Rekha Garments has received an order to export 2000 men's trousers to Swift Imports Ltd. located in Australia. Discuss the procedure that Rekha Garments would need to go through for executing the export order. 

2. Receipt of Indent : Once the importer is satisfied with the quotation, he will place an indent or order either directly or through an indent house. The term indent has been derived from the ancient practice of cutting or indenting edges of triplicate copies of the order so as to prevent forgery and to facilitate identification. The order or indent contains full particulars of goods with regard to size, quality, method and time of delivery, price and mode of payment, etc. It also gives instructions regarding the packing, marking and insurance of goods. Indent may be of two types. 1. open ident, 2. closed indent.

3. Credit Enquiry : After receiving the indent from the importer the exporter makes efforts to ascertain the creditworthiness of the importer. For this purpose, he may check up with the reference given by the importer.

4. Export License and Quota : It exercise of the power granted by the Imports and Exports Control Act, 1947, the Central Government has issued Export Control Order 1962. The goods covered under this order cannot be exported without obtaining an export license. In order to obtain export license, the exporter must apply to the controller of Exports and Imports in the prescribed form along with a challan from the Government Treasury. Such a challan can be obtained by depositing the prescribed export license free. He has also to submit income-tax verification stating that the exporter is paying income-tax regularly.

5. Foreign Exchange Regulations : Under the Foreign Exchange Regulations Act 1947, an exporter is required to make a declaration that he will surrender the foreign exchange received from the importer to the Reserve Bank of India within the prescribed period. For this purpose he has to fill in four copies of the G.R. form specifying full particulars of the value of the goods, methods of payment, and name of the dealer in foreign exchange through whom the documents are to be negotiated. After the rupee convertibility an exporter can sell his foreign exchange earnings in the foreign market.

6. Fixation of Exchange Rate : Exchange rate refers to the rate at which the currency of one country can be exhanged for the currency of another country. There is a time lag between the despatch of goods by the exporter and the receipt of payment. During this period exchange rate may fluctuate. Hence it is necessary to fix it in advance.

7. Packing and Marking : The next step in export procedure is to collect the goods mentioned in the indent. Once the goods are procured, they are packed and marked as per the instruction of the importer. If the ident contains no instruction in this regard, the exporter must pack and mark the goods properly in accordance with the prevailing customs.

8. Securing the shipping order : The exporter enters into an agreement with a shipping company or its agent to hire space in a ship for transportation of goods to the importer. The shipping company issues a shipping order which contains instructions to the captain of the ship to receive the specified quantity of goods from the exporter mentioned therein. When the quantity of goods to be exporte is very larger, the exporter may hire the whole.

9. Customs formalities : After hiring the ship, the exporter despatches the goods to the port by rail or road transport. At the port, he has to fulfill customs formalities. The exporter or his forwarding agent submits three copies of the shipping bill, along with the export license and G.R. forms to the customs office where the duties payable on the goods are assessed. The customs authorities retain one copy of the shipping bill and return the other copies together with the export license and G.R. forms to the exporter. After this, the exporter presents these documents to the Landing and Shipping Dues Office of the Port Trust. On payment of the port dues and export duty, a Dock Challan or Custom Export Pass is issue to the exporter. This pass permits him to bring the goods in the docks.

10. Mate’s receipt : The exporter delivers the goods to the dock or the ship. When goods are delivered to the dock, a dock receipt is issued to the exporter. If the exporter hands over the goods directly to the captain of the ship or his assistant, called the ‘Mate’, a ‘Mate’s Receipts is issued to him. The exporter has to hand over a copy of shipping bill and the shipping order to the captain of the ship. The captain or the Mate will inspect the goods and will issue a clean Mate's Receipt if he is satisfied with the packing of the goods. But if the packing is defective, a foul receipt is issued specifying the defect in packing. Goods are loaded to the ship in the presence of a customs preventive officer. He compares the goods with the shipping bill and the shipping order to ensure that only those goods are loaded on the ship which are specified in the shipping bill and the shipping order. Mate's receipt certifies that the goods mentioned in it have been delivered to the ship.

