Customs Bonded Area – It’s meaning and functions

What is customs bonded area in exports and imports?

The term Customs Bonded Area is used in export and import of international trade. This term – Customs Bonded Area – means, the area under customs control where in goods cannot be moved in or out without the permission of customs department.

What is customs bonded area in exports and imports? 

How Customs does bonded area work in Export Import Trade?

Customs bonded area means, the cargo enters inward the area and going outward area is under the supervision of customs department. In other words, you cannot move out or move in the bonded area without customs permission. If you want to do any jobs inside the area also is under customs supervision.

Now let us discuss about some of the circumstances where customs bonded area is used.

Customs Bonded Area at a customs location under regular imports and exports.

As you know, any goods moved in to a country and moved out from the country are under the control of government through its agency – Customs Department. So each customs location has a customs bonded area.

The goods for export are moved to this Customs Bonded Area for necessary examination and assessment procedures under export customs clearance procedures and formalities of the country. Once after completion of such export customs clearance procedures, customs permits to move goods out of such Customs Bonded Area for export.

In an import, all goods importing to a location is moved to a customs bonded area at the customs location first. Once after completion of necessary import customs clearance procedures and formalities, the goods are moved out from such Customs Bonded Area to the importer’s place. In other words, any goods moved in to a country is moved to a customs bonded area first, and such goods can be moved out from customs bonded area only after necessary permission from customs.

Customs Bonded Area at an Exporter’s location for units under EOU and STPI.

Each unit under 100 percent Export Oriented Unit and unit under STPI have Customs Bonded Area at their location. At the time of obtaining LOP Letter of Permission, each unit of EOU or STPI is allotted an area by customs department after necessary physical inspection and satisfaction. This customs bonded area could be a warehouse also. Any dutiable goods, let the goods be import or domestic which attracts import duty or central excise duty have to be moved to such customs bonded area first.

Under exports or local movement like Inter Unit Transfer etc, the unit under EOU or STPI has to take necessary customs permission by following certain documentation procedures and formalities. The necessary examination procedures are followed by customs officials if applicable and permits to move goods out of such Customs Bonded Area.

Under imports or local procurement of goods, each Export Oriented Unit or unit under STP has to notify customs department immediately up on such arrival of goods in specified format within a specified period of time of arrival. Necessary Re-Warehousing Certificate procedures have to be completed by each EOU /STP units by completing necessary procedures and formalities specified.

Customs Bonded Area in a Customs Bonded Ware House.

Under imports, if importer need not take delivery of goods immediately up on its arrival, he can store goods in a Customs Bonded Area. The importer need not pay duty amount on such goods immediately up on import. The importer can pay duty and take out goods as and when he requires. The importer can move goods part by part also as per his convenience. Here, the importer files necessary import documentation for warehousing immediately up on arrival of import goods and arranges to move goods to a customs bonded ware house, which is a customs bonded area. The importer need not pay any import duty amount at that point of time of warehousing. As stated, as and when the importer requires to move imported goods to his place, he pays necessary duty amount to customs and clears the goods either part or full quantity of imports.

How does a Running bond work?

Running bond is commonly used at various government and private authorities against security requirements. 

• What is running bond? 
• How running bond works?

In imports and exports, running bond is commonly used at customs authorities under various requirements.

How does running bond work?

A bond is executed with the authorities to fulfill certain terms and conditions legally. Once after fulfilling the terms and conditions mentioned in the bond, the executor does not cancel the bond but carries over to next obligation against same terms and conditions mentioned in the bond.

If a running bond has been executed by a customer with authorities, once after fulfillment of required obligation under running bond, such running bond do not be cancelled, but carry over to the new obligation executing.

Here the benefit for the customer is that, he need not execute each and every time against each obligation.

For example, if a customer executes a bond worth 10 billion, he can use the said bond for more than one transaction below 10 billion. He can submit proof of obligation for each transaction time to time and reduce bond obligation. In turn, the customer can execute new jobs subjected to maximum 10 billion in this example. While fulfillment of obligation under each bond after necessary formalities by submitting necessary documentary proof, the value of each bond replenishes, to enable him to execute new transactions.

Let me explain once again in simple terms:

A bond for 10 billion has been executed by an importer to avail import duty exemption against his import shipment. This importer imports goods worth of import duty of 2 billions. The bond value came down to 8 billion. The said importer can further import goods worth import duty of 8 billion. Now the bond value is 0. During this period, if he fulfills his obligation against bond worth 2 billions against his first imports, the bond value comes up to 2 billions again. So he can further import goods worth import duty of 2 billion maximum. So the bond value replenishes when completing obligation under each import. In other words, If an importer executed a bond worth 10 billions against import duty exemption worth 10 billions, the said importer can import goods up to duty worth 10 billion at any point of time. The bond value should not exceed more than 10 billions at any point of time.

