Export project var

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A Summer Training ReportOn

“VITAL ROLE OF EXPORT PROCESS, EXPORT DOCUMENTATION & EXPORT SERVICES(LOGISTICS) IN

THE EXPORT OF FINISHED GOODS PRODUCTS”Of

HINDALCO INDUSTRIES LIMITEDSUMMER INTERNSHIP REPORT IN PARTIAL FULFILLMENT OF THE AWARD OF FULLTIME

MBA SESSION (2008-2010)

Preface

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Objective of Study

The objective of study is to find answer of the some questions, which are important to clearly

understand the importance, procedure and role of export documentation for Aluminium & Aluminium

products in smooth Export working.

The main objectives of doing this project are as follows:-

To study the Export Documentation Process.

To understand the global aluminium industry trends in the major demand and supply center of

the world.

To understand the global marketing of Hindalco products.

To understand the Export Market Plan.

To study the Export Process from Order Booking to Shipment.

To understand the overall process involved in the Export Management System of the Hindalco

Industries Ltd.

To understand the overall process used by the Hindalco to establish the Export Documentation

Process.

To understand the benefits and incentives given by the government to the exporter for

boosting up the Indian Export.

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ContentsPreface

Acknowledgements

Objective of Study

Section 1: Introduction……………………………………………………………... About Aditya Birla Group………………………………………..……..9 Group Companies ………………………………………………..…....14 Aditya Birla Management Corporation …………………………..……19 At A Glance ……………………………………………………..……..19 Financial Foot Prints……………………………………………..……..20 Hindalco At A Glance……………………………………………..……21 Highlights Of Hindalco Industries limited………………………..……23 Hindalco Overview ………………………………………………..……24 Company Profile…………………………………………………..…….41 Industry At A Glance…………………………………….………..…….42 Aluminium ………………………………………………..……….……42 Copper …………………………………………………...……….……..43 Production Process……………………………………..……….……….45 Extracdion Of Alumina From Bauxite………………………………….46 Extraction Of aluminium From Alumina………………………………..47 Product Profile…………………………………………………………...48 Product Overview ……………………………………………………….49 Aluminium ………………………………………………………………49 Copper……………………………………………………………………49 Primary Aluminium Product……………………………………………..49 Integrated Operation Of Hindalco ……………………….………………51 Production Capacity…………………………………………………….. 52 Organizational Profile of Hindalco Industry Ltd………………...……....54 Product and Brands of Hindalco………………………...………...……..57 Hindalco Product Range………………………………...……...………..65

Section 2: About Flat Rolled Product…………………………………………...….66 Flat Rolled Products (FRPs)…………………………………………........66 Types of FRPs (Export)……………………………………………….......67

Section 3: About International Marketing………………………………………....68 What is International Marketing?................................................................68 What is Global Marketing?..........................................................................69 Advantages and Disadvantages of Global Marketing……………………..69

Section 4: About Export……………………………………………………………..70 What is Export?............................................................................................70 Types of Export……………………………………………………………70 Benefits of Export…………………………………………………………70 Risk from Export…………………………………………………………..72 Why we should Export?...............................................................................74

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How to Export?............................................................................................75 Advantages of Export……………………………………………………..76 Process of Export Management…………………………………………...77 Export Cycle………………………………………………………………78

Section 5: Export Marketing………………………………………………………..80 Export Marketing Plan…………………………………………………….80 Practical Suggestion for Export Marketing Plan………………………….80 Tips for Export Marketing………………………………………………...81 Market Entry Strategies: Location of Importers…………………………..82

Section 6: Developing an Export Strategy…………………….…………………....86 Determining Product’s Export Potential………………….……………….90 Assessing Company’s Export Readiness………………….………………90 Developing an Export Plan……………………………….……………….90

Section 7: Developing a Market Plan…………………………..…………………..92 Marketing Strategy Benefits………………………..…………………….92 Market Research………………………………….………………………92 Method of Market Research…………………….………………………..93 Step-by-Step Approach to Market Research….………………………….94

Section 8: Methods/Channel of Exporting…………..…………………………….96 Approaches of Exporting…………………..……………………………..96 Distribution Consideration………………..………………………………97 Indirect Exporting………………………..……………………………….98 Direct Exporting……………………….………………………………....98

Section 9: Preparing Product for Export………………………………………...100 Questions to Consider…………………………………………………...100 Product Adaptation……………………………………………………...101 Engineering and Redesign……...……………………………………….102 Branding, Labeling and Packaging...…………………………………....102 Installation ……………………………………………………………….103 Warranties……………………...………………………………………..103 Servicing…………………...……………………………………………103

Section 10: Export Order…………………………………………………………......105 Processing of an Export Order………………………………………….....105 Terms and Conditions of an Export Order………………………………...107 Planning for Execution of the Export Order………………………………108

Section 11: Export Pricing, Quotation and Incoterms……………………………...109 Pricing Consideration………………………………………………….…..109 Quotations and Proforma Invoice………………………………………....112 Difference between Proforma Invoice and a Quotation…………………..114 Use of a Proforma Invoice………………………………………………...114 Commercial Invoice……………………………………………………….115 Customs and Consular Invoice……………………………………………116 From the Proforma Invoice to the Commercial Invoice…………………..116 Incoterms or Terms of Sale………………………………………………..119

Section 12: Export Process…………………………………………………………...123

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Procedure for Export……………………………………………………...124

Section 13: Logistics Process………………………………………………………....127 Brief Description of the Flow of Logistics………………………………..128 Flow of Logistics Process Implemented by Hindalco…………………….130

Section 14: Export Documentation…………………………………………………..132 Importance of Export Documentation…………………………………….132 Set of Documents Required for Exports…………………………………..133 Major Export Documents……………………………………………….…133 Need for Export Documents……………………………………………....136 Significance of Some Export Documents………………………...……….136 Common Defects in Documentation……………………………...……….143 Process of Getting Custom Clearance……………………………...……...144

Section 15: Government Policies for Export………………………………………145 EXIM Policy…………………………………………………………….145 Main Objectives of EXIM Policy……………………………………….145

Section 16: Export Incentives………………………………………………………146 Process Involved in Getting Export Incentives………………………....149 Export Finance………………………………………………………….152 Hindalco’s Export Data (From Renukoot Plant)………………………..157

Section 17: SWOT Analysis of Hindalco……………………………………………158

Section 18: Findings and Recommendations…………………………………….....159

Section 19: Bibliography………………………………………………………….....161

Section 20: Annexure…………………………………………………………...…...162 Specimen of Proforma Invoice…………………………………………..162 Specimen of Packing List………………………………………………..162 Specimen of Certificate of Origin………………………………………..163 Specimen of Bill of Lading……………………………………………...163 Specimen of Export Quotation Worksheet………………………………164 Specimen of Commercial Invoice……………………………………….164 Sample of Insurance Certificate…………………………………………164

INTRODUCTION

ABOUT ADITYA BIRLA GROUPADITYA BIRLA MANAGEMENT CORPORATIONGROUP COMPANIESAT AGLANCEFINANCIAL FOOT PRINT

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ABOUT

ADITYA BIRLA GROUP

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The ADITYA BIRLA GROUP is India’s 1st tryly multinational corporation(MNC)

whose over 30% of revenues flow frpm its operations across tehe world.

The group is anchored by an extra-ordinary force of 72000 employees

belonging to over 20 different nationalities the world over.

The ADITYA BIRLA GROUP reaches out to the core sector in India –in

industries integral to the nation’s growth-cement,aluminium,fertilizers,viscose

stable fibre, textile,power,telecommunications,industrial chemicals and

financial services.

The ADITYA BIRLA GROUP is a dominated player in all the sectors in which

it operates, such as viscoses stable fibre, non ferrous metal, cement viscoss,

telecommunication and financial service.

Group Overviews

Aditya Birla group traces it’s origin back to the Tiny village of Pilani in the

RAJASTAN desert, where late Shri Seth Shiv Narajan Birla started carton trading

operation in 1857. Then one visionary the late Shri G.D. Birla set up Indian’s first

integrated aluminium manufacturing unit at Renukoot 1962 backed by captive power

plant at Renusagar in 1967.

It further evolved under the dynamic leadership of the late Shri Aditya Vikram

Birla a prominent figure in the Indian industries, under whose stewardship HINDALCO

attained its leadership position in aluminium. Today our group chairman Dr. Kumar

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Manglam Birla has put together the building block to make Indian business a global

force.

Group Today

The Aditya Birla Group is India’s first truly multinational corporation (MNC),

whose over 60% of revenues flow from its operations across the world.

Over 75 units in India and overseas as well (in Thailand, Indonesia, Malaysia,

Philippines, Egypt and Canada) and international trading operations spanning several

countries including Singapore, Dubai, Russia, Vietnam, Myanmar and China make it

India’s first truly multinational conglomerate.

THE ADITYA BIRLA GROUP HAS THE FOLLOWING ACHIVEMENTS TO

ITS CREDITS:-

The words no 1 in viscose fiber.

The word’s largest single location palm oil producer.

Asia’s largest integrated aluminum producer.

The forth largest producer of insulator.

The forth largest producer of carbon black.

The eleven largest cement producers.

Among the best energy efficient fertilizer plant.

Among the word’s top 15 largest BPO company.

IN INDIA , A FRONTRUNNER POSITION ARE:-

A premier branded garments players.

The second largest player in viscose filament yard.

Among the top three BPO companies.

India’s leading copper producer.

The second largest in the chlor alkali sector.

Among the top five mobile telephony players.

A leading player in life insurance & asset management.

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Group vision

“To become a premium conglomerate with clear business focus at each

corporate level.”

Group mission

“To deliver value for our customer, shareholders, employees and society at large.”

Group Philosophy

Reset on four pillars

Customize

People-size

Strategize

Institutionalize

Group values

Integrity

Speed

Seamlessness

Passion

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CHAIRMAN: Shri Kumar Mangalam Birla

“The winning organization will be those who regularly out perform competition They

have a stable consistent strategy. A stable strategy does not means a static strategy,

rather it means following a broad philosophy and continuous improvement in how

strategy is manifested, incorporating the expected market requirement and the

customer needs.”

Kumar Mangalam Birla

COMPANIES

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Group companies:

Grassim Industries Ltd.

Hindalco Industries Ltd.

Aditya Birla Nuvo Ltd.

Ultra Tech Cement Ltd.

Indian companies:

PSI Data systems

Aditya Birla Minacs Worldwide Ltd.

Essel Mining & Industries Ltd.

Shree Digvijay Cement Ltd.

Idea Cellular Ltd.

Aditya Birla Insulators.

Aditya Birla Retail Limited

Bihar Caustic and Chemicals Ltd.

International companies:

Thailand:

Thai Rayon

Indo Thai Synthetics

Thai Acrylic Fibre

Thai Carbon Black

Aditya Birla Chemicals(Thailand) Ltd.

Thai Peroxide.

Philippines:

Indo Phil Textile Mills.

Indo Phil Cotton Mills.

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Indo Phil Acrylic Mfg.

Pan Century Surfactants Inc.

Indonesia:

PT Indo Bharat Rayon.

PT Elegant Textile Industry.

PT Sunrise Bumi Textiles.

PT Indo Liberty Textiles.

PT Indo Raya Kimia.

Egypt:

Alexandria Fiber Company S.A.E.

Alexandria Carbon Black Company S.A.E.

China:

Liaoning Birla Carbon.

Birla Jingwei Fibres Company Ltd.

Aditya Birla Grasun Chemicals(Fangchenggang) Ltd.

Canada:

AV Cell Inc.

AV Nackawic Inc.

Australia:

Aditya Birla Minerals Ltd.

Laos:

Birla Laos Pulp and Paper Plantation Company Ltd.

North and South America, Europe and Asia:

Novelis Inc.

Globally

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A metals powerhouse, among the world's most cost-efficient Aluminium and Copper producers.

Hindalco-Novelis from its fold is a Fortune 500 company. It is the largest Aluminium rolling

company

It ranks as No. 1 in Viscous Staple Fibre

The largest single location palm oil producer

The third largest producer of insulators

The third largest producer of carbon black

The eleventh largest producer of cement and the largest in a single geography

The largest single location copper smelter

Among the world's top 15 BPO companies and among India's top three

Among the best energy efficient fertilizer plants

In Asia

The largest integrated Aluminium producer

In India A premier branded garments player

The second largest in the chlor-alkali sector

Among the top five mobile telephony companies

Among the top three supermarket chains in the retail business

Second largest player in viscous filament yarn

Second largest private sector insurance company and a leading assets management company.

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JOINT VENTURES

Birla Sun Life Insurance

Birla Sun Life Asset Management Company Ltd.

Birla Sun Life Distribution Company Ltd.

Tanfac Industries Ltd

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ADITYA BIRLA MANAGEMENT CORPORATION

BOARD OF DIRECTOR

Mr. Kumar Mangalam Birla (chairman)

Mr. S.Aga

Mr. D.bhattacharya,managing director

Mr. S.K.jain

Mr. Santrupt misra

Dr. Bharat singh

Mr.S.K. mitra

Mr. Di mittal

FINANCIAL FOOT PRINT:

A us $28 billian corporation with a market cap of US $31.5 billian and in the

leaque of fotune 500.the A.B. group is anchored by an extra ordinary sale of 100000

employee belonging to 25 different nationalties. In India the group has been adjusted

the best employees in India and among the top 20 in asia by the Hewitt- economic

times and wall streetjournal study2007over50% of its revenues flow from overes

operations. The groupoperation in 20 country: India

thiland,indonasia,Egypt,china,Canada,Australia,U.S.A.germany,brazil,italy,Switzerland,

andmalasia.

Renukoot: A general overview

Lying in the foothills of the vindhya range, renukoot is about 160kms from

varanasi and 154 kms from mirzapur.

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There is a direct daily train named muri expressed between jammu tawl to

tatanagar and rachi via renukoot.

A part from above renukoot is also connected with kolkatta through direct train

named shaktipunj express.

Location:-

Renukoot- zonal office:-

Kolkatta

Mumbai

Bangalore

delhi

Divisional office:-

Power division

Foil division

Guest house:-

Delhi

Mirzapur

Lucknow

Allahabad

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INTRODUCTION

HINDALCO AT A GLANCEHIGHLIGHTS OF HINDALCO INDUSTRIES LIMITEDHINDALCO OVERVIEW

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HIGHLIGHTS OF HINDALCO INDUSTRIES LIMITED

India ‘s largest aluminium producer.

Market share of 50 percent.

World’s cost producer of aluminium.

Fully integrated production facilities from bauxite mines to value added

aluminium products.

Fully integrated aluminium plant at renukoot,U.P.

Aluminium wheels and foils plant at silvassa, in Dadra& NagarHaveli.

First Indian Aluminium producer which was accorded ISO 9002 and 14001

certified.

Significant economies of small scale from large scale production.

Strong market presence and wide distribution network.

HINDALCO OVERVIEW:-

“Hindalco” was set up in collaboration with Kaiser Aluminum & Chemicals

Corporation U.S.A, in a record time of 18 months. The plant started functioning in the

year 1962 with a capacity of 20,000 tons per annum.

The company has growth manifold and is managed by Board of Directors, with

Shri Kumar Mangalam Birla as the chairman of the Board of Directors. Day to day

affairs of the company are managed by Professional Executives headed by Shri Ratan

K Shah as the chief operation officer-Aluminium & Power.

Hindalco is one of India’s largest producers of Aluminium. The company was in

corporated on December 15, 1958 and commenced production in 1962 with an initial

smelting capacity of 20,000 TPA.

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Hindalco’s integrated operation and operational efficiency have enabled the

company to be one of the world’s lowest cost producers of Aluminium.

Hindalco Today

Aluminium has turned out to be the wonder metal of the industrialised world. No

other single metal can do so many jobs, so well, and so economically.

Aluminium’s growth rate is the highest amongst the major basic metals today.

Hindalco ranks as the largest Aluminium producer in India, whose more than 58%

sales is in value added product and has more than 40% in total market share.

Hindalco’s integrated operations and operational efficiency have enabled the company

to be one of the world’s lowest cost producers of Aluminium.

Hindalco also owns a large captive thermal power plant at Renusagar that meets

the power requirement of the company very effectively. Hindalco currently has primary

Aluminium capacity of 3, 75,000 MTPA.

Hindalco is a leading domestic player in two metals business segments -

aluminium and copper. The aluminium division's product range includes alumina

chemicals, primary aluminium ingots, billets, wire rods, rolled products, extrusions, foils

and alloy wheels.

The company has a significant market share in all the segments in which it

operates. It enjoys a domestic market share of 42 per cent in primary aluminium, 63

per cent in rolled products, 20 per cent in extrusions, 44 per cent in foils and 31 per

cent in wheels.

As a step towards expanding the market for value-added products and services,

Hindalco has launched several brands in recent years, which include Aura for alloy

wheels, Freshwrapp for kitchen foil and Everlast for roofing sheets. Our exclusive

showroom, The Aluminium Gallery, seeks to promote Hindalco products to its

http://www.hindalco.com/products/aluminium.htm

http://www.hindalco.com/media/features/hindalco_aluminium_gallery.htm

http://www.hindalco.com/products/primaryaluminium.htm

http://www.hindalco.com/products/alloywheels.htm

http://www.hindalco.com/products/foil_packaging.htm

http://www.hindalco.com/products/extrusions.htm

http://www.hindalco.com/products/rolled_products.htm

http://www.hindalco.com/products/primaryaluminium.htm#3



http://www.hindalco.com/products/copper.htm

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customers. It is a platform for the company to showcase quality products to a

quality audience in an appropriate ambience.

The exhibits include products like windows, doors, furniture, ladder, roofing

sheets and ceiling and cladding panels.

Hindalco's products are well received not only in the domestic market, but also in

the international market. The company's metal is accepted for delivery under the high

grade aluminium contract on the London Metal Exchange (LME). The company exports

about 17 percent of its total sales volume of aluminium.

The company's alumina chemical business is a leader in manufacturing and

marketing of speciality alumina and alumina hydrate products in the country. It has a

major market share in the country. These speciality products find wide usage in

diversified industries including water treatment chemicals, refractories, ceramics,

cryolite, glass, fillers and plastics, conveyor belts and cables, among others. The

company also exports these alumina chemicals to over 30 countries covering North

America, Western Europe and the Asian region.

Birla Copper, Hindalco's copper division at Dahej in Gujarat, enjoys a leadership

position in India, having built over 40 per cent of the domestic

market share within three years of its commissioning. It has also made

successful forays into the export markets of the Middle East,

Southeast Asia, China, Korea and Taiwan.

The copper plant produces world-class copper cathodes,

continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid, di-

ammonium phosphate, other phosphatic fertilizers and phospho-gypsum are also

produced at this plant.

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Hindalco Vision

“To strength our position as a premium Aluminum company, sustaining, domestic

leadership and global competitiveness through innovation quality and value added

growth.”

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Hindalco Mission

“To pursue the creation of value for our customers, shareholders, employees and

society at large.”

Hindalco Values

INTEGRETY: Honesty in every action.

COMMITMENT: Doing whatever it takes to deliver, as promised.

PASSION: Missionary zeal arising out of an emotional engagement with work.

SEAMLESSNESS: Thinking and working together across functional silos,

hierarchy levels, business and geographies.

SPEED: Responding to stockholders with a sense of urgency.

Hindalco Strategy

EFFICIENCY FOCUS: To be one of the lowest cost producers globally.

EFFECTIVENESS FOCUS: To continue to remain the market leader

domestically.

GROWTH FOCUS: To pursue value adding growth opportunities.

HINDALCO’S MARKETING VISION

“To be a premium marketing organization sustaining domestic market leadership

and establishing global presence in each product category.”

HINDALCO’S MARKETING MISSION

“To create value for our customers and profitable markets for Aluminium,

ensuring rapid and sustained long-term growth.”

HINDALCO POLICY

QUALITY POLICY

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We, at Hindalco, shall aim to achieve and sustain excellence in all our activity.

We are committed to total customer satisfaction by providing products and

services, which meet or exceed the customer, expectations.

Modernization of the manufacturing facilities stress on technological

innovation and training of employee at all level shall be a continuous process of

Hindalco.

A motivated workforce with a sense of pride in the organization shall us

towards total quality.

SAFETY POLICY

We at Hindalco value as our most importance resource and hence committed to

achieve health and safety. Excellence by providing healthy and safe working

environment our objective therefore, will be

Use appropriate technology and other resources to upgrade safety standards.

To continuously improve the working condition leading to prevention of

accidents.

Not only continue to comply with all the applicable laws and regulation but also

strive to achieve beyond and set new standards.

To continuously monitor and control work places hazard and project employees

and community from them.

To creation awareness and concern for safety amongst employees through

active involvement participation continuous training etc.

ENVIRONMENT POLICY

We at Hindalco Industries Ltd. are committed to resources conservation and

control of environmental aspect of our activities internally relating to production of

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Alumina. Aluminium fabricated product and power generation at Renukoot in order to

serve the cause of sustainable development our objective therefore will be to

Innovate and improve our process equipment operations maintenance and

other practices continuously for population prevention.

Adopt cleaner technologies wherever techno-Economically viable.

Conserve key input resources such as bauxite caustic soda coal, power, water

furnance oil and other oil.

Keep exploring the flexibility of recycling and utilization of inevitable waste

especially of water tube oil red mud fly ash.

We shall make this policy available to all employee and public.

TPM-WCM POLICY

Weat hindalco shall continuosly TPM-WCM practices as a key to optimization of

resource, and recognition as a world class company constantly aspiring to exceed the

ezception of all atakeholder.

We shall:

Involve all our people in the pursuit of efficient production system.

Target zero accident, Zero breakdown, and Zero defect.

Work vigorously for elimination of losses and wastage of resource.

Promote process capability through innovation.

Conserve energy and ensure healthy a green environment through pollution

prevention and control.

Be flexible, so as to meet the challenge of change through association

assimilation and improvisation.

Be a solutions provider-delivering optimum valve to our customers.

BOARD OF DIRECTOR

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Non Executive Directors

Mr. Kumar Mangalam Birla (chairman)

Mrs. Rajashree Birla

Mr. A. K. Agarwala

Mr. E. B. Desai

Mr. S.S. Kothari

Mr. C. M. Maniar

Mr. M. M. Bhagat

Mr. K. N. Bhandari

Mr. N. J. Jhaveri

Executive Director

Mr.D.Bhattacharya

Managing Director

RENUKOOT UNIT

Mr. D. K. Kohly,

Chief Operating Officer

Mr. Ashok Machher, Joint President(F& C)

Mr. G.M.Pandey,Joint President (Renusagar Power)

Chief financial officer

Mr. S.talukdar

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(Group executive president &CFO)

Corporate-

Mr.R.Ram, Senior president

(project corporate)

Mr. Pratik roy. (Chief people officer)

Advisors

Mr.R.K. Kasiwal

Mr.Amit Basu.

Key executives- (aluminium business)

Mr.Shashi k. maudgal (chief marketing officer)

Mr.R.S.Dhulkhed president

Mr shanker roy president

Mr S.M. Bhatia, president

Copper business

Mr Dilip gaur(group executive president copper)

Mr N.M. pathaik,

Mr j.p.paliwal,( commercial president)

Mr B.M. sharma (chief marketing officer copper)

Joint venture companies of Hindalco

1. Indo-gulf Fertilizers & chemicals Corpn Ltd.

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2. Bihar Caustic & Chemicals Ltd.

3. Tanfac Industries Ltd.

4. Mangalore Refinery & Protochemicals Ltd.

5. Birla AT & T Communication Ltd.

6. Bina Power Supply Co. Ltd.

7. Birla Global Finance Ltd.

8. Birla Capital International AMC Ltd.

9. Century Enka.

Recent Awards won by Hindalco in Different fields.

National Safety Award 2003 : By

Minister of Labor and Employment.

Rajiv Gandhi National Quality Award 2003 : Joint award

winner of R.G.N.Q.A. 2003 in large –scale manufacturing category. The award is

instituted by Bureau of Indian Standard, Ministry of Consumer Affairs, Government of

India.

