MANUFACTURING INDUSTRY:- Manufacturing industry refers to those industries which involve in the manufacturing and processing of items and indulge in either creation of new commodities or in value addition. The manufacturing industry accounts for a significant share of the industrial sector in developed countries. The final products can either serve as a finished good for sale to customers or as intermediate goods used in the production process. Evolution of the manufacturing industry:
Manufacturing industries came into being with the occurrence of technological and socio-economic transformations in the Western countries in the 18th-19th century. This was widely known as industrial revolution. It began in Britain and replaced the labor intensive textile production with mechanization and use of fuels. Working of manufacturing industry: Manufacturing industries are the chief wealth producing sectors of an economy. These industries use various technologies and methods widely known as manufacturing process management.
Manufacturing industries are broadly categorized into engineering industries, construction industries, electronics industries, chemical industries, energy industries, textile industries, food and beverage industries, metalworking industries, plastic industries, transport and telecommunication industries. Manufacturing industries are important for an economy as they employ a huge share of the labor force and produce materials required by sectors of strategic importance such as national infrastructure and defense.
However, not all manufacturing industries are beneficial to the nation as some of them generate negative externalities with huge social costs. The cost of letting such industries flourish may even exceed the benefits generated by them. [pic] A FEW DETAILS ABOUT THE COMPANY WE VISITED:- Office Address : NP23 &24, DEVELOPED PLOT, Ekkattuthangal, Chennai -600097 Primary Industry: Measurment &Testing Instruments Company Logo : This is the companys logo [pic] Hours of Operation: [pic] Monday : 09. 0 – 18. 30 Tuesday : 09. 30 – 18. 30 Wednesday : 09. 30 – 18. 30 Thursday : 09. 30 – 18. 30 Friday : 09. 30 – 18. 30 Saturday : 09. 30 – 18. 30 Sunday : 09. 30 – 18. 30 BUSINESS SUMMARY:- Devi Polymers Private Limited (Devi) is pioneers in manufacturing Polyester Moulding Compound (PMC), Sheet Moulding Compound (SMC) and Dough Moulding Compound (DMC) in India. Devi started manufacturing PMC’s Polyester Moulding Compounds) in the year 1975 under license from Fothergill & Harvey Ltd. U. K. / Freeman Chemicals, U. K. Devi is one of the largest manufacturers of PMC Compounds in India. The capacity of the plant for manufacturing SMC and DMC is around 10,000 tones per annum. Besides supplying SMC and DMC, Devi also supply SMC and DMC moulded components for the Electrical and Automotive Industry. Devi is one of the leading OEMs supplying SMC and DMC components to almost all Electrical Switchgear Companies in India, such as Larsen & Toubro, Siemens India, GE India, Legrand India, Havels India, Socomec HPL etc. In addition to compounds and OEM supply, Devi has designed & manufactured its own range of Industrial / Engineering Products, catering to various Industrial Sectors in India and also exporting countries like Middle East, Africa, USA etc. PRODUCTS SUMMARY:- 1. Flosto – SMC/GRP Sectional Panel Water Tanks. 2. Duro-Box – SMC/GRP Moulded Weather Proof Enclosures. 3. Duro-Stor- Modular Housing Systems. 4. CAD / CAM / CAE Services: Extensive Tool Room for Manufacture of Hot Press / Injection Moulding Tools, Oem Products, and Special Purpose Machines. 5. Research & Development Capabilities. . Engineering Services: OEM Mouldings, CAD / CAM / CAE Services, Tool Room Facility, Special Purpose Machines, Dust Collector (Pulse-Jet Type), and Duro-STOR Modular SMC/GRP housing systems. 2. SMC / DMC Compounds & Components: FLOMAT – Sheet Moulding Compound (SMC), FLODO- Dough Moulding Compound (DMC/BMC), FLODOMAT – Kneaded Moulding, FLOSTO SMC Panel water tanks, Duro-BOX Polyester enclosures, and SMC Chequered Plates. MANUFACTURERS OF :- Manufacturers of: Hot Press Moulded GRP, (SMC) Sectional Water Tanks, Glass, Polyester Moulding Compounds and Mouldings of Electrical Insulators.
Compression, Transfer & Injection Moulding Facility and tooling. ABOUT US:- Devi Polymers Private Limited (Devi) are pioneers in manufacturing Polyester Moulding Compound (PMC), Sheet Moulding Compound (SMC) and Dough Moulding Compound (DMC) in India. Devi started manufacturing PMC’s Polyester Moulding Compounds) in the year 1975 under license from Fothergill & Harvey Ltd. , U. K. / Freeman Chemicals, U. K. Devi is one of the largest manufacturer of PMC Compounds in India. The capacity of the plant for manufacturing SMC and DMC is around 10,000 tones per annum.
Besides supplying SMC and DMC, Devi also supply SMC and DMC moulded components for the Electrical and Automotive Industry. Devi is one of the leading OEMs supplying SMC and DMC components to almost all Electrical Switchgear Companies in India, such as Larsen & Toubro, Siemens India, GE India, Legrand India, Havels India, Socomec HPL etc. , In addition to compounds and OEM supply, Devi has designed & manufactured its own range of Industrial / Engineering Products, catering to various Industrial Sectors in India and also exporting countries like Middle East, Africa, USA etc. ,
The premium products / services of Devi are: [pic]FLOSTO – SMC/GRP Sectional Panel Water Tanks [pic]DURO-BOX – SMC/GRP Moulded Weather Proof Enclosures [pic]Duro-STOR- Modular Housing Systems [pic]CAD / CAM / CAE Services [pic]Extensive Tool Room for Manufacture of Hot Press / Injection Moulding Tools [pic]OEM Products [pic]Special Purpose Machines [pic]Research & Development Capabilities MAANUFACTURING UNITS :- Devi Polymers is one of the leading companies in the world having well integrated facilities under One roof: Devi Polymers has three manufacturing units in Chennai.
