UNIT-4
EXPORT PROCEDURE AND DOCUMENTATION
The exporter may register with various authorities; such as follows:
1. Registration of the Organisation:
Before exporting, the exporter must decide about the type of organisation, the type of product to be exported, and must also complete other preliminary activities including appointment of agents to book orders.
After setting up the organisation, the exporter must register the organisation with concerned authorities depending upon the type of the organisation:
a) A joint stock company under the Companies Act, 2013.
b) A partnership firm under the Indian Partnership Act, 1932.
c) A cooperative organisation under the Cooperative Societies Act.
d) A sole trading firm may obtain permission from local authorities, if required.
2. Registration with RBI:
Prior to 1997, it was necessary for every exporter to register with RBI. RBI was granting Code Number for Exporters (CNX) which was required to be quoted on any correspondence by the exporter with RBI. Now, RBI registration for exporters is not required.
3. Registration with DGFT:
Exporters must register with Directorate General of Foreign Trade to get Importers-Exporters Code (IEC) Number. IEC Number is a ten digit code required for the purpose of export as well as import. No exporter is allowed to export without IEC Number.
If the goods are exported to Nepal or to Myanmar through Indo Myanmar boarder or to China through Gunji, Namgaya, Shipkila or Nathula ports then it is not necessary to obtain IEC Number, provided the CIF value of a single consignment does not exceed Indian 25000/-.
Application for IEC Number can be submitted to the nearest regional authority of DGFT. Application form which is known as 'AaaatNiryaatFor-ANP2A' can also be submitted online at the DFGT web-site: http:/dgft.gov.in.
While submitting an application form for IEC Number, an applicant is required to submit the following documents:
a) A photocopy of Permanent Account Number (PAN)
b) Current Bank Account Number
c) Banker's Certificate.
A sum of 1000/- must be paid towards the application fee. The amount can be paid in the form of Demand Draft or payment through EFTS (Electronic Fund Transfer System) through a nominated bank.
4. Registration with Tax Authorities:
Exporters need to register with various tax authorities to claim exemptions and deductions, wherever applicable. The various tax authorities include:
a) Income Tax Department to obtain Permanent Account Number (PAN)
b) State Sales Tax Department for VAT and with Central Sales Tax Department.
c) Central Excise Authorities to claim exemption of excise duty.
5. Registration with Export Promotion Council:
Registration with EPC is not compulsory, but it is important for exporters to become members of concerned EPC. There are about 28 EPCs in India. Each EPC looks after the promotion of specific product.
Exporters obtain Registration-Cum-Membership-Certificate (RCMC) from their respective EPC. For instance, ready-made garments exporter may register with Apparel EPC and exporter of engineering goods may register with Engineering EPC. An application for registration must be accompanied by self-certified copy of TEC number. Membership fee should be paid in the form of cheques or demand draft. The membership fee differs depending upon the type of EPC.
The RCMC is valid from 1st April of the licensing year in which it is issued. It is valid for 5 years ending 31st March of the licensing year, unless otherwise specified.
6. Registration with Commodity Boards:
Exporters of commodities such as coir, coffee, rubber, spices, tea, tobacco, etc. may register with respective commodity board. The CBs are similar to that of EPCs.
The EPCs promote manufactured items, whereas, CBs develop and promote agriculture-related commodities. An application must be submitted for RCMC along with a photocopy of IEC number along with other relevant documents.
7. Registration with FIEO:
A Status Holder (Export House/ Trading House) exporter is required to obtain RCMC from Federation of Indian Export Organisations. Membership of FIEO is required by Status Holders to avail various benefits under Foreign Trade Policy. The registration also enables status holders to get certain benefits from Customs and Central Excise authorities. FIEO can issue the RCMC under its multi-products group category, if the export products for which registration is sought fall under at least two product groups (covered by two different EPCs). However, registration with EPC is compulsory for the main line of business in such cases.
FIEO is the registering authority for service exporters other than service exporters of 14 specified services (as listed in the Appendix-2 of Handbook of Procedures Volume 1).
8. Registration with Other Authorities:
The exporters may register with various other authorities to avail facilities or services offered by them, the other authorities include:
a) Regional Chambers of Commerce and Industry
b) Export Credit Guarantee Corporation
c) Indian Institute of Foreign Trade
d) India Trade Promotion Organisation
e) Indian Institute of Packaging
f) Quality Council of India, etc.
There are various activities to be undertaken at the pre-shipment stage. The main steps involved at the pre-shipment procedure are:
1. Preliminary Activities:
The exporter has to perform a number of preliminary activities before receiving export order. The preliminary activities involve:
(a) Registration with various authorities such as DGFT to obtain Importer-Exporter Code (IEC) Number, registration with concerned EPC to obtain Registration-cum Membership Certificate (RCMC), etc.
(b) Appointment of agents in the overseas markets to solicit for export orders.