CIOL Dataquest Award :

For best performance in the pioneer category for 2004-05 by CIOL, an IT portal

along with Dataquest Magazine.

Green Tech Gold Award 2003-04 :

By Greentech Foundation, New Delhi for organizational Health & Safety.

Qualtech Award 2004 : For

Quality Management by Quimpro college, Mumbai.

CII National Award :

For Excellence in Energy Management-2004.

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Prime Minister’s Shram Award 2004 : Shram Veer

award to Mr. Ram Kailash of Aluminium plant won the Excellence Case Study

Presentation Award at NCQC, Mumbai in December 2004.

National Energy Conservation Award 2004 :

In aluminium sector – Government of India, Ministry of Power.

Aditya Birla Planet Award 2004 :

Jt. Winner of Aditya Birla Planet Award 2004 for community initiative & Rural

Development Works.

Our Mines Division has been reorganized by Indian Bureau of Mines,

Government of India for A forestation; Plantation, waste Dump Management,

Topsoil Management, Reclamation and Rehabilitation, Dust suppression

Arrangement, Publicity & propaganda and overall Performance.

Training & Development (HR) Practices 2004 :

Renusager Power has declared winner of Innovation Training & Development

(HR) Practices 2004. Award given by Indian Society for Training & Development,

New Delhi.

Annual Greentech Safety Gold Award :

Hindalco own the 4th Annual Greentech Safety Gold award for the year 2004-05

in Metallurgy Sector. The award will be presented on 11th May 2005 at

Hyderabad.

National Award for Excellence in Energy Management 2005 :

Belure Sheet Plant received the National Award for Excellence in Energy

Management 2005 (Energy Efficient Unite) from CII –Sohrabji Godrej Green

Business Center.

National Safety Award 2004 :

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Owned by Renukoot Plant, given by the Ministry of Labor and Employment,

Government of India.

Vishkarma Rashtriya Puraskar :

Awarded to Five workmen of our smelter, Mr. Rajesh Pal, Mr. A.K. Gupta, Mr.

R.K. Singh, Mr. H.N. Singh, & Mr. S.K. Singh, given by the Ministry of Labor and

Employment, Government of India.

National Energy Conservation 2005 : Renukoot

plant won the 1st Prize in Aluminium sector, given by Ministry of power,

Government of India.

ICWAI National Award for Excellence in Cost Management-2005 :

Hindalco was awarded by Institute of Cost and Works Accountants of India.

“ National Energy Conservation Award-2006”

Hindalco was awarded by Ministry of Power, Government of India

National Award for Excellence in Water Management 2006

Hindalco, Renukoot has won the National Award for Excellence in Water

Management 2006 organised by CII

Quality Circle Forum of India Award

The quality circle teams at Hindalco, Renukoot were adjudged winners in the live

quiz competition organised by the Quality Circle Forum of India.

Rajiv Gandhi National Quality Award 2007

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Renukoot was selected for the Rajiv Gandhi National Quality Award 2007 –

Silver Trophy, presented by the Bureau of Indian Standards, in the large scale

manufacturing (metallurgy) category

National Award for Excellence in Water Management 2007".

Hindalco awarded the CII-Sorabji Green Business Centre "National Award for

Excellence in Water Management 2007".

“D.L. Shah National Award for Economics of Quality”

Hindalco won the prestigious “D.L. Shah National Award for Economics of

Quality” given by quality council of India. Chief manufacturing officer, Mr. R. P.

Shah and Mr. Arun Kumar received the award from the President of India, H.E.

Dr. A.P.J. Abdul Kalam on 9 February 2007 at New Delhi

IT Competition 2008 Award By CII:

Hindalco Hirakud Systems ranked runners up at the state level IT Competition

2008 organised by CII in association with the department of informational

technology, Government of Orissa.

Greentech Safety Gold Award 2008:

Greentech Safety Gold Award 2008 for outstanding achievement in safety

management in coal based power sector

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Above Figure Shows The Sales Revenue Of Aluminium Business

IMPORTANT MILESTONES OF PROGRESS

YEAR ACHIEVEMENTS

1958 Date of registration

1962 Aluminium production started.capacity20,000TPA

Aluminium production started.capacity40,000TPA

1964 properzi wire rod mill commissioned.

1965 Aluminium production capacity expanded to 40,000TPA.

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Renusagar pawar plant commissioned with 65.7mw capacity.

Aluminium production capacity expanded to 60,000TPA.

Properi mll no.2,extrusion press 2&3.

1969 Aluminium production capacity expanded to. 80000TPA



Third generater at renusagar commissioned.

1886 Alumina production capacity expanded to 300,000.

1988 Conferm extrusion press commissioned.

1990 Continuous caster installed.

1991 Aluminiumproduction capacity expanded to 150,000TPA.

1993 Dave cold rolling mill commissioned.


1996 Continuos ingot casting machine installed. Aluminiumproduction capacity

expanded to 210,000TPA Wag stuff slab casing machne installed.

1997 Bliss hot & cold mill revamped.

Co-generation power plant of 37 mu commissioned.

Wag stuff billet casing machine commissioned.

6th generator commissioned At Renusagar.


Aluminiumproduction capacity expanded to 450,000TPA.

34

Aluminium fil production commenced at silvassa.

1996 wheel plant commissioned at silvassa.2001

1997 under brown field expansion of smelter, pot line 9 commisioned and

aluminium production capacity expanded to 275, 000TPA

2002 brown field expansion of capitive power plant completed power production

capacity enhanced by 160 mu .

2002 brown field expansion of alumina refinery completed.

2004 co generation power plant of 40 mu commissioned.

2005 HIndalco received the ICWAI national award for excellence in cast

management.

2006 In may the company singed a mow wih the government of

Madhya Pradesh for setting up a green field aluminium smelter and a

captive power plant.

2007 In may novelis become a Hindalco subsidery with the completion of the

acquisition process.

ACHIVEMENTS:-

Recent awards won by Hindalco of labour and employment:-

National safety award 2003 by ministry of labour and employment.

Joint award winner of Rajive Gandhi national quality award 2003 in large scale

manufacturing category. The award I sinstotuted by bureau of Indian standerds

ministry of consumer affairs, govt. of India.

CIOL Dataquest award for best performance in the pioneer category for 2004-2005

by CIOL an IT portal along with dataquestr magazine.

Green tech gold awad 2003-2004 by greentech foundation new delhi for

organization health and safety.

35

Qualtech award 2004 for quality management bu quimpro college.

CLL national award for excellence in energy management 2004.

Prime minister’s shram awards 2004 sharam veer award to mr.Ram kailash of

alumina plant and Sharam shree award to Mr. Suresh Prasad of alumina plant.

Quality circle shakti of reduction plan won the excellence case study presentation

award at NCQC Mumbai in December 2004.

National energy congervation award 2004 in aluminium sector government of

India, ministry of power.

Jt.winner of Aditya Birla planed award 2004 for commity initiative & rural

development works.

Our mines division has been recognized by Indian bureau of mines, govt of India

for afforestation, plantation management publicityn and propaganda and overall

performance.

Renusagar power has declared winner of innovation training and development

practice 2004 award givin by Indian society for training & development new delhi.

Hindalco won the 4th annual greentech safety gold award for the year 2004-2005 in

metallurgy sector. The award will be presented on the 11th may 2005 at

hydarabad.

36

COMPANY PROFILEINDUSTRY AT GLANCEALUMINIUMCOPPER

37

COMPANY PROFILE

INDUSTRY AT GLANCE

Hindalco industry limited, a flagship company of ADITYA BIRLA group, with a

turnover of Rs.192,010.00 crore in 2007-08, ranks

M vmd ndnvkl among India’s top 10 companies in terms of capital market

capitalization a non ferrous metal powerhouse Hindalco’s operations are organized into

two strategic business units –Aluminium and Copper. The company is an industry

leader in both these business.

ALUMINIUM

Hindalco is Asia’s largest integrated primary producer of aluminium and among

the most cost efficient producers globally. In India, Hindalco enjoys a leadership

position for aluminium and downstream products.

Synergies of operations with it’s wholly – owned subsidiary Indian aluminium

company Ltd. (Indal), have enhanced the company share in value addition segments,

in which the Hindalco – Indal combine has a market share of over 50 %.

As a step towards expanding the market for value –added products and services,

Hindalco has launched several brands in past year –“Aura”, “Freshwrapp”, Everlast”,

and, “Al plant”. The company’s product range includes primary

aluminium ingots, billets, wire rods, rolled products, extrusions, and foils and

alloy wheels.

To enhance its capacities, the company had under taken Brownfield expansions,

leading to smelting capacity of 1,46,000 tpa, an alumina refining capacity of 4,50, 0000

tones, and captive power generation of 167.5MW.

The company further enhanced the smelter capacity of 4, 29,140MT and alumina

refinery to 7, 00,000 tones, by streamlining to eliminate bottlenecks and

38

installation of balancing equipment, including another co- generation plant. This

has facilitated optimization of expand facilities and, more importantly, has been

achieved within the original budget.

Besides being a dominant player in the Indian aluminium market, Hindalco’s

products are well accepted in international markets. The company’s metal is accepted

for delivery under the high grade aluminium contract on the LME (London Metal

Exchange). The company’s export efforts have led to its reorganization as a “Star

Trading House”.

Hindalco is an ISO 9001 company, and has been awarded the ISO

14001certification for its entire operations at Renukoot and Silvassa, including its

power plant and mines. It has received several awards from the export promotion

council as well as the government of India. With the completition of on going Brownfield

expansion, Hindalco will further consolidate its domestic market leadership, and reach

out to international markets in larger measure.

COPPER

Birla copper enjoys leadership position in India, having built up-------percent

domestic market share with in three years of commissioning. It has also made

successful forays into the export markets of the Middle East, South East Asia, china

Korea and Taiwan.

Birla copper has a mega green field copper smelting and refining complex at

dahej in the bharuch district of Gujarat, India. With an investment of Rs 1,850. Crore, it

is largest of its kind in India. The plant produces world- class copper cathodes,

continues cast copper rods and precious metals. Sulphuric acids, phosphoric acid, di-

39

ammonium phosphate, other phosphatic fertilizers and phospho- gypsum are

also produced at this plant .

Birla copper aspires to be among the world’s foremost cost competitive

producers of cooper. To reach this goal, it had under taken a brown field expansion

raising its smelter capacity from 65,000 tones per annum to 146000 tones per annum.

The copper division is evaluating a further expansion as well, so as to rank among the

top 10percent of cost competitive producer globally.

To make birla copper an integrated producer of copper, the company believes

that upstream expansion through ownership in mines is important for a smelter of its

size.

As a first step in this direction, birla copper acquired the nifty copper mines in

Australia. Nifty currently has a capacity of 25000 tones per year of copper cathodes,

with a large underdeveloped copper sulphide.

PRODUCTION PROFILEPRODUCTION PROCESSEXTRACTION OF ALUMINA FROM BAUXITEEXTRACTION ALUMINIUM FROM ALUMINA

41

PRODUCTION PROCESS

The aluminum production process can be categorized into up stream and down

stream activities. The upstream process involves meaning and refining bauxite to

alumina while the downstream process involves smelting and casting and fabricating.

Hindalco refines bauxite primarily obtained from captive mines, to extract

alumina, which is smelted into alumina ingots or billets. Hindalco smelts its entire

production of alumina into aluminum and does not engage in alumina trade.

Production of aluminum can be categories in two stages, namely

From bauxite to alumina

From alumina to aluminum

EXTRACTION OF ALUMINA FROM BAUXITE

Alumina is manufactured by conventional bayers process i.e. treating bauxite

with caustic soda. Bauxite is brought to the site from mines by means of railways

wagon tippler. Primary crushing is done in cone crusher where bauxite size is reduced

form 8”- 12” to 3” - 4” and then stockpiled. Secondary crushing is done by means of

hammer mills where process liquor known as a spent liquor and 600 psig. Seam is

mixed together. This solution of alumina from bauxite into caustic solution in the form of

sodium aluminates is carried out of digesters at 240 degrees centigrade temperature

and 36-kg/sq.cm pressures. The digested slurry is placed flashed and brought to

atmosphere pressure; flashed vapors are utilized for pre heating the spent liquor and

condensed returned to boiler hose for generation of steam. Digested flashed slurry is

pumped to clarification area for removal of solid Impurities (red mud). Red mud is

separated out, in solid liquid hydrocyclon and stellar. Separated mud slurry is washed

in counter current and washing Circuit without using water. Washed mud slurry is

cauterized by treating with lime slurry to recover soda. Cauterized mud slurry is filtered

on drum filters. Filtrate liquor is taken back into the system and red mud cake is

42

disposed off by means of dumpers Settler overflow pregnant liquor is filtered in Kelly

presses to remove fine mud particles. Clear pregnant liquor is pumped to precipitators

through plate heat exchanges after exchanging heat with the spent liquor where it is

seeded with alumina trihydrate. Alumina trihydrate is separated out in thickness and

pan filter. Alumina trihydrate cake thus obtained is fed into the gas suspension calciner

where furnace oil is burnt for calcining alumina. The reduction grade alumina thus

produced is transported to smelter plant.

Spent liquor generated and separated from precipitation circuit is fed to the

evaporation unit for increasing caustic concentration to the desired level and

recirculated to digesters through heaters for further processing of bauxite and thus the

process goes on.

EXTRACTION OF ALUMINUM FROM ALUMINA

Alumina from alumina plant is conveyed to the reduction plant. The reduction

plant has 11 prebaked pot – lines which have 1278 pot cells. Each pot has 24/26

carbon anodes and it is lined with carbon cathode. Alumina is converted to metallic

aluminum is these pot cells by the standard “hall heroult” process. The pot cells work at

an average 4.3-volt D. C. current of 5800/6300 amperes. Electrolysis of the alumina

takes place in molten bath of cryolte at a temperature of 955 to 960 degrees

centigrade. The molten aluminum that collects at the cathodes is siphoned into

crucibles periodically. The entire process is controlled by microprocessor system.

43

PRODUCT PROFILEPRODUCT OVERVIEWALUMINIUMCOPPERPRIMARY ALUMINIUM PRODUCTSINTEGRATED OPERATION OF HINDALCOPRODUCTION CAPACITY

44

PRODUCT OVERVIEW

Hindalco operations are organized into two strategic business units- aluminum

and copper. The company is an industry leader in both these businesses.

ALUMINUM

Hindalco’s Aluminum business comprises primary aluminum, extrusions, rolled

products, foils and alloy wheels. In the value-added segment, hindalco, along with its

subsidiary Indal, has a 50 percent market share. In the past year, hindalco has

launched several brands – “Aura”, Freshwrapp”, “Everlast”, “Permashield”, and, Al

Planet”.

COPPER

BIRLA copper, with an over 45 per cent market share, is India leading copper

producer in private sector. Its plant at dahej in Gujarat, produces world class copper

cathodes, continuous cast copper rods and precious metals.

A part form copper products, euphoric acid, phosphoric acid, di-ammonium

phosphate, other phosphates fertilizers and phosphor –gypsum are also produced at

this plant.

PRIMARY ALUMINIUM PRODUCTS

INGOTS:

Is an LME (London Metal Exchange) registered brand. These are also known

as virgin metal. These are used as raw material for making aluminium product.

ROUND BILLETS:

These are use for making extrusion.

CAST SLABS:

Slabs are used input in Hot Rolling Mill, which is converted into

thinner sheets, plates or coils.

45

SEMI FABRICATED PRODUCTS:

Hindalco produces 900 different rolled product items of which 40 are standard.

HOT ROLLED PRODUCTS:

These are the product which are used after the process of hot rolling

according to their specification and requirements, these products are as follows:

1. Hot rolled plates electrical application

2. Hot rolled wire.

COLD ROLLED PRODUCT.

(plane sheets)

(Cold rolled coil)

3. Circle

4. checkered sheet

5. alkaloid sheets.

EXTRUSIONS

Hindalco extrusions offer an enormous range of shapes,

wide range of alloys for decorative, structural and functional

application. The present die catalogue included over one thousand

die for various sections and we are fuy equipped to design and make

new die as per exclusive requirement. Some of the common shapes are as follows:

ROD, BAR-Flat, Square, Hexagonal

STRUCTURAL SHAPES-Angles, Channels, Tee, I-beans, H sections etc.

TUBES-Round, Oval, Square, Rectangular, Triangular

MOUDINGS

FOIL

Cable Rape stock

Light Gauge Foil

Bare & Coated Fine stock

Collapsible insulation Ducts

46

ALLOY WHEELS

12 to 18 inch diameters.

OTHERS: The main by products of the process included

VANADIUM SLUDGE

GALLIUM

INTEGRATED OPERATION OF HINDALCO

BAUXITE MINES

ALUMINA REFINARY

ALUMINIUM SMELTER

SEMIFABRICATION PLANT

ROLLING MILL

FOILS

CASTIC SODA

ALUMINIUM FLURIDE

EXTRUSION PROCESS

ALUMINIUM WHEEL PLANT

CO-GENERATION

RENUSAGAR POWER PLANT

REDRAW ROD MILLS

47

PRODUCTION CAPACITY

ALUMINA

CAPACITY 12, 30,000TPA

RENUKOOT 700,000TPA BELGAUM 350,000TPA MURI 180,000TPA

SMELTER (PRIMARY ALUMINIUM)


RENUKOOT 375,000TPA HIRAKUND 1,43,000TPA ALPURAM 14,000TPA TALOJA 25000TPA BELGUAUM 2000TPA

ROLLED PRODUCTS


48

RENUKOOT 100,000TPA BELUR 57,000TPA TALOJA 50,000TPA MOUDA 30,000TPA

FOIL

CAPACITY 40,000TPA

SILVASA 30,000TPA KALWA 6,000TPA KOLLAR 4,000TPAEXTRUSIONS

CAPACITY 46,000TPA

RENUKOOT 33,000TPA ALPURAM 13,000TPA ALLOY WHEELS

CAPACITY 3,00,000 pcs. PA

SILVASA 3,00,000 pcs.CAPATIVE POWER

CAPACITY 1188MW

RENUSAGAR 742MW RENUKOOT 78MW HIRAKUD 368MW

49

Organizational Profile of Hindalco Industries Limited

Hindalco Industries Limited, a Non-ferrous Metal powerhouse, is the flagship company of the Aditya

Birla Group.

Hindalco is one of India’s producers of Aluminium. The company was incorporated on December 15,

1958 and commenced production in 1962 with an initial smelting capacity of 20,000 TPA. The

company has sales and distribution network that covers all of India and includes five sales offices

located in Mumbai, New Delhi, Bangalore, Chennai and Renukoot.

In India Hindalco enjoys a leadership position in Aluminium and Copper. All of the Hindalco’s units

are ISO 9001:2000, ISO 14001:2004 and several have attained the OHSAS 18001— the

occupational health and safety certification. On the export front, the company has been accorded a

Trading House status by the Indian government.

Both in Aluminium and Copper, Hindalco is the largest Company in India. The company’s Aluminium

product range includes Primary Aluminium Ingots, Billets, Rolling Slabs, Redraw Roads, Alloy Wire

Rods, Flat Rolled Products, Extruded Profiles, Foils and Alloy Wheels.

Hindalco is the largest manufacturer of the entire range of flat rolled products in India. Hindalco’s

domestic market share in Flat Rolled Products is nearly 60% and its rolled products are widely used

in various segments such as packaging, transportation, building and construction, electrical, defense

and general engineering applications. Hindalco is registered as a star Trading House. About 35% of

Flat Rolled Products are exported to more than 50 countries.

The company's commitment to quality and service along with its extensive infrastructure has made

Hindalco a prime source for best-selling brands. Continuous improvements in manufacturing,

processes, practices and systems ensure that customers' needs and expectations are fully met.

50

Efficiency and product quality are ensured by using state-of-the-art equipment and a strong research

and development set-up, supported by dedicated and motivated employees and the Oracle ERP

system.

Wag staff Air Slip™ slab casting technology is used to ensure consistent quality and surface finish of

stock feed, which in turn ensures quality, finished products. The company's capacity in flat rolled

products at present is 2,30,000 tonne per annum and new plans are being implemented to increase

the manufacturing capacity Of the total production of Hindalco's flat rolled products, around 40 per

cent is exported and customers in more than 50 countries are using the products.

Ever last, a Hindalco brand for aluminium-roofing sheets, offers ideal and economical solutions for all

roofing and cladding needs. Hindalco also offers colour-coated and tiled roofing profiles.

Hindalco is one of Asia's largest producers of primary aluminium and one of the most cost-efficient

producers globally. In India, Hindalco enjoys a leadership position in specialty alumina, primary

aluminium and downstream products

The company's integrated complex at Renukoot houses an alumina refinery, aluminium smelter and

facilities for production of semi-fabricated products. Power is sourced from the company's captive

power plant at Renusagar, located at a distance of about 45 km from Renukoot. It has a captive

capacity of 820.2 mw.

Besides the integrated complex at Renukoot, Hindalco's other manufacturing facilities are situated at

locations across the country. While the captive bauxite mines are located in western and eastern

India, the alumina refineries are located in Belgaum in southern India and Muri in eastern India.

Smelters are located at Hirakud, Orissa, with a captive power plant and coal mines, and at Alupuram,

Kerala. Rolled product manufacturing facilities are located at Belur and Taloja, and an extrusion plant

is situated at Alupuram. Foil plants are based in the Union Territory of Silvassa and in Kalwa,

Maharashtra. The foil plant at Kollur, Andhra Pradesh is the only remaining entity with the erstwhile

Indal after the merger of Indal with Hindalco. The wheel plant of Hindalco is also located at Silvassa.

51

The company has two R&D centres: the Belgaum Research and Development Centre in Belgaum,

Karnataka and Taloja Research and Development Centre in Taloja, Maharashtra. They have been

recognized by the Government of India's Department of Scientific and Industrial Research (DSIR).

Hindalco is a leading domestic player in two non-ferrous metals business segments- Aluminium and

Copper.

The Aluminium division's product range includes alumina chemicals, primary Aluminium ingots and

billets, wire rods, rolled products, extrusions, foils and alloy wheels.

The company has a significant market share in all the segments in which it operates. It enjoys a

domestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products, 20 per

cent in extrusions, 44 per cent in foils and 31 per cent in wheels.

As a step towards expanding the market for value-added products and services, Hindalco has

launched several brands in recent years, which include Aura for alloy wheels, Freshwrapp for kitchen

foil and Ever last for roofing sheets. Our exclusive showroom, The Aluminium Gallery, seeks to

promote Hindalco products to its customers. It is a platform for the company to showcase quality

products to a quality audience in an appropriate ambience. The exhibits include products like

windows, doors, furniture, ladder, roofing sheets and ceiling and cladding panels.

Hindalco's products are well received not only in the domestic market, but also in the international

market. The company's metal is accepted for delivery under the high-grade aluminium contract on the

London Metal Exchange (LME). The company exports about 17% of its total sales volume of

Aluminium.

The company's alumina chemical business is a leader in manufacturing and marketing of speciality

alumina and alumina hydrate products in the country. It has a market share of 90 per cent in the

country. These speciality products find wide usage in diversified industries including water treatment

chemicals, refractories, ceramics, cryolite, glass, fillers and plastics, conveyor belts and cables,

52

among others. The company also exports these alumina chemicals to over 30 countries covering

North America, Western Europe and the Asian region.

Birla Copper, Hindalco's copper division at Dahej in Gujarat, enjoys a leadership position in India,

having built over 40 per cent of the domestic market share within three years of its commissioning. It

has also made successful forays into the export markets of the Middle East, Southeast Asia, China,

Korea and Taiwan.

The copper plant produces world-class copper cathodes, continuous cast copper rods and precious

metals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic fertilizers and

phospho-gypsum are also produced at this plant.

Products and Brands of HINDALCO

Key Products and Brands

Locations Capacities Country

Hindalco Industries Ltd.

