1. Project on-:
Export import and shipping operations of various
steel industries in India
Submitted by -: faculty guide-:
Suraj kumar mr. amit kumar
3. Table of Content
2) Steel industry in India
3) Steel production process
4) Steel producers in India
5) Type of steels
6) Major companies & their capacity
7) Review of previous year
8) Growth chart
9) International trade of steel
10) Export procedure
11) Aligned documentation system
12) Documentation related to
13) Documentation related to
14) Document relating to inspection
4. 15) Document related to goods
16) Document related to foreign
17) Elements in export contract
18) Methods of receiving payment
19) Inco terms
20) Project outcome
23) Significance of the project
5. 1. Introduction-:
India‟s economic growth is contingent upon the growth of Indian steel industry.
Consumption of steel is taken to be an indicator of economic development. While
steel continues to have a stronghold in traditional sectors such as construction,
housing and ground transportations, special steels are increasingly used in
engineering industries such as power generation, petrochemicals, and fertilizers.
India occupies a central position on the global steel map, with the establishment of
new state-of-the art steel mills, acquisition of global scale capacities by players,
continuous modernization and up gradation of older plants. Improvingly energy
efficiency and backward integration into global raw material sources.
Steel production in India has increased by a compounded annual growth rate
(CAGR) of 8 percent over the period 2002-03 to 2006-07. Going forward, growth
in India is projected to be higher than the world average, as the per capita
consumption of steel in India, at around 46kg , is well below the worlds
average(150kg) and that of developed countries “(400kg). Indian demand is
projected to rise to 200 million tonnes by 2015. Given the strong demand scenario,
most global steel players are into a massive capacity expansion mode, either
through brownfield or Greenfield route. By 2013, steel production capacity in India
is expected to touch 124 million tones and 275 million tones by 2020. While
Greenfield projects are slated to add 28.7 million tones, brownfield expansions are
estimated to 40.5 million tones to the existing capacity of 55 million tones .
Steel is manufactured as globally tradable product with no major trade barriers
across national boundaries to be seen currently. There is also no inherent resource
related constraints which may significantly affect production of the same or its
6. capacity creation to respond to demand increases in the global market. Even the
government policy restrictions have been negligible worldwide and even if there
are any to same to respond to specific condition in the market and have always
been temporary. Therefore the industry in general and at a global level is unlikely
to throw up substantive competition issues in any national policy framework.
Further, there are no natural monopoly characteristics in steel. Therefore, one may
not expect complex competition issues in any national policy framework. Further
there are no natural monopoly characteristics in steel. Therefore , one may not
expect complex competition issues as those witnessed in industries like telecom,
electricity, natural gas, oil etc.
This however does not mean that there is no relevant or serious competition issue
in the steel industry. The growing consolidation in the steel industry worldwide
through merger and acquisition has already thrown up several significant concerns.
The fact that internationally steel has always been an oligopolistic industry,
sometimes has raised concerns about the anti-competitive behavious of large firm
that dominates this industry on the other hand the set of large firms that
characterize the industry have been changing over time.
Trade and other government policies have significant bearing on competitive issue.
Matter of subsidies, non tariff barriers to trade, discriminatory customs duty
(on export and import) etc. may bring in significant distortions in the domestic
market and in the process alter the competitive positioning of individual players in
the market. The specific role of the state in creating market distortion and thereby
the competitive conditions in the market a well-known issue in this country.
7. 2. Steel Industry in India:
Overview, performance and structure.
The establishment of Tata Iron and Steel Company (TISCO) in 1907 was starting
point of modern Indian steel industry. Afterwards a few more steel companies
where established namely Mysore Iron and Steel Company, (later renamed
vivesvararya Iron & steel Ltd.) in 1923; Steel corporation of Bengal (later renamed
Martin Burn Ltd and Indian Iron and Steel Ltd.) in 1939. All these companies were
in private sector.
1907*: Tata iron and Steel Company set up.
1913: Production of steel begins in India.
1918: The Indian Iron And Steel Co. set up by burn &co. to complete the
TATA Iron and Steel co.
1923*: Mysore Iron and Steel Company set up.
1939*: Steel Corporation of Bengal set up.
1948: A new industrial policy statement states that new venture in the iron
and steel industry are to be undertaken only by the central government.
1954: Hindustan steel is created to oversee the Rourkela plant.
8. 1959: Hindustan steel is responsible for two more plants in Bhilai and
1964: Bokaro steel Ltd. Created.
1973: The steel Authority of India Ltd.(SAIL) is created as a holding company
to oversee most of India’s Iron and Steel production.
1989: SAIL acquired Vivesvata Iron and Steel Ltd.
1993: India set plans in motion to partially privatize SAIL.
SOURCE:* Government of India, Joint Plant Committee Report 2007.
At the time of independence, India had a small Iron and Steel industry with
production of about a million tones (mt). In due course, the government was
mainly focusing on developing basic steel industry, where crude steel constituted a
major part of the total steel production. Many public sector units were established
and thus public sector has a dominant share in the steel production till early 1990s.
Most private players were in downstream production, which was mainly producing
finished steel using crude steel products. Capacity ceiling measure was introduced.
Basically, the steel industries were developing under a controlled regime, which
established more public sector steel companies in various segments.
Till Early 1990s when economic liberalization reforms were introduced, the steel
industry continued to be under controlled regime, which largely constituted
regulation such as large plant capacities were reserved only for public sector under
capacity control measure; price regulation; for additional capacity creation
producers had to take license from the government; foreign investment was
restricted; and there were restrictions on import as well as exports.
Undoubtedly there has been significant government bias towards public sector
undertakings. But not all government action has been beneficial for the public
9. sector companies. Freight equalization policies of the past were one example. The
current governmental „moral- suasion‟ to limit steel price increases is another.
However after liberalization- when a large number of controls were abolished
some immediately and other gradually-the steel industry has been experiencing
new era of development. Major developments that occurred at the time of
1. Large plant that were reserved for public sector were removed;
2. Export restrictions were eliminated;
3. Import tariffs were reduced from 100% to 5%;
4. Decontrol of domestic steel prices;
5. Foreign investment was encouraged, and the steel industries was part of the high
priority industries for foreign investment and implying automatic approval for
foreign equity participation up to 100%; and
6. System of freight ceiling was introduced in place of freight equalization
As a result, the domestic steel industry has since then, become market oriented and
integrated with the global steel industry. This has help private player to expand
their operation and bring in new cost effective technology to improve
competitiveness not only domestic but also in the global market. Private sectors
contribution in the total output has since been increasing in India. Development pf
private sector has high growth in all steel industry that is capacity, production,
export and imports. During the last decade more than 12 mt of capacity has been
added in steel industry is receiving significant foreign investment such as POSCO-
South Korean steel producer – and Arcelor-Mittal Goup-UK/Europe based steel
producer- Announcing plans for establishing about 12mt production unit each in
10. The Indian steel industry, with a production of about 1mt at the time of
independence, has come long way to reach production of about 57mt in 2006-07.
Moreover, the steel industry is showing promising future growth as major players
in the industry have announced their plans for establishing about 12mt production
units each in India.
Impressive development of the steel industry with active participation of private
sector and integration of India steel industry with the global steel industry has also
been introduced the government to come up with National steel policy in 2005.
The national steel policy 2005 was drafted with the aim of establishing roadmap
and framework of development of the steel industry. The policy envisages steel
production to reach at 110mt by 2019-20 with annual growth rate of 7.3%. As later
sections will show this expectations are not exclusively high.
With increasing need for large investments in the industry‟s private sectors role
would be crucial in the development of the steel industry. The future, it appears
will continue to be dominated by few large players and other industry will remain
oligopolistic- as it is internationally.
11. Steel production process-:
Blast furnace/basic oxygen furnace (bf/bof):
BF basically converts iron ore into liquid form of iron. Iron produced by BF
contains high amount of carbon and other impurities, this iron is called pig iron.
Pig iron due to its high carbon content has limited end use application such as
cover of mainholes. To make steel products out of pig iron is known as BOF where
its carbon contains and impurities are burnt and remove through slag separation.
Producer that use this technology includes SAIL,RINL,TSL AND JSWL.
Electric arc furnace(EAF):
Basic purpose of EAF is remelting sponge iron, melting scrap, its main inputs, to
produced finished steels. It uses electricity as much as 400-500kwh/ton. ISPAT
ESSAR, and the Jindal group are example of producers, which use this technology.
Induction Arc furnace (IAF):
It is one of the most advance process of making steel. Like EAF it uses electricity
as main fuel. IAF is most environment friendly and efficient way of producing
steel. However its lack of refining capacity requires clean products as its inputs.
Large numbers of small steel companies use this technology.
