Export

Export-Import Procedures (With Flow Chart)
This article throws light upon the sixteen major export-import procedures. The procedures are:
1. Compliance with Legal Framework
2. Concluding an Export Deal
3. Arranging Export Finance
4. Procuring or Manufacturing of Goods
5. Pre-shipment Inspection
6. Central Excise Clearance on Goods for Exports
7. Packaging, Marking, and Labeling of Goods and Others.
Export-Import: Procedure # 1.
Compliance with Legal Framework:

Each country has its own legal framework for export-import transactions which need to be complied
by those entering into international trade.
ADVERTISEMENTS:
In the process of executing an export order, an exporter needs to interact with the exporting country’s
principal agency governing international trade, i.e., generally, the ministry of commerce and trade or
its body, for example, the DGFT in India, customs and central excise authorities, central bank (e.g..
Reserve Bank of India), banks, port trust authorities, insurance company, shipping company or airline,
freight forwarders, chambers of commerce, inspection agencies. Export Promotion Council or
authority, etc.
Obtaining import export code number:
It is mandatory for every exporter to hold a valid Import-Export Code (IEC) Number for exporting or
importing goods from India or into India without which Indian customs would not permit the export-
import transaction. The IEC number is required on any other documents prescribed under the Foreign
Trade (Development and Regulation) Act, 1992 or the Customs Act, 1962.
The IEC number can be obtained from the Regional Authority (RA) under DGFT. This number needs
to be mentioned in various international trade documents, including shipping bill or bill of entry as the
case may be.
ADVERTISEMENTS:
It is also required for foreign exchange declaration forms, such as Guaranteed Remittance (GR)
forms, to be submitted to the negotiating bank. In its efforts to simplify the export-import procedures,
the Government of India has dispensed with the requirement of obtaining the RBI Code Number from
Reserve Bank of India since 1997.

Registration with sales tax and central excise authorities:
Goods which are shipped out of the country are generally eligible for exemption from the states’ sales
tax, central sales tax, and central excise duties. Therefore, Indian exporters are required to get
themselves registered with the sales tax authority of the state under the Sales Tax Act varying from
state to state.
Both manufacturer and merchant exporters have the option either to deposit the central excise duty at
the time of taking goods out of the factory and avail its refund later or take out the goods under a bond
to the central excise authority without paying duty.
ADVERTISEMENTS:
Once the central excise authorities receive the proof of shipment, including Bills of Lading, Shipping
Bill and ARE1/ARE2 Form, exporters running bond account is credited.
Registration with export promotion organization:
For obtaining benefits under the foreign trade policy, an exporter is required to get registered with an
appropriate export promotion organization relating to his or her main line of exports. The application
for registration needs to accompany by self- certified copy of IEC Number, issued by the Regional
Authority.
Besides, Export Promotion Councils, the registration authorities include Marine Products Export
Development Authority (MPEDA), Agricultural and Processed Food Products Export Development
Authority (APEDA), Commodity Boards, such as Tea Board, Coffee Board, Spices Board, Jute
Commissioner, Khadi and Village Industry Commission (KVIC), Development Commissioners of
Special Economic Zones (SEZs), and Federation of Indian Export Organisation (FIEO).
ADVERTISEMENTS:

The Export House or Trading Houses need to get themselves registered with FIEO. Export Promotion
Agencies issue a Registration-Cum-Membership Certificate (RCMC) which is valid for five years.
Exporters are required to submit regular export returns to the registration agency.
Concluding an Export Deal:
While concluding an export deal an exporter should negotiate the terms of the deal in detail, including
the price, the product description, and packaging, port of shipment, and delivery and payment terms.
The process of concluding an export deal is summarized in Fig. 18.5.
It is recommended that exporters conclude and comply with the written contract rather than relying on
verbal agreements so as to avoid future disputes. However, a substantial amount of exports from
India, especially in case of gems and jewellery, garments, handicrafts, handloom, etc., are carried out
without written contracts.
In case there is no written contract, considerable communication between exporter and importer does
take place by way of e-mail, fax, telex, letters, proforma invoice. Letter of Credit, commercial invoice,
etc. Under such situations, a ‘constructed contract’ comes into existence.