(c) Designing website to provide information and to secure orders.
(d) Appointment of distributors or setting up of sales divisions abroad, etc.
2. Order- Receipt and Confirmation:
The exporter obtains orders from the overseas buyers either on-line or through the agents. THE exporter needs to confirm the receipt of the order. The exporter also needs to sign a contract with the importer. The contract must have clear terms and conditions.
3. Letter of Credit:
Generally, the exporter requests the importer to issue letter of credit, especially in the case of large contracts. Letter of credit is the safest method of payment in international trade. (LC is an undertaking given by the importer s bank guaranteeing the payment on behalf of the importer.)
Alter getting request from the exporter, the importer requests his bank to issue LC in favour of the exporter. The importer's bank issues the LC and dispatches the same to the exporter.
4. Obtaining Packing Credit:
After getting the LC, the exporter obtains packing (pre-shipment) credit from his bank. Packing credit is required to meet working capital needs before shipment of goods. To obtain packing credit, the exporter must make an application to the bank with required documents such as:
a) Copy of LC
b) Copy of confirmed export order
c) Letter of pledge/hypothecation, etc.
5. Production or Procurement of Goods:
Once packing credit is obtained, the manufacturer exporter makes arrangement for production of goods as per buyer's specifications. A merchant exporter procures the goods from the local market or from overseas market, and then makes arrangement for exports.
6. Packing and Marking of Goods:
The exporter must make suitable packing depending upon:
a) Buyer's specification.
b) Mode of transport.
c) Nature of goods, etc.
The packages must be appropriately marked with: Country of origin.
a) Port of shipment
b) Port of destination
c) Handling instructions.
d) Net and Gross weight, etc.
7. Pre-shipment Inspection:
The exporter should apply to EIA, if the export cargo is subject to quality control and pre-shipment inspection. The EIA issues an Inspection Certificate, if satisfied with the quality and if not issues a Rejection Note. At present, exporters who have obtained ISO 9001 certification or equivalent, do not have to get their goods inspected buy EIA.
8. Central Excise Clearance:
Export goods are exempted from Central Excise. However, clearance has to be obtained from excise authorities. There are two ways of excise clearance (a) Export under Rebate, (b) Export under Bond.
9. ECGC Cover:
The exporter should obtain ECGC cover to protect against credit risk. The exporter may obtain either standard policy or specific policy, depending upon, the type of product/service and period of credit extended to overseas buyer.
10. Marine Insurance Policy:
As soon as the goods are ready for export, the exporter has to apply to Insurance Company for insurance cover- if it is a CIF Quotation or if the importer wants the exporter to obtain the cover on his behalf. The insurance policy is obtained in duplicate. Certain other formalities such as Certificate of Origin, Consular Invoice, should be completed at this stage.
11. Appointment of Custom House Agent:
The exporter needs to appoint CHA to look after forwarding of goods. The CHA undertakes the following activities:
a) Booking of space on the vessel
b) Preparation of shipping bill.
c) Submission of documents to the customs.
d) Obtaining 'let export order'.
e) Obtaining 'let ship order', etc.
12. Instructions to CHA:
The exporter needs to give relevant instructions to the CHA regarding forwarding of goods. The CHA must be handed over certain documents for further action including custom attestation. The documents include:
a) Commercial invoice
b) Certificate of origin.
c) Consular invoice.
d) GR form (original and duplicate)
e) Other relevant documents.
- PROCEDURE OF QUALITY CONTROL AND PRE-SHIPMENT INSPECTION
Realizing the importance of the need for supplying quality goods as per international standards, the Government of India had introduced Compulsory Quality Control and Pre-Shipment Inspection (QC&PSI) of several items of export under Export (Quality Control and Pre-Shipment Inspection) Act, 1963. The export items that were subjected to compulsory inspection were food and agricultural products, chemicals, engineering, coir, jute and footwear. At present, most of the exporters have obtained ISO 9000 certification, and therefore, the items of such exporters are not subject QC&PSI.
For monitoring pre-shipment inspection, Government of India has set up Export Inspection Council (EIC). The EIC has set up 5 Export Inspection Agencies (EIA). The EIAs are located one each at Mumbai, Kolkata, Kochi, Delhi and Chennai. The EIAs has a network of nearly 60 offices throughout India. Each EIA is given certain jurisdiction for inspection purpose. For instance, EIA of Mumbai has jurisdiction over Maharashtra, Gujarat and Goa.
• Systems of Quality Control:
For the purpose of pre-shipment inspection, EIC has recognised three systems of inspection, namely:
(a) Self-Certification.
(b) In-Process Quality Control.
(c) Consignment Wise Inspection.