12. The high weight of the product significantly pushes up the transportation and
movement cost. Therefore large integrated plants are the norms for cost efficient
13. STEEL PRODUCER S IN INDIA -:
Top 10 Steel Companies in India:
1. Rashtriya Ispat Nigam Limited.
2. Steel Authority of India Limited.
3. Tata Steel.
4. Visveswarayya Steels.
5. Bokaro Steel Plant.
6. Bhilai Steels
7. Essar Steels Limited.
8. Jindal Steel & Power.
9. KVS Ispat
10. Jindal Steels Limited.
14. Some of the details regarding these top players in steel industry-:
1. Rashtriya Ispat Nigam Limited:
The foundation stone of the Rashtriya Ispat Nigam Limited was laid in the year
1971 and this organization is the corporate body of Vishkhapatnam steel plant.
They have three different mines under their control being the blast furnace grade
limestone mine, manganese mine and dolomite mine. They are specialized in the
production of the following products:
Reabars or reinforcement bars.
15. 2. Steel Authority of India Limited:
Steel Authority of India shortly called SAIL is one of the top steel maker in public
sector steel-makers in India and they produce steel products both for export and for
domestic consumption as well. SAIL holds the pride of being one among the four
Maharatnas in the central public sectors enterprise in India. They are the major
manufacturers and seller of the following steel products:
Rods and bars
Cold and hot coils and rolled sheets
16. Tata steel:
Tata steel is a part of the India‟ popular Tata group and they are one of the global
steel service and manufacturing companies in India. They have a balance presence
in the continent of Europe and developed countries in the continent of Europe and
they have manufacturing units in 26 different countries all over the world.
Visveswarayya Steel is actually a unit of the Steel Authority of India. And they are
dealing in the production of pig iron and alloy steels. The company began as a
separate entity in the year 1923 and it has now come under the SAIL.
Bokaro Steel Plant:
Bokaro steel plant began its journey as a limited company in the year 1964 and the
company is situated in the Bokaro District of the state Jharkhand. The plant holds
the pride of being the country‟s first Swadeshi Steel Plant. Even though, the
company began its journey as a separate entity, it is now merged with the Steel
Authority of India.
17. Bhilai Steels:
Bhilai steels are one of the leading suppliers, stockiest, exporter and importer of
hast alloy, inconel, monel, brass, copper, alloy steel, carbon steel and stainless
steel. They are also leader in a wide range of pipe fittings like compression type of
pope with ferrules, forges, screwed, SW and BW pipes. The steel product of this
company are being used in the different industries like cement, power, textile,
pharmaceuticals, sugar mills, petrochemicals, fertilizer and chemicals.
Essar Steel Limited:
Essar steels are one of the most versatile producers of steel based products and
tailor – made products and these products are the best known for their quality.
Their 24-carat steel is a product that got worldwide acceptance. They have
international centers in different countries like Indonesia, Vietnam, Canada and the
USA. Some of the products manufactured by them are:
Cold Rolled Products
Hot Briquetted Sponge Iron
Hot rolled products
Iron ore pallets
18. Jindal Steel & Power:
Jindal steel & power is leading player in different industries like infrastructure, gas
and oil, coal to liquid, mining, power and steel. They are continuously creating
new opportunities by leveraging their core capabilities to venture into new
business, diversifying investment and by increasing production capacity.
KVS Ispat is flagship of KVS group of companies and the company enjoys a
legacy in the industry of steel for the past 22 years. This company is known for its
excellence right from its inception and they are consistently making great
contribution towards the development of society. They are dealing with different
types of steel products like:
Rounds & Squares
Light Structural Steel
19. Jindal Steels Limited:
Jindal steels are also making good contribution towards the development of
India and they are ranked sixth among the top business houses with respect
to their asset holding. They are one among the multi billionaire corporation
in India. Their main aim is to become a world player in the industry of steel
production and they are committed to maintain world-class quality in their
production, to offer products at a competitive price and to do their excellent
after sale service to their customers.
Thus like any other industry steel industry in India is also offering wide
range of employment opportunities to deserving candidates thereby
acquiring the required talents for their organization and by offering the right
job to the right candidate.
21. Major companies and their Capacities:
The World Steel (World Steel Association) ranked top 80 steel producers in 2008,
by mmt (million metric tons of crude steel output). The Top 10 are listed like
Ranking Metric tonne Company Country
1st 103.3 mmt ArcelorMittal Luxembourg
2nd 37.5 mmt Nippon Steel Japan
3rd 35.4 mmt Baosteel Group China
4th 34.7 mmt POSCO South Korea
5th 33.3 mmt Hebei Steel China
6th 33.0 mmt JFE Holdings Japan
7th 27.7 mmt Wuhan Iron & Steel Group(Wisco) China
8th 24.4 mmt Tata Steel India
9th 23.3 mmt Jiangsu Shagang Group Jiangsu, China
10th 23.2mmt U.S. Steel United States
Review of pervious year:
22. World crude steel production reached 1,414 million metric tons (mmt) for
the year of 2010. This is an increase of 15% compared to 2009 and is a new
record for global crude steel production.
All the major steel-producing countries and regions showed double-digit
growth in 2010. The EU and North America had higher growth rates due to
the lower base effect from 2009 while Asia and the CIS recorded relatively
In December 2010, world crude steel production for the 66 countries
reporting to the World Steel Association (world steel) was 116.2 mmt, an
increase of 7.8% compared to December 2009. The crude steel capacity
utilization ratio of the 66 countries in December 2010 declined slightly to
73.8% compared to 75.2% in November 2010. Compared to December
2009, the utilization ratio in December 2010 is 1.1 percentage points higher.
25. International Trade of Steel:
International trade is done in two ways-
The intended buyer enquires about the rate and stocks through email/ letter or any
The ITD department then enquires about the availability of the stocks from
different plants and then replies to the enquiry regarding the various details.
The intended buyer visits the company‟s website, where the auctions are made for
the available goods for export. Then the regular procedure is applied to carry out
26. Export procedure:
The Export and Import was covered in step by step process.
Step 1: A contract is prepared by the INTERNATIONAL TRADE DIVISION and
duly finalized with the buyer.
Step 2: The ITD then places a work order to the plant
Step 3: The plant then prepares the goods as per the specifications in the contract
Step 4: The TRANSPORT and SHIPPING Department checks the Letter Of Credit
and amends it.
Step 5: The plant then sends the goods to the delivery point which may be stock
yards, plants or the port.
Step 6: The goods are then inspected by the customs officer and then they are taken
to the port to be loaded on the vessel.
Step 7: The shipping agent then issues a Bill Of Lading
27. Step 8: The Customs officer then gives “LET EXPORT” order
Step 9: Then the exporter negotiates the L/C with its bank and realizes the amount
Step 10: The original copy of the shipping bill and the bank realization certificate
is send to the DGFT‟s office to obtain the DEPB license.
Step 11: After obtaining the DEPB license it has to be registered with the customs
and the port as well as the importing port from where the goods are dispatched.
The customs officer registers the license in its system and the benefit is availed
when the import is done.
Step 12: The importers bank releases the payment to the negotiating bank.
Step 13: The negotiating bank informs the RBI that foreign exchange has been
IMPORTS: The same procedure is followed for imports. The plant finalizes the
contract and the documents are received through the banking channel. The
documents are sent to B.T.S.O to clear the goods from the port and to pay the
customs duty. The importer has to fixes the vessel from the shipping company.
Once the vessel arrives the B.T.S.O is informed about it. The duty is then paid and
the documents are sent to the doc for clearance of the goods. The goods are then
sent to the respective plants.
28. Aligned Documentation System:
The standardisation of the pre-shipment export documents is done on the basis of
the system, popularly known as Aligned Documentation System (ADS).
For the purpose of Documents Aligned System, documents have been classified
into two categories as under:
1. Commercial Documents
2. Regulatory Documents
1. COMMERCIAL DOCUMENTS:
They are divided into two parts.
a. Principal Export Documents b. Auxiliary Export Documents
Principal Export Documents.
Certification of inspection/quality control (where required)
Bill of lading/Combined Transportation Documentation
Certificate of origin
Insurance Certificate/Policy (In case of CIF export sales contract)
Bill of Exchange.
Auxiliary Documentation System
29. Performa invoice
Intimation for Inspection
Application for Certificate of Origin and
Letter to the Bank for Collection/Negotiation of Documents.
Gate Pass-I/Gate Pass II: The Central Excise Authorities prescribe them.
ARE-1: These are Central Excise forms. Earlier, AR4 and AR5 Forms have
been used. In their place, ARE 1 form, now, is used.
Shipping Bill/Bill of Export: They are standardized and prescribed by the
Central Excise Authorities.
For export of goods.
For export of duty free goods.
For export of dutiable goods.
For export of goods under claim for duty drawback.
Export Application/Dock Challan: Standardized and prescribed by the Port
Receipt for Payment of Port Charges: Standardized.
