EXPORT TRADE PROCEDURE II BCOM IB

EXPORT TRADE PROCEDURE

II BCOM IB- UNIT 3

PREPARED BY

DR.GB.KARTHIKEYAN

ASSISTANT PROFESSOR AND HEAD

DEPARTMENT OF COMMERCE (IB)

GOVT ARTS COLLEGE,CBE - 641018

Reference : Foreign Trade Theory, Practices, Procedures and Documentation –

Dr.Khushpat Jain, Dr.Apexa V.Jain

UNIT 3

QUALITY CONTROL & PRE-SHIPMENT INSPECTION

In order to promote exports of quality goods as per the international standards , the government of India has introduced compulsory quality control &

pre-shipment inspection for 90%of items export under one or the other systems as per the Export Act, 1963.

Some of these items are :

a) Food & Agricultural products;

b) Chemical & allied products;

c) Engineering goods;

d) Textiles;

e) Coir ,jute and leather products such as footwear etc,.

Reference : Foreign Trade Theory, Practices, Procedures and Documentation – Dr.Khushpat Jain, Dr.Apexa

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OBJECTIVES OF QUALITY CONTROL AND PRS-SHIPMENT INSPECTION

• TO FULFILL COMMITMENTS OF WTO : WTO’S agreement on Sanitary and Phyto- sanitary measures makes it mandatory for all member countries to enforce a strict measures

to protect health and safety of consumers by introducing regulatory import controls ,especially in food sector. Export inspection council is the main agency for ensuring the fulfilment

of the provisions of the said agreement in India’s export sector.

• TO ENSURE QUALITY OF PRODUCTS : International market is highly competitive . Sellers across all countries have an access to global market. consumers are willing to pay

higher price for quality goods. Under such circumstances , quality control and pre-shipment play an important role in ensuring quality of exports.


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• INSTILLING CONFIDENCE AMONG FOREIGN BUYERS : Indian exports have always been branded as low quality in international market for one or the other reasons

.Although ,the scenario has changed over the period of time, the perception that has been built over years needs to be changed. The initiatives like quality control and pre-

shipment inspection can go a long way in changing this perception and instil confidence among foreign buyers about the quality control of the Indian products.

• TO MINIMIZE IMPEDIMENTS TO FOREIGN TRADE : Quality control & pre-shipment at the exporters end can minimize many hurdles to free flow of trade, viz :

a) Minimizing the hurdles by reducing the time for inspection and testing at the importing end.


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b) Minimising and even eliminating rejection due to non – compliance at the point of import .

c) Minimising the problems of repairs and replacement.

• TO BUILT IMAGE: Quality control and pre-shipment inspection helps in building the image of the country as it ensures that inferior quality products are not

exported by unscrupulous one-time or fly-by-night operators. Such problems can be minimised through mandatory export certification.

• TO COMPLY WITH INTERNATIONAL LAWS : Quality control and pre-shipment inspection ensure compliance with these laws on proactive basis and

ensure smooth flow of international transactions between the countries.

• OTHER OBJECTIVES :


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a) Avoid duplication of inspection , sampling and tests at the exporting and importing ends.

b) Take care of variation in quality due to production by small farmers , fisherman or enterprises .

c) Helps in ‘capacity building’ as with a mandatory export certifications system the country identifies the weakness and focuses on correcting these.


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METHODS OF QUALITY CONTROL & PRE-SHIPMENT INSPECTION

The government of India has set up Export Inspection council to monitor the quality of goods meant for exports. The EIC has set up five Export

Inspection Agencies at Mumbai, Kolkata, cochin, Delhi & Chennai. These EIA’s have a network of nearly 62 offices throughout the India . These EIA’s have certain

specific areas under their jurisdiction.