- Self-Certification:
Under this system, complete authority is given to the manufacturing units to certify their own products and issue certificates for export The manufacturing units which have been recognised under this scheme have to pay a nominal yearly fee at the rate of 0.1 % of FOB price subject to minimum of 2,500/- and maximum of 1 lakh in a year to the concerned EIA
- In-Process Quality Control (IPQC):
In this system, companies /units adjudged as having adequate level of quality control right from raw material stage to the finished product stage including packaging are eligible to get the inspection certificate on a formal request by the exporter. Over 800 units all over India are operating under this system.
Constant vigil and surveillance are kept on the units approved under IPOC and self-certification system. Units approved under the above two systems are often known as "Export Worthy Units", because of their consistent standards of quality.
- Consignment Wise Inspection:
Under this system, each and every consignment is subject to compulsory inspection. The exporter has to follow a certain procedure such as:
a) He has to make an application to Export Inspection Agency
b) The EIA deputes inspector to inspect the goods.
c) After the inspection, the goods are repacked with EIA seal.
d) The inspector then makes a report to Deputy Director of EIA.
e) The Deputy Director of EIA then Issues Inspection Certificate in triplicate if the inspection report is favourable.
f) If the inspection report is not favourable, a rejection note is issued.
- Procedure of Pre-Shipment Inspection:
Exporters who are not approved under Self-Certification and IPQC must follow consignment wise inspection procedure. The procedure is as follows:
1. Application:
The exporter must make an application to the concerned EIA in the prescribed form in duplicate. The original copy i submitted to EIA, and the duplicate to the EIC, at least 7 days in advance before the actual shipment of goods. The application form must be accompanied with the following documents:
(a) A crossed cheques/DD in favour of EIA towards inspection fees
(b) A copy of commercial invoice.
(c) A copy of export contract giving details of importer's specifications.
2. Deputation of Inspector:
After receiving the application, the EIA deputes an inspector to inspect the goods. The exporter must keep ready all the goods fully packed for inspection. The inspector may conduct inspection either at the factory or at the warehouse where the goods are kept for inspection.
3. Inspection and Testing:
The inspector usually conducts inspection on sample basis facilities for conducting a test may be provided to the inspector, if he so desires. Where such facilities are not available, tests are conducted at independent laboratories and the results evaluated.
4. Repacking of Goods:
If the Inspector is satisfied with the quality, the items are repacked. The entire consignment is marked and sealed in the presence of the Inspector with the official EIA seal.
5. Reporting to EIA:
The inspector makes a report to Deputy Director of EIA for the purpose of examination of report and for taking suitable action. The report can be favourable or unfavourable.
6. Inspection Certificate:
If the report of the inspector is favourable, the Deputy Director of EIA issues an inspection certificate in triplicate.
(a) Original Copy to the Customs.
(b) Duplicate Copy to the Importer.
(c) Triplicate copy to be retained by the Exporter.
7. Rejection Note:
If the consignment is not approved for export, the Dy.Dir. of EIA issues a rejection note. In other words, unfavourable report is issued to the exporter. This means that the exporter cannot export the goods.
8. Appeal against Rejection Note:
The exporter can appeal against the rejection note within 10 days from the date of the receipt of rejection note. The appeal is then reviewed by a panel of experts. If needed, inspection may be done once again. The decision of the panel of experts is final on both the parties - Exporter and Export Inspection Agency. This means if the rejection note is rejected by the Appellate Panel (panel of experts), the exporter is issued inspection certificate.
- SHIPPING AND CUSTOM STAGE FORMALITIES/CLEARANCE
The goods can be loaded on the ship only after obtaining clearance from the custom authorities. Necessary formalities have to be completed relating to custom clearance before shipment of goods.
The following is the procedure involved in custom clearance and shipment of goods:
1. Submission of Documents:
The exporter through the CHA submits relevant documents to the custom authorities for verification. The documents include:
- Commercial invoice
- Certificate of origin
- Consular invoice.
- GR form (original and duplicate)
- Packing List
- Shipping Bill
- Other Relevant Documents.
2. Verification of Documents:
The Customs Appraiser verifies the documents and appraises the value of goods. He then makes an endorsement of 'Examination Order' on the duplicate copy of shipping bill regarding the extent of physical examination of the goods at the docks.
All documents are returned back to the agent or exporter, except:
- Original Copy of GR to be forwarded to RBI.
- Original Copy of Shipping Bill.
- One Copy of Commercial Invoice.
3. Carting Order:
The exporter's agent has to obtain the carting order from the Port Trust Authorities. Carting Order is the permission to bring the goods inside the docks. The Carting Order is issued by the Superintendent of Port Trust.
Carting order is issued only after verifying the endorsement on the duplicate copy of shipping bill by the customs appraiser.
The endorsement must also be there on the Port Trust Copy of Shipping Bill. The Carting order enables the exporter s agent to cart goods inside the docks and store them in proper sheds
4. Storing of Goods in the Sheds:
After obtaining carting order, the CHA gets the goods inside the docks. The goods are then stored in the shed (warehouse) at the docks. The goods are kept in the shed till they are loaded on the ship. Also, the goods are stored in the shed for the purpose of examination of goods by the custom authorities.