All three units are certified to ISO 9001 quality system. [pic] [pic] [pic] [pic] [pic] [pic] [pic] PRODUCTS :- [pic] OEM Mouldings [pic] CAD / CAM / CAE Services [pic]Tool Room Facility [pic] Special Purpose Machines [pic] Dust Collector (Pulse-Jet Type) [pic] Duro-STOR Modular SMC/GRP housing systems [pic]FLOMAT – Sheet Moulding Compound (SMC) [pic]FLODO- Dough Moulding Compound (DMC/BMC) [pic]FLODOMAT – Kneaded Moulding [pic]FLOSTO SMC Panel water tanks [pic] Duro-BOX Polyester enclosures [pic]SMC Chequered Plates OEM MOULDED COMPONENTS Compounding Facility :- [pic]
Comprises of controlled storage facility, for resin, fillers, crystals etc. Bulk filler storage and handling with 2 silos of 60 tonnes capacity each width conveying and drying capacity of 3 tonnes per hour. Bulk filler handling capacity with bulk storage and handling of filler with 2 silos of capacity 60 Mt each, including handling and drying capacity of 3 Mt/hrs. Laboratory and test facilities- Components & Products Devi has extensive facilities to test as per relevant British (BS), American (ASTM), German (DIN) and Bureau of Indian (BIS) Standards, required Electrical, Mechanical, Thermal and Chemical Properties.
Mechanical and Thermal Laboratory [pic] • Izod impact tester • Abrasion / wear resistance tester • Mould Shrinkage measurement. • Martens heat stability tester • Flammability tester UL 94. V0 • Barcol Hardness Test Electrical Laboratory : • 1000KV Di-Electric Break down tester • Arc Resistance Tester (ASTM-D495) • Tracking Index Tester. • Volume and Surface resistivity. Chemical Laboratory : • Glass Polyester resin • Glass fiber • Fillers and other raw materials used in manufacture of PMC • Cure time of compounds Research & Development
Independent R & D team headed by a Doctorate in Chemical Engineering to develop and improve new & existing grades of PMC, testing of products etc. Products list 1)Polyester Moulding Compounds (PMC) [pic] Sheet moulding Compounds (SMC) [pic] Dough Bulk Moulding Compounds (DMC / BMC) [pic] Kneaded Moulding Compounds (KMC) 2)PMC Moulded Components [pic] By Compression (100 gms – 20 Kgs) [pic] By Transfer (100 gms – 800 gms) [pic] By Injection (100 gms – 800 gms) 3)Allied finished products [pic] [pic] MANUFACTURING OF SPECIAL PURPOSE MACHINES:
DEVI have adquate capability to build our own SPM’s including SMC Machines, Moulds & Dies and CNC Equipment etc. , DEVI have a good team of experts, who can design & manufacture required SPMs. DEVI, in the last few years has designed and built a wide range of Special Purpose Machines (SPM) and other development activities, for captive use like: Manufacture of Sheet Moulding Compound Machine capable of thickness 12 mm sheet, with associated (A+B) continuous mixing system [pic]Drilling Machine for Panel Tanks [pic]Design and Development of Pulse Jet type Dust Collectors pic]Design and Development of new range of Enclosures with CAD-CAM & CAE [pic]New product developments by Solid Modeling, Finite Element Analysis and Production of tooling by CAD-CAM machining [pic]Design & Manufacture of Moulding Tools especially compression / injection moulding tools for thermosets ranging from mould weights of 100 kgs. To 13,000 kgs. Water Tank Panel Drilling Machine [pic] [pic] View of Machine in design stage Machine in operation [pic] A PANEL OF DIFFERENT SIZES :- [pic] |W |=|Minimum 1m up to 10m |[pic] | | | | | |(Increments in steps of 0. 15m / 0. 5m| | | | | | |/ 1m) | | | | |D |=|Minimum 1m | | | | | | |up to 3m – without internal steel | | | | | | |support. | | | | | | |up to 10m – with internal steel | | | | | | |support. | | | |H |=|Minimum 1m up to 4m | | | | | | |(Increments in steps of 0. 15m / 0. 5m| | | | | | |/ 1m) | | | Photographs of the SMC Moulded Components of various applications [pic] ELECT COMPONENT-SMC [pic]ELECT COMPONENT-SMC DOUGH MOULDING COMPOUND Dough Moulding Compound (DMC) is a one which comprises of Glass fiber, Polyester Resin, Fillers, Catalyst, Additives, etc. DMC /BMC Compounding Z blade mixers capacity 50 Kg, 100 Kg & 300 Kg.
Bulk filler handling capacity with bulk storage and handling of filler with 2 silos of capacity 60 Mt each, including handling and drying capacity of 3 Mt/hrs. [pic]DOUGH MOULDING COMPOUND [pic] DMC MIXING A FINISHED PRODUCT :- Photographs of external view of the SMC Panel tank. [pic] [pic] • ISO Quality system [pic] • [pic] Devi Polymers Private Limited (UNIT A) – ISO 9001 [pic] • [pic] Devi Polymers Private Limited (UNIT B) – ISO 9001 [pic] • [pic] Devi Polymers Private Limited (UNIT C) – ISO 9001 [pic] [pic] Devi Polymers Private Limited (UNIT C) – ISO 14001 : 2004 — TUV [pic] [pic] | S. Ram Mohan, Manager – Marketing & Devpt. | |(Marketing Division, Unit ‘C’) | |Devi Polymers Private Limited | |NP 23 & 24, Developed Plot, | |Ekkattuthangal, Chennai – 600 097, INDIA | | | |Email: marketing@devipolymers. om | |Telephone: ++91 44 2225 0359, 2225 1502, 2225 0391 | |Fax: ++91 44 2225 0349 | EXPORT PROCEDURE:- The export procedure is carried out as follows: • The overseas customer will send an inquiry to the company. An inquiry refers to the customer’s question on whether the goods they are seeking for is available and easily accessible for the company or not. he exporter may get an inquiry for exports through trade promotion councils or a direct request from the prospective importer from another country. The enquiries will contain information on the details of the product and goods required by the importers from abroad. The inquiry will also specify complete details of the goods like the volume and the value, grading, catalogues, sizes, weights, the international standardization certificates, the expected time of delivery and mode of shipment along with the delivery. • The company will see if the goods they are enquiring about is right in mount and volume and convenient for them to supply. According to the availability of the goods, the company will take up the offer. The exporter will attend to the enquiry by responding through mail and provides details on products through literature and catalogues etc. • If the company has taken the offer, the next step is sending the quotation. A quotation is a form in which the company includes the goods name, nature of the goods ordered, quantity of the goods ordered and price of the goods ordered. The form is drawn up by the company to send to his customer.
