By,

ANJALA JOSE
The number of steps and the sequence in which these are taken vary from
one export transaction to another. Steps involved in a typical export
transaction are as follows.

(i) Receipt of enquiry and sending quotations

(ii) Receipt of order or indent
(iii) Assessing importer’s creditworthiness and securing a guarantee
for payments
(iv) Obtaining export license
(v) Obtaining pre-shipment finance
(vi) Production or procurement of goods
(vii) Pre-shipment inspection
(viii) Excise clearance
(ix) Obtaining certificate of origin
(x) Reservation of shipping space
(xi) Packing and forwarding
(xii) Insurance of goods
(xiii) Customs clearance
(xiv) Obtaining mates receipt
(xv) Payment of freight and issuance of bill of lading
(xvi) Preparation of invoice
(xvii) Securing payment
 The prospective buyer of a product sends an enquiry to
different exporters requesting them to send information
regarding price, quality and terms and conditions for
export of goods.
 Exporters can be informed of such an enquiry even by
way of advertisement in the press put in by the importer.
The exporter sends a reply to the enquiry in the form of
a quotation— referred to as proforma invoice.
 The proforma invoice contains information about the
price at which the exporter is ready to sell the goods and
also provides information about the quality, grade, size,
weight, mode of delivery, type of packing and payment
terms.
 In case the prospective buyer (i.e., importing firm) finds
the export price and other terms and conditions
acceptable, it places an order for the goods to be
dispatched.
 This order, also known as indent, contains a description
of the goods ordered, prices to be paid, delivery terms,
packing and marking details and delivery instructions.
 After receipt of the indent, the exporter makes necessary
enquiry about the creditworthiness of the importer. The
purpose underlying the enquiry is to assess the risks of
non payment by the importer once the goods reach the
import destination.
 To minimize such risks, most exporters demand a letter
of credit from the importer.
 A letter of credit is a guarantee issued by the importer’s
bank that it will honour payment up to a certain amount
of export bills to the bank of the exporter.
 Letter of credit is the most appropriate and secure
method of payment adopted to settle international
transactions
Important pre-requisites for getting an export licence are as
follows:

 Opening a bank account in any bank authorized by the

Reserve Bank of India (RBI) and getting an account number.
 Obtaining Import Export Code (IEC) number from the
Directorate General Foreign Trade (DGFT) or Regional
Import Export Licensing Authority.
 Registering with appropriate export promotion council.
 Registering with Export Credit and Guarantee Corporation
(ECGC) in order to safeguard against risks of non payments.
 An export firm needs to have the Import Export Code (IEC) number as it
needs to be filled in various export/ import documents. For obtaining the
IEC number, a firm has to apply to the Director General for Foreign Trade
(DGFT) with documents such as exporter/importer profile, bank receipt
for requisite fee, certificate from the banker on the prescribed form, two
copies of photographs attested by the banker, details of the non-resident
interest and declaration about the applicant’s non association with caution
listed firms.

 It is obligatory for every exporter to get registered with the appropriate

export promotion council. Various export promotion councils such as
Engineering Export Promotion Council (EEPC) and Apparel Export
Promotion Council (AEPC) have been set up by the Government of India
to promote and develop exports of different categories of products.

