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IBO-04: Export Import Procedures and Documentation

IBO-04: Export Import Procedures and Documentation

IGNOU Solved Assignment Solution for 2021-22

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Assignment Code IBO-04 / TMA / 2021 - 2022

Course Code: IBO-04

Assignment Name: Export Import Procedure and Documentation

Year: 2021 - 2022

Verification Status: Verified by Professor

Attempt all the questions:

Q 1. What do you understand by Foreign Trade Policy of Government of India? Discuss the general provisions regarding Exports and Imports. (20)

Ans) The trade policy has two components: import policy, which is concerned with import regulation and management, and export policy, which is concerned with export promotion as well as regulation. The major goal of government policy is to encourage exports as much as possible. Exports should be encouraged in such a way that they do not harm the country's economy by allowing unrestricted exports of products that are desperately required within the country. As a result, export control is restricted to a small number of products whose supply situation necessitates that their exports be managed in the country's broader interests.

To put it another way, the policy strives to:

  1. boosting exports and increasing foreign exchange profits; and

  2. limiting exports where it is necessary to minimise rivalry among Indian exporters or to ensure domestic availability of vital mass-market goods at acceptable rates.

The Indian government made substantial changes to its trade strategy in 1991. As a result, the new Export-Import policy took effect on April 1, 1992. Various sections of imports and exports have been progressively liberalised under the new policy:

Exports and imports free unless regulated: Exports and imports must be allowed unless they are governed by the rules of this policy or any other legislation in existence at the moment. The export and import policies for individual items must be detailed in the ITC (HC) published by the Director General of Foreign Trade.

Compliance with law: Every exporter and importer must abide by the terms of the Foreign Trade (Development and Regulation) Act of 1992, as well as the regulations and orders issued under it. They must also follow the rules of this policy, the terms and conditions of any licence issued, and the restrictions of any other legislation in effect at the time. If there is any dispute or issue about the interpretation of any section of the EXlM policy, it should be addressed to the Director General of Foreign Trade, whose judgement is final and obligatory.

Provisions under Export Import Policy 1994-2002 are:

  1. To hasten the country's transformation to a globally oriented, thriving economy in order to reap the most possible benefits from growing global market possibilities.

  2. To improve the technological strength and efficiency of Indian agriculture, industry, and services, therefore increasing their competitiveness and creating new jobs. It promotes the achievement of internationally recognised quality standards.

  3. To provide people high-quality goods at affordable costs. All government agencies, in general, including the Ministry of Commerce and the Directorate General of Foreign Trade and its network of Regional Offices, in particular, shall work together to achieve the goals.

Further it will be achieved with a shared vision and commitment and in the best spirit of facilitation in the interest of export:

  1. Exemption from Policy/Procedure: Any request for a waiver of the terms of this policy or process, based on difficulties or a negative impact on trade, should be directed to the Director General of Foreign Trade.

  2. Trade with Neighbouring Countries: The Director General of Foreign Trade may give instructions or develop plans as needed to boost trade and enhance economic connections with neighbouring nations from time to time.

  3. Trade with Russia under Debt Repayment Agreement: The Director General of Foreign Commerce may give such directions from time to time in the context of trade with Russia under the debt repayment arrangement.

  4. Transit Facility: Goods transiting through India from or to nations bordering India will be governed by the treaties barren India and those countries.

  5. Execution of Bank Guarantee / Legal Undertaking: Wherever duty-free imports are permitted or otherwise stated, the importer must execute a formal undertaking or bank guarantee with the Customs Authority prior to the goods being cleared through customs.

  6. Free Movement of Export Goods: Any agency may not withhold, or delay consignments of commodities approved for export for any reason. In the event of a question, the involved authorities may request an undertaking from the exporter.

  7. Import/Export of Samples: The regulations of the EXIM Policy regulate the import and export of samples.

  8. Third Party Exports: A licence holder has the option of exporting directly or via third parties.

  9.  Clearance of Goods from Customs: Goods that have previously been imported, transported, or received but have not yet been cleared by customs may be cleared using the licence granted later.

  10. Green Card: The Directorate General of Foreign Trade will give a green card to all status holders and manufacturer exporters who export more than 50% of their output and have a minimum revenue of Rs. 1 crore in the previous year. This card offers automated licencing, automatic customs clearing, and other EXIM policy-required services.