5. Examination of Goods:
The exporter s agent then approaches the Customs Examiner to examine the goods. The Customs Examiner examines the cargo and records his report on the duplicate copy of the shipping bill. The customs examiner then signs the 'Let Export Order'.
6. Let Ship Order:
The Let Export Order is then shown to the Customs Preventive Officer, along with other documents. The CPO is in charge of supervision of loading operations on the vessel. If CPO finds everything in order, he endorses the duplicate copy of shipping bill with the 'Let Ship Order'. This order helps the exporter/ shipper to load the goods on the ship.
7. Loading of Goods:
After obtaining the 'let export order' and the 'let ship order the goods are loaded on the ship. The CPO supervises the loading operations so that only the goods cleared by customs are loaded on board the ship.
After loading is completed, the Chief Mate (Chief Cargo Officer) of the ship issues the Mate Receipt. The Mate Receipt is the acknowledgement that certain number of packages is loaded on the ship and in certain condition.
8. Payment of Port Trust Dues:
The Chief Mate sends the mate receipt to the port trust office. The CHA pays the port trust dues for using the shed and the docks for clearance. After payment of port trust dues, the CHA approaches the CPO for certification of shipment of goods on shipping bill and other documents.
9. Obtaining Bill of Lading:
The Mate's Receipt is then handed over to the shipping company (on whose vessel the goods are loaded). The shipping company issues Bill of Lading. The Bill of Lading is issued in:
- 2 or 3 Negotiable Copies.
- 10 to 12 Non-negotiable Copies.
The negotiable copies have title to goods, whereas non-negotiable copies do not have title to goods but are used for record purpose.
10. Payment to CHA:
The exporter has to make payment to the CHA for the services rendered by him. The exporter also needs to pay the expenses incurred by CHA regarding shipping and custom clearance.
The CHA provides a number of services. The services of the CHA includes the following:
1. Obtaining Shipping Order:
The CHA may obtain shipping order from the shipping company. The shipping order enables booking of space on the ship. At times, the importer does the booking of space on the ship.
2. Arrangement for Internal Transport:
The CHA agent would make necessary arrangement of internal transport. Such transport is required to transport the goods from the exporter s factory or warehouse to the docks or airport.
3. Preparation of Shipping Bill:
The CHA prepares the shipping bill in five copies. The shipping bill is an important document required for customs clearance.
The shipping bill is prepared on the basis of other documents provided to him by the exporter such as commercial invoice packing list, etc.
4. Submission of Documents to Customs:
The CHA submits the relevant documents to the customs house for the purpose of verification. The documents include required number of copies of:
- Commercial Invoice
- Shipping Bill
- Packing List
- GR - Form
- ARE-1 Form, etc.
5. Obtaining Carting Order:
The CHA has to obtain the carting order from the Port Trust Authorities. Carting order is required to get the goods inside the docks for the purpose of examination and shipment.
6. Storing of Goods:
After obtaining the carting order, the CHA would then make arrangement to store the goods in the sheds at the docks. Such storing is required for the purpose of examination of goods.
7. Obtaining Let Export Order:
The CHA gets the goods examined by the Customs Examiner. If the Customs Examiner is satisfied, then he will issue the Let Export Order.
8. Obtaining Let Ship Order:
The agent shows the let export order to the customs preventive officer before loading of goods on the ship. The customs i preventive officer may check the let export order and the goods. If satisfied, he will issue Let Ship Order which gives permission to load the goods on the ship.
9. Loading of Goods:
The agent then makes arrangement to load the goods on the ship. The agent has to see to it that the goods are loaded in good condition on the ship.
10. Payment of Port Trust Dues:
The agent would then make payment of port trust due for making use of docks. After that he will collect the mate receipt from the port authorities.
11. Obtaining Bill of Lading:
The agent then goes to the shipping company and exchange is the mate receipt to the bill of lading. The bill of lading is the important document required by the importer for customs clearance at the port of destination.
In India, the export proceeds must be realized within 180 days from the date of shipment in the case of consumer goods. However, certain organisations such as units in SEZ, STPs, EHTPs, BTPs, EOUs, Export Houses and Trading Houses can realise payment within 360 days.
In case of capital goods, the exporter can sell on 'deferred payment' terms, i.e., credit period can be allowed beyond 180 days. Under deferred payment terms, the payment can be received in instalments over a period of time which may extend even beyond 10 years depending upon the type of capital goods and the amount involved.
• Procedure in Realisation of Export Proceeds:
1. Submission of Documents to Bank:
The exporter must submit relevant export documents (certified by customs) to the bank. The documents must be submitted within 21 days of shipment. The documents include:
- Bill of Lading
- Shipping Bill
- Commercial Invoice
- Consular Invoice.