The exporter will have to make his offer to the importer in which he will have to submit his quotation on a pro forma invoice and other relevant details like products to be supplied, their rates, quantity, quality, value, details regarding freight, insurance and other charges. He will also quote the time of payment, method of payment,letter of credit if needed, conditions of sale, delivery period and other details on warranty, inspection, approval by home authorities, certification by international standardization authorities etc. • Based on the quotation that is send there will be a negotiation of the prices.
In the quotation form , the company will give the price they have put for the goods. It also shows in which area the company has incurred extra costs for the procurement of goods and the reason for their pricing. Along with this the company will mention the profit they require in the deal. This is submitted to the customer and he will decide if it is appropriate through negotiations. Once the customer is satisfied he will seal the deal. • Once the prices have been discussed and fixed, the next step is to send the purchase order.
A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a purchase order by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the Purchase Order is accepted. Once the importer has accepted the offer made to him, he will have to place an order with the exporter. The exporter has to confirm the acceptance in writing.
He will have to send a pro- forma invoice in triplicate to the buyer and ask him to return two copies duly acknowledged and signed by him so that out of these two copies , one copy can be signed by the exporter too and sent back to the importer buyer. This will signify the confirmation and acceptance of the order by the exporter and an international contract for the export order will become binding between both the parties. • The confirmation and acceptance will result into formation of an export contract between exporter and importer.
The contract will carry details in terms of conditions of the international deal. A normal contract will carry details of goods, quality, quantity, price per unit, total value of the contract, details regarding freight, insurance and other charges. He will also quote the time of payment, method of payment, letter of credit if needed, conditions of sale, delivery period and other details on warranty, inspection, approval by home authorities, certification by international standardization authorities etc • The exporter has to check if he needs license issued for the items which he has received the export order. There are various schemes and finances available for pre shipment finances. The exporters get in touch with the banks and export promotion councils of their respective products as to how to avail these financial assistances. Devi polymers ltd gets its finances from the State Bank Of India. All financial transactions of this company is dealt through state Bank of India. • Once all the formalities have been completed and the exporter has entered into a sales contract with the importer, the exporter has to ensure he manufactures or procures goods as per the specification given in the export contract. The reservation of space in the ship for the goods are made with the help of carrying and forwarding agents. They work as commission agents and will reserve shipping space on commission. The exporter needs to get in touch with them immediately after the export order has been confirmed and book the required shipping berth with the shipping company on the port through which shipping will be taking place. • The importer will specify in the export contract about the standards and specifications to be followed for the packing and marking of goods meant for export.
There are some very important documents that are involved in the process of export. They are as follows: 1. Invoice : An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay these goods and are sometimes offered a discount if paid before.
In the rental industry, an invoice must include a specific reference to the duration of the time being billed, so rather than quantity, price and discount the invoicing amount is based on quantity, price, discount and duration. Generally speaking each line of a rental invoice will refer to the actual hours, days, weeks, months etc being billed. From the point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an invoice is a purchase invoice. A typical invoice contains • The word invoice, • A unique reference number (in case of correspondence about the invoice), • Date of the invoice.. Name and contact details of the seller,Tax or company registration details of seller (if relevant), • Name and contact details of the buyer, • Date that the product was sent or delivered, • Purchase order number (or similar tracking numbers requested by the buyer to be mentioned on the invoice) • Description of the product(s), • Unit price(s) of the product(s) (if relevant), • Total amount charged (optionally with breakdown of taxes, if relevant) • Payment terms (including method of payment, date of payment, • and details about charges late payment) There are different types of invoices: Pro forma invoice – In foreign trade, a pro forma invoice is a document that states a commitment from the seller to provide specified goods to the buyer at specific prices. It is often used to declare value for customs. It is not a true invoice, because the seller does not record a pro forma invoice as an accounts receivable and the buyer does not record a pro forma invoice as an accounts payable.
A pro forma invoice is not issued by the seller until the seller and buyer have agreed to the terms of the order. In few cases, pro forma invoice is issued for obtaining advance payments from buyer, either for start of production or for security of the goods produced. Pro Forma Invoice: An invoice presented by one company to another for payment for goods prior to their despatch. This method of invoicing is to ensure payment is received and is often the case when two companies have not traded before.
If future trading is anticipated it will then be usual for an account to be set up for the purchasing company with credit facilities. • Credit memo – If the buyer returns the product, the seller usually issues a credit memo for the same or lower amount than the invoice, and then refunds the money to the buyer, or the buyer can apply that credit memo to another invoice. • Commercial invoice – a customs declaration form used in international trade that describes the parties involved in the shipping transaction, the goods being transported, and the value of the goods. 5] It is the primary document used by customs, and must meet specific customs requirements, such as the Harmonized System number and the country of manufacture. It is used to calculate tariffs. • Debit memo – When a company fails to pay or short-pays an invoice, it is common practice to issue a debit memo for the balance and any late fees owed. In function debit memos are identical to invoices. • Self-billing invoice – A self billing invoice is when the buyer issues the invoice to himself (e. g. according to the consumption levels he is taking out of a vendor-managed inventory stock). Evaluated receipt settlement (ERS) – ERS is a process of paying for goods and services from a packing slip rather than from a separate invoice document. The payee uses data in the packing slip to apply the payments. “In an ERS transaction, the supplier ships goods based upon an Advance Shipping Notice (ASN), and the purchaser, upon receipt, confirms the existence of a corresponding purchase order or contract, verifies the identity and quantity of the goods, and then pays the supplier. “[6] • Timesheet – Invoices for hourly services such as by lawyers and consultants often pull data from a timesheet.
