to March 2 ter

Under this policy, all the free for importlexpor

goods are ember io2tion
restricted. Free for import/exports means that no licence is require
unless
un .
exporting such goods. FeW ftems placed under restrictadd for i i G
licensing for imports/exports. A small number of items are tod

imports/exports.
category
ally importin
rfrotingy
bannedTequi
The administration of the Foreign Trade Policy is the
Director General of Foreign Trade (DGFT) at New Delhi ponsibilit
assisted of
Deputy Director Generals at other important cities in the
countrv by
try. Joint an
Jointe
Foreign Exchange Management Act
The flow of money into-the eeuntry and from the country in
international transactions is regulated by Foreign settln
Exchange Managemaonent
(FEMA). Reserve Bank of India administers FEMA
licensed by it as authorised dealers in
Management Act
through commercial Acr
realise the foreign exchange only through
foreign exchange. Exporters
ers are bank
reusnkganke
are requiredt
authorised dealers.
required to route their transactions only through Impord to
ers are-
obtain the required authorise dealers.
foreign exchange to pay for their imports from They ca
dealers. the authorie
rised
Customs Act
Goods going out of the
country on export or entering the
get customs clearance by country import should
on
Customs Act. complying with the procedures prescribed under the

FOREIGN TRADE DOCUMENTS

International documents can be
(a) commercial documents, broadly
and
classified into two
categories
(b) regulatory documents.
Commercial docunents are
the exporter to the required to facilitate the movement of
and importer,ensuring the safety of the goods, goods from
quantity, and assuring the quality
settlement of the dues by financial transfer.
includebill of exchange, transport The documents
certificates that may be documents, invoices, marine policy and other
required by the importer.
 INTERNATIONAL TRADE DOCUMENTS
3.3
Reeulatory documents are prescribed under the laws that govern export import
ansactions. They are mandatory. These are required in the process of getting the
trans

00ds cleared for exports. The important regulatory documents are ARE forms,
GR forms, shipping bill and bill of entry.

REGULATORY DOCUMENTS
Important regulatory documents are:
i) ARE form under Excise Act;
)GR form under Foreign Exchange Management Act;
(ii) Shipping bill under Customs Act; and
(i6) Bill of entry under Customs Act.

ARE Form
ARE form is the application for removal of excisable goods from the factory for
exports. There are two types of ARE forms-ARE1 and ARE2.
ARE1 form is used when the claim of rebate excise duty is only on the finished
goods being exported. ARE2 form is used when the claim for rebate of duty is on
inputs and on finished goods.
ARE form will be prepared by the exporter and approved by the
Superintendent of Excise.

GR Form
GR form is export declaration form prescribed under Foreign Exchange
an

Management Act. In this

form, the exporter declares the value of the goods,
exporter, agency commission payable, discount allowed, etc. The exporter gives
an
undertaking that the export proceeds will be repatriated into India within the
time prescribed (normally six months from date of shipment).
Two copies of the form is
prepared and submitted to customs along with
other documents for export clearance. Customs will
return the duplicate to the
exporter. The exporter should submit this duplicate to his banker
export bill for negotiation or collection. along with the
At ports where EDI system is in vogue, GR form is replaced
by form SDF
(statutory declaration form). Form SDF contains only the declaration to get the
proceeds into India within the permitted time.

Shipping Bill
Shipping bill is the main document for
getting customs clearance for
There are five types of exports.
shipping bills as follows:
(a) Shipping bill for dutiable goods;
) Shipping bill for duty free goods;
3.4
under duty drawback;
GN TRA
bill
Shipping
() ex-bond;
bill for goods
(d) Shipping DEPB scheme.
bill under
(e) Shipping
should submit
the shpping bil appropriate to his
The exporter
EDI scheme,
the shipping
bill is generated by the systemn. export.I
Bill of Entry
should be prepared by
the r and
importer and presented.
Bill of entry
the imported g0ods Po three
cleared. There are throhe u
o the custe
authorities for getting
types of bil.,
entry
for home consumption, to be used for
for
(a) Bill of entry
customs duty;
getting the goo00ds
getsi.

cleared by paying the

to be used when the importer
()Bill of entry for warehousing,
the import duty immediately and wants to keep the goods canne
in papay
bonded warehouse;
(Bill of entry for clearance ex-bond, to get released the goods Dror.