- Certificate of Origin
- GR Form
- Other Relevant Documents.
2. Verification of Documents:
The bank verifies documents to find out whether or not:
- Required documents are in order.
- Relevant details are properly filled in all documents.
- Documents are certified by customs.
- Documents as per letter of credit.
3. Certification of Documents:
If the bank is satisfied with the documents, the bank certifies the documents including the copies of shipping bill. Certain documents such as shipping bill, commercial invoice, etc., which are certified by the bank are required by the exporter to claim incentives like duty drawback.
Bank certified documents are also required by the importer for customs clearance at the port of destination.
4. Dispatch of Documents:
The exporter's bank dispatches the documents to the importer's bank. The importer's bank transfers the documents to the importer depending upon the method of payment.
- In case of Documents Against Payment (DP) Bills method, the documents are handed over to importer only when he makes payment to the bank.
- In case of Documents Against Acceptance (DA) Bills method, the documents are handed over to importer if he accepts the bill of exchange drawn by the exporter.
- In case of advance payment received by exporter and in case of letter of credit, the documents are handed over to the importer immediately on receipt of such documents by the importer's bank.
5. Letter of Indemnity:
The exporter's bank may ask exporter to sign letter of indemnity. The letter of indemnity is required when the bank makes advance payment to the exporter against discounting of bills. Under letter of indemnity, the exporter gives an undertaking to the bank to repay the advance amount plus other charges if the discounted bills are dishonoured by the importer.
6. Discounting of Bills:
The exporter may discount the Documents against Payment bills or bills drawn against LC. The exporter may discount the bills and obtain advance for working capital needs. The advance against discounting of bills is adjusted against the payment received from the importer.
7. Payment by Importer:
The importer makes payment to the importer's bank. The importer's bank transfers the amount to the exporter's bank. The exporter's bank credits the account of the exporter on receipt of the funds from the importer's bank.
8. Processing of GR Form:
The exporter's bank records the actual amount received on the duplicate copy of GR. The bank then sends the GR copy to RBI. The RBI cross checks the amount received on the duplicate copy with the original copy of GR (earlier received from the customs) If the amount received is less than mentioned on the original copy, the exporter may have to give necessary explanation.
9. Follow-up:
The exporter needs to follow-up the payment. If payment is not received within the due date, the exporter sends reminders. When the amount is received, the exporter must immediately acknowledge the same. The acknowledgement enables to develop good relations with the importer.
Under GST regime exports would be considered as zero-rated supply. Any person (exporter) making zero-rated supply shall be eligible to claim refund either of following options:
(a) He may supply goods or services or both under bond or under letter of undertaking, subject to such conditions, safeguards and procedures, without payment of integrated tax and claim refund of unutilized input tax credit.
(b) He may supply goods or services or both, subject to such conditions, safeguards, and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied in accordance with the provisions of section 54 (Refunds) of Central Goods and Services Tax or rules made there under (Refund Rules, 2017).
• Export Under Bond
The following are the provisions and procedure of Export Under Bond:
1. A Bond (in nature of Indemnity bond) in Form GST RFD-11 is executed on non-judicial stamp paper between the exporter and the Government. As a transition provision, exports were allowed under existing Bonds till July 31, 2017, by which date, the above mentioned Form GST RFD-11 had to be furnished for future exports.
2. The Bond need not be given separately for each export as this would make the compliance burdensome. The Bond would be like a running Bond (with debit / credit facility).
3. The Bond should sufficiently cover the amount of tax involved in the export based on estimated tax liability as assessed by the exporter himself. The exporter shall ensure that the outstanding tax liability on exports is within the bond amount. In case the bond amount is insufficient to cover the tax liability in yet to be completed exports, the exporter shall furnish a fresh bond to cover such liability.
4. As an ease of compliance, the Bond shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter (though Rule 96A (1) requires to be filed with the Jurisdictional Commissioner).
5. In the Bond, the exporter undertakes that he shall export the goods / services and observe all the provisions of the Act / Rules in respect of export of goods / services.
6. A Bank Guarantee will have to be furnished to the Commissioner as a security under the Bond. The Jurisdictional Commissioner may decide about the amount of Bank Guarantee depending upon the track record of the exporter. If Commissioner is satisfied with the track record of an exporter, then furnishing of bond without bank guarantee would suffice. In any case the bank guarantee should normally not exceed 15% of the bond amount.
7. The Bonds also will state that in the event of breach or failure in performance, the Government shall invoke the bank guarantee to make good all the loss / damages.
8. The Bond has to be furnished prior to the export. Once the Bond is furnished, the exporter can carry out the export of goods services
9. No tax will be paid on the export supply and the invoice shall carry a declaration as 'SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX'.
