vessel name and voyage number, description of goods etc.
• Currency of the insurance cover
• Insurance cover amount
• Insurance company’s agent at the port of destination
• Procedures for the claim and required documents
Insurance policies issued by the insurance companies for specific transactions. An insurance company gets the details of the shipment from the policy holder and prepares his insurance policy offer. IBO 04 Free Solved Assignment
If the insurance holder agrees on the terms and conditions as-well-as insurance premium, then the insurance company or the underwriter issues the insurance policy.
An insurance policy generally issued when the goods are loading and expires on completion of unloading from the carrying vessel at the port of destination.
Insurance Certificate: In some cases, exporters or importers do not prefer to make insurance for each shipment separatel but they sign an insurance cover for a certain period of time such as 1 year.
During the insurance period, as illustrated 1 year 4 the above example, exporter’s all shipments will be covered with a cargo insurance.
Periodic insurance contracts are also know.. as open cover. In case the exporter, whom uses an open cover insurance, needs an insurance document for a specific shipment, then the insurance company issues an insurance certificate.
Insurance certificates are not issued as a stand alone insurance document for a specific shipment, but they are issued under an open cover.
Both insurance policy and insurance certificate should be issued by an insurance company or an underwriter.
Both documents should state identical information such as:
• Insurance terms and additional risks covered
• Amount of insurance premium
• Shipment details such as port of loading, port of discharge, vessel name and voyage number, description of goods etc.
• Currency of the insurance cover
• Insurance cover amount
• Insurance company’s agent at the port of destination
• Procedures for the claim and required documents
(b) Liner and Tramp Shipping Services:
Ans. The Liner and Tramp Shipping are distinguished as under:
1 Liner shipping is designed to carry a variety of cargo with spaces for bales, bundles, boxes, barrels and tramp services are designed to carry the more simple and homogenous cargo in large quantity IBO 04 Free Solved Assignment
2 Liner services can carry reefer (refrigerated cargo). Tramp Services are not equipped to carry refer.
3 Liner ships have different type of holds and number of docks. Tramp Services are usually designed for a particular type of cargo for example, for foodgrains, fertilizer etc.
4 Liner ships have a varied and sophisticated equipments for quick loading and unloading. Tramp Services have a simple material handling equipment.
5 Liner ships ensure speedier carriage . Tramp Ships have less speed.
6 Liner services have pre-announced schedule between two ports. Tramp services do not have a pre-announced schedule
7 The Liner shipping services has fixed carriage and stable freight rates. The Tramp shipping services do not haS fixed freight and its freight tariffs may vary at times.
8 The terms and conditions of Liner service are not negotiable. The terms and conditions of Tramp services are nogotiable.
9 Liner services operate between fixed ports and loads and discharge loads on way. Tramp services do not operate between fixed ports.
10 The Liner services are little more costly. The Tramp services are comparatively cheaper.
Q. 3. (a) Describe the process of preparing goods for exports and their transit to the port of shipment alongwith documentation formalities.
Ans. When an exporter receives an export order he has to make a lot of efforts to organise the activity if he is a manufacturer exporter he sends a delivery note alongwith the copy of export order which give the quality, quantity, specifications, marking, labelling,
inspection details to the production department simultaneously ties up the raw materials practising materials. A merchant exporter starts procurring the goods through reliable vendors as per the given specifications.
Then the goods are ready for packing a pre-shipment inspection is carried out by the Export Inspection Agency on receipt of notice along with technical specification,
which in turn issues a certificate of Inspection in triplicate, and then the goods needs to be cleared by the Central Excise Authorities, who on receiving the application for excise inspection and issue certificate on form AR4/AR5 in six copies,
then the goods are packed and sealed before removal of goods, after this the goods are hand over to the carrier either a road transport or Railways, and the relevant receipts along with other documents are sent to t. clearing and forwarding agent for onward shipment,
After the receipt of documents and the carriage receipt the Clearing and Forwarding Agent takes the delivery of goods from the carrier and arranges its storage in the warehouse.
