EXPORT SHIPMENT PROCEDURES

Hello everyone,

This is the guide how to start & proceed export shipments in India.

I shall elaborate each and every aspect of export shipments and try to make you understand how international logistics works.

So let’s discuss point wise and try to understand the basics of export shipments.

1. Obtain IEC code

The first thing is to issue IEC code certificate.

IEC Code is a ten digit code issued by DGFT – Director General of Foreign Trade,

Ministry of Commerce, Government of India to Indian Companies.

You need to submit online application for IEC on DGFT website,

while submitting you need to upload pdf/gif (not more than 300 KB) files of your PAN,

Photo, Bank certificate, various business licenses of your organization etc.

(class 2 digital signature is required to sign the application).

Once your application is completed you need to wait for approval,

you can trace the application status online, if all details and documents are correct the IEC certificate will be issued online.

There is a separate article, where we have explained the process of IEC registration (Online application) step by step, you can read that article by clicking here.

After issuance of IEC you need to get few more certificates or complete few more registrations which are listed below.

A)RCMC registration

Registration Cum Membership Certificate is issued by the Export Promotion Councils.

B)AD code (Authorized Dealer Code) registration

AD code is issued by the bank, exporter has to issue that from it’s operating bank.

2. Once you complete all the registration and receive all the certificates  you need to decide which commodity you want to export and that particular commodity is allowed to export from India or not.

3. If the commodity you select is allowed to export than you need to find a proper buyer for your commodity in international market.

For buyers you can reach out to export promotion councils, make a website with all the particulars about the product,  Participate in Trade fairs across the globe, contact overseas agents etc.

4. Once you get the buyers give them quotations as per your price, in some case buyer may ask you provide the sample, you can courier the sample to buyer's address.

If the sample passes the standard parameters agreed by you & buyer and the price is ok for buyers

you can proceed further and send your sales contract to buyer for counter signatures, in some cases buyer will give you their purchase contract or order confirmation.

In Contract you need to furnish all the details as Seller, Buyer, Commodity, Weights, Packages, Price, Incoterms (terms of delivery & payment), shipment period, exporting & importing country etc. including any other special requirements.

5. Payment & Delivery terms for sea export/import (Incoterms):

Commonly used delivery terms in sea export/import shipments are mentioned below:

A) FOB (Free on Board)

In case of FOB shipments seller clears the cargo and deliver at the vessel, after that it is buyer's responsibility.

In this case seller/exporter clears the cargo from customs and delivers the goods to the vessel at the port. All the charges till this point are on seller's account.

Buyer books the container, Insure the cargo & receive the cargo at POD. So Ocean freight, Insurance charge, handling charges at POD, import clearance charges & duty if any are in buyer's/consignee's account.

B) CIF (Cost Insurance & Freight)

In case of CIF shipments seller clears the cargo deliver at the vessel, Books containers & Pays freight and Insure the cargo after that it is buyer's responsibility.

In this case cost of cargo clearance at load port, Ocean freight charge, any export duties, Insurance charges are on seller's account.

And handling charges at destination port, import clearance charges & duty if any are in buyer's/consignee's account.

C) CFR/CNF (Cost and Freight)

In case of CFR/CNF shipments seller clears the cargo deliver at the vessel, Books containers & Pays freight after that it is buyer's responsibility.

In this case cost of cargo clearance at load port, Ocean freight charge, any export duties are on seller's account.

And handling charges at POD, import clearance charges & duty if any, Insurance charges are in buyer's/consignee's account.

Note: Some other incoterms are mentioned below, will describe all one by one on a separate post for incoterms.

EXW, FCA, FAS, CPT, CIP, DPU, DAP, DDP

Commonly used payment terms in sea export/import shipments are mentioned below:

A) CAD (Cash Against documents): In this case seller/exporter will submit the post shipment documents with bill of exchange at the bank after vessel departs and instruct the bank to release documents to importer once received the amount mentioned on bill of exchange. It is same as DP/DAP(Documents against Payment).

B) LC (Letter of credit): In this case seller/exporter will submit the documents at their bank after vessel departs and seller's bank sends the same to buyer's bank, if all documents are in order as per transmitted LC then seller's bank remit the funds to seller's bank within the agreed time period.

C) TT (Telegraphic Transfer): Telegraphic Transfer is a method of transferring money from a bank to another bank electronically.

D) DA (Documents against Acceptance): In this case first importer accepts and promises to pay the related bill of exchange then only it receives the negotiable documents.

Note: Will mention briefly regarding these & other payment term in separate post.

6. Letter of Credit (LC)

Once contract is signed you need to decide whether you want to open LC (Letter of credit) or not.