10. The format of Form GST RFD-11 along with format of the Bond to be executed is available in Circular No 26/2017-Customs dated July 1, 2017
11. Presently, the module for furnishing of GST FORM RFD-11 is not available on the CSI common portal. Hence, the Form GST RFD-11 has to be downloaded from cbec.gov.in and furnished manually to the jurisdictional Deputy/Assistant Commissioner.
12. Form ARE-1, which all along was an important statutory document to avail export benefits, both under Excise and Customs Laws, now dispensed off with the onset of GST, except that it will now apply only two commodities to which provisions of Central Excise Act continue to be applicable.
- PROCEDURE OF EXPORT UNDER LETTER OF UNDERTAKING (LUT)
Export Under Bond requires furnishing of Bond supported by a Bank Guarantee, which results in blocking of working capital since Bank would ask the exporter for a margin money deposit against the Guarantee. For this reason, every exporter would want to exercise Option to export against LUT in lieu of a Bond.
The following are the provisions and procedures for export under LUT:
1. The Government is selective in giving this option and at present, only registered person shall be eligible for submission of LUT in place of a Bond.
- A status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020; or
- Who has received the due foreign inward remittances amounting to a minimum of 10% of the export turnover, which should not be less than Rs 1 Crore, in the preceding financial year, and he has not been prosecuted for any offence under the CGST Act, 2017 or under any of the existing laws in case where the amount of tax evaded exceeds 2.5 lakhs.
2. A Letter of Undertaking in Form GST RFD-11, addressed to the President of India has to be executed by the Registered Person. As a transition provision, exports may be allowed under existing LUT's till July 31, 2017, by which date, the above mentioned Form GST RFD-11 has to be furnished for future exports.
3. As an ease of compliance, the LUT shall be accepted by the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter (though Rule 96A (1) requires to be filed with the Jurisdictional Commissioner).
4. In the LUT, the exporter would undertake the following: (a) To export goods within 3 months from invoice date (b) To receive consideration for export of services in foreign currency within 1 year from invoice date (c) To observe all the provisions of the Act/ Rules in respect of export (d) In event of failure to do the export he shall pay IGST (Integrated Goods and Services Tax) along with interest @ 18% on the IGST from the invoice date till date of payment.
5. The LUT has to be furnished prior to the export. Once the LUT is furnished, the exporter can carry out the export of goods/ services.
6. No tax will be paid on the export supply and the invoice shall carry a declaration as 'SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX'.
7. The LUT will be valid for 12 months and should be furnished for each financial year in duplicate.
8. No Bank Guarantee is required to be furnished to the Commissioner. However, it the exporter fails to comply with the conditions of the LUT, he may be asked to furnish a Bond.
9. The format of Form CST RFD-11 along with format of the LUT to be executed is available in Circular No 26/2017- Customs dated July 1, 2017.
10. Presently, the module for furnishing of GST FORM RFD-11 is not available on the GST common portal. Hence, the Form GST RFD-11 has to be downloaded from cbec.gov.in and furnished manually to the jurisdictional Deputy/Assistant Commissioner.
11. Form ARE-1, which all along was an important statutory document to avail export benefits, both under Excise and Customs Laws, now dispensed off with the onset of GST, except that it will now apply only two commodities to which provisions of Central Excise Act continue to be applicable.
- COMMERCIAL INVOICE CUM PACKING LIST
Meaning:
Commercial invoice is the statement of account sent by the seller to the buyer and is prepared on seller’s letter-head. It is an exporter’s bill for the goods shipped. Commercial invoice is the basic document in an export transaction. All other documents are prepared with the help of information contained in commercial invoice. It contains such information as description of goods, price charged, term of shipment and the marks and numbers on the packages containing the merchandise. It is the seller’s bill for the goods which contains complete particulars about the consignment.
- The commercial invoice should contain:
a) The name and address of the exporter and the importer.
b) The description of goods like quality, quantity, weight etc.
c) The value of goods, less discounts, if any.
d) The net amount payable by the importer.
e) Terms and conditions for sale.
f) The signature of the exporter.
- Other details of shipment to be included as –
g) Name of the ship
h) Letter of credit number.
i) Import-Export licence number of the export.
j) Bill of lading number.
k) Packaging specification and marketing there on
l) Identification marks on the package.
m) Shipping bill number and date.
n) Shipping terms and conditions.
o) Freight charges and Marine Insurance premium.
p) Any other details if required.
- IMPORTANCE OF COMMERCIAL INVOICE
The commercial invoice is important both to the exporter and to the importer.
I. Importance to the Exporter –
1) Payment collection – Commercial invoice is the exporter’s bill which the importer has to pay. It enables the exporter to collect payment from the importer.
2) Quality Control Inspection – A copy of commercial invoice is required to be submitted to Export Inspection Agency (EIA).