A Timesheet invoice may also be generated by Operated equipment rental companies where the invoice will be a combination of timesheet based charges and equipment rental charges. • Invoicing – The term invoicing is also used to refer to the act of delivering baggage to a flight company in an airport before taking a flight. [citation needed] • Statement – A periodic customer statement includes opening balance, invoices, payments, credit memos, debit memos, and ending balance for the customer’s account during a specified period.
A monthly statement can be used as a summary invoice to request a single payment for accrued monthly charges. • Progress billing used to obtain partial payment on extended contracts, particularly in the construction industry (see Schedule of values) • Collective Invoicing is also known as monthly invoicing in Japan. Japanese businesses tend to have many orders with small amounts because of the outsourcing system (Keiretsu), or of demands for less inventory control (Kanban). To save the administration work, invoicing is normally processed on monthly basis. Continuation or Recurring Invoicing is standard within the equipment rental industry, including tool rental. A recurring invoice is one generated on a cyclical basis during the lifetime of a rental contract. For example if you rent an excavator from 1st January to 15th April, on a calendar monthly arrears billing cycle, you would expect to receive an invoice at the end of January, another at the end of February, another at the end of March and a final Off-rent invoice would be generated at the point when the asset is returned.
The same principle would be adopted if you were invoiced in advance, or if you were invoiced on a specific day of the month. 2. Packing list: The packing list refers to a consolidated statement of the contents packed in each large case and the number of such large cases meant for shipment. Such list will mention the • packing date, • name and address of the exporter, • name and address of the importer, • export order number and date • contents of the goods in terms of quality and quantity • weight • special handling instructions • marking numbers to identify the consignment export price will be mentioned in the invoice. 3. Certificate of origin: The certificate of origin as the name suggests certifies the name of the country in which the goods meant for export have been produced. This certificate is sent by the exporter to the importer, as it will be needed by him to get the goods cleared by the customs authority of his country. The customs law of the country may have preferential duty rates for a particular country or the country may have put an embargo on the imports of specific goods from a particular country. The submission of the certificate of origin is required.
The exporters can approach the chamber of commerce, the export promotion council and many other trade promotion councils authorized by government to issue the certificate of origin. 4. Bill of lading: A bill of lading is a type of document that is used to acknowledge the receipt of a shipment of goods. A transportation company or carrier issues this document to a shipper. In addition to acknowledging the receipt of goods, a bill of lading indicates the particular vessel on which the goods have been placed, their intended destination, and the terms for transporting the shipment to its final destination.
Inland, ocean, through, and air waybill are the names given to bills of lading. An inland bill of lading is a document that establishes an agreement between a shipper and a transportation company for the transportation of goods. It is used to lay out the terms for transporting items overland to the exporter’s international transportation company. An ocean bill of lading is a document that provides terms between an exporter and international carrier for the shipment of goods to a foreign location overseas. A through bill of lading is a contract that covers the specific terms agreed to by a shipper and carrier.
This document covers the domestic and international transportation of export merchandise. It provides the details of the agreed upon transportation between specific locations for a set monetary amount. An air waybill is a bill of lading that establishes terms of flights for the transportation of goods both domestically and internationally. This document also serves as a receipt for the shipper, proving the carrier’s acceptance of the shipper’s goods and agreement to carry those goods to a specific airport. Essentially, an air waybill is a type of through bill of lading.
This is because air waybills may cover both international and domestic transportation of goods. By contrast, ocean shipments require both inland and ocean bills of lading. Inland bills of lading are necessary for the domestic transportation of goods and ocean bills of lading are necessary for the international carriage of goods. Therefore, through bills of lading may not be used for ocean shipments. Inland and ocean bills of lading may be negotiable or non-negotiable. If the bill of lading is non-negotiable, the transportation carrier is required to provide delivery only to the consignee named in the document.
If the bill of lading is negotiable, the person with ownership of the bill of lading has the right of ownership of the goods and the right to re-route the shipment. The bill of lading is prepared on the prescribed form of the shipping company and carries the following information: • The shipping company’s name and address • Date and place of shipment • The name of the consigner • Name and destination of vessel • Description and quality of goods • Destination of goods • The private markings and numbers • Invoice number • Date of shipment Gross weight and net weight of consignment • Number of packages • Freight details • Signature and seal of shipping company’s authorized agent Three original sets of bill of lading are issued by the shipping company. The non negotiable copies can also be obtained with clear markings of “non negotiable” for other necessary records. Types of bill of lading are: • Clean bill of lading: A bill of lading is a document issued and signed by a transportation company to show receipt of goods for transportation from and to the point of destination.
A clean bill of lading, simply put, is when the goods received by the carrier (transportation company) are in appropriate condition with no defects or damage to goods and/or packaging. If, for example, the container received by the carrier was damaged, the carrier makes a notation that expressly declares the defective condition of the container. Ultimately, it is the exporter who will be responsible financially because of the damaged container and or package to be shipped. • Claused bill of lading: A bill of lading that shows a shortfall or damage in the delivered goods.
Typically, if the shipped products deviate from the delivery specifications or expected quality, the receiver may declare a claused bill of lading. Being issued a claused bill of lading can be troublesome for most exporters. If the goods are deemed damaged or some quantity is missing, the exporter may have difficulty receiving payment. Because most banks will refuse to accept any claused bills of lading, purchasers relying on letters of credit to pay for the goods will be unable to receive funds if the bill is foul. Trans-shipment bill of lading: If shipping company has to use multi- modal systems of transportation, that is, rail, road, air, shipping company, the ships commanding office can issue a trans shipment bill of lading. • Freight paid bill of lading: it refers to a bill of lading the freight for which has already been paid by the exporter. 5. Shipping bill: Is the principle document needed to obtain permission of the customs to export the goods by sea or air. This document contains details regarding • Exporters name and address Particulars and description of goods under export • Details of the packages of goods • Total number of packages • Total weight • Fob prices • Value as defined in the sea customs and act • Name of the vessel • Port of destination • Interim port before trans shipment to final destination 6. Mate’s receipt: The cargo is handed over to the ship only after all formalities by the custom authorities and port authorities have been completed that is the examination of the goods by the custom’s authorities, and the payment of port charges have been paid by the exporter.
