PROJECT REPORT

ON EXPORT OF SPICES FOR INTERNATIONAL MARKETING BY

NAME Sagar Ashamshetty Devadas Boda Rahul Dhas Lilesh Gangurde Rohit Padalkar Sunil Yadav ROLL NO 62 67 69 74 91 120

SPICES INDUSTRY India produces 2.5 million tones to 3 million tones of spices annually. India produces spices of different categories worth around US$ 3 billion. In terms of volume and value, India accounted for 46 percent and 23 percent in value of global spice trade. (Source: Spices Board India) India accounts for 25-30 per cent of worlds pepper production, 35 per cent of ginger and about 90 per cent of turmeric production. Among the Indian Federal states, Kerala tops in pepper (96 per cent), Cardamom (53 per cent), Ginger (25 per cent) production in the country. Andhra Pradesh leads in Chilli and Turmeric production in the country with 49 per cent and 57 per cent. In coriander, cumin and fenugreek production in the country, Rajasthan emerges as the largest producer with63 per cent, 56 per cent and 87 per cent. (Source: All India Spice Exporters Forum)The world spice trade is estimated at US$ 1.5-2 billion in terms of value and 500,000tonnes in terms of quantity REASONS FOR EXPORTING SPICES Out of the 109 spices listed by the ISO, India produces as many as 75 in its various agro climatic regions. India accounts for about 45% (2, 50,000 tons-2002-03) of the global spice exports, though exports constitute only some 8% of the estimated annual production of spices at 3.2 million tons (2002). Over all, spices are grown in some 2.9 million hectares in the country. Spice production in India, as much of the agriculture in the country, is undertaken in millions of tiny holdings and determine the livelihood of large number of the rural population. Spices exports have registered substantial growth during the last one decade. It has increased from 203398 tons valued MLN US $ 241million in 1995-96 to 350363tonnes valued MLN US $ 593 million in 2005-06, registering an annual average growth rate of 9.4% in value terms. During the year 2006-07, the spices export from India has registered an all time high both in terms of quantity and value. In 2006-07 the export of spices from India has been 373,750 tons valued MLN US $ 793 million registering an increase of 34% in value over 2005-06. India commands a formidable position in the World Spice Trade with 47% share in Volume and 40% in Value.

Exporting Spices STEP 1: REGISTRATION PROCEDURE 1. Registration of the organization: The form of organization selected by the exporter must. Be registered under the appropriate Act of the country A joint stock company under the Companies Act, 1956. A partnership firm under the Indian Partnership Act, 1932. A sale trader should seek permission from the local authorities, as required. 2. Opening-Bank Account: The exporter should open a current account in the name of the firm or company with a commercial bank which is authorized by the Reserve Bank of India (RBI) to deal in foreign exchange. Such bank also serves as a source of pre-shipment and post-shipment finance for the exporter. 3. Obtaining Importer-Exporter Code Number (IEC No.) To start with any export, one has to obtain Import-Export Code Number issued the office of the Director General of Foreign Trade. In all foreign trade as well as foreign exchange documentation you have to mention IE code number. In case of export/import of Spices/Spice products, Certificate of Registration as Exporter of Spices issued by the Board is also required in addition to the IE Code number. Spices Board issues Certificate of Registration as Exporter of Spices [CRES] under Section 11 of the Spices Board Act. 5. Obtaining Permanent Account Number- (PAN): Export income is subject to a number of exemptions and deductions under different sections of the Income Tax Act. For claiming such exemptions and deductions, the exporter should register his organization with the Income Tax Authorities and obtain the Permanent Account Number (PAN).

6. Obtaining Sales Tax Number: Exportable goods are exempted from sales tax, provided, the exporter or his firm is registered with the Sales Tax Authorities, For this purpose, the exporter is required to make an application in the prescribed form to the Sales Tax Office (STO) in whose jurisdiction his {exporters). Office is situated. 7. Registration with, Export Promotion Council (EPC): It is obligatory for every exporter to, register with the appropriate Export Promotion Council (EPC) and obtain the Registration-cum-Membership Certificate (RCMC). The benefits provided in the current EXIM Policy are extended only to the registered exporters having valid RCMC. 8. Registration with ECGC: The exporter should also register with the Export Credit and Guarantee Corporation of India (ECGC) in order to secure overseas payments against political and commercial risks. It also helps the exporters in obtaining the financial assistance from commercial banks and other financial institutions. STEP 2: PRE- SHIPMENT STAGE 1. APPROACHING FOREIGN BUYERS In order to secure an export order, a new exporter can make use of one or more of the techniques, such as advertising in international media, sales promotion, and public relation, personal selling, publicity and participation in trade fairs and exhibition. 2. Inquiry and Offer: An inquiry is a request from a prospective importer about description of goods, their standard or grade, size, weight or quantity, terms of payment, etc. on getting an inquiry, the exporter must process it immediately by making an offer in the form of a Performa invoice.