Export Inspection Council has recognised three systems of pre-shipment inspection namely :


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(a) Self-Certification: Under this system, a manufacturing unit certifies its own products and issues exporters: certificate for export. This facility is extended to the exporters:

• Having good reputation and goodwill in the market;

• Fulfilling stringent norms prescribed for product quality, design and peg a development, raw materials and bought out components;

• Having quality control laboratory, process Control, meteorological control and independent quality audit facility.

The manufacturing units, which have been recognized under this system, have to pay a nominal yearly fee at the rate of 0.1% of FOB value subject to minimum of Rs.

2,500/- and maximum of Rs. 1 lakh in a year to the concerned EIA. Such units are recognised for a period of one year, which may be extended, provided r. the manufacturing unit

continues to fulfil the recognized norms.


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(b) In-Process Quality Control (IPQC): Under this system, stage by stage inspection of products like chemicals and engineering goods is done during the process of production.

The inspection includes:

• Raw materials and bought out components control,

• Process Control,

• Product control,

• Packing and packaging control.

Certain units under IPQC System have been given option to issue Certificate of Inspection themselves provided they get registered themselves as 'Export Worthy

Units' with the concerned EIA.


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(c) Consignment-wise Inspection : Under this system, each individual consignment is subject to compulsory inspection by the EIA. The following is the procedure for the same:

• The exporter has to apply in the prescribed form to EIA at least 7 days before the expected date of shipment.

• After getting the ‘Intimation of Inspection’ , the EIA deputes an Inspector to conduct the Pre- shipment inspection at the exporters factory.

• After the inspection ,the goods are packed with EIA seal and the inspector submits the report to the Deputy Director of EIA.

• The Deputy Director of EIA issues the Inspection certificate in triplicate if the inspection report is favorable. Otherwise he issues the rejection note.


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UNITS EXEMPTED FROM THE INSPECTION PROCEDURE

Export houses and Trading Houses.

Approved 100% EOU’s and EPZ’s.

Exporters who are rejected with the Textile committee

Goods marked with ISI, AGMARK,BIS-14000, & ISO 9000


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PROCEDURE FOR PRE-SHIPMENT INSPECTION

• Those exporters, who are approved under Self-Certification and IPQO, have to submit their applications in a prescribed 'Intimation for inspection' form to the Export Inspection

Agency. The Export Inspection Agency issues the Inspection Certificate on the basis of their performance reports as submitted by the EIA officials during the checks at all levels

of production carried out by them. checks may also be carried out whenever required.

• However, the units not approved under Self-certification or IPQC systems, required to undergo the following procedure:


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(a) Application to EIA: The exporter has to apply in the prescribed ‘intimation for Inspection' form (in duplicate) to EIA at least 7 days before the expected date of shipment

along with the following documents:

• Copy of export contract;

• Copy of letter of credit;

• Details of packing specifications;

• Commercial invoice giving evidence of FOB value of export consignment;

• Crossed cheque/D.D. in favour of EIA towards inspection fees;

• Declaration regarding importer's technical specifications.


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(b) Deputation of Inspector: After getting the 'Intimation for Inspections, the EIA deputes an inspector to conduct the pre-shipment inspection at the exporters

factory or warehouse. The exporter should keep goods ready for inspection on the day and time allotted for inspection.

(c) Inspection and Testing: The inspector conducts inspection randomly and prepares the report to be submitted to EIA. The exporter is required to arrange for

facilities required for the inspection. Where such facilities are not available, inspection may be carried out at private independent laboratories.

(d) Packing and Sealing of Goods: if the inspector is satisfied with the quality of goods, he issues order for packing of goods in his presence. After packing, the

consignment is marked and sealed with the official seal of the EIA.


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(e) Submission of the Report to EIA and Issue of Inspection Certificate: The report prepared by the inspector is submitted to the Deputy Director of ElA. If the report is favorable,

the Director of EIA issues an inspection certificate in triplicate.

• The original copy is required to be submitted to the Customs.

• The duplicate copy is dispatched to the importer.

• The triplicate copy to be retained by the exporter for his record.

(f) Issue of Rejection Note: If the report submitted by the inspector is not favorable, the Deputy Director of EIA issues a rejection note.