How to send export samples to foreign buyer?

• How to send export samples to foreign buyer? 
• Tips to send samples to foreign buyer?

Some of you may need a support on procedures to send export samples to your buyer at foreign country. Sending export samples is a simple procedure under export and import.

• Can I get cost of export sample from foreign buyer, if value of product is high? 
• Can we get reimbursed on the cost of courier to send export samples?

Based on your communication with the buyer, you are asked to send sample of your product. If value of your product sample is high, you can request buyer to make payment on the same. The buyer remits the amount to your bank. If value is nominal and you can afford the cost, you can supply free of cost. There are government financial assistances to send sample products to foreign countries. You can contact your export promotion council or commodity board for further information. While sending samples, do not forget to retain a set of same sample with you as you have to meet the specification of product as per the said sample. If you do not keep a copy of sample, you can not claim with your buyer against any disputes on the quality specification of product.

You can send export sample by courier if the value is below a certain amount. Contact your service provider for latest value limit that government of your country allowed on export sample that you can send by courier without any specific regulations.

The cost of courier charges can be paid by you or the buyer as per your understanding with the buyer on mutually agreed terms of communication.

Does exchange rate of foreign currency with local currency affect export business?

• Does exchange rate of currency effect export business? 
• Does exchange rate of foreign currency with local currency affect export business?
• How does change of exchange rate of currency effect export business?

Your buyer sent you a purchase order in January, for 24 containers to ship 02 containers each month. The price fixed as USD 20,000 per container and total of USD 480000 for 24 containers. 

You have quoted the rate as per the exchange rate of January, but the shipment period is through out the year till December. Your term of payment is 60 days from the date of bill of lading. Means, you have agreed a credit limit of 60 days from the date of shipment. In this case, you will start receiving your payment from March onwards till February of next year. Here, the exchange rate of this month may not be for next month. In short, certainly there would be a difference in exchange rate of March to February of next month. So, when converting USD in to your country’s currency, you can anticipate loss in business also.

How to overcome such risk of variation of exchange rates in Exports and Imports?

There are some solutions to solve risk in variation of exchange rates in exports and imports. One of them is to open an EEFC – Exchange Earners Foreign Currency account with your bank. Here, you are maintaining a foreign currency account in your name where in you can convert to your currency as and when you require.

Another method to prevent loss in variation of exchange rate is to enter overseas business contract to pay amount in local currency. Here, your buyer/importer buys – converts - your domestic currency and remits amount to you in your local currency. You need to make clear about these arrangements before entering in to the business contract.

No Bank realization Certificate BRC required for Indian Exporters

Foreign Inward Remittance Certificate (FIRC) or Bank Realization Certificate (BRC) is not required to be submitted by exporters now to claim benefits from Director General of Foreign Trade. As per the new developments, the details of inward remittance is linked with the software system of DGFT, where in the details are electronically transferred.

Here the benefit for exporter is, need not to wait to get the hard copy of Bank Realization Certificate from the respective bank to submit with Director General of Foreign Trade (DGFT) to claim for their benefit under Foreign Trade Policy (FTP).

This is a good movement initiated by the authorities to save time and money on the procedures for exporters.

Difference between GR and SOFTEX forms

What is GR form and how does it work?

GR.forms are issued by Reserved Bank of India to regulate and monitor foreign exchange transactions against export of goods under physical forms. Exporter has to collect blank GR.forms from RBI. The forms are in duplicate. Exporter had to sign both copies and arranged to deliver to Customs House Agents for filing with customs. While filing shipping documents by customs house agents, a Xerox true copy of shipping bill to be impressed on the GR.form. Once customs formalities completed, original GR form is submitted with customs and duplicate copy of GR. sends back to the exporter. Exporter submits duplicate GR form with their bank along with other shipping documents. Exporter’s bank sends back the said duplicate GR form to RBI for foreign exchange regulations. Customs department also sends back the original GR copy to RBI. PP form is used, if shipment by Post office. After introduction of online filing of shipping bill for export where in electronic filing system is available (EDI) , these procedures have been waived off by Reserve Bank of India as such GR details are electronically transferred from customs department to Reserve bank directly. However, GR forms are mandatory at export customs locations where EDI facility is not available.

How SOFTEX form works?