Exchange Control Declaration Forms: GR/PP forms are standardized and
prescribed by RBI.
Freight Payment Certificate.
Insurance Premium Payment Certificate.
30. Classification of Commercial and Regulatory Documents
The different commercial and regulatory documents may be classified into
related to goods, documents related to shipment, documents related to payment,
related to inspection, documents related to excisable goods and documents related
to foreign exchange regulations.
Document Related to Goods:
Significance of Proforma Invoice are Two Fold
a. It forms basis of all trade transactions and further negotiation or contract is
made on this basis.
b. It helps the importer to obtain the import licence, where required, and obtain
foreign exchange for completion of the contract.
31. Significance of Commercial Invoice
a. It is prima facie evidence of the contract of sale and purchase of goods. On
b. of the invoice, all the other documents, in the context of export, are prepared
as it is the basic document.
c. Invoice constitutes the main document for various export formalities such as
preshipment inspection, quality, excise and customs procedures.
d. It is useful for accounting purposes, both by the exporter and importer.
e. This document is required in collection/negotiation of documents through
f. For claiming incentives, this document is essential.
Significance of Consular Invoice can be Summarized
Importance to the Exporter
a. Once the invoice is signed by the consulate of the importing country,
the exporter is reasonably assured that there are no import restrictions
in the importer‟s country for the goods and that there would be no
problem in realization of export proceedsor foreign exchange.
b. It enables prompt clearance from the customs of exporter‟s country for
shipping the goods.
Importance to the Importer
32. a. In the importer‟s country, the customs do not normally open the
packages. It helps the importer to get speedy delivery of goods.
b. Lot of unnecessary hardship which importer faces once the packages
are opened is avoided.
Importance to the Customs
a. The customs of the exporting country can easily clear the goods.
b. The customs of the importing country need not open the packages for
checking and can easily calculate the import duties.
Certain Latin American countries like Mexico require this. It is just like consular
invoice, which requires certification from consulate or authorized mission,
stationed in the exporter‟s country.
When the commercial invoice is prepared on the format prescribed by the customs
authorities of the importing country, it is called “Customs Invoice”. This is the
requirement of U.S.A, Canada and Australia.
Packing Note and Packing List
There is a difference between packing note and packing list. Packing note refers to
33. particulars of contents of an individual pack while packing list is a consolidated
of the contents of the total number of cases or packs.
A packing note contains the following details:
(a) Date of packing,
(b) Number of packing note,
(c) Number of case to which it relates to,
(d) Contents of case in terms of quantity and weight,
(e) Marking numbers,
(f) Name of exporter,
(g) Name of importer,
(h) Importer‟s order number,
(i) Number and date of bill of lading and
(j) Name of vessel/flight.
Packing note is kept in each concerned case/pack. Packing note and packing list
sent to the importer along with other documents. If any case contains any shortfall,
importer can communicate to the exporter in which case there is shortage of goods
for making good.
Certificate of Origin
34. As the very name indicates, certificate of origin is a certificate that specifies the
Of the country where goods are produced. This is absolutely necessary where the
Country has banned the entry of goods of certain countries to ensure that the goods
Those countries are not allowed to enter in. At the time of arrival of the goods in
importer‟s country, this certificate is necessary for the customs to permit
Certain countries offer preferential tariff to goods produced and imported from
such a case, this is a must to the importer to claim preferential tariff and importer
on this document from the exporter. This enables the importer‟s country to regulate
concessional tariff only to select countries and deny to the rest of the countries.
A certificate of origin can be obtained from Chamber of Commerce, Export
Council and various trade associations which have been authorized by Government
of India to issue.
35. DOCUMENTS RELATED TO SHIPMENT
The shipping bill is the main document on the basis of which the customs
is given. Under manual processing of export documents, the exporter is required to
appropriate type of shipping bill to seek the order for customs clearance of the
shipment. Under computerized processing, the exporter does not prepare the
instead it is computer generated. The customs order is called “LET EXPORT
the shipping bill is stamped by the customs, then only the goods are allowed to be
to the docks.
36. The shipping bill contains the following particulars:
a. Nature of goods exported,
b. Name of vessel, master or agents,
d. Country of destination, the port at which the goods are to be discharged,
e. Exporter‟s address,
f. Importer‟s address,
g. Details of the packages, such as numbers and marks,
h. Quantity details of each case, total number of cases and aggregate weight,
i. F.O.B. prices and real value as defined in the Sea Customs Act and
j. Whether the merchandise is Indian or foreign origin which is re-exported.
The shipping bill is prepared in five copies:
1. Customs copy
2. Drawback copy
3. Export Promotion copy
4. Port Trust copy and
5. Exporters copy
Types of Shipping Bills
a. Free Shipping Bill
b. Dutiable Shipping Bill
c. Drawback Shipping Bill
37. d. Shipping bill for Shipment Ex-Bond
e. Coastal Shipping Bill
(ii) Mate’s Receipt
A mate‟s receipt is issued by the mate (assistant to the captain of the ship) after the
cargo is loaded into the ship. It is an acknowledgment that the goods have been
received on board the ship.
Contents of Mate’s Receipt
Mate‟ receipt contains the details about
1. Name of the vessel,
2. Date of shipment,
6. Description and condition of goods at the time they are shipped, port of loading,
7. Name and address of the shipper,
8. Name and address of the importer(consignee) and
9. Other required details.
38. Types of Mate’s Receipts
Mate’s receipt can be clean or qualified.
a. Clean Mate‟s Receipt
b. Qualified Mate‟s Receipt
Significance of Mate’s Receipt
1. Mate‟s receipt is an acknowledgment of goods. It is not a
document of title.
2. It is issued to enable the exporter or his agent to secure
bill of lading from the shipping company.
3. Bill of Lading, which is the title to the goods, is prepared
on the basis of Mate‟s receipt so it should be obtained
without any adverse remarks.
4. Port Trust Authorities are enabled to collect their dues as
it is routed through them.
A cart ticket is also known as cart chit. This is prepared by the exporter, which
contains the details of the vehicle number, description of goods, quantity, name of
the shipper, shipping bill number and port of destination. The driver of the vehicle
carries the cart ticket. At the time of entry into Port, the cart ticket is verified by the
Port Authorities to satisfy that the vehicle is carrying only those goods, which are
mentioned in the cart ticket. After being satisfied, the gatekeeper/warden/inspector
39. issues the gate pass to the driver and allows entry of the vehicle into the premises
of the port.
Certificate of Measurement
Freight is charged either on the basis of weight or measurement. When weight is
the basis of measurement, the shipping company for the purpose of calculation of
freight may accept the weight declared by the exporter. However, when
measurement is the basis for calculation of freight, the shipping company may
insist on a certificate issued by Chamber of Commerce or other approved
organization in respect of goods. The certificate of measurement contains the
details in respect of description of goods, quantity, length, breadth and depth of the
packages, name of the vessel and port of destination of the cargo etc.,
Bill of Lading
Bill of Lading is a document issued by the shipping company or his agent
acknowledging the receipt of cargo on board. This is an undertaking to deliver the
goods in the same order and condition as received to the consignee or his agent on
receipt of freight, the shipping company is entitled to. It is a very important
document to the exporter as it constitutes document of title to the goods.
It serves three main purposes.
(A) As a document of title to the goods
(B) As a receipt from the shipping company and
(C) As a contract of affreightment (transportation) of goods.
40. Types of Bill of Lading
a. Received for Shipment B/L: A shipping company issues it when goods
have been given to the custody of the shipping company, but they have not
been placed on board.
b. On Board Shipped B/L: The shipping company certifies that the cargo has
been received on board the ship.
c. Clean B/L: It indicates a clean receipt. In other words, it implies that there
has been no defect in the apparent order or condition of goods at the time of
receipt or shipment of goods by the shipping company.
d. Claused or Dirty B/L: It shows that the B/L is qualified which expressly
declares a defective condition of goods. The clause may state “bale number
5 hook-damaged” or “package number 10 broken”. By superimposing this
type of clause, the shipping company is limiting its responsibility at the time
of delivery of goods, at the destination.
e. Transshipment or Through B/L: When the journey covers several modes
of transport from the place of starting to the place of destination, this type of
B/L is taken. It indicates that transshipment would be en route. For example,
part of the journey is by ship and the rest of journey may be by road, rail and
41. f. Stale B/L: According to international commercial practice, B/L along with
other documents must be presented to the bank not later than twenty one
days of the date of shipment as given in the B/L. In some cases, the importer
may indicate the number of days within which the documents are to be
presented from the date of shipment. Exporter has to comply with the
stipulation indicated. Otherwise, the B/L becomes stale and is not accepted
by the bank for payment. A stale bill is one which is tendered to the
presenting bank so late a date that it is impossible for the bank to dispatch to
the consignee‟s place, in time, before the goods arrive at the destination port.