Enquiries for product should, specify the following details or provide the following data Quantity required Delivery schedule Is the price required on FOB or C& F or CIF basis Mode of Dispatch - Sea, air or Sea/air Mode of Packing 3. Confirmation of Order: Once the negotiations are completed and the terms and conditions are finalized, the exporter sends three copies of Performa Invoice to the importer for the confirmation of order. The importer signs these copies and sends back two copies to the exporter. 4. Opening Letter of Credit The documentary credit or letter of credit is the most appropriate and secured method of payment adopted to settle international transactions. On finalization of the export. Contract, the importer opens a letter of credit in favor of the exporter, if agreed upon in the contract. The following are the step in the process of opening a letter of credit: Exporters Request: The exporter requests the importer to issue LC in his favor. LC is the most secured form of payment in foreign trade. Importers Request to his Bank: The importer requests his bank to open a L/C. He May either pay the amount of credit in his current account with the bank. Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank with also request to inform the beneficiary that the L/C has been opened. The issuing bank may also request the advising bank to add its confirmation to the L/C, if so required by the beneficiary. Receipt of LC: the exporter takes in his possession the L/C. He should see it that the L/C is confirmed. Shipment of Goods: Then exporter supplies the goods and presents the full set of documents along with the draft to the negotiating bank.

Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if they are in order makes the payment to the exporter. Negotiation: The exporters bank negotiates the document against the letter of credit and forwards the export documents to the L/C opening bank or as per their instructions. Realization of payment: The issuing bank will reimburse the amount (which is paid to the exporter) to the negotiating bank. Document to Importer: the issuing in turn presents the documents to the importer and debits his account for the corresponding amount. 5. Arrangement of Pre-shipment Finance On securing the letter of credit, the exporter procures a pre-shipment finance from his bank for procuring raw materials and other components, processing and packing of goods and transfer of goods to the port of shipment. Pre Shipment Finance is issued by a financial institution when the seller wants the payment of the goods before shipment. The main objectives behind preshipment finance or pre export finance are to enable exporter to:

Procure raw materials. Carry out manufacturing process. Provide a secure warehouse for goods and raw materials. Process and pack the goods. Ship the goods to the buyers. Meet other financial cost of the business.

Types of Pre Shipment Finance

Packing Credit Advance against Cheques/Draft etc. representing Advance Payments.

Preshipment finance is extended in the following forms:

Packing Credit in Indian Rupee

Packing Credit in Foreign Currency (PCFC)

Requirement for Getting Packing Credit This facility is provided to an exporter who satisfies the following criteria

A ten digit importer exporter code number allotted by DGFT. Exporter should not be in the caution list of RBI. If the goods to be exported are not under OGL (Open General License), the exporter should have the required license /quota permit to export the goods.

Packing credit facility can be provided to an exporter on production of the following evidences to the bank: 1. Formal application for release the packing credit with undertaking to the effect that the exporter would be ship the goods within stipulated due date and submit the relevant shipping documents to the banks within prescribed time limit. 2. Firm order or irrevocable L/C or original cable / fax / telex message exchange between the exporter and the buyer. 3. License issued by DGFT if the goods to be exported fall under the restricted or canalized category. If the item falls under quota system, proper quota allotment proof needs to be submitted. The confirmed order received from the overseas buyer should reveal the information about the full name and address of the overseas buyer, description quantity and value of goods (FOB or CIF), destination port and the last date of payment.

Eligibility Pre shipment credit is only issued to that exporter who has the export order in his own name. However, as an exception, financial institution can also grant credit to a third party manufacturer or supplier of goods who does not have export orders in their own name.

In this case some of the responsibilities of meeting the export requirements have been out sourced to them by the main exporter. In other cases where the export order is divided between two more than two exporters, pre shipment credit can be shared between them Quantum of Finance The Quantum of Finance is granted to an exporter against the LC or an expected order. The only guideline principle is the concept of Need Based Finance. Banks determine the percentage of margin, depending on factors such as:

The nature of Order. The nature of the commodity. The capability of exporter to bring in the requisite contribution.

