A Letter of Credit is a written undertaking by the Importers bank, known as the Issuing Bank, on behalf of its customer, the Importer (Applicant), promising to effect payment in favour of the Exporter (Beneficiary) up to a stated sum of money, within a prescribed time limit and against stipulated documents. A key principle underlying Letters of Credit is that banks deal only in documents and not in goods. The decision to pay under a Letter of Credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the Letter of Credit. It would be prohibitive for the banks to physically check whether all merchandise has been shipped exactly as per each letter of Credit.

Exporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires; freight forwarders are specialists in this process. The following documents are commonly used in exporting; which of them are actually used in each case depends on the requirements of both our government and the government of the importing country.

• Commercial invoice
• Bill of lading
• Consular invoice
• Certificate of origin
• Inspection certification
• Dock receipt and warehouse receipt
• Destination control statement
• Insurance certificate
• Export license
• Export packing list

Indian Standards Institute now known as Bureau of Indian Standard (BIS) is a registered society under a Government of India. BIS main functions include the development of technical standards, product quality and management system certifications and consumer affairs.

Agmark is an acronym for Agricultural Marketing and is used to certify the food products for quality control. Agmark has been dominated by other quality standards including the non manufacturing standard ISO 9000.

The term cargo insurance, popularly known as marine insurance, applies to all modes of transportation. The need for export (or import) cargo insurance often differs from exporter to exporter (or importer to importer) and from consignment to consignment. Unless the insurance is mandatory in a trade term, the exporter or the importer may opt not to insure the goods at his/her own risks.Depending on the international commercial terms, either the seller (the exporter) or the buyer (the importer) is responsible for insuring the cargo. The seller is obligated to insure the cargo in the CIF and CIP terms. The seller may opt not to insure the cargo at his/her own risks in the DDU and DDP terms.The trade terms DDU and DDP are often used in the turnkey projects where the amount at stake is large. In practice, the seller usually insures the cargo in the DDU and DDP terms.

Duty Entitlement Pass Book Scheme in short DEPB is an export incentive scheme. Notified on 1/4/1997, the DEPB Scheme consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book Scheme at a pre-determined credit on the FOB value.

An SPS measure is any measure applied:

• To protect animal or plant life or health within the territory of the Member from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms;
• To protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs;
• To protect human life or health within the territory of the Member from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests;
• To prevent or limit other damage within the territory of the Member from the entry, establishment or spread of pests.

A tariff (or duty, the words are used interchangeably) is a tax levied by governments on the value of imported products. Sales and state taxes, and in some instances customs fees, will often be levied as well. The tariff is assessed at the time of importation along with any other applicable taxes/fees. Tariffs raise the prices of imported goods, thus making them less competitive within the market of the importing country. Before exporters want to export to any country, he/she need to determine what the tariff rate is on their product(s) as well as any import fees for that country.

Methods employed in controlling the volume or value of goods coming into a country, usually to maintain the exchange rate of the country's currency. Also called import controls, the primary import restrictions are: (1) Tariffs (import duties) or taxes levied on the imported goods to make them costlier, (2) Import licenses or import quotas that limit the total quantity of goods imported, or imported from a certain country, (3) Currency restrictions that limit the amount of foreign exchange available for payment of imports, and (4) Prohibition that prevents entry of illegal or harmful items. The last three are collectively known as non-tariff barriers.

Generalized system of preferences referred to as GSP, the developed countries to developing countries exports of finished and semi finished products (including some primary products) in general, non-discriminatory, non-reciprocal tariff preferences of a system.
Under the GSP (Generalized System of Preferences) program or the preferential tariff treatment, a free or reduced duty is granted by developed countries to certain manufactured goods from the least developed countries, in order to bolster their exports and economic growth.

Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce & Industry, Department of Commerce, Government of India. Provides a range of credit risk insurance covers to exporters against loss in export of goods and services Offers guarantees to banks and financial institutions to enable exporters to obtain better facilities from them Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan

• Offers insurance protection to exporters against payment risks
• Provides guidance in export-related activities
• Makes available information on different countries with its own credit ratings
• Makes it easy to obtain export finance from banks/financial institutions
• Assists exporters in recovering bad debts
• Provides information on credit-worthiness of overseas buyers

Pre-shipment inspection, also called PSI, is an important and reliable quality control method for checking goods' quality while clients buy from the suppliers. The pre-shipment inspection is normally agreed between a buyer, a supplier, and a bank, and it can be used to initiate payment for a letter of credit. A PSI can be performed at different stages:

• Checking the total amount of goods and packing
• Controlling the quality and/or consistency of goods
• Verifying compliance with the standards of the destination country

Post Shipment Finance is a kind of loan provided by a financial institution to an exporter or seller against a shipment that has already been made. This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters dont wait for the importer to deposit the funds.
The post shipment finance can be classified as :

• Export Bills purchased/discounted.
Export Bills negotiated
• Advance against export bills sent on collection basis.
• Advance against export on consignment basis
• Advance against undrawn balance on exports
• Advance against claims of Duty Drawback.

IEC Stands for IMPORTER EXPORTER CODE. No export or import shall be made by any person without an Importer-Exporter Code (IEC) number unless specifically exempted.

Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The use of anti dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti dumping is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic industry. It provides relief to the domestic industry against the injury caused by dumping.

