Functions of Export and Import Firms

Study the working of firms importing and exporting goods

 Faculty - Khushboo Jain

For classes on economics and commerce contact at 9231505644

 

Introduction

Import and export of goods fall under international trade between countries. International trade involves trade of goods amongst the nations in those commodities in which they are specialized and have a cost-advantage. Like India has a cost advantage in Information Technology related work because of availability of huge trained manpower that are ready to provide services at a cheaper rate than those in developed countries like USA, UK, etc.  The import and export of goods and services are being carried out by various export and import firms.

This project shall look into the functioning and working of these export and import firms. They have to carry out certain functions for international trade.

Export firms

An export firm is one which is engaged in the transfer of goods, commodities and services outside the geographical boundaries of a nation. These firms are therefore, engaged in the transfer of domestic goods and services into foreign countries.

THE MAIN FUNCTIONS OF THE EXPORT FIRMS

Functions of Export Firm

An export firm has to follow these stages while exporting goods abroad

STAGE 1 – EXPORT REGISTRATION – An export house has to undergo following registration procedure to begin exporting of goods and services to foreign clients.

• EXPORTING PERMISSION FROM RBI – An Indian exporter has to register itself with Reserve bank of India and obtain necessary approval for export of goods. The firms follow the following steps while receiving permission from the RBI. Firm submits application along with its financial reports >> RBI issues code >> The firm than submits Import Export Code (IEC) form >> The firm is allotted its own IEC number.

• EXPORT PROMOTION COUNCIL – India has a number of export promotion councils to allow the exporters to avail various benefits of the government policies. An export firm registers itself in the respective export promotion councils.   

STAGE 2 – INDENT, INSPECTION AND MARKING OF GOODS – Export firms have to carry out the following functions in the second stage

• INDENT IS RECEIVED FROM THE IMPORTER – The export firm receives indent from the importer which confirms the order from the importer.

• THE EXPORTER COLLECTS AND ARRANGES FOR THE INSPECTION OF THE GOODS – Upon receipt of the indent or order the exporter starts to collect and arrange the necessary goods. Once he has collected the requisite goods he invites Export Inspection Agency to inspect the goods which issues an Export Inspection Certificate.

• THE FINAL PACKING AND REQUIRED MARKING OF GOODS IS CARRIED OUT – The export goods are then packed as per the necessary instructions of the importer. Once packed, the goods are suitably marked to enable proper and easy identification of the goods.

STAGE 3 – RESPONSIBILITIES OF THE FORWARDING AGENT – The Exporter firm which appoints a forwarding agent takes care of the various legal formalities and paper work for the export of goods. The various responsibilities carried out by the forwarding agent have been detailed below:

• Goods are sent to forwarding agent either through rail or road and the agent is similarly issued the rail receipt or lorry receipt.

• ARRANGING SHIPPING ORDER – The forwarding agent secures a shipping order which contains the details of the goods sent along with its value for the information of the captain of the ship. The shipping order also provides details of the port of destination.

• GETTING SHIPPING BILLS FROM CUSTOM AUTHORITIES – the forwarding agent upon receipt of the goods from the exporter has to secure shipping bill from the custom authorities. This shipping bill provides necessary details about the goods like the name of the exporting firm, port of loading and port of discharge, description of goods and value and identification marks of the packages.

• CLEARING OF DOCK DUES – When the custom authorities provide details of the custom duties applicable on the goods, the forwarding agent arranges for the payment of the custom duties and obtains permission to bring the goods inside the port. The forwarding agent pays the dock dues to the dock officials and arranges for obtaining clearances from the dock.

• LOADING OF GOODS ON THE SHIP - The agent arranges for the loading of the goods on the ship under the inspection of the custom authorities. The agent provides the shipping order to the ship’s mate who receives the goods and issues a mate’s receipt. The forwarding agent then submits the mate’s receipt and the shipping charges at the office of the shipping company while the shipping company issues a Bill of Lading as a receipt of the goods on the ship.

• ARRANGING MARINE INSURANCE – To cover the goods sent through the ship, the agent secures and arranges for a suitable marine insurance on behalf of the exporting firm.

• SENDING INFORMATION TO THE EXPORTER – The forwarding agent sends necessary information to the exporting firm about the shipment of the goods.