Alumina Chemicals Renukoot (Uttar Pradesh), Muri (Jharkhand), Belgaum (Karnataka)

1,160,000 tpa India

Primary Aluminium Renukoot, Hirakud (Orissa), Taloja

489,000 tpa

Extrusions Renukoot, Alupuram 27,700 tpa

Rolled Products Belur (West Bengal), Taloja (Maharashtra), Renukoot, Mauda (Maharashtra)

200,000 tpa

Wire Rods Renukoot, Alupuram (Kerala) 64,400 tpa

Aluminium Foil Silvassa (Dadra & Nagar Haveli), Kalwa (Maharashtra)

11,000 tpa

Aluminium Wheels Silvassa (Dadra & Nagar Haveli) 300,000 pcs

http://www.hindalco.com/

53

For Taloja recycling plant

Indal (subsidiary of Hindalco)

Foil Rolling Kollur (Andhra Pradesh) 4,000 tpa

Key Products and Brands Locations Capacities Country

Birla Copper (Hindalco Industries Ltd.)

Copper Cathodes Dahej (Gujarat) 500,000 tpa India

Continuous Cast Copper Rods 97,200 tpa

Sulphuric Acid 1,670,000 tpa

Phosphoric Acid 180,000 tpa

Gold (Birla Gold) 15 mtSilver (Birla Silver) 150 mt

Power 135 mw DAP and Complexes (Birla Balwan)

400,000 tpa

Hindalco Industries Ltd. (Aditya Birla Minerals Resources Pty. Ltd.)Copper Cathodes Nifty mines 25,000 tpa Australia

Copper in concentrate Mt. Gordon mines 40,000 tpa AustraliaPower Mt. Gordon mines 28 mw Australia

Key Products and Brands Capacities Country

Aditya Birla Nuvo Ltd (Hi-Tech Carbon)

Carbon Black Birla Carbon 2,30,000 mtpa India

Thai Carbon Black Co. Ltd.

Carbon Black Birla Carbon 220,000 mtpa Thailand

http://www.birlacarbon.com/

http://www.birlacarbon.com/companies/thai_carbon_black.htm


http://www.birlacarbon.com/companies/hi_tech_carbon.htm


http://www.birlacopper.com/

http://hindalco.com/about_us/tapping_new_markets.htm

54

Alexandria Carbon Co. S.A.E

Carbon Black Birla Carbon 285,000 mtpa Egypt

Liaoning Birla Carbon Co. Ltd.

Carbon Black Birla Carbon 55,000 mtpa China

Key Products and Brands Capacities CountryGrasim Industries Ltd.

White Cement Birla White 475,000 tpa India

Grey Cement UltraTech Cement (formerly Birla Plus), Birla Super

13.12 mn tpa

Shree Digvijay

Grey Cement Kamal 1.08 mn tpa

UltraTech Cement Ltd.

Ordinary Portland Cement, Portland Blast Furnace Slag Cement, Portland Pozzolana Cement and Grey Portland Cement

17 mn tpa


Indo Gulf Fertilizers Ltd.

Urea Birla Shaktiman 864,600 mt India

Birla Copper (Hindalco Industries Ltd.)

DAP/NPK Complexes

Birla Balwan 400,000 tpa India

http://www.birlacopper.com/

http://www.indo-gulf.com/

http://www.ultratechcement.com/

http://www.birlawhite.com/

http://www.grasim.com/


http://www.birlacarbon.com/companies/liaoning_birla_carbon.htm


http://www.birlacarbon.com/companies/alexandria_carbon_black.htm

55

Key Products and Brands Capacities CountryAditya Birla Insulators

Insulators 38,800 tpa India

Key Products and Brands Capacities CountryPulpGrasim Industries Ltd. Rayon Grade Pulp 70,000 tpa IndiaAV Cell Inc. Softwood / Hardwood Pulp 122,500 tpa CanadaAV Nackawic Inc.Dissolving Pulp 189,000 tpa CanadaFibreGrasim Industries Ltd. Viscose Staple Fibre (VSF)

Birla Viscose 270,100 tpa India

Thai Rayon Public Company Ltd.VSF Birla Viscose 110,000 tpa ThailandPT Indo Bharat RayonVSF Birla Viscose 155,000 tpa IndonesiaThai Acrylic FibreAcrylic Fibre Texlan 100,000 tpa ThailandAlexandria Fiber Company, S.A.EAcrylic Fibre 18,000 tpa EgyptYarnAditya Birla Nuvo Ltd. Viscose Filament Yarn Ray One 16,400 tpa IndiaAditya Birla Nuvo Ltd. (Jaya Shree Textiles)Flax Yarns 15,340 spindles IndiaWorsted Yarns 25,548 spindlesPT Indo Liberty TextilesRayon Yarn, Polyester, Blended Yarn

45,120 ring spindles Indonesia

PT Elegant Textile IndustryRayon, Polyester, Rayon-Polyester Blended Spun Yarn

168,088 spindles Indonesia

PT Sunrise Bumi TextilesViscose Rayon, Polyester Viscose, Spun Polyester, Polyester Combed Cotton, Anti Pill Yarn, Sewing Thread, High Twist Yarn, Reverse

89,376 spindles Indonesia

http://www.sunrise-textiles.com/

http://www.eleganttextile.com/

http://www.jayashree-iril.com/

http://www.adityabirlanuvo.net/

http://www.thaiacrylic.com/

http://www.thairayon.com/

http://grasim.com/

http://www.adityabirla.com/our_companies/international_companies/av_nackawic.htm

http://www.adityabirla.com/our_companies/international_companies/avcell_canada.htm

http://grasim.com/

http://www.adityabirlainsulators.com/

56

Twist Yarn, Flame Retardant Yarn, Rayon Cotton Blended Yarn, Micro Denier Polyester Rayon Yarn, Rayon Silk Yarn, Slub Yarn, Lycra Core Spun YarnIndo Phil Acrylic Manufacturing CorporationHigh Bulk Acrylic Dyed Yarn, Non-bulk Acrylic Dyed Yarn

3,700 mtpa Philippines

Indo Phil Textiles Mills IncPoly Viscose Blended Yarn, Poly Cotton Blended Yarn, Polyester Yarn

13,500 mtpa Philippines

Indo Phil Cotton Mills IncCotton Yarn 10,000 mtpa PhilippinesIndo Thai Synthetics Co. Ltd. Synthetic Yarns 98,568 spindles Thailand

FabricsGrasim Industries Ltd. Fabric -Polyester, Viscose, Silk and Wool Blends 146 looms IndiaUncrushables, Ice Touch, Purista, and Clean Fab 18 million metersAditya Birla Nuvo Ltd. Pure Linen and Linen Blends

Linen Club 107 looms India

Flame Retardent Fabrics

Pyroguard

Branded apparelAditya Birla Nuvo Ltd. (Madura Garments) Ready-to-wear Garments

Louis Philippe,Allen SollyVan Heusen, Peter England

India


Grasim Industries Ltd. (Vikram Ispat)

Sponge Iron (HBI & DRI) 900,000 tpa India

http://www.maduragarments.com/



57


Essel Mining & Industries Ltd

Iron and Manganese ore 15 million tons India

Key Products and Brands Capacities CountryGrasim Industries Ltd.Caustic Soda 258,000 tpa IndiaAditya Birla Nuvo Ltd.Caustic Soda 82,125 tpa IndiaLiquid Chlorine 50,340 tpa Hydrochloric Acid 5,475 tpa Tanfac Industries Ltd.Aluminium Fluoride 17,000 tpa IndiaHydrofluoric Acid 17,000 tpaBihar Caustic and Chemicals Ltd.Caustic Soda Lye 92,750 mt IndiaLiquid Chlorine 65,785 mtHydrochloric Acid 29,040 mt Sodium Hypochlorite 1,800 mt Compressed Hydrogen 17,42,400 nm3 Aluminium Chloride 12000 tpaCaptive Power Plant 30 mwAditya Birla Chemicals (Thailand) Ltd.Sodium Triployphosphates,Tetrasodium Pyrophosphate,sodium Hexametaphosphate,Sodium Acid Pyrophosphate,Monosodium Phosphate,Disodium Phosphate,Trisodium Phosphate, Speciality Phosphates

Epoxy Resins (bis-a and bis-f), Diluents, Curing Agents and Allied Products

Sodium Sulphite, Sodium Metabisulphite,Sodium Bisulphite Epichlorohydrin Caustic Soda Chlorine

Polyphos EpotecBirlasulf-SS,Birlasulf-SM,Birlasol 35

Thailand

Thai Peroxide Co. Ltd.

http://www.thaiperoxide.com/

http://www.adityabirlachemicals.com/



http://www.esselmining.com/

58

Hydrogen Peroxide, Peracetic Acid, Calcium Peroxide

Encare, Ecare, Aqua-x, Birlox 5, Birlox 12, Ocare

15,000 mtpa Thailand

PT. Indo Raya KimiaCarbon Disulfide 50,000 tpa Indonesia


Pan Century Surfactants Inc.

Fatty Acids 55000 mtpa Philippines

Fatty Alcohol 30000 mtpa

Glycerin 6500 mtpa


PSI Data Systems Ltd. (subsidiary of Aditya Birla Nuvo Ltd.)

IT Solutions (Banking, Finance and Insurance) India


http://www.psidata.com/

http://www.adityabirla.com/our_companies/international_companies/pan_century_surfactants.htm

59

Aditya Birla Minacs Worldwide Limited (subsidiary of Aditya Birla Nuvo Ltd.)

BPO / ITES 9,089 seats India


Birla Global Finance Company Ltd.

Financial Services India

Birla Sun Life Insurance Company Ltd.Insurance Solutions India

Birla Sun Life Asset Management Company Ltd.

Mutual Funds IndiaBirla Sun Life Distribution Company Ltd.Investment Planning Services India

Birla Insurance Advisory Services Ltd.Non-life Insurance Advisory Services India


Idea Cellular

Cellular Services Idea 21 million subscriber base India


http://www.ideacellular.com/IDEA.portal

http://www.adityabirla.com/our_companies/indian_companies/birla_insurance_advisory_service.htm

http://www.birlasunlife.com/BirlaSunlife/index.aspx



http://www.birlaglobal.com/


http://www.birlaglobal.com/

http://www.minacs.adityabirla.com/

60

Aditya Birla Retail Limited

Multi-format Stores More 170 retail outlets India

Sources: Through the website www.hindalco.com/www.adityabirla.com

Hindalco Product Range

1) -

2) - 3) - 4) - 5) -

Primary Aluminium Alloy ingots Billets Slab Aluminium sheet

Ingots

6) - 7) - 8) - 9) - 10) -

Wire rods sheet Circle

Alloy Wheel Watch Blister Pack

11) - 12) -

13) -

14)-

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Ladder Door

Handle

Can

Hindalco Products

Everlast aluminium roofing sheets

Freshwrapp aluminium foil

Freshpakk semi-rigid containers

Permashield waterproofing

Aluminium foil

Aura alloy wheels

Hindalco extrusions

FLAT ROLLED PRODUCTS (FRPs) Of HINDALCO

Hindalco is the world's largest aluminium rolling company with the acquisition of Novelis, the global

leader in value-added high-end aluminium flat rolled products and

aluminium can recycling. The combined volume of sales of flat rolled

products in the world market is about 3 million tonnes and the market

share is more than 20 percent.

Hindalco is the largest manufacturer of the entire range of flat rolled

products in India. It enjoys nearly 60 per cent of market share and its rolled

products are widely used in various segments such as packaging, transportation, building and

construction, electrical, defence and general engineering applications.

The company's commitment to quality and service along with its extensive infrastructure has made

Hindalco a prime source for best-selling brands. Continuous improvements in manufacturing,

processes, practices and systems ensure that customers' needs and expectations are fully met.

Hindalco is now world No.1 in aluminium flat rolled products

62

Efficiency and product quality are ensured by using state-of-the-art equipment and a strong research

and development set-up, supported by dedicated and motivated employees and the Oracle ERP

system. Wagstaff Air Slip™ slab casting technology is used to ensure consistent quality and surface

finish of stock feed which in turn ensures quality finished products. The company's capacity in flat

rolled products at present is 2, 00,000 tonnes per annum and new plans are being implemented to

increase the manufacturing capacity.

Of the total production of Hindalco's flat rolled products, around 40 per cent is exported and

customers in more than 50 countries are using the products.

Everlast, a Hindalco brand for aluminium roofing sheets, offers ideal and economical solutions for all

roofing and cladding needs. Colour-coated and tiled roofing profiles are also offered by Hindalco.

Types of Flat Rolled Products (Export)

Basically, there are three kinds of Flat Rolled Products (FRPs) which is being exported by Hindalco

i.e.

1. Cold rolled Coils

2. Cold rolled Sheets

3. Circles

Cold Rolled Coils

Hindalco's cold rolled coils are precision-finished to match international

standards. They have good shape, high tolerance, versatility and

blemish-free surfaces. They are used in commercial and general

engineering applications such as bus bodies, cladding and fan blades.

The company meets the demands of its ever-growing clientele with

continuous upgrades and process improvement.

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Cold Rolled Sheets

Hindalco's cold rolled sheets are precision-finished to match international standards for tight

thickness, tolerance, flatness and dimensional accuracy. Sound metallurgical properties for further

fabrication, anodizing characteristics and a blemish-free surface make it useful in both commercial

and general engineering applications.

CirclesHindalco offers circles, also known as flat circular sheets, in a variety of diameters and thickness to

meet specific needs. Extensively used in the manufacture of pressure

cookers, non-stick cookware, coated cookware, cans, etc they have earned

the trust of many leading brands.

Continuous upgrades and improvement of processes enable the company

to keep pace with the demands of its ever-growing clientele.

Major Aluminium Producer Industries in India.

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Company Ownership Location Capacity

Hindalco AB Group Renukoot

Alpuram

Hirakud

Belgaum

345,000

14,000

65,000

31,000

NALCO Public Sect. Angul 345,000

BALCO Sterlight Korba 350,000

MALCO Sterlight Mettur 40,000

EXTRUSIONS CAPACITY, PRODUCTION & DEMAND 1991-2020(MT)

Particulars 91-92 99-00 03-04 2010 2020

Capacity 122000 190000 202000 202000 400000

Production 61000 109000 132000 188000 370000

Domestic Demand

60000 105000 117000 166000 325000

Export Nil 4000 15000 22000 45000

Excess Capacity

62000 81000 70000 14000 30000

Product segment of Hindalco

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World Consumption & Consumption growth%

What is International Marketing?International marketing is simply the application of marketing principles to more than one country. However,

there is a crossover between what is commonly expressed as international marketing and global marketing,

66

which is a similar term. For the purposes of this lesson on international marketing and those that follow it,

international marketing and global marketing are interchangeable.

The intersection is the result of the process of internationalisation. Many American and European authors see

international marketing as a simple extension of exporting, whereby the marketing mix is simply adapted in

some way to take into account differences in consumers and segments. It then follows that global marketing

takes a more standardized approach to world markets and focuses upon sameness, in other words the similarities

in consumers and segments.

“At its simplest level, international marketing involves the firm in making one or more marketing mix decisions

across national boundaries. At its most complex level, it involves the firm in establishing manufacturing

facilities overseas and coordinating marketing strategies across the globe.”

Doole and Lowe (2001)

International Marketing is the performance of business activities that direct the flow of a company's goods and

services to consumers or users in more than one nation for a profit. International marketing is the application of

marketing orientation and marketing capabilities to international business.

If the exporting departments are becoming successful but the costs of doing business from headquarters plus

time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the

foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the

foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These

offices still report to headquarters in the home market but most of the marketing mix decisions are made in the

individual countries since that staff is the most knowledgeable about the target markets. Local product

development is based on the needs of local customers. These marketers are considered polycentric because they

acknowledge that each market/country has different needs.

What is Global Marketing?Global marketing refers to marketing activities coordinated and integrated across multiple country markets.

Johansson (2000)

Global/transnational marketing focuses upon leveraging a company's assets, experience and products globally

and upon adapting to what is truly unique and different in each country.

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The Oxford University Press defines global marketing as “marketing on a worldwide scale reconciling or taking

commercial advantage of global operational differences, similarities and opportunities in order to meet global

objectives.”

When a company becomes a global marketer, it views the world as one market and creates products that will

only require weeks to fit into any regional marketplace. Marketing decisions are made by consulting with

marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere.

Global marketing: Advantages and DisadvantagesAdvantages Economies of scale in production and distribution Lower marketing costs Power and scope Consistency in brand image Ability to leverage good ideas quickly and efficiently Uniformity of marketing practices Helps to establish relationships outside of the "political arena" Helps to encourage ancillary industries to be set up to cater for the needs of the global player

Disadvantages Differences in consumer needs, wants, and usage patterns for products Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market Differences in the institutions available, some of which may call for the creation Differences in the institutions available, some of which may call for the creation of entirely new ones Differences in administrative procedures Differences in product placement.

What is Export?Export is the provision of goods, services or knowledge across national and international boundaries.

Australia offers a wide range of goods and services to the world's markets. Export products include

manufactures, computer software, business consultancies, education services and technology transfer.

Exporting of goods from Australia is controlled by laws and government policies. Goods may not be exported

unless all the necessary export permits have been obtained from the relevant agency. The federal, state and

territory governments provide a wide range of services to new exporters including advice and information about

getting into exporting and assistance on the ground in foreign markets.

http://en.wiktionary.org/wiki/marketing

68

Types of ExportExport is divided into two main types: direct and indirect exports

Direct exports

Direct exports are transactions where exporters enter into direct relationships with importers overseas and

negotiate a contract for the sale of goods and services. Alternatively, exporters may use a commission agent in

the overseas market to solicit orders and generally represent the exporter's interests. The agent is paid by means

of a commission on the value of orders obtained.

Indirect exports

Indirect exports are transactions arranged in Australia through local merchants or the Australian-based branch

of an overseas company. Sales are negotiated with a trader in the exporter's country with payment made in local

currency from the trader's office.

For example, a Japanese trading house in Victoria arranges the contract for the supply of a particular product for

the Japanese market. In such cases, payment will probably be made in Australian dollars.

The Benefits of ExportThe benefits of exporting products and/or services include:

Development of Additional Sales

For most companies, exporting is a logical way of expanding sales when the domestic market has been fully

developed.

Optimizing Prices

We may be able to achieve a much higher price for exported goods than is possible on the domestic market.

Maximizing Resources

Expansion into overseas markets can be an excellent way of increasing production with corresponding

economies of scale in plant utilization and raw material purchases.

Levelling Seasonal Demand

Marketing internationally, especially in both northern and southern hemispheres, can achieve an overall

levelling of seasonal demand for products like summer and winter clothing, sports equipment, heating and

cooling equipment etc.

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Distribution of Market Risk

A company can protect itself from the risk of a downturn in any one particular market by operating in a number

of different markets, both domestic and overseas.

Increased Competitive Advantage

An improvement in product and service will usually flow from exposure to international competition. This in

turn will lead to an increased competitive advantage in both the international and domestic areas.

Improved Morale

Being part of an internationally successful company will boost staff morale, particularly if the contribution of

all staff members is recognized as an integral part of the company's international success.

Capitalization of A Unique Product or Technology

A unique product, service or technology that's difficult to sell on the domestic market may be easier to sell

overseas.

A Proactive Measure to Combat Foreign Competition

It's possible to neutralize overseas competitors in the domestic market by exporting to the overseas competitor's

market.

The Risks From ExportIt is not possible to eliminate risk from export transactions. The development of export markets must be

regarded as a long-term investment and companies should not expect an immediate return on the time and

capital they invest. Banks, accountants, export consultants and government agencies can advise on ways of

minimizing financial risks and exporters are encouraged to use external advice to supplement their own skill

base.

A risk management strategy developed as part of exporter export business plan will help identify risks to your

export business and provide a strategy to minimise and handle those risks should they occur.

There are a number of different types of risks that exporter should consider, including:

Financial

Intellectual property

70

Increased insurance claims

Inadequate resources

Financial risks

A. Failure to Pay

Be aware that there's a series of international payment terms ranging from totally secure (exporter paid before

goods are dispatched) to minimum security (exporter send the goods and wait for payment). Which particular

term is used is negotiable between the buyer and seller when entering into a contract.

B. Cash Flow

Export will have a significant effect on the cash flow cycle of exporter business. It's not always possible to

negotiate payment in advance of or immediately after shipment. This may lead to a considerable delay in

receiving payment for goods and result in a cash flow problem. Alternatively, if favourable terms are available,

export can have a very positive effect on the cash flow cycle.

C. Foreign Currency Risk

If export contracts are written in foreign currencies, fluctuations in rates of exchange can result in financial loss.

This risk can be avoided by quoting in Australian dollars or, if this isn't acceptable to the overseas buyer, by

taking forward exchange cover with the bank.

D. Inadequate Working Capital

Exporters may need additional working capital to purchase the raw materials and other components they require

to produce goods for export. Access to adequate pre-shipment finance is crucial to export success. There are

risks involved in over-borrowing and firms must ensure that they can fully service the additional borrowings

export may entail.

Intellectual Property Inexperienced exporters are vulnerable to the risk of losing intellectual property. The legal systems in some

countries do not afford the same level of protection for intellectual property rights, as does the Australian

system.

71

The cost of patenting a product or registering a trademark internationally can be substantial, as can the defence

of patents or trademarks if they are infringed.

Exporters should also ensure that their product does not infringe the intellectual property rights of other

companies already operating in the marketplace.

Increased Insurance Claims Transport over long distances with repeated handling can increase the risk of cargo damage. Freight forwarders

can advise on the best methods of packing and transport to prevent damage and reduce the risk of claims.

Unethical trading partners may use spurious claims to achieve a discount on price. In such circumstances it is

advisable to obtain inspection certificates from cargo surveyors to prove quality standards at the point of

loading.

Given the increasing trend toward litigation, exporters are now more vulnerable to product liability claims in the

overseas market. Exporters must consider the difficulty of obtaining adequate product liability insurance and the

cost of such cover.

It is also important to consider the warranty, continuing technical update of products, spare parts supplies,

servicing of equipment etc that may be required to support export sales. All these factors will affect the ongoing

market acceptance of the product or service and its price in the market place.

Inadequate Resources A business seeking to enter the international marketplace must ensure that it has adequate resources, including

raw materials, components and human and financial resources to meet the export requirement. If these resources

aren't available and part of the export work needs to be subcontracted, the business runs the risk of losing

control of quality or of spending time and money on constant supervision.

Why we should Export?There are many reasons for a country to export, some of these are:

It provides valuable foreign exchange to country.

72

It is one of the measures of country’s economic growth.

To control over balance of payments.

For employment generation.

For poverty alleviation.

It provides shield against demand fluctuations in domestic market.

For import of capital goods at 0% duty.

Prepares ourselves for duty free regime.

For capacity utilization.

To get the working capital loan at low rate of interest.

In line with company’s & country’s image.

How to Export? Golden Rule: In order to be successful in exporting one must fully research its markets. No one should

ever try to tackle every market at once. Many enthusiastic persons bitten by the export bug fail because they bite

off more than they can chew. Overseas design and product requirements must be carefully considered.

Always sell as close to the market as possible. The fewer intermediaries one has the better, because every

intermediary needs some percentage for his share in his business, which means less profit for the exporter and

higher prices for the customer. All goods for export must be efficiently produced. They must be produced with

due regard to the needs of export markets. It is no use trying to sell windows which open outwards in a country

where, traditionally, windows open inwards.

Sell Experience: If a person cannot easily export his goods, may be he can sell his experience.

Alternatively, he can concentrate on supplying goods and materials to exporters' who already have established

an export trade. He can concentrate on making what are termed 'own brand' products, much demanded by

buyers in overseas markets which have the manufacturing know-how or facilities.

Selling in Export: In today's competitive world, everyone has to be sold. The customer always has a

choice of suppliers. Selling is an honorable profession, and you have to be an expert salesman.

73

On-Time Deliveries: Late deliveries are not always an exporters fault. Dock strikes, go-slows, etc.

occur almost everywhere in the world. If one enters into export for the first time, he must ensure of fast and

efficient delivery of the promised consignment.

Communication: Communication internal and external must be comprehensive and immediate. Good

communication is vital in export. When you are in doubt, pick up the phone or email for immediate

clarification.

Testing Product: The risk of failure in export markets can be minimized by intelligent use of research.