The CFA initiates proceedings to obtain customs clearance and permission for exports. The documents on which customs give clearance for export is the Shipping Bill but before the permission is granted the following documents need to be submitted along with the Shipping Bill:
- Shipping Bill-Four Copies IBO 04 Free Solved Assignment
- Contract/Correspondence leading to contract in original
- Letter of Credit in original (if applicable)
- Commercial Invoice-one each for each Shipping Bill.
- GR form (original and duplicate)
- Inspection Certificate (original)
- AR4/AR5-Original and duplicate
- Packing List.
The Customs Appraiser examine these documents and appraise the value having regard to the following considerations.
That the value and quantity declared in the Shipping Bill is the same as in the export order/ Letter of Credit. That the formalities regarding exchange control pre-shipment quality control inspection etc., have been duly completed.
After examination of documents and appraisal of value the Customs Examiner Appraiser makes an end receipt on the duplicate copy of the Shipping bill.
He gives directions to the Dock Appraiser about the extent of physical examination of that cargo is to be conducted at the docks, When Dock Appraiser is presented with the documents viz, original Shipping Bill and a copy of the Commercial Invoice, these documents are presented to shed Superintendent of the port.
The CFA obtains a carting order and brings the goods into the shed for physical examination by the Dock Appraiser along with the following documents:
(a) Duplicate, triplicate and export promotion copies of the Shipping Bill.
(b) Commercial Invoice
(c) Packing List.
(d) AR4/AR5 form in original and duplicate plus the invoice
(e) Inspection Certificate-original
(f) GR form (Duplicate)
The Dock Appraiser after conducting physical examination, records examination report and makes “Let Export” endrsement on the duplicate copy of the Shipping Bill.
After this these documents are presented to the Preventive officer of the Customs who supervises the loading of Cargo on board the vessel on being satisfied the Preventive officer makes an endorsement ‘Let Ship’on duplicate copy of the Shipping Bill.
This constitutes an authorication by the customs to the shipping company to accept the Cargo in the vessel. IBO 04 Free Solved Assignment
After the goods are loaded on board the ship a Mate’s Receipt is issued, and when the Mate’s Receipt is presented the Preventive officer, he returns the Export promotion copy, copy of Drawback Shipping Bill and presents the Mate’s receipt to the Shipping Company with the request for issue of Bill of Lading (Negotiable and Non-negotiable)
(b) Explain the customs clearance via sea alongwith documentation formalities.
Ans. Customs Clearance Formalities: The Law in India mandiates that no overseas carrier can load the cargo on an Indian port without the express permission of the Customs Authorities under section 40 of the Indian Customs Act.
The permission is granted to the exporter or his Clearing and Forwarding Agent by following the procedures and formalities as required under the law.
Legal Framework Section 50 of the Indian Customs Act requires the exporter to file a declaration in a prescribed form and submit support.
documents to enable the customs authorities to check declarations made by the exporter the objectives of the customs control are:
(i) To ensure that nothing goes out of the country against the laws of the land and that prohibetions and restrictions regarding outward cargo are duly enforced by the customs authorities.
(ii) To ensure authenticity of the value of outward cargo according to the customs vauation rules to check over and under
invoicing.
(iii) To assess and realise export duty/cess/charge according to the Customs Tarrif Act and other fiscal legislation.
(iv) To check that all the relevant regulatory provisions enforced by various authorities in the country have duly complied within respect of export.
(V) To provide export data through the Customs returns. Customs Clearance Stages Private Limited IBO 04 Free Solved Assignment
The following are the four stages of Customs clearance:
- Processing of documents at Custom House ise, main office. This stage involves the following:
(a) Checking up or documents to ensure that all relevant documents have been submitted:
(b) Verification of quantity and value of goods.
(c) Verification and determination of rate of duty and collection of the duty amount.
(d) Direction for the customs officer in the docks for physical examination of goods.
(e) Physical examination of goods in the docks in accordance with the examination order given at the Customs House.
(f) Supervision of loading by the customs Preventive Officer.
(g) Post-shipment endorsement by the Customs Preventive officer.
Documentary Requirements
Export is possible only with the help of documents for movement of goods by air or sea the customs permission for Shipment is given on a prescribed document know as Shipping Bill.