SOFTEX forms are to be filed with STPI to regulate inward outward remittance by Reserve Bank under export of goods in non-physical form, either domestic or offshore. The products includes computer software, export of Video and TV software and all other types of software products and packages which are falling under goods of non physical form.

SOFTEX form is issued by Reserve Bank foreign exchange department. All software forms under STP units are eligible to obtain SOFTEX forms from Foreign exchange department of Reserve bank once after submitting self-certified copy of overseas buyer’s contract/purchase order or work order with STPI office as per 7(a) of SOFTEX form for declaration. SOFTEX forms are issued in triplicate. These SOFTEX forms are to be submitted by STP units within 30 days of issue of export invoice or within 30 days of last invoiced released in a month. Once exports effected, after necessary certification by STPI director’s office, the said SOFTEX forms are sent to Reserve bank. SOFTEX blank forms are obtained from foreign exchange department of Reserve bank by the STP units in triplicate. Once after effecting sales, the said SOFTEX forms in triplicate are submitted with STPI for necessary approval / endorsement by director of STPI under the jurisdiction of STP units. After certification of three copies of SOFTEX forms, original and duplicate are returned to STP units and triplicate copy is retained by STPI units. Once after exports effected, the duplicate copy of SOFTEX form is submitted with authorized dealer bank along with the necessary supporting documents. Original SOFTEX form is submitted with Reserve Bank’s exchange control department within the jurisdiction of STP unit. Once after receipt of foreign exchange under the said SOFTEX form, authorized bank returns the said duplicate copy of SOFTEX form to Reserve Bank.

How to differentiate between BRC and FIRC?

I have been receiving many enquiries asking the difference between BRC and FIRC - Bank Realization Certificate and Foreign Inward Remittance certificate. Some asked, what is BRC and others what is FIRC and difference between BRC and FIRC.

Strictly speaking, both are certificate issued by authorized dealer bank to the customers for receiving amount from foreign countries. Let us discuss in detail:

FIRC is issued against any receipt of amount from foreign countries by a bank to their customers. It can be an advance payment against export proceeds, ocean or airfreight, or remuneration or wages under consultancy charges or for any other reasons.

BRC means Bank Realization Certificate issued by bank to their customers against any specific documents. Normally BRC is issued by a bank to their customers who has been in to export business on each shipment of export proceeds. Various export promotion agencies provide incentives, import duty exemptions and other financial assistance to the exporters. These agencies requires to be submitted export proof by exporters to claim such benefits. One of the proof of exports other than export promotion copy of shipping bill (EP copy of shipping bill), Mate Receipt issued by the carrier and/or customs authorized ARE-1 (for goods under central excise only) is Bank Realization Certificate BRC issued by the respective bank who received foreign amount for exporters.

So once after receiving the amount under each shipment, the exporter approaches their bank and submits the proof of exports and FIRC details (Foreign Inward Remittance Certificate) to obtain a BRC under each shipment. This Bank Realization Certificate BRC is submitted with the various authorities as proof of shipment or proof of exports along with customs legal document of EP copy of shipping Bill, Mate receipt issued by carrier of goods and central excise document of ARE – 1 where ever applicable.

Here you need to observe that an FIRC can be obtained whenever you receives amount from foreign country. It can be an advance amount against exports or services.

Before introducing EDI system (Electronic Data Interchange), a GR form has to be filed by exporters along with shipping bill to customs for completion of export procedures and formalities. The copy of shipping bill is impressed on GR form. GR form is a document of export to be submitted with RBI to regulate foreign inward remittance. In order to get BRC, exporter has to submit a copy of GR form to prove the account under which they had received foreign amount.

At present, there is no FIRC or BRC required for government export promotion agencies like DGFT or Customs department where in EDI facility available, as the said foreign receipt is directly linked electronically with customs and DGFT through the authorized dealer bank of exporters.

So, the exporters need not obtain FIRC (foreign inward remittance certificate) or BRC (Bank realization certificate) from their bank to claim any export benefits from DGFT or customs department.

Is Letter of Credit (LC) a safe mode of payment for an Exporter?

Is Letter of Credit (LC) a safe mode of payment for an Exporter?- 

Some tips to exporters.