A bank guarantee is a written contract given by a bank on the behalf of a customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in case, if it is not paid by the customer on whose behalf the guarantee has been issued. In return, a bank gets some commission for issuing the guarantee.
Any one can apply for a bank guarantee, if his or her company has obligations towards a third party for which funds need to be blocked in order to guarantee that his or her company fulfils its obligations.

Export Import Policy or better known as Exim Policy is a set of guidelines and instructions related to the import and export of goods. The Government of India notifies the Exim Policy for a period of five years (1997 2002) under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current policy covers the period 2002 2007. The Export Import Policy is updated every year on the 31st of March and the modifications, improvements and new schemes becames effective from 1st April of every year. All types of changes or modifications related to the Exim Policy is normally announced by the Union Minister of Commerce and Industry who coordinates with the Ministry of Finance, the Directorate General of Foreign Trade and its network of regional offices.

Foreign Exchange Management Act or in short (FEMA) is an act that provides guidelines for the free flow of foreign exchange in India. It has brought a new management regime of foreign exchange consistent with the emerging frame work of the World Trade Organisation (WTO). Foreign Exchange Management Act was earlier known as FERA (Foreign Exchange Regulation Act), which has been found to be unsuccessful with the proliberalisation policies of the Government of India.

The scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of license. Capital goods would be allowed at 0% duty for exports of agricultural products and their value added variants.

A Certificate of Origin (CO) is a document which is used for certification that the products exported are wholly obtained, produced or manufactured in India. It is generally an integral part of export documents.

No. Only bodies authorized by DGFT, Union Ministry of Commerce and Industry can issue Certificate of Origin

EIC is the official certification body of the Government of India. It has been established under the Export (Quality Control and Inspection) Act, 1963 (22 of 1963), for advising the Central Government on measures to be taken for development of export trade through quality control & pre-shipment inspection.

EIAs are the five Export Inspection Agencies having headquarters at Bombay, Calcutta, Cochin, Delhi & Madras. EIAs are autonomous bodies established by the Central Government under the Export (Quality Control and Inspection) Act, 1963 (22 of 1963), as the field organisations for implementing the policies of the Central Government with respect to quality control and / or pre shipment inspection of export commodities from India.

Depending upon the product, any of the following or a combination is taken as the basis of inspection and certification
Requirements laid down in the notification;
Buyers Requirements;
Requirements of the importing countries;
National and International Standards;
Contractual specifications;
Primary aim of the EIC / EIAs in this respect is to ensure compliance of the product to the requirements of the importing country and / or the buyer.

The certification of EIC/EIAs provides the following benefits to the exporters:

• independent third party certification as a tool for market access.
• official assurance of quality, which is becoming particularly relevant in food sector to meet regulatory requirements of importing countries.
• free entry for Indian products in overseas market through equivalence agreements / MOUs with official import control bodies of our trading partners whereby EICs certification is recognized by them as meeting their requirements.

The Codex Alimentarius Commission was created in 1963 by FAO and WHO to develop food standards, guidelines and related texts such as codes of practice under the Joint FAO/WHO Food Standards Programme. The main purposes of this Programme are protecting health of the consumers and ensuring fair trade practices in the food trade, and promoting coordination of all food standards work undertaken by international governmental and non-governmental organizations.

Codex Alimentarius follows the principle that consumers have a right to expect their food to be safe, of good quality and suitable for consumption. In this regard, the safety and essential quality of internationally traded food is of paramount importance. Codex has set a number of standards and codes on foods for vulnerable groups such as infants and young children, to provide adequate nutrition while protecting them from foodborne risks and to reduce infant mortality and morbidity worldwide.

MRLs are defined as the maximum concentration of pesticide residue (expressed as milligrams of residue per kilogram of food/animal feeding stuff) likely to occur in or on food and feeding stuffs after the use of pesticides according to Good Agricultural Practice (GAP), i.e. when the pesticide has been applied in line with the product label recommendations and in keeping with local environmental and other conditions). MRLs are primarily trading standards, but they also help ensure that residue levels do not pose unacceptable risks for consumers.

Where there is an approved use of the compound on a particular crop, or pesticide residues on imported produce ('import tolerances'), the MRL is generally set at a value determined from field trials (i.e. where the crop has been treated with the pesticide and samples of the crop have been analyzed to determine residue levels). MRLs can typically be less than a milligram (mg) of pesticide residue in a kilogram of food (1mg/kg or less than one in a million) up to 5 mg/kg.

1. Trade credit Insurance insures suppliers against the risk of non- payment of goods or services by their buyers.
2. This may be a buyer situated in the same country as the supplier (Domestic Risk) or A buyer situated in another country (Exporter Risk).
3. The insurance covers non- payment as a result of insolvency of the buyer or non-payment after an agreed number of months after the due date.
It may also insure the risk of non payment following an event outside the control of the buyer or seller (political risk cover),The risk that money cannot be transferred from one country to another.

The GSTP is an Agreement on economic co - operation for promotion of trade by providing preferential trading among developing countries . The scope of GSTP has included complementary trade liberalization techniques as follow:
a) tariff reduction
b) removal or reduction of non-tariff and para-tariff barriers
c) direct trade measures as well as mid-term and long-term contracts
d) sectoral agreement

A bill of lading is a type of document that is used to acknowledge the receipt of a shipment of goods. A transportation company or carrier issues this document to a shipper. In addition to acknowledging the receipt of goods, a bill of lading indicates the particular vessel on which the goods have been placed, their intended destination, and the terms for transporting the shipment to its final destination.