In other words, bank finds it impossible to see the documents reach before
the ship reaches the destination.
g. To Order B/L: In this case, the B/L is issued to the order of a specified
h. Charter Party B/L: It covers shipment on a chartered ship.
i. Freight paid B/L: When the shipper pays the freight, then this type of B/L
is issued with the words “Freight paid”.
j. Freight Collect B/L: When the freight on the B/L is not paid and to be
collected at the point of destination, it is marked “Freight Collect” and this
B/L is known as “Freight Collect B/L”. Generally, the importer insists on the
“clean on-board shipped” bill of lading with the prohibition of transshipment
of goods as goods can suffer damage during transshipment. If transshipment
is allowed, even period of journey may take longer
42. Contents of B/L
Name and address of the shipper.
Name and address of the vessel.
Name of port of loading.
Date of loading of goods.
Name of port of discharge and place of delivery.
Quantity, quality, marks and other description.
Number of packages.
Freight paid or payable.
Number of originals issued.
Name of the shipping company.
Voyage number and date.
Signature of the issuing authority.
SIGNIFICANCE OF BILL OF LADING
Importance to the Exporter
a. It is an acknowledgment from the shipping company that the goods
have been received for the purpose of shipment.
b. After receipt of B/L, it helps him to send the shipping advice to the
c. If any damage occurs to the cargo during transit, he can hold the
shipping company responsible, if he has received clean bill of lading.
d. A copy of bill of lading is required to be attached to the application
form to claim the incentives
e. It is a contract of carriage between the exporter (shipper) and the
43. Importance to the Importer
a. It is a document of title to the goods, which enables him to transfer the
tittle by endorsement and delivery.
b. The exporter can send a non-negotiable copy of B/L as advance
intimation of shipment to the importer.
c. It enables him to pay the freight amount as the B/L contains freight
Importance to the Shipping Company
a. It helps the shipping company to collect the freight amount from the
exporter (CIF contract) or importer (FOB contract).
b. Shipping company can protect itself from the wrongful claims of
exporter/importer by incorporating condition of goods/packaging, at the time
of receipt. In case the shipping company, inadvertantly, omits to mention the
advesrse conditon, at the time of receipt, advantage can be claimed by
exporter/importer, by submitting wrongful claim.
Airway Bill is also called Air consignment Note. It is a receipt issued by an airline
for the carriage of goods. As each shipping company has its own Bill of Lading, so
each airline has its own airway bill. Airway Bill or Air consignment note is not
treated as a document of title to goods and is not issued in negotiable form.
Delivery of the goods is made to the consignee without the production of airway
44. Importance of Airway Bill:
a. It is a contract of carriage of goods between the consignor and airlines
or his agent.
b. It acts as a customs declaration form.
c. It contains details of freight and so works as a freight bill.
Bill of Entry:
Bill of Entry is a declaration form made by the importer or his clearing agent in the
prescribed form under Bill of Entry Regulations, 1971 on the strength of which
clearance of imported goods can be made. When goods are imported into a
country, customs duty has to be paid by the importer. For this purpose, importer
prepares the Bill of Entry declaring the value of goods, quantity and description.
This is prepared in triplicate. Customs authorities may ask the importer to produce
the invoice of the exporter, broker‟s note and insurance policy to satisfy about the
correctness of value of goods declared.
Contents of Bill of Entry:
a. Name and address of importer.
b. Name and address of exporter.
c. Import licence number.
d. Name of port where goods are to be cleared.
e. Description of goods.
f. Value of goods.
g. Rate and value of import duty payable.
45. DOCUMENTS RELATED TO PAYMENT:
Letter of Credit:
A letter of credit is a document-containing guarantee of a bank to make payment to
exporter, under certain conditions and up to a certain amount, provided the
contained in the letter of credit are complied with.
Bill of Exchange:
The Negotiable Instruments Act, 1881 defines a Bill of Exchange as “ an
instrument in writing containing an unconditional undertaking, signed by the
maker, directing a certain
person to pay a certain sum of money only to, or to the order of, a certain person or
bearer of the instrument”.
There are five important parties to a Bill of Exchange:
The Drawer: The drawer is the person who has issued the bill. In an export
transaction, exporter draws the bill as money is owed to him.
The Drawee: The drawee is the person on whom the bill is drawn. Exporter draws
the bill on the importer who is the drawee. Drawee is the debtor who owes money
to the exporter (creditor).
46. The Payee: The payee is the person to whom the money is payable. The bill can be
drawn by the exporter payable to the drawer (himself) or his banker.
The Endorser: The endorser is the person who has placed his signature on the
back of the bill signifying that he has obtained the title for the bill on his own
account or on account of the original payee.
The Endorsee: The endorsee is the person to whom the bill is endorsed. The
endorsee can obtain the payment from the drawer.
Types of Bills of Exchange:
a. Sight Bill of Exchange: In this Bill of Exchange, also known as
demand Bill of Exchange, the drawee has to make the payment, on
b. Usance Bill of Exchange: In case of Usance or Time Bill of
Exchange, payment is to be made on the maturity date, after a certain
period, known as tenor. When the calculation of period is made with
reference to the sight of bill, the bill is known as „after sight usance
bill‟. Sometimes, the maturity date is calculated with reference to the
date of bill of exchange, it is known as „after date usance bill‟.
c. Clean Bill of Exchange: A clean Bill of Exchange is one when the
relative shipping documents do not accompany with it. In this case,
the relative shipping documents i.e. Bill of Lading is sent directly to
the importer to enable him to take delivery of the cargo.
d. Documentary Bill of Exchange: A documentary Bill of Exchange is
one where the relative shipping documents such as Bill of Lading,
marine insurance policy, invoice and other documents are sent along
with the Bill of Exchange.
47. Trust Receipt: In case of D/P bill, the importer has to make the payment to
take delivery of goods. If the importer is unable to make the payment, on
arrival of the shipment, and take possession of goods, he executes a Trust
Receipt to take delivery of goods. Importer will have the right to sell the
goods and would be acting as agent of the bank. Importer will be depositing
the sale proceeds with the bank, as and when sales are made. Till the
importer makes the final settlement, bank retains ownership for the
merchandise and the role of the importer is not that of owner but that of
agent to the bank.
Bank Certificate of Payment: It is a certificate issued by the negotiating
bank to the exporter that the bill covering the shipment has been negotiated
through it and export proceeds have been received from the importer. The
certificate indicates the details of the merchandise exported.
DOCUMENTS RELATING TO INSPECTION:
Certificate of Inspection
It is a certificate issued by the Export Inspection Agency certifying that the
consignment has been inspected under the Export (Quality Control and Inspection)
Act, 1963 and found that the requirements relating to quality control and inspection
have been complied with, as applicable, and the goods are export worthy.
48. DOCUMENTS RELATED TO EXCISABLE GOODS:
1. GP Forms
GP stands for Gate Pass. A GP form, gate pass, is issued for the removal of
excisable goods from the factory or warehouse. Form GP1 is issued for the
removal of excisable goods on payment of duty. GP2 is issued for the removal
of excisable goods without payment of duty.
2. Form C
It is not to be confused with C form. Form C is used for applying for rebate of
duty on excisable goods (other than vegetable, non-essential oils and tea)
exported by sea. It is to be submitted, in triplicate, to the Collector of Central
3. Forms AR4/AR4A
These forms are meant for removal of excisable goods for export by sea/post.
Now, in their place, ARE-1 form is used.
49. DOCUMENTS RELATED TO FOREIGN EXCHANGE
REGULATIONS-LEGAL REGULATED DOCUMENTS:
Foreign Exchange Regulations require that all exports other than exports to Nepal
Bhutan shall be declared on the following forms:
1. GR Form:
GR is an exchange control document required by Reserve Bank of India. It is
required to be filled, in duplicate, for all exports in physical form other than by
post. An exporter has to realize the export proceeds within a period of 180 days
from the date of shipment, in India. To ensure control on realization, RBI has
introduced this procedure. GR form, in duplicate, is to be submitted by the exporter
to the customs along with the Shipping Bill. Customs will give their running serial
number on both the copies. After admitting the customs shipping bill, customs will
certify the value of goods declared by the exporter in the space earmarked and also
record their assessment of value. Customs retains he original copy and return the
duplicate to the exporter. Customs sends the original GR form to RBI, which will
be an indication of the goods, which are to be exported. Exporter has to submit the
duplicate of GR form to the authorized dealer, named in GR form, along with other
shipping documents within a period of 21 days of shipment for the purpose of
negotiation. After the negotiation of bill, the authorized dealer will report the
transaction of negotiation to RBI. On receipt of the original, RBI is apprised of the
developments in respect of the export transaction. Once the export proceeds are
received from the importer, the authorized dealer has to forward the duplicate copy
of GR form together with the copy of invoice to RBI. RBI recognizes that the
export transaction has been concluded and export proceeds have been fully
realized. At certain customs offices, shipping bills are processed electronically. So,
at those offices, GR form has been replaced by SDF (Statutory Declaration Form).