Before committing to a large-scale operation overseas, try out on a small scale. Use the sample test, and any

mistakes can then be corrected without much harm having been done. While the test campaign may appear to

cost more initially, remember that some of the cost will be repaid by sales, so that test marketing often turns out

to be cheaper.

Approach: If possible some indication of the attitudes towards the product should be established, like any

sales operation. Even if the product is successful, to obtain reactions from the customer.

Advantages of Export

The income from export business is exempted to the specified extent under the Income Tax Act,

1961.

Refund of central excise and custom duty on export is also made under the Duty Drawback

Scheme of the Government.

There is no sales tax on products meant for exports.

Duty free import of raw materials is allowed under various schemes of Ministry of Commerce.

Foreign exchange regulations have been substantially liberalized for exporters.

Liberal release of foreign exchange is made available for travel abroad.

74

Norms for establishing offices abroad by the exporters have been eased.

Export credit is also available to the exporters at confessional rates of interest.

Transport subsidy is given for export by air as well as rail.

Import policy has also been liberalized substantially for export oriented importers.

Process of Export Management

The process of export management is essentially the process of planning, scheduling and controlling the

complex of non-routine activities that must be completed to secure the export orders and to ensure the timely

shipment of goods. The managerial process involved in export management relates to the following three

activities:

1. Planning

2. Scheduling, and

3. Controlling

Fig 1: Process of Export Management

1. Planning

Planning refers to taking various decisions involved in export business. This relates to procurement of

export orders and their timely and successful execution. Planning for export order would involve making

concerted efforts supported by proper market entry strategies to get the export order.

2. Scheduling

PLANNING

PLANNING

SCHEDULINGSCHEDULING

CONTROLLINGCONTROLLING

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Scheduling refers to deciding the logistics for execution of export order. This is primarily concerned

with implementation and monitoring of export order. This involves defining in detail the various jobs/activities,

the nature of those jobs/activities (parallel or sequential), expected time frame for completion of those

jobs/activities and fixing responsibility for completion.

3. Controlling

It seeks to ensure whether the activities planned have been completed on time or not and whether the

various schedules drawn up for execution of those orders have been followed or not. A system of reporting

should be developed and implemented in every export organization to ensure proper control of various activities

involved in execution of export orders.

EXPORT CYCLE

The various activities/stages involved in planning and execution of an export order are performed in a

sequential manner. Therefore, the activities/stages are viewed as different links in the chain of a cycle called

export cycle. The export cycle is divided into three phases:

a. Planning for exports

b. Implementation and monitoring of an export order

c. Post exports follow up action.

Co-ordination

Co-ordination

Planning for Exports

Planning for Exports

Post-export follow-up action

Post-export follow-up action

Implementation & Monitoring of Export

order

Implementation & Monitoring of Export

order

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Fig. 2: Export Cycle

A. Planning for Exports

Planning for exports involves the following activities namely,

1. Understanding the international trade environment

2. Setting up an export firm/organization structure

3. Identification of export opportunities

4. Procurement of export order, negotiation and confirmation.

B. Implementation and Monitoring of Export Order

This represents the second phase in the export cycle and involves the following activities:

1. Development of logistics for execution of export order

2. Export financing arranging pre-shipment finance

3. Procurement of goods/supplies-domestic procurement and imports

4. Labeling, packaging, packing and marking

5. Pre-shipment inspection

6. Export risks-identification, quantification and management

7. Pre-shipment documentation

8. Shipment of good-central excise and customs clearance and transportation

9. Compliance with exchange control regulations

C. Post Export Follow-up Action

Once the shipment of goods has been sent, export manager should take the necessary follow-up action. This

would involve the following steps:

1. Negotiation of documents with the bank to realize payment against the port shipment,

2. Arranging post shipment finance

3. Claiming incentives/facilities

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4. Maintaining liaison with the importer

5. Settlement of disputes, if any.

Export Marketing Plan

An export marketing plan is step-by-step guide to strategy implementation. It addresses strategic issues and

outlines the corresponding operational action to be taken. It specifies targets for each step. The plan should

answer all questions on how the export firm’s strategy is to be implemented and direct the enterprise in attaining

the strategic objective.

A typical export marketing plan focuses on the following aspects:

Marketing objectives

Market segmentation and positioning,

Market research,

Characteristics of the product line,

Export pricing,

Distribution channels, and

Promotional strategies.

Some Practical Suggestion The exporters should innovate new product designs, strategies and promotional policies to improve the

level of exports. This helps them to make ‘value rich offers’ that are better than the best.

The exporter should aim at a Market Niche rather than at the mass market.

Exporters should know the key buyers in the target market.

Exporters should choose their markets carefully. The choice of market can make the difference between

success and failure in exporting.

Exporters should clarify their motives for exporting and set their objectives at the outset. They should

know why they want to export and set their goals.

Exporters should consider export market development a long-term investment. Sustained efforts are

essential in export marketing.

Planning and strategy development are essential for success in the long run in export trade.

The export firm should have the requisite technical expertise, in addition to careful planning and suitable

products.

No enterprise should seek entry an export market until it is ready. Any attempt at exporting without

experience in domestic marketing is bound to fail.

The responsibility for the export effort should be assigned to a key staff member, usually known as

export manager.

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Tips For Export Marketing1. Select the product and the target market on the basis of desk research even before considering exporting.

2. Once a market has been decided upon, the entrepreneur should carry out in-depth study of the target

market.

3. The aim of the first visit to foreign market should not be to do business or looking for orders. Rather, the

visit should be used to improve the preparation for entering the market.

4. Evaluate all the information collected and then formulate a marketing strategy and develop a marketing

plan.

5. Gaining foothold in foreign markets can only be effective on a long term basis. Thus, the entrepreneur

should have the strong financial base.

6. The foreign buyers can’t afford to loose face and credibility by deterioration in quality or alternatives to

price and/or late deliveries. It is important to understand the requirement of the foreign buyers before

marketing commitments.

7. In exports, consumers are quality and price conscious in a market which enjoys large and varied

supplies. Success or failure in business will depend upon understanding this sensitivity of the foreign

buyer. The entrepreneur should adopt a consumer oriented approach to manufacturing and selling.

8. International markets are trend sensitive. Designs frequently change and products may not remain in

demand. It is therefore, necessary to be aware of this trend and efforts should be made to keep up-to-date

with the market trends.

9. Foreign markets, particularly in the developed countries, are often highly segmented into different age

and income groups. The exporter should select the right market segment and accordingly position the

product in the market.

Market Entry Strategies : Location of Importers

79

The main thrust of the market entry strategy should be to ensure long-term presence in the chosen export

market. This would be possible only if long-term approach is followed to export marketing as this is the basic

condition for success in the export business.

There are four alternative strategies to penetrate the foreign market with a view to locating the importers for the

export product(s). These strategies are as follows:

1. Regular trade fair participation.

2. Business promotion visits to foreign markets.

3. Doing business through agents.

4. Opening overseas offices.

1. Regular Trade Fair ParticipationParticipation in foreign trade fairs is one of the oldest forms of promotion of exports. Trade fairs provide

an opportunity to the exporter to display their products to large number of buyers or their representatives

who visit the fair. It offers tremendous facilities to bring across the message to a large number of buyers

than perhaps any other trade promotional tool. (See Annexure)

The objectives of trade fair participation are as follows:

To introduce the concept of the products i.e., the basic theme of the products.

To introduce the export firm in the foreign market.

To introduce the brand of the product or increase the popularity of the existing brand.

To conduct consumer research on the new product and test it in the market.

To ensure customer loyalty.

To look for prospective buyers.

2. Business Promotion Visits to Foreign MarketsThe exporter should plan for to foreign market in order to build relationships and understandings with

the foreign buyers. The planning for the business promotion trip can be divided into three stages:

(i) Before the trip,

80

(ii) During the trip, and

(iii) After the trip

(i)- Planning Before the TripAn exporter should identify the valid reasons to justify his visit to the foreign country. There could be number

of reasons to visit the foreign market. Some of these are as follows:

To study the latest trends in the market to explore the possibilities for new business opportunities.

To find new buyers.

To find and negotiate with market agents.

To hold negotiations with the buyers to conclude the business deals.

To locate new buyers.

To launch a new product.

To attend to the queries of the foreign buyers and solve their problems in the use of the product.

To develop understanding the riles and regulations as regards tariff, fumigation, inspection, labeling,

packaging, safety, public health and quality of the products.

(ii)- During the Business Promotion Visit The exporter should observe the following guidelines on his arrival in the foreign country:

He should inform the buyers regarding his arrival and reconfirm the appointments.

The exporter should be on time for his meeting with the prospective buyer. It is important to remember

that the punctuality is at a premium in all the developed countries.

The exporter should take his notes during discussion with the importer.

The exporter should find time to visit the market/chamber of commerce and the economic section of the

Embassy of India to gain first hand information about the foreign market and the business practices.

(iii)- After the Business Promotion VisitOnce the visit is over, the exporter should take up promptly the follow up action on the various points agreed

with the buyers during the business meetings, this may relate to providing clarification, giving additional

information, sending modified samples or any other point mentioned by the importer which needs clarifications.

Time is the essence of follow up action to ensure successful conclusion of the business visit. The exporter

should also submit the bank certificate for repatriation of export proceeds and evidence regarding bringing

goods.

3. Business through AgentsMany buyers prefer to make imports through import agents (also known as commercial agents/sales

representatives etc.) based in their own countries. It is also common among some of the large importers to make

direct imports through the intermediation of a representative firm in the exporting country. The representative

81

firm is known as buying house or buying agent in exporting country or indenting agent in the importing

country. The importer depends upon the buying agent for selection of the exporter to arrange for timely

supplies. Thus, the exporter can approach either of the two or both of them to promote his exports business.

These agents are classified as:

a) Import Agent or Overseas Agent

b) Buying Agent.

a) Import Agent (or Overseas Agent) The exporter should prefer an import agent in the following situations:

When communication is a major problem, particularly in the case of traditional exporters.

In certain countries like Spain, Scandinavia etc. exporters can penetrate only through agents. These

agents ensure prompt payment. The possibilities of default or delay in payments can also be minimized.

Functions of import agents are Marketing, Quality Control, Ensuring Payments, and Warehousing etc.

b) Buying Agents

Buying agents are the firms in exporting countries to represent foreign buyers. Generally, foreign buyers

who regularly import from certain countries face the difficulty in locating the reliable exporters to supply

the goods of the desired quality. In order to overcome this problem, the large importers may appoint local

business firms in the countries of exports to act as their indenting agents. Such firms of indenting agents are

usually referred to as buying agents or the buying houses in the exporting countries. The main function of a

buying agent is to arrange foe supplies of goods desired by the foreign buyers i.e. their principals. The

various functions performed by buying agents are merchandising, product development, and quality control,

placing order, payment arrangements and documentation.

4. Opening Overseas Offices

Another strategy to enter a foreign market is to open the office in the market itself. The implication of

this strategy is that the exporter and the importer will be the same party. The exporter can utilize this route to

ensure his effective presence in the foreign market. As a consequence, the chain of distribution shall be as

follows:

ExporterImporter (Exporter) WholesalerRetailerConsumer

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In this case, the exporter with the help of his overseas office shall be in a position to effectively penetrate the

foreign market. He would have first hand information of the foreign market and the market inputs so collected

would help him plan his marketing strategy. He can secure business from the wholesalers or the sales

representative or the sales / commercial agents or the distributors.

The distinctive feature of this strategy is that the exporter can gain the confidence of the foreign buyers

by referring to his office both in India and the foreign market. The presence of the exporter in the foreign

market will give confidence to the buyers that they are dealing with the reliable party. The exporter on his part

can provide better after sale service to the importers or attend to their queries promptly. This arrangement also

enables the exporter to ensure that there are no defaults in making payments. Better payment terms can also be

offered to the foreign buyers. As far as exporter is concerned, he would be receiving orders from his own outlet

in the foreign market. The order can be placed on D/A (Document against Acceptance) terms of payment with

the exporter by the importer which represents the Indian exporter in the foreign country. This will reduce the

risk of non payment and also obviate the need for obtaining letter of credit.

One of the fundamental advantages of this strategy is that the exporter can increase his profitability by

being more competitive in the foreign market. The other advantage is that the exporter can bypass the traditional

channel used for distribution of the product and offer the product at lower prices directly to the retailers. This

would help the exporter to not only increase his sales volume but also his profits.

Developing an Export Strategy

Determining Products' Export Potential

There are several ways to evaluate the export potential of our products and services in overseas markets. The

most common approach is to examine the success of our products domestically. If our company succeeds at

selling in the U.S. market, there is a good chance that it will also be successful in markets abroad, at least those

where similar needs and conditions exist.

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Another means to assess our company's potential in exporting is by examining the unique or important features

of our product. If those features are hard to duplicate abroad, then it is likely that we will be successful

overseas. A unique product may have little competition and demand for it might be quite high.

Finally, our product may have export potential even if there are declining sales in the U.S. market.

Assessing Company's Export Readiness

By answering these general questions about how exporting will enhance into our company's short, medium and

long-term goals will help determine our company's readiness to export:

What does the company want to gain from exporting?

Is exporting consistent with other company goals?

What demands will exporting place on the company's key resources, management and personnel,

production capacity, and finance and how will these demands be met?

Are the expected benefits worth the costs, or would company resources be better used for developing new

domestic business?

Developing an Export Plan

Once we decided to sell our products abroad, it is time to develop an export plan. A crucial first step in planning

is to develop broad consensus among key management on the company's goals, objectives, capabilities, and

constraints. In addition, all aspects of an export plan should be agreed upon by the personnel involved in the

exporting process, as they will ultimately execute the export plan.

The purposes of the export plan are (a) to assemble facts, constraints, and goals and (b) to create an action

statement that takes all of these into account.

At least the following ten questions should ultimately be addressed:

1. Which products are selected for export development? What modifications, if any, must be made to adapt

them for overseas markets?

2. Which countries are targeted for sales development?

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3. In each country, what is the basic customer profile? What marketing and distribution channels should be

used to reach customers?

4. What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and

what strategy will be used to address them?

5. How will the product's export sale price be determined?

6. What specific operational steps must be taken and when?

7. What will be the time frame for implementing each element of the plan?

8. What personnel and company resources will be dedicated to exporting?

9. What will be the cost in time and money for each element?

10. How will results be evaluated and used to modify the plan?

The first time an export plan is developed, it should be kept simple. It need be only a few pages long, since

important market data and planning elements may not yet be available. The initial planning effort itself

gradually generates more information and insight. As the planners learn more about exporting and our

company's competitive position, the export plan will become more detailed and complete. A detailed plan is

recommended for companies that intend to export directly. Companies choosing indirect export methods may

require much simpler plans.

Developing A Marketing Plan

Once you have decided that your company is able and committed to exporting, the next step is to develop a

marketing plan.

Marketing Strategy Benefits

A clearly written marketing strategy offers six immediate benefits:

1. Because written plans display strengths and weaknesses more readily, they are a great help in formulating

and polishing an export strategy.

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2. Written plans are not easily forgotten, overlooked, or ignored by those charged with executing them. If

deviation from the original plan occurs, it is likely to be due to a deliberate and thoughtful choice.

3. Written plans are easier to communicate to others and are less likely to be misunderstood.

4. Written plans allocate responsibilities and provide for an evaluation of results.

5. Written plans are helpful when seeking financial assistance. They indicate to lenders that you have a serious

approach to the export venture.

6. Written plans give management a clear understanding of what will be required of them and thus help to

ensure a commitment to exporting. Actually, a written plan signals that the decision to export has already

been made.

Building an international business takes time. It usually takes months, sometimes even several years, before an

exporting company begins to see a return on its investment of time and money. By committing to the specifics

of a written plan, top management can make sure that the firm will finish what it begins and that the hopes that

prompted its export efforts will be fulfilled.

Market Research

To successfully export our product, we should examine foreign markets through research. The purpose is to

identify marketing opportunities and constraints abroad, as well as to identify prospective buyers and customers.

Market research encompasses all methods that a company can use to determine which foreign markets have the

best potential for its products. Results of this research inform the firm of: the largest markets for its product, the

fastest growing markets, market trends and outlook, market conditions and practices, and competitive firms and

products.

Firm may begin to export without conducting any market research if it receives unsolicited orders from abroad.

A firm may research a market by using either primary or secondary data resources. In conducting primary

market research, a company collects data directly from the foreign marketplace through interviews, surveys, and

other direct contact with representatives and potential buyers. Primary market research has the advantage of

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being tailored to the company's needs and provides answers to specific questions, but the collection of such data

is time-consuming and expensive.

When conducting secondary market research, a company collects data from various sources, such as trade

statistics for a country or a product. Working with secondary sources is less expensive and helps the company

focus its marketing efforts. Although secondary data sources are critical to market research, they do have

limitations. Yet, even with these limitations, secondary research is a valuable and relatively easy first step for a

company to take. It may be the only step needed if the company decides to export indirectly, since the

intermediary firm may have advanced research capabilities.

Methods of Market Research

Because of the expense of primary market research, most firms rely on secondary data sources. The three

following recommendations will help us obtain useful secondary information:

1. Keep abreast of world events that influence the international marketplace, watch for announcements of

specific projects, or simply visiting likely markets. For example, a thawing of political hostilities often

leads to the opening of economic channels between countries.

2. Analyze trade and economic statistics. Trade statistics are generally compiled by product category and by

country. These statistics provide the U.S. firm with information concerning shipments of products over

specified periods of time. Demographic and general economic statistics, such as population size and

makeup, per capita income, and production levels by industry can be important indicators of the market

potential for a company's products.

3. Obtain advice from experts. There are several ways of obtaining this advice:

Contact experts at the U.S. Department of Commerce and other government agencies.

Attend seminars, workshops, and international trade shows.

Hire an international trade and marketing consultant.

Talk with successful exporters of similar products.

Contact trade and industry association staff.

A Step-by-Step Approach to Market Research

It involves screening potential markets, assessing the targeted markets, and drawing conclusions.

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A. Screen Potential Markets

Step 1 :- Obtain export statistics that indicate product exports to various countries. Published export

statistics provide a reliable indicator of where U.S. exports are currently being shipped. The U.S. Census

Bureau provides these statistics in a published format. Trade statistics also can be obtained using the

National Trade Data Bank (NTDB).

Step 2 :- Identify five to ten large and fast-growing markets for the firm's product. Look at them over the

past three to five years. Has market growth been consistent year to year? Did import growth occur even

during periods of economic recession? If not, did growth resume with economic recovery?

Step 3 :- Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If

the market is just beginning to open up, there may be fewer competitors than in established markets. Growth

rates should be substantially higher in these countries to qualify as up-and-coming markets, given the lower

starting point.

Step 4 :- Target three to five of the most statistically promising markets for further assessment. Consult with

a Department of Commerce Export Assistance Center, business associates, freight forwarders, and others to

further evaluate targeted markets.

B. Assess Targeted Markets

Step 1 :- Examine trends for company products as well as related products, that could influence demand.

Calculate overall consumption of the product and the amount accounted for by imports. The National Trade

Data Bank (NTDB) and the National Technical Information Service (NTIS) offer Industry Sector Analyses

(ISAs), Country Commercial Guides (CCGs), and other reports that give economic backgrounds and market

trends for each country. Demographic information (such as population and age) can be obtained from World

Population (Census) and Statistical Yearbook (United Nations).

Step 2 :- Ascertain the sources of competition, including the extent of domestic industry production and the

major foreign countries the firm is competing against in each targeted market by using ISAs and competitive

assessments. This information is available from the NTDB and the NTIS. Look at each competitor's U.S.

market share.

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Step 3 :- Analyze factors affecting marketing and use of the product in each market, such as end-user

sectors, channels of distribution, cultural idiosyncrasies, and business practices. Again, the ISAs and

Customized Market Analyses (CMAs) offered by the Department of Commerce are useful.

Step 4 :- Identify any foreign barriers (tariff or nontariff) for the product being imported into the country.

Identify any U.S. barriers (such as export controls) that affect exports to the country.

Step 5 :- Identify any U.S. or foreign government incentives that promote exporting of your particular

product or service.

C. Draw Conclusions

After analyzing the data, the company may conclude that its marketing resources would be applied more

effectively to a few countries. Exporting to one or two countries will allow the company to focus its resources

without jeopardizing its domestic sales efforts. The company's internal resources should determine its level of

effort.

Methods/Channels of ExportingThe most common methods of exporting are indirect selling and direct selling. In indirect selling, an export

intermediary such as an export management company (EMC) or an export trading company (ETC) normally

assumes responsibility for finding overseas buyers, shipping products, and getting paid. In direct selling, the

U.S. producer deals directly with a foreign buyer. The paramount consideration in determining whether to

market indirectly or directly is the level of resources a company is willing to devote to its international

marketing effort. Other factors to consider when deciding whether to market indirectly or directly include:

The size of firm;

The nature of products;

Previous export experience and expertise;

Business conditions in the selected overseas markets.

Approaches to Exporting

The way your company chooses to export its products can have a significant effect on its export plan and

specific marketing strategies. The basic distinction among approaches to exporting relates to the company's

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level of involvement in the export process. There are at least four approaches, which may be used alone or in

combination:

1. Passively filling orders from domestic buyers who then export the product : - These sales

are indistinguishable from other domestic sales as far as the original seller is concerned. Someone else has

decided that the product in question meets foreign demand. That party takes all the risk and handles all of

the exporting details, in some cases without even the awareness of the original seller.

2. Seeking out domestic buyers who represent foreign end users or customers : - Many U.S.

and foreign corporations, general contractors, foreign trading companies, foreign government agencies,

foreign distributors and retailers, and others in the United States purchase for export. These buyers are a

large market for a wide variety of goods and services. In this case a company may know its product is being

exported, but it is still the buyer who assumes the risk and handles the details of exporting.

3. Exporting indirectly through intermediaries : - With this approach, a company engages the

services of an intermediary firm capable of finding foreign markets and buyers for its products. EMCs,

ETCs, international trade consultants, and other intermediaries can give the exporter access to well-

established expertise and trade contacts. Yet, the exporter can still retain considerable control over the

process and can realize some of the other benefits of exporting, such as learning more about foreign

competitors, new technologies, and other market opportunities.

4. Exporting directly : - This approach is the most ambitious and difficult, since the exporter personally

handles every aspect of the exporting process from market research and planning to foreign distribution and

collections. Consequently, a significant commitment of management time and attention is required to

achieve good results. However, this approach may also be the best way to achieve maximum profits and

long-term growth. With appropriate help and guidance from the Department of Commerce, state trade

offices, freight forwarders, international banks, and other service groups, even small or medium-sized firms

can export directly if they are able to commit enough staff time to the effort. For those who cannot make

that commitment, the services of an EMC, ETC, trade consultant, or other qualified intermediary are

indispensable.

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Distribution Considerations

Which channels of distribution should the firm use to market its products abroad?

Where should the firm produce its products and how should it distribute them in the foreign market?

What types of representatives, brokers, wholesalers, dealers, distributors, or end-use customers, and so forth

should the firm use?

What are the characteristics and capabilities of the available intermediaries?

Should the assistance of an EMC or ETC be obtained?

Indirect Exporting

The principal advantage of indirect marketing for a smaller U.S. company is that it provides a way to penetrate

foreign markets without the complexities and risks of direct exporting. Several kinds of intermediary firms

provide a range of export services.

Direct Exporting

The advantages of direct exporting for a U.S. company include more control over the export process, potentially

higher profits, and a closer relationship to the overseas buyer and marketplace.

When a company chooses to export directly to foreign markets, it usually makes internal organizational changes

to support more complex functions. A direct exporter normally selects the markets it wishes to penetrate,

chooses the best channels of distribution for each market, and then makes specific foreign business connections

in order to sell its product.

Once the company is organized to handle exporting, a proper channel of

distribution needs to be carefully chosen for each market. These channels

include sales representatives, agents, distributors, retailers, and end users.

Sales Representatives

Overseas, a sales representative is the equivalent of a manufacturer's representative in the United States. The

representative uses the company's product literature and samples to present the product to potential buyers. A

representative usually handles many complementary lines that do not conflict. The sales representative usually

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works on a commission basis, assumes no risk or responsibility, and is under contract for a definite period of

time. The contract defines territory, terms of sale, method of compensation, reasons and procedures for

terminating the agreement, and other details. The sales representative may operate on either an exclusive or a

nonexclusive basis.

