IMT-18 Export Finance and Documentation

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Subject Code: IMT-18

 

Subject Name : Export Finance and Documentation

 

Objective:

1. To develop necessary insights in financing options available for exports in India.

2. To equip the students with the management of export operation and decision – making

3. To equip the students with the knowledge of export documentation and procedures.

 

PART– A

 

  1. Explain the role export credit plays in export promotion in India. How is the export credit delivery system in India implemented.

 

Answer:  An export credit agency (known in trade finance as ECA) or Investment Insurance Agency is a private or quasi-governmental institution that acts as an intermediary between national governments and exporters to issue export financing. The financing can take the form of credits (financial support) or credit insurance and

 

 

 

  1. Outline various risks covered under standard policy.

 

Answer: Under the Standard Policy, ECGC covers, from the date of shipment, the following risks:

 

  1. Commercial risks

 

  • Insolvency of the buyer
  • Failure of the buyer to make the payment

 

  1. Explain FERA TO FEMA Transition .What do you understand by current account and capital account convertibility.

 

Answer: Transition from FERA to FEMA

A cut-off period of two years has been stipulated for transition from FERA to FEMA, which means that cases in which proceedings have already begun under FERA will continue to be governed by it.

 

 

 

 

  1. How is a letter of credit transacted? Explain in detail various types of letter of credit.

 

Answer: Transaction of letter of credit:

 

1. The starting point of the letter of credit process is the agreement upon the sales terms between the exporter and the importer. Then they sign a sales contract. It is important to stress here that letters of credit are not a sales contract.

 

 

  1. Does Cargo Insurance play a role in Export Transaction? Explain difference between Marine and cargo insurance

 

Answer: Yes, Cargo Insurance is playing role in Export Transaction . Cargo insurance is concerned primarily with international commerce. Basically, anyone who has an insurable interest in a cargo shipment (i.e., anyone who would suffer a loss if the cargo were damaged or destroyed or who would benefit from the safe arrival of the cargo) has a need for an ocean cargo policy. The cargo insurance policy indemnifies the exporter or

 

 

 

 

 

 

PART– B

 

  1. Outline in detail the claims procedure for a export cargo.

 

Answer: Claims Handling

  • It is important that exceptions be taken in writing on all receipts. This will not only facilitate the processing of the claim with insurers but is also extremely important for subrogation purposes.
  • If loss/damage is suspected, immediate

 

  1. As goods exported are in foreign countries, highlight the major standard clauses of export order

 

Answer:  Major standard clauses of export order:

 

  1. Seller Acceptance
  2. Delivery
  3. Inspection and Test
  4. Non-Conforming

 

 

  1. The Indian Exporters are given certain foreign exchange facilities outline the same.

 

Answer: Facilities Available To Exporters And Importers

 

Exporters

 

  • Exporters are provided timely and adequate credit to meet the exports commitments.
  • Exporters are allowed pre and post-shipment credit at competitive interest rates.
  • Export Credit is made available both in

 

  1. What do you understand by foreign exchange .Explain different types of possible exchange rate

regimes?

Answer: The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.

 

 

 

  1. Outline the factors affecting exchange rate

 

Answer: 1. Differentials in Inflation

As a general rule, a country with a consistently lower inflation rate exhibits a rising currency value, as its purchasing power increases relative to other currencies. During the last half of the twentieth century, the countries with low inflation included Japan, Germany and Switzerland, while the U.S. and Canada achieved low inflation only later.

 

  1. Differentials in Interest Rates

 

 

PART– C

  1. Export finance is important to be competitive do you agree with this statement. What are the means of short term financing?

 

Answer: Without exception, every country on the globe has some form of export financing or guarantee program. The point of this is to both encourage exports and boost the profitability of the domestic firms involved in exporting. The importance of this sort of financing is difficult to exaggerate, since so much hard currency is earned through exports. Entire economies, such as the Korea or Chinese, are based around exports. Export financing has helped turn third world countries into international economic powerhouses.

 

 

 

  1. Outline need of export documentation. Explain major shipping documents needed in export transaction

Answer: Documents Required for Post Parcel Customs Clearance

In case of Post Parcel, no Shipping Bill is required. The relevant documents are mentioned below:

 

  • Customs Declaration Form – It is prescribed by the Universal Postal Union (UPU) and international apex body coordinating activities of national postal administration. It is known by the code number CP2/ CP3 and to be

 

  1. Explain major steps required in custom clearance of export shipment

 

Answer: a. Declaration

Any person who imports or exports goods must file a prescribed import or export declaration to Customs, together with an invoice and other related documents. Related documents (such as certificates of country of origin, etc.) are

 

 

  1. What is the role of clearing and forwarding agents in international trade

 

Answer: Clearing and forwarding agents act as intermediaries in transactions between shippers and suppliers of logistics services, and are required by customs to represent the owner in the procedures for clearing cargo over international

 

 

 

  1. Explain in detail major Inco terms used in export transaction

Answer: Incoterms are internationally accepted commercial terms, developed in 1936 by the International Chamber of Commerce (ICC) in Paris. Incoterms 2000 define the respective roles of the buyer and seller in the agreement of

 

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CASE STUDY – I

 

 

Questions

 

  1. Does FEMA allows better flexibility of all export and import Transactions .

 

Answer: Yes , FEMA allows better flexibility of all exports and import Transactions . 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

 

 

  1. What Role does agriculture trade play in International Trade and Negotiations with WTO.

 

Answer: The department contributes to international negotiations to improve market access for Australian agricultural commodities and processed foods through the WTO Doha Round of negotiations.

 

The department’s aim is to ensure that these negotiations address portfolio interests and maximise opportunities to improve the international competitiveness of Australia’s agricultural, food, fisheries and forest industries. The department works

 

 

 

CASE STUDY-II

QUESTIONS

1 Did the ITC exceed the scope of authority by ordering certification of secondary products.

 

Answer: No. The decision of the ITC is affirmed.

REASONS

The commission’s remedy determination in this case represents a careful and common sense balancing of the parties’ conflicting interests as well as other relevant factors and is socially based on the evidence in the record.

 

The commission’s limited exclusion order requiring Hyundai to clarify, as a condition of entry, tht certain of it’s downstream products do not

 

 

 

2 Was the export by Hyundai of memory chips to Taiwan and re-export to USA a unfair trade practice

Answer : No, it was not an unfair trade. The immense difficulties of diversifying from the US market in an increasingly protectionist world are suggested by the following set of statistics. In 1988, Hyundai sold over 300,000 Excel subcompact cars in

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