Thus, under a ‘constructed contract’, the existence of the contract can be inferred from relevant
documents, such as e-mail, fax, telex, proforma invoice, Letter of Credit, commercial invoice, etc.
However, in such cases an exporter is required to preserve all these documents carefully.
Depending upon the export product and the importing country, the export contracts may
differ, but an exporter should take care of the following aspects:
i. Details of contracting party
ii. Description of products, including quality specifications
iii. Quantity
iv. Unit price and total value of the contract
v. Packaging
vi. Marking and labelling
vii. Inspection requirements for quality, quantity, and packaging as per the inspection agency
viii. Shipment details, such as the choice of carrier, place of delivery, date of shipment/ delivery, port
of shipment, trans-shipment, etc.
ix. Payment terms, including currency, credit period, if any, and mode of payment, such as Letter of
Credit (including type of Letter of Credit, such as revocable, irrevocable, confirmed, unconfirmed, etc.)
x. Insurance requirement and risk liabilities
xi. Documentary requirement for payment realization include number and type of invoices, certificate
of inspection, certificate of origin, insurance policy, transport document. Bill of exchange, etc.
xii. Last date of negotiating documents with bank
xiii. Force Majeure, in case of non-performance of contract

xiv. Arbitration
xv. Jurisdiction
Once an exporter receives an export order as above, she/he should examine it carefully to ensure
that it serves her/his capability and interest to execute the export deal.
The exporter should also scrutinize it carefully to see if it meets commercial and legal provisions of
both the countries of export and import. In case an exporter finds it difficult to fulfil the contractual
obligations, such as the quality specifications, delivery schedule, mode of payment, availability of the
inspection agency, etc., she/he should ask for an amendment from the importer.
Although export contracts are concluded between two private firms and the government does not
interfere in such contracts, these contracts should nevertheless abide by the legislative provisions of
both the exporting and importing countries.
Generally, an exporter prepares a proforma invoice mentioning details of the description of goods,
number and kind of packaging, marks and container numbers, quantity, rate, amount, etc., as per the
contract. The importer returns the signed copy of the proforma invoice, which becomes part of an
export contract. The exporter should also examine the Letter of Credit for any discrepancy and ask for
amendment, if needed.
Arranging Export Finance:
The exporters may avail packing credit facility from commercial banks, generally at concessional
rates, for manufacturing, purchasing, and packaging of goods. Export credit is extended to exporters
to meet their working capital requirements.
Pre-shipment credit is generally provided for the following activities:
i. Packing credit or shipping loan in local currency, e.g., in Rupees in India
ii. Packing credit advance in foreign currencies

iii. Advances against export incentives
iv. Import financing for opening Letter of Credit for the importing goods needed as input for
manufacture of export goods
v. Export credit, normally given on collateral security through a third party guarantee or mortgage of
immovable property
The procedure followed for disbursement of export credit is discussed here:
i. The exporter has to submit an evidence of export, such as an irrevocable Letter of Credit issued by
a reputed international bank or confirmed order placed by a foreign buyer.
ii. The bank calculates the amount of packing credit to be granted which generally does not exceed
FOB value of the goods.
iii. Generally, banks fix 10 to 25 per cent as margin (i.e., exporters’ contribution) and release the funds
debiting to the packing credit amount and credit to the exporters’ account.
iv. The exporter would be required to send the goods through approved transport and forwarding
agency.
v. Besides, exporters are also required to take adequate insurance while warehousing and transport
of goods.
Procuring or Manufacturing of Goods:
After receiving the confirmed export order, the exporting firm should make preparations for the
procurement or production of goods (Fig. 18.6), as the case may be, for merchant or manufacturing
exporter respectively.