Agents

The widely misunderstood term "agent" means a representative who normally has authority, perhaps even a

power of attorney, to make commitments on behalf of the firm he or she represents. Firms in the United States

and other developed countries have stopped using the term and instead rely on the term "representative," since

agent can imply more than intended. It is important that any contract state whether the representative or agent

does or does not have legal authority to obligate the firm.

Distributors

The foreign distributor is a merchant who purchases goods from a U.S. exporter (often at a substantial

discount) and resells it for a profit. The foreign distributor generally provides support and service for the

product, thus relieving the U.S. company of these responsibilities. The distributor usually carries an inventory

of products and a sufficient supply of spare parts and also maintains adequate facilities and personnel for

normal servicing operations. Distributors typically handle a range of non-conflicting but complementary

products. End users do not usually buy from a distributor; they buy from retailers or dealers.

Foreign Retailers

A company may also sell directly to foreign retailers, although in such transactions, products are generally

limited to consumer lines. The growth of major retail chains in markets such as Canada and Japan has created

new opportunities for this type of direct sale. This method relies mainly on traveling sales representatives who

directly contact foreign retailers, although results might also be achieved by mailing catalogs, brochures, or

other literature. The direct mail approach has the benefits of eliminating commissions, reducing traveling

expenses, and reaching a broader audience. For optimal results, a firm that uses direct mail to reach foreign

retailers should support it with other marketing activities.

American manufacturers with ties to major domestic retailers may also be able to use them to sell abroad. Many

large American retailers maintain overseas buying offices and use these offices to sell abroad when practical.

Direct Sales to End Users

A U.S. business may sell its products or services directly to end users in foreign countries. These buyers can be

foreign governments; institutions such as hospitals, banks, and schools; or businesses. Buyers can be identified

at trade shows, through international publications, or through Commerce's Export Contact List Service.

The U.S. Company should be aware that if a product is sold in such a direct fashion, the company is

responsible for shipping, payment collection, and product servicing unless other arrangements are made. Unless

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the cost of providing these services is built into the export price, a company could have a narrower profit than

originally intended.

Preparing Product for ExportSelecting and preparing product for export requires not only product knowledge but also knowledge of the

unique characteristics of each market being targeted. Market research conducted and foreign representatives

contacts should give the U.S. company an idea of what products can be sold and where. However, before the

sale can occur, the company may need to modify a particular product to satisfy buyer tastes or needs in foreign

markets.

The extent to which the company will modify products sold in export markets is a key policy issue to be

addressed by management. Some exporters believe the domestic product can be exported without significant

changes. Others seek to consciously develop uniform products that are acceptable in all markets.

If the company manufactures more than one product or offers many models of a single product, it should start

with the one best suited to the targeted market. Ideally, the firm chooses one or two products that fit the market

without major design or engineering modifications. Doing so works best when the U.S. company:

Deals with international customers that have the same demographic characteristics or the same

specifications for manufactured goods;

Supplies parts for U.S. goods that are exported to foreign countries without modifications;

Produces a unique product that is sold on the basis of its status or foreign appeal; or produces a product

that has few or no distinguishing features and that is sold almost exclusively on a commodity or price

basis.

Questions to Consider

What foreign needs does the product satisfy?

What product should the firm offer abroad?

Should the firm modify its domestic-market product for sale abroad? Should it develop a new product for the foreign market?

What specific features, such as design, color, size, packaging, brand and warranty should the product have?

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What specific services are necessary abroad at the pre-sale and post-sale stages?

Are the firm’s services and repair facilities adequate?

Product Adaptation

To enter a foreign market successfully, a U.S. company may have to modify its product to conform to

government regulations, geographic and climatic conditions, buyer preferences, or standards of living. The

company may also need to modify its product to facilitate shipment or to compensate for possible differences in

engineering and design standards.

Foreign government product regulations are common in international trade and are expected to expand in the

future. These regulations can take the form of high tariffs or nontariff barriers, such as regulations or product

specifications. Governments impose these regulations to:

Protect domestic industries from foreign competition;

Protect the health of their citizens;

Force importers to comply with environmental controls;

Ensure that importers meet local requirements for electrical or measurement systems;

Restrict the flow of goods originating in or having components from certain countries; and

Protect their citizens from cultural influences deemed inappropriate.

It is often necessary for a company to adapt its product to account for geographic and climatic conditions as

well as for the availability of resources. Factors such as topography, humidity, and energy costs can affect the

performance of a product or even define its use. For example, the cost of petroleum products and the state of a

country's infrastructure may indicate the demand for energy-consuming products.

Market potential must be large enough to justify the direct and indirect costs involved in product adaptation.

The firm should assess the costs to be incurred and though it may be difficult, determine the increased revenues

expected from adaptation. The decision to adapt a product is based partly on the degree of commitment to the

specific foreign market; a firm with short-term goals will probably have a different perspective than a firm with

long-term goals.

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Engineering and Redesign

The exporter should be aware that even fundamental aspects of its products may require changing. For

example, electrical standards in many foreign countries differ from U.S. electrical standards. It is not unusual to

find phases, cycles, or voltages (for both residential and commercial use) that would damage or impair the

operating efficiency of equipment designed for use in the United States. These electrical standards sometimes

vary even in the same country. Knowing this requirement, the manufacturer can determine whether a special

motor must be substituted or arrange for a different drive ratio to achieve the desired operating revolutions per

minute.

Similarly, many kinds of equipment must be engineered in the metric system for integration with other pieces

of equipment or for compliance with the standards of a given country. The United States is virtually alone in its

adherence to a non-metric system, and U.S. firms that compete successfully in the global market realize that

conversion to metric measurement is an important detail in selling to overseas customers. Even instruction or

maintenance manuals should take care to give dimensions in centimeters, weights in grams or kilos, and

temperatures in Celsius degrees.

Branding, Labeling, and Packaging

Consumers are concerned with both the product itself and the product's supplementary features, such as

packaging, warranties, and service. Branding and labeling products in foreign markets raise new considerations

for the U.S. company such as:

Are international brand names important to promote and distinguish a product? Conversely, should local brands or private labels be employed to heighten local interest?

Are the colors used on labels and packages offensive or attractive to the foreign buyer? For example, in some countries certain colors are associated with death.

Can labels be produced in official or customary languages if required by law or practice?

Does information on product content and country of origin have to be provided?

Are weights and measures stated in the local unit?

Must each item be labeled individually?

Are local tastes and knowledge considered? A dry cereal box picturing a U.S. athlete may not be as attractive to overseas consumers as the picture of a local sports hero.

A company may find that building international recognition for a brand is expensive. Protection for brand

names varies from one country to another. To protect its products and brand names, a company must comply

with local laws on patents, copyrights, and trademarks.

Installation

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Another element of product preparation that a company should consider is the ease of installing that product

overseas. If technicians or engineers are needed overseas to assist in installation, the company should minimize

their time in the field if possible. To do so, the company may wish to preassemble or pretest the product before

shipping.

Disassembling the product for shipment and reassembling abroad may be considered by the company. This

method can save the firm shipping costs, but it may add to delay in payment if the sale is contingent on an

assembled product. The company should be careful to provide all product information, such as training

manuals, installation instructions, and parts lists - all in the local language - even relatively simple instructions.

Warranties

The company should include a warranty on the product since the buyer expects a specific level of performance

and a guarantee that it will be achieved. Levels of expectation for a warranty vary by country depending upon

its level of development, competitive practices, the activism of consumer groups, local standards of production

quality, and other factors. Product service guarantees are important since customers overseas typically have

service expectations as high as or greater than in the United States.

A company may use warranties for advertising purposes to distinguish its product from the competition. Strong

warranties may be required to break into a new market, especially if the company is an unknown supplier. In

some cases, warranties may be instrumental in making the sale and become a major element in negotiations.

Servicing

Service after the sale is critical for some products. Generally, the more complex the product's technology, the

greater the demand for pre-sale and post-sale service. Therefore, there is pressure in some firms to offer

simpler, more robust products overseas thereby reducing the need for maintenance and repairs. U.S. suppliers

who rely on foreign distributors or agents to provide service backup must take steps to ensure an adequate level

of service. These steps include training, periodically checking service quality, and monitoring inventories of

spare parts.

PROCESSING OF AN EXPORT ORDERExport Order is a document communicating decision of the foreign buyer to purchase certain item(s) from the

exporter. It specifies the description of the item(s), their quantity and quality specifications, unit price, delivery

terms, shipping marks, insurance requirements, requirements as regards labeling, packing and packaging,

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payment terms, pre-shipment inspection requirements, documents required and so on. The Export Order

represents an ‘offer to sell’ made by the exporter and its ‘acceptance’ by the foreign buyer.

Process of Securing Export OrderGenerally, the process of obtaining the export order follows the sequence of the steps given below:

Step 1:- The exporter locates a trade enquiry i.e., he/she comes across the details of a foreign buyer who is

willing to import the item(s). The exporter may get these details through any of the following ways:

a) Websites of the import firms.

b) Visit to the exporter’s website by an interested foreign buyer.

c) Participation in a trade fair/visit to a trade fair by the exporter.

d) Business promotion visit to a foreign country.

e) Contact with the overseas marketing agent.

f) Contact with a buying agent in the exporter’s country.

g) Exporter’s own retail outlet in the foreign country.

h) Circulation of the trade enquiry by the trade promotion body in the exporter‘s country.

Step 2:- On receipt of the trade enquiry, the exporter sends his/her company profile, product profile and the

promotional literature of his/her product range to know the interest of the buyer.

Step 3:- The buyer may like to have the details of certain product of his/her choice from the exporter.

Step 4:- The exporter sends the quotation in respect of the product of interest to the buyer. This quotation

contains the basic details like its FOB price, mode of payment, photograph of the item along with its

specifications and the likely delivery time.

Step 5:- On receipt of this basic information, the foreign buyer puts forward his/her requirements as regards

the design, size, finish or other specifications of the product in view. Once the product has been identified, then

the process of negotiations of the other terms and conditions begins. It is very likely that these terms and

conditions would be negotiated only as a result of personal meeting between the exporter and the foreign buyer

particularly if the exporter happens to be a new exporter.

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Step 6:- The exporter sends the proforma invoice to the foreign buyer setting out in detail the terms and

conditions negotiated between the two parties. This proforma invoice represents the ‘offer to sell’ made by the

exporter.

Step 7:- The importer conveys his/her ‘acceptance’ of the exporter on the proforma invoice originally sent by

the exporter. It is however, not essential for the offer and acceptance to be on the proforma invoice. These could

be in the form of exchange of letters as well.

Terms and Conditions of an Export Order

The following are the standard clauses of an export order:

1. Product and its description

2. Product specifications as regards its quality

3. Price: FOB/CFR/CIF etc., as per INCOTERMS 2000

4. Quantity

5. Payment Terms: D/A, D/P, Letter of Credit, Advance Payment etc.

6. Delivery Schedule: Time Period; Partial/complete dispatch

7. Mode of Shipment: Air/Sea/Road

8. Type of Shipment: Direct/Transhipment

9. Inspection

10. Labeling, Packaging, Packing and Marking requirements

11. Insurance: By exporter/importer

12. Documents required

13. Escalation clause: Sharing of increase in cost

14. Force Majeure clause: Clause providing for excuse of non-performance due to acts of God.

15. Arbitration Clause: Clause foe settlement of dispute

16. Fines/Penalties

17. Applicability of Law

The exporter and importer hold negotiations with regard to the above points to conclude the business deal.

Planning for Execution of the Export Order

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Planning for the execution of the export order involves the following steps:

Step 1:- Acknowledgement of the Export Order

First of all, the exporter should send a letter of thanks to the foreign buyer for placing the order.

Step 2:- Constitution of Team of Executives

The exporter should treat each export order as a separate project and constitute a team of executives drawn from

the marketing, production, finance and accounts, shipping, quality control departments etc. to implement the

order. One of the executives should be made the Team Leader to coordinate with all the departments and

external agencies involved in the execution of the order.

Step 3:- Scrutiny of the Export Order

The careful scrutiny of the order in respect of its following aspects by the team of executive appointed to

observe the implementation:

i. The order has been received for the product for which quotation/offer was sent and the exporter is still in a

position to supply the product.

ii. Sizes and specifications should be same as per the offer and quotation.

iii. Pre-shipment inspection by Export Inspection Agency is required; the buyer should be informed about the

inspection scheme.

iv. Payment terms are the same as stipulated/negotiated. If the payment is by means of an irrevocable Letter of

Credit, it should be ensured that such an irrevocable letter of credit (L/C) has been opened and its terms &

conditions have been clearly understood by the exporter and are also acceptable to him/her.

v. Special packaging, labeling and marketing requirements, if any, should be noted for compliance.

vi. Shipment and delivery date is in conformity with the exporter’s production plan and whether:

a. Part shipment is allowed.

b. Transhipment is permissible.

c. Port of shipment/destination is same.

vii. Whether insurance is to be done by the exporter or the buyer, and conditions (terms) of insurance.

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viii. Documents required by the buyer. It should be examined as to whether the exporter can arrange for the

documents required by the buyer.

Step 4:- Confirmation of the Export Order

The buyer requires the exporter to confirm the order to him/her. Based on this confirmation he/she can draw

his/her own schedules for supply of goods to his/her customers or plan for production schedules.

Step 5:- Developing Logistics for Execution of the Order

Logistics refers to the formulation of a detailed plan of action for the implementation of the export order. This

involves identification of the minutest possible activities/jobs that need to be performed to ensure the successful

execution of the order as per its terms and conditions. This listing of various jobs/ activities should be done as a

result of the brain storming sessions amongst the members of the export team. The team should thus, prepare an

Activity Profile for the order. The Activity Profile should state the following:

a. Name of job/activity.

b. Nature of the activity/job whether it is to be performed sequentially or parallel to some other activity.

c. Likely time required for the completion. It should be specified as to what would be earliest start/finish time;

the latest start/finish time of the activity and the total time duration for its completion. This information can

used to draw a network diagram to control the likely delay in the execution of the order and as consequence

control the likely cost escalations.

d. The executive/agency responsible for its completion.

Step 6:- Contents of the Activity Profile

The contents of the Activity Profile are as follows:

1. Determination of materials/supplies required

2. Making arrangement for the procurement of the materials/supplies

3. Arrangements of funds to send the shipment i.e., packing credit from the bank

4. Labeling, packaging, packing and marking of the export consignments

5. Arrangements for ensuring pre-shipment inspection of goods for quality

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6. Compliance with the statutory requirements as regards inspection/authentication of export products

7. Managing the risks involved in the export shipment

8. Appointment of the clearing and forwarding agent

9. Preparing the pre-shipment documents for obtaining central excise and custom clearance of the export

shipment.

10. Compliance with the exchange control requirements

11. Shipment of goods

12. Negotiation of documents

13. Arranging post shipment finance from the bank

Step 7:- Reservation of Shipping Space

The exporter should plan for reservation of the shipping space much in advance in the ship. The reason is that

there is a shortage of shipping space and their frequency is also limited. It is quite possible that exporter may

not be able to obtain the reservation for the timely shipment of the goods. As far as shipment by sea is

concerned, there is not much difficulty in booking the cargo with the airlines. The reservation can be arranged

through the clearing and forwarding agent. Thus, the exporter should appoint a clearing and forwarding agent at

the initial stages if the shipment is to be sent by sea.

EXPORT PRICING, QUOTATIONS AND INCOTERMS

Proper pricing, complete and accurate quotations, choosing the terms of the sale, and selecting the payment

method are four critical elements in selling a product or service overseas. Of the four, pricing can be the most

problematic, even for an experienced exporter.

Pricing ConsiderationsThe price considerations listed below will help an exporter determine the best price for the product overseas:

At what price should the firm sell its product in the foreign market?

What type of market positioning (customer perception) does the company want to convey from its pricing structure?

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Does the export price reflect the product's quality?

Is the price competitive?

Should the firm pursue market penetration or market-skimming pricing objectives abroad?

What type of discount (trade, cash, quantity) and allowances (advertising, trade-off) should the firm offer its foreign customers?

Should prices differ by market segment?

What should the firm do about product line pricing?

What pricing options are available if the firm's costs increase or decrease? Is the demand in the foreign market elastic or inelastic?

Are the prices going to be viewed by the foreign government as reasonable or exploitative?

Do the foreign country's antidumping laws pose a problem?

As in the domestic market, the price at which a product or service is sold directly determines a firm's revenues.

It is essential that a firm's market research include an evaluation of all of the variables that may affect the price

range for the product or service. If a firm's price is too high, the product or service will not sell. If the price is

too low, export activities may not be sufficiently profitable or may actually create a net loss.

It is very important that the exporter take into account additional costs that are typically borne by the importer.

They include tariffs, customs fees, currency fluctuation transaction costs and value-added taxes (VATs). These

additional costs can add substantially to the final price paid by the importer.

Foreign Market Objectives An important aspect of a company's pricing analysis is determining market objectives. For example, is the

company attempting to penetrate a new market, looking for long-term market growth, or looking for an outlet

for surplus production or outmoded products? Many firms view the foreign market as a secondary market and

consequently have lower expectations regarding market share and sales volume. This naturally affects pricing

decisions.

Marketing and pricing objectives may be general or tailored to particular foreign markets. For example,

marketing objectives for sales to a developing nation where per capita income may be one tenth of that in the

United States are necessarily different from the objectives for Europe or Japan.

Costs

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The computation of the actual cost of producing a product and bringing it to market is the core element in

determining if exporting is financially viable. Many new exporters calculate their export price by the cost-plus

method. In the cost-plus method of calculation, the exporter starts with the domestic manufacturing cost and

adds administration, research and development, overhead, freight forwarding, distributor margins, customs

charges, and profit.

Marginal cost pricing is a more competitive method of pricing a product for market entry. This method

considers the direct, out-of-pocket expenses of producing and selling products for export as a floor beneath

which prices cannot be set without incurring a loss. For example, additional costs may occur due to product

modification for the export market that accommodates different sizes, electrical systems, or labels. On the other

hand, costs may decrease if the export products are stripped-down versions or made without increasing the fixed

costs of domestic production.

Other costs should be assessed for domestic and export products according to how much benefit each product

receives from such expenditures. Additional costs often associated with export sales include:

Market research and credit checks;

Business travel;

International postage, cable, and telephone rates;

Translation costs;

Commissions, training charges, and other costs involving foreign representatives;

Consultants and freight forwarders; and

Product modification and special packaging.

After the actual cost of the export product has been calculated, the exporter should formulate an approximate

consumer price for the foreign market.

Sample Cost-Plus Calculation of Product Cost

Domestic Sale Export Sale

Factory price $7.50 $7.50

Domestic freight .70 .70

Subtotal 8.20 8.20

Export documentation .50

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Subtotal 8.70

Ocean freight and insurance 1.20

Subtotal 9.90

Import duty (12 percent of landed cost) 1.19

Subtotal 11.09

Wholesaler markup (15 percent) 1.23

Subtotal 9.43

Importer/distributor markup 2.44

Subtotal 13.53

Retail markup (50 percent) 4.72 6.77

Final consumer price $14.15 $20.30

Table 1: Calculation of Final Consumer Price

Market Demand For most consumer goods, per capita income is a good gauge of a market's ability to pay. Some products may

create such a strong demand such as popular goods like Levis, that even low per capita income will not affect

their selling price. The firm must also keep in mind that currency fluctuations may alter the affordability of its

goods. Thus, pricing should try to accommodate wild changes in the U.S. and/or foreign currency. The firm

should anticipate the type of potential customers. If the firm's primary customers in a developing country are

expatriates or belong to the upper class, a higher price might be feasible even if the average per capita income is

low.

Competition In the domestic market, few companies are free to set prices without carefully evaluating their competitors'

pricing policies. This situation is true in exporting, and is further complicated by the need to evaluate the

competition's prices in each potential export market.

If there are many competitors within the foreign market, the exporter may have little choice but to match the

market price or even under price the product or service in order to establish a market share. On the other hand,

if the product or service is new to a particular foreign market, it may actually be possible to set a higher price

than in the domestic market.

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Pricing Summary The key points to remember during determining product's price are:

Determine the objective in the foreign market.

Compute the actual cost of the export product.

Compute the final consumer price.

Evaluate market demand and competition.

Consider modifying the product to reduce the export price.

Include "nonmarket" costs, such as tariffs and customs fees.

Exclude cost elements that provide no benefit to the export function, such as domestic advertising.

Quotation and Proforma Invoice

QuotationsMany export transactions, particularly initial export transactions, begin with the receipt of an inquiry from

abroad that is followed by a request for a quotation. The preferred method for export is a pro forma invoice,

which a quotation is prepared in invoice format.

A quotation describes the product, states a price for it, sets the time of shipment, and specifies the terms of the

sale and terms of the payment. Since the foreign buyer may not be familiar with the product, the description of

it in an overseas quotation usually must be more detailed than in a domestic quotation. The description should

include the following 15 points:

1. Seller's and buyer's names and addresses.

2. Buyer's reference number and date of inquiry.

3. Listing of requested products and brief description.

4. Price of each item (it is advisable to indicate whether items are new or used and to quote in U.S. dollars

to reduce foreign-exchange risk).

5. Appropriate gross and net shipping weight (in metric units where appropriate).

6. Appropriate total cubic volume and dimensions packed for export(in metric units where appropriate).

7. Trade discount (if applicable).

8. Delivery point.

9. Terms of sale.

10. Terms of payment.

11. Insurance and shipping costs.

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12. Validity period for quotation.

13. Total charges to be paid by customer.

14. Estimated shipping date from U.S. port or airport.

15. Currency of sale.

The Proforma InvoiceA proforma invoice (sometimes written as pro forma invoice) is little more than a 'preadvice' or indication of

what will stand in the commercial invoice once negotiations have been completed. Indeed, the proforma invoice

and the commercial invoice often look exactly the same, except that it should state clearly "proforma invoice"

on this document, whereas the commercial invoice will state "invoice" or "commercial invoice". The proforma

invoice serves as a negotiating instrument. The initial proforma invoice often sets the stage for the first round of

negotiations if the exporter and importer have not yet had any real discussions.

Difference Between a Proforma Invoice and a QuotationIn reality, there is very little difference in function between the two and the proforma invoice is really a

quotation in invoice form; in other words. The difference really comes about in terms of the structure and layout

of the proforma invoice/quotation. A typical quotation appears more like a business letter describing a written

offer, while a proforma invoice appears exactly the same as a invoice (except with the words "proforma

invoice" written on the document). The proforma invoice essentially serves as a 'quotation' that sets the road to

further negotiations. Some exporters choose to prepare an 'official' quotation, while others prefer to use the

proforma invoice as their quotation. In fact, the quotation can contain the same information as a proforma

invoice. Sometimes a firm may send out a written quotation and the importer may ask for a proforma invoice. It

is important to note that there is no standard format for the proforma invoice and one proforma invoice may

differ redically in layout from the next (although there is common agreement on the information that should be

included in the coument). It is a document prepared by the exporter and so will take the format/layout decided

on by the exporter.

Use of a Proforma Invoice

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In summary, the proforma invoice is a popular document in exporting because:

It is a widely accepted form of sales offer in the global export community.

It clearly outlines all of the relevant information required to enable an export purchase decision to be

made by the importer

It is a legal document, which if accepted by the importer is considered the basis of a binding agreement

Banks and other financial institutions will commonly accept proforma invoices in order to establish a

Letter of Credit on behalf of the importer

The commercial invoice is almost identical to the proforma invoice (except for the title) and is thus easy

to prepare, thus minimising the possibility of errors.

Details Pertinent to the Proforma Invoice

The following details are pertinent to the setting up of the proforma invoice and need careful attention:

The document title should clearly state "Proforma Invoice"

The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail),

including physical (not postal) address

The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods

are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In

the case of transshipment, there may be an intermediate consignee and their contact details and address

should then also be included on the invoice.)