The captain of the ship issues this receipt which contains information regarding name of the vessel, berth, date of shipment, description of packages, identification marks and numbers, condition of the cargo at the time of loading into the ship etc 7. Bill of exchange: An unconditional order issued by a person or business which directs the recipient to pay a fixed sum of money to a third party at a future date. The future date may be either fixed or negotiable. A bill of exchange must be in writing and signed and dated. . Letter of credit: A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of credit can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another.
They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, stormwater ponds, etc. ) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i. e. , cannot be amended or cancelled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any.
In executing a transaction, letters of credit incorporate functions common to giros and Traveler’s cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment was insured against loss or damage in transit. However, the list and form of documents is open to imagination and negotiation and might contain requirements to present documents issued by a neutral third party evidencing the quality of the goods shipped, or their place of origin.
Letter of credit being an irrevocable undertaking of the issuing bank makes available the Proceeds, to the Beneficiary of the Credit provided, stipulated documents strictly complying with the provisions of the letter of credit, UCP 600 and other international standard banking practices, are presented to the issuing bank, then: • if the Credit provides for sight payment – by payment at sight against compliant presentation • if the Credit provides for deferred payment – by payment on the maturity date(s) determinable in accordance with the stipulations of the Credit; and of course undertaking to pay on due date and confirming maturity date at the time of compliant presentation • if the Credit provides for acceptance by the Issuing Bank – by acceptance of Draft(s) drawn by the Beneficiary on the Issuing Bank and payment at maturity of such tenor draft, or • if the Credit provides for acceptance by another drawee bank – by acceptance and payment at maturity Draft(s)drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, • or by payment of Draft(s) accepted but not paid by such drawee bank at maturity; • if the Credit provides for negotiation by another bank – by payment without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit, (and so negotiated by the nominated bank ) • Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorized to negotiate, viz the nominated bank. Mere examination of the documents and forwarding the same to LC issuing bank for reimbursement, without giving of value / agreed to give, does not constitute a negotiation.
Documents called for under letter of credit • Financial Documents: Bill of Exchange, Co-accepted Draft • Commercial Documents: Invoice, Packing list • Shipping Documents: Transport Document, Insurance Certificate, Commercial, Official or Legal Documents • Official Documents: License, Embassy legalization, Origin Certificate, Inspection Cert , Phyto-sanitary Certificate • Transport Documents: Bill of Lading (ocean or multi-modal or Charter party), Airway bill, Lorry/truck receipt, railway receipt, CMC Other than Mate Receipt, Forwarder Cargo Receipt, Delivery Challan… etc • Insurance documents: Insurance policy, or Certificate International Trade Payment methods Advance payment (most secure for seller): Where the buyer parts with money first and waits for the seller to forward the goods • Documentary Credit (more secure for seller as well as buyer) subject to ICC’s UCP 600, where the bank gives an undertaking (on behalf of buyer and at the request of applicant ) to pay the shipper ( beneficiary ) the value of the goods shipped if certain docs are submitted and if the stipulated terms and conditions are strictly complied. Here the buyer can be confident that the goods he is expecting only will be received since it will be evidenced in the form of certain docs called for meeting the specified terms and conditions while the supplier can be confident that if he meets the stipulations his payment for the shipment is guaranteed by bank, who is independent of the parties to the contract. Documentary collection (more secure for buyer and to a certain extent to seller) subject to ICC’s URC 525, sight and usance, for delivery of shipping documents against payment or acceptances of draft, where shipment happens first, then the title documents are sent to the [collecting bank] buyer’s bank by seller’s bank [remitting bank], for delivering documents against collection of payment/acceptance • Direct payment (most secure for buyer) Where the supplier ships the goods and waits for the buyer to remit the bill proceeds, on open account terms Risk situations in LC transaction Fraud Risks • The payment will be obtained for nonexistent or worthless merchandise against presentation by the Beneficiary of forged or falsified documents. • Credit itself may be forged. Sovereign and Regulatory Risks • Performance of the Documentary Credit may be prevented by government action outside the control of the parties. Legal Risks Possibility that performance of a Documentary Credit may be disturbed by legal action relating directly to the parties and their rights and obligations under the Documentary Credit Force Majeure and Frustration of Contract • Performance of a contract – including an obligation under a Documentary Credit relationship – is prevented by external factors such as natural disasters or armed conflicts Risks to the Applicant • Non-delivery of Goods • Short Shipment • Inferior Quality • Early /Late Shipment • Damaged in transit • Foreign exchange • Failure of Bank viz Issuing bank / Collecting Bank Risks to the Issuing Bank • Insolvency of the Applicant • Fraud Risk, Sovereign and Regulatory Risk and Legal Risks Risks to the Reimbursing Bank no obligation to reimburse the Claiming Bank unless it has issued a reimbursement undertaking. Risks to the Beneficiary • Failure to Comply with Credit Conditions • Failure of, or Delays in Payment from, the Issuing Bank • Credit Issued by Party other than Bank Risks to the Advising Bank • The Advising Bank’s only obligation – if it accepts the Issuing Bank’s instructions – is to check the apparent authenticity of the Credit and advising it to the Beneficiary Risks to the Nominated Bank • Nominated Bank has made a payment to the Beneficiary against documents that comply with the terms and conditions of the Credit and is unable to obtain reimbursement from the Issuing Bank Risks to the Confirming Bank If Confirming Bank’s main risk is that, once having paid the Beneficiary, it may not be able to obtain reimbursement from the Issuing Bank because of insolvency of the Issuing Bank or refusal of the Issuing Bank to reimburse because of a dispute as to whether or not payment should have been made under the Credit Risks in International Trade • A Credit risk risk from change in the credit of an opposing business. • An Exchange risk is a risk from a change in the foreign exchange rate. • A Force majeure risk is 1. a risk in trade incapability caused by a change in a country’s policy, and 2. a risk caused by a natural disaster. Devi Polymers are presently one of the leading players in the world in prefabricated GRP panel type water storage tanks. It exports • water tank panels, • Electrical components like fuse gear, switch gear, transformers.