kept in bonded warehouse. Ousty

COMMERCIAL DOCUMENTS

Bill of Exchange
exchange is an instruction by the exporter (drawer) to the importer h
A bill of
make payment of the amount mentioned in it to
exporter's bank or its agent. The
bill of exchange acts as an authorisation from the
make payment to the collecting bank, who is a third
exporter to the importer to
valid discharge for the amount due under the
party to the contract, and get
export made. A bill of exchange is
a
negotiable instrument and is governed by the Negotiable Instruments Act in
India and by similar enactments in other
countries.
Sight and Usance Bills. A bill of exchange is a
the drawee is to make sight bill (or demand bil) i
bill is
payment immediately on presentation of the bill to him. A
a bill if the drawee is to make
usance
after a period
30 days or 60 days) in the bill has expired. Apayment
usance bill
specified (say
after may be 'after date' bill or
sighe bill. For an 'after date' bill, the due date is calculated from the date
appearing on the face of the bill. The bill
from date of bill of may also be drawn 'after so many
lading or
airway bill in which case the due date willaa
calculated from the date
For an 'after appearing on the relevant bill of lading or airway be
sight' bill, date is calculated from the
the bil.
accepted by the drawee. date it is sighted,
1.e,
1t
DA and D/P Bills. A usance bill
terms may be
D/A or D/P terms. If it is on
on A
(documents against
acceptance),
documents to the drawee on the the collecting bank is to deliver
be made acceptance
by the drawee on the due date of the bill by him. The payment
of ill
the bill. If it is D/P bill
a
(docune
 INTERNATIONAL TRADE DOCUMENTS 3.5

acainst payment), the documents will be delivered to the drawee only on payment
Hl which time they are retained by the bank on behalf of the exporter.
Bills in Sets. Bills of exchange covering international trade are normally bills

drawn in sets of two Either of the copies can be presented to the drawee
copies.
is made on one copy, the
for payment or acceptance. Once payment or acceptance
other becomes null and void.
other documents are
In international dealings, not only bills of exchange, but
documents are sent in two sets, by separate
also prepared in multiple copies. The
the second set on a subsequent
mail for each set. One set is sent on the first day and
documents in transit.
day. The procedure is to avoid risk of delay/loss of

Mate's Receipt at
delivered to the company for transportation,
shipping
When the goods are
On the
first a temporary receipt is issued which is known the mate's receipt.
as
has to the port dues and other charges.
basis of the mate's receipt, the shipper pay bll
is exchanged fora regular
After these formalities are over the mate'sTeceipt

of lading. It is not a document

of
A mate's receipt is not a substitute for bill of lading.
does not pass the title in the goods,
transfer of a mate's receipt
title to goods. The the goods. It is, however,
prinma
equivalent to possession of
nor is its possession received by the shippin8
of the goods
evidence ofthe quantity and condition mate's receipt is generally
the
facie The possessor of the
company for
transportation.
to him.
bill of lading issued
entitled to have the
person

Bill of Lading as a mode of

a n important place
trade, shipping occupies is the 'bill of
In i n t e r n a t i o n a l the carriage of goods by sea

document evidencing or its agent,

transport. The company
is a document
issued by the shipping
deliverable to the consignee
or
lading'.A bill of lading uwhich are

acknowledging the receipt of

goodsfor carriage received.
condition as they were
the same evidences a contract
his assignee in which
defined as "a document
A bill of lading has been
of loadingof the goods by the carrier, by
surrender of the
over
and the taking
of carriage by
sea
to deliver the goods against
undertakes
carrier three functions:
which the
renders the following
document." A bill
of lading
contract of carriage;
evidence of
It is an and
() received by the carrier;
for the goods
() It is a receipt to goods.
document of title features of
(i) It is a instrument though
it has s o m e
the
is not a negotiable e n d o r s e m e n t and
delivery and
A bill of lading t r a n s f e r r e d by one
it lacks
negotiability
Thus, it can be sue in his own
n a m e . But
the
faith can instrument,
for value and in goods negotiable
transferee i n s t r u m e n t . In a had.
receives it
feature of a negotiable from whom he
Important the person
a better
title than what
transferee gets
 3.6
FORE IGN TRAT
But a transferee in bill of lading gets his
a
rights subject to defecto
in
ADE
the transferor the tile
The bill
lading is usually drawn in sets ot more than two neoot:
of of
goods deliverable against any one of the copies surrendered
company duly discharged. Each negotiable copy is called
to tho
led an
lading. The number of negotiable copies prepared would be original of theshipbillpiillnofg
of lading which would also d intmentioned i
provide that "one of the copies being accomplished
he bill
the others shall stand void."

