International Trade — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMInternational Trade5 Marks
Question
Explain steps of export procedure.
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Answer
Introduction :
Every country produces special product due to its specialty of climate.
Natural resources and technological differences.
When these produce exceed the requirements of the country extra quantity is exported to other countries.
Every country has formed its own rules and regulations for export.
Every exporter has to follow export rules laid under export policy of government
What is Export ? :
When any country or the trader of any country sends goods to the person of another country is called 'export'. The person who exports goods is called 'exporter'.
Steps of Export Procedure :
Following is the export procedure for exporting product from India.
To receive order :
The importer gives the order to exporter regarding the products he desires to import.
The order is a written document which contains the description of the product to be imported, its quantity, agreed price, packing material and form, date of dispatch, details of insurance, details of transports, mode of payment, terms and conditions etc.
Order showing all the above details is called 'indent'.
Normally, the exporter gets information about economic condition of the importer and his business activity before obtaining order.
To obtain Export License :
Every country does not give export license for all product Special license for export is to be obtained for controlled products. Other products can be freely ported.
For that also Open General License is to be obtained To obtain export license the exporter has to apply in the form published by ministry of commerce.
Exporter has to show his identity and has to promise to pay income tax and other taxes like sales tax etc., With application the exporter has to pay fees.
Those who export regularly, are registered under Export House.
They do not have to obtain export license for every export order. They do not require separate license.
To collect goods :
After receiving order from importer, the exporter collects too much goods.
If the exporter himself is the manufacturer he produces the product as per the order received.
If the exporter is a trader he collects quality goods.
Procedure regarding Foreign Exchange :
According to economic reforms of 1991, the importer has to pay the amount of the products imported, in $U.S.$ dollars.
Foreign Exchange is controlled by the Reserve Bank and other banks appointed by it.
As a result, the exporter has apply for conversion of Foreign Exchange into local currency to Reserve Bank. In this application, he has to show the total amount of foreign exchange he is going to receive, country from which he is going to receive it, the time of receiving it and the mode of payment.
A copy of the application is given to the bank or the institution through which he carries out this activity.
To obtain Letter of Credit (L/C):
The exporter checks the goodwill and financial position of the importer before executing the order.
The exporter requests his bank to check the goodwill for safety of his payment.
Exporter's bank assigns this work to its branch in Foreign country or through other sources it gets information about goodwill of the importer.
The certificate of credit is called letter of credit $(L/C).$
To receive shipping order :
After receiving Letter of Credit of importer, the exporter contacts the company to transport goods as per instruction of the importer.
The goods are sent through marine route, aviation or road.
The company which is prepared to transport the goods on desired date is given the work of shipment. The exporter declares the quantity, weight, size, number of parcel, price etc.
The company which assures to carry goods is given the consignment.
At this time, the exporter pays freight and the shipping company gives the letter to the exporters which instructs the captain of the ship to transport the goods.
This is called "shipping order'. After receiving the shipping order the exporter, feels that his material will be dispatched on the specific date.
When the exporter has to export material in very large quantity he hires the entire ship. The agreement in this regard with the shipping company is called "Charter Party Contract'.
Custom Process :
Every exporter has to follow custom procedure.
The exporter has to obtain the custom free certificate from custom officer, if the goods are custom free.
For this, he has to notify in the form that the goods is custom free.
If the goods is not custom free the exporter has to prepare shipping bill and to mention importer's name, address, detail of goods, destination, the name of the ship and shipping company etc.
Sometimes custom is calculated on direct checking of goods.
When the goods is re-exported, the custom officer endorses shipping bill. After obtaining this type of shipping bill, these goods are re-exported.
Packing and Marketing:
Packing is required when goods are exported.
Packing is important when the exporter manufactures it in his own factory or purchases goods from market to export. .
Packing should be strong, sturdy and perfect because the goods is transported through marine route, aviation route or road. It should be protected from climate, moisture, heat, rain to retain its quality.
Packing should be perfect of international standard.