If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the

goods are being sent, then you should include both their contact details and addresses in the proforma

invoice

The name of the person and company to notify once shipment has taken place and their contact details

and physical address (here the contact details such as telephone, fax and cell number and e-mail address

are more important than the physical address)

A proforma invoice reference number

An order number or similar reference to correspondence between the supplier and importer

The date of issue of the proforma invoice (the 'quotation date') - quite important

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A complete, detailed and clear description of the goods in question, incorporating the appropriate HS

codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may

not be the same in the importing country and may thus incur additional or higher duties to the importer's

detriment because of their inadvertent misuse)

The quantity of goods in question, including the number of units/items

The packing details, including their external dimensions, cubic capacity, weight, numbers and contents

of each package shipped, and kinds of packaging involved (pallets, boxes, bags, etc.)

The grand total price of the goods for the whole consignment

Where applicable, the unit prices should be indicated - the unit price multiplied by the number of

units/items should be reflected in the line total. The various line totals (in the case where different items

are included in the same commercial invoice, or where additional services are itemised in the invoice),

should add up to the total price for the whole consignment (also referred to as the 'Grand Total')

The currency in which the goods will be sold (e.g. US dollars or rands)

The type and amount of any discount given, where applicable

The likely delivery schedule and delivery terms

The payment methods (for example cash in advance, documentary collection, L/C, etc.)

The payment terms (for example 30 days on sight)

The Incoterms to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.)

Who is responsible for the banking fees and other related costs (insurance and freight costs are covered

by the incoterms in question)

What the freight and insurance charges are

The exporter's banking details

A declaration of the country of origin of the goods

The expected country of final destination

Any freight details such as the port of loading and discharge

Any additional exporter-provided services that should be added to the invoice to come to the grand total

Any transhipment requirements

The validity of the proforma invoice - that is, when does the offer expire (leaving it open-ended could be

very risky)

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Any other information relevant to the order

Make sure the proforma invoice is signed, together with the signature's name written underneath, with

initials, title and position

Pro forma invoices are not used for payment purposes. A pro forma invoice should include two statements. One

that certifies the pro forma invoice is true and correct and another that gives the country of origin of the goods.

The invoice should also be clearly marked "pro forma invoice."

Pro forma invoices are models that the buyer uses when applying for an import license, opening a letter of credit

or arranging for funds. In fact, it is a good practice to include a pro forma invoice with any international

quotation, regardless of whether it has been requested or not. When final commercial invoices are being

prepared prior to shipment, it is advisable to check with the U.S. Department of Commerce or another reliable

source for any special invoicing requirements that may be required by the importing country.

The Commercial Invoice

After the pro-forma invoice is accepted by the importer, the exporter must prepare a commercial invoice. The

commercial invoice is required by both the exporter (to obtain the necessary export documents to enable the

consignment to be exported, to prove ownership and to enable payment) and importer (who requires the

commercial invoice to facilitate the import of the goods into the country in question). In exporting, the

commercial invoice is considered a very important document as it serves as the starting or initiating document

that underpins the rest of the export transaction.

The commercial invoice is essentially a bill (i.e. invoice) from the seller (the exporter) to the buyer (the

importer) describing the parties to the agreement, the goods to be sold, and the terms involved, as agreed

between the exporter and importer. As such, the commercial invoice is the final bill exchanged between the

seller and the buyer. The commercial invoice will normally be presented on the exporter's letterhead and will be

addressed to the importer. It should contain full details of the consignment, including price and other related

costs, in order to facilitate customs clearance. It must also be signed and dated. Freight and insurance, when

included in the selling price, should be itemised separately as these charges are not subject to duty in certain

countries. It is important that the commercial invoice clearly differentiates between the dutiable component of

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the order (the market value of the order), any other typically non-dutiable charges such as freight and insurance,

and the total invoice value of the order. The commercial invoice is used by Customs authorities throughout the

world for assessing Customs duties, inspection purposes, and for the keeping of statistics.

Custom’s and Consular InvoicesSome countries, however, may require the commercial invoice to be completed on their own specified forms -

such commercial invoices are known as "Customs' invoices" and may be provided in lieu of or in addition to the

standard commercial invoices referred to above. In addition, a "consular invoice" is required by certain

countries. The consular invoice must be prepared in the language of the destination country and can be obtained

from the country's consulate, and often must be "consularised" (i.e. stamped by an authorised Consul official in

the exporting country).

From the Proforma to the Commercial InvoiceThere is usually very little, if any, difference between the final proforma invoice accepted by the importer and

the commercial invoice, except that the one is titled "Proforma Invoice", while the other is titled "Commercial

Invoice". Although the proforma invoice comes before the commercial invoice, the proforma invoice really

only serves as a means of negotiating the actual contract. The proforma invoice is the 'offer' put to the importer

by the exporter. The importer may accept the terms specified in the proforma invoice, but a more likely scenario

is that the importer will negotiate some of these terms with the exporter. There may be some backward and

forward communication between the exporter and importer before the importer finally agrees to the transaction.

Once the importer indicates that he/she is happy with the terms of the contract as outlined in the proforma

invoice, the exporter will then be requested to provide the importer with a commercial invoice. The commercial

invoice should reflect the final (agreed-upon) profroma invoice exactly - any deviances will result in problems

executing the transaction and/or receiving payment.

Based on the terms specified in this commercial invoice, the importer will instruct his/her bank (referred to as

the issuing bank) to issue a letter of credit (L/C). This L/C (or the documentation associated with any other form

of payment) will also need to reflect the terms specified in the commercial invoice exactly, while all subsequent

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documentation must reflect the terms of the L/C; there can be no exceptions. From this explanation, it is clear

that the commercial invoice plays a central role in an export transaction.

What should appear in the Commercial Invoice?

The following details should appear in the commercial invoice:

The document title should clearly state "Commercial Invoice"

The name of the exporter (referred to as the shipper) and their contact details (tel, fax, cell, e-mail),

including physical (not postal) address

The name of the importer (referred to as the consignee, meaning the person or firm to whom the goods

are to be sent) and their contact details (tel, fax, cell, e-mail), including physical (not postal) address (In

the case of transshipment, there may be an intermediate consignee and their contact details and address

should then also be included on the invoice.)

If the person or firm buying the goods (the importer) is not the same as the person or firm to whom the

goods are being sent, then you should include both their contact details and addresses in the commercial

invoice

The name of the person and company to notify once shipment has taken place and their contact details

and physical address (here the contact details such as telephone, fax and cell number and e-mail address

are more important than the physical address)

A commercial invoice reference number

A purchase order number or similar reference to correspondence between the supplier and importer

The date of issue of the commercial invoice

A complete, detailed and clear description of the goods in question, incorporating the appropriate HS

codes and brandmarks if applicable (here the importer may ask you to remove these codes as they may

not be the same in the importing country and may thus incur additional or higher duties to the importer's

detriment because of their inadvertent misuse)

The quantity of goods in question, including the number of units/items

The packing details unless provided in a separate packing list, including their external dimensions, cubic

capacity, weight, numbers and contents of each package shipped, and kinds of packaging involved

(pallets, boxes, bags, etc.) - if a separate packing list is used, reference should be made in the

commercial invoice to the packing list

The grand total price of the goods for the whole consignment

Where applicable, the unit prices should be indicated - the unit price multipled by the number of

units/items should be reflected in the line total. The various line totals (in the case where different items

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are included in the same commercial invoice, or where additional services are itemised in the invoice),

should add up to the total price for the whole consignment (also referred to as the 'Grand Total')

The currency in which the goods will be sold (e.g. US dollars or rands)

The type and amount of any discount given, where applicable

The likely delivery schedule and delivery terms

The payment methods (for example cash in advance, documentary collection, L/C, etc.)

The payment terms (for example 30 days on sight)

The Incoterm to be used (Incoterms 2000 - FAS, CIF, CFR, DDP, etc.)

Who is responsible for the banking fees and other related costs (insurance and freight costs are covered

by the incoterm in question)

What the freight and insurance charges are

The exporter's banking details

A declaration of the country of origin of the goods

The expected country of final destination

Any freight details such as the port of loading and discharge

Any additional exporter-provided services that should be added to the invoice to come to the grand total

Any transhipment requirements

The validity of the commercial invoice - that is, when does the offer expire (leaving it open-ended could

be very risky)

Any other information relevant to the order

Make sure the commercial invoice is signed, together with the signature's name written underneath, with

initials, title and position

Commercial Invoices are the Basis for Assessing Duties and Statistics

Commercial invoices are often used by governments to determine the true value of goods when assessing

customs duties and recording trade statistics. Governments that use the commercial invoice to control imports

will often specify its form, content, and number of copies, language to be used, and other characteristics.

Examples of commercial invoice

Unzco commercial invoice

Meridian commercial invoice

BellAir commercial invoice

Incoterms or Terms of Sale In any sales agreement, it is important that there is a common understanding of the delivery terms since

confusion over their meaning can result in a lost sale or a loss on a sale. The terms in international business

http://www.unzco.com/basicguide/figure11.html

http://www.meridianiq.com/resources/docs/packing_list.pdf

http://www.unzco.com/basicguide/figure2.html

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transactions often sound similar to those used in domestic business, but they frequently have very different

meanings. For this reason, the exporter must know the terms before preparing a quotation or a pro forma

invoice.

There are a number of common sale or trade terms used in International Trade to express the sale price and

corresponding rights and responsibilities of the seller and the buyer. The International Chamber of Commerce

regulates these terms.

Then the exporter and the importer agree on the terms of delivery, they legally bind themselves the four

legal aspects of the transactions, which are:

Which cost does the exporter and which are to be paid by the importer pay?

Which costs the exporter will obtain and at whose expense?

When the title of the goods and responsibility for them passes from the exporter to the importer?

Where and when the goods are delivered?

The following are a few of the more frequently used terms in international trade:

EXW-Export WorksThe seller’s obligation to the deliver the goods under this term is complete when he passes the goods at the

disposal of the buyer at his own premises and other places named therein, i.e. works, factory, warehouse etc. not

cleared for export and not loaded on any collecting vehicle. This term thus enjoys the minimum for the seller.

The buyer has to bear all the cost and risks. This term should therefore not be used if buyer cannot carry out the

export formality himself.

FCA-Free CarrierHere the seller’s obligation to deliver the goods is complete when he delivers to the carrier nominated by the

buyer at the named place cleared for export. If the chosen place is the exporter’s premises then the seller is

responsible for loading. If it occurs at any other place, the seller is not responsible for unloading.

FAS-Free Alongside Ship

Under this term the seller delivers the goods by placing them alongside the vessel at the named port of

shipment. The buyer bears all the cost and risk of loss of or damage to the goods from that moment. This term

can be used only of sea or inland waterway transport.

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FOB-Free on Board

Under this term, the seller fulfills his obligation of delivery when goods pass the ship’s rail at the named port of

shipment. Form that point onwards buyer bears all costs and risks. The seller clears the goods for export. If the

intention is not to deliver the goods across the ship’s rail, FCA terms should be used.

CFR-Cost and Freight

In CFR also, obligation of delivery is fulfilled when the goods pass the ship’s rail at the port of shipment. The

only addition is that the seller also pays the freight necessary to bring the goods to the named port of destination

but the risk of loss of or damage to the goods and also additional costs occurring after the time of delivery are

transferred from seller to the buyer. Under this term the seller clears the goods for export. This term can be used

only for the sea or inland waterway transport. If the parties do not intend to deliver the goods across the ship’s

rail, the term should be used.

CIF-Cost, Insurance and Freight

Here again the delivery point is the goods passing the ship’s rail in the port of shipment. The seller however

paid the cost and freight necessary to the named port of destination and contracts for insurance and pays the

insurance and pays the insurance premium and the risk of loss of or damage to the goods and additional costs

occurring after the time of delivery at transferred from the seller to the buyer. The seller obtains the insurance

only for the minimum cover. If the buyer whishes to have a greater cover, he would either need to agree with

the seller expressly or to make his own extra insurance arrangements. Clearance of goods for export is the

responsibility of the seller under this term as well. It can be used for sea and inland waterway transport. If the

parties do not intend to deliver the goods across the ship’s rail, the CIP terms should be used.

CPT-Carriage Paid To

It denotes that seller delivers to the carrier nominated by him. If subsequent carriers are used, the risks pass

when the goods have been delivered to the first carrier. The must in addition pay the cost of carriage to bring the

goods to the named destination. The buyer bears all the risks and any cost occurring after the goods have been

so delivered. Here too, obtaining the export clearance is the responsibility of the seller. It can be used for any

mode of transport including multi-modal transport.

FAO/FOB Airport

'FOB Airport' is based on the same main principle as the ordinary FOB term. You fulfill your obligation by

delivering the goods to the air carrier at the airport of departure. Without the buyer's approval delivery at a town

terminal outside the airport is not sufficient, your obligations with respect to costs and risks do not extend to the

arrival of the goods at the destination.

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CIP-Carriage and Insurance Paid To

The term corresponds to CPT except that under CIP the seller also to procure insurance against risk of loss of

or damage to the goods during the carriage. The seller therefore has to obtain the insurance and pay the

insurance premium for a minimum cover. For any additional cover, the buyer needs to either have express

arrangements with the seller or make his own arrangement. Here again if subsequent carriers are used, the risks

passes when the goods have been delivered to the first carrier and clearance of goods for export is the

responsibility of the seller. The term can be used for any mode of transport including multi-modal transport.

DAF-Delivered At Frontier

Under this term the seller delivers the goods by placing them at disposal of the buyer on arriving means of

transport not unloaded, cleared for export but not cleared for imports at the named point/place at the frontier but

before the custom border at the adjoining country. Since the term frontier includes the frontiers of the country of

export naming the point and the place in the term is of vital importance. For making the seller responsible for

the unloading of the goods and to bear the risk and cost therefore explicit working to this effect need to be

included in the contract. The term can be used for any mode of transport when goods are to be delivered at the

land frontier. When the delivery is to take place in the port of destination on board, a vessel or on the quay, the

DES or DEQ terms should be used.

DES-Delivered Ex Ship

This term applies that the seller delivers the goods by placing them at the disposal of the buyer on the board, the

ship not cleared for import at the named port of destination. The seller bears all the cost and the risk involved in

bringing the goods to the named port of destination before their discharge. If the parties intend the seller to bear

the cost and risk of discharging goods then the DEQ term should be used. This term can be used for sea or

inland waterways or multimode transport on a vessel in the port of destination.

DEQ-Delivered Export Quay

The point of delivery at this term moves to the quay not cleared for export at the named port of destination. The

seller bears the cost of discharging the goods in quay in addition to the cost of risk involved as per the term

DES. The term DEQ has been modified in the incoterms 2000 and is a total reversal from the previous

incoterms version. Under the modified DEQ term the buyer clears the goods for imports and pays all

formalities, duties, taxes and other charges. If the buyer still wants the seller to undertake import clearance, it

should be made clear by adding an explicit warning. This term can be used only when the goods are to be

delivered by sea or inland waterways or multimode transport on discharging from a vessel onto the port of

destination. If the parties intend to include in the seller’s obligation the risk and cost of handling of the goods

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from the quay to another place (warehouse, terminal transportation station) in or outside the port, the DDU or

DDP should be used.

DDU-Delivered Duty Unpaid

This term can be used irrespective of the mode of transport, but when the delivery is to take place in the port of

destination on board, the vessel or on the quay, the DES or DEQ terms should be used. Under DDU, the seller

delivers the goods to the buyer not cleared for import, not unloaded from any arriving means of transport at the

named place of destination. The seller bears the cost and the risk involved in bringing goods there to other than,

where applicable, any duty of import in the country of destination. The term duty includes the responsibility for

and the risk in the carrying out the customs formalities, the payment of such formalities, custom duties, taxes

and other charges. Such duty has to be borne by the buyer, so also any costs and risks caused by his failure to

clear the goods for import in time. If the intention is to make the seller carry out customs formalities and bears

the risks resulting there from as well as some of the costs payable upon import of goods. This should be made

clear by adding explicit wording to this effect in the contract of sale. The responsibility, risks and costs for

unloading or reloading of the buyer or the seller.

DDP-Delivered Duty Paid

Under the term the seller delivers the goods to the buyer cleared for imports but not unloaded from any arriving

means of transport at the named place of destination. Thus all cost and risk involved in bringing the goods there

to including, wherever applicable, any duty for import in the country of destination. Thus the term represents

minimum obligation to the buyer and maximum obligation to the seller. It should, therefore not be used if the

seller is unable to obtain the import clearance. It the parties wish the buyer to bear all risks and costs of import

the DDU term should be used.

EXPORT PROCESS Enquiry

Quotation

Order confirmation

Letter of Credit

Production planning

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Production of material

Dispatch

Preparation of Pre-shipment documents

Arrival at port

Shipment

Preparation of Post-shipment documents

Document negotiation with bank

Payment realization

Fig. 3: Export Process

PROCEDURE FOR EXPORTThere are various steps involved for the proper procedure of export of a product. These are as follows:

RECEIPT OF AN ENQUIRY.

CHECK ON RESTRICTIONS ON FOREIGN EXCHANGE AND IMPORT IN THE IMPORTER’S COUNTRY.

SCRUITINISE THE ORDER.

ACKNOWLEDGEMENT OF THE ORDER.

ARRANGING FOR GOODS.

EXPORT LICENCE.

CENTRAL EXCISE CLEARANCE.

APPLY TO EXPORT INSPECTION COUNCIL OF INSPECTION.

APPLY FOR MARINE INSURANCE POLICY, IF IT IS A C.I.F. QUOTATION.

ISSUE INSTRUCTIONS TO THE CLEARING AND FORWARDING AGENT.

CLEARING AND FORWARDING AGENTS ROLE FOR SHIPPING AND CUSTOMS AT PORT.

DOCUMENTS RETURNED BY THE FORWARDING AGENTS.

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SHIPPING ADVICE TO IMPORTER.

PRESENTATION OF DOCUMENTS BY THE BANK.

CENTRAL EXCISE REBATE.

DUTY ENTITLEMENT PASSBOOK SCHEME

STEP 1:- Receipt of an Enquiry

It is not possible to attend personally to all of these enquiries, as it would not be economical to do so. The best

way to do this is to ask the enquirers themselves to supply information about their business.

If the enquirer is well established, he will be glad to give the information asked for, but if he refuses to do so

than it is fair evidence that his intensions are not good.

The exporter after having satisfied himself that the enquirer abroad is a fit person and is capable of meeting his

obligations should give him the details of his business.

STEP 2:- Check on Restrictions on Foreign Exchange and Import in the Importer’s

Country

When the order is received its first decision is based upon the approval of credit. For example: War or any other

disturbances in the buyer’s country could lead to the restriction of transaction.

Therefore if the exporter is dealing with a well experienced importer, the latter will furnish full information with

reference to foreign exchange restrictions and import Licenses while placing the initial order.

STEP 3:- Scruitinise the Order The exporter should carefully scrutinize and check the contents of an export before its confirmation. If should

be broadly in accordance with the ‘elements of contract’ which might have been conveyed to the overseas

buyer, received along with the duplicate copy duly signed of export contract. The export should be scrutinized

on the following aspects:

Terms of payment

Documents

Delivery schedule

STEP 4:- Acknowledgement of Order In this step the order is to be acknowledged. The order must be acknowledged before the exporter states that

whether he would be able to fill it or not.

The acknowledgement should contain the essential features concerning the shipment which the exporter should

know.

STEP 5:- Arranging the GoodsAs soon as the export order has been confirmed or finalized, preparations are made for the production or

procurement of goods to be exported.

STEP 6:- Export License

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If the item being exported requires an export License, the same should be procured by the exporter from the

Licensing authority, i.e., chief Controller of imports and Exports.

STEP 7:- Central Excise Clearance The excisable goods can be exported outside India either under claim for rebate of excise duty or under bond.

STEP 8:- Apply to Export Inspection Council for Inspection Exporter should apply to EIC for pre-shipment inspection. Under the EIC an inspector will carry out the quality

control and inspection for exportable products.

After carrying out inspection the consignment is found to confirm to the prescribed specification.

STEP 9:- Apply for Marine Insurance Policy, if it is A C.I.F. Quotation As soon as the goods are ready for export, the exporter has to apply to insurance company for an insurance

cover/policy as the case may be. The policy would be for C.I.F. value plus 10% to cover expenses.

STEP 10:- Issue Instruction to the Clearing and Forwarding AgentA detailed note is prepared for the clearing and forwarding agent, giving instructions regarding the shipment of

the consignment.

STEP 11:- Clearing & Forwarding Agents Role For Shipping & Customs at the Port The clearing and forwarding agent then prepares the shipping bill and presents them along with the above

documents to the export department of the customs house.

STEP 12:- Documents Returned by the Forwarding Agent The master document is returned by the clearing and forwarding agent to the exporter along with:

Shipping bill

Original L/C

AR-4/AR-4A form in duplicate

Full set of clean-on-board of lading together with required number of non-negotiable copies.

STEP 13: Shipment Advice to Importer Intimation is sent to the imports, indicating the date of dispatch of goods and the name of ship by which they

have been sent.

STEP 14:- Presentation of Documents by the Exporter of the BankThe following documents are presented by the exporter for negotiation/collection.

Master Document

GR-1 form

Full set of clean-on-board bill of lading

Original L/C

Bank certificate in prescribed form

Marine Insurance Policy

Export Contract/Order

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Bill of Exchange

STEP 15:- Processing of Documents by the BankBank examines the documents with reference to the terms and conditions of the original order and also of the

letter of credit. The exporter’s bank screens the above documents and sends a set of the following documents to

the importer’s bank:

Master Document Marine Insurance Policy Negotiable Bill of Lading Bill of Exchange

STEP 16:- Central Excise Rebate

A claim is filled by the exporter with the concerned maritime collector of Central excise for rebate on central

excise duty.

STEP 17:- Duty Entitlement Passbook Scheme

The exporter should file an application to the Licensing authority for an advance License/special License in

accordance with export/import policy of the country at point of time.

LOGISTICS PROCESSLogistics is the management of the flow of goods, information and other resources, including energy and

people, between the point of origin and the point of consumption in order to meet the requirements of

consumers (frequently, and originally, military organizations). Logistics involve the integration of information,

transportation and inventory, warehousing, material-handling, and packaging.

Logistics ManagementLogistics management is that part of the supply chain which plans, implements and controls the efficient,

effective forward and reverse flow and storage of goods, services and related information between the point of

origin and the point of consumption in order to meet customers' requirements. A professional working in the

field of logistics management is called a logistician.

Logistics Management SoftwareSoftware is used for logistics automation which helps the supply chain industry in automating the work flow as

well as management of the system. There is very few generalized software available in the new market in the

said topology. This is because there is no rule to generalize the system as well as work flow even though the

practice is more or less the same. Most of the commercial companies do use one or the other custom solution.

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But there are various software that is being used within the departments of logistics. Few departments in

Logistics are namely, Conventional Department, Container department, Warehouse, Marine Engineering,

Heavy haulage, Etc.

The software that is used in these departments are:

Conventional Department: CVT software / CTMS software

Container Trucking: CTMS software

Warehouse: WMS

Note: In Hindalco, all the departments are interconnected with computer network system and the

software on which these department works is on the Oracle 11i platform. This software is connected with

Internet and the working in any department in any region of Hindalco will make effect in all over India.

A Brief Description of the Flow of Logistics Process

Fig. 4: Flow of Logistics Process in Brief

First of all Customer or Importer place their order to the company. This is done in the following two ways:

1. Through Export Office

2. Directly to Planning Office

Export

Office

Export

Office

ImporterImporter

Planning Dept.Planning Dept.

Production Process

Production Process

PackagingPackaging

Finished Goods Warehouse

Finished Goods Warehouse

Export Control

Head

Export Control

Head

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1. Through Export OfficeFor placing their order, Customer or Importer contacts to their respective Export Office. There must be one

Export Control Head who can deal with that order. Export Control Head sends the information about the order

to the Planning department. Planning dept. can make a plan to execute that order and sends the information

about the amount of production to the Production Plant. After production, the product is being sent for

packaging. There packaging should be done according to the demand of the customer. When the product is

being packed, it is being sent to the Finished Goods Warehouse for storage. When the finished product reaches

to the warehouse, it can be informed to the Export Control Head that the product is ready for the delivery to the

customer. From warehouse the product reaches to the Export office and from there it reaches to the respective

Importer’s destination.