  11. Electronic Data Interchange: Electronic data exchange will be encouraged in order to speed up transactions and increase transparency in different export-related operations. Electronically submitted applications must be processed within 24 hours.

Q 2. a) Explain customs clearance of export cargo by sea along with the documentation formalities. (10+10)

Ans) Clearing and forwarding agencies, often known as freight forwarders, help the exporter with a variety of tasks. They give specialised assistance by completing the procedural and documentation formalities from the exporter's warehouse to the importer's warehouse. He assists with consignment packing, marking, and labelling, transportation to rile port, shipment overseas, and freight customs clearance, as well as the purchase of transportation and other papers. However, the agent's primary responsibility is to secure customs clearance for products, ship them, and obtain the necessary transport documents (Bill of Lading or Airway Bill). The exporter must provide precise instructions to his agent in order for him to fulfil the needed duties, and the agency will charge a fee for these services.

The manufacturing department dispatches the cargo to the port of export by road or rail once the excise authorities have cleared the consignment and obtained the Inspection Certificate. Signing the Delivery Note or completing a Despatch Advice together with the accompanying papers sends this information to the export department:

  1. Railway Receipt or Lorry Way Bill

  2. Invoice

  3. AR4lAR5 form (Original and Duplicate),

  4. Inspection Certificate (Original) and Policies.

The export department will appoint a clearing and forwarding agency after receiving these papers by signing and mailing a document known as the Shipping Instruction Sheet or simply the Shipping Instructions. This document contains all of the exporter's instructions as well as information on the cargo to be sent.

Along with this document, following documents will be sent to the agent:

  1. Commercial Invoice (Generally 8-10 copies with at least one completed)

  2. Customs Declaration Form in Triplicate (This is a legal requirement whereby the exporter states that the declarations made to the customs authorities by the agent on his behalf are true)

  3. Packing list, if needed

  4. Original Letter of Credit contract

  5. Inspection Certificate (Original)

  6. GR Form- Original and Duplicate (it is a foreign exchange declaration form

  7. AR4JAR5 form (Original and Duplicate)

  8. Invoice

  9. Railway Receipt/ lorry Way Bill.

Q 2. b) Describe various post shipment finance available to Indian Exporters.

Ans) Post-shipment finance is a type of loan given by a financial institution to an exporter or seller in exchange for a completed shipment. This form of export financing is provided from the time the credit is extended after the products have been sent to the time the exporter proceeds are realised. Exporters do not wait for the funds to be deposited by the importer.

The features of post shipment finance are:

Purpose of Finance

Post shipment finance is used to fund export sales receivables from the time the items are shipped until the time the export proceeds are realised. It is extended to finance receivables against supplies supplied to authorised agencies in the case of considered exports.

Basis of Finance

Post-shipment funds are given in exchange for proof of products or supplies being shipped to the importer, seller, or any other specified agency.

Types of Finance

There are two types of post-shipment financing: secured and unsecured. The finance is generally self-liquidating since it is extended against evidence of export shipping and the bank gets the documentation of title of commodities. In that scenario, it is generally unsecured and comprises an advance against an undrawn amount. Furthermore, the funding is typically in the form of a financed advance. The problem of guarantee (retention money guarantees) is engaged in a few situations, such as the financing of project exports, and the financing is not financed in nature.

Quantum of Finance

Post shipment financing can be extended up to 100% of the invoice value of goods as a sum of money. Finance for a price difference can be extended in rare circumstances when the domestic worth of the products exceeds the value of the exporter order, and the price difference is paid by the government. This sort of financing is not available during the pre-shipment stage.

Period of Finance

Depending on the payment conditions given by the exporter to the foreign importer, post-shipment financing might be short or long term. The maximum duration for realising export revenues in the event of cash exports is six months from the date of shipment. The concessionary rate of interest is offered for a maximum of 180 days, starting from the date of document surrender. The documentation must usually be supplied within 21 days of the shipment date.

