TUTOR MARKED ASSIGNMENT
Course Code : IBO-04
Course Title : Export Import Procedures and Documentation
Assignment Code : IBO-04/TMA/2011-12
Assignment Coverage : All Blocks
Maximum Marks : 100
Attempt all the questions
1. Do you think that International Contract Terms help in solving the problems of exporters and importers? Give argument and discuss various International Contract Terms. (20)
Solution:
Various International Contract Terms:
1. PRICE. Unless otherwise expressly provided, prices stated herein do not include duties or sales, use, gross receipts, excise or similar taxes and, accordingly, in addition to the
price stated herein, the amount of any such present or future taxes or duties or increases therein applicable to the goods covered by this Contract or to the manufacture, production,
transportation or sale thereof, shall be added to the price and paid by the Purchaser (“Purchaser”) or in lieu thereof, Purchaser shall provided Anemostat (“Seller”) with tax-exemption
certificates acceptable to the relevant taxing authorities. Unless otherwise expressly provided, the prices stated are F.O.B. Seller’s factory and do not include any taxes assessable
or assessed by any governmental unit including value-added tax, any duty or customs fees or charges or the cost of any certificates or other charges related to delays at any port
due to customs or otherwise.
2. PAYMENT. Unless otherwise expressly provided, all payments are to be made net 30 days after date of invoice. Seller may at any time require full or partial payment in advance
of delivery, or in advance of manufacture, or satisfactory assurances or security from Purchaser that invoices will be paid when due if in Seller’s judgment the same at any time
becomes necessary. If payment is not made when due, interest at the lower of 1 1/2 % per month or the highest rate permitted by applicable law will be charged thereon and paid
by Purchaser from the due date thereof until paid. In the event Purchaser does not pay within the terms of this Contract, all collection costs incurred by Seller, including attorney’s
fees, will be paid by Purchaser.
4. DELAYS. The scheduled dates for shipment of the products are estimated based on current and anticipated manufacturing capabilities at the time of quotation and may be
quoted as weeks after receipt of order. All delivery dates are estimates only, and Seller shall not be liable for any damages relating to failure to ship the products as of a certain date.
Seller shall not be liable for any delay in fulfillment of or failure to fulfill this Contract arising from any factory or labor conditions, fire, failure or delay in Seller’s usual sources of supply
by the acts or omissions of Purchaser, its agents, subcontractors or material suppliers, or any cause not reasonably within the control of Seller. In the event of any delay in delivery
or failure to manufacture due to a cause beyond Seller’s control, unless otherwise agreed, the time for delivery shall be deemed extended for a period equal to the period of delay.
5. TRANSPORTATION AND DELIVERY. Unless otherwise provided, all deliveries of goods are F.O.B. Seller’s factory and Seller assumes no liability for loss or damage to the
goods after delivery for shipment at Seller’s factory, and risk of loss with respect to the goods passes to Purchaser at the said F.O.B. point.
6. EXPORT LICENSE. Purchaser shall comply with all laws, regulations applicable to the sale of the goods, and shall obtain all permits or licenses(if any) needed to complete this
transaction under the laws of the United States. Purchaser represents and warrants that the goods are intended for commercial use, and will not be used for any military purpose,
or installed in any military installation.
7. INSPECTION. Purchaser shall inspect the products immediately on the arrival thereof, and shall within fourteen (14) days after arrival give written notice to Seller of any matter
by reason whereof it may allege that the products are not in accordance with the agreement. If Purchaser shall fail to give such notice, the products shall be deemed to be in all
respects in accordance with the agreement terms. All products made to special specifications are deemed to be inspected and accepted before shipment is made, and may not be
canceled.
8. CHANGE ORDERS. Proposed changes in the goods subject to this Contract, submitted in writing by the Purchaser, will be reviewed by Seller for acceptability and for the effect
of the proposed changes on shipping schedules and prices; Seller will submit to Purchaser its decision to accept or not to accept the proposed changes and the amendments to the
shipping schedules, selling prices and other terms upon which the proposed changes would be acceptable to Seller; the changes will become effective as amendments to this
Contract upon Purchaser’s written acceptance of the said amended terms.