2. Directly to Planning OfficeThe second option for the customer to place their order is that they can place their order directly to the planning

office of the company. Rest all the process after planning till warehousing is same as through Export office

process. In this process the product is being delivered to the importer from the Finished Goods Warehouse

directly.

Logistics

Warehouse Inland Transportation Sea Transportation

Storage of Stuffing of By Sea By Air

Finished Goods Finished Goods

By Roadways By Railways

Fig. 5: Diagram Shows the Sub-Division of Export Logistics Process

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Flow of Export Logistics Process Implemented by Hindalco

Fig. 6: Flow of Export Logistics in Hindalco

Confirmation of the Export OrderConfirmation of the Export Order

Arrange empty Containers at ICD, Kanpur/Kolkata port based on Export OrderArrange empty Containers at ICD, Kanpur/Kolkata port based on Export Order

Container Indenting ProcessContainer Indenting Process

Indent Container in advance based on Production ScheduleIndent Container in advance based on Production Schedule

Inform Finished Goods Warehouse for segregating of material as per container loadInform Finished Goods Warehouse for segregating of material as per container load

Inform Finished Goods Warehouse with details of the OrderInform Finished Goods Warehouse with details of the Order

Pre-shipment Export Documentation & stuffing of materials in containersPre-shipment Export Documentation & stuffing of materials in containers

Excise Clearance (Filling ARE-1 form & Excise Invoice, Verification of exporting consignment by Excise Clearance Authority)

Excise Clearance (Filling ARE-1 form & Excise Invoice, Verification of exporting consignment by Excise Clearance Authority)

Arrival of consignment at Dry PortArrival of consignment at Dry Port

Custom ClearanceCustom Clearance

ShipmentShipment

Post-shipment DocumentationPost-shipment Documentation

Document NegotiationDocument Negotiation

Payment RealizationPayment Realization

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Step 1:- First of all, order is being confirmed.

Step 2:- Container Indenting Process Order for the container is given to the Shipping Line according to the Production schedule.

Container comes via ICD, Kanpur in case of Mumbai Shipment and directly via roadways or

railways in case of Kolkata Shipment.

A particular number is being allotted in the ICD or Kolkata port before sending it to the factory.

Information is being sent to the warehouse about the availability of containers for the stuffing of

containers.

Step 3:- According to the information, materials is being segregated as per container load in the Warehouse.

Step 4:- Stuffing of material in the containers is being done as well as Pre-shipment documents is being made

in this step.

Step 5:- After the stuffing of material, Excise Clearance office is being informed to do the Excise clearance

process. In this stage ARE-1 form and Excise Invoice is being filled by the exporter.

Step 6:- After the completion of Excise clearance process, stuffed containers is being sent to the respective

port according to their destination.

Step 7:- After the arrival of export consignment at the port, Custom Clearance process is being done by the

Custom clearing authority.

Step 8:- Shipment is being done after the Custom process is cleared.

Step 9:- Post-Shipment documents is being made by the exporter after the shipment of the consignments.

Step 10:- When the post-shipment documents are made, these documents are being sent to the bank for the

negotiation.

Step 11:- After negotiation, the documents are cleared for making payments which exporter receives. This

stage is called Payment Realization stage.

EXPORT DOCUMENTATION

Any export shipment involves a number of documents required mainly by the customs or port authorities.

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According to the Customs Act, the person Incharge of a conveyance-vessel, vehicle aircraft etc. cannot permit

loading of export cargo at the customs stations unless & until the formal permission given by proper customs

office is presented.

An improved system of documentation for exports announced by the government of India on 31st March, 1991

is fine and should be adopted by the exporters as far as possible. Export documentation work constitute heavy

on our export activity. It’s complex, cumbersome and costly. Some of the procedures that must be followed

when an exporter has marketed his goods and received an order. These procedures often involve a good deal of

documentation. This documentation is one of the major differences between trading in the home country as well

as in foreign country. The document materials to an export sales contract are not many in number.

The documents used differed in size and layout, despite the fact that most of the information requirements are

common to a number of them. Therefore they have to be completed individually.

Importance of Export Documentation

Once the goods are ready, an exporter has to prepare and execute various documents at different stages of

sending the shipment of goods to the importer. These documents are important for two reasons:

As an evidence of shipment and title of goods

For obtaining payment

The various documents are therefore of vital interest to the exporter and the bank which is the usual media of

payment. The documentary requirements are both regulatory and operational in nature and have to comply with

the rules and regulations of the Indian Government as well as the importing country for different type of

products. These requirements are different for different type of products.

Accuracy and completeness are a prime necessity in documents covering export shipments. Any alteration or

addition made by an Authority issuing the documents must be endorsed properly, with the signature of person

issuing the signature of person issuing the documents only. If the documents are not the correct ones, the

importer may not be able to get the goods when the ship arrives.

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One of the major purposes of documentation is to provide a specific and complete description of the goods, so

that they can be correctly assessed for import duty. But documentation also plays an important role in transport

arrangements, in payment and credit procedures and in relation to cargo insurance and claims.

Set of Documents Required For Exports

The following documents are generally required for export of products:

1. Invoice-in 4 copies plus 10 copies for certification.

2. Packing List in4 copies.

3. Mill’s Certificate in 3 copies.

4. Insurance Certificate in duplicate.

5. Certificate of Origin in 3 copies.

6. Bill of Exchange-in duplicate.

7. B/L-full set plus 2 non-negotiable copies.

8. Material Safety Data Sheets/Analysis Report in 3 copies.

9. SDF Form & Custom certified Invoice both in original.

10. Above mentioned L/C in original.

The Major Documents

Export documentation plays a vital role in international marketing as it facilitates the smooth flow of physical

goods and payments thereof across national frontiers. Export documentation is however complex as the number

concerned authorities to whom the relevant documents are to be submitted.

On the basis of the function to be performed export documents can be classified under four categories:

A. Trade Documents/Commercial Documents

The commercial documents are those by which customs of trade are required for effecting physical transfer of

goods and their title from the exporter to the importer. On an average there are 16 commercial documents. The

following 16 commercial documents are involved in the pre-shipment stage:

Pro-forma invoice

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Commercial invoice

Packing list

Shipping instruction

Intimation inspection

Certificate of inspection

Insurance declaration

Certificate of insurance

Shipping order

Mate’s receipt

Bill of lading

Application for certificate of origin

Certificate of origin

Bill of exchange

Shipping Advice

Letter to the bank for collection

Out of 16 documents 14 have been standardized and aligned to one another. Two documents viz; Shipping

Order and Bill of Exchange could not be standardized.

B. Regulatory Documents These are the documents which are required for complying with the rules and regulations governing export

trade transactions such as foreign exchange regulations, customs formalities, export inspection etc. The

regulatory documents associated with the pre-shipment stage of an export transaction are as follows:

Gate Pass-1/gate Pass-2

AR-4 form

Shipping bill/bill of export

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Export application/dock Challan/Port trust copy of shipping bill

Receipt for payment of port charges

Vehicle chit

Exchange Control declaration (GR/PP) Forms

Freight Payment Certificate

Insurance premium payment certificate

Out of the above 9 regulatory documents, 4 have been standardized.

C. Export assistance documents These are the documents which are required for claiming assistance under the various export assistance

measures or may be in operation from time to time. Presently these refer to import replenishment licenses, cash

compensatory support scheme drawback of central excise & custom duties & packing credit facilities.

D. Foreign documentation These are the documents which are required by the importer in order to satisfy the requirements of his

governments. These include:


Consular invoice

Quality control certificate etc.

Export documents can be classified into two categories depending upon the specific requirements:

Regulatory

Operational

Need for Export Documents Export documents have to be prepared for various purposes:

Declaration of exports as per exchange control regulation of the country.

Transport of the goods.

Customs clearance of the goods

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Other purposes.

Significance of Some Export Documents Some of the principal documents are discussed as follows:

Letter of credit

Export invoice

Packing list


Bill of lading

Shipping order/mate’s receipt

Shipping bill

Marine insurance policy

Letter of Credit

Letter of credit is an undertaking by the importer’s bank that if the exporter exports the goods and produces

documents as stipulated in the letter, the bank would make payment to the exporter. “Letter of credit” is the

most important single document in international trade. It forms the basis of very large volume of world trade.

Letter of credit provides great security to the exporter. “It is an arrangement by means of which (issuing bank)

acting at the request of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predetermined

amount by a given date according agreed stipulation and against presentation of stipulated documents.”

Salient Features

It is an undertaking by the bank.

It is an undertaking to make payment.

It is an undertaking to make on behalf of the person.

It is an undertaking given to the third party.

It is an undertaking given to the third person. (A person other than the one on whose behalf it is given)

It is a conditional undertaking, payment being subjected to compliance with some conditions.

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Parties to A Letter of Credit

A documentary credit has got four parties, namely:

APPLICANT (opener)

ISSUING BANK

BENIFICIARY

ADVISING BANK

Mechanism of L/C

Is to make payment to the order of a third party (the beneficiary), or is to accept and pay bills of exchange

drawn by the beneficiary; or

Authorizes another bank to effect such payment or to accept and pay such bill of exchange; or

Authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions

of the credit are complied with.

Types of a Letter of Credit

Revocable Letter of Credit: - It is a credit which can be revoked. A revocable L/C is the one which

can be cancelled or amended by the issuing bank at any time without prior notice to the beneficiary.

Revocable credits indicate the nature by a specific clause addressed to the advising bank.

Irrevocable Letter of Credit: - It is a firm undertaking on the part of issuing bank and cannot be

cancelled or amended without the consent of the parties to L/C, particularly the beneficiary. An irrevocable

credit constitutes a definite undertaking of the issuing bank to accept or pay bills drawn on another bank or

make payment.

Payment Credit: - It is a credit which will be paid at sight basis against presentation of requisite

documents to the designated paying bank. In a payment credit, beneficiary may or may not be called upon

to draw a draft.

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Deferred Payment Credit: - It is a usance credit where payment will be made by designated bank, on

respective due dates.

Acceptance Credit: - It is similarly to defer payment credit except for the fact that in this credit

drawing of a usance draft is a must. Under this credit, drafts must. Under this credit, drafts must be drawn

on the specified bank.

With recourse without recourse credit

Revolving letter of credit

Confirmed letter of credit

Transferable credit

Revolving credit

Transit credit

Bank to back credit

The sight credit

Usance credit

The deferred payment credit.

Export Invoice

Commercial InvoiceIt is one of the most important documents issued by the seller in the standardized format. The invoice is usually

made out of the full realizable amount of the Trader term. The invoice should be strictly as per the contract of

sale and must be signed by the seller or the person on his behalf.

Consular InvoiceA consular invoice is required to be prepared in a prescribed format and it should be signed/certified by the

council of the importing country located in the country of export. The main purpose of consular invoice is to

enable the importer’s country to collect accurate and authenticated information about the value, volume, quality,

source etc of the import for assessing Import duties and for other statistical purposes. It helps the importer to

get cleared the goods through the customs without any undue delay. This document is required mainly by the

Latin American countries like Kenya, Tanzania, Nigeria, Mauritius, New Zealand etc.

Packing List

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Packing list may be shown on invoice or separately and should contain item by item, the contents of cases or

containers or of a shipment with its weight and description set forth in such a manner as to permit checks of the

contents by the customs on arrival at the port of destination.

The packing list is a relatively simpler document and the whole of the information can be reproduced

from the master by masking information not desired on the packing list. Special information, if any can be

given in the blank space in the lower third position of the document. It is a list showing the details of goods

contained in each Parcel shipment. Packing list has to be prepared in the Aligned document from.

Bill of Lading A Bill of lading is a document issued by the sipping company or its agent, acknowledging the receipt of goods

for carriage which are deliverable to the consignee or his assignee in the same condition as they were received.

A bill of lading serves the following purposes:

It is a receipt of goods received by the shipment company.

A Contract with the carrier: it contains the terms of contract between the shipper and the shipping company, between stated points at a specific charge.

Evidence of title: It is a certificate of ownership or title to the goods.

Contents of Bill of lading The usual form of a bill of lading includes the following information:

Name of the shipping company.

Name of the shipper.

Name and address of the importer.

Name and address of the party to be notified on the arrival of shipment.

Name of the carrying vessel.

Name of the ports of loading and discharge.

Whether freight is payable or whether freight has been paid.

Number of originals in the set of bill of lading documents.

Marks and number identifying goods.

Brief description of the goods (including weights and dimensions).

Number of packages.

Signature of ship’s master or his agent.

Date on which goods were received for shipment.

Signature of the exporter (or his agent) and his designation applicable.

Importance of Bill of Lading

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It is a contract between the shipper and the shipping company for the carriage of goods to the port of

destination.

It is an acknowledgement indicating that the goods mentioned in the document have been received on

the board for the purpose of shipment.

It issue for claiming incentives offered by the government to exporters.

Marine Insurance Policy The safe conduct of the goods from the time it leaves the exporter’s godowns and till it reaches the warehouse

of the importer is what all the parties in the transaction pray for. It depends upon the safety of the goods during

the voyage and safety of the vessel that carries the goods. Marine insurance Policy offers the desired cover

against the loss or damage of the goods during the transit. It allows a free flow of international trade. In India

Marine insurance is governed by the marine Insurance act’ 1963. Section 3 of the act defines a contract of

marine insurance as “as agreement in which the insurer undertakes to indemnify the assured in the manner and

to the extent thereby agreed”.

Nature of Marine Cargo Insurance

Parties

Insurable interest

Utmost good faith

Indemnity

Assignment

Certificate of Origin This certificate certifies the place of origin of the merchandise’ Besides the federation of Indian Chamber of

Commerce and Industry, EPC’s and various other trade associations have been authorized government of India

to issue certificate of origin. These certificates are important in case of shipments to countries which have

preferential rates of tariff for Indian goods.

Certificates of origin are issued by Chamber of commerce on their own printed forms differing in sizes and

layout. The standard documents in respect of certificate of origin are included in the series of aligned

documents.

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A Certificate of origin declares the place of actual manufacture or growth of the goods. A country may place

restrictions on imports from certain countries.

Shipping Order/Mate’s Receipt When a cargo is loaded on the ship the commanding officer of the ship will issue a receipt called the mate’s

receipt for the goods. The mate receipt is first handed over the port trust authorities so that all the port dues are

paid by the exporter to the port trust.

The bill of lading is prepared by the shipping agent only after the male receipt has been obtained.

The aligned shipping order and the mate’s receipt have been prepared after examining the forms of the two

documents issued by the different shipping companies. The information required in these documents can be

reproduced with great ease from the master. The issuance of these documents in the standard from will also

facilitate the processing of documents at various stages.

Shipping Bill Shipping bill is required by the customs. It is only after the shipping bill is stamped by the customs that cargo is

allowed to be carted to the docks. The aligned shipping bill has been prepared after taking into consideration

the requirement of custom’s public notice no. 39 which suggests a uniform shipping bill for different categories

of exports. Basically shipping bill is of four types:

Export duty/cess

Free of duty/cess

Entitlement to duty drawback

Re-export of imported goods.

The format presented for shipping bill is as under:

White shipping bill.

Green shipping bill.

Yellow shipping bill.

Pink shipping bill.

Where goods are to be cleared by the Land customs, Bill of export is prepared instead of shipping bill.

Bill of Exchange

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A bill of exchange is an instruction by the exporter (drawer) to the (importer) or the importer’s bank to make

payment of the amount mentioned in it. A bill of exchange is a negotiable instrument and is governed by the

Negotiable Instruments Act in India and by similar enactments in other countries. The Negotiable Instruments

Act defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by the

maker directing a certain person to pay a certain sum of money only to or order of a certain person or to the

bearer of instrument”. A bill of exchange is also called as draft contains an order from the credit to the debtor to

pay a specified amount to a person mentioned therein.

There are three parties to B/E.

The Drawer (exporter):- The person who executes the B/E.

The Drawee (importer):- The person on whom the B/E is drawn and who is required to meet the terms

of the document.

The Payee (the exporter’s bank):- The party to receive the payment.

Types of Bill of Exchange Sight and usance bills.

D/A and D/P bills.

Inland and foreign bill.

GR Form The RBI to ensure that the foreign exchange receipts in respect of exports are repatriated to India has prescribed

this form. This has to be prepared in duplicate. The original copy has to be submitted to the customs authorities

at the port of shipment. This is sent to the RBI directly by the customs authorities. The duplicate copy is

submitted to the negotiating bank along with the other documents after shipment of goods. The negotiating bank

sends the duplicate copy to the RBI.

Common Defects in Documentation The bank making payment on behalf of its foreign correspondent must verify that all documents & drafts

conform precisely to the terms & conditions of the L/C. to avoid payment delays, the beneficiary should prepare

& examine all documents carefully before presenting them to the paying bank. Paying banks find that the

following discrepancies between the documents & the letter of credit occur most frequently:

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i. Drafts are presented after L/C has expired or after time for shipment has expired.

ii. Invoice value or draft exceeds amount available under L/C.

iii. Charges included in the invoice are not authorized in the L/C.

iv. Amount of insurance coverage is inadequate or coverage does not include risks required by the L/C.

v. Insurance document is not endorsed and/or countersigned.

vi. Date of insurance policy or certificate is later than the date on bill of lading.

vii. Bills of lading are not “clean” that is, they bear notations that qualify good order & condition of

merchandise of its packing.

viii. Bills of lading are not marked “On Board” when so required by L/C.

ix. “On Board” endorsement or charges on bills of lading are not signed by carrier or its agent or initialed by

party who signed bills of lading.

x. “On Board” endorsement is not dated.

xi. Bills of lading are not endorsed.

xii. Bills of lading are made out “to order” (Shipper’s order, Blank endorsed) where L/C stipulates “Straight”

(direct to consignee bills of lading or vice versa.

xiii. Bills of lading do not indicate, “Freight prepaid” as stipulated in the L/C.

xiv. B/L are not marked “Freight prepaid” when freight charges are included in invoice.

xv. Descriptions, marks & nos. of merchandise are not same on all documents presented or are not as required

by L/C.

xvi. Not all documents required by L/C are presented.

xvii. Invoice states “used”, “Second hand” or “rebuilt” merchandise when L/C does not authorize such

condition.

xviii. Invoice does not specify shipment terms (C & F, CIF, FOB, etc) as stated in L/C.

xix. Invoice is not signed as L/C requires.

Process of Getting Custom Clearance

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Fig. 7: Process of Getting Custom Clearance

GOVERNMENT POLICIES FOR EXPORT

EXIM Policy

The EXIM Policy was announced by the government on 1st April, 1992 which is effective for a period of 5

years upto March, 1997 co-terminus with the 8th Five year Plan. This is the first time that an EXIM Policy for a

Five Year Plan was announced against earlier policies for 3 years or one year duration. This was done in

response to the appeal made by the trade that frequent and radical changes in the EXIM policy had adversely

affected country’s export efforts and the credibility of the Indian exporters abroad.

The changes in the present EXIM Policy announced on 31st March, 1995 are a result of the intense interaction

between trade and industry. One of the highlights of revised policy is the widening of the scope of the Export

Promotion Capital Goods (EPCG) scheme to provide for zero duty import of capital goods of a value of at least

Rs. 20 crores.

Exports and imports in India are governed by the EXIM policy published by the Director General of Foreign

trade (DGFT).

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The EXIM policy allows imports and exports from/to any country in the world except Fiji, Iraq, Yugoslavia

(Serbia and Montenegro).

Main Objectives of EXIM Policy

Globalization of India’s foreign trade.

Augmenting exports by facilitating access to imported inputs.

Promoting efficient and internationally competitive import substitution.

Encouraging high and internationally accepted standards of quality.

Transparency in the export-import policies, minimization of quantitative restriction/licensing and other

discretionary controls.

Strengthening and stimulating the country’s research and development capabilities.

Simplifying and streamlining procedures governing imports and exports.

EXPORT INCENTIVESThe Government of India has framed several schemes to promote exports and to obtain foreign exchange. These

schemes grants incentive and other benefits. The few important export incentives, from the point of view of

indirect taxes are briefed below:

Free Trade Zones (FTZ)Several FTZs have been established at various places in India like Kandla, Noida, Cochin, etc. No excise duties

are payable on goods manufactured in these zones provided they are made for export purpose. Goods being

brought in these zones from different parts of the country are brought without the payment of any excise duty.

Moreover, no customs duties are payable on imported raw material and components used in the manufacture of

such goods being exported. If entire production is not sold outside the country, the unit has the provision of

selling 25% of their production in India. On such sale, the excise duty is payable at 50% of basic plus additional

customs or normal excise duty payable if the goods were produced elsewhere in India, whichever is higher.

Electronic Hardware Technology Park / Software Technology Parks

138

This scheme is just like FTZ scheme, but it is restricted to units in the electronics and computer hardware and

software sector.

Advance License/ Duty Exemption Entitlement Scheme (DEEC)

In this scheme advance license, either quantity based (Qbal) or value based (Vabal), is given to an exporter

against which the raw materials and other components may be imported without payment of customs duty

provided the manufactured goods are exported. These licenses are transferable in the open market at

a price.

Export Promotion Capital Goods Scheme (EPCG)

According to this scheme, a domestic manufacturer can import machinery and plant without paying customs

duty or settling at a concessional rate of customs duty. But his undertakings should be as mentioned below:

Customs Duty Rate Export Obligation Time

10% 4 times exports (on FOB basis) of CIF value of machinery.

5 years

Nil in case CIF value is Rs200mn or more. 6 times exports (on FOB basis) of CIF value of machinery or 5 times exports on (NFE) basis of CIF value of machinery.

8 years

Nil in case CIF value is Rs50mn or more for agriculture, aquaculture, animal husbandry, floriculture, horticulture, poultry and sericulture.

6 times exports (on FOB basis) of CIF value of machinery or 5 times exports on (NFE) basis of CIF value of machinery.

8 years

Table 2: Undertaking of EPCG

Note:-

NFE stands for net foreign earnings.

CIF stands for cost plus insurance plus freight cost of the machinery.

FOB stands for Free on Board i.e. export value excluding cost of freight and insurance.

Deemed Exports The Indian suppliers are entitled for the following benefits in respect of deemed exports:

Refund of excise duty paid on final products

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Duty drawback

Imports under DEEC scheme

Special import licenses based on value of deemed exports

The following categories are treated as deemed exports for seller if the goods are manufactured in India:

Supply of goods against duty free licenses under DEEC scheme

Supply of goods to a 100 % EOU or a unit in a free trade zone or a unit in a software technology park or

a unit in a hardware technology park

Supply of goods to holders of license under the EPCG scheme

Supply of goods to projects financed by multilateral or bilateral agencies or funds notified by the

Finance Ministry under international competitive bidding or under limited tender systems in accordance

with the procedures of those agencies or funds where legal agreements provide for tender evaluation

without including customs duty

Supply of capital goods and spares upto 10% of the FOR value to fertilizer plants under international

competitive bidding

Supply of goods to any project or purpose in respect of which the Ministry of Finance permits by

notification the import of goods at zero customs duty along with benefits of deemed exports to domestic

supplies

Supply of goods to power, oil and gas sectors in respect of which the Ministry of Finance permits by

notification benefits of deemed exports to domestic supplies

Manufacture under Bond

This scheme furnishes a bond with the manufacturer of adequate amount to undertake the export of his

production. Against this the manufacturer is allowed to import goods without paying any customs duty, even if

he obtains it from the domestic market without excise duty. The production is made under the supervision

of customs or excise authority.

Duty Drawback

It means the rebate of duty chargeable on imported material or excisable material used in the manufacturing of

goods in and is exported. The exporter may claim drawback or refund of excise and customs duties being paid

by his suppliers. The final exporter can claim the drawback on material used for the manufacture of export

products. In case of re-import of goods the drawback can be claimed.

The following are Drawbacks:

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Customs paid on imported inputs plus excise duty paid on indigenous imports.

Duty paid on packing material.