The Letter of credit is a document which is the guarantee that seller will get paid the value of it's commodity.

Buyer's or importer's bank (issuing bank) will pay to the seller's or exporter's bank (accepting bank, negotiating bank). So in this case the transaction is secured as seller get the assurance that they will receive the money at any cost.

There are different types of LC, let's discuss one by one:

A) Revocable LC: The LC can be cancelled or changed at any time by the buyer or the issuing bank without notification.

B) Irrevocable LC: The LC which cannot be cancelled or changed unless all parties (issuing bank, confirming bank, buyer/importer and seller/exporter) agreed to do so.

C) Confirmed LC: Status of the LC is called as confirmed once confirming bank (exporter's bank) has added its obligation to the issuing bank.

D) Unconfirmed LC: If  the LC is guaranteed by issuing bank but it is not confirmed by advising bank it is called as Unconfirmed LC.

E) Transferrable LC: The LC is known as transferrable LC if it allows first beneficiary to transfer credit (some or full credit) to secondary beneficiary (another party).

F) Un-transferrable LC: The LC is known as transferrable LC if it doesn't allow first beneficiary to transfer credit to secondary beneficiary.

G) Straight LC: The LC is known as straight LC if it is payable at opening bank within the credit limit. In this case beneficiary gets paid by issuing bank. 

H) Negotiable LC: Beneficiary or the bank nominated by beneficiary gets paid by the issuing bank.

I) Restricted LC: In the case of a restricted LC only one nominated bank can be used for negotiation in relation to a letter of credit.

J) Unrestricted LC: The bank is not specified, which means that the letter of credit can be negotiated through any bank of the beneficiary’s choice.

K) Term (Usance) LC: Payment can be deferred in the case of a usuance LC which gives time for the buyer to inspect or even sell the goods.

L) Sight LC: If the LC is at sight, once documents are verified & presented the payment will be done.

Buyer needs to reach out their bank to open a letter of credit, they need to submit export contract and apply for LC,

once application is done bank will give LC draft for checking, that draft needs to be sent to the seller, once seller confirms the LC draft buyer's bank will transmit the LC.

The documents comes under LC are to be prepared vary carefully, each and every word should match the LC otherwise bank may claim discrepancy charge as per the rule. Once operating LC is received export shipment can be planned.

Note: If the buyer is new to seller or it is the 1^st shipment then I suggest payment should be done through LC.

7. Packaging

Packing of the commodity plays a vital role in case of Export/ Import shipments.

e.g. for Raw cotton or coconut fiber coir mode of packing is bale, in case of grains like Rice, Sugar etc. mode of packing is bag (50 KG, 25 KG, 5 KG, 1 KG based on requirement), Copier papers used to pack inside cartons, barrels are palletized by wood and so on.

In case of bag packing commodities the buyer - seller decides the bag marking (Art work), the approved Art work given to the printer,

once bags are printed as per approved markings those are sent to the supplier/seller/exporter for packing. Exporter fills the bags with cargo/ commodity after weighment and stich all the bags.

8. Booking of Containers or Vessel

In case of containerized shipments containers has to be booked.

Anyone can book the containers from directly liners or though freight forwarders. First you need to ask for the quotation for Ocean freight, THC (Terminal handling charges), BL release charges, Seal fixing  charges etc. from liners or freight forwarders. Usually the currency of Ocean freight charges are in USD and remaining all charges are in local currency.

Once the charges are agreed exporter has to confirm liner/ freight forwarder to book containers (Size & no. of containers [depends upon nature of cargo & it's weight) also to be confirmed by exporter].

At the time of booking of containers exporter has to give necessary information line how many containers, which size, POL (Port of loading) & POD (Port of discharge), based on these freight rate are finalized.

EX: 20' Containers (heavy weighted cargo e.g. Rice, pulses etc.) charges less than 40' containers(low weighted cargo e.g. cotton bales, coconut coir fibers etc.), per container maximum weight varies based on rules of different countries however it varies between 24 MT to 28 MT.

Once booking is placed on liner's website or through any software like Intra booking copy received, in booking copy everything used to be mentioned like POL, POD, targeted vessel, Vessel ETD (Estimated Time of Departure), ETA (Estimated Time of Arrival) etc.

In ideal case Booking copy does not give you the commitment of confirmed space in that particular vessel, it may be changed as per availability of the slot in vessel, cancellation of the commenced vessel, delay in berthing, any technical problem etc.

In case of bulk shipments bulk vessel/ cargo ship has to be booked.

Exporter gets in contact with charter party, charter parties are like freight forwarders of containerized shipments.