Different companies have their own internal communication systems which generally involve sending
a ‘delivery note’ in duplicate to the factory for manufacture and dispatch of goods to the given port of
shipment.
The delivery note should mention in clear terms the description of goods, the quantity, quality
specifications, packaging and labelling requirements, the date by which the goods should be
manufactured, and the details of formalities, such as pre-shipment inspection and central excise
clearance. In case of merchant exporters, similar activities follow in case of procurement of goods
instead of their production.
Pre-shipment Inspection:
At the time of exports before clearing the shipment, customs authorities require submission of an
inspection certificate in compliance with the rules and regulations of the exporting country under force
regarding compulsory quality control and pre-shipment inspection.
Under the Export Quality Control and Inspection Act, 1963, about 1000 commodities, including the
major groups of fisheries, food and agriculture, organic and inorganic chemicals, light engineering,
jute products, etc., are subject to compulsory pre-shipment inspection.
Inspection of export goods may be carried out in one or more of the following manners:

i. In-process quality control
ii. Self-certification
iii. Consignment-wise quality control
The pre-shipment inspection should be completed before the consignment is sealed by the excise
authorities. The exporter has to apply to the nominated export inspection agency for conducting the
pre-shipment and quality control inspection for the export consignment and obtain an inspection or
quality certificate conforming to the prescribed specifications.
This inspection certificate would be required for customs clearance of cargo before shipment.
Central Excise Clearance on Goods for Exports:
The exports are free from the incidence of indirect taxes as per internationally accepted practice.
Therefore, all goods exported from India are exempt from payment of central excise duties.
The act also provides rebate on excise duty levied both on inputs used for manufacture of export
products and the final export production under the ‘Export Rebate/Exemption Scheme’ of Rule 18 of
Central Excise (No. 2) Rules, 2001 under the Central Excise Act, 1944.
Soon after manufacturing the goods, for getting the central excise clearance, the exporter has
to adopt any one of the following options available:
Option I: Export of goods under claim for excise duty rebate:
Under this procedure, the exporter first makes payment on the excise duty and subsequently gets
refund (rule 18). Complete refund of excise duty paid on raw materials used for exports and excisable
finished goods for exports is allowed except for exports to Nepal and Bhutan.
However, in case the exporter has availed the benefits under the Duty Drawback Scheme or the
Central Value Added Tax Credit (CENVAT) on excisable inputs, she/he is not eligible for refund of the
excise duty paid.

The exporter has an option to get the goods examined and sealed by central excise authorities at
his/her own premises before removal of goods for exports so that the goods are not examined at the
port/airport by the customs authorities.
The exporter prepares six copies of ARE1/ARE2 forms and submits them to superintendent of central
excise having jurisdiction over the premises of the exporter. The superintendent may depute an
inspector of central excise or may in person carry out inspection and sealing of export cargo. The
central excise authorities put their seal on the cargo after its examination and their satisfaction.
Option II: Export of goods under bond:
Exporters are allowed to remove excisable goods for exports or inputs for export production from the
place of manufacture or warehouse without payment of excise duty under rule 19 using the following
procedure:
(i) Examination of goods at the place of dispatch:
The exporter submits four copies of ARE-1 to the jurisdictional central excise authority. However, the
exporter has an option to submit the fifth copy of ARE-1 for availing any export facility for her/his
record.
On the basis of information furnished, the concerned central excise authority identifies and examines
the goods in accordance with rules and regulations laid down in the export import policy and other
related regulations in force.
After conforming to these requirements, the goods are allowed to be sealed and an endorsement is
made on all the copies of ARE-1 form that the goods have been examined, sealed, and are permitted
for exports.
The original and duplicate copies of ARE-1 form are given to the exporter, the triplicate is sent to the
central excise (bond) authority and the quadruplicate copy is kept for the purpose of central excise
records.

At the time of shipment, the exporter encloses the original and duplicate copy of the ARE-1 form with
the Shipping Bill to the customs at the port of loading. Customs authorities verify the examination
report and the seal on the goods and permits goods for loading on board the carrier.
Subsequently, an endorsement is made on the original and duplicate copy of ARE-1 by the customs.
The original endorsed copy is handed over to the exporter and the duplicate is sent to the concerned
central excise authorities.
The exporter submits the original copy endorsed by customs to the concerned central excise
authorities as a proof of exports and gets his/her obligation under Legal Undertaking (LUT) or Bond
discharged.
(ii) Removal of goods under self certification:
An exporter can move the goods from the factory or warehouse under self-certification in the ARE-1
form. The original and duplicate copies are sent along with the goods while the third and fourth copies
are sent to the concerned central excise authorities within 24 hours of removal of goods for
verification and record.
The endorsement is made by the customs on ARE- 1 and export is allowed. The exporter submits the
original and duplicate to the customs as a proof of exports and discharges his/her obligation under
LUT or bond.
(iii) Examination of goods at the place of export:
This is similar to the procedure discussed in the preceding section but in this case, the physical
examination of goods is carried out by the customs authorities as per the information furnished in the
ARE- 1 form. Subsequently, goods are allowed to be exported and the exporters’ obligation under
LUT/bond is discharged.
However, the following conditions need to be observed for central excise clearance:
i. The central excise duty leviable on the goods should not exceed the bond amount

