INTRODUCTION In their sales contract buyer and seller agree on the conditions of sale : payment on the one hand

d and delivery on the other. These terms determine at what precise location the ownership of the goods is transferred from seller to buyer and when/how payment will be done. In international trade a universal set of rules on delivery has been developed over the years. It is called INCOTEMRS.
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EXW = EX WORKS ( named place)

Cost of Goods plus cost of Export packing and marking

In this term the seller delivers the goods by keeping it ready in deliverable state at the seller's place or another named place. This named place can be factory/godown or manufacturing unit. In this term seller does not clear the goods for exports nor goods are loaded on vehicle.

FCA = FREE CARRIER ( named place)

Cost of Goods plus cost of Getting goods to railway station or truck for transportation to port

This term refers to seller's responsibility to deliver the goods, cleared for export, to the carrier appointed by the buyer at the named place. In this term the place of delivery is very important. If the delivery is at sellers place's then he is responsible for loading. If the delivery occurred at any other place, the seller is not responsible for unloading. This term can be used for all modes of transport as well as multimodal. Slide 3 of 31

FAS = FREE ALONGSIDE SHIP (named port of shipment)

Cost of Goods plus cost of Transport to port and getting goods alongside ship

In this term when the goods are placed alongside the vessel at the named port of shipment it will be considered that the seller has completed the delivery. The buyer has to bear all risks of loss or damage to the goods and all costs from this point of time. However the seller must clear the goods for the purpose of export. This term can be used only for inland waterway transport or shipment by sea. It is not used Slide 4 of 31 when it is air shipment.

FOB = FREE ON BOARD ( named port of shipment)

Cost of Goods plus cost of Getting goods on board and preparing shipping documents

This is the most popular term and is widely in use. FOB means that the seller delivers when the goods pass the ship's rail at the named port of shipment. Under this term the buyer has to bear all costs and risk of loss of damage to the goods from that point. This term requires the seller to clear the goods for exports. This term is used only for sea or inland waterway transport. It is not suitable for shipment by Slide 5 of 31 air.

CFR = COST AND FREIGHT ( named port of destination)

Cost of Goods plus cost of Freight cost (port to port)

Earlier this term was popularly known as C&F or CNF. CFR means the seller must pay the cost and the freight necessary for the goods to reach at the named destination. However, the risks of loss or damage to the goods after the time of the delivery is on buyers account. The seller is required to clear the goods for exports. This term can be used only for sea and Slide 6 of 31 inland waterway transport.

CIF = COST INSURANCE AND FREIGHT ( named port of destination)

Cost of Goods plus cost of Marine Insurance

Cost, Insurance and Freight means that the seller, delivers when the goods pass the ships rail in the port of shipment. The CIF price refers that it covers the cost of the goods, freight necessary to bring the goods to the named port of destination and also marine insurance. Compared to the previous term, CFR the seller contracts for the insurance and pay the insurance premium. It will be essential for the buyer to know that under the CIF term the seller is required to obtain the insurance only on minimum cover.
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If the buyer wishes to have more protection then he should make his own insurance arrangement extra or should specify to the seller at the time of contract. In this term the seller must clear the goods for exports and the buyer must arrange necessary clearance for import. This term can be used only for sea and inland water transport.

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EXW

Ex Works

Buyer takes title when taking delivery of the goods at suppliers facility. Buyer is responsible for the shipment and duties.

FCA

Free Carrier

Buyer takes possession and title at the airport or truck terminal at the port of export in the sellers country after the goods clear customs.
Buyer takes possession at the dock at the port of export after the goods clear customs. Buyer takes responsibility and title for the goods as they pass over the ships rail during loading.
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FAS

Free Alongside Ship

FOB

Free of Board

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CFR

Supplier arranges freight and pays as far as Cost and Freight the buyers port of entry. Title and risk of loss remain with the buyer.

CIF

Supplier arranges freight and buys insurance for the goods as part of the sales Cost, Insurance, price. Title and risk transfer to the buyer and Freight once the goods clear a ships rail while being loaded.
Carriage Paid Carriage and Freight Paid to Title transfers to buyer when goods are loaded into a container. Seller selects and pays the carrier. Similar to CFR. Similar to CIF but applies to air or truck transport only.
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CPT

CIP

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What is Export Sales Contract?

Agreement between buyer and seller, stipulating each and every details of the transaction. Legally binding document. It reduces the probabilities of disputes & differences as it fixes the role and responsibilities of each party.

