If you are looking for AED-01 IGNOU Solved Assignment solution for the subject Export Procedures and Documentation, you have come to the right place. AED-01 solution on this page applies to 2022-23 session students studying in BDP, BCOMAF, BCOMCAA, BCOMFCA courses of IGNOU.
AED-01 Solved Assignment Solution by Gyaniversity
Assignment Code: AED-01/TMA/2022-23
Course Code: AED-01
Assignment Name: Export Procedures and Documentation
Verification Status: Verified by Professor
Maximum Marks: 100
Attempt all the questions.
Q.1 Discuss the institutions providing technical services for the promotion of export in India. Explain the institutional setup for Government policy making and consultation for export promotion in India.(20)
Ans) For any country's export promotion programme to be successful, export marketing efforts are crucial. An exporter needs specific advice and support for carrying out operations related to international marketing in key areas such as packaging, market promotion and publicity, quality certification, risk coverage, market intelligence, finance and credit support, etc. Only with the assistance and services provided by specialised organisations can an exporter successfully translate his "production" into "sales" on the global market. In order to strengthen the export-marketing effort for the nation as a whole, any country, including India, engaged in the task of export promotion, must establish specialised institutions.
Successful export efforts depend on appropriate government policies. A separate Ministry of Commerce has been given the task of promoting India's interest in the global market due to the growing and crucial role that foreign trade plays in economic development. India's external trade and all issues related to it now fall under the purview of the Department of Commerce in the Ministry of Commerce. The Ministry's primary responsibilities include developing the nation's export-import policy and implementing it, as well as negotiating trade agreements and formulating international commercial policy. In order to facilitate export-import trade flows, it has established a network of commercial sections in Indian embassies and high commissions abroad. To help exporters with swift redress of grievances, it has established an “Exporters Grievances Redressal Cell.”
With this goal in mind, the Indian government has created a number of specialised institutions across the nation to give each corporate unit the support and services they need to be successful in their export efforts. The Government of India has established specialised institutions at the production/industry level to support exporters from various sectors in light of the widely diversifying nature of the export markets in various parts of the world and an equally diverse and varied nature of products and services traded in international market.
Board of Trade
The Government of India has established a Board of Trade with representatives from the Ministries of Commerce and other significant Ministries, Trade and Industry Associations, and Export Service Organizations to ensure regular consultation, monitoring, and review of India's foreign trade policies and operations. It serves as a crucial national forum for ongoing communication between the government, business, and industry. The Board of Trade's discussions offer the government guidelines for appropriate policy measures for corrective action.
Cabinet Committee on Exports
The Cabinet Committee on Export has also been established with the aim of ensuring regular and efficient monitoring of India's foreign trade performance and related policies.
Empowered Committee of Secretaries
An Empowered Committee of Secretaries has also been established to assist the Cabinet Committee on Exports in making decisions more quickly.
A grievances cell has been established to consider and oversee the handling of complaints and suggestions. It is a cell designed to quickly resolve legitimate complaints. In the corresponding licencing offices, grievance committees led by the director general of foreign trade and the chief of the relevant regional licencing authority have been established. Representatives of the concerned Export Promotion Council/Commodity Board, other departments, and organisations are also included on the Committee. The grievances may be submitted in the required format to the Grievance Cell of the relevant Licensing Authority.
Director General of Foreign Trade (DGFT)
The DGFT is a crucial department within the Ministry of Commerce that aids in the creation and execution of India's export-import policy. In almost all Indian States and Union Territories, regional offices have been established. Regional Licensing Authorities are the name given to these offices. The DGFT office has an Export Commissioner who serves as the focal point for all export promotion initiatives. Additionally serving as export facilitation centres are the regional licencing offices.
Q.2 (a) Discuss the duties of an exporter under FOB and CIF contract. Describe the major legal implications of FOB contract. (10)
Ans) FOB Contract: A FOB contract is a written agreement between two parties for the sale of goods. In accordance with the terms of this agreement, the seller will deliver and load the goods at his own expense on a ship in order to ship them to the buyer. It is important to remember that the seller will only cover the costs associated with loading the goods. Additionally, the risk is transferred to the buyer the moment the goods are loaded onto the deck. As a result, he will be liable for the freight, insurance, and any additional fees.
Duties of the Seller
Careful loading of the goods onto the buyer-designated ship.
Paying the costs associated with loading the cargo.
Establishing a legal agreement with the shipping company in order to transport the goods and obtain a bill of lading. The agreement will be based on fair conditions.