ii. The goods meant for exports must be exported within a period of six months after clearance.
However, the period can be extended by the competent central excise authority in special cases.
iii. Proof of export of goods is mandatory for getting LUT or bond discharged.
(iv) Removal of excisable inputs for export production:
The central excise rules provide facility for procurement of excisable goods without payment of excise
duty to be used as input in export production. To avail this facility the manufacturer exporter is
required to register under rule 9 of Central Excise (No. 2) Rule, 2001. The manufacturer exporter has
to furnish details of input-output ratio and the rate of excise duty levied on such excisable goods.
After verification and countersigning by the competent central excise authority, the exporter may avail
benefit of removing the goods used as inputs for production without payment of duty. The goods are
exported under this case using ARE-2 formalities which are similar to ARE-1.
As a rule, central excise authorities are required to settle all claims within three months from the date
of acceptance. For any delay beyond three months, the exporter becomes eligible for getting interest.
Packaging, Marking, and Labeling of Goods:
Proper packaging of export cargo facilitates in minimizing transit and delivery costs and losses.
Besides, the insurance companies also insist upon adequate packaging for settling the claims. After
packaging, marking of the packages is done so as to facilitate identification of goods during handling,
transportation, and delivery. Labeling contains detailed instructions and is carried out by affixing
labels on the packs or by stencils.
Appointment of Clearing and Forwarding Agents:
Clearing and forwarding (C&F) agents or freight forwarders are essential links in international trade
operations.

They carry out a number of functions, including the following:
i. Advising exporters on choice of shipping routes
ii. Reservation of shipping space
iii. Inland transportation at port
iv. Packing
v. Studying provisions of L/C or contract and taking necessary action accordingly
vi. Warehousing insurance
vii. Complying with port, shipping, and customs formalities
viii. Arranging overseas transport service
ix. Rendering assistance in filing claims
x. Monitoring movements of goods to the importer
xi. General advisory services
The export department of the company prepares detailed instructions regarding shipment of
consignment and sends the following documents to the C&F agent:
i. Original export order/export contract
ii. Original letter of credit
iii. Commercial invoice
iv. OR forms (original and duplicate) indicating the IEC number
v. Certificate of origin

vi. Inspection/quality control certificate
vii. Purchase memo (in case of merchant exporters)
viii. Railway receipt/truck/lorry receipt
ix. Consular/customs invoice (if required)
x. ARE-l/ARE-2 forms
xi. Declaration form (in triplicate) by the exporter that the value, specifications, quality, and description
of goods mentioned in the shipping bill are in accordance with the export contract and statement
made in shipping bill are true.
Arranging Cargo Insurance:
The marine insurance cover is arranged by the export department soon after receiving the documents
and obtaining insurance policy in duplicate. The liability to take the insurance cover is determined by
the conditions of the export contract. In case of FOB and CFR contracts, the importer has to obtain
the insurance cover once the cargo is loaded ‘on board’ the vessel.
In case of CIF contacts, the insurance is to be arranged by the exporter but the policy is to be
endorsed in favour of the importer. The nature of risk coverage and insurable value is also specified in
the export contract. Other procedural formalities such as arranging ECGC cover, certificate of origin,
consular invoice etc., are completed at this stage.
Booking Shipping Space:
While obtaining the excise clearance and pre-shipment inspection by the manufacturing office, the
export department gets the shipping space reserved in the vessel by sending shipping instructions
either through the C&F agent or through freight broker who works on behalf of the shipping company.