Charter parties land the vessel from the vessel owner, load the cargo, perform the whole operation and issue BL to the exporter as per the information on Mate’s receipt once loading is completed.

9. Appointing CHA

A CHA (Custom House Agent) is authorized person who has the license to deal with customs department for clearing the goods for export or imported goods.

An exporter cannot directly go to customs to clear the cargo it has to appoint a CHA who will perform all documentation process and clear the cargo from customs department on behalf of exporter. Exporter has to provide necessary documents e.g. Copy of Contract/ LC, Invoice, Packing List, SDF, Cenvat declaration, Drawback declaration etc.

In most of the cases exporter authorizes CHA to sign on behalf of them, in that case CHA can prepare the necessary documents on behalf of exporter and produce the same to customs authorities. Once cargo is ready customs officer/inspector inspect the cargo and gives the clearance.

10. Place of stuffing

Once booking is done & cargo is ready exporter will have to decide where the stuffing (process of loading cargo in to containers) will be done.

Usually containers kept/ stacked at CFS (Container freight station) or ICD (Inland container depot) yards.

So wherever the stuffing will be done containers need to be collected/picked from CFS or ICD. Exporter or Freight forwarder need to show the booking copy or booking reference no to the nominated CFS/ICD if containers are available in that particular yard authorized persons of that CFS/ICD yard will release the container s to the exporter/freight forwarder.

It is exporter’s call where he wants to stuff his cargo.

A CFS situated at the coastal areas & a ICD situated at non coastal areas (where sea ports are not available). So if exporter’s warehouse/factory is near to the sea port he can choose one of the nearest CFS available or otherwise he will opt a nearby ICD.

If stuffing is done at CFS then the containers directly taken to the port after customs clearance, if it is stuffed at ICD then the containers will be taken to nearest sea port by train (railway siding).

Here we shall discuss all stuffing options one by one.

A) CFS Stuffing

Once cargo is ready it will loaded in to truck and sent to the CFS, meanwhile exporter will provide all necessary documents to their CHA and also ask freight forwarder or liners to arrange the containers.

Once CHA gets all the documents it will file shipping bill checklist and it will be submitted to customs officer along with other required documents, CHA will show the documents to custom officers and ask for stuffing permission, if all documents are fine custom officer will give the permission. Once truck reaches to the CFS those will be taken inside the CFS if the custom has permitted. CFS is custom bounded area so for each and every activity permission of customs is required. After receiving all permissions stuffing will be done at CFS.

Once stuffing is completed the CHA executive will request customs inspector/superintendent or any other customs official on duty at that CFS to inspect the cargo, after inspection containers will have to be sealed,  if everything found in order customs official will pass the shipping bill and register the same at ICEGATE website and issue Let Export Order (LEO). (www.icegate.com is the website for Indian customs each and every export/ import shipments are done through this website).

After LEO received stuffing report will be issued by customs official.

Stuffing report  is the copy of let export order in which all container no, seal no & no of package are mentioned, and customs official put their stamp and sign, it is basically the confirmation by customs that the containers are properly inspected, sealed and the provided information are correct as per their knowledge.

Simultaneously CHA/ Freight forwarder will have to send request to line for Form-13 once stuffing process is completed. The details of container no, seal no, shipping bill no, no of package, net weight, gross weight, booking copy etc. has to be sent to liner or it’s agent, liner will check all the details and availability of slots in that particular vessel, if everything is in order liner will issue Form-13s online and send it to the exporter/Freight forwarder, Once Form-13 received those have to be handed over to the trailer.

Basically Form-13 is like a gate pass at port or container terminal, it is a type of permission,  port authorities will check Form-13 while entering the trailer inside the port.

Once LEO & stuffing report are issued, containers are sealed accordingly and loaded to trailers, weighment done and sent to the port, each trailer will get one Xerox copy of stuffing report, Form -13 & gate pass from CFS.

B) ICD Stuffing

Like CFS stuffing process is same in ICD.

Once stuffing completed & let export issued containers will be sealed, loaded in rail and sent to the port.

C) Factory stuffing

The process of Factory stuffing is bit different from CFS/ICD.

In this case once goods are ready at exporter’s factory/plant, factory people ask the CHA persons to send the containers (containers has to booked previously) from CFS to their factory. CHA will contact liner of freight forwarders who booked the containers, containers will be finalized and then CHA will request customs officers to give permission for sending the containers to the factory from CFS, once permission granted containers will be sent to the factory.

 Then concerned person of that factory will contact central excise authorities and request them to come down to the factory premises for monitor & inspect the stuffing process.

Central excise authorities will come to the factory and monitor the below process.