It has 3 manufacturing units in Chennai which are all ISO9001 certified and its plant unit ‘C’, the tank manufacturing unit is ISO 14001 certified. Devi polymers give letter of credit for 30 to 90 days depending on the credibility of the customer. It carries out all financial transactions through the State Bank Of India. Devi polymers Ltd exports their products to countries like USA, UK, Gulf countries. Some of its major customers are • Robroy Enclosures, USA • New Basis, USA • Union Fibre Glass, Dubai PROCEDURE OF IMPORT:- Certain procedures have to be followed for the purpose of clearing goods to be imported. Briefly these procedures have been discussed below.
The person in-charge of a vessel, ship or aircraft entering India must call or land only at a Customs Port or a Customs Airport only. It may call or land at any other place only if compelled by accident, bad weather or due to some genuine unavoidable reason. In such a case, he must report to the nearest police station or custom officer of such emergency arrival. In case of import of goods through the land route, the vehicle should follow the approved route and arrive at the approved Land Customs Station only. The person in-charge of a vessel, ship, aircraft or vehicle must submit within 24 hours after arrival at a Customs Area an Import Manifest or Import Report in the prescribed form in duplicate.
This will give details of cargo to be unloaded, unaccompanied baggage, goods to be transhipped, retention cargo, details such as general declaration about the conveyance, stores on the conveyance, private property in possession of the Captain of the aircraft or Master of the ship and other members of crews and Passenger Manifest. Separate declaration has to be given in respect of goods like arms, explosives, narcotics, dangerous drugs, gold and silver. The Import Manifest may be amended only with permission if there was no fraudulent intention. This report is not required if the conveyance is carrying only luggage of its occupants. Sometimes, filing of the Import Manifest is allowed before the arrival of the vessel by the Steamer Agents. This enables the importers to clear the imported goods quickly.
If, everything is found to be in order and berthing accommodation is available to the ship, the Customs Officer grants Entry Inwards. Unloading of cargo can start only after such order is made. The goods are then unloaded from the vessel. However, only those goods which have been mentioned in the Import Manifest can be unloaded. Such unloading can be done only at approved places and under supervision of the Customs Officer on a working day during working hours. However, unloading on holidays and after working hours may be allowed after giving notice to the prescribed authorities and after paying the prescribed fees. After the goods are unloaded, they shall remain in the custody of the prescribed authority (eg.
Port Trust in case of Port and Airport Authority in case of Airport) approved by the Collector of Customs until they are cleared. A tally sheet is prepared after the goods are goods are unloaded. If less than the reported goods are found, insurance survey is immediately carried out. If the goods unloaded are lower than the reported quantity, the shipper is liable to pay penalty upto twice the amount of duty payable on such shortfall in goods. The conveyance will leave only on written order given by the Customs Officer. Such order is given only after all formalities are completed and all duties and other payments due are paid. Duties on stores consumed have to be paid. Important terms used in import
Bill of Entry must be filed in the prescribed form by the Import or his authorised agent giving the prescribed details such as name and address of the importer, importer code, name address and licence number of the Custom House Agent, name of vessel, Rotation Number and date, Line Number, port of shipment, country of origin, country of consignment, number of Bill of Lading, description of packages, number of packages, quantity of goods, description of goods, Customs Tariff Heading, details of exemption from customs duty claimed, invoice number, and value, etc. A declaration that the details are true and there is no other document showing contrary information must also be given. The Bill of Entry may be signed by the importer himself or his Custom House Agent. Bill of Entry are of three types :- 1. Bill of Entry for home consumption: is to be submitted when the imported goods are to be cleared on payment of full duty for consumption of the goods in India. It is white colored. 2.
Bill of Entry for Warehouses : is to be submitted when the imported goods are not required immediately the importer but here they are to be stored in a warehouse without payment of duty under a bond and cleared later when required on payment of duty. This enables the importer to defer payment of Customs Duty until the goods are actually required by him. It is yellow colored. It is also known as “Bond Bill of Entry” since bond is executed for transfer of goods in a warehouse without payment of duty. 3. Bill of Entry for Ex-Bond Clearance : is used for clearing goods from the warehouse on payment of duty. The goods are classified and valued at the time of clearance from the Customs Port. Value and classification are not determined on such Bill of Entry. It is green coloured. The rate of duty payable is that rate which is applicable on the date of removal of goods from the warehouse.
If the rate of duty has changed after goods are cleared from custom port, duty assessed in the yellow Bill of Entry and paid on green Bill of Entry will not be the same. Assessment and Clearance : The document details filed by the importer or his authorized agent are checked and assessed by custom authority and then the goods are cleared. The following are the procedures in this connection: – The Bill of Entry submitted by importer is tallied with the Import Manifest submitted by shipper. If any variance is found between the two, further clarifications for the difference are called for by the Customs authorities. The rate of duty payable will be that rate which is prevalent on the date of presentation of Bill of Entry.
The importer or his agent may present Bill of Entry upto one week before expected date of arrival of the vessel. In such a case duty is payable at the rate of applicable on the date of which Inward Entry is granted and not the date of presentation of shipping bill. However the rate of foreign exchange will be that rate which was prevalent on the date of submission of Bill of Entry. This enables the importer to clear the goods quickly. On presenting of the Bill of Entry, date of presentation is noted. The Bill of Entry is then send to the appraising department for examination. The examiners carry out physical examination of the goods. Packages are opened and examined on a test check sample basis on the basis of which examination report is prepared.
The appraiser classifies the goods, determines the customs value, rate of duty applicable and verifies that the imports do not violate any provision of law. The duty payable is typed by a pin point typewriter. The Importer must pay the amount of duty so determined in cash or by bank draft for clearance of goods. However, regular importers may pay the duty out of the current account balance which they keep deposited with the Customs authorities. Once the duty is assessed, the Bill of Entry is returned to the importer for payment of duty. Duty must be paid within 7 days after Bill of Entry is returned ; otherwise interest at the rate of 20% p. a. is payable. Sometimes, f all documents are in order and the authorities are convinced that there is no violation of any law, the assessment may be done without physically examining the goods. Provisional Assessment may be done in the following circumstances: – • When the Customs Officer is satisfied that importer or exporter is unable to produce the required document or information. • It is necessary to carry out chemical or other test of goods. • When the importer or exporter has produced all documents but the Customs Officer still feels that further enquiry is required. In such circumstances, assessment is done on a provisional basis i. e. on a tentative basis. The importer has to pay the duty assessed and may clear the goods.