50. 2. PP Form:
It is required to be filled in for all export transactions, in duplicate, for all countries
to be made by post parcel, except when made on “value payable” or “cash on
3. VP/COD Form:
It is required to be filled for all export transactions to all countries by post where
the export proceeds are realized on “value payable” or “cash on delivery basis”.
3. SOFTEX Form:
It is required to be prepared, in triplicate, for export of computer software in
All the above documents serve the purpose of monitoring the realization of export
Proceeds in the stipulated manner.
51. ELEMENTS IN EXPORT CONTRACTS:
Meaning and Significance:
The term “Elements” is a bit confusing that refers to the general conditions in
contracts. Export contracts invariably refer to the subject matter of the contract. In
addition to the subject matter, it is advisable for both the paties to incorporate
several general conditions in the contract, in particular, rights of the parties in case
of failure of performance or other contractual obligations. The goods may be lost,
stolen or damaged during transit. Who would bear the risk in such a situation? If
the contract specifies the position clearly, lot of litigation and approaching the
court can be avoided. Physical movement of goods involves cost. Who has to bear
the costs and up to what point? These issues are resolved by incorporating the
elements (general conditions) in export contracts. Most exporters have developed
standard general contracts. It simplifies the day to day operations and also reduces
the possibility of missing certain items. The complexity of the conditions depends
on what is exported. If the items exported are common items such as handicrafts,
garments or normally used consumption items, standard general conditions
contract is sufficient. However, if the goods exported are complex item such as
petrochemicals, the export contract has to be drafted with a great deal of care,
which may turn to be voluminous running into hundreds of pages. For a majority
of products being exported from India, the following elements have to be
incorporated in the export contracts:
1. Names of the Parties
2. Description of the Products
4. Price per unit
5. Total value
7. Tax and Charges
52. 8. Packing
9. Marking and Labelling
10. Mode of Transport
11. Delivery: Place and schedule
15. Mode of Payment
16. Credit period, if any
18. Passing of risk
19. Passing of property
20. Availability/non-availability of export-import licence
21. Force Majeure (Factors beyond the control of the parties that makes the
performance of the contractual obligations impossible e.g. Wars, floods, fire, civil
war. Once this specific clause is incorporated, parties are relieved of their mutual
obligations, on the happening of the event. Contract comes to an end and no party
is liable for damages)
22. Settlement of Disputes
23. Proper Law of the Contract
The Ministry of Commerce, Government of India, has set up Indian Council of
53. It has developed a model set of Contracts for the benefit of exporters. These model
contracts are suitable, in case of most small and medium enterprises.
Methods of Receiving Payment:
Payment in Advance:
This is most favoured method of payment from the viewpoint of the exporter. This
mode does not have any credit or transfer risk to the exporter in executing the
contract, whatsoever. When the conditions in the importer‟s country are unstable
and there is no guarantee of receipt of payment, even after successful execution of
the contract, advance payment is always insisted by the exporter. Exporter receives
payment from the importer, in advance, before execution of the order. Receipt of
payment can be at the time of receiving the order, initially, or later, in installments,
but before final execution of the order. Payment may be received by means of
demand draft, mail transfer or telegraphic transfer in the currency specified in the
contract of sale
When the exporter is unable to get the advance payment from the importer, the
next best alternative mode of payment is „Documentary Bills‟. The exporter is
unwilling to part with the documents of title till he receives the payment and the
importer is not prepared to part with payment and assume the risk until he is sure
of receiving the goods. Under those circumstances, „Documentary Bills‟ is a
bridge, as documents are routed through the bank. It provides the required solution
as it satisfies the claims of both the parties. In this system of payment, banks act as
a media to reconcile the conflicting requirements of the exporter as well as
54. Forms of Documentary Bills
Documentary Bills can be in the form of
a. Sight Bill and
b. Acceptance Bill.
Documents against Payment:
Under this method, exporter draws a sight bill on the importer and hands over the
relative documents specified in the contract to his banker with the instructions to
deliver the documents only on payment. The documents are sent to the
correspondent‟s bank, where the importer is located, with the instructions given by
the exporter. When the importer makes the payment, he can get title to the goods
Documents against Acceptance :
Under this method, exporter draws usance bill on the importer. Usance period may
be 30 to 180 days. Usance period cannot exceed 180 Terms of Payment 51 days as
the export proceeds are to be collected within a maximum period of 180 days as
per Exchange Control restrictions. The essence of the transaction is the exporter is
not only willing to ship the goods but also prepared to part with the title and
possession of goods, before payment is received and even extending the agreed
period of credit.
55. Collection of Bill:
In this case, either D/P bill or D/A bill is sent to the correspondent‟s bank for
collection of proceeds from the importer. In case of D/P bill, importer has to make
payment to get the documents. In case of D/A Bill, on receipt of advice from the
bank, importer accepts the usance bill by writing the words „Accepted‟ with his
signature on the usance draft. Then only, importer gets documents of title to goods
from the bank. He can get possession of goods and even sells the goods to get the
necessary funds to make payment on the due date. In this case, the exporter is
extending credit to the exporter, apart from assuming the commercial risk of
default in payment as the importer may not pay on the due date, after taking
delivery of goods. Soon after the payment is received from the correspondent bank,
exporter‟s account will be credited when the bill is sent on collection basis.
Purchase/Discounting of Bill:
When the exporter is in need of funds, at the time of handing over the documents,
he can request the banker to purchase/discount the bill and allow the proceeds to be
credited to his account. If it is a sight bill, bank purchases and if it is usance bill,
bank discounts the bill. In both the cases, payment is made to the exporter, on
presentation of documents
Documentary Credit under Letters of Credit
Main Attraction: This method of payment has become highly popular in recent
times. The greatest attraction to the exporter is elimination of credit and payment
risks. Exporter is not concerned with the credit +worthiness of the borrower while
entering into the contract. In other words, the credit of the banker is substituted for
that of the importer. There is no payment risk as negotiating bank makes the
payment to him, once the stipulated conditions are complied with. Above all, an
important advantage from the viewpoint of the exporter, he can obtain the payment
from a bank, at his own centre. The documentary bills finance a large part of
According to Article 3 of Uniform Customs and Practices relating to Documentary
credits, Documentary Letter of Credit has been defined as “any arrangement
whereby a bank acting at the request and in accordance with the instructions of a
customer (the importer) undertakes to make payment to or to the order of a third
party (the exporter) against stipulated documents and compliance with stipulated
terms and conditions”.
At the request of the importer, bank makes a commitment to the exporter to make
payment, under certain circumstances and up to a limit, provided the stipulated
documents in the letter of credit, requested by the importer, are presented and
found to be in order. Exporter may draw the draft on the importer or importer‟s
bank. The documents usually required are full set of bill of lading, invoice and
marine insurance policy.
Parties in Documentary Credits:
In a documentary credit, there should be at least four parties, applicant,
beneficiary, the issuing bank and the advising bank. The advising bank, confirming
bank and paying bank may be rolled into one.
57. Different Types of Letter of Credit
There are different types of letter of credit. They are:
Documentary Letter of Credit:
This letter of credit specifies the various documents that are required to be
submitted by the exporter to the importer. That is the reason why it is called
documentary letter of credit.
Following documents are usually specified in the letter of credit.
a. Sight or Usance Bill of Exchange
b. Commercial Invoice/Customs Invoice
c. Consular invoice
d. Packing List
e. Full set clean-on-board Bill of lading/Airway Bill/Combined Transport
f. Inspection Certificate
g. Marine insurance policy/certificate
h. Certificate of origin
i. Any other document as required by the buyer, mentioned in letter of credit
Revocable and Irrevocable Credit:
Under revocable letter of credit, the opening bank reserves the right to
cancel or modify the credit, at any time, without the consent of the
beneficiary. In case of irrevocable letter of credit, the opening bank has no
right to change the terms of credit, without the consent of the beneficiary.
The opening bank is irrevocably committed itself to make the payment, if
58. the documents are in conformity to credit terms specified in the letter of
According to UCP, the letter of credit should state whether it is revocable or
irrevocable credit. In the absence of any specific mention, it is deemed that the
credit is irrevocable credit effective from 1st January ‟94.
With Recourse or Without Recourse Letter of Credit:
Under „With Recourse” letter of credit, the negotiating bank can make the
exporter liable, in case of default in payment by the opening bank or
importer. For this, Negotiating bank has to obtain suitable undertaking from
the exporter for refund of amount paid, in the event of not getting
reimbursement from the issuing bank. Under “Without Recourse” letter of
credit, the negotiating bank has no recourse to the exporter. But, if the
confirming bank happens to be the negotiating bank, it cannot have recourse
to the exporter.