In other cases like Rail/Road the document is known as Bill of Export. There are four types of Shipping Bill as under:
1 Dutiable Shipping Bill / Bill of Export: This is for those goods which attract the payment of duty/cess for exports.
2 Drawback Shipping Bill/Bill of Export: It applies to those goods which are entitled to the Duty Drawback Scheme.
3 Free Shipping Bill/Bill of Export: These are those goods which do not attract Export Duty and are not eligible for Duty Drawback.
4 Ex-Bond Shipping Bill/Bill of Export: This applies to these goods which are shipped from the customs bonded warehouses.
The exporter or his CFA has to submit the following documents to the Customs Department for Customs clearance: IBO 04 Free Solved Assignment
1 Shipping Bill in duplicate, triplicate, quadriplicate duly filled, in signed and stamped
2 Declaration regarding truth of statement made in the Shipping Bill.
3 Invoice copy
4 GR Form
5 Export Licence, if required
6 Quality Control Inspection Certificate
7 Original contract of export or correspondence leading to the contract
8 Contract registration certificate
9 Letter of Credit if applicable
10 Packing List
11 AR4/AR5 forms original and duplicate
12 Any other relevant documents
Procedural Formalities
(a) The Shipping Bill and the other documents are submitted to the custom house as soon as the Rotation Number been given to the carrier.
(b) As soon as the documents are filed in the Customs House the receiving clerk will stamp the shipping bills with date and time and number them according to their category.
(c) The Shipping Bill involving Foreign Exchange will be sent to the Appraisment section where they are allotted to appraisers and examiners for scruting and giving examination order
(d) While the Appraiser will examine the Dutiable and Drawback Shipping Bills.
(e) Free Shipping Bill will be examined by the Examiners.
(f) The verification of the Shipping Bill will be carried out with reference value and quantity of goods Export licence/ quota/permit compliance with statutory requirements, rate and amount of export duty etc. IBO 04 Free Solved Assignment
(g) After verification of Shipping bill the customs Appraiser Examiner will give an “examination order” on the Duplicate Shipping Bill.
This order will enable the customs officer to carry out physical examination of goods in the docks. The “examination order” will also be counter-endorsed by the principal Appraiser.
(h) After completion of formalities at the Appraisement Section, the documents are given to the GR form clerk who puts the Shipping Bill Number on the GR form and detaches the original to be sent to RBI.
(i) Further where export duty is to be paid, the documents are given to the exporter/CFA to pay it at the cash and accounts department.
After payment of duty, Shipping Bill (Original) is detached and the other documents are given to the exporter/CFA.
In other cases Shipping Bill (original) is retained at Customs House and other documents are given to the exporter/Agent for bringing the goods to the shipment shed and make Shipment arrangement.
The second stage of Customs formalities is to carry-out physical examination of goods in the shed.
The goods can brought into the shed only afttier completing port formalities once the goods have been brought in the exporter CFA will present the Shipping bill to the custom shed Appraiser / Examiner along with the following documents:
(1) Invoice
(ii) Packing List
(iii) AR4/AR5 Forms
(iv) Agmak Certificate, if applicable.
The shed Appraiser/Examiner would carryout physical examination according to the “examination order” given in Shipping Bill (Duplicate).
Once this activity is over the Examiner will give “Let Export” order on the Shipping Bill (duplicate) which constitutes the physical examination report.
After the physical examination report, the customs preventive officer at the docks gives permission for Shipment on the Shipping Bill (Duplicate) in the form of “Let Ship” order.
This copy is presented to the master of the carrier who then in consultation with the concerned customs preventive officf commences loading operations.
The master of the carrier, after receiving consignments on board issues “Mate’s Receipt” which is obtained by the exporter or his CFA through the shed Superintendent after paying port dues. IBO 04 Free Solved Assignment
The Mate’s Receipt provide the basis for certification of the “Fact of Shipment” on those documents where it is needed for claim of export incentives.
These documents are AR4/AR5 Form, Export Promotion Copy of Shipping Bill, GR (Duplicate) and Commercial Invoice.
4 Comment on the following statements:
(a) Export houses do not get any strategic advantages through EDI.
