Export Procedures and Documentations

Overview of Export Procedures and Documentations

Exports, like the import system, are held to be one of the major components of international trade. Moreover, after the LPG initiative, exporting and importing have heightened its pace of development. Exporting done by the country is bound to many formalities both legal and compulsory made by the exported nation.


In this section, we will know about these formalities that stimulate domestic economic activity.  The business exports its goods and services to other nations by adhering to basic principles and law and thus this is very important in the study of export and import fields.


Export Procedure

In general, an export procedure initiates with the willingness to send the goods and services to other foreign nations at some price, these procedures of export are stated below:

  • Step 1: Receipt Order

The Indian exporter will receive the order either directly from the importer or through the indent houses.

  • Step 2: Obtaining License and Quota

After receiving the order from the importer, the Indian exporter is required to obtain an export license from the Government of India, for this the exporter needs to apply to the Export Trade Control Authority and get a valid license for this.

  • Step 3: Letter of Credit

The exporter then asks the importer for the letter of credit, if the importer does not send the letter of credit along with the order.

  • Step 4: Fixing the Exchange Rate

The rate at which the home currency can be exchanged with the foreign currency is then fixed. The foreign exchange rate fluctuates from time to time so they need to fix the rate of exchange.

  • Step 5: Foreign Exchange Formalities

As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to furnish a declaration in the form prescribed in a manner in the Act.

  • Step 6: Preparation for Executing the Order

The exporter should make the required arrangements to execute the order:

  • Step 7: Formalities by a Forwarding Agent

Then the formalities are to be performed by the agent which includes obtaining a permit from the customs department, preparing the shipping bill, paying the dues after disclosing the required details of the product being exported. 

  • Step 8: Bill of Lading

The Indian exporter of the goods presents the receipt copy to the shipping company and issues the Bill of Lading. 

  • Step 9: Shipment Advice to the Importer

The Indian exporter sends shipment advice to the importer of the goods to inform him about the shipment of the goods. 

  • Step 10: Presentation of Documents to the Bank

The Indian exporter needs to confirm that he possesses all the necessary shipping documents.

  • Step 11: The Realization of Export Proceeds

The exporter of the goods needs to comply with banking formalities after submission of the bill of exchange.


Export Procedure and Documentation

In the previous section, we have learned about the export procedure formalities here we will know about the documentation necessary - 

  • Step 1: Receive an Inquiry

The first step in the shipping documentation process is when someone urges them to buy products. 

  • Step 2: Screen the Potential Buyer and Country

After you receive the inquiry from the buyer, the process is to check their business potentiality to do business with them. 

  • Step 3: Provide a Proforma Invoice

After screening the buyer, we need to provide the proforma invoice for the transaction. 

  • Step 4: Finalize the Sale

The buyer will either reject or accept your proposal thus finalizing the sale. 

  • Step 5: Prepare the Goods and the Shipping Documents

Commercial Invoice, Packing List, Certificate of Origin, Shipper's Letter of Instruction, Bills of Lading all need to be prepared 

  • Step 6: Run a Restricted Party Screening 

Again, the process needs to be run, before the goods ship for export. 

  • Step 7: Miscellaneous Forms and Ship Your Goods

There may be other documents that need to be prepared before exporting the goods.


Documents Required for Exporting

When deciding which documents are necessary for an export procedure, the best place to start is with your overseas customer/importer or a freight forwarder. You may help your customer in clearing items with customs in the target market by gathering precise information. Commonly used expert documents are:


Pro Forma Invoice- The document provides a description of the products, such as Price, quantity, weight, kind, and so on, and is a statement by the seller to provide the customer with the products and services at the given date and price.  


Commercial Invoice- The commercial invoice is a legal document that is exchanged between the seller and the buyer that clearly outlines the items being sold as well as the price the customer is to pay. 


Packing List- This list includes the invoice number, seller, buyer, shipper, carrier, date of shipping, mode of transport, itemized quantity, description, package type, package quantity, total net, and gross weight (in kilograms), packaging markings, and measurements.


Air Waybill- An air waybill is a document that accompanies goods carried by an international air carrier. The paperwork contains complete information about the package and enables tracking.


Export Licenses- A government document that allows the transfer of specified commodities in precise quantities to a specific destination for a defined end-use is known as an export license.


Formalities of Registration and Export Documentation 

Export is a very wide concept with a lot of preparations which is required by an exporter before starting the export business.  

  1. Establishing an Organization

  2. Opening a Bank Account

  3. Obtaining Permanent Account Number (PAN)

  4. Obtaining Importer-Exporter Code (IEC) Number

  5. Registration cum membership certificate (RCMC)

  6. Selection of product

  7. Selection of Markets

  8. Finding Buyers

  9. Sampling

  10. Pricing/Costing

  11. Negotiation with Buyers

  12. Covering Risks through ECGC


Preparation for Executing an Order

The exporter must make the following arrangements in order to carry out the order:

  • Marking and packaging of products to be exported in accordance with the importer's standards.

  • Obtaining an inspection certificate from the Export Inspection Agency after scheduling a pre-shipment inspection.

  • Getting an insurance policy from the Export Credit Guarantee Corporation (ECGC) to safeguard against credit risks.

  • Obtaining the necessary marine insurance coverage.

  • Appoint a forwarding agent, often known as a custom house agent, to handle customs and other related issues.


Formalities by a Forwarding Agent

The agent must complete the following formalities:

  • The forwarding agency must first get permission from the customs authority before exporting the items.

  • To the shipping business, agents must provide all needed data about the products to be shipped, such as kind, amount, and weight.

  • A shipment bill/order must be prepared by the forwarding agent.

  • The forwarding agency is responsible for duplicating the port challans and paying the fees.

  • The loading of the products on the ship is the responsibility of the ship's captain. The loading must be done in the presence of customs authorities and on the basis of the shipping order.

  • When the cargo is loaded into the ship, the ship’s master provides a receipt for them.


Foreign Exchange Formalities 

Under exchange control laws, an Indian exporter must comply with specific foreign exchange procedures. Every exporter of products is obliged under the Foreign Exchange Regulation Act of India (FERA) to provide a declaration in the form provided in a way. According to the declaration:

  • The foreign exchange gained by the exporter on exports must be disposed of in the manner and within the timeframe stipulated by the RBI.

  • Authorized foreign exchange dealers are needed to handle shipping documentation and discussions.

  • Only permitted methods will be used to collect payment for the products shipped.

  • Surrender the foreign exchange to approved dealers through the exchange control authority.

FAQs on Export Procedures and Documentations

1. What are Indent Houses?

The import of goods from foreign countries can be affected in two ways. The import of goods can take place directly or through a middleman. Also, another way is the import of goods through an intermediary and this is called an Indent House.

2. What is meant by ‘Letter of Credit’?

A letter of credit, also known as a "credit letter" is a letter from the bank which guarantees that a buyer's payment to a seller will be received on time and for the exact amount. In the event that the buyer is not able to make any payment on the purchase, the prescribed bank will be required to cover the full or partial amount of the purchase.

3. What is Bill of Lading?

A bill of lading is a document issued by a carriage in acknowledgment of receipt of cargo for the shipment. Although the term historically relates only to carriage by the sea, a bill of lading may be used today for any type of carriage of goods.

4. What is a Proforma Invoice?

A pro forma invoice is a type of preliminary bill which is presented before the sale sent to buyers in advance of a shipment or delivery of the goods. The invoice will describe the items that are being purchased and other important information, like the shipping weight and transport charges.

5. Can we get the Study material for “Export Procedures and Document” on Vedantu?

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