The cargo will be stuffed in front of the excise officials, and sealed, then weighment of the containers will be done and weight details will be entered in Packing list and total net & gross weights also be mentioned in Invoice, based on that weight Invoice amount will be finalized (If cargo packages are not uniform then the weight of individual package has to be mentioned).

After that central excise people will check these documents along with other required declarations & cargo, if everything is in order they will stamp & sign in the documents and seal these documents in a cover and hand over that cover to the exporter/factory people, that cover should not be opened by anyone, that will be opened at port by the customs officers.

Once everything completed sealed containers will be sent to the port directly for inspection and further process, the cover containing original signed documents will be sent to the CHA. CHA will get Xerox copy of invoice & Packing list for filling shipping bill checklist and request for Form-13 to liner.

Once vehicle reached at port or any pre-gate copies of Form-13 & Shipping bill check list will be handed over to the driver and then containers will be taken inside the port.

Meanwhile CHA people will go to customs officials on duty at port and hand over the cover given by central excise along with shipping bill checklist. Custom officer will check everything if all are in order will issue Let export order.

D) Factory stuffing with self/ RFID-sealing 

RFDI - Radio Frequency Identification

From November 2017 for all factory stuffing containers self-sealing made mandatory.

Self-sealing process is implemented in order to save time, tempering of the seals, reduce transaction cost etc. Also it will improve the visibility and enhance the security of the cargo during transportation from factory to ports.

To avail this facility exporter has to take permission from Principal commissioner of customs, necessary document has to be produced at custom house to get self-sealing permission.

Exporters need to submit one request letter to Commissioner of customs along with copies of IEC, PAN, GST, list of authorized signatories, warehouse/ Factory details etc. , Containers can be self-sealed within the permitted area/premises only, it is not applicable for CFS/ICD stuffing or Air cargo.

Self-sealing means after stuffing of the containers it will be sealed by exporter themselves and send the containers to port directly, physical inspection by customs officers will not be done in this case.

Seals used for self-sealing are RFID seals, which can be purchased from some authorized dealers (authorized by central excise) only (booking can be done online through vendors websites seals will be delivered at the door).

At the time of dispatch vendors will feed the details given by exporters e.g. Name of exporter, IEC code, Description of goods, GSTN number etc.

Once stuffing is done and it is finalized which seal to be used in which containers at that time exporter has to link shipping bill no with associated seal nos.

At the time of filing shipping bill RFID seal nos has to be feed, also self-declaration has to be given by exporters, once stuffing is completed and containers are sealed with RFID seals containers will be moved from factory to port as per availability of Form-13s, once containers reached at port all associated documents will be submitted to custom officer, custom officer will feed the details on system if everything is in order let export order will be issued.

In case of self/RFID sealing export open order may be issued by system randomly, while registering the shipping bill online at ICEGATE, system randomly issued open order for any lot.

e.g. one shipping bill filed for 10 containers, at the time of registering if open order comes it will be applicable for all 10 containers.

If open order comes, all containers of that particular shipping bill has to be taken to the nearest CFS and all containers will be opened and examined by on duty custom officer at CFS and then let export order will be granted(if open order comes containers will be taken to CFS and it will be cleared with the same process as it happened for CFS stuffing).

Note: In each and every case if the goods are plant products there is a process to be followed which is known as Plant Quarantine clearance.

There is a separate article on Plant quarantine & Phytosanitary certificate, please click the link for detailed information.

11. EDI (Electronic Data Interchange) Shipping Bill

Once let export order is granted in system EDI print of that shipping bill will be enabled. Custom officers are authorized to give print of that EDI shipping bill, Exchange control copy & Exporter’s copy will be handed over to exporter through CHA by customs. Exporter copy needs to be submitted to shipping line & Exchange control copy will be sent to the exporter.

12. Submission of Shipping bill

Exporter copy needs to be submitted to shipping line by CHA as a proof of export.

CHA needs send exchange control copy to exporter and exporter needs to submit the same to their bank as a proof of export.

Once vessel cross the territory of loading country shipping line will submit all the details shipped in that particular vessel e.g. Exporters name, cargo, quantity, weights, container & seal nos etc. in a specific format to customs through icegate which is known as Export general manifest (EGM).

After EGM is filed by shipping line status of EP copy(export promotion copy) is enabled, CHA can approach customs offices to get the printed EP copy.

13. If the commodity/cargo exported comes under Drawback/STR (service tax refund) category and the shipping bill filed under drawback/str scheme then the drawback/str amount will be automatically credited in exporter’s account after accomplishment of all the obligation.

14. Post shipment documents

Documentation is the most important part of any export/Import shipments. 