STAGE 4 – ISSUANCE OF CERTIFICATE OF ORIGIN AND CONSULAR INVOICE – The next step of the functions of the exporting firm involves attaining of certificate of origin and consular invoice

• CERTIFICATE OF ORIGIN – This certifies the origin of the goods from the country and allows the importer to avail any preferential import duties benefits.

• CONSULAR INVOICE – In order to allow better and faster clearance from customs in the port of destination, the exporting firm may also attach a consular invoice. This consular invoice provides the exact and true value of goods.

STAGE 5 – INFORMING THE IMPORTER – Once the goods have been shipped, the exporter takes suitable steps to inform the importer about the goods sent for export. This involves the following points:

• ISSUING OF BILL OR INVOICE FOR EXPORT – In this step the exporter arranges for sending the export invoice to the importer. This invoice contains the detailed description of the goods, costs and expenses and the exact value of costs to be paid by the importing firm.

• The export firm also issues an advice to the importing firm regarding the export of the goods.

STAGE 6 – THIS FINAL STAGE INVOLVES THE RECEIPT OF PAYMENT OF EXPORT GOODS BY THE EXPORTING FIRM.

• Payment is transferred by the importing firm’s bank to the exporting firm’s bank when the exporter files and submits necessary documents to the importer’s bank.

With this the export cycle of the exporting firm comes to an end. The functions of the exporter entail all the above mentioned points.

FUNCTIONS OF IMPORT FIRMS

An import firm is a firm that arranges for the transfer of goods within the domestic country from an exporting firm situated outside the national boundaries of the importing country.

THE MAIN FUNCTIONS OF THE IMPORT FIRMS

 

Functions of Import Firms

STAGE 1 – In the first step the importing firm arranges for the application of import license. This is one of the most important steps in the import procedure.

• APPLICATION AND SECURING IMPORT LICENSE – The firm looking to import goods has to apply for and secure an import license prior to ordering or placing indent with the exporter.

STAGE 2 – ISSUANCE OF INDENT/IMPORT ORDER AND LETTER OF CREDIT

• ISSUANCE OF IMPORT INDENT – The importer sends multiple requests for quotations to various exporting firms and selects the best price quotation from among all the quotations received. The importer confirmation his order to the exporter by issuing an import indent or order providing complete description of the goods, value of order,  delivery date, payment terms and various other necessary terms and conditions.

• ARRANGING LETTER OF CREDIT – The importer has to arrange for a Letter of Credit from his banker which has to be dispatched to the exporter before the exporter can start collection of the goods for the order.

STAGE 3 – This stage begins when the importer receives advice from the exporter that the goods have been sent to the importing country. The importer then arranges for making necessary payment to arrange for securing all necessary documents.

• COLLECTION OF DOCUMENTS UPON DEPOSIT OF PAYMENT TO THE EXPORTER’S BANK – The importer makes necessary payment to the exporter firm to collect documents such as bill of lading, marine and other insurance policy documents, etc. These documents are necessary for the importer to secure the goods from the customs and dock yard.

STAGE 4 – CLEARING AGENT’S ROLE – The clearing agent appointed by the importing firm takes care of various necessary legal formalities on behalf of t5he importer. The role’s carries out by the clearing agent have been mentioned as follows.

• The clearing agents carries out the following steps at the CUSTOM DEPARTMENT– Filing Bill of Entry which outlines the detailed description of goods to be imported to Custom Department >> The Custom Department calculates the custom duties and a demand is raised upon the importer >> The clearing agent makes the custom duty payment on behalf of the importer >> Upon payment of custom duty the agent secures release order for the goods.

• DOCK YARD FORMALITIES are also carried out by the agent – Here, the agent secures shipping firm’s endorsement upon the bill of lading sent by the exporter. The agent makes all necessary payment which is due to bee paid to the dock authorities and the shipping company including freight, handling charges, dock dues, etc. Upon payment of all dues the agent takes delivery of goods from the dock authorities.

• The final role of the agent is to arrange for the dispatch of goods to the importer. The agent sends the necessary railway receipt or lorry receipt to the importer along with the goods.

STEP 5 – The importer completes the import cycle by making the final payment of all dues payable to the exporter. Generally the exporter receives money either from an agent of the importer or the importer’s banker who accepts and honours the letter of credit issued by the importing firm earlier.  

CONCLUSION

The export and import firms have to carry out various formalities and functions to export and import of goods. These steps are very important and necessary for the smooth and transparent functioning of these firms. By following the above mentioned steps the export and import firms can easily carry out their respective works.

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