11. Bill of lading : The exporter hands over the Mate’s Receipt to the office of the shipping company. In exchange for it, he is issued a bill of lading which severs as the receipt of goods loaded. If the Mate’s Receipt contains a remark regarding any defect in the packing of goods. The same is noted in the bill of Lading, the bill of lading mentions whether the freight has been paid or not. In case the exporter has paid the freights, the bill of lading is marked “freight paid”. When the freight is to be paid by the importer of goods, the bill of lading marked ‘freight forward’. In such a case, the shipping company issues a ‘fright note’ stating the freight charges payable on the port of destination.

12. Marine Insurance : Generally the shipping companies refuse to carry the goods unless they are insured. Commercial banks also refuse to discount the documentary bills of exchange unless insurance policies are attached with them. Therefore, goods are isured agains sea perils before they are despatched. A marine insurance is purchased from the insurance company.

13. Certificate of origin : The certificate indicates the origin of the exports. It can be obtained from a Trade Consul, Secretary of a Chamber of Commerce or from some other authorised person. This certificate is required for calculating import duties at the port of destination. Some countries give preferential treatment to the goods of friendly nations in the matter of customs duties under trade agreements. In such cases the importer can get the benefit of lower tariff on the basis of the certificate of origin. The exporter obtains this certificate and sends it to the importer.

14. Consular invoice : In certain cases, import duties are charged and valorem, i.e. on the basis of the value of the goods. At the port of destination, the goods may have to be opened to ascertain the value of goods and the duties payable on them. To avoid this difficulty, a consular invoice may be sent to the importer. This invoice is issued by the trade consul of the importing country situated in the exporting country. It describes the quantity and value of goods. The customs authorities in the importer’s country usually accept such invoice as a true statement of the value of goods.

15. Export invoice : Then the exporter prepares a commercial invoice for the goods sent to the importer. The invoice is prepared according to the terms and conditions previously agreed upon. For instance, if the goods are sold on C.I.F. basis, no separate chare will be made for insurance and freight. The invoice is prepared in triplicate showing the quantity, quality, description and price of the goods. It also contains ident No. name of the ship, packing and making details etc.

16. Advice to the importer : After completing all the formalities the exporter sends a letter to the importer informing him of the dispatch of goods. He also sends the invoice, certificate of origin, consular invoice, marine policy, bill of lading and other necessary documents to the importer either directly or though a bank. On the basis of this advice, the importer makes arrangements to take delivery of the goods and to make payment to the exporter.

17. Securing payment : The last step in an export transaction is securing payment from the importer. The exporter can secure payment in either of the following ways :

(a) Documentary Bill of Exchange : Under the this methods, the exporter draws a bill of exchange on the importer asking him to make payment to the specified banks. With this bill, documents to title (bill of lading, marine insurance policy, certificate of origin, invoice etc.) are attached. Therefore, such a bill is known as documentary bill of exchange.

(b) Discounting the Bill : D/A (Document against Acceptance) is a time bill as it is payable after a period of usance which may vary from one month to three months. If the exporter wants immediate payment, he may discount the bill with a bank. For this purpose, he will have to submit a “Letter of Hypothecation” to the bank., This letter authroizes the bank to take delivery of the goods and dispose them of in case the importer fails to make payment on the bill.

(c) Bill on Bank : When the importer has furnished a letter of credit, the exporter draws a bill on the bank which has issued the letter of credit. The exporter sends the bill along with the documents to his bank for collection of payment. This method is known as ‘documentary credit’ and it involves no risk to the exporter or the importer.

(d) Foreign Bank Draft : The importer may get a bank draft by depositing a certain sum of money in his country’s currency with a local bank. He then sends the draft to the exporter. The exporter gets cash for this draft through his own bank.

(e) Telegraphic Transfer (TT) : It is a transfer of money by telegram or telex issued by a bank. It is the fastest mode of remittance. Payment can be made on the date the telegram is received and little risk is involved.