3) Customs Clearance – A copy of commercial invoice is required to submit to customs for customs clearance at the post of shipment.
4) Documentary Proof – It can act as a documentary proof in case of disputes between the exporter and importer regarding the amount payable by the importer and such other aspect.
5) Preparation of other documents – Commercial invoice helps to the exporter on his agent to prepare other documents based on the commercial invoice, such as shipping bill.
6) Claiming of Incentives – A copy of commercial invoice is required by the exporter to claim incentives like DBK, Excise Refund, etc.
7) Recording and Filing – A copy of commercial invoice is required by the exporter for the purpose of recording and filing for future reference.
II. Importance to the Importer
1)Payment of customs duty – A copy of commercial invoice helps to the importer to pay customs duty at the port of destination.
2) Payment to Exporter – Commercial invoice helps to know the exact amount that is to be paid to the exporter.
3) Obtaining Loan – A copy of commercial invoice may be required to obtain loan from the bank against the import of goods.
4) Preferential Tariffs – Commercial invoice is useful for the collection of tariff concession, if available.
5) Recording and Filing – A copy of commercial invoice is required for future reference.
6) Customs clearance – A copy of commercial invoice is required by the importer for the purpose of customs clearance at the port of destination.
- BILL OF LADING/AIRWAY BILL
Meaning:
A bill of lading is a document issued by the shipping company upon shipment of the goods. It is a contract between the shipper (exporter) and the shipping company for the carriage of goods to the port of destination. It is a document title to goods and as such required by the importer to clear the goods at the port of destination. Bill of Lading is a document of title to the goods. It is issued by the shipping company and serves as a receipt from the shipping company which undertaken to deliver the goods at agreed destination on payment of freight.
A Bill of Lading contains are the following.:
a) The name of the shipping company.
b) The name and address of the shipper exporter.
c) The name and address of the importer / agent.
d) The name of the ship.
e) Voyage number and date.
f) The name of the ports of shipment and discharge.
g) Quality, quantity, marks and other description.
h) The number of packages.
i) Whether freight paid or payable.
j) The number of original issued.
k) The date of loading of goods on the ship.
l) The signature of the issuing authority.
In short, bill of lading is a contract between the shipper and the shipping company for the carriage of goods to the port of destination. It is an acknowledgement indicating that the goods accepted for transportation are in order and in good condition.
- TYPES OF BILL OF LADING
1) Clean Bill of Lading – A clean bill of lading is one which does not contain any indication that the goods were defective when boarded on ship.
2) Clause BL – It bears some adverse remarks when goods are not properly packed and show signs of damage. The shipping company puts adverse remark for example “goods damaged”.
3) State BL – If the bill of lading is held to long and not presented to the bank / consignee soon after it is given by the shipping company, it is called state bill of lading.
4) Freight paid BL – This bill of lading is issued when the exporter has paid for the freight charges. The words „freight paid‟ are mentioned on the bill of lading.
5) Freight collects BL – When the export contract is on F. O. B. terms and when freight is not paid by the exporter, it is called freight collect bill of lading.
6) To order BL – This bill of lading is issued in the order of a certain person. Title to the goods is given by possession of bill of lading.
7) Straight BL – In this importer / consignee / agent is named in the bill of lading, it is called straight bill of lading.
8) On Board & Received BL – A bill of lading issued after the goods are loaded on the vessel is called „on board bill of lading‟.
9) Container BL – When containers are used in international trade, the shipping company issues container bill of lading. Such a bill covers a particular container from one port to another.
- IMPORTANCE OF BILL OF LADING:
I) Importance of BL to the Exporter
a) Bill of lading is a legal document. In the event of dispute, it can be presented in a court of law.
b) It is a contract of transportation.
c) It is an acknowledgement of the receipt of the goods on board the ship.
d) It enables the exporter to send a shipment advice to the buyer.
e) It helps the exporter to file claim of compensation, if goods are damaged in transit.
f) It helps the exporter to calculate exact amount of freight while submitting CIF quotation.
II) Importance of BL to the Importer
a) It is a document title of goods; as such he can claim the possession.
b) It is a semi-negotiable document i.e. its ownership can be transferred by endorsement and delivery.
c) It enables him to pay proper freight amount under FOB contract.
III) Importance of BL to the shipping company
a) It helps the shipping company to collect the freight from the shipper or the importer.
b) It protects the shipping company in sense that goods damaged before loading on the ship is shown in bill of lading.
- SHIPPING BILL/BILL OF EXPORT
Meaning:
Shipping Bill is the main documents on the basis of which the custom’s permission for export is given. It is a multi-purpose documents used as application for export of goods, as dock challan and for claiming duty drawback and other export incentives.
The shipping bill contains description of goods and other particulars such as.
a) Name, address and IEC number of the exporter.
b) Name of the ship or the vessel.
c) Name of the agent
d) Description of goods
e) Details of packages and marketing there on.
f) Value of the goods.
g) The port at which goods are to be discharged.
h) Other details, if applicable.