Once the vessel reaches at the port of destination consignee/buyer needs to provide some specific documents to their customs authorities to clear the cargo, once these documents are submitted clearance procedure will be started. These documents are known as post shipment documents and these are prepared by the exporter at exporting country (POL).

Here is the list of some important documents:

A) Commercial Invoice

It is a legal document which will be issued by seller to buyer, it has the details of sold commodity, due amount, weight, quantity, incoterms, POL, POD etc. 

B) Packing List

Packing list is the document in which per unit packing details & weights are mentioned.

C) Bill of lading (B/L) 

B/L is a negotiable document issued by carrier/liner to acknowledge of receipt of the cargo.

The liner who has provided containers will issue B/L (MBL – Master B/L), in some cases freight forwarders/NVOCC agents also issue the B/L (HBL- House B/L).

Once cargo reaches at destination, consignee/buyer has to submit original B/L issued at origin port at the office of the same liner or its agent who has issued the B/L, once liner/agent at destination port receives the original B/L and required mandatory charges (documentation fees, DTHC- Destination terminal handling charges, Detention/demurrage if any etc.) it will issue DO – Delivery order of the containers which are mentioned in B/L. Once consignee/buyer will get the DO they can open those containers in front of customs officers on duty.

We will discuss about B/L briefly in a separate post, it will cover each and every aspect of a B/L.

D) Certificate of origin (COO) 

Certificate of origin is a document issued by recognized Chamber of commerce which certify that the mentioned goods are produced/manufactured in a specific country.

COO is basically a form which is filled by exporter and submit to any local chambers or any other competent authorities who are authorized to issue COO, chamber check all the documents and if all are in order they sign on that form or certify that the goods mentioned are of that particular country.

E) Phytosanitary certificate (Required only if the commodity to be exported is the plant product) 

Phytosanitary certificates are issued are issued by Plant protection organization/ Plant Quarantine department to indicate that consignments of plants, plant products or other regulated articles meet specified phytosanitary import requirements.

After PQ clearance as I mentioned earlier CHA needs to approach the PQ office to collect Phytosanitary certificate, the details in that certificate will be taken from the application submitted online.

Note: For all plant product exports Phytosanitary certificate is mandatory.

F) Fumigation certificate (Required only if the commodity to be exported is the plant product or if other commodity contains wooden products/ pallets) 

If the cargo is plant product or wooden pallets are there inside containers then the cargo needs to be Fumigated with prescribed doses as per importing country rules.

Fumigation means spreading poisonous gas or tablets inside containers or hatches of bulk vessels to protect the cargo from various types of pests/insects.

MBR (Methyl bromide) & ALP (Aluminum phosphide) are mostly used fumigants.

Fumigation operation can not be performed by anyone, Plant Quarantine office gives authority to some skilled persons in this fields only they can do fumigation.

Once fumigation is done the organization/person will issue one certificate which will show the name of fumigant, doses, duration, container nos etc. that is called as Fumigation certificate.

G) Inspection certificate

To check the quality of the cargo it has to go through the inspection procedures.

These inspections are done by some international surveyors, who draws samples and test at their laboratories and list out the standard parameters. They test the samples and provide report it is called as inspection certificate.

As per the contract buyer or seller can nominate any international inspection agency, appointed agency/surveyors goes to the concerned place of inspection and perform the procedure, once the process is done they sends reports to the organization who has appointed them as surveyor/inspector/controllers.

Quality parameters are standard and pre decided and mentioned in sales/purchase contract/agreement, surveyors tests the drawn samples and prepare checklist and finally they tally their test results with standard parameters and prepare their reports.

Some renowned international agencies are listed below:

SGS

Bureau veritas

Control union

Geochem

Intertek

Cotecna

Quality Services & Solutions (QSS)

Some other certificates are also to be issued as per specific requirement of some countries:

COC, Health certificate, Non GMO certificate, Manufacturer certificate, Freight certificate, ECTN, BSC etc. 

Once the vessel sails CHA/exporters start collecting these post shipment documents one by one from concerned authorities and send all documents together to the consignee/buyer or their banks as per contract/agreed payment terms.

Exporter/Seller receives the payment as per their agreed payment terms, payment terms are mentioned on point no. 5, please have a look.

Note: Please be advised that this is the standard process of export shipments, but the process keeps updated time to time and those changes are decided by the authorities like Customs, DGFT, EIC, Port/Terminal, Shipping lines etc. as per the requirement of time which are beyond anybody’s control.

If anyone have any doubt or want more clarity please feel free to write. 

You can reach us out with the help of CONTACT FORM or comment below.