Types of Bills of Lading

Depending upon the specific features found on them, bills of
classified as follows: ladino can be
1. Clean and Claused Bill of
Lading. A clean bill of
goods are received in good condition orlading
either states that the is one
whi.
remark about the defective condition of the does not makehich
-
bill of lading, a 'claused' or goods or packing. As against a any
remark about the goods or
'dirty' or 'foul' bill of lading contains an cle
packing, such as "packages torn", or "drums adveren
etc. leaking
ng',
2. On Board and
Received for Shipment Bill of Lading.
of lading is one which An 'on board'
states that
goods to be carried have actually been bil
into the ship. Sometimes the
goods may be delivered to the loaded
but they may not be shipping
put into the ship because of
arrival of the vessel. In such
cases, the shipping
non-availability of spacecompany
or non-
for
shipment' bill of company will issue a
'received
received by
lading whereby it
acknowledges that
it for
carriage and will be carried goods have been
specified vessel. by the next available vessel or a
When the goods are
subsequently put
shipment bill of lading will board of the
ship, a
on the
received for
be stamped with the
the vessel indicated if notation 'on board', the name of
not
carrier or his
already there, signed or initialled and dated
agent. A
shipment bill of lading thus noted is asby
received for the
as
any 'on board' bill of good
be deemed to be the lading. In this case, the date of the on board
date of notation will
3. Freight Paid and shipment.
Freight Collect Bill
a
'freight to pay' or 'freight collece bill of of Lading. The bill of lading will be
destination by the consignee. If the lading, if the freight is payable at the
shipping company will issue a 'freight freight charges are paid by the
exporter, the
freight paid or freight to pay bill of paid' bill of lading. Whether to obtain a
between the exporter and lading depends upon the terms of contract
4.
importer.
Straight
or Order Bill of
Lading.
A bill of
deliverable to a named lading under which goods are
consignee is known as a straight
an order bill of
lading which provides that the bill of lading as
person or his order. A straight bill of goods deliverable to a against
are
named
lading is not a negotiable instrument and is
NTERNATIONAL TRADE DOCUMENTS
3.7
a l l y taken in the name of the consignee (importer). Presentation of bil! of
norn

nding may not necessary be for delivery of goods under a straight bill of lading
f the consignee is known to the shipping company. Coods will be delivered to
him against his receipt.
An order bill of lading is normally taken in the name of the shipper or his
On arrival of
order. The bill of lading will indicate the buyer as the 'notify party'.
goods at the port of destination, a notice will be sent to the importer intimating
the fact of arrival of cargo. But this does not entitle the importer to take delivery
it
of the goods. Under an order bill of lading, the title over the goods covered by
is transferred by endorsement and delivery of the bill of lading.
The goods are
deliverable to the last endorsee.
5. Through or Port-to-port Bill of Lading. Where the goods are to be carried
by two or more ships or partly by ship and partly by rail, the bill of lading
the
providing for the continuous responsibility of all the shipping companies
or

shipping company and the railway company is called a through bill of lading.
Where issued by a railway company, it serves as a railway receipt for transport
a bill of lading for the sea voyage.
up to the port and as
In a through bill of lading issued by the shipping company, the shipping

company is liable for damages if it occurs during the sea voyage. For any damage
to the goods during land transport, the shipping company is not liable. Though
to arrange for land transport, the rail or road
the shipping company undertakes
to work as agents of the
transport company entrusted with the job is supposed
for the loss of goods, if any, during
consignor. Thus, under a through bill of lading,
the land transport, the consignor cannot have recourse to the shipping company.
have been evolved.
To remedy this situation, the combined transport documents
bill for
6. Stale Bill of Lading. A bill of lading presented under an export
It will be
negotiation by a bank after long delay is called a stale bill of lading.
considered a long delay if the goods will reach the destination before the
documents could reach there.
7. Charter Party Bill of Lading. A complete ship may be made available to
a shipper tfor a particular voyage or for a particular period of time. The document
containing the terms and conditions of this contract is known as the charter party.
The shipper who has chartered the ship may agree to carry the goods of others in
the ship and issue bill of lading for this purpose. The bill of lading thus issued is
subject to the terms and conditions of the charter party.
8. House Bill of Lading. A few freight forwarders indulge in collection of
cargo from different shippers and arrange for a consolidated shipment under
their name, normally in containers. They issue their own bills of lading in favour
of the shippers who have entrusted them with shipment. The bill of lading issued
by such freight forwarders is known as 'house bill of lading'
9. Liner Bill of Lading. A liner vessel is a ship operating on a fixed route
serviCe and
eNeen two
ports or series of ports. It operates a regular scheduled
 FOREIGN
3.8
from a tixed
schedule. A
TRADE
confa.