Q 3. Distinguish between: (20)

Q 3. a) War Perils and Strike Perils

Ans) The Institute War Clauses cover the following circumstances as war perils:

  1. Any hostile act by or against a combatant power, including war, civil war, revolution, revolt, insurgency, or civil strike;

  2. Capture, seizure, arrest, restraint, or detention of a carrier or craft as a result of the above-mentioned occurrence. As a result, the confiscation of illegal items by customs officials cannot be covered; and

  3. derelict (abandoned) mines, torpedoes, bombs, or other derelict weapons of war cannot be insured. As can be seen from the foregoing, war risk insurance covers not only hostile or warlike activities, but also hazards that persist after the war has ended.

Strike Perils

Strike dangers are defined as occurrences that result in cargo loss or damage as a result of:

  1. Strikes, lockout workers, or anyone involved in labour unrest, riots, or civil commissions; and

  2. Strikes, lockout workers, or anyone involved in labour unrest, riots, or civil commissions; and

  3. terrorist or any person acting from a political motive.

As can be seen from the preceding, strike risks are not limited to those posed by striking workers. Perils posed by political actions that engage in or contribute to the strike are also included. In reality, strike hazards, unlike war hazards, are created by people of the same nation. Because the hazards protected by the Institute's Strike Clauses supplemen1 the perils covered by the Institute's War Clauses, it is common to cover both war and strike risks at the same time for a single premium. Strike clauses, on the other hand, are meant to be employed independently of the war risk coverage.

Q 3. b) Actual Total Loss and Constructive Total Loss

Ans) Actual Total Loss (ATL): A total loss might happen in one of three ways. To begin with, when the insured cargo is physically destroyed, when a ship's hold fire entirely destroys a consignment of paper, or when a ship sinks in deep sea and the cargo ship has been wrecked, and there is no way to rescue it (recovery). Second, the insured cargo is sufficiently damaged that it no longer qualifies as a covered item, such as cement that becomes concrete owing to saltwater corrosion. Third, real loss occurs when the insured cargo is irreversibly lost after a reasonable length of time has passed. For example, if a ship with cargo sinks, it can be recovered, but it will take so long that the insured items will lose their worth. When cargo is misplaced, the insured may consider it a total loss if it cannot be returned to him in a reasonable amount of time.

Constructive 'Total Loss (CTL): CTL is not a physical loss and is not absolute, unlike a total loss. When the cost of preserving, repairing, or reconditioning the insured items exceeds the worth of the products, it is referred to be a total loss. For instance, if a machine is damaged during loading 011 board the carrier and the cost of restoration is exorbitant, the insured may consider the damage to be a total loss. The insurance company may also deem it a total loss after examining the extent of the damage and the estimated cost of restoration. When a real total loss appears unavoidable, C'TL may be claimed. If cargo in a ship cannot be removed from the ship at a reasonable cost while on the ground or ashore, the assured may claim CTL.

Q 4. Comment on following: (4X5)

Q 4. a) There is no difference between Documents Against Payment and Documents Against Acceptance.

Ans) Documents against Payment

In international trade, DP/DAP is a payment word. It is based on a bill of exchange, often known as a draught, which is commonly used in international commerce.

The documents under consignment are only provided to the buyer/importer when the buyer's bank has collected payment for the items. The exporter ships the products and submits the shipping paperwork to the importer's bank, which instructs the bank to release the documents to the importer against payment, with the importer responsible for paying the exporter when the documents are released from the bank. Only when the importer has paid the bill does the collecting bank hand over the shipping paperwork, including the deed of title.

Simply put, a D/P arrangement is one in which a seller instructs the presenting bank to deliver shipment and title paperwork to the buyer only if the importer pays the bill of exchange or draught in full. In international trade, DP/DAP is a payment word. It is based on a bill of exchange, often known as a draught, which is commonly used in international commerce.

Documents Against Acceptance

The Documents against Acceptance (D/A) are based on a bill of exchange or draught, which is widely used in international trade. The transaction uses a time draught or Usance (the permissible duration, permitted by custom, between the date of the bill and its payment), in which the Exporter grants credit to the Importer. The importer must accept the bill in exchange for a signed agreement to pay the amount at a later date. He can take the paperwork and clear his items once he has signed the bill of acceptance.

Simply put, a D/A agreement is one in which an exporter orders a bank to provide shipping and title papers to an importer only if the importer signs a bill of exchange or draught accompanying the shipment. In this situation, the clearing bank will only release the paperwork needed to take ownership of the items when the buyer accepts a time draught issued on him.