However, he has to execute a bond or furnish warranty or security as required by the custom officer for payment of difference, if any. The surplus amount paid, if any, on final assessment is refunded to him and the shortfall, if any, is to be paid by him. If the imported goods are warehoused after provisional assessment, the Customs Officer may require the importer to execute bond for twice the difference in duty, if the duty finally assessed is higher. Sometimes goods are imported in completely knock down condition i. e. CKD ( eg. all the components an parts of a car are imported and they are then assembled in India ). Such packages comprise of several goods, each of which are liable at different rate of duty.
In such a case, if the importer is liable to produce satisfactory evidence regarding break-up value of different parts, duty will be charged at different rates applicable on the basis of such break-up. If break-up is not available, the rate of duty for the entire package will the highest rate applicable among the parts in the package. Import Control : After assessment, the Bill of Entry is sent to the “License Section” where it is checked whether the import complies with the export and import policy of the Government. If any license is required for the import, it is verified whether the goods have been imported against a proper import license.
Such import license is given in duplicate, one copy for customs purpose and another exchange control copy for clearance of foreign exchange by bank. Out of Customs Charged Order : After all the above formalities are completed, the Customs Officer will issue Out-of Customs Order. Goods can be removed only on receipt of such order. Delay due to Customs formalities: Heavy charges known as “demurrage” are payable if goods are not cleared from the Customs Port within 3 days of unloading. If due to Customs formalities, such goods cannot be removed, the Customs authorities issue a certificate stating that delay was due to bonafide Customs formalities or due to bonafide Import Control formalities.
In such a case, the demurrage may be refunded by the Port authorities. Self Assessment of Bill of Entry (Green Channel of Import) This is a special scheme allowed in certain cases for speedy clearance of imports. As the name suggests, the duty is assessed by the importer himself and voluntarily paid by him. Some of the situations where this scheme has been made applicable are Public Sector Undertakings, Government Departments, 100 % export oriented units approved by the Collector and other importers which a proven identity and clean track record. The following are the main conditions of the scheme :- • Goods should not be subject to any import license or import restriction.
They must be goods which fall under the open general list of the RBI. • They must not fall under any negative list of imports • Consignment must be of a single product and not a combination of products. • Sensitive Item are not permitted under this scheme. • Assessment must not require any bond. • Assessment should not require original inspection of goods. • Importer must be regularly importing that item. Bulk imports from manufacturer and test certificate of manufacturer is produced. Under the scheme, the importer must file Bill of Entry having green colour band for identification. Bill of Entry must be self assessed and must be submitted along with proof of previous clearance of goods. | | | | | | | | | | | | | | | | | | | | | | 1. Bill of Entry – Cargo Declaration: Goods imported in a vessel/aircraft attract customs duty and unless these are not meant for customs clearance at the port/airport of arrival by particular vessel/aircraft and are intended for transit by the same vessel/aircraft or transhipment to another customs station or to any place outside India, detailed customs clearance formalities of the landed goods have to be followed by the importers.
In regard to the transit goods, so long as these are mentioned in import report/IGM for transit to any place outside India, Customs allows transit without payment of duty. Similarly for goods brought in by particular vessel/aircraft for transhipment to another customs station detailed customs clearance formalities at the port/airport of landing are not prescribed and simple transhipment procedure has to be followed by the carrier and the concerned agencies. The customs clearance formalities have to be complied with by the importer after arrival of the goods at the other customs station. There could also be cases of transhipment of the goods after unloading to a port outside India. Here also simpler procedure for transhipment has been prescribed by regulations, and no duty is required to be paid. 2.
For other goods which are offloaded importers have the option to clear the goods for home consumption after payment of the duties leviable or to clear them for warehousing without immediate discharge of the duties leviable in terms of the warehousing provisions built in the Customs Act. Every importer is required to file in terms of the Section 46 an entry (which is called Bill of entry) for home consumption or warehousing in the form, as prescribed by regulations. 3. If the goods are cleared through the EDI system no formal Bill of Entry is filed as it is generated in the computer system, but the importer is required to file a cargo declaration having prescribed particulars required for processing of the entry for customs clearance. 4.
The Bill of entry, where filed, is to be submitted in a set, different copies meant for different purposes and also given different colour scheme, and on the body of the bill of entry the purpose for which it will be used is generally mentioned in the non-EDI declaration. 5. The importer clearing the goods for domestic consumption has to file bill of entry in four copies; original and duplicate are meant for customs, third copy for the importer and the fourth copy is meant for the bank for making remittances. 6. In the non-EDI system alongwith the bill of entry filed by the importer or his representative the following documents are also generally required:- * Signed invoice * Packing list Bill of Lading or Delivery Order/Airway Bill * GATT declaration form duly filled in * Importers/CHA’s declaration * License wherever necessary * Letter of Credit/Bank Draft/wherever necessary * Insurance document * Import license * Industrial License, if required * Test report in case of chemicals * Adhoc exemption order * DEEC Book/DEPB in original * Catalogue, Technical write up, Literature in case of machineries, spares or chemicals as may be applicable * Separately split up value of spares, components machineries * Certificate of Origin, if preferential rate of duty is claimed * No Commission declaration 7. While filing the bill of entry and giving various particulars as rescribed therein the correctness of the information given has also to be certified by the importer in the form a declaration at the foot of the bill of entry and any mis-declaration/incorrect declaration has legal consequences, and due precautions should be taken by importer while signing these declarations. 8. Under the EDI system, the importer does not submit documents as such for assessment but submits declarations in electronic format containing all the relevant information to the Service Centre. A signed paper copy of the declaration is taken by the service centre operator for non-repudiability of the declaration. A checklist is generated for verification of data by the importer/CHA. After verification, the data is submitted to the system by the Service Centre Operator and system then generates a B/E Number, which is endorsed on the printed checklist and returned to the importer/CHA. No original documents are taken at this stage.