Confirmed and Unconfirmed Letter of Credit:
Exporter and importer remain in different countries. Exporter may not be
aware of the standing of the issuing bank. In such cases, exporter may insist
that the local bank should add confirmation to the credit opened. Once
confirmation is added, the confirming bank, which is normally the
correspondent bank of the opening bank, adds a clause to the effect that:
“The above credit is confirmed by us and we hereby irrevocably undertake to
honour the drafts drawn under this credit on presentation, provided that all the
terms and conditions of the credit are duly satisfied”.
When the credit is irrevocable but not confirmed, the issuing bank asks the
correspondent bank to advise the credit and in such a case, the correspondent
bank will advise the credit with a clause stating that:
59. “This credit is irrevocable on the part of the issuing bank but is not confirmed
by us and therefore it does not involve any undertaking on our part.”
Transferable and Non-Transferable Letter of Credit:
Under transferable letter
of credit, exporter can transfer the credit fully or partly to one or more parties. In
cases, when the product is to be fabricated by a third party, fully or partly, a
portion of the credit is made transferable to the third party.
When the credit is not transferable, it is non transferable credit.
Fixed and Revolving Letter of Credit:
A fixed letter of credit is for a fixed period and amount. Letter of credit
expires if the credit is exhausted or period is over, whichever is earlier. In
case of revolving letter of credit, the letter of credit would be revived
automatically for the same amount and period, once it is exhausted.
Freely Negotiable and Restricted Letter of Credit:
When the letter of credit does not put any condition for the negotiation of
documents, it is a freely negotiable letter of credit. This letter of credit can
be negotiated through any willing bank. In case, the credit names a specific
bank for negotiation, then the letter of credit is a restricted credit. In case, the
bank that has been named for negotiation refuses to negotiate, then it is the
responsibility of the opening bank to pay as per the terms of credit.
60. Red Clause and Green Clause Letter of Credit:
A red clause letter of credit is one that authorises the exporter to avail pre-
shipment finance on the strength of the credit. In this letter of credit, the
clause is printed or typed in red ink. Hence, such letter of credit is known as
red clause letter of credit.
In a green clause letter of credit, in addition to pre-shipment finance, storage
facilities are allowed at the port of shipment to the exporter by opening bank.
Such type of clause is typed or printed in green ink. So, this letter of credit is
known as “green clause letter of credit‟.
Back-to-Back Letter of Credit:
This letter of credit provides pre-shipment finance to the beneficiary. When
the beneficiary wants to purchase raw materials from a third party for the
purpose of executing export order, or is only a middleman and not the actual
supplier of goods, he can ask the bank to open a new letter of credit, on the
strength of this credit, in favour of a third party. In this case, a new letter of
credit has to be opened while in the case of transferable credit; the existing
credit is only transferred.
Assignable and Non Assignable Letter of Credit:
An assignable letter of credit can be assigned to a third party by the
beneficiary of the credit. When the buyer is not able to find the real exporter,
in the meantime, he opens the credit in favour of his agent or representative.
When the agent is able to find an exporter who is willing to supply the goods
on the terms of the buyer, he assigns the letter of credit to the supplier of
goods.A non-assignable letter of credit is one that cannot be further assigned
and so opened only in favour of the real exporter of goods after the exporter
confirms the order.
61. Deferred period of Credit:
In this period of credit, the supplier provides credit to the buyer after supply
Stand by Credit:
This is similar to a performance bond or guarantee, but in the nature of letter
of credit. The credit assures the beneficiary that in the event of non-
performance or non-payment of any obligation, the beneficiary may request
the issuing bank to make the payment. The beneficiary has to draw the claim
by drawing a bill on the issuing bank, accompanied with documentary
evidence in support of non-performance of contract. When the exporter
receives the advance payment from importer, importer may insist on
exporter to open „Stand by credit‟ in favour of the importer to protect the
Central Board of Excise and Customs
Central Board of Excise and Customs (CBEC) is a part of the Department of
Revenue under the Ministry of Finance, Government of India. It deals with the
tasks of formulation of policy concerning levy and collection of Customs and
Central Excise duties, prevention of smuggling and administration of matters
relating to Customs, Central Excise and Narcotics to the extent under CBEC's
purview. The Board is the administrative authority for its subordinate
62. organizations, including Custom Houses, Central Excise Commissionerates and the
Central Revenues Control Laboratory.
On 1 January 2011, the ICC‟s Incoterms 2010 came into force. These are the
eighth revision of the Incoterm Rules, with the last revision dating back to 2000.
The new Rules have been revised to take into account developments in
international trade over the past ten years as the volume and complexity of global
sales has increased, to address security issues arising in recent times and to provide
for the ongoing changes in electronic communication. The new Rules also
recognise the growth of customs free areas.
One of the principal concerns with regard to the Incoterms has been that often the
wrong term is selected for use by the parties. The introduction to the new 2010
Rules stresses the need to use the term appropriate to the goods, to the chosen
means of transport and to whether or not the parties intend to impose additional
obligations on the seller or buyer. In addition, there are Guidance Notes (and a
diagram) at the front of each Incoterms Rule containing information to assist in
making a choice on which Rule to use.
Summarised below are the principal changes to the 2000 version.
63. Reclassification of Rules:
The new Rules have been separated into two classes:
i. Rules for use in relation to any mode or modes of transport,
which can be used where there is no maritime transport at all or
where maritime transport is used for only part of the carriage
ii. Rules for sea and inland waterway transport, where the point of
delivery and the place to which the goods are carried to the
buyer are both ports.
FAS, FOB, CFR and CIF belong to the second class of Rules. In respect of FOB,
CFR and CIF, reference to the “ship‟s rail” has now been deleted and this has been
replaced with the goods being delivered when they are “on board” the vessel.
Rules apply to domestic as well as international trade
The Incoterms have traditionally been used for international sale contracts even
though some trade blocs, such as the European Union, have minimised the
significance of border formalities. The new Rules now recognise that they can also
be used for domestic sale contracts and reference is made in a number of the Rules
that export and import formalities will only need to be complied with where
applicable. It is anticipated that this change may encourage greater use of the Rules
in the USA in place of the former US Uniform Commercial Code.
Two new terms replace four current terms
Incoterms 2000 contained 13 Rules, which have been reduced to 11 terms in
Incoterms 2010. This has been achieved by introducing two new Rules to replace
four current Rules. The two new Rules may be used irrespective of the mode of
64. transport selected and under both new Rules, delivery takes place at a named
destination. In essence, the “D” (Delivered) terms under the 2000 Rules have been
consolidated to reduce the number of terms that were considered to have little real
difference between them.
DAT (Delivered at Terminal) replaces DEQ (Delivered ex Quay). DAT may be
used irrespective of the mode of transport selected and may also be used where
more than one mode of transport is employed. “Delivered at Terminal” means that
the seller delivers when the goods, having been unloaded from the arriving means
of transport, are placed at the buyer‟s disposal at a named terminal at the named
port or place of destination. DAT requires the seller to clear the goods for export
where applicable but the seller has no obligation to clear the goods for import, pay
any import duty or carry out any import customs formalities. It was considered that
DAT would prove more useful than DEQ in the case of containers that might be
unloaded and then loaded into a container stack at the terminal, awaiting shipment.
There was previously no term clearly dealing with containers that were not at the
DAP (Delivered at Place) replaces DAF, DES and DDU. The arriving “vehicle”
under DAP could be a ship and the named place of destination could be a port.
Consequently, the ICC considered that DAP could safely be used instead of DES
and that it would make the Rules more “user-friendly” if they abolished terms that
were fundamentally the same. Again, a seller under DAP bears all the costs (other
than any import clearance costs) and risks involved in bringing the goods to the
66. A. GENERAL TERMS AND CONDITIONS FOR EXPORT (FOB)
1.0 Trade Terms
1. To interpret all commercial terms and abbreviations used herein and which have not been
otherwise defined, the rules of „INCOTERMS 2000 shall apply.
2. Price(s) as agreed between the Seller and the Buyer are inclusive of the labour charges involved in
the work of dunnaging/ stowing/ lashing/ shoring and securing of the materials supplied by the
3. The Buyer shall arrange at his own costs and expenses to provide to the Master of the vessel at the
LOAD PORT all the materials including materials for dunnage required for stowing, dunnaging,
lashing, shoring and securing of the materials inside the hatches/ holds of the vessel.
67. 4. The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoever
nature arising subsequent to the delivery / loading of the materials on board the vessel on the basis
of FOB (Stowed) Load Port, such as ocean freight, insurance charges, port dues, taxes including
income tax, customs duties, unloading and handling charges, levies and fees, if any, of whatsoever
nature and kind, payable or leviable at the time of or by reason of importation of the materials in
the country of import.
