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I.B.O – 04
Export Import Procedure and Documentation IGNOU IBO 04 Solved Assignment 2023-24
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NOTE: All
questions are compulsory.
Q1.
“Export documentation is commonly considered to be the most complex and difficult
part of overseas marketing”. In the light of the above statement, explain the
perspectives of export documents. Explain the main features of various
commercial documents.
Export
documentation is indeed considered to be a complex and challenging aspect of
overseas marketing. It involves a range of paperwork and documents that
facilitate the export process, ensure legal compliance, and provide information
about the goods being exported. Here are the perspectives and main features of
various commercial documents used in export:
Proforma
Invoice: A preliminary invoice that provides details of the goods, their value,
and terms of sale. It helps the buyer understand the pricing and terms before
placing an order.
Purchase Order:
Issued by the buyer to the seller, it confirms the intention to purchase
specific goods and outlines the terms and conditions of the purchase.
Commercial
Invoice: A detailed bill issued by the seller to the buyer, indicating the
description, quantity, price, and terms of sale for the goods. It serves as a
legal document for payment and customs clearance.
Packing List:
Provides a detailed list of the contents, quantities, and packaging of the
shipped goods. It helps in verifying the goods during the receiving and
inspection process.
Bill of Lading
(B/L): A document issued by the carrier or their agent, acknowledging the
receipt of goods for shipment. It serves as evidence of the contract of
carriage and contains details of the goods, their destination, and the terms of
transportation.
Certificate of
Origin: A document issued by the exporter or a designated authority, stating
the country of origin of the goods. It is required for customs clearance and
may be needed to claim preferential tariffs under trade agreements.
Insurance
Certificate: Provides evidence of insurance coverage for the goods during
transit. It specifies the risks covered, the insured value, and the terms and
conditions of the insurance policy.
Export License:
Some countries require exporters to obtain an export license for certain goods
to ensure compliance with export regulations, restrictions, or national
security measures.
Inspection
Certificate: Issued by an authorized inspection agency, it certifies the
quality, specifications, and conformity of the goods with the agreed-upon
standards.
Certificate of
Conformity: Demonstrates compliance with technical standards, regulations, or
product specifications of the importing country. It may be mandatory for
certain goods to meet safety, health, or quality requirements.
Main Features
of Commercial Documents:
Accurate
Information: Commercial documents should provide accurate and detailed
information about the goods, including descriptions, quantities, values, and
terms of sale.
Legal
Compliance: Commercial documents must comply with the laws, regulations, and
customs requirements of the exporting and importing countries.
Clarity and
Transparency: Documents should be clear, legible, and easy to understand. They
should accurately represent the commercial transaction and facilitate smooth
communication between parties.
Consistency:
Commercial documents should be consistent with each other, ensuring that
information matches across different documents, such as the commercial invoice,
packing list, and bill of lading.
Timeliness:
Documents need to be prepared and submitted within the required timeframe to
avoid delays in the export process and meet contractual obligations.
Customization:
Commercial documents may need to be customized to meet specific requirements of
the importing country, such as language preferences or additional
certifications.
Proper handling
of export documentation is essential to ensure smooth international trade
operations, regulatory compliance, and risk mitigation. Exporters must pay
attention to the accuracy, completeness, and timely submission of these
documents to facilitate successful export transactions.
Q2. (a)
There are several parties involved in the documentary credit arrangement.
Explain them in detail.
In a
documentary credit arrangement, also known as a letter of credit, several
parties are involved. Each party plays a specific role in ensuring the smooth
and secure execution of the transaction. Here are the key parties involved:
Applicant: The
applicant is the buyer or importer who applies for the letter of credit from a
bank. The applicant initiates the process and agrees to the terms and
conditions of the letter of credit. They are responsible for providing the
necessary instructions to the issuing bank and ensuring compliance with the
terms of the credit.
Beneficiary:
The beneficiary is the seller or exporter who will receive payment under the
letter of credit. The beneficiary is named in the letter of credit and must
comply with its terms and conditions to receive payment. They prepare the
required documents, present them to the issuing bank or nominated bank, and
fulfill the obligations specified in the credit.
Issuing Bank:
The issuing bank is the bank that issues the letter of credit on behalf of the
applicant. It undertakes to pay the beneficiary upon presentation of compliant
documents as per the terms and conditions of the credit. The issuing bank
verifies the documents and ensures they comply with the terms of the letter of
credit before making payment.
Advising Bank:
The advising bank is the bank in the beneficiary's country that receives the
letter of credit from the issuing bank and advises the beneficiary of its
existence. The advising bank's role is primarily to authenticate and transmit
the letter of credit to the beneficiary. They may also provide guidance to the
beneficiary regarding the terms and conditions of the credit.