Original documents are taken at the time of examination. The importer/CHA also need to sign on the final document after Customs clearance. 9. The first stage for processing a bill of entry is what is termed the noting of the bill of entry, vis-a-vis, the IGM filed by the carrier. In the non-EDI system the importer has to get the bill of entry noted in the concerned unit which checks the consignment sought to be cleared having been manifested in the particular vessel and a bill of entry number is generated and indicated on all copies. After noting the bill of entry gets sent to the appraising section of the Custom House for assessment functions, payment of duty etc.
In the EDI system, the Steamer Agents get the manifest filed through EDI or by using the service centre of the Custom House and the noting aspect is checked by the system itself – which also generates bill of entry number. 10. After noting/registration of the Bill of entry, it is forwarded manually or electronically to the concerned Appraising Group in the Custom House dealing with the commodity sought to be cleared. Appraising Wing of the Custom House has a number of Groups dealing with earmarked commodities falling under different Chapter Headings of the Customs Tariff and they take up further scrutiny for assessment, import permissibility etc. angle. Assessment: 11.
The basic function of the assessing officer in the appraising groups is to determine the duty liability taking due note of any exemptions or benefits claimed under different export promotion schemes. They have also to check whether there are any restrictions or prohibitions on the goods imported and if they require any permission/license/permit etc. , and if so whether these are forthcoming. Assessment of duty essentially involves proper classification of the goods imported in the customs tariff having due regard to the rules of interpretations, chapter and sections notes etc. , and determining the duty liability. It also involves correct determination of value where the goods are assessable on ad valorem basis.
The assessing officer has to take note of the invoice and other declarations submitted alongwith the bill of entry to support the valuation claim, and adjudge whether the transaction value method and the invoice value claimed for the basis of assessment is acceptable, or value needs to be redetermined having due regard to the provisions of Section 14 and the valuation rules issued thereunder, the case law and various instructions on the subject. He also takes note of the contemporaneous values and other information on valuation available with the Custom House. 12. Where the appraising officer is not very clear about the description of the goods from the document or as some doubts about the proper classification which may be possible only to determine after detailed examination of the nature of the goods or testing of its samples, he may give an examination order in advance of finalisation of assessment including order for drawing of representative sample.
This is done generally on the reverse of the original copy of the bill of entry which is presented by the authorized agent of the importer to the appraising staff posted in the Docks/Air Cargo Complexes where the goods are got examined in the presence of the importer’s representative. 13. On receipt of the examination report the appraising officers in the group assesses the bill of entry. He indicates the final classification and valuation in the bill of entry indicating separately the various duties such as basic, countervailing, anti-dumping, safeguard duties etc. , that may be leviable. Thereafter the bill of entry goes to Assistant Commissioner/Deputy Commissioner for confirmation depending upon certain value limits and sent to comptist who calculates the duty amount taking into account the rate of exchange at the relevant date as provided under Section 14 of the Customs Act. 14.
After the assessment and calculation of the duty liability the importer’s representative has to deposit the duty calculated with the treasury or the nominated banks, whereafter he can go and seek delivery of the goods from the custodians. 15. Where the goods have already been examined for finalization of classification or valuation no further examination/checking by the dock appraising staff is required at the time of giving delivery and the goods can be taken delivery after taking appropriate orders and payment of dues to the custodians, if any. 16. In most cases, the appraising officer assessees the goods on the basis of information and details furnished to the importer in the bill of entry, invoice and other related documents including catalogue, write-up etc. He also determines whether the goods are permissible for import or there are any restriction/prohibition.
He may allow payment of duty and delivery of the goods on what is called second check/appraising basis in case there are no restriction/prohibition. In this method, the duties as determined and calculated are paid in the Custom House and appropriate order is given on the reverse of the duplicate copy of the bill of entry and the importer or his agent after paying the duty submits the goods for examination in the import sheds in the docks etc. , to the examining staff. If the goods are found to be as declared and no other discrepancies/mis-declarations etc. , are detected, the importer or his agent can clear the goods after the shed appraiser gives out of charge order. 17.
Wherever the importer is not satisfied with the classification, rate of duty or valuation as may be determined by the appraising officer, he can seek an assessment order. An appeal against the assessment order can be made to appropriate appellate authority within the time limits and in the manner prescribed. EDI Assessment: 18. In the EDI system of handling of the documents/declarations for taking import clearances as mentioned earlier the cargo declaration is transferred to the assessing officer in the groups electronically. 19. The assessing officer processes the cargo declaration on screen with regard to all the parameters as given above for manual process. However in EDI system, all the calculations are done by the system itself.
In addition, the system also supplies useful information for calculation of duty, for example, when a particular exemption notification is accepted, the system itself gives the extent of exemption under that notification and calculates the duty accordingly. Similarly, it automatically applies relevant rate of exchange in force while calculating. Thus no comptist is required in EDI system. If assessing officer needs any clarification from the importer, he may raise a query. The query is printed at the service centre and the party replies to the query through the service centre. 20. After assessment, a copy of the assessed bill of entry is printed in the service centre. Under EDI, documents are normally examined at the time of examination of the goods.
Final bill of entry is printed after ‘out of charge’ is given by the Custom Officer. 21. In EDI system, in certain cases, the facility of system appraisal is available. Under this process, the declaration of importer is taken as correct and the system itself calculates duty which is paid by the importer. In such case, no assessing officer is involved. 22. Also, a facility of tele-enquiry is provided in certain major Customs stations through which the status of documents filed through EDI systems could be ascertained through the telephone. If nay query is raised, the same may be got printed through fax in the office of importer/exporter/CHA. Examination of Goods: 23.
All imported goods are required to be examined for verification of correctness of description given in the bill of entry. However, a part of the consignment is selected on random selection basis and is examined. In case the importer does not have complete information with him at the time of import, he may request for examination of the goods b