Once the space is reserved, the shipping company issues shipping order as a proof of space
reservation.
Dispatch of Goods to Port:
On receiving information on reservation of shipping space, the production department makes
arrangements for transport of goods to the port of shipment, either by road and obtaining lorry/truck
receipt or by rail and obtaining railway receipt. The goods are generally consigned to the port town in
the name of the C&F agent.
Indian Railways allots wagons on priority basis for transportation of export cargo to the port of
shipment for which the following document are required to be submitted:
i. Forwarding note (a railway document)
ii. Shipping order (proof of booking shipping space)
iii. Receipt of wagon registration fee
After the loading of goods is completed in the allotted wagons, the railway department issues railway
receipt (RR).
At this stage, the manufacturing office prepares a ‘Dispatch Advice’ and sends it to the export
department along with the following documents:
i. Railway receipt/lorry/truck receipt
ii. ARE-1/2 form
iii. Inspection certificate
Port Procedures and Customs Clearance:

At the port town, procedure for the customs clearance and other port formalities are relatively complex
which need not only the knowledge of export procedures but also the ability to get the shipment
speedily with least hassles.
Therefore, exporters generally avail the services of C&F agents. The activities related to port
procedures and customs clearance for exports from India are summarized for ease of understanding
in Fig. 18.7.

After receiving the documents, the C&F agent takes delivery of the consignment from the road
transportation company or the railway station.
The cargo is stored in C&F agent’s warehouse till shipment. Soon after receiving the cargo, the C&F
agent initiates action to obtain customs clearance and seek permission of port authorities for bringing

the cargo to the shipment shed. Customs departments in all countries are entrusted with control of
export-import of goods in compliance to the law of the land.
The basic objectives of customs control are:
i. To ensure that goods exported out of the country or imported in to the country comply with various
regulations related to export-import
ii. To ensure authenticity of value of goods in the export-import trade and check under-invoicing or
over-invoicing.
iii. To accurately assess and collect the customs duty, wherever applicable
iv. To compile the data
The customs department makes both documentary check and physical examination of goods before
clearance.
The C&F agent prepares the shipping bill and submits the following documents to the customs
house for their clearance:
i. Shipping bill (4-5 copies)
ii. Export order/contract
iii. Letter of credit (original), where applicable
iv. Commercial invoice (one each for Shipping Bill)
v. GR form (original and duplicate)
vi. Inspection certificate (original)
vii. ARE-l/ARE-2 form (original and duplicate)
viii. Packing list, if required

ix. Any other document needed by the customs
These documents are examined by the customs appraiser for:
i. Compliances with the rules, regulations, and other procedural requirements for exports
ii. Declaration of value and quantity in the shipping bill vis-a-vis export order or letter of credit
After value appraisal and examination of documents, the customs appraiser/ examiner makes an
endorsement on the duplicate copy of the shipping bill and gives direction to the dock appraiser to the
extent of physical inspection required to be made at the docks. Except for the original shipping bill,
original GR form and a copy of commercial invoice, all documents are returned to the C&F agent.
The C&F agent submits the Port Trust Copy of the shipping bill to the shed superintendent of port
trust and obtains order for carting the cargo in the transit shed for physical examination by the dock
appraiser. In case of shed cargo, separate dock challan is prepared, while in case of ship loading
over-side, no separate dock challan is needed and the dock charges are mentioned in the shipping
bill itself.
For having the physical examination carried out by the dock appraiser, the following
documents need to be submitted:
i. Shipping bill (duplicate, triplicate, and export promotion copies)
ii. Commercial invoice
iii. Packing list
iv. Inspection certificate (original)
v. ARE-l/ARE-2 form
vi. GR form (duplicate)