9. RETURNS AND BACKCHARGES. Goods delivered hereunder may not be returned by Purchaser without the approval of Seller and the obtaining of appropriate documentation
(including return tags) from Seller. All returns so approved are subject to Seller’s restocking charge unless otherwise agreed to in writing by Seller. No backcharges for repairs,
corrections or changes in construction of the product shall be made by Purchaser or accepted by Seller without the prior written approval of an authorized employee at Seller’s factory.
10. LIMITATIONS OF LIABILITY. No representation or warranty, expressed or implied, made by any sales representative or other agent or representative of the Seller which is
not specifically set forth herein shall be binding upon Seller. Seller shall not be liable for any special, incidental or consequential damages, losses or expenses directly or indirectly
arising from the manufacture, sale, or use of the products or from any other cause relating thereto.
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2. What are the objectives of customs clearance of import Cargo? Discuss the procedure of customs clearance of import Cargo. (5, 15)
Solution: Objectives of Customs Clearance of Import Cargo:
Whether you're an importer, wholesale or retail, a business with sites around the globe, courier company with regular shipments, or a private individual making an occasional overseas purchase; Whether your consignments arrive by air or sea, in bags or cartons, on pallets or in containers, Customs Clearance Limited offers tailored services to meet your clearance and onward forwarding needs. We clear your goods, move them to destinations around the UK and Europe, and even store, break bulk and distribute for you.
Customs clearance is specialised and there are heavy penalties for making false declarations. Where it could take the inexperienced person many long hours to complete the process, we can get most shipments cleared on their day of arrival. We complete the paperwork; and we get things processed - fast.
We offer tailored services to suit every requirement. We like challenges and look for creative ways to meet your needs. Our aim is to deliver an efficient, professional, timely service, specific to your individual requirements.Our experienced team is there to answer your questions regarding importation, taxation and clearance procedures, helping to ensure that your consignments clear customs swiftly and efficiently.
Procedure of Customs Clearance of Import Cargo
1. Bill of Entry – Cargo Declaration:
Goods imported in a vessel/aircraft attract customs duty and unless these are not meant for customs clearance at the port/airport of arrival by particular vessel/aircraft and are intended for transit by the same vessel/aircraft or transshipment to another customs station or to any place outside India, detailed customs clearance formalities of the landed goods have to be followed by the importers. In regard to the transit goods, so long as these are mentioned in import report/IGM for transit to any place outside India, Customs allows transit without payment of duty. Similarly for goods brought in by particular vessel aircraft for transshipment to another customs station detailed customs clearance formalities at the port/airport of landing are not prescribed and simple transshipment procedure has to be followed by the carrier and the concerned agencies. The customs clearance formalities have to be complied with by the importer after arrival of the goods at the other customs station. There could also be cases of transshipment of the goods after unloading to a port outside India. Here also simpler procedure for transshipment has been prescribed by regulations, and no duty is required to be paid. (Sections 52 to 56 of the Customs are relevant in this regard).
2. For other goods, which are offloaded importers, have the option to clear the goods for home consumption after payment of the duties leviable or to clear them for warehousing without immediate discharge of the duties leviable in terms of the warehousing provisions built in the Customs Act. Every importer is required to file in terms of the Section 46 an entry (which is called Bill of entry) for home consumption or warehousing in the form, as prescribed by regulations.
3. If the goods are cleared through the EDI system no formal Bill of Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the entry for customs clearance.
4. The Bill of entry, where filed, is to be submitted in a set, different copies meant for different purposes and also given different colour scheme, and on the body of the bill of entry the purpose for which it will be used is generally mentioned in the non-EDI declaration.
5. The importer clearing the goods for domestic consumption has to file bill of entry in four copies; original and duplicate are meant for customs, third copy for the importer and the fourth copy is meant for the bank for making remittances.
