· Most important agreement clauses for an exporter
Introduction
According to
Section 2(5) of IGST, export of goods means taking goods outside India.
According to
Section 2(6) of IGST, export of services means, the supply of any service when:
1.
Supplier of service is located in
India,
2. The recipient of service is located
outside India,
3.
Place of supply of service is outside
India,
4.
Payment for service has been received
by the supplier of service in convertible foreign exchange, and
5.
Supplier of service and the recipient
of service are not merely establishments of a distinct person.
Basically, the
import and export procedures involve the activities which ensure the licenses
and compliance which shall be made before the shipment, arranging for the
transportation and warehouse after the shipment, custom clearances as well as
for the payment of taxes before the release of goods.
In this article, we
shall discuss in detail the export procedures, export agreements, and
important clauses for the export agreement.
The export
contracts are used when there is any international sale of certain goods and
services. Export contracts will be entered between the exporter and importer. The exporter is the one who is selling the goods and the importer is the one who is
purchasing the goods.
The export
contracts can be either formal or informal, but it is always preferred to have
a formal export contract, where the terms and conditions shall be reduced into
writing and signed by the parties.
The export
contracts mainly concentrate on the provisions such as price, offer,
acceptance, delivery of goods or services, shipping, acceptance of goods or
services, complaints, and returns:
·
International Sale Contract: An international sale contract is an agreement that has been entered into between the
buyer and seller for the sale of goods or services and it contains the terms
and conditions of the sale. This contract is used for the contracts that occur
only once.
·
International Supply Contract: The international supply contract is used for the long-term agreements between the
manufacturer and supplier, which are used for the supply of the products for
the regular orders.
Laws which
regulate the trade in India
Some of the laws
which regulates the exports and imports in India are the Customs Act, 1962,
Customs Tariff Act, 1975, Foreign Exchange Management Act, 1999, Foreign Trade
Development and Regulation Amendment Act, 2010, Foreign Trade Development and
Regulation Act, 1992, Special Economic Zones Act, 2005, CGST Act, IGST Act and
UTGST Act.
Export
documents and their types
What is an export document?
When the trade is
between the parties from different countries (international trade), there is a
need to obtain certain documents from different authorities or the institutions
for the fulfillment of the terms and conditions and to obtain the license and permits.
Depending upon the type of the product being exported and the place of export,
there is a need for an export document in India. The export document is nothing but
the document which gives the complete details about the product being exported
and the place of export.
These export
documents are very much necessary for the movement of goods from one country to
another without any hurdles. It is important for every exporting agencies to
get these exporting documents from the authorities mentioned below:
1.
Income Tax, Customs, and Exchange
authorities of both the countries
2.
Authorities responsible for the
loading and unloading of goods
3.
Warehouse and Shipping
authorities
4.
Inspection agencies
5.
Bank Agencies of both the countries
Types of Export Documentations
There are four
types of Export Documentations:
·
Regulatory Documentation: The
regulatory documentation includes the pre-shipment documents which are issued
by the exporting country and which has to be mandatorily complied with by an exporter or the exporting agency. The regulatory documentation include the
documents such as shipping bill, insurance payment certificate, excise gate
pass after the clearance of the goods and the application for export that has
been prescribed by the port authorities.
·
Export Assistance Documents: The
export assistance documents are necessary to obtain government assistance
such as government subsidies. It includes documents such as quality control
certificates and export-import contracts.
·
Documents Prescribed to the
Importer’s Country: The exporter needs to follow the norms of the
importer’s country as well to maintain the free flow of trade between
both countries. The exporter has to submit a certain set of documents to
the importer to show that the exporter has acted as per the terms of
the contract and has abided by all the rules and regulations imposed by the
importing country. Certain documents that shall be submitted by the exporter
are documents relating to quality check, pre-inspection, etc.
·
Commercial Documents: These documents
disclose the absolute transfer of ownership from the exporter to the importer.
These documents include the bills of exchange, bills of lading, letters of
credit, certificates that show the origin of goods, marine insurance policy
etc.
Export
procedure in India:
The company which
is engaging in the export shall obtain the IEC Number (Import Export Code) from
the regional joint DGFT (Directorate General of Foreign Trade). The IEC code number is a unique 10 digits code issued by the DGFT, Ministry of Commerce,
Government of India to the Indian Companies involved in export or import
business, without which no import or export shall be carried out.
The procedures that
are generally carried out in India for the exports are as follows:
·
Quotation and Indent: The exporter
gives the quotation of the sale to the importer, which includes all the terms
and conditions on which the sale is being made such as, the quality of the
product, quantity, price, delivery terms, payments, and discounts if any. The most common types of quotation and indent used by the exporters are:
oFree on-board quotation
cost, Insurance, and Freight quotation
The exporter
receives the indent from the importer, which contains the particulars of the
export and how the export has to be made, how the packaging and mode of
delivery, etc., shall be made by the exporter.
·
Shipping Credit Enquiry: Once the
importer and exporter agree to enter into the contract, the exporter must
arrange for the shipping of the goods to the importer. Once the shipping
company agrees to export the goods, it provides the order. The exporter has to
open an account in the form of a letter of credit in the bank which operates in
the importing company as well to grant the credit.