(g) Appeal against Rejection Note: The exporter can file an appeal against the rejection note within 10 days from the dab of the receipt of such note. On receiving the appeal, the

EIA convenes a mooting of the Appellate Panel. The panel reviews the inspection report and if necessary examines the consignment again, The decision of the Appellate panel is final and is binding

On both parties, the exporter and the Export Inspection Agency.


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PROCEDURE FOR SHIPPING AND CUSTOM CLEARANCE

• According the Section 40 of the Customs Act, the person in-charge of the conveyance vessel, vehicle, aircraft, etc., cannot permit loading of export cargo at the

Customs Station unless and until a formal permission to the export given by the authorised Customs Officer is presented.

Before granting the permission, the Customs Officer ensures that the

(a) The exporter. goods are of the same type sort and value as have been declared by the exporter.

(b) The duty or cess leviable thereon has been properly determined and paid.

(c) Provisions of Export (Control) Order, Export (Quality Control and Inspection) Act and Foreign Exchange (Regulation) Act are complied with.


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The Procedure for shipping and customs clearance is as under:

(a) Preparation and Submission of Export Documents: For the clearance of cargo from customs, the exporter or his agent is required to submit the following set of

documents along with five copies of shipping bill to the Customs Appraiser at the Customs House.

a. Letter of Credit along with export contract or export order.

b. Commercial Invoice (2 copies)

c. Packing List or Packing Note.

d. Certificate of Origin.

e. GR Form (original and duplicate)

f. ARE-I Form.

g. Original copy of Certificate of Inspection, where necessary.

h. Marine Insurance Policy.


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• (b) Verification of Documents: The Customs Appraiser verifies the details listed in each document and ensures that all the formalities relating to exchange

control, pre-shipment inspection and licensing have been complied with by the exporter. If satisfied, he issues a 'Shipping Bill Number', which is very important

from exporter's point of view.

• (c) Valuation of the Goods: The Customs Appraiser assesses the shipping bill and values the goods. The value of goods as determined by the Customs Appraiser is

considered for all future transactions, especially for the claim of Incentives. All documents are returned to the exporter or his agents except:

1. Original copy of GR to be forwarded to the RBI.

2.Original copy of Shipping Bill.

3.One copy of Commercial Invoice.


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The validity of assessed shipping bill is for one month only. If the exporter fails to deliver the goods in that period, he will have to undergo the above procedure

again.

(d) Obtaining 'Carting Order' from the Port Trust Authorities: The C&F agent, then, approaches the Superintendent of the concerned Port Trust for Obtaining the

'Carting Orders for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is physically moved into the port area and stored in the appropriate

shed for loading on ship.


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(e) Customs Examination and Issue of 'Let Export Order': The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his

presence. The same can be arranged for at the factory or warehouse of the exporter by making an application to the Assistant Collector of Customs. The Customs

Examiner, if satisfied, issues a formal permission for the loading of cargo on the ship in the form of a 'Let Export Order'.

(f) Obtaining 'Let Ship Order' from the Customs Preventive Officer: 'Let Export Order' must be supplemented by a 'Let Ship Order' issued by the Customs Preventive

Officer. The C&F agent submits the duplicate copy of Shipping Bill, duly endorsed by the Customs Examiner, to the Customs Preventive Officer who endorses it with

the 'Let Ship Order'.


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• (g) Obtaining Mate's Receipt and Bill of Lading: The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mate's Receipt

to the Port Superintendent. The Port Superintendent, on receipt of port dues, hands over the Mate's Receipt to the C&F Agent. The C&F Agent surrenders the

Mate's Receipt to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to three negotiable and two to three non-negotiable

copies of Bill of Lading.


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REFERENCE:

FOREIGN TRADE- THEORY, PROCEDURES AND DOCUMENTATION

DR. KHUSHPAT S. JAIN

DR. APEXA V. JAIN


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Thank you


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