Given the foregoing, we can easily understand the distinction between the two: The importer must pay the face amount of the draught at sight when dealing with documents against payment. In other words, after the buyer receives the draught and before any shipping papers are released, the payment must be paid to the bank. Documents opposing acceptance impose a payment deadline on the importer.

Q 4. b) Electronic Data Interchange (EDI) does not provide significant benefits to the Organization.

Ans) There's no denying that Electronic Data Interchange (EDI) may help businesses save time and money. These may be divided into three categories: strategic, operational, and opportunity advantages, which will vary in importance based on why and how EDI was introduced. The first EDI applications focused on increasing business productivity by enhancing data flow and reducing errors. The business case for EDI in these cases was largely based on immediate cost reductions. Businesses may avoid clerical mistakes by eliminating the need to re-enter data from paper documents using EDI. It's also been calculated that the cost of processing an electronic request is one tenth of the expense of managing a paper requisition.

Furthermore, EDI can minimise the number of people needed to process orders and accounts. EDI systems can reduce the time it takes for orders to be received and fulfilled. Inventory reduction may save a lot of money. The use of EDI to communicate invoice data and payments can help a company's cash flow and working capital by allowing accounts to be handled more effectively. The process of collaborating with trading partners to deploy EDI can also result in the development of stronger business ties.

Clearly, the greatest value of EDI will emerge in key areas such as increased customer service and marketing competitiveness. In summary, the field of application of EDI extends to all trade and trade-related operations and benefits the organisation.

Q 4. c) Open cover and Open policy are the same.

Ans) Open cover

It's a type of insurance created particularly for businesses with a high volume of import-export transactions and frequent transactions. These businesses don't have to deal with the hassle of arranging insurance contracts every time they do business.

Main features of an open cover arrangement are as follows:

  1. It is a contract in which the insurance company agrees to honour and accept declarations of cargo transportation and provide a stamped particular certificate of insurance for each statement.

  2. The insured and the insurer must agree on the subject matter (e.g., goods) insured, packing requirements, trips, risks covered, prices, and other terms and conditions of the insurance in any open cover arrangement. Within these agreed-upon criteria, the insured can get insurance coverage.

  3. When an open cover is granted, no premium is paid, but insurance firms often ask the insured to provide either a bank guarantee or cash deposits to cover premium payments against each declaration as they are made.

  4. An open cover has a twelve-month validity term.

  5. An open cover agreement is usually subject to two limitation provisions: Par Bottom and Par Place clauses.

6)     Either party can cancel an open cover by giving 30 days' notice in writing. This condition excludes conflict and raises concerns about the dangers of maritime travel.

The insured's responsibility is to declare any and all inadvertent failures to record shipping, which the insurance company will overlook. If the insured fails to disclose shipments knowingly, the insurance provider may declare the open cover null and invalid for any future shipments.

Open Policy

'Floating policy,' as it is often known, has a lot in common with the open cover. Clients with high turnover and a significant number of despatches profit from this approach. Thus, it covers a series of consignments with all stipulations of the open cover, except that:

  1. Because an open policy is an enforceable insurance contract, it must be stamped.

  2. An open policy is for a set amount against which a succession of consignments can be sent and declared, with the sum insured steadily decreasing by the amount of each declaration until it is exhausted.

  3. Despite the fact that an open policy expires after one year from the date of issue, the quantity covered is crucial. As a result, the money covered may run out before the insurance expires.

  4. After giving 15 days written notice of termination, either party may cancel the open policy.


Based on the foregoing, we may deduce that an Open Cover and an Open Policy are not the same. An open policy intends to cover an unlimited number of future requirements, but an open cover insurance policy can function as blanket coverage for firms who conduct a lot of business, sparing them from having to buy a new policy every time a shipment is completed.

Q 4. d) The insurance contract is not in the nature of indemnity.

Ans) The word indemnification literally means "protection against loss" or "making good on a loss." The goal of an insurance contract is to put the insured in the same relative position after a loss that he would have been in if the loss had not occurred. In other words, an insured can only sue for the amount of loss he has sustained (or lost). Even though the insured has paid premium on the whole insured value, if the cargo is damaged by 1% of the insured value, the insured will be compensated that amount. However, it must be noted that the insurance company's indemnification commitment is just a "commercial" indemnity.