Ans. Export houses draw the following strategic advantages through EDI:
1 Less Paperwork
2 Documentation made easy
3 Sales contracts through EDI for repeat business.
4 Immediate receipt of documents
5 Customs declaration and documents can now be submitted using EDI
6 Electronic fund transfers are instant.
7 Enhanced effecacy of operations
8 Reduction in costs of operations.
9 Not much negligible paper record keeping
10 Trading information obtained from historical data built up from EDI transactions help in further market research and strategic planning.
11 Closer working relationships with business partners.
12 Faster trading cycle.
13 Terms of trade affected by bargaining power
14 Need to respond to highly competitive market entrants.
15 Access to new markets and customers
16 Reduction in money tied up in stocks
17 Paper and postage bills reduced
18 More secure and efficient system
19 Enhanced image
20 Better enterprise resource planning.
21 Better vendor development and management.
(b) Documents against acceptance do not have a usage period.
Ans. Under the contract the duty of the exporter is to ship the contracted goods in agreed packing, as per the contracted mode of transport and as per the schedule of time and delivery along with the tendering of documents as per the contract to the importer.
It is the duty of the importer to release due payment on receipt of documents showing the proof of delivery to a designated carrier for delivery at the desired point or port and bear all costs and risk at the inward port.
Most of the exporters handover the shipping documents for all export consignments to a banker in their country, IBO 04 Free Solved Assignment
who arrange to send such documents to a designated banker in the country of import and handover the carriage receipt to the importer on receipt of payment of the bill.
Unless otherwise specified till such time the payments are received the goods remain under the custody of the bank.
(c) Credit is a major weapon of international competition but it involves risk.
Ans. Meaning of Credit Risk: Credit is a risk taken voluntarily or under compulsions of the trade practices and the will suruive the challenges imposed by the markets.
Competition is getting keen and tough, so is the credit being hotly persued a. the creditor want to cover their risks at all costs.
In today’s international trade competition, the credit has become one of most efficient determining factor in clinching the order in one’s favour.
Bankers want to expand and are willing and ready to extend credit but they want a safe bet by covering their risks through various institutional guarantees and appropriate Insurance policies duly assigned to them,
so as to make good the losses in an eventuality of non-payment by the buyer for whatsoever reasons.
(d) Export incentives do not promote export.
Ans. Incentives are very necessary and important for the export sector so, is the procedure for timely claiming the Export incentives.
The Rules governing various incentives require documentary evidence in the support of claim and a set procedure to be followed for claiming the incentive.
A Director Drawback in the Customs Department has been made responsible for issuing the refund of duties paid by the exporters since duties are different for various products, so a procedure has been set-up which guides and allows the exporters to claim incentives offered under the export promotion policy.
The exporter has to plan out the claiming of export incentives, a so that it obtains the necessary supporting documents in time in regular manner and should file its claims well in time along with all evidentiary documents so that his claims are settled in time to keep his cash flow in line. IBO 04 Free Solved Assignment
- Write notes on the following:
(a) General Provisions for imports.
Ans. The Export and Import policy in force at present have libearlised the import-export trade and have removed all impediments in this trade. The following are the basic highlights of Import and Export policy:
Exports and Imports free unless Regulated: Open General licence provides for almost easy export and import unles. the items have been regulated under the law and the Director General of Foriegn Trade will notify the regulated items through publication of the same.
Compliance with Law: Every Exporter and Importer will comply with various provisions of Foreign Trade (Development and Regulation) Act, 1992 and rules and orders made there under, they will also comply with the condition of Export licence and any other law in force.
Interpretation of Policy: The interpretation of export-import policy will be made only by the Director General of Foreign Trade and shall be final and binding.
Exemption from Policy, Procedure: An appeal can be made to the Director General of Foreign Trade for exemption from a specific point in the policy, which adversely affects the trad IBO 04 Free Solved Assignment
Trade with Neighbouring Countries: The Director General of Foreign Trade with a view to increase and promote trade with neighbouring countries may issue guidelines in this regard.