As per the terms of contract, your overseas buyer agreed to open LC against the shipment to be effected by you. As you know, letter of credit is a safe mode of payment commonly for any business especially in international business also. Once after opening letter of credit in your name as beneficiary, your overseas buyer sends a copy to you by fax or mail. The original can be collected from your bank. Because, letter of credit is opened by your buyer’s bank to the seller’s bank, mentioning beneficiary of LC as you (seller). Any seller or exporter will be happy in opening a letter of credit as terms of payment because the payment guarantee is more assured than shipping by documents against payments (DAP or DA) or documents against acceptance (D.A). As per letter of credit, the opening bank of LC (buyer’s bank) guarantees to effect payment to exporter through exporter’s bank as per the agreed terms and conditions mentioned on letter of credit. My first tip to exporters is, make sure Letter of Credit (LC) has been opened with a prime bank. In other words, the opening bank (buyer’s bank) of letter of credit should be a prime bank.

Who is a ‘prime banker’ . As per the details of assets and liabilities based on the annual financial report of each bank all over the world, the authorities related to banking prepares prime bankers list. The prime banks are the banks who are strong financial background with sound assets and have been serving people with best service. The prime bankers data base will be available with all major reputed banks all over world. You can check this data with your bank. Or your bank may help you to whom to be approached to get the said data.

My second tip to exporters while opening an LC is ‘check the authenticity of Letter of Credit (LC)’.

How to check authenticity of letter of credit (LC)? 

There are many banks all over world. Now a days, after the introduction of globalization of trade, a number of banks and financial institutions have been introduced all over world with least restrictions within the country. Some of them have been working without any regulations by government also. As I have mentioned previously, you can approach your bank with the copy of letter of credit to verify whether the said LC has been opened by a prime bank.

Why LC with a prime banker is safe?: 

The financial strength and reputation among people are very high compared to other banks. So, the prime banks work professionally as per their standard banking norms. No individual or firm can influence to violate the banking rules and regulations especially the norms of international trade. This helps the clients globally to depend prime banks for smooth handling of export import business.

The role of bill of exchange in export business

How bill of exchange works in export trade? 

Are export sales under a bill of exchange safe for an exporter in a DA terms of payment? 

What is a bill of exchange? 

How does Bill of Exchange function in Export and Import business?

In an international trade, bill of exchange is a negotiable instrument made by seller/exporter addressed to the buyer/importer.

Once after shipping goods, the required documents for import along with bill of exchange are submitted with exporter’s bank to send to foreign buyer through buyer’s bank. The said bill of exchange draws in duplicate as per specified format.  Bill of exchange contains the reference details of shipment, amount of invoice to be receivable from overseas buyer, the time of payment to be effected, bank details etc.  A sample body structure of a bill of exchange is as follows:

"On 60 days from the date of bill of lading, please pay an amount of USD 0000  to this first of exchange (second of exchange unpaid), to the order of xyz bank against invoice number 0000.   To: xyz bank "

The bill of exchange is drawn on the letter head of exporter and signs under and sends to buyer through his bank.  Once after reaching documents to overseas buyer, he accepts bill of exchange by signing on bill of exchange.   On maturity date of bill of exchange, the buyer effects amount of proceeds to the supplier of goods through his bank. 

he legal strength of bill of exchange in international trade under DA terms of payment has to be discussed with the experience of traders, as I personally have no recommendations on this mechanism.

Different types of Bill of Lading

What are the various types of Bill of Lading?

The various types of bill of lading  are given below. The details articles about each type of Bill of Lading is written in separate article. The readers may go through each article to have a good knowledge about Types of Bill of Lading and its functions. I hope, you will have a sound knowledge about types of Bill of Lading after reading those articles.

Please find below various types of Bill of Lading:

Ocean Bill of Lading: If a consignment is transported by sea, nationally or internationally Ocean Bill of Lading is used. Ocean Bill of Lading is a common term used in shipping.

Inland Bill of Lading: Inland Bill of Lading is the bill of lading which allows the shipping carrier to ship cargo, by road or rail, across domestic land, but not over seas.

Multimodal/ Combined Transport Bill of Lading: This is a type of Through Bill of Lading that involves a minimum of two different modes of transport, land or ocean. The modes of transportation can be anything from freight boat to air. 

Direct Bill of Lading: Direct Bill of Lading is used when you know the same vessel that picked up the cargo will deliver it to its final destination.

Clean Bill of Lading: If a consignment with no damage on packages apparently, the carrier issues a Bill of lading called Clean Bill of Lading. 

Clean On Board Bill of Lading: A consignment with no damage on packages apparently and if such consignment gone on board the vessel, a Clean On Board Bill of Lading is issued by carrier of goods. 

Unclean Bill of Lading/ Claused bill of lading/ foul bill of lading/ Dirty Bill of Lading/ Soiled Bill of Lading. If owner of ship or his agent does not agree with one or more of the statements mentioned in the bill of lading, he add the said clause or clauses on the bill of lading. This bill of lading is called unclean bill of lading, claused bill of lading or foul bill of lading. 