Bill of lading is delivered to the customer.
Letting the buyer know about the shipment so he can insure the goods while they are being transported by sea.
CIF Contract: A CIF contract is a sales agreement that includes the cost of the goods, insurance, and shipping costs in the price. As a result, in these contracts, the buyer is responsible for paying the freight costs as well as the insurance during transit. This is so because the cost of the goods is increased by these fees.
Duties of the Seller
Preparing the sales invoice for the goods.
Delivering the goods to the shipping port
Obtaining an affreightment contract that provides for the delivery of goods to the agreed-upon location. To transport the goods and obtain a bill of lading, the seller will thus enter into a contract with the shipping business.
Getting an insurance policy and insuring items
Delivering shipping papers like bills of lading, invoices, and insurance policies to the buyer in a timely manner.
Legal Implication of FOB contract
Delivering the goods to the carrier completes the delivery. In other words, unless the seller has reserved the right of disposal over the goods, delivery to the carrier functions as delivery to the buyer.
A FOB contract's price includes all costs up to the point of loading the goods onto the carrier. Any costs incurred after that are the buyer's responsibility.
When delivery is complete, or when the goods are loaded onto the carrier, risks in the goods transfer from the seller to the buyer.
Normally, along with risks, ownership of the goods should also transfer from the exporter to the importer. A specific clause in the contract may postpone the passing of property.
When the delivery is complete, payments become due. Property will typically only transfer when the buyer completes his obligations under the pertinent terms of the contract. Acceptance, for instance, of a Bill of Exchange that was submitted with a Bill of Lading or an Airway Bill.
(b) State the documents required for export. Discuss in detail the features of Commercial invoice and Bill of lading. (10)
Ans) Article 4 of the Uniform Customs and Practice for Documentary Credit states that all parties involved in credit operations deal with documents during credit operations rather than the possible goods, services, or other performances to which the documents may be related. Therefore, it is essential that the beneficiary submits documents that are in line with the letter of credit's specifications. Below is a discussion of typical documents mentioned in letters of credit:
Bill of Exchange
It is a document drawn by the seller of the goods on the buyer, instructing him to pay to or in accordance with the order of the drawer (i.e., the seller). The term "payee" refers to the recipient of the payment, who may be the drawer himself or a different party. For the majority of letters of credit, the exporter must draught the bill and submit it to the banker along with other supporting documentation. It is a piece of paper used to make arrangements for payment.
It is a content-based document. It includes information on the items sold, the price, and any additional fees that may be the buyer's responsibility. If the seller offers any discounts, that information is also included. A properly filled-out commercial invoice should be in accordance with the sale contract.
This gives details of the individual parcels/packets shipped to the buyer.
All letters of credit insist on the submission of documentary evidence to support the exporter's claim that the goods have been shipped because shipment is the most important requirement for payment. When sending goods by air, a bill of lading is issued. When sending goods by land, a railway receipt or truck challan is issued. Where the exporter opts for a multimodal transport system, a combined transport document is issued. These records are recognised as shipping proof.
All letters of credit demand an Inspection Certificate because the products must abide by aped quality standards. The Inspection Certificate must be provided as evidence that the goods were examined by an authorised public or private organisation.
Insurance Policy Certificate
An insurance policy is a document that details the risks covered by the contract and serves as legal proof. The value of each shipment is declared in the insurance certificate, which is applicable in cases of “Floating” or “Open” cover and is assigned by the exporter. Ordinarily, an insurance certificate is not accepted unless it is specifically mentioned in the letter of credit.
Q.3 Comment on the following: (4×5)
(a) Standard policies of ECGC cover losses of all types of risks.
Ans) The policy that is best suited to cover risks relating to goods exported on short-term credit is the Shipments (Comprehensive Risks) Policy. From the date of shipment, both commercial and political risks are covered by this policy. Since the products exported on short-term credit are raw materials, primary goods, consumer goods, or consumer durables that can be easily resold, the risk of pre-shipment losses due to export contract frustration is zero or very low. Contract policies, which cover risk as of the contract date, are only issued in exceptional circumstances, such as when export goods are manufactured to a buyer's non-standard specifications.
The insolvency of the buyer.
The buyer's protracted default to pay (within 4 month of due date) for goods accepted by him.
In some special circumstances specified in the policy, buyer's failure to accept the goods, when such non-acceptance is not due to exporter's action.
Restrictions placed on remittances by the government of the buyer's nation, or any other government action that might prevent or delay payment to the exporter.
War, revolution or civil disturbances in the buyer's country.