6. While filing the bill of entry and giving various particulars as prescribed therein the correctness of the information given has also to be certified by the importer in the form a declaration at the foot of the bill of entry and any mis-declaration/incorrect declaration has legal consequences, and due precautions should be taken by importer while signing these declarations.
7. Under the EDI system, the importer does not submit documents as such for assessment but submits declarations in electronic format containing all the relevant information to the Service Centre. A signed paper copy of the declaration is taken by the service centre operator for non-repudiability of the declaration. A checklist is generated for verification of data by the importer/CHA. After verification, the data is submitted to the system by the Service Centre Operator and system then generates a B/E Number, which is endorsed on the printed checklist and returned to the importer/CHA. No original documents are taken at this stage. Original documents are taken at the time of examination. The importer/CHA also need to sign on the final document after Customs clearance.
8. The first stage for processing a bill of entry is what is termed the noting of the bill of entry, vis-à-vis, the IGM filed by the carrier. In the non-EDI system the importer has to get the bill of entry noted in the concerned unit which checks the consignment sought to be cleared having been manifested in the particular vessel and a bill of entry number is generated and indicated on all copies. After noting the bill of entry gets sent to the appraising section of the Custom House for assessment functions, payment of duty etc. In the EDI system, the Steamer Agents get the manifest filed through EDI or by using the service centre of the Custom House and the noting aspect is checked by the system itself – which also generates bill of entry number.
9. After noting/registration of the Bill of entry, it is forwarded manually or electronically to the concerned Appraising Group in the Custom House dealing with the commodity sought to be cleared. Appraising Wing of the Custom House has a number of Groups dealing with earmarked commodities falling under different Chapter Headings of the Customs Tariff and they take up further scrutiny for assessment, import permissibility etc. angle. Assessment:
10. The basic function of the assessing officer in the appraising groups is to determine the duty liability taking due note of any exemptions or benefits claimed under different export promotion schemes. They have also to check whether there are any restrictions or prohibitions on the goods imported and if they require any permission/license/permit etc., and if so whether these are forthcoming. Assessment of duty essentially involves proper classification of the goods imported in the customs tariff having due regard to the rules of interpretations, chapter and sections notes etc., and determining the duty liability. It also involves correct determination of value where the goods are assessable on ad valorem basis.
11. Whenever mistakes are noticed after submission of documents, amendments to the of entry is carried out with the approval of Deputy/Assistant Commissioner. The request for amendment may be submitted with the supporting documents. For example, if the amendment of container number is required, a letter from shipping agent is required. Amendment in document may be permitted after the goods have been given out of charge i.e. goods have been cleared on sufficient proof being shown to the Deputy/Assistant Commissioner. Prior Entry for Bill of Entry:
12. For faster clearance of the goods, provision has been made in section 46 of the Act, to allow filing of bill of entry prior to arrival of goods. This bill of entry is valid if vessel/aircraft carrying the goods arrive within 30
days from the date of presentation of bill of entry.
13. The importer is to file 5 copies of the bill of entry and the fifth copy is called Advance Noting copy. The importer has to declare that the vessel/aircraft is due within 30 days and they have to present the bill of entry for final noting as soon as the IGM is filed. Advance noting is available to all imports except for into bond bill of entry and also during the special period. Mother Vessel/Feeder vessel:
14. Often in case of goods coming by container ships they are transferred at an intermediate ports (like Ceylon) from mother vessel to smaller vessels called feeder vessels. At the time of filing of advance noting B/E, the importer does not know as to which vessel will finally bring the goods to Indian port. In such cases, the name of mother vessel may be filled in on the basis of the bill of lading. On arrival of the feeder vessel, the bill of entry may be amended to mention names of both mother vessel and feeder vessel Specialised Schemes.
15. The import of goods are made under specialised schemes like DEEC or EOU etc. The importer in such cases is required to execute bonds with the Customs authorities for fulfillment of conditions of respective notifications. If the importer fails to fulfill the conditions, he has to pay the duty leviable on those goods. The amount of bond would be equal to the amount of duty leviable on the imported goods. The bank guarantee is also required alongwith the bond. However, the amount of bank guarantee depends upon the status of the importer like Super Star Trading House/Trading House etc. Bill of Entry for Bond/Warehousing:
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3. a) Discuss various kinds of letter of credit.