6. Production or Procurement of Goods On securing the pre-shipment finance from the bank, the exporter either arranges for the production of the required goods. Or procures them from the domestic market as per the specifications of the importer. 7. Packing and Marking: The goods should be properly packed and marked with necessary details such as port of shipment and destination, country of origin, gross and net weight, etc. If required, assistance can be taken from the Indian Institute of Packing (IIP). 8. Pre-shipment Inspection If the goods to be exported are subject to compulsory quality control and pre-shipment inspection then the exporter should contact the Export Inspection Agency (EIA). For obtaining an inspection certificate.

9. Central Excise Clearance The Exporter are totally exempted from the payment of central excise duty, however. The exemption should be claimed in one of the following ways: a. Export under Rebate b. Export under Bond 10. Obtaining Insurance Cover The exporter must take appropriate policies in order to insure risks: ECGE policy in order to cover credit risks, Marine policy, if the price quotation agreed upon is CIF. 11. Appointment of C&F Agent Since exporting is a complex and time- consuming process, the exporter should appoint a Clearing and Forwarding (C&F) agent for the smooth clearance of goods from the customs and preparation and submission of various export documents. The Forwarding Agent completes the following formalities: He obtains the Customs' Permit from the Customs Department for exporting goods. The Forwarding Agent discloses the details of the goods such as their nature, size, quantity, weight, etc. to the shipping company. The Forwarding Agent prepares a Shipping Bill. The Forwarding Agent prepares two copies of the dock challans and pays the dock dues. The Captain of the ship gets the goods loaded on the ship on the basis of the Shipping Order in the presence of customer officers. When the goods are loaded on the ship, the Mate (Vice Captain or the Captain) issues a receipt, called Mate's or Captain's Receipt. Size of the agent's company Date of foundation of the agent's company Company's ownership and control Company's capital, funds, available and liabilities

 Name, age and experience of the company's senior executives Number, age and experience of the company's salesman Other agencies that the company holds, including those of competing products and turnover of each Length of company's association with other principal New agencies that the company obtained or lost during the past year Company's total annual sales and the trends in its sales in recent years Company's sales coverage, overall and by area Number of sales calls per month and per salesman by company staff Any major obstacles expected in the company's sales growth Agent's capability to provide sales promotion and advertising services

STEP 3. SHIPMENT PROCEDURE Export, cargo can be exported to the overseas buyer by sea, air or land. However, shipment by sea is the most popular and generally resorted to, as it is comparatively cheaper. Besides, the ships capacity is far greater than other modes of transportation. Nevertheless, transportation by air is utilized for export of expensive items like, diamonds, gold, etc. The shipment stage includes the following steps 1. Reservation of Shipping Space: Once the export contract is finalized, the exporter reserves the required space in the vessel for shipment. On accepting the exporters request, the shipping company issues a Shipping Order. The original copy of the shipping order as given to the exporter and the duplicate instruction by the shipping company to the commanding officer of the ship that the goods as per the details given should be received on board. 2. Arrangement of Internal Transportation up to the Port of Shipment :The exporter makes necessary arrangements for transportation of goods to the port either by road or railways. On loading goods into the railway wagon, the railway authorities issue a Railway

Receipt, which may be either freight paid or freight to pay. It serves as a title to the goods. The exporter doses the railway receipt in favour of his agent to enable him to take delivery of the goods at the port of shipment. 3. Preparation and Processing of Shipping Documents:As the goods reach the port of shipment, the exporter should issue detailed instructions to the C&F agent for the shipment of cargo along with a complete set of the documents listed below: Letter of Credit along with the export contract or export order. Commercial Invoice (2 copies) Packing List or Packing Note. Certificate of Origin GR Form (original and duplicate) ARE-I Form. Certificate of Inspection where necessary (original copy) Marine Insurance Policy. 4. Customs Clearance: The cargo must be cleared from the Customs before it is loaded on the ship. For this, the above mentioned documents, along with five copies of shipping bill, are to be submitted to the Customs Appraiser at the Customs House. The Customs Appraiser ensures that all the formalities relating to exchange control, quality control, pre-shipment inspection and licensing have been complied with by the exporter. After verification, all documents, except the original GR, original copy of Shipping Bill and one copy of Commercial Invoice, are returned to the C&F agent. 5. Obtaining Carting Order from the Port Trust Authorities: The C&F agent then approaches the Superintendent of the concerned Port Trust for obtaining the Carting Order for moving the cargo inside the dock. After obtaining the Carting Order, the cargo is physically moved into the port area and stored in the appropriate shed.