Shipped On Board Bill of Lading: A Shipped On Board Bill of Lading is issued when the cargo arrives at the port in good, expected condition from the shipping carrier and is then loaded onto the cargo ship for transport over seas. 

Received Bill of Lading: Received for shipment’ bill of lading can be issued to shipper immediately up on receipt of goods by the carrier after necessary export customs clearance procedures of exporting country. 

Through Bill of Lading: Under a Through Bill of Lading, the shipping carrier can pass the cargo through several different modes of transportation and/or several different distribution centers. This Bill of Lading needs to include an Inland Bill of Lading and/or an Ocean Bill of Landing depending on its final destination.

Stale Bill of Lading: A Bill of Lading can be treated as  ‘Stale’ , if  it is presented long after sailing of vessel  pertaining to a shipmnet at  port of loading.   Such presentation  of Bill of Lading could be with the Supplier’s Bank, Discounting Bank, Negotiating Bank, Buyer’s Bank or buyer.  The term ‘Stale Bill of Lading’ is also used when a bill of lading is presented with a bank after expiry date of credit. 

Straight Bill of Lading: Straight Bill of Lading is also known as Consignment Bill of Lading. Straight Bill of Lading is a non negotiable Bill of Lading where in no payment is required against the goods. The carrier of goods release cargo to consignee on production of identity of consignee at port of final destination.

Unclean Bill of Lading/ Claused bill of lading/ Foul bill of lading/ Dirty Bill of Lading

Unclean Bill of Lading/ Claused Bill of Lading/ Foul Bill of Lading/ Dirty Bill of Lading - 

You would have heard any of these terms during your career in handling sea shipments. 

Are Claused bill of lading, Foul Bill of lading, Dirty bill bill of lading and unclean bill of lading same? 

• What is the meaning of Dirty bill of lading? 
• How does Foul bill of lading work? 
• How to explain claused bill of lading? 
• What does unclean bill of lading mean?

Let me state first of all: The term Foul Bill of lading,claused bill of lading, dirty bill of lading and unclean bill of lading are same.

Now let us discuss, how does Unclean Bill of lading, Claused bill of lading, foul bill of lading or Dirty bill of lading work?

If owner of ship or his agent does not agree with one or more of the statements mentioned in the bill of lading, he add the said clause or clauses on the bill of lading. This bill of lading is called unclean bill of lading, claused bill of lading or foul bill of lading.

For example, the vessel owner or his agent mentions on the BL as “two cartons missing”. This remarks is mentioned in bill of lading. Means, the shipper declares 55 cartons, but the carrier or his agent mentions ‘two cartons missing’. This means, the carrier’s responsibility is to deliver only 53 cartons.

Let us discuss another example – If a bill of lading shows “unprotected machinery”. This means, the carrier accepted goods with a remark of ‘unprotected machinery’ and he has no responsibility on unsafe package of goods he received. If any loss under any damage due to this poor package is on account of shipper only.

Some times carrier may issue bill of lading with a remark of “damaged crates” . When handing over cargo to the carrier by shipper, the carrier would have noticed such damage and he does not take responsibility on such damage and mention a clause on bill of lading – ‘damaged crates’.

So a bill of lading with clause or clauses as explained below are called Dirty bill of lading, claused bill of lading, unclean bill of lading or foul bill of lading.

Does Unclean bill of lading, Dirty bill of lading, claused bill of lading or Foul bill of lading accept by bank for Letter of Credit Negotiation?

Answer is ‘No’. If a bill of lading reflects clauses, such bill of lading does not accept by bank for Letter of credit negotiation or discounting.

What is Combined bill of lading? How does combined bill of lading work?

What is Combined Bill of Lading / Multi model Bill of Lading?

Some of the traders in export and industry are confused with this type, Combined Bill of Lading.  

As you are aware, all exporters are not situated near seaport or air port. Most of exporters are situated at different locations in inland points of each country. So, government of each country makes arrangements to complete necessary legal export customs formalities at different inland locations of country to facilitate exporters for smooth handling of exports.

So,if the exporter’s location is away from the loading port, he can move the cargo to nearest Container freight station (CFS) to complete necessary export formalities. If a cargo is shipped from a CFS, goods are moved from CFS to nearest sea port after customs clearance.

Once after completion of such export customs formalities by shipper, the carrier accepts goods at exporter’s location and issues Bill of Lading. Here the