Drawback is not allowed on inputs obtained without payment of customs or excise duty. In part payment of

customs and excise duty, rebate or refund can be claimed only on the paid part.

In case of re-export of goods, it should be done within 2 years from the date of payment of duty when they were

imported. 98% of the duty is allowable as drawback, only after inspection. If the goods imported are used

before its re-export, the drawback will be allowed as at reduced per cent.

Process Involved in Getting Export Incentives

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Fig. 8: Process of Getting Export Incentives

Shipping Bill for Export of Goods under claim for DEPB Scheme is made after shipment

BRC is prepared for claiming the export incentives

A bunch of 20-25 Shipping Bills and their respective BRCs has been made for one

application

Various data regarding export made are feeded in the Excel system for the purpose of online

feeding on the DGFT Site

Necessary application fee in the form of EFT is made through system

The application is digitally signed and submitted to Jt. DGFT, Varanasi through the

Internet Site

Hard copy of Application form along with E.P. copy of Shipping Bills & original BRCs has been sent to Jt. DGFT, Varanasi for issuing

DEPB License

After receipt of DEPB license, this license along with respective DEPB copy of shipping bills & duplicate copy of BRCs & a statement showing comprehensive details of claims has been sent to respective customs house through the clearing

agents for verification

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Step 1: – First of all, Shipping Bill has been made for claiming the Export Incentives. It is made as SHIPPING

BILL FOR EXPORT OF GOODS UNDER CLAIM FOR DUTY ENTITLEMENT PASS BOOK (DEPB)

SCHEME. Under this the main things which have been covered are:--

1. Invoice No. & Date

2. Custom House agent’s Description

3. Nature of Contract

4. Exchange Rate

5. Currency of Invoice

6. Statistical Code & Description of Goods & Exim Scheme code where applicable.

7. Analysis of Export Value

8. Amount

9. DEPB Rate

10. Rate List Sr. No.

11. Product Group

12. DEPB No.

13. LET Export date Passed for Shipment

There are two copies of this document. 1st one is export promotion copy & the 2nd one is DEPB copy. These

document having the stamp of Custom & Excise and the signature & seal of Custom Inspector.

Step 2: – When Shipping Bill has been prepared, after that Bank Realization Certificate (BRC) has been made

for negotiation process in claiming the Export Incentives. This document has two parts; the 1st part contains 17

columns named Invoice no. & date, Shipping Bill no. & date, Description of goods, Bill of Ladings’ no. & date,

Destination, Bill amount, Freight amount, Insurance amount Commission Paid, FOB value, Date of realization

of export proceeds and No., date & category of applicable Licence which has been filled by the exporter. Under

these columns Place, Date, Seal & Signature of the exporter have been mentioned. The 2nd part of this document

contains Bank’s Certificate which has to be filled by the Banker with their authorization seal & signature.

When the exporter gets this BRC, it means that exporter had got the exported amount in his bank account.

Step 3: – After getting the BRC from the bank, one application have been prepared for a bunch of 20-25

Shipping bills and their respective BRCs. This application is in favor of the Jt. Director General of Foreign

Trade (DGFT). Description of application for issue of DEPB license, description of EFT towards the

application fee, description of Export Promotion Copy of Shipping Bills & the description of self-addressed

envelop with a relevant amount of stamp fixed on it have been mentioned in this application.

Step 4: – On the DGFT site, there is application software for filling the data regarding export made. For this

purpose various data regarding export made are feeded in the Excel system.

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Step 5: – After filling the necessary information regarding export made in the DGFT site, relevant application

fee in the EFT form is made through system.

Step 6: – After that application is digitally signed & submitted to DGFT through the Internet.

Step 7: – A hard copy of application form has been made and along with Export Promotion Copy of Shipping

Bills & original BRCs, it has been sent to Jt. DGFT, Varanasi for issuing DEPB License.

Step 8: – After getting the DEPB license from DGFT, this license along with respective DEPB copy of

shipping bills & original BRCs & a statement showing comprehensive details of claims, it has been sent to

respective customs house through the clearing agents for verification.

The DEPB license from DGFT which an exporter receives after the verification of application regarding export

made under DEPB scheme contains the following:

1. Authorization Forwarding Letter

2. DEPB License

3. Details of the exported items

4. Application Submission Details

5. DEPB E-Commerce Version, under this-

IEC Details

Application Firm Details

Nature of Concern

Type of Exporter

Industrial Registration Details

Service Tax Registration Details

RCMC Registration Details

Status House Details

Excise Details

VAT Details

Past Turnover (Rs. Lakhs)

Name & Address of the exporter

Payment Details

FOB value of Exports

DEPB Claimed

DEPB Applied for

DEPB Entitlement for 100%

DEPB Entitlement after cut

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Shipping Bills Details

Declaration/Undertaking

Signature & Description of the applicant

Sign of DGFT

is being covered.

EXPORT FINANCE

Financial assistance to the exporters are generally provided by Commercial Banks, before shipment as well as

after shipment of the said goods. The assistance provided before shipment of goods is known as per-shipment

finance and that provided after the shipment of goods is known as post-shipment finance. Pre-shipment finance

is given for working capital for purchase of raw-material, processing, packing, transportation, ware-housing etc.

of the goods meant for export. Post-shipment finance is provided for bridging the gap between the shipment of

goods and realization of export proceeds. The later is done by the Banks by purchasing or negotiating the export

documents or by extending advance against export bills accepted on collection basis. While doing so, the Banks

adjust the pre-shipment advance, if any, already granted to the exporter.

Pre-Shipment Finance

An application for pre-shipment advance should be made by you to your banker along with the following

documents:

Confirmed export order/contract or L/C etc. in original. Where it is not available, an undertaking to the

effect that the same will be produced to the bank within a reasonable time for verification and

endorsement should be given. An undertaking that the advance will be utilised for the specific purpose

of procuring/manufacturing/shipping etc., of the goods meant for export only, as stated in the relative

confirmed export order or the L/C. If you are a sub-supplier and want to supply the goods to the

Export/Trading/Star Trading House or Merchant Exporter, an undertaking from the Merchant.

Exporter or Export/Trading/Star Trading House stating that they have not/will p 7 3 not avail

themselves of packing credit facility against the same transaction for the same purpose till the original

packing credit is liquidated. Copies of Income Tax/Wealth Tax assessment Order for the last 2-3 years

in the case of sole proprietary and partnership firm. Copy of Exporter's Code Number (CNX). Copy of a

valid RCMC (Registration-cum-Membership Certificate) held by you and/or the Export/Trading/Star

Trading House Certificate. Appropriate policy/guarantee of the ECGC.

145

Any other document required by the Bank. For encouraging exports, R.B.I. has instructed the banks to

grant pre-shipment advance at a concessional rate of interest. The present rate of interest is 10% p.a. for

pre-shipment advance upto an initial period of 180 days. Pre-shipment advance for a further period of 90

days is given at the concessional rate of 13% p.a. Banks are free to determine the interest rate for

advances beyond 270 days and upto 360 days.

Following special schemes are also available in respect of pre-shipment finance:

Exim Bank's scheme for grant of foreign currency pre-shipment credit to exporters for financing cost of

imported inputs for manufacture of export products.

Scheme of export packing credit to sub-suppliers from export order.

Packing credit for deemed exports.

Pre-shipment Credit in Foreign Currency (PCFC). For further details refer to Nabhi's "How to Borrow

from Financial and Banking Institutions".

Post Shipment FinancePost-shipment finance is the finance provided against shipping documents. It is also provided against duty

drawback claims. It is provided in the following forms:

Purchase of Export Documents drawn under Export Order: - Purchase or discount

facilities in respect of export bills drawn under confirmed export order are generally granted to the

customers who are enjoying Bill Purchase/Discounting limits from the Bank. As in case of purchase or

discounting of export documents drawn under export order, the security offered under L/C by way of

substitution of credit-worthiness of the buyer by the issuing bank is not available, the bank financing is

totally dependent upon the credit worthiness of the buyer, i.e. the importer, as well as that of the exporter

or the beneficiary. The documents dawn on DP basis are parted with through foreign correspondent only

when payment is received while in case of DA bills documents (including that of title to the goods) are

passed on to the overseas importer against the acceptance of the draft to make payment on maturity. DA

bills are thus unsecured. The bank financing against export bills is open to the risk of non-payment.

Banks, in order to enhance security, generally opt for ECGC policies and guarantees which are issued in

favor of the exporter/banks to protect their interest on percentage basis in case of non-payment or

delayed payment which is not on account of mischief, mistake or negligence on the part of exporter.

Within the total limit of policy issued to the customer, Drawee-wise limits are generally fixed for

individual customers. At the time of purchasing the bill bank has to ascertain that this Drawee limit is

not exceeded so as to make the bank ineligible for claim in case of non-payment.

Advances against Export Bills Sent on Collection: - It may sometimes be possible to avail

advance against export bills sent on collection. In such cases the export bills are sent by the bank on

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collection basis as against their purchase/discounting by the bank. Advance against such bills is granted

by way of a 'separate loan' usually termed as 'post-shipment loan'. This facility is, in fact, another form

of post- shipment advance and is sanctioned by the bank on the same terms and conditions as applicable

to the facility of Negotiation/Purchase/Discount of export bills. A margin of 10 to 25% is, however,

stipulated in such cases. The rates of interest etc., chargeable on this facility are also governed by the

same rules. This type of facility is, however, not very popular and most of the advances against export

bills are made by the bank by way of negotiation/purchase/discount.

Advance against Goods Sent on Consignment Basis: - When the goods are exported on

consignment basis at the risk of the exporter for sale and eventual remittance of sale proceeds to him by

the agent/consignee, bank may finance against such transaction subject to the customer enjoying specific

limit to that effect. However, the bank should ensure while forwarding shipping documents to its

overseas branch/correspondent to instruct the latter to deliver the document only against Trust

Receipt/Undertaking to deliver the sale proceeds by specified date, which should be within the

prescribed date even if according to the practice in certain trades a bill for part of the estimated value is

drawn in advance against the exports.

Advance against Undrawn Balance: - In certain lines of export it is the trade practice that bills

are not to be drawn for the full invoice value of the goods but to leave small part undrawn for payment

after adjustment due to difference in rates, weight, quality etc. to be ascertained after approval and

inspection of the goods. Banks do finance against the undrawn balance if undrawn balance is in

conformity with the normal level of balance left undrawn in the particular line of export subject to a

maximum of 10% of the value of export and an undertaking is obtained from the exporter that he will,

within 6 months from due date of payment or the date of shipment of the goods, whichever is earlier

surrender balance proceeds of the shipment. Against the specific prior approval from Reserve Bank of

India the percentage of undrawn balance can be enhanced by the exporter and the finance can be made

available accordingly at higher rate. Since the actual amount to be realised out of the undrawn balance,

may be less than the undrawn balance, it is necessary to keep a margin on such advance.

Advance against Retention Money: - Banks also grant advances against retention money,

which is payable within one year from the date of shipment, at a concessional rate of interest up to 90

days. If such advances extend beyond one year, they are treated as deferred payment advances which are

also eligible for concessional rate of interest.

Advances against Claims of Duty Drawback: - Duty Drawback is permitted against exports

of different categories of goods under the 'Customs and Central Excise Duty Drawback Rules, 1995'.

Drawback in relation to goods manufactured in India and exported means a rebate of duties chargeable

147

on any imported materials or excisable materials used in manufacture of such goods in India or rebate on

excise duty chargeable under Central Excises Act, 1944 on certain specified goods. The Duty Drawback

Scheme is administered by Directorate of Duty Drawback in the Ministry of Finance. The claims of duty

drawback are settled by Custom House at the rates determined and notified by the Directorate. As per

the present procedure, no separate claim of duty drawback is to be filed by the exporter. A copy of the

shipping bill presented by the exporter at the time of making shipment of goods serves the purpose of

claim of duty drawback as well. This claim is provisionally accepted by the customs at the time of

shipment and the shipping bill is duly verified. The claim is settled by customs office later. As a further

incentive to exporters, Customs Houses at Delhi, Mumbai, Calcutta, Chennai, Chandigarh, and

Hyderabad have evolved a simplified procedure under which claims of duty drawback are settled

immediately after shipment and no funds of exporter are blocked.

However, where settlement is not possible under the simplified procedure exporters may obtain advances against claims of duty drawback as provisionally certified by customs.

Negotiation of Export documents Drawn under L/C: - This aspect has been discussed in the chapter on Special Care for negotiation of Export Documents under Letter of Credit.

Rates of Interest : -The rate of interest depends on the nature of the Bills, i.e.,

whether it is a demand bill or usance bill. Like pre-shipment, post-shipment finance is also available at

concessional rate of interest.

The Present Rates of interest are as under:

Demand Bills for transit period Not exceeding (as specified by FEDAI) 10% p.a.

Usance Bills (for total period comprising usance period of ex-port bills, transit period as specified

by FED AI and grace period, wherever applicable:

Upto 90 days 10% p.a.

Beyond 90 days and upto six 12% p.a. months from the date of shipment.

Beyond six months from the 20% date of Shipment (Minimum)

Normal Transit Period: - Foreign Exchange Dealers Association of India (FEDAI) has fixed

transit period for export bills drawn on different countries in the world. The concept of this transit period

is that an export bill should normally be realised within that period. The transit period so fixed by

FEDAI is known as 'Normal Transit Period' and mainly depends on geographical location of a particular

country.

Direct and Indirect Bill: - If the currency of the bill is the same as the currency of the country on

which it is drawn, it is termed as direct bill, e.g. an export bill in US $ drawn on a place in U.S.A.

However, if the currency of the bill in which it is drawn is different than the currency of the country on

which it is drawn, it is termed as indirect bill, e.g. an export bill in US $ drawn on a place in Japan. The

148

normal transit period fixed for indirect bill is on higher side as compared to transit period fixed for direct

bills.

Notional Due Date: - To determine the due date of an export bill we have to consider the following

3 components: - (1) Normal transit period as fixed by FEDAI, (2) Usance period of the bill and (3)

Grace period if applicable in the country on which the bill is drawn. Grace period is applicable only in

the case of Usance bills. The notional due date of an export bill may thus be calculated after adding all

the above 3 components the concessional rate of interest is chargeable upto the notional due date subject

to a maximum of 90 days.

Forfeiting Finance by Authorised Dealers: - Reserve Bank has now permitted the authorised

dealers (Banks) to arrange forfeiting of medium term export receivables p 7 3 on the same lines as per

the scheme of EXIM Bank and many International forfeiting agencies have now become active in Indian

market. Forfeiting may be usefully employed as an additional window of export finance particularly for

exports to those countries for which normal exports credit is not intended by the commercial banks. It

must be noted that charges of forfeiting are eventually to be passed on to the ultimate buyer and should,

therefore, be so declared on relative export declaration forms.

External Commercial Borrowings: - Proposals for raising foreign currency loans/credits viz.,

Buyer's Credits, Supplier's Credits or Lines of Credits by firms/companies/lending institutions, banks,

etc. for financing cost of import of goods, technology or for any other purposes, other than short-term

loans/credits maturing within one year should first be submitted to government of India, Ministry of

Finance (Department Economic Affairs), ECB Division, New Delhi for necessary clearance. The

proposals are considered by the government on merits of each case and in the light of prevailing

Government policy.

EXIM Bank Finance: - Besides commercial banks, export finance is also made available by the

EXIM bank. The EXIM bank provides financial assistance to promote Indian exports through direct

financial assistance, overseas investment finance, term finance for export production and export

development, pre-shipment credit, lines of credit, re-lending facility, export bills re-discounting,

refinance to commercial banks, finance for computer software exports, finance for export marketing and

bulk import finance to commercial banks. The EXIM Bank also extends non-funded facility to Indian

exports in the form of guarantees. The diversified lending programmed of the EXIM Bank now covers

various stages of exports, i.e. from the development export markets to expansion of production capacity

for exports, production for export and post shipment financing. The EXIM Bank's focus is on export of

manufactured goods, project exports, exports of technology, services and export of computer software.

149

Hindalco Export Data (From Renukoot Plant)

Although, EXIM bank is assisting finance to the exporters but Hindalco is not availing this facility provided by

the EXIM bank.

HINDALCO’S EXPORTS

(From Renukoot Plant)

YEAR QTY. (MT)

2003-04 20393

2004-05 32828

2005-06 36559

2006-07 35477

2007-08 39317

2008-09 34282

Table 3: Hindalco’s Export in terms of Quantity (MT)

SWOT ANALYSIS OF HINDALCO

STRENGTH

A global leader in value-added high-end aluminium flat rolled products and aluminium can recycle.

150

It is the largest manufacturer of the entire range of flat rolled products in India & enjoys nearly 60 per

cent of market share.

The company exports about 17 per cent of its total sales volume of aluminium.

The company has been accorded the Five Star Trading House status in India.

The company's metal is accepted for delivery under the high grade aluminium contract on the London

Metal Exchange (LME).

WEAKNESS

Since I had done my project in Renukoot plant then the only weakness which I found here in Renukoot plant

is that Marketing process is very difficult from here due to its remote location and it is also very far from

ports.

OPPORTUITIES

Takeover of Indal is taking Hindalco to the way of increased production to meet the Importer’s

requirements without any delay in time and it also giving the opportunities to export marketing

department to secure as much export order due to increased capacity of production.

Acquisition of Novelis giving the opportunities to the Hindalco to expand more its global market, since,

Novelis has the unrivaled capability to provide its customers with a regional supply of technologically

sophisticated rolled aluminium products throughout Asia, Europe, North America and South America.

THREATS

Due to high International Inflation rate, price of the Aluminium is increasing in the International Metal

Market. As a result, the Aluminium, which was said as the product of poor peoples, now it has been gone far

from the hands of a middle class people. Now, it becomes a product of high class society. So, poor and

middle class peoples are searching and getting the alternatives of the Aluminium metal i.e. Iron and Steel

which is low in cost as comparison to Aluminium now-a-days.

FINDINGS & RECOMMENDATIONS

Findings

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Hindalco is the leading exporter of Aluminium Semi-Finished products in India.

FIEO (Federation of Indian Export Organisation) has awarded Hindalco as a Five Star Trading

Houses on their export achievements.

Hindalco is following all the norms as per Central Excise & Customs and other government rules &

regulations in the export process.

Hindalco is following positive and proactive approach towards export.

Hindalco is exporting from Kolkata and Mumbai port both.

Hindalco is exporting all over the world, from underdeveloped countries to advance countries.

Recommendations

Hindalco is a reputed Aluminium industry in the world and its products are well accepted in the market but as

we know that there is always a scope of improvement.

Following are the recommendations in all the three areas i.e. Export Process, Export Documentations and

Export Logistics:

Sometimes 3-4% execution of export order has been delayed due to rejection of partial quantity of the

product due to quality problems and manufacturing defects. So, it is recommended that Hindalco should

have to keep advance stock or backup products in their warehouse to overcome this problem and to

execute the order on time.

Some of the Caster product order is being delayed due to limited capacity of the Caster Plant. So, it is

recommended that Hindalco should have to increase the capacity of their Caster Plant.

Hindalco is using Oracle 11i & IVL software system for making export documents. The working of

this software is from Order management to Shipment. This process is time taking due to partly adoption of

the software system. So, it is recommended that this software should have been start from Enquiry

management to Shipment. It would ease in making documents in faster way manual interruption will be

minimized.

152

Sometimes there is unavailability of containers for any particular destination occurs. This problem have

been overcome by helding a meeting and making a successful negotiation process from the shipping line

companies for the arrangement of empty containers.

Unavailability of tailors due to non-uniformity of production occurs. This problem should have been

solved by the proper working collaboration of the Marketing & Production department.

Movement of export consignment tailors disturbs due to creation of problems by the Naxalieds in

Jharkhand and Bihar. This problem will be overcome by the Indian Government only, company have not

any solution of this problem.

Some other recommendations are:

Company should focus on small-scale industries.

Improved and advanced technologies should be used for better Quality and more Quantity.

Company should focus on CRM (Customers Relationship Management).

BIBLIOGRAPHY

Books:

Khurana P. K., Export Management, 4th Edition, Galgotia Publication Company.

Philip R. Cateora and John L. Graham, International Marketing, 11th Edition, Tata McGraw-Hill

Publication Company Limited.

153

Francis Cherunilam, International Trade and Export Management, 15th Edition, Himalaya Publication

House.

Rothor B.S. & J.S. Rathor, Export Management, 6th Edition, Himalaya Publication House.

Magazines:

Aluminium International Today

Aluminium Times

APT – Aluminium Process and Product Technology

Induction Manual

Internet:

http://www.unzco.com/basicguide

http://www.fieo.org

http://www.wikipedia.com/trade_policy/export_procedures

http://www.google.co.in

http://www.altavista.com

http://www.hindalco.com

http://www.novelis.com

http://www.adityabirla.com

http://www.bxa.doc.gov

SPECIMEN OF PROFORMA INVOICE

Exporter Invoice no. & date

Exporter’s Ref

Buyer’s order no. & date

Other references

Consignee Buyer

Country of origin of Country of

http://www.bxa.doc.gov/

http://www.adityabirla.com/

http://www.novelis.com/


http://www.altavista.com/

http://www.google.co.in/

http://www.wikipedia.com/trade_policy/export_procedures

http://www.fieo.org/

http://www.unzco.com/basicguide

154

goods Final destination

Terms of delivery and payment

Pre-carriage by Place of Receipt by Pre-carrier

Vessel/Flight No.

Port of lading

Port of discharge

Final destination

Marks and no. of containers

No. and kind of Pkgs.

Description of goods

Quality Rate Amount

SPECIMEN OF PACKING LIST

Exporter Invoice No. Date

Buyer’s order no. & date

Other reference(s)

Consignee Buyer

Signature & date

155

Country of origin of goods

Country of Final destination

Pre-carriage by Place of Receipt by Pre-carrier

Vessel/Flight No.

Port of lading

Port of discharge Place of delivery

Marks & No.s/ containers no.

No. and kind of Pkgs. Description of goods

Quality Remarks

SPECIMEN OF CERTIFICATE OF ORIGIN

Exporter

NAME OF THE

CHAMBER OF COMMERCE

Consignee

Signature & date

156

Gross weight (kg) Measurement

Pre-carriage by Place of receipt of Pre-Carrier

Vessel Port of loading

Port of discharge Final destination

No. and kind of packages : Description of goods

Certification :

It is hereby certified that this declaration was made before me and that to the best of my knowledge and believe the above mentioned goods are of Indian origin.

Declaration by Exporter :

We hereby declared that the above mentioned goods were produced in the Indian Union and are shipped to

Name of the authorized Signatory

Place and date of issue

Signature

SPECIMEN OF BILL OF LADING

Shipper

B/L NO.

NAME AND LOGO

OF

SHIPPING LINE

Consignee

Notify Party

Place & date of issue

Signature Secretary

157

Local Vessel From

Ocean Vessel Port of Lading

Port of Discharge Final Destination (if on carriage)

Marks & Numbers No. & Kind of Packages; Gross weight(kg) Measurement

Description of goods

Freight details, charges, etc

Shipped on board in apparent good order……………

Freight Payable at Place & date of time

No. of Original B/L Signature

Applicable only when document used as through Bill of Lading

SPECIMEN OF EXPORT QUOTATION WORKSHEET

159

SPECIMEN OF COMMERCIAL INVOICE

1. EXPORTER2. CONSIGNEE

INTERMEDIATECONSIGNEE

3. FORWARDING AGENT

4. COMMERCIAL INVOICE

NO. 5. CUSTOMER

PURCHASEORDER NO.

6. B/L, AWB NO.a. COUNTRY OF

ORIGINb. DATE OF

EXPORT

c. TERMS OF

PAYMENTd. EXPORT REFERENCESe. AIR/OCEAN PORT OFf. EMBARKATION

g. EXPORTING

h. CARRIER/ROUTE

160

i. PACKAGESj. QUANTITYk. NET WEIGHT/GROSS WEIGHT

l. DESCRIPTION OF MERCHANDISE UNITm. PRICE/TOTAL VALUEn. PACKAGE MARKSo. MISC. CHARGESp. CERTIFICATIONS

161

SAMPLE OF INSURANCE CERTIFICATE

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