Because insurance companies cannot guarantee that cargo will be reinstated or replaced in the case of a loss, they pay a quantity of money termed "insurable value" that is agreed upon in advance between the insured and the insurer. The insurable value is estimated using the "market worth" of the insurance products, plus an agreed-upon percentage to cover general overheads and offer a profit margin on the transaction. An indemnity in insurance does not cover either a gambling loss or an emotional loss from this range (if tangible loss). As a result, over insurance, defined as insuring more than the market value plus a percentage, is not a premise of cargo insurance.

As a result, the insurance contract is in the nature of indemnification.

Q 5. Write notes on the following? (4 x 5)

Q 5. a) Government Policy Making and Consultation for Export Promotion in India.

Ans) Appropriate government policies are required for a successful export endeavour. In light of the increasingly important and vital role of international trade in economic growth, a separate Ministry of Commerce has been established to promote India's interests in the global market. The Department of Commerce, which is part of the Ministry of Commerce, is responsible for all aspects of India's international commerce.

The Ministry's main tasks include establishing and implementing the country's export-import policies, as well as devising international commercial strategy and negotiating trade agreements. It has created a network of commercial sections in Indian embassies and high commissions across the world to handle export-import trade flows. It has set up an "Exporters Concerns Redressal Cell" to assist exporters in promptly resolving their complaints.

Q 5. b) Procedures of Central Excise rules for claiming rebate of central excise under rule 18.

Ans) Rebate procedures can be claimed from either the Jurisdictional Assistant Collector of Central Excise or the Maritime Collector.

Exporters can seek a refund from either the Maritime Collector or the Jurisdictional Assistant Collector of Central Excise. Exporters must submit their claims within six months after the date of shipment. The claim must be submitted in the appropriate format, together with an original copy of the AR4 form validly approved by the customs officer who certified the items' export. The original AR4 form shall be compared to the duplicate copy of AR4 form obtained from the Superintendent, Central Excise by the Maritime Collector of Central Excise or the Jurisdictional Assistant Collector. If he is satisfied, he will approve the rebate in full or in part, depending on the circumstances. Following documents are required to be filed for claiming rebate:

  1. Application in prescribed form

  2. Original copy of AR4 form

  3. Duplicate copy of AR4 form in sealed cover received from custom officer, if required.

  4. Duly attested copy of Bill of Lading

  5. Duly attested copy of Shipping Bill (Export Promotion Copy)

  6. Disclaimer Certificate in case claimant is other than exporter.

Q 5. c) Financing under deferred payment arrangement.

Ans) Imports on a delayed payment basis imply that the supplier has committed to provide products on terms longer than six months. In such cases, the authorised dealer must refer each deferred payment case to RBI for prior approval of advance payment, bank guarantee, and instalments (principal and interest), along with supporting documents such as an exchange control copy of the import licence, if applicable, a contract copy, and a statement of desired facilities.

Term financing is comparable to appraisal for the purpose of issuing guarantees or loans. When importing on a delayed payment basis, the importer must have enough cash on hand to pay the necessary instalments. He should set aside funds to satisfy the bank's margin requirement by paying the advance and down payments from his own resources. Imported machinery must be hypothecated to the bank, and the transaction must be counter-guaranteed by the importer.

Q 5. d) Importance of Institutional Infrastructure.

Ans) Export marketing effort is critical to the success of any country's export promotion programme. An exporter needs specific direction and help in important areas such as packaging, market promotion and publicity, quality certification, risk coverage, market intelligence, financing and credit support, and so on in order to conduct worldwide marketing activities. Only with the assistance and services of specialised organisations can an exporter effectively transform his "output" into "sales in the worldwide market."


As a result, every country involved in export promotion, including India, must develop specialised organisations to improve the country's overall export marketing effort. This will pave the way for the establishment of an export environment and culture, which will serve as the foundation for an active and sustained export marketing effort at the corporate level. The Indian government has set up a number of specialised institutions around the nation to provide the required services and assistance to specific corporate units in order to help them succeed in their export efforts.

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