3.0 Test Certificate and Inspection
3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant(s) of the Seller. The Works Test
Certificate shall be furnished showing Heat / Cast Number, material, chemistry as per Ladle Sample Analysis,
mechanical properties as may be required in the specification mutually agreed to.
3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency, mutually
acceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a) that the materials were inspected at
the load port prior to loading and the markings (except for pig iron) were as per the requirements of the Agreement
between the Seller and the Buyer (b) total number of pieces / bundles/ packets/ coils (except for pig iron) and weight
in Metric tonne (MT) and (c) that the materials loaded on board the vessel are without apparent damage, properly
lashed and secured (except for pig iron) inside the hatches/ holds of the vessel. The cost of such Pre-shipment
Inspection at the load port shall be borne and paid for by the Seller.
3.3 Remarks such as „materials partly rust stained/ rusty edges/ wet before shipment/ rust stained/ some rusty edges‟
and/or „stored in open area prior to loading‟ and/or „unprotected cargo‟ appearing in the Pre-Shipment Inspection
Certificate shall be acceptable to the Buyer.
i. Delivery/ Shipment
4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter of Credit
satisfactory in all respects to the Seller, within the time schedule.
4.2 Subject to acceptance by the Seller of vessel(s) nominated by the Buyer and subject to the arrival of such
vessel(s) at the load port within the agreed lay can with such extensions as may be mutually agreed upon in writing
(in which event the validity of the Letter of Credit for shipment and negotiation shall be promptly extended by the
Buyer), the Seller shall deliver the materials on FOB [(SLSD) stowed, lashed, secured and dunnaged} load port
68. ii. Risk and Title
5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as the materials cross the
ship‟s rails at the LOAD PORT.
5.2 The title to the materials shall pass from the Seller to the Buyer only after the Seller has negotiated the
documents and has received payment of the full invoice value of the materials.
5.3 The clauses 5.1 & 5.2 shall be applicable in case of all overseas shipments.
5.4 Clause 5.2 shall also apply to documents under the Clause 9 hereunder, if such an eventuality has arisen.
iii. Right of Transfer
1. Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from this
Agreement except to its successor or permitted assignee(s) and in the case of any such assignment
or transfer, the contract shall be binding upon such successor or transferee.
iv. Modification of the Contract
7.1 This Agreement cancels all previous negotiations/ agreements between the parties hereto. There are no
understanding(s) or agreement between the Buyer and the Seller which are not fully expressed herein and no
statement or agreement, oral or written, made prior to or at the signing hereof shall affect or modify the terms hereof
or otherwise be binding on the parties hereto. No change in respect of the contract covered by this Agreement shall
be valid unless the same is agreed to in writing by both the parties hereto specifically stating the same to be an
amendment to this Agreement.
69. v. Waiver
8.1 Failure to enforce any condition herein contained shall not operate as a waiver to the condition itself or any
subsequent breach thereof.
vi. Red Clause
9.1 In the event of:
(a) The failure of the Buyer to nominate a suitable vessel within the specified laydays, as mentioned in the Seller‟s
Notice of Readiness (NOR)
(b) The vessel nominated by the Buyer and accepted by the Seller failing to arrive at the designated load port within
the agreed laycan for reasons other than Force Majeure, as defined under Clause 10 herein below:
(c) The vessel (nominated by the Buyer and accepted by the Seller) being found unsuitable after its arrival at the
designated loadport, as certified by independent marine surveyor(s),
the seller shall be entitled to negotiate their Commercial Invoice against the L/C opened by the Buyer and realise
100% of the value of the materials ready for shipment on the basis of certificate issued by the Pre- shipment
Inspection agency certifying that the contracted materials and quantity are ready for shipment and also that the
materials are in good condition.
Remarks such as “materials partly rust stained/rusty edges/wet before shipment/rust stained/ some rusty edges‟
and/or “stored in open area prior to loading” and/or “unprotected cargo” appearing in the Pre-Shipment Inspection
Certificate are acceptable.
9.2 The title having already passed on to the buyer, the materials will thereafter be held in custody by the seller at
the risk and responsibility of the buyer at the storage yard of the seller. The materials will be covered by tarpaulin at
the buyer‟s request and cost at the storage yard of the seller.
The cost of holding materials shall be as follows till the date of acceptance of vessel‟s NOR, when the vessel finally
calls at the loadport : US $ PMT
70. i] For the first 15 days from the date of expiry of Seller‟s NOR Laycan Nil
ii] For any subsequent week(s) (7 days) or part thereof 1
Buyer to ensure that payment towards Ground Rent and/or Tarpaulin cost is remitted and remittance instruction duly
forwarded by SWIFT message, before actual shipment, against the debit invoice.
9.3 The Buyer shall however nominate [another] suitable vessel within reasonable time from the date of realisation
of payment, as mentioned above, for taking delivery of the cargo and subject to such vessel arriving at the
designated loadport, the seller shall at his cost deliver the materials FOB [SLSD] in terms of Contract.
9.4 The Letter of Credit * established by the buyer in favour of the seller shall make specific and unconditional
provision to the above [9.1 to 9.3] effect.
* L/C to be opened with First Class International Bank having Correspondent relationship with State Bank Of India. Name of the
Banks can be obtained by the buyer from SAIL
vii. Force Majeure
1. If the Seller and/ or the Buyer be prevented from discharging its or their obligation under this
Agreement by reason of arrests or restraints of Princes or Rulers , Government of People , War,
Blockade, Revolution, Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs ,
Accidents, Acts of God, Plague or other epidemics, destruction of the materials by fire or flood or
other natural calamity or on account of any other cause beyond the Seller‟s or the Buyer‟s control
and interfering with the production and/or delivery of the materials as herein above contemplated,
the time for delivery shall be postponed by the time or times during which production and/or
delivery is prevented by any such causes as herein above mentioned, provided that in the event of
such delay exceeding ninety days , the party other than the party which invokes the force majeure
may at their option, cancel this Agreement by Notice in writing to the other party in respect of the
undelivered quantity of the materials without , however, any right against or being responsible to
the other party for such cancellation. The party invoking force majeure shall within 15 days of the
occurrence of force majeure causes, put the other party on notice, supported by certificate from the
Chamber of Commerce or concerned governmental authority and shall likewise intimate the
cessation of such causes. If the force majeure condition continues beyond a period of six months,
the Seller or the Buyer may at his option cancel this Agreement by notice in writing to the other
party in respect of the undelivered quantity of the materials without, however, any right against or
being responsible to the other party for such cancellation.
11.0 Legal Interpretation
71. 1. This contract shall be governed and construed in accordance with the Laws of India for the time
being in force.
12.0 Settlement of Disputes
12.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to the construction,
meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between
the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration of the Indian
Council of Arbitration (ICA) ,New Delhi, India by a sole Arbitrator appointed by the Arbitration
Committee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuance
thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi,
72. 13.0 Import/ Export License: It shall be the responsibility of the Seller to arrange export license(s), if any, required
and it shall be the responsibility of the Buyer to arrange for the import license(s) , if required, in the country into
which the materials are intended to be imported.
14.0 General Clause
14.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller is entering into
this Agreement solely on its own behalf and not on behalf of any other person or entity. In particular, it is
expressly understood and agreed that the Government of India is not a party to this Agreement and has no
liabilities, obligations or rights hereunder. It is expressly understood and agreed that the Seller is an
independent legal entity with power and authority to enter this contract solely in its own behalf under the
applicable laws of India and general principles of Contract Law. The Buyer expressly agrees,
acknowledges and understands that the Seller is not an agent, representative or delegate of the Government
of India. It is further understood and agreed that the Government of India is not and shall not be liable for
any acts, omission(s), commission(s), breaches or other wrong(s) arising out of the contract. Accordingly,
the Buyer hereby expressly waives, releases and foregoes any and all actions or claims including cross
claims, impleader claims or counter claims against the Government of India arising out of this contract and
covenants not to sue the Government of India as to any manner, claim, and cause of action or thing
whatsoever arising out of or under this Agreement.
15.0 Changes in Destination
15.1 The contracted cargo has to be taken to the designated station only. Any change in destination shall be made
through a formal agreement to this Agreement and on the mutually agreed terms and conditions.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF THE SELLER THE BUYER STEEL
AUTHORITY OF INDIA LTD.
Hindustan Times House, 13th Floor, - -----------------------------------
18-20 Kasturba Gandhi Marg, ------------------------------------
New Delhi - 110001 INDIA ------------------------------------
SIGNATURE : SIGNATURE
73. NAME : NAME
DESIGNATION : DESIGNATION
COMPANY : SAIL COMPANY
PLACE : NEW DELHI PLACE
DATE : DATE
B. GENERAL TERMS AND CONDITIONS FOR EXPORT (CFR)
1.0 Trade Terms
1.1 To interpret all commercial terms and abbreviations used herein and which have not been otherwise
defined, the rules of 'INCOTERMS 2000' shall be applied.