6. Customs Examination and Issue of Let Export Order: The Customs Examiner at the port of shipment physically examines the goods and seals the packages in his presence. The same can be arranged for at the factory or warehouse of the exporter by making an application to the Assistant Collector of Customs. The Customs Examiner, if satisfied, issues a formal permission I for the loading of cargo on the ship in the form of a Let Export Order. 8. Obtaining Mates Receipt and Bill of Lading: The goods are then loaded on board the ship for which the Mate or the Captain of the ship issues Mates Receipt to the Port Superintendent The Port Superintendent, on receipt of port dues, hands over the Mates Receipt to the C&F Agent. The C&F Agent surrenders the Mates Receipt to the Shipping Company for obtaining the Bill of Lading. The Shipping Company issues two to three negotiable and two to three non-negotiable copies of Bill of Lading. STEP 4: REALIZING EXPORT INCENTIVES INCENTIVE Is an expectation that encourages people to behave in a certain way. The 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 & exemptions are --- Exemptions for Indian Exporters Registration with Excise Authorities---They get exemption,& they have two options either deposit excise duty at time of clearance from factory & later claim return or open Bond Account with Maritime Collector of Central Excise Facilities to Indian Exporters Marketing Development Assistance (MDA) Market Access Initiative (MAI) Free Trade Zones (FTZ) Export Financing Exim Bank Finance

 Advance License / Duty Exemption Entitlement Scheme (DEEC) & Duty Drawback Manufacture under Bond 5. POST SHIPMENT STAGE The post-shipment stage consists of the following steps: 1. Submission of Documents by the C&F Agent to the Exporter: On the completion of the shipping procedure, the C&F agent submits the following documents to the exporter A copy of invoice duly attested by the Customs Drawback copy of the shipping bill. Export promotion copy of the shipping bill. A full set of negotiable and non-negotiable copies of bill of lading. The original L/C, export order or contract. Duplicate copy of the ARE-I form 2. Shipment Advice to Importer: After the shipment of goods, the exporter intimates the importer about the shipment of goods giving him details about the date of shipment, the name of the vessel, the destination, etc. He should also send one copy of non-negotiable bill of lading to the importer. 3. Presentation of Documents to Bank for Negotiation: Submission of relevant documents to the bank and the process of getting the payment from the bank is called Negotiation of the Documents and tile documents are called Negotiable Set of Documents. The set normally contains: Bill of Exchange Sight Draft or Usance Draft Full set of Bill of Lading or Airway Bill Original Letter of Credit Customs Invoice

 Commercial Invoice including one copy duly certified by the Customs Packing List Foreign exchange declaration forms, GR/SOFTEX/PP forms in duplicate Exchange control copy of the Shipping Bill Certificate of Origin, GSP or APR Certificate, etc Marine Insurance Policy, in duplicate 4. Dispatch of Documents: The bank -negotiates these documents to the importers bank in the manner as specified in the L/C. Before negotiating documents, the exporters bank scrutinizes them in order to ensure that all formalities have been complied with and all documents are in order. The bank then sends the Bank Certificate and attested copies of commercial invoice to the exporter. 5. Acceptance of the bill of exchange: Bill of Exchange accompanied by the above documents is known as the Documentary Bill of Exchange. It is of two types: Documents against Payment (Sight Drafts) In case of sight draft, the drawer instructs the bank to hand over the relevant documents to the importer only against payment. Documents against Acceptance (Usance Draft): In case of usance draft, the drawer instructs the bank to hand over the relevant documents to the importer against his acceptance of the bill of exchange. Letter of Indemnity: The exporter can get immediate payment from his bank on the submission of documents by signing a letter of indemnity. By signing the letter of indemnity the exporter undertakes to indemnify the bank in the event of non-receipt of payment from the importer along with accrued interests. Realization of Export Proceeds : On receiving the documentary bill of exchange, the importer releases payment in case of sight draft or accepts the usance draft undertaking to pay on maturity of

the bill of exchange. The exporters bank receives the payment through importers bank and is credited to exporters account. 6. Processing of GR Form: On receiving the export proceeds, the exporters bank intimates the same to the RBI by recording the fact on the duplicate copy of GR. The RBI verifies the details in duplicate copy of GR with, the, original copy of GR received from the Customs. If the details are found to be in order then the export transaction is treated to be completed.