Shipping bill is the main customs document. It is required by the customs authorities for granting permission for the shipment of goods.
The shipping bill is generally prepared in five copies –
a) Customs copy
b) Drawback copy
c) Export Promotion copy
d) Port Trust copy
e) Export’s copy
- TYPES OF SHIPPING BILLS
Generally, there are five types of shipping bill. These are as follows.
1) Free Shipping Bill – Free shipping bill is used for goods which neither attracts any duty nor is entitled to duty drawback on their exportation.
2) Dutiable Shipping Bill – Dutiable shipping bill is used in case of goods subject to export duty.
3) Drawback Shipping Bill – Drawback shipping bill is used in case of goods which are entitled to drawback (refund of customs duty)
4) Shipping bill for shipment Ex-bond – It is used in case of imported goods meant for re-exports and which are kept in bond.
5) Coastal shipping bill – It is used in case of shipments which are moved from one port of another by sea in India. It not an export document. Generally, the format of shipping bill in case of export by air and by sea is more or less the same, except colour of the form may be different.
- IMPORTANCE OF SHIPPING BILL
The importance of shipping bill to the exporter can be stated as follows –
1) Customs clearance – Shipping bills is required by the custom authorities for clearance of goods. The custom authorities endorse the duplicate copy of the shipping bill with “let export order” and “let ship order”.
2) Obtaining Incentives – Shipping bill endorsed by the customs enables the exporter to obtain export incentives, such as excise refund and duty drawback.
3) Loading of goods – When the customs preventive officer provides duplicate copy of the shipping bill to the agent of the shipping company, permission to load the goods or Cargo is given.
4) Appraising value of goods – Shipping bill helps the customs to appraise the value of goods that are to be exported.
Meaning:
Certain countries require their importers to obtain certificate of origin from the exporter, certifying the origin of goods, without which clearance of imported goods is refused. This certificate may form a part of the commercial invoice itself. This certificate is issued by the chamber of commerce or Trade Association or some other competent authority. Some countries, such as countries in the Middle East and Gulf insist an certificate of origin attested by their consulate stationed in India. Certificate of origin (COO) declares that the goods which are being exported are manufactured in a specific country.
Contents of the certificate of origin:
a) Description, quantity and value of goods.
b) Number of packages and markings there on.
c) Declaration by the shipper
d) Certificate by the issuing authority.
- IMPORTANCE OF CERTIFICATE OF ORIGIN
I) Importance of COO to the exporter
a) It acts as a proof that the goods are of Indian origin.
b) It helps to clear the goods from the customs of exporter’s country.
II) Importance of COO to the Importer
a) An importer gets quick delivery of goods from the customs.
b) An importer can claim special concession as regards payment of tariff.
c) An importer gets adequate proof about the origin of goods, duty.
Meaning:
Sometimes, the importer requires the invoice to be certified by the consulate of his own country stationed at the exporters‟ country. The certified copy of the commercial invoice is called consular invoice.
Consular invoice is issued by the council of the importing country stationed in the exporting county. This is obtained by the exporter to ensure prompt clearance of the goods on the arrival of the ship. It is necessary to convince the customs authorities desiring to open the packages and scrutinize the goods for the purpose of calculating customs duty. If this is done a considerable delay will be put many hardships. To avoid this, consular invoice is obtained by applying to the concerned consulate on a prescribed form. It is generally prepared in triplicate one copy is sent to the customs authorities of the importing country and the third copy is given to the exporter to enable him forward to the importer along with other documents. Consular invoice is a certificate issued by the Trade Consulate of the importer’s country stating that goods of particular value are being imported from a particular country by a particular importer.
- IMPORTANCE
- Importance of Consular Invoice to the Exporter
a) It facilitates easy clearance of goods from the customs.
b) When the invoice is signed by the consulate of the importing country, it is an assurance to
c) the exporter this his goods will enter into the buyer’s country without any difficulty.
d) The interest of the exporter is well protected. He can realize foreign exchange against
e) shipment without problem.
II. Importance of consular Invoice to the importer
a) The importer gets quick delivery of goods and that too without opening the containers for verification purpose.
b) Goods are delivered quickly after the calculation of duty as per the consular invoice received.
c) The importer is rest assured that banned goods are not sent.
III. Importance of consular invoice to the customs office.
a) The work of customs authorities become easy and quick. Goods are cleared quickly.
b) Duty calculation is possible on the basis of consular invoice received. This means the
a) physical verification is not required.
b) No need to open the cargo to calculate of value of goods.
c) Loss of time and re-packing of the goods are avoided.
References
- Export Marketing Imperative by Michael R. Czinkota
- International Marketing and Export Management by Edwin Duerr, Gerald Albaum