74. 1. Prices
2.1 The Seller shall under no circumstances be liable for any costs, charges, liabilities of whatsoever
nature arising subsequent to the delivery /loading of the materials on board the vessel on the basis of
CFR (FO/LT) Port, such as insurance charges, port dues, taxes including income tax, customs duties,
unloading and handling charges, levies and fees, if any, of whatsoever nature and kind payable or
leviable at the time of or by reason of importation of the materials in the country of import.
3.0 Test Certificate and Inspection
3.1 The materials shall be covered by Works Test Certificate issued by Steel Plant of the Seller. The
Works Test Certificate shall be furnished showing Heat/ Cast Number, material, chemistry as per Ladle
Sample Analysis, mechanical properties as required in the specification.
3.2 The materials will be inspected at the load port prior to loading by a Pre-shipment Inspection Agency,
mutually acceptable to the Seller and the Buyer. The Inspection Certificate shall certify (a) that the
materials were inspected at the load port prior to loading and the markings ( except for pig iron) were as
per the requirements of the Agreement between the Seller and the Buyer (b) total number of pieces/
bundles/ packets/ coils (except for pig iron) and weight in MT and (c) that the materials loaded on board
the vessel are without apparent damage, properly lashed and secured (except for pig iron) inside the
hatches/ holds of the vessel. The cost of such Pre-shipment Inspection at the load port shall be borne and
paid for by the Seller.
3.3 Remarks such as ‘materials partly rust stained/ rusty edges/ wet before shipment/rust stained/ some
rusty edges’ and/or 'stored in open area prior to loading' and/or ‘unprotected cargo' appearing in the Pre-
Shipment Inspection Certificate and Bills of Lading shall be acceptable to the Buyer.
4.1 The shipment schedule will be subject to the condition that the Seller is in possession of the Letter of
Credit, within the time schedule, satisfactory in all respects to the Seller.
5.O Risk and Title
75. 5.1 With respect to each shipment, the risk shall pass from the Seller to the Buyer as soon as the
materials cross the ship's rails at the port of loading and the title to the materials shall pass from the Seller
to the Buyer only after the Seller has negotiated the documents and has received payment of the full
invoice value of the materials shipped.
6.0 Right of Transfer
6.1 Neither the Buyer nor the Seller shall be entitled to assign or transfer contract resulting from this
Agreement except to its successor or permitted assignee/ s and in the case of any such assignment or
transfer, the contract shall be binding upon such successor or transferee.
7.0 Modification of the Contract
7.1 This Agreement cancels/ supersedes all previous negotiations/ agreements between the parties
hereto. There are no understandings or agreement between the Buyer and the Seller which are not fully
expressed herein and no statement or agreement, oral or written, made prior to or at the signing hereof
shall affect or modify the terms hereof or otherwise be binding on the parties hereto. No change in
respect of the contract covered by this Agreement shall be valid unless the same is agreed to in writing by
both the parties hereto specifically stating the same to be an amendment to this Agreement.
8.1 Failure to enforce any condition herein contained shall not operate as a waiver of the condition itself
or any subsequent breach thereof.
9.0 Force Majeure
9.1 If the Seller and/or the Buyer be prevented from discharging its or their obligation under this
Agreement by reason of arrests or restraints of Princes or Rulers, Government of People , War, Blockade,
Revolution Insurrection, Mobilization, Strikes, Riots, Civil Commotion, Lock Outs, Accidents, Acts of God,
Plague or other epidemics, destruction of the materials by fire or flood or other natural calamity or on
account of any other cause beyond the Seller's or the Buyer's control and interfering with the production
and/or delivery of the materials as herein above contemplated, the time for delivery shall be postponed by
the time or times during which production and/or delivery is prevented by any such causes as herein
above mentioned, provided that in the event of such delay exceeding ninety days, the party other than the
76. party which invokes the force majeure may at their option, cancel this Agreement by Notice in writing to
the other party in respect of the undelivered quantity of the materials without, however, any right against
or being responsible to the other party for such cancellation. The party invoking force majeure shall within
15 days of the occurrence of force majeure causes, put the other party on notice, supported by certificate
from the Chamber of Commerce or concerned governmental authority and shall likewise intimate the
cessation of such causes. If the force majeure condition continues beyond a period of six months, the
Seller or the Buyer may at his option cancel this Agreement by notice in writing to the other party in
respect of the undelivered quantity of the materials without, however, any right against or being
responsible to the other party for such cancellation.
10.0 Legal Interpretation
10.l This contract shall be governed and construed in accordance with the Laws of India for the time
being in force.
viii. Settlement of Disputes
11.1 All disputes or differences whatsoever between the parties hereto arising out of or relating to the
construction, meaning or operation or effect of this contract or the breach thereof shall unless amicably
settled between the parties hereto, be settled by arbitration in accordance with the Rules of Arbitration of
the Indian Council of Arbitration (lCA) ,New Delhi, India by a sole Arbitrator appointed by the Arbitration
Committee of the Indian Council of Arbitration, New Delhi, India and the Award made in pursuance
thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi,
ix. Import/ Export Licence
12.1 It shall be the responsibility of the Seller to arrange export licence(s), if any, required and it shall be
the responsibility of the Buyer to arrange for the import licence(s), if required, in the country into which the
materials are intended to be imported.
x. General Clause
13.1 It is expressly understood and agreed by and between the Buyer and the Seller that the Seller is
entering into this Agreement solely on its own behalf and not on behalf of any other person or entity. In
particular, it is expressly understood and agreed that the Government of India is not a party to this
Agreement and has no liabilities, obligations or rights hereunder. It is expressly understood and agreed
that the Seller is an independent legal entity with power and authority to enter this contract solely in its
own behalf under the applicable laws of India and general principles of Contract Law. The Buyer
expressly agrees, acknowledges and understands that the Seller is not an agent, representative or
delegate of the
77. Government of India. It is further understood and agreed that the Government of India is not and shall not
be liable for any acts, omissions, commissions, breaches or other wrongs arising out of the contract.
Accordingly, the Buyer hereby expressly waives, releases and foregoes any and all actions or claims
including cross claims, impleader claims or counter claims against the Government of India arising out of
this contract and covenants not to sue the Government of India as to any manner, claim, cause of action
or thing whatsoever arising out of or under this Agreement.
FOR AND ON BEHALF OF FOR AND ON BEHALF OF THE SELLER THE BUYER STEEL
AUTHORITY OF INDIA LTD. M/S ------------------------------
Hindustan Times House, 13th Floor, - -----------------------------------
18-20 Kasturba Gandhi Marg, ------------------------------------
New Delhi - 110121 INDIA ------------------------------------
SIGNATURE : SIGNATURE
NAME : NAME
DESIGNATION : DESIGNATION
COMPANY : COMPANY
PLACE : PLACE
DATE : DATE
78. REFLECTIONS ON WHAT HAS BEEN LEARNED
DURING THE PROJECT
Detailed study of export and import procedures. Physical import and export of
materials, customs procedures and port formalities, import financing and export
negotiation. The export formalities required for exporting steel material to Nepal
Letter of Credit
Materials as per contract
Documents related to material
Export documentation ( bill of export for land export, shipping bill for sea
export and airway bill for export by air )
A.R.E / Nepal Invoice for Nepal
Test certificate of materials
Physical movement of goods across border.
Negotiation at bank
Bank Realization Certificate (B.R.C)
79. POST EXPORT BENEFITS
B.R.C and other related documents for D.E.P.B ( Duty Entitlement Passbook
Registration of D.E.P.B license with Customs
Utilization of D.E.P.B license
Letter of credit
Receipt of documents
a. Bill of lading
b. Packing list
c. Test certificate
d. Certificate of origin
Processing of Bill Of Entry
Customs examination of goods ( restricted items , green channel items )
Customs Pass out
1. To study the current export scenario of steel industry which is used to import
and export of steel in India.
2. To study the shipping operations during Export-Import.
3. To study the Documentation and its process.
4. To explore the future perspective which help the company to increase their
I will use the secondary data that is available, and will look to focus on those data and will do a
time series analysis to predict the future growth of the steel industries. I will use the current
growth statistics to predict the future growth. I will also try to look in to the aspects about how
the Industry is working to save their money & risk during exports of the steel.
SIGNIFICANCE OF THE PROJECT:-
Explore the steel industry.
To know the current condition of the sector
To know all the procedures of documentation which is required during the export of
To know how the shipping operations is being made.
Ways to improve the relation of the exporter with the importer.
The full value of exports should be realized after negotiation that is no delay
should be made at the time of receiving payments
No clearance charges should be there at the time of discharging the container
from the port. It should be rent free
Privatization should be adopted
ANNUAL REPORTS OF MINISTRY OF STEEL
EXPORT IMPORT PROCEDURES
Documents and logistics--- by C. RAMA GOPAL