The exporter has to follow international standards of packing.
If the packing is not proper the captain issues faulty mate receipt.
Note is made on each parcel for its identification.
It is known as 'marking'. Normally the name of the sender, the name of receiver, destination, weight etc., are mentioned on the parcel.
Most of the exporters use the ink which is not washed away. They use lasting marking.
Insurance :
After proper packing and marking and paying custom, the goods is completely ready to export.
For the safety of goods, insurance policy is taken.
In Foreign Trade, it is compulsory to take insurance.
After paying premium to insurance company, the exporter gets 'Cover note' from insurance company.
Thereafter, when the 'Insurance Policy' is prepared it is given to the exporter against 'Cover Note'.
To obtain carting order :
The exporter has to apply to the station or port authority from where the goods are exported.
In this application form he has to notify that required details showed in the shipping bill and complete procedure is followed.
The exporter has to pay fees for the usage of services and resources of the port.
Then order is given to load the goods on ship. This permission is called 'carting order'.
To obtain Mate Receipt :
The goods is loaded on the ship on the basis of the carting order issued by port authority.
The captain of the ship or his representative is known as 'mate'.
He checks whether the goods tally with the Shipping bill and it is properly ready to be transported.
When they issue the receipt after checking is called "Mate Receipt".
If the packing is not up to the international standard and rule and regulation, he mentions the same on the receipt, then this type of receipt is called 'Foul Receipt' or 'Dirty Chit.
When packing is up to international standard then 'Clean Receipt' is issued.
The mate receipt indicates that goods is at loaded on the ship and is in the possession of the captain of the ship.
It is a proof of surety to transport goods to the destination of the importer.
To obtain Bill of Lading :
The bill of lading is provided to exporter by shipping company.
It shows that the goods to be exported to importer is received.
It assures transportation of goods to the importer.
Before issuing this document, shipping company on the basis of mate receipt recovers freight as prescribed rate.
If there is difference between shipping order and shipping bill, extra freight is recovered as per rule. Shipping company issues, the receipt of freight.
It is called 'Freight note'. The shipping company charges 'primage' for extra services used by the exporter. In short, extra services are charged that is called 'primage'.
The receipts of freight paid and 'primage paid are to be presented to obtain bill of lading.
If the amount of freight is to be paid by the importer, that too is mentioned in the bill of lading.
Bill of lading is a negotiable instrument.
Exporter can endorse it and give the ownership right to any one.
Three copies of bill of lading is prepared out of which the exporter keeps one copy, second copy is given to the captain of the ship and the third copy is sent to the importer on the basis of which the importer releases goods.
Certificate of Origin :
The certificate of the quantity of goods produced in specific country is called 'certificate of origin'.
As per agreement, the concern country allows discount in custom.
To obtain this discount certificate of origin is required.
This certificate can be obtained from chambers of commerce, government or trade union.
Consular Invoice :
The ambassador of importer is in the country of the exporter.
When the goods of the exporter reach the country of importer, from the ambassador of one own country the certificate of the value of goods is received.
It is called 'Consular Invoice'. Quantity of goods, price etc., are mentioned in this invoice.
On the basis of it the importer country recovers custom duty.
Consular invoice is an important document to simplify the payment of custom duty.
To Send Documents :
The exporter sends the following documents to the importer's bank, through his bank. Documents such as invoice, insurance policy, or cover note, bill of lading, certificate of origin, consular invoice etc.
Recovery of Money :
Exporter instructs bank for recovery of money for the goods exported.
Bank instructs the branch of the bank, located in the area of importer to recover the amount of bill along with documents.
It is known as $D/P$, Document against Payment.
When the exporter's Bill or Exchange letter is accepted by the importer, it is called $D/A$, Documents against Acceptance.
Exporter can send all documents direct to the importer and recover the amount.
If recovery process is carried out through bank, its charges are to be paid.
Conclusion :
No exporter can form his own procedure of export. He has to follow rules laid by the government. He has to pay export duty fixed by the government.
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