Solution: 8 various kinds of letter of credit.
1. Revocable letter of credit: A revocable L.C can be cancelling or modified without the consent of all the parties. The issuing bank can inform the advising bank for any change in the L.C. The seller can face the problems of obtaining payment directory form the buyers.
2. Irrevocable letter of credit: Irrevocable credit cannot be altered or modified without the consent of all the parties i.e. the opener, the opening bank, the confirming bank and the bank beneficiary. This type of L.C is issued under terms and conditions of sales contract.
3. Confirmed L.C: The confirm letter of credit has the protection of credit standing of the importers as well as the importer's bank. The exporter's bank gives undertaking to honor the draft. The seller gets double assurance of payments form the issuing and advising bank.
4. Unconfirmed L.C: In case of an unconfirmed L.C the bank through whom the credit is negotiated, the advising bank does not give any guarantee to the exporter that the bill drawn will be honored by the issuing bank. The unconfirmed L.C is a commitment of the issuing bank to honor the draft.
5. Documentary L.C: A documentary L.C is one which provides for bills to be accompanied by the documents of title to goods. Such as bill of lading, invoice and the marine insurance policy of insurance etc.
6. Clean letter of credit: If there is no condition attach to the bill and the issuing bank makes payment up to a limit of credit, the letter of credit is called clean or open letter of credit. It is payable to the exporter according to his will.
7. Fix Letter of credit: The amount of this type of letter of credit remains the same within a fix period. When the original fixed amount is used fresh credit is necessary. In other words, a fixed L.C. is that which is available for a fixed total amount payable in one or more than one drafts.
8. Revolving L.C: The amount of this L.C. is automatically renewed or received when the certain conditions are fulfilled is called a revolving letter of credit.
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b) Describe the procedure of import finance under Letter of Credit. (10, 10)
Solution: coming soon
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4. Distinguish between
a) Liner Shipping Service and Tramp Shipping Service.
Solution:
Liner Service – is a service that operates within a schedule and has a fixed port rotation with published dates of calls at the advertised ports.. A liner service generally fulfills the schedule unless in cases where a call at one of the ports has been unduly delayed due to natural or man-mad causes..
Example : The UK/NWC continent service of MSC which has a fixed weekly schedule calling the South African ports of Durban, Cape Town and Port Elizabeth and carrying cargo to the UK/NWC ports of Felixstowe, Antwerp, Hamburg, Le Havre and Rotterdam..
A Tramp Service or tramper on the other hand is a ship that has no fixed routing or itinerary or schedule and is available at short notice (or fixture) to load any cargo from any port to any port..
Example : A ship that arrives at Durban from Korea to discharge cargo might carry some other cargo from Durban to the Oakland in the West Coast of USA which in an entirely different direction.. From Oakland say for example it could carry some cargo and go to Bremerhaven..
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b) Voyage Charter and Time Charter (10, 10)
Solution: Voyage charter gives the charterer a fixed price per ton of material and passes almost all the risks, especially risks of delays due to bad weather, strikes etc onto the shoulders of the shipowner. The charterer does, however, have to pay for the privilege of being risk-free. Time charter gives the charterer considerable flexibility as to where to send the ship and is spared the problems of demurrage. Time charter does, however, mean that if bad weather delays the ship or if workers in a chosen port decide to strike, the daily rate of hire still has to be paid.
Incidentally if the delay is caused through the ship breaking down, then hire is not payable; the ship goes off-hire. As the charterer assumes many of the owner's risks and costs, the equivalent amount paid to the owner per ton of cargo carried is less than for a voyage contract. The charterer has a single commodity from one or a limited number of loading places to go to a single or limited number of discharging places, and the rates of loading and discharging are well established, then voyage charter is the obvious choice.