·
Preparation of Export: Upon the
manufacturing of the product, the export commission housing, who is acting as
an agent of the importer shall be liable to collect the goods as per the indent
made by the exporters. The export commission house will take up the
responsibility of packaging of goods as specified by the importer and prepare
the same for the shipment after the inspection of the goods and issuance of the
certificate by the Export Inspection Council (EIC).
·
Customs and Exchange Formalities: At At this stage, the exporter will complete the formalities of filling the shipping
bills and issuing the same to the required authorities. The exporter is liable
to get the export license from the controller of exports, which will be valid
for the period of 3 months and the extension of the license can be made by the
licensing authority.
·
Placing the Goods-board the ship:
After completing the above-mentioned formalities, the exporter will place the
goods on the ship for the delivery of the same. After placing the goods, the
exporter shall receive the bill of lading from the steamship company.
Essential
clauses of the Export Agreement
These are some of
the essential clauses of the contract agreements:
·
Parties: This clause of the contract
shall contain the details of the parties such as the name of the parties entering
into the contract along with their detailed address, nationality, company
details along with the tax details of the parties.
·
Product: This clause deals with the
details of the product, standards (applicable national or international
standards) and specifications of the products.
·
Quantity: This clause specifies the
quantity of the product which shall be measured in terms of the unit both in words
and numerals.
·
Price: This clause specifies about
the price or the total value payable for the goods or services along with the
currency in which it is payable, whether it is payable at once or in the
installments and the mode of payment.
·
Delivery Terms: The terms in which
the delivery has to be made shall be mentioned under this clause.
·
Taxes, Duties, and Charges: This clause specifies the tax that the parties are responsible to pay and
whether the price quoted by the exporter is inclusive of tax or excluded shall
be clearly mentioned in this clause.
·
Shipment Clause: This clause includes
the details about the shipment specifications along with the mode of shipment.
·
Packaging, labeling, and marking: The
packaging, labeling marking shall be made as per the terms of the contract
i.e., as agreed by the parties under this contract.
·
Insurance: The contract shall specify
about the insurance that shall be made for the goods against the loss or
damages caused during the transportation and this clause shall also include the
type of risk that is involved during the transportation and to what extent the
insurance is covered.
·
License and Permits: This clause
shall specify whether there is any need for license and permits if there is a
need to obtain the same, who shall obtain such license and who shall bear the
expenses shall be specified.
·
Documents required: This clause shall
specify as to what documents are required for the transactions such as invoice,
bill of exchange, insurance policy, and such other trade documents.
·
Delay in Delivery: This clause
shall specify about the delay in delivery of goods, remedies available to the
importer for suffering damages or losses due to the delay in delivery and
exceptions and under what circumstances such delay shall be condoned shall be
mentioned in detail.
·
Product Guarantee: This clause
specifies in detail as to what guarantee shall be available to the importer and
the period till which such guarantee shall be available.
·
Warranties Clause: This clause shall
specify whether the importer can get a warranty for the goods which have been
damaged and what kind of damages can be covered under warranties and till what
period the guarantee can be covered.
·
Remedial Actions: In the event if,
there exists any default in the obligations of the parties, what remedies are
available under the law shall be specified in this clause.
·
Force Majeure Clause: This clause
shall specify the circumstances under which parties can be relieved from the
mutual obligations for the non-performance of the contracts on the occurrence of
such circumstances and the relief available to such parties.
·
Applicable Laws: This clause shall
specify as to which country’s law shall govern the contract.
·
Dispute Resolution/ Arbitration
Clause: This clause shall define how the parties shall amicably settle
the dispute in case if any dispute arises between the parties to the
agreement. The Ministry of Commerce, Government of India, has set up a model of a contract which shall benefit the exporters to have suitable contracts, which
shall help the small and medium exporters to have a standard contract.
·
Signature of the Parties: Both the
parties to the contract shall sign the agreement or the contract to
prove that there is the consent of both the parties to enter into the contract
without any force, coercion, or fraud, and both the parties agree for all the
terms and conditions of the contract.
Conclusion
In a nutshell,
International trade is one of the important means which promotes the welfare of
the country. It not only extends the country’s market beyond the national
frontiers but helps to make the domestic business of the country efficient by
helping it to compete at the international level. It is essential for both the
parties (i.e., exporter and importer) to understand the complete details and
information of the products or services that are imported or exported. Both the
parties have to abide by the laws, rules, regulations, norms fixed by the other
country for the purpose of trade or any other business. One of the most
important advantages of the trade agreements or the contracts are, it lowers
the trade barriers on the goods that have to be imported from the other
country. The exporter needs to develop a standard general
agreement, wherein he fulfills all the terms and conditions of such agreements
and the complexities.
Referred
articles
·
https://www.netlawman.co.in/d/export-contract
·
https://www.globalnegotiator.com/international-trade/dictionary/export-contract/
·
http://www.tradeforum.org/Export-Contracts/
·
https://www.businessmanagementideas.com/international-trade/exports/export-procedure-in-india-11-steps-export-management/18635
·
https://www.businessmanagementideas.com/international-trade/exports/export-procedure-in-india-11-steps-export-management/18635
·
https://www.indiantradeportal.in/vs.jsp?lang=0&id=0,31,224
·
https://www.india-briefing.com/news/import-export-procedures-india-19125.html/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration
·
https://www.publishyourarticles.net/knowledge-hub/articles/what-are-the-list-of-documents-generally-used-in-export-trade/3671/
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