the freight charges

can be quoted
on the same
ference is an
route to avoidce
avoid unl
competition
lading ensures
arrangement among
regular
between liners operating
themselves.
service andAisliner
welcomed
bill of lading
by shippers.
or a conference
As againstiealth
ner ll
er
vessel
of
bill of
healthy
a chartered ship
prepared to carry anything anywher e, there
is a tramp which is upon demae
and depend upon
The freight charges vary demand
are no regular trips. and
supply.
Combined Transport Documents

or multi modal transport document i

A combined transport document the
in technology manifested in the for
outcome of the development transport
The cargo is stuffed into the containers
containerisation, palletisation, etc. the
premises of the exporter. The transport operator takes charge from there a
and
undertakes to deliver the goods to the consignee at the destination. The comhin
transport document issued by the transport operator is similar to a bill of ladin
but provides for continued responsibility of the transport operator for sea as well
as land journey.

Air Waybill
Air waybill is the transport document obtained in case of movement of cargo by
air. The air waybill is made out in three originals and handed over to the carrier
along with the cargo. The document is prepared in three copies. The first of the
Originals is intended for the carrier and is signed by the carrier. The second
intended for the consignee is signed both by the consignor and the carrier. It is
sent along with the cargo. The third original is a receipt for the consignor; it is
signed by the carrier.
An air waybill serves several purposes as follows:
( It is a prima facie evidence of the conclusion of the
contract, of the receipt
of cargo and of the condition of cargo.
(i) It serves as an instruction sheet giving all the instructions needed for
moving the goods and handling them at all stages of their journey from
departure to destination.
(i) It is customer's declaration and bill for the
(i) If the amount and extent of
a
freight.
insurance are included in it, it becomes a
certificate of insurance.
It may, however be noted that
unlike a bill of lading, an air
document of title to goods. The is not a waybill
before it is delivered to the consignor
has the right to call back the
goods
delivered
consignee.
He can also direct that
goods should be
at another place and/or to another person.
When the goods reach the
destination, the carrier should give a notice of
arrival of cargo to the consignee. The
consignee is entitled to
waybill and to deliver the cargo torequire
to hand over to him the air the carrier
him.
INTERNA
ATIONAL TRADE DOCUMENTS
3.9
Commercial Invoice

nvoice is a statement containing full

A commerci.
details of the goods
antents of a commercial invoice used in
The g e n e r a l c o n t shipped
foreign trade are:
and addresses of the seller and the
()names
buyer;
details of goods shipped-quantity, quality,
packing details and packing marks; description and value
and amount payable by the buyer;
(io) price
of trade-FOB, CFR or CIF, etc.
terms
v)
(ovdetails of freight harges, insurance premia and other charges;
details of

the sale contract in fulfilment of which the

rence to thes
reference
(vil)
vessel in which the
shipment is made;
nameof the goods shipped; and
are
(oi)
the licence number under which the
(ix reference to
import is made.
nvoice is not a document of title to goods but is only a description of
An
rves the purpose of verifying that the goods shipped and the price
ods. Itserves
e as per the contract. Ihough there is no specific proforma in which an
invoicei s to pared, certain countries may prescribe the format in which
voices for
i
imports into their countries have to be prepared. Such requirements
in view while preparing the invoice.
have to be kept
Invoices
Special Types of
nhimes, to fulfil the needs of the importer, special types of invoices may be

preparedin place of the usual commercial invoice.

Chnsular Invoice is a special type of invoice, usually in a prescribed form,

describing the details of the goods shipped and sworn as being correct in all
betore the Consul of theimporting country stationed in
respects by the exporter
the exporting country.
IheConsul of the importing country then certifies the
invoice may also contain a declaration about the place of
invoice. A consular
would serve the importer in getting the duties assessed and
origin of goods. It declaration in the
goods released by the customs without much delay. Any false
consular invoice involves heavy penalty.
similar purpose to that of a consular invoice. The
Legalised Invoice serves a
format of invoice, the ordinary commercial
difference is that instead of a specific
or Consulate for certification.
Certain
invoice is presented to the Embassy
invoice.
countries in Middle East require legalised
which contains certain certification
Certified Invoice is a commercial invoice
state that (i) the goods are of particular
by the exporter. The certification may contract or
are in conformity with a specific
country of origin; or (ii) the goods
of the importer has been fulfilled.
protorma; or (i) any other stipulation
customs invoices in the prescribed
Countries like USA and Canada rèquire Value an4
valuation. Combined Certificates of
torm for the purpose of their customs
forms of invoice
used between members of the Commonwealth. Special
Urngn are
3.10

