Processing of an Export Order

An export has to be processed to meet the requirements of materials required by the importers. The export order must be processed as expeditiously as possible so that the buyers can receive the materials on time, as per their delivery schedules and also conforming to the specifications stipulated by them.

Parties Acts and Publications Involved:

The most important Acts/publications which must be consulted by an exporter in connection with the processing of an export order are: Foreign Trade (Development and Regulations) Act, 1992; customs Act, 1962; Carriage of goods by Sea Act, 1924; Foreign Exchange Regulations Act, 1973 Schedule of Charges of Goods in respect of the Port of Shipment; Handbook of Export Promotion; and Export Import policy and handbook of Procedures (1997-2002). The main parties which are involved in this processing are: the exporter, the foreign buyer, the negotiating bank, the shipping company, the insurance company, the Reserve Bank of India, Director General of Foreign Trade the collector of customs, the Port Commissioners and the Clearing & Forwarding Agents.

Before we discuss the various sages involved in the processing of an export order, we will discuss some of the important steps required to enable a businessman to undertake export business which are: (1) Registration with Export Promotion Councils etc and (2) Obtaining the Importer/Exporter Code number.

Registration: An exporter should get him self registered by making an application on the prescribed form with an Export Promotion Council (EPC) related to his main product line of export. If there is no EPC, registration may be done with the Regional Licensing Authority concerned. Some of the important registering authorities are Export Promotion Councils, Commodity Boards, the Marine Products and Agricultural and Processed Food Products Export Development Authorities, Jute Commissioner, Khadi and village industries Commission, State Directors of Industries, Development Commissioners of Foreign Trade Zones /Export Processing Zones, and the Federation of Indian Export Organizations. Once an exporter has been registered, the registration shall remain valid for 5 years. Registered experts have to submit quarterly reports about exports made by them.

Common defects in Documentation:

The bank making payment on behalf of its foreign correspondent must verify that all documents and drafts confirm precisely to the terms and conditions of the letter of credit. The requirements of credit cannot be waived or altered by the paying bank without specific authority from the issuing bank. To avoid payment delays the beneficiary should prepare and examine all documents carefully before presenting them to the paying bank.

Paying banks find that the following discrepancies between the documents and the letter of credit occur most frequently:

1. Drafts are presented after letter of credit has expired or after time for shipment has expired;
2. Invoice value or draft exceeds amount available under letter of credit;
3. Charges included in the invoice are not authorized in the letter of credit;
4. Amount of insurance coverage is inadequate or coverage does not include risks required by letter of credit;
5. Insurance document is not endorsed and/or countersigned;
6. Date of insurance policy or certificates is later than the date on bill of lading;
7. Bills of lading are not ‘clean’ – that is, they bear notations that qualify good order and condition of merchandise or its packing;
8. Bills of lading are not marked ‘on board’ when so required by letter of credit;
9. “On Board” endorsement or changes on bills of lading are not signed by carrier or its agent or initialed by party who signed bills of lading;
10. On board endorsement s not dated;
11. Bills of lading are not endorsed;
12. Bills of lading are made out ‘to order’ (Shipper’s order, blank endorsed) where letter of credit stipulates straight (direct to consignee) bill of lading or vice versa. In fact, it is better for the exporter to prepare to order B/L as this will keep goods in the custody of the bank. In case of straight B/L, the title of the goods passes automatically to the named consignee.
13. Bills of lading do not indicate ‘freight prepaid’ as stipulated in the letter of credit;
14. Bills of lading are not marked ‘freight prepaid’ when freight charges are included in invoice;
15. Description marks and numbers of merchandise are not the same on all documents presented or are not as required by the letter of credit;
16. Not all documents required by letter of credit are presented.
17. Invoice states ‘used’ ‘second hand’ or rebuilt merchandise when such conditions is not authorized by the letter of credit;
18. Invoice does not specify shipment terms (C & F., C.I.F , F.O. B etc) as stated in the letter of credit and
19. Invoice is not signed as the letter of credit requires.