Confirming
Bank: In some cases, the beneficiary may request a confirming bank to add its
confirmation to the letter of credit. The confirming bank undertakes an
additional obligation to make payment to the beneficiary, independent of the
issuing bank's payment, upon presentation of compliant documents. This provides
an additional level of security to the beneficiary, especially when dealing
with unfamiliar or high-risk markets.
Nominated Bank:
The nominated bank is a bank specifically designated in the letter of credit as
the bank authorized to pay, accept, negotiate, or incur a deferred payment
undertaking on behalf of the issuing bank. The nominated bank may be the
advising bank, confirming bank, or any other bank in the beneficiary's country.
Reimbursing
Bank: The reimbursing bank is the bank that settles the payment to the issuing
bank upon receipt of a complying claim for reimbursement. The reimbursing bank
acts on behalf of the issuing bank and ensures that the issuing bank is
reimbursed for the payment made to the beneficiary.
Freight
Forwarder: Although not a direct party to the letter of credit, freight
forwarders play a crucial role in facilitating the transportation and logistics
aspects of the transaction. They handle the transportation of goods, arrange
shipping, and provide documentation services to ensure that the goods are
delivered in compliance with the letter of credit requirements.
Each party
involved in the documentary credit arrangement has specific responsibilities
and obligations to fulfill. Clear communication, adherence to the terms and
conditions of the letter of credit, and prompt document handling are essential
for the successful execution of the transaction and the timely receipt of
payment by the beneficiary.
(b)
Explain the different Kinds of Letter of Credit.
There are
several different kinds of letters of credit (LCs) used in international trade
transactions. Each type serves a specific purpose and offers varying levels of
flexibility and security. Here are the main types of letters of credit:
Revocable
Letter of Credit: A revocable LC can be modified or canceled by the issuing
bank without prior notice to the beneficiary. It provides little security for
the beneficiary and is rarely used in international trade due to its lack of
reliability.
Irrevocable
Letter of Credit: An irrevocable LC cannot be modified or canceled without the
consent of all parties involved, including the beneficiary, applicant, and
issuing bank. It provides a higher level of security for the beneficiary,
ensuring payment as long as the terms and conditions of the LC are met.
Confirmed
Letter of Credit: A confirmed LC includes an additional level of guarantee
provided by a confirming bank, usually in the beneficiary's country. The
confirming bank adds its confirmation to the LC, assuming the responsibility of
payment in case the issuing bank fails to fulfill its obligations. This type of
LC offers enhanced security for the beneficiary, particularly when dealing with
unfamiliar or high-risk markets.
Unconfirmed
Letter of Credit: An unconfirmed LC does not have the added guarantee of a
confirming bank. It relies solely on the issuing bank's commitment to pay upon
compliance with the terms and conditions of the LC. While it provides some
level of security, the beneficiary takes on the risk of the issuing bank's
creditworthiness.
Revolving
Letter of Credit: A revolving LC allows for multiple shipments and payments
within a specified period. It is often used for ongoing or repetitive
transactions between the same buyer and seller. The available credit limit is
reinstated after each shipment, providing flexibility for continuous trade.
Standby Letter
of Credit: A standby LC serves as a backup payment method if the applicant
fails to fulfill its financial obligations or meet specified terms. It acts as
a guarantee of payment to the beneficiary and is typically used in
non-trade-related transactions such as construction projects, contracts, or
performance guarantees.
Transferable
Letter of Credit: A transferable LC allows the beneficiary to transfer all or
part of the LC's value to one or more second beneficiaries. This is commonly
used when an intermediary or middleman is involved in the transaction, enabling
them to receive payment and arrange for the goods or services to be provided by
a third party.
Back-to-Back
Letter of Credit: A back-to-back LC involves the issuance of two separate LCs.
The first LC is received by the beneficiary, who then uses it as collateral to
obtain a second LC from their own bank. The second LC is issued in favor of a
supplier or manufacturer, allowing the beneficiary to act as an intermediary
between the buyer and seller.
These different
types of letters of credit offer varying levels of flexibility, security, and
complexity. It is important for parties involved in international trade
transactions to carefully consider their specific needs and choose the
appropriate type of LC to ensure smooth and secure trade operations.
Q3.
Comment on the following:
(a) War
Perils is not as same as strike perils.
(b) In
export-import trade people are dealing in documents and not in goods.
(c) Credit
is a major weapon of international competition but it involves risk.
(d)
Current account transactions are same as capital account transactions.
Q4. Distinguish
between the following:
(a) Total
loss and particular loss
(b) Tramp
Shipping Service and Liner Shipping Service
(c) Voyage
Charter and Time Charter
(d)
Domestic sales contract and export saIes contract
Q5. Write
a short note on the following:
(a)
Packing Credit
(b) Role
of EXIM Bank
(c)
Import documents
(d) ISO
9000
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