After the date of shipment or, if applicable, the contract, new import licencing restrictions or the cancellation of an effective import licence in the buyer's country.
(b) Credit is a major weapon of international competition but it involves risk.
Ans) More fierce competition exists in foreign markets than on domestic ones. Exporters from numerous nations seek out overseas customers. Due to an all-out effort on the part of all countries to increase their exports, competition is becoming even more intense. Exporters from India must compete with those from other nations in terms of payment terms as well as quality, price, and delivery schedules, among other factors.
Their success would depend on their capacity to provide the foreign buyer with terms of credit that were competitive with those provided by exporters from rival nations. All credit transactions carry some level of risk, but export transactions carry higher levels of risk. The buyer's potential inability to pay—whether due to insolvency or another factor—exposes the exporter to credit risk. Even in situations where the tile buyer's credit history has been carefully examined, credit risk may still exist.
A cautious approach to assessing potential customers may prevent you from taking advantage of business opportunities. Credit risk cannot be avoided, especially in the export industry. Because it is challenging to gather trustworthy information about foreign buyers and, as a result, assess their credit worthiness, credit risk is higher in export transactions.
Today, credit risk has grown significantly due to both the increased volume of export transactions and the profound political and economic changes that are sweeping the globe. A war, civil war, coup, or insurrection's onset could prevent or delay payment for exported goods. Transfer delays could be caused by problems with the balance of payments. And even when the buyer is fully capable of making payments, all of this is still possible.
(c) Exporters and importers are not exposed to any exchange risks.
Ans) The delay between the dispatch of products and the receipt or payment of their price creates the exchange risk. Additionally, the currency conversion rate may change during the course of the time frame. If you are an exporter, you get less export finance in rupees than you anticipated. Importers sometimes end up having to pay more than they anticipated.
It is equally possible that the foreign currency will appreciate or devalue by the time you are anticipated to receive payment if you have billed your importer in it. Therefore, you can get more or less money in rupees than you anticipated. While there is a chance that the exporter will profit unexpectedly, there is also a danger to which the exporter is definitely exposed. The risk to which the exporter is exposed increases with the amount of the foreign currency depreciation.
On the other hand, if the importer is billed in rupees, he has absolutely nothing to lose from either an increase or decrease in the value of the foreign currency. However, no exporter would want to charge the Indian importer in rupees given the current state of the Indian rupee. Therefore, an exchange risk is always present for the importer. The risk to which he is exposed increases as the value of the dollar rises.
(d) The role of marketing effort is not crucial in export promotion.
Ans) The only way that production may become a "sell" is through marketing efforts. To put it another way, "marketing effort" acts as the crucial conduit or link between production and sales. As a result, marketing efforts play a critical role in export success. India's export promotion strategy therefore places a lot of emphasis on the necessity of enhancing and bolstering export marketing efforts.
With this goal in mind, the Indian government has created a very extensive network of organisations to support the export industry. In other words, a concerted effort has been made to develop the infrastructure required to support the export industry, especially to enhance export marketing efforts. With this goal in mind, the Government of India has developed a variety of specialised institutions to offer specific corporate units in the export industry the services and support they require.
Q.4 Differentiate between the following: (4×5)
(a) Pre-shipment finance and Post-shipment finance
Pre-shipment financing is a facility that allows the exporter of the goods to extend working capital financing in order to export them to another country.
to assist exporters in locating labour, supplies, and raw materials needed to produce, package, store, and transport the goods
company that exports goods directly or through export houses.
Post-shipment financing is a type of loan that a bank gives to an exporter in exchange for goods that have already been shipped.
to finance export receivables from the moment documents are delivered to the exporter's bank until the moment the sale of exported goods is realised.
The exporter themselves or the person to whom the export documentation is given.
(b) Voyage charter and Time charter
A ship may be chartered for a single trip (for example, from Port A to Port B), a series of trips (for example, from Port A to Port B to Port C), or an entire journey (for example, from Port A to Port B to Part A). In order to transport a specified amount of cargo from the named port or ports for discharge at the named port or ports, the shipowners lend the vessel to the charterer. Alternately, the contract (also known as the Charter Party) calls for the transportation of cargo between ports within a specific range (say from any port in In& to any port in Germany). In the latter scenario, the charterers will be required to inform the shipowners—who are in fact the vessel's master—of the names of particular ports at the time the voyage or voyages are to be made.