After conducting the physical examination, the dock appraiser endorses ‘Let Export’ on the duplicate
copy of the shipping bill and hands it over to the forwarding agent along with all other documents.
The forwarding agent then presents these documents to the preventive officer of the customs
department who supervises loading of cargo on vessel, examines and checks content, weight, etc.,
and makes an endorsement ‘Let Ship’ on the duplicate copy of shipping bill. This endorsement
authorizes the shipping company to accept the cargo in the vessel for shipment.
On completion of loading ‘on board’, the master of the vessel issues ‘mate’s receipt’ to the shed
superintendent of the port. The C&F agent takes delivery of the mate’s receipt after payment of port
charges to the port authorities.
The mate’s receipt is presented to the preventive officer, who makes certification that shipments has
taken place on all the copies of the shipping bill, original and duplicate copies of ARE-1/ ARE-2 form,
and all other copies which need post-shipment endorsement from the customs.
The mate’s receipt is presented to the shipping company, which in turn issues bills of lading (two or
three negotiable in original and about 10 non-negotiable copies) in its exchange.
The bills of lading are prepared in strict accordance to the mate’s receipt. The exporter has to ensure
that the bills of lading is ‘clean on board’ since ‘claused’ or ‘dirty’ Bills of lading are generally not
acceptable to the importer unless otherwise specifically stipulated in the letter of credit.
Dispatch of Documents to the Exporter:
Soon after obtaining the bills of lading from the shipping company, the C&F agent sends the
following documents to the exporter:
i. Full set of ‘clean on board’ bills of lading
ii. Copies of commercial invoice attested by customs
iii. Duty drawback copy of shipping bill

iv. Original export order/export contract
v. Original letter of credit
vi. Copies of consular invoice/customs invoice, if any
vii. ARE-l/ARE-2 forms
viii. OR form (duplicate)
Sending Shipment Advice:
Soon after the shipment, the exporter sends a shipment advice to the importer intimating the importer
about the date of shipment, name of the vessel, and it’s expected time of arrival (ETA) at the port of
discharge. The shipment advice is accompanied by commercial invoice, packing list (if any), and a
non-negotiable copy of bills of lading so as to enable the importer to take delivery of the shipment.
Presentation of Documents at the Negotiating Bank:
Soon after the shipment, the exporter has to present the documents to the negotiating bank as
under:
i. Bill of exchange (first and second of original)
ii. Commercial invoice (two or more copies as required)
iii. Full set of ‘clean on board’ bills of lading (all negotiable and non-negotiable as required)
iv. GR form (Duplicate)
v. Export order/contract
vi. Letter of credit (Original)
vii. Packing list

viii. Marine insurance policy (two copies)
ix. Consular and/or customs invoice, if required
x. Bank certificate (in the prescribed form)
The negotiating banks thoroughly scrutinize all the documents strictly as per the terms of the letter of
credit.
The bank sends a set of documents to the issuing (importer’s) bank by two consecutive airmails so as
to ensure delivery of documents to the importer’s bank and subsequently, subject to fulfilment of
importer’s payment obligations as already agreed upon, the importer’s bank hands over these
documents to the importer to enable him/her to take delivery of the cargo at destination.
The set of documents sent by the negotiating bank to the issuing bank includes:
i. Bill of exchange
ii. Commercial invoice
iii. Negotiable bills of lading
iv. Insurance policy
v. Customs/consular invoice, if any
vi. Packing list (if any)
vii. Inspection/quality control certificate
viii. Certificate of origin
The payment is made by the negotiating bank on receipt of these documents. Once the payment is
received from the importer’s bank, the duplicate copy of the GR form is directly transmitted by the
negotiating bank to the Exchange Control Department of the RBI.

The exporter is returned the original copy of bank certificate along with attested copies of commercial
invoice. The authorized dealer forwards the duplicate copy of the bank certificate to the jurisdictional
DGFT office.
Claiming Export Incentives:
Soon after the shipment, the exporter files claims for getting export incentives as follows:
Claiming excise rebate:
After the shipment, the exporter or his/her C&F agent files claim with the Maritime Commissioner of
Central Excise in the port town or jurisdictional central excise authorities for getting refund of the
excise duty paid or getting credit in the Personal Ledger Account (PLA) and getting discharge of bond
liabilities.
The duplicate copy ARE-l/ARE-2 certified by customs and a non-negotiable copy of bill of lading or
shipping bill are the only documents required for the purpose.
Receiving duty drawback:
The exporter has to file duty drawback claim with the drawback department of customs by submitting
drawback claim proforma, bank or customs certified copy of commercial invoice, and non-negotiable
copy of bills of lading. After examining the exporter’s claim, the duty drawback claim amount is sent to
the exporter’s bank under her/his intimation.

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