Chp-20 ~ Export Trade Flashcards
What do you understand by export trade?
- Export trade involves selling goods and services to foreign countries.
- Exemptions from customs duty, transport concessions, cheap finance, supply of scarce raw materials, etc. are other type of assistance available to exporters.
What are some of the institutions established by the government of India for promoting exports?
The institutions established by the government of India for promoting exports include:
1. Export Promotion Council
2. Export Inspection Council
3. The Board Of Trade
4. Indian Institute of Foreign Trade
5. Commodity Boards
Why was Exim bank established in India?
- Export-Import (EXIM) Bank of India was established as a specialised financial institution for promoting exports.
- The main objective of the Exim Bank is to coordinate the activities of various institutions engaged in financing foreign trade.
What are the functions of Exim Bank?
The main functions of the Exim Bank are as follows:
a) It provides medium and long term credit to Indian exporters.
b) It provides finance for export of consultancy and related services.
c) It assists in setting up joint ventures in other countries and promotion of export-oriented industries in India.
d) It offers merchant banking services to exporters and importers.
e) It undertakes studies of foreign markets for boosting exports.
What are the objectives, purposes and functions of export trade?
The main objectives of export trade are as follows:
1. To sell surplus goods
2. To make better utilisation of resources
3. To earn foreign exchange
4. To increase national income
5. To generate employment
What are the stages involved in the procedure of export trade?
Stage 1 - Receiving trade enquiry and Sending Quotation
Stage 2 - Receiving and indent and sending confirmation
Stage 3 - Securing letter of credit
Stage 4 - Obtaining IEC (Importer Exporter Code) Number and RBI code number
Stage 5 - Obtaining RCMC (Registration-cum-Membership) certificate from export promotion council/commodity board
Stage 6 - Manufacturing/Procuring goods and packing them
Stage 7 - Procuring export inspection certificate
Stage 8 - Appointing forwarding agents
Stage 9 - Despatching goods to port and sending receipt to agent
Stage 10 - Formalities by forwarding agents
Stage 11 - Getting certificate of origin
Stage 12 - Getting consular invoice
Stage 13 - Preparing commercial invoice and submitting documents to bank
Stage 14 - Securing payment
Stage 15 - Claiming export incentives
What is an indent? What information does it include?
An indent refers to an order received from abroad for sale (export) of goods.
It is generally prepared in duplicate, one copy is sent to the exporter. The second copy is files by the importer in his records.
It contains the following information:
a) quantity of goods to be sent
b) quality, size, and design of goods
c) price
d) nature of packing and marking
e) mode of shipment and insurance
f) period of delivery
g) method of payment
What are the different types of indent?
An indent can be of the following types:
a) Open Indent
In this type of indent, the importer authorises the exporter to decide the quality and price of goods to be sent. The exporter is expected to exercise his best judgement in the choice of goods.
b) Closed Indent
In a closed indent the importer gives full details regarding the quality and price of goods to be sent. The exporter is not allowed to exercise his discretion in the choice of goods or in their packing.
c) Confirmatory Indent
An indent which is subject to confirmation by the importer or his agent is known as confirmatory indent. In such a case, final indent is sent after confirmation.
What is a letter of credit?
A letter of credit is an undertaking by its issuer (the importer’s bank) that the bills of exchange drawn by the foreign dealer on the importer will be honoured on presentation up to the specified amount.
It is a guarantee by the bank to the foreign dealer that his bills up to the amount mentioned therein will be honoured.
What are the different types of letters of credit?
A letter of credit may be of the following types:
a) Clean letter of credit
In this type of letter of credit no conditions are laid down for the acceptance and payment of the bill of exchange
b) Documentary letter of credit
It lays down the condition that the documents of title to goods must be sent along with the bill of exchange without which the bill will not be honoured.
c) Revocable letter of credit
It can be cancelled of withdrawn at the discretion of the issuing bank at any time without the prior consent of the foreign dealer or exporter in whose favour it has been issued. It is also known as unconfirmed letter of credit.
d) Irrevocable letter of credit
It cannot be withdrawn by the issuing bank without prior consent of the foreign dealer concerned. It is also known as confirmed letter of credit.
e) Resolving letter of credit
When an amount stated in a resolving letter of credit is drawn by the foreign dealer, it is automatically renewed again for the original amount.
What is IEC number and how is it obtained?
IEC number is Importer Exporter code number which is filled in various import export formalities.
In order to obtain this number, an exporter has to apply to the Regional Import-Export Licensing Authority in the prescribed form.
The application should be submitted along with the following documents:
a) Profile of the exporter
b) Bank receipt for the required fee
c) Certificate from the banker in the prescribed form
d) Two copies of photographs attested by the banker
e) Detail of non-resident interest, if any
f) Declaration about the applicant’s non-association with a caution listed firm.
If the Regional Import-Export Licensing Authority is satisfied with the documents and formalities, IEC number is issued.
Why is RBI code no. required and how is it obtained?
Reserve Bank of India (RBI) requires exporters to obtain RBI code no. before exporting goods from India.
This number has to be mentioned in various documents to obtain permission from the customs authorities for shipment of goods.
In order to obtain RBI code No. an exporter has to apply a CNX form in duplicate to the RBI.
A banker’s report on the financial standing of the exporter has to be submitted along with the application.
How to obtain a RCMC certificate?
This certificate is issued by Export Promotion Councils-Commodity Board/Federation of Indian Export Organisations, etc.
Application has to be made to the concerned authority in the prescribed form along with membership fee, IEC number, bank certificate, and other specified documents.
If the registration authority is satisfied, a Registration-cum-membership certificate is issued.
What are the formalities performed by a forwarding agent?
- Taking delivery of goods at port town
- Obtaining ship order
- Obtaining customs clearnace
- Paying dock dues
- Obtaining permission for shipment
- Securing mate’s receipt
- Obtaining bill of lading
- Getting insurance policy
- Sending advice to the exporter
What is a shipping bill?
A shipping bill contains information about name and address of the exporter port of loading, port of destination, name of the ship, description and value of goods, identification marks in packages.