 Registration with the ECGC is necessary in order to protect overseas

payments from political and commercial risks. Such a registration also
helps the export firm in getting financial assistance from commercial
banks and other financial institutions.
 Once a confirmed order and also a letter of credit have
been received, the exporter approaches his banker for
obtaining pre-shipment finance to undertake export
production.
 Preshipment finance is the finance that the exporter
needs for procuring raw materials and other
components, processing and packing of goods and
transportation of goods to the port of shipment.
 Having obtained the preshipment finance from the bank,
the exporter proceeds to get the goods ready as per the
specifications of the importer.
 Either the firm itself goes in for producing the goods or
else it buys from the market.
 One such step is compulsory inspection of certain products
by a competent agency as designated by the government.
 The government has passed Export Quality Control and
Inspection Act, 1963 for this purpose and has authorized
some agencies to act as inspection agencies.
 If the product to be exported comes under such a category,
the exporter needs to contact the Export Inspection Agency
(EIA) or the other designated agency for obtaining
inspection certificate.
 The pre-shipment inspection report is required to be
submitted along with other export documents at the time of
exports.
 As per the Central Excise Tariff Act, excise duty is payable on the
materials used in manufacturing goods. The exporter, therefore, has to
apply to the concerned Excise Commissioner in the region with an
invoice.
 If the Excise Commissioner is satisfied, he may issue the excise
clearance.
 But in many cases the government exempts payment of excise duty or
later on refunds it if the goods so manufactured are meant for exports.
The idea underlying such exemption or refund is to provide an incentive
to the exporters to export more and also to make the export products
more competitive in the world markets.
 The refund of excise duty is known as duty drawback.
 This scheme of duty drawback is presently administered by the
Directorate of Drawback under the Ministry of Finance which is
responsible for fixing the rates of drawback for different products.
 Some importing countries provide tariff concessions or
other exemptions to the goods coming from a particular
country.
 For availing such benefits, the importer may ask the
exporter to send a certificate of origin.
 The certificate of origin acts as a proof that the goods
have actually been manufactured in the country from
where the export is taking place.
 This certificate can be obtained from the trade consulate
located in the exporter’s country.
 The exporting firm applies to the shipping company for
provision of shipping space. It has to specify the types
of goods to be exported, probable date of shipment and
the port of destination.
 On acceptance of application for shipping, the shipping
company issues a shipping order.
 A shipping order is an instruction to the captain of the
ship that the specified goods after their customs
clearance at a designated port be received on board.
 The goods are then properly packed and marked with
necessary details such as name and address of the
importer, gross and net weight, port of shipment and
destination, country of origin, etc.
 The exporter then makes necessary arrangement for
transportation of goods to the port.
 On loading goods into the railway wagon, the railway
authorities issue a ‘railway receipt’ which serves as a
title to the goods.
 The exporter endorses the railway receipt in favour of
his agent to enable him to take delivery of goods at the
port of shipment.
 The exporter then gets the goods insured with an
insurance company to protect against the risks of loss or
damage of the goods due to the perils of the sea during
the transit.
 The goods must be cleared from the customs before
these can be loaded on the ship.
 For obtaining customs clearance, the exporter prepares
the shipping bill. Shipping bill is the main document on
the basis of which the customs office gives the
permission for export.
 Shipping bill contains particulars of the goods being
exported, the name of the vessel, the port at which
goods are to be discharged, country of final destination,
exporter’s name and address, etc.
Five copies of the shipping bill along with the following
documents are then submitted to the Customs Appraiser at the
Customs House:

 Export Contract or Export Order

 Letter of Credit
 Commercial Invoice
 Certificate of Origin
 Certificate of Inspection, where necessary
 Marine Insurance Policy

After submission of these documents, the Superintendent of the

concerned port trust is approached for obtaining the carting order.
Carting order is the instruction to the staff at the gate of the port
to permit the entry of the cargo inside the dock. After obtaining
the carting order, the cargo is physically moved into the port area
and stored in the appropriate shed. Since the exporter cannot
make himself or herself available all the time for performing all
these formalities, these tasks are entrusted to an agent — referred
to as Clearing and Forwarding (C&F) agent.
 The goods are then loaded on board the ship for which
the mate or the captain of the ship issues mate’s receipt
to the port superintendent.
 A mate receipt is a receipt issued by the commanding
officer of the ship when the cargo is loaded on board,
and contains the information about the name of the
vessel, berth, date of shipment, description of packages,
marks and numbers, condition of the cargo at the time of
receipt on board the ship, etc.
 The port superintendent, on receipt of port dues, hands
over the mate’s receipt to the C&F agent.
 The C&F agent surrenders the mates receipt to the shipping
company for computation of freight.
 After receipt of the freight, the shipping company issues a
bill of lading which serves as an evidence that the shipping
company has accepted the goods for carrying to the
designated destination.
 In the case the goods are being sent by air, this document is
referred to as airway bill.
 After sending the goods, an invoice of the dispatched goods
is prepared.
 The invoice states the quantity of goods sent and the amount
to be paid by the importer.
 The C&F agent gets it duly attested by the customs.
 After the shipment of goods, the exporter informs the importer
about the shipment of goods. The importer needs various
documents to claim the title of goods on their arrival at his/her
country and getting them customs cleared.
 The documents that are needed in this connection include certified
copy of invoice, bill of lading, packing list, insurance policy,
certificate of origin and letter of credit.
 The exporter sends these documents through his/her banker with
the instruction that these may be delivered to the importer after
acceptance of the bill of exchange — a document which is sent
along with the above mentioned documents.
 Submission of the relevant documents to the bank for the purpose
of getting the payment from the bank is called ‘negotiation of the
documents’.
THANK YOU