Trade with Russia under Debt Repayment Agreement: The trade with Russia is governed by the policy of Debt Repayment Agreement and Director General of Foreign Trade may issue instructions in this regard from time-to-time.
Transit Facility: Transit facility may be provided to those countries with which India has such agreement for safe transits of goods through Indian ports without payment of any fee or duty.
Execution of Bank Guarantee/Legal Undertaking: An importer shall execute a legal undertaking or a bank guarantee with the Customs Authority before the clearance of goods through Customs.
Free Movement of Export Goods: All export goods will be allowed free movement and shall not be withhold or delayed and in case of any doubt an undertaking shall be taken from the exporter.
Import-Export of Samples: Sending or receiving of trade samples shall be governed by the provisions of the ExportImport policy.
Third Party Exports: An export licence holder may export himself directly or through a third party. IBO 04 Free Solved Assignment
Clearance of Goods from Customs: The Customs may allow clearance of goods imported / shipped/arrived in adva. but not cleared from Customs against a licence issued subsequently.
Green Card: The Director General of Foreign Trade will issue a green card to all those exporters or manufacturers who have exported more than 50% of their production subject to a minimum of Rs. One Crore in the preceeding year.
This Card may also be issued to service providers rendering services in free foreign exchange for more than 50% of their service turnover subject to a minimum Rs. Thirty Five Lacs in foreign exchange in the preceeding year.
This card provides automatic licensing, automatic custom clearance and other facilities as provided in the Export-Import Policy.
Electronic Data Interchange: To promote transparancy and speed to the export process electronic data interchange would be preferred and encouraged and all applications received electronically with be cleared within 24 hours of their receipt.
(b) Foreign Currency Account.
Ans. Foreign Currency Account
Exporters resident in India are allowed to open and maintain a Foreign Currency Account in India and also outside India. IBO 04 Free Solved Assignment
Exporters are permitted to maintain Exchange Earners Foreign Currency Accounts in India and Foreign Currency Accounts also be maintained outside India by exporters who are exporting goods on deferred payment terms.
This facility is also availa to the companies who undertake civil construction and other turnkey projects contract in foreign countries.
This Account may be held or maintained on any currency other than the currency of India, Nepal or Bhutan. This account may be opened and maintained as follows:
(i) Resident Foreign Currency Account,
(ii) Exchange Earners Foreign Currency Account,
(iii) Foreign Currency Accoun outside India,
(iv) Other Accounts as per law.
(c) Financing under Deferred Payment Arrangement.
Ans. Financing Import against Deferred Payment: When a supplier exporter agrees to supply the goods on credit terms beyond Six months in such cases the authorised dealer has to refer each deferred payment case to RBI for prior approval of advance pay much, bank guarantee and intalments of prirrcipal amount and interest with documents viz.,
exchange control copy of import licence if any, copy of the contract and settlement of desired facilities, for improving under deferred payment the importer should have sufficient cash generated to pay the due installments. IBO 04 Free Solved Assignment
He should be able to arrange for payment of advance and down payment form is own resource which would cover bank’s margin money.
Imported machinery his to be hypothecated with the bank after paying the due charge.
(d) ISO 9000.
Ans. ISO-9000 is a quality standard which is respected, recognised and accepted all over the world as the necessary quality standard of the product or services being at offer.
ISO-9000 is a series of International standards of quality systems. These standard have been evolved by the International Standards Organisation (ISO).
These standards are genuine in nature and do not refer or apply to any particular product actually these standards are the series of working practices which when worked are able to produce standard quality products or services Now-a-days customers all over the world the products they want to procure the ISO-9000 Standards.
These standards provide models for quality assurance in design development, production installation and maintenance services.
Following are the major benefits of ISO-9000:
1 Better product design
2 Improved product quality IBO 04 Free Solved Assignment
3 Reduction in scrap rework and customer complaints
4 Efficient utilisation of men, machine and materials
5 Higher productivity
6 Tension-free work environment
7 Better human relations
8 Creation of quality awareness
9 Provides greater job satisfaction
10 Improvement of confidence among customers
11 Higher acceptability of the products produced
12 Improvement in company’s image
13 More business order flow. IBO 04 Free Solved Assignment
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