arealso used for trade between members of other free trade

areas s
FOREIGN TRAD
and LAFTA.
the EEC
Proforma Invoice
It is essential to make a distinction between a commercial
invoice and
invoice. As discussed earlier under export
procedures, proforma
a
inuoiOma
as offer document from the exporter and when it is
accepted by the inm erves
well, it becomes a contract. A protorma invoice contains all the
commercial invoice. It is distinguished from the latter particu a mporte
the by ha
invoice' appearing on it.
A proforma invoice does
not evidence a sale. The
proforma
ords'
words
proforma
required in the following cases: invoice
y be
(a) It may be the basis on which the contract of sale is
concluded later
(b) When goods are sent
consignment basis, a protorma invoice mavi
on
used since the goods are sent y be
only to an agent of the seller; it
guide to the price at which the
as
should sell
serves adas a
agent goods. the
(c) It may be used to support a tender for sale
contract.
Details of the goods in the commercial
invoice should agree with
proforma invoice. that in the

Packing List
The contents of
the value
packing list are similar to that of a commercial invoice, but
particulars. Instead the list would contain the details of without
in individual
packages. This helps in identifying the contents of goods contained
and thus may facilitate
assessment by the customs. specified packages
Certificate of Origin
A certificate of
origin declares the place of actual manufacture or
goods. A country may place restrictions on growth of the
imports
preferential treatment may be accorded in tariff for from certain countries.
Or,
For both these
purposes, certificate of
imports from certain countries.
certificates are issued by the Chambers oforigin becomes necessary. Usually such
Commerce or Trade Associations in the
exporting country.
GSP Certificate is a
special form of certificate of origin issued when
exported are covered under the Generalised goods
GSP, industrialised countries System of Preference (GSP). Under
concessions for imports from unilaterally
and without
developing reciprocity offer tariff
countries. GSP certificate can be issued
only by specified agencies like Export
councils. Inspection Agencies and export promotion
Marine Insurance Policy
Marine insurance ofters cover against loss of or damage to the
goods during the
N T E R N AT I O N A L T R A D E DOCUMENTS
3.11
allows a
Gree
free flow of international trade by absorbing an
transit.
It
ertainty c o n n e c t
ted with it. In India, marine important
insurance is governed
by the
nsurance Act, 1963. Section 3 of the Act defines a contract of marine
"an a0reement whereby
the insurer
as
agreement

undertakes to indemnify the

insurar

in
the
aner
manr and to the extent thereby agreed,
against marine losses,
su
assured,
the losses incidental to marine adventure."
to say,
is contract of marine insurance is evidenced by the marine insurance policy.
thatThe
T h ep o l i c ys p e c i f i e s the following:
af
of the assured or of some
ass
person who affects the insurance
()thename on
his behalf;
thesubject-matterinsuredaand risk insured against;
(i) thes
(i) the voyage or period of time or both, as the case may be, covered by the
insurance;

sum insured; and

or sums
(io) the
(v) he name or names of the insurer or insurers. The marine policy may be
gned by or on behalt of two or more insurers.
signe
InstituteCargo Clauses. Insurance policies are available with three types of
Hard risk coverage. They are known as Institute Cargo Clause A, Institute
sta la Band Institute Cargo Clause C. Clause Coffers cover against basic
risks. The maximum extento cover can be obtained by opting for Institute Cargo
Clause A, with endorsement for War Clause and Strike, Riot and Civil Commotion

clause.
Snecific and Open Policies. A policy issued against specific shipment of
goods is known as specific policy. This has to be on a stamped document. The
policyshould be issued in the standard format.
Exporters having continuous shipment may opt for an open policy. Under
this arrangement, a policy covering the expected shipments for a period of, say,
oneyear,is taken. As and when shipment is made, they are declared to the insurer
and covered under the insurance. The insurance policy issued for the overall limit
will be a stamped document. For the declaration of shipment made under the
insurance, separate certificates of insurance are issued. The certificates of insurance
are unstamped as the original policy is stamped. A variant of the practice is the
open cover'. An open cover is similar to an open policy, but is not a legal document
and not executed on stamped paper. Specific policies or certificates of insurance
issued under the
open cover are stamped.
The insurance should be taken for 110% of CIF value of
exports.
Other Certificates
pending upon the needs of the importer, the exporter may have to furnisn rew
other certificates.

the
g t20te orcertificate is issued certifving the weight of individual item or
entire argo.
Quality or inspection certificate may be issued by the exporter of