If, however, the charterer has many different commodities from/to a variety of places so complex that it would be difficult if not impossible to include them all in a voyage charter, then time charter is a better idea. This is typified by time charter on a 'trip' basis where one could well see the business being quoted "Delivery Kobe, trip across Far East/West Coast North America redelivery Los Angeles - Vancouver Range expected duration 90 days" Another regular reason for time chartering is when a liner company seeks temporarily to supplement its own fleet in order to cope with a seasonal increase in business. Time charter is often regularly used by container lines to cater for their 'feeder' business and there is a whole segment of the market devoted to relatively small container ships to fill the requirements of the feeder industry.
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5. Write short notes on the following:
a) Export Promotion Councils.
Solution:
Export promotion councils reflect the interest of national governments to stimulate exports. Subsidies, tax exceptions, and special credit lines are the main instruments
used to promote exports. The regulatory aspects of export promotion changed significantly in the late twentieth century. In the past export promotion activities were not substantially regulated, but increasingly since the creation of the World Trade Organization (WTO) in 1995 some export promotion activities have been identified as tradedistorting practices. The WTO has devised rules that allow countries that have been affected by the export promotion practices of their trading partners to use the WTO’s dispute-settlement procedure and in some cases retaliate. Export promotion is sometimes seen as a complementary development strategy to import protection. While import protection usually allows infant industry to
develop, export promotion allows access to external markets. Foreign demand is often required by the limited size of domestic markets and the need to achieve economies of scale, essential in many productive activities. In a 1984 article Paul Krugman argued that, under increasing returns to scale, import protection may act as a form of export promotion, because in this case protection would allow considerable gains in terms of productivity that
would enhance the possibilities of exporting. However, in policy circles export promotion or export oriented industrialization (EOI) is seen more often as an alternative development strategy to import substitution industrialization (ISI)
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b) Star Export Houses.
Solution: Companies which are Star Export Houses as well as part of a Group company shall have an option to either apply as an individual company or as a Group based on the growth in the Group’s turnover as a whole
The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for a duty credit based on incremental exports substantially higher than the general annual export target fixed (Since the target fixed for 2004-05 is 16 %, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year. All Star Export Houses (including Status Holders as defined in para 3.7.2.1 of Exim Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange of Rs 10 crores in the previous licensing year are eligible for consideration under the Target Plus Scheme . The entitlement under this scheme would be contingent on the percentage incremental growth in FOB value of exports in the current licensing year over the previous licensing year, as under:
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c) Customs clearance of export cargo by Post.
Solution: Articles exported by post are required to be covered by a declaration in
prescribed form. Where the value exceeds Rs 50 and payment is to be
received, the export must be declared in exchange control form PP. Export of
Indian and foreign currency, bank drafts, cheques, National Saving 295 Certificates are not allowed unless accompanied by permit issued by RBI, unless where such negotiable instruments are sent by authorised dealers in India. Goods upto Rs 25,000 can be exported as gifts. Export of purchases made by foreign tourists is permitted on submission of proof that payment was received in foreign exchange.
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d) Packing Credit.
Solution: Packing credit is a loan/ cash credit facility sanctioned to an exporter in the Pre-Shipment stage. This loan facilitates the exporter to purchase raw materials at competitive rates and manufacture or produce goods according to the requirement of the buyer and organize to have it packed for onward export.. The lending institutions seek a Letter of Credit opened in favour of the exporter from the overseas buyer along with the irrevocable (cannot be canceled once drawn) Purchase Order favouring the exporter. Packing Credit facility will cover all the working capital needs of the exporter including raw materials, wages, packing costs and all pre-shipment costs.
Packing credit is available for generally a period of 90 days and the exporter has to pay lower rate of interest compared to traditional Overdraft or Cash Credit facility. Exporters use this facility so they can bid the most competitive price for export thus gaining more business opportunities for export. Packing credit is also known as preshipment credit in India and comprises a part of export credit. This is a bank loan which is commonly extended to an exporter for the specific purpose of financing the purchase, processing, manufacturing or packing of goods prior to their shipment. These loans are given on the basis of a letter of credit opened in favour of the exporter by an overseas buyer