In time charter engagement, a ship is hired for a predetermined amount of time to operate within predetermined geographic areas or between predetermined ports. Despite being under the charterers' control, the ship cannot be taken outside of the agreed-upon ports or regions in order to safeguard the shipowners' interests. It should be noted that although time is the main focus of the agreement, the voyage territories are also covered. Shipowners are required by the terms of the time charter agreement to deliver the vessel in a state that makes it completely suitable and equipped for the intended use, at the agreed-upon port, within the allotted time frame. The ship must be returned to the charterers in the same condition that it was taken in charge of, with the exception of normal wear and tear, at the designated port.
(c) Trading house and Star trading house
A trading house is a business that facilitates trade between two countries – i.e., a foreign country and a home country. It provides a service that eliminates trading barriers to enter into foreign markets, especially for small companies with limited resources or import or export capability. Trading houses promote both imports and exports by purchasing and selling products through local or overseas sales offices. A trading firm can also market goods and services produced locally in foreign countries while performing other intermediary roles.
Star Trading House
Star trading houses or Star export house is a designation given to exporting firms in accordance with the export volume they realize. The nomenclature for star trading houses or Export House are: Single star export house, Two-star, Three-star, Four-star, Five-Star Export House.
(d) FOB contract and CIF contract
Provide the contracted goods in accordance with the terms of the sale agreement and deliver the goods on the vessel the buyer specifies at the specified port of shipment.
until the goods have actually passed the ship's rail, you are responsible for all costs and risks associated with them.
Provide the customary clean documents as proof of the delivery of the goods at his own expense.
Provide the goods in accordance with the terms of the sales agreement, make his own arrangements for the shipping space via the standard route, and cover the cost of the freight for the transportation of the goods.
assemble all documentation related to official approval required for exporting goods, at his own cost and risk.
he must pay for and load the goods onto the ship at the shipping port. He should at his own expense obtain a marine insurance policy in transferable form with a value equal to c.i.f. plus 10%.
Carry all risks until the goods have actually passed the ship's rail and provide a clear, revocable bill of lading to the buyer.
Q.5 Write a short note on the following: (4×5)
(a) Forward Contracts
Ans) As you have learned, one of the crucial ways to manage the foreign exchange risk is by entering into forward contracts. Let us also remind you that forward contracts are agreements between two parties for the future sale or purchase of foreign currency. The banks are willing to offer both importers and exporters forward coverage for the risks associated with exchange rate fluctuations.
Let's use an example to better understand it. The exporter can ask his banker to buy dollars in advance for him at the forward rate in effect on the day of the contract if, for example, he anticipates receiving money in three months. He will guarantee his export proceeds in terms of rupees in this way. Of course, by taking this risk, he will forfeit any potential benefits from a dollar appreciation. However, the exporter's primary concern is making a profit from exports rather than from changes in exchange rates, which is the activity of foreign exchange speculators.
(b) India Trade Promotion Organization
Ans) The Trade Fair Authority of India and the Trade Development Authority were combined to form the India Trade Promotion Organization. This is India's top trade promotion organisation, with its headquarters in New Delhi. It also opened offices in New York, Frankfurt, Tokyo, and Dubai. The ITPO is a service organisation that keeps close ties to the government, business community, and trade. The organisation supports fair participation and offers marketing information to the sector. Additionally, it aids in the growth of new product exports and uses its network of offices both domestically and abroad to provide better trade-related services.
(c) War Perils
Ans) War perils covered by the Institute War Clauses refer to following events:
Any hostile act committed by or against a belligerent power, including war, civil war, revolution, rebellion, insurrection, or civil strike;
Capture, seizure, arrest, restraint, or detention of a craft or a carrier resulting from the aforementioned event. Smuggled goods being seized by customs officials also cannot be insured, can derelict (abandoned) mines, torpedoes, bombs, or other derelict weapons of war. The information above makes it clear that war risk insurance covers hazards that continue to exist even after a war has ended, in addition to acts of hostility or warlike behaviour.
(d) EXIM bank
Ans) Exim Bank is currently concentrating on export financing. The Bank provides export financing on a deferred payment basis for 1 Indian machineries, manufactured goods, consulting, and technology services. During the export production process, Exim Bank financing is also accessible. Exporters can assess their competitiveness, export opportunities, and exposure to international risks with the help of the EXIM Bank's information and advisory services. Forfaiting may be used to finance any exports of capital goods and other goods that are made on medium- to long-term credit. Indian exporters and foreign financing companies are connected through the EXIM bank in India. When requesting a financing transaction, the exporter goes to the EXIM bank. The EXIM bank obtains information about the transaction from foreign organisations.
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