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Terms and Conditions:

While drafting the sales contract one must ensure the following:1. 2. 3. 4. 5. 6. Coverage is complete. Maximum clarity. Future probability to be provided. Trade practices. Law of both countries Need of both parties.

There should not be any ambiguity regarding the exact specifications of goods and terms of sale including export price, mode of payment, storage Slide 12 of 31 and distribution methods, type of packaging, port

 Following standard terms and conditions are covered in an Export Sales contract: Name & address of both the parties. Contract Number & Date, place Description of goods, quantity and quantity Product Standards and Technical Specifications of goods. Inspection/certification Total Value of Contract Terms of delivery (F.O.B./C.F.R./C.I.F. etc.), Period of Delivery/Shipment, part shipment, Transshipment. Terms of payment:- L/C, D/A, D/P, advance payment, Contd.. Amount/Mode & Currency Slide 13 of 31

An Export order is an offer to sell made by the exporter and its acceptance by foreign buyer. It is a documents communicating decision of the foreign buyer to purchase certain item (s) from the exporter. It specifies: Description of Items Their Quantity and quality Specifications Unit Prices Delivery terms Shipping Marks Insurance requirement

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Labeling Packaging and packing Payment terms Pre-Shipment Inspection requirements

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1.
2. 3. 4. 5.

6.
7.

Exporter locates trade enquiry The exporter then sends his profile to know the interests of buyer Buyer likes to have details of certain products Exporter then sends the quotation Buyer specifies his requirements regarding shape and size and other terms Exporter send the Performa Invoice Buyer confirms the Performa Invoice

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The Performa invoice should indicate the unit & total prices of the production internationally accepted or mutually agreed currency. It should indicate total quantity of products offered. There should be clearly indicate the discount for a specific volume.

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The Performa invoice submitted entails legal obligations on the part of the exporter to supply the product to the buyer, in the event of the invoice being accepted by him. Hence it is necessary that the conditions of sale & other factors qualifying it should be clearly spent out.

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Processing of an export order is to make arrangements for the items to be produced at the factory of exporter or to be obtained from supplier. All the operations from the time for production is placed, till it reaches to export warehouse, are normally covered by this phase.

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It is levy imposed by government of India on all excisable item as specified by it and is usually collected at source, i.e. manufacturing stage. The manufactured products, as soon as they are ready for dispatch from the factory attract the levy. Only after the excise is paid can the products be removed from the factory premises.
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The govt. allows exemption from paying sales tax for export products. For this, Exporter should register with the sales tax authorities. Sales tax exemption is for the last two stages of transaction in a product before export.

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The GOI has introduced a compulsory pre shipment inspection for selected items of export to ensure that the products to be exported conform to high quality std. Pre shipment inspection scheme is administered by the Export Inspection council. Under this scheme, the emphasis is on quality control rather than on inspection for export.
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In case the export of the product is subject to export inspection by the agency, the exporter makes an application in the prescribed form to the export inspection Agency, enclosing the following documents.
Copy of commercial Invoice A cheque or Demand Draft A copy of export contract

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More popular method of Dispatching goods to an export buyer than dispatch by air. Freight charges are less compare to air freight. Physical size of product constraints exporter to dispatch the goods by air. the

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This are specialized personnel who arrange for the completion of all formalities connected with the shipment of goods.

As soon as the export goods reaches to the warehouse, the exporter arranges for a complete set of shipping documents, to be passed on the forwarding agent.

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These comprise: GR-1 form Performa Invoice Certificate of inspection where necessary. Form of declaration Shipping bill Export License Mate Receipt Port trust dues

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It is an exchange control document required by RBI. As per exchange control regulations, an exporter has to realize the proceeds Within 180 days from the date of shipment from India. In order to ensure this, the RBI has introduced the GR Form.

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Its a main document required by the custom authorities for the purpose of Granting permission for shipment. It is prepared in 5 copies. It contains the name of exporter, his address, code no, the description and Quantity of goods to be shipped, the value of goods, number of packages etc.

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The GOI regulations require that an export license be obtained for certain categories of export products before shipment is made. Obtained from DGFT DGFT scrutinizes the application with reference to quantity, value and description of goods in all the documents.

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According to prevailing customs regulations, no cargo meant for export can be loaded on a ship unless the custom authorities at the port accord their formal approval. After obtaining the shipping documents, including 5 copies of shipping bills is submitted by the exporter to the customs house concern.

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A complete set of negotiating documents is presented to the negotiating bank through whom the L/C has been advised.

Where the exporter has compiled with all the T&C of the L/C while submitting his documents to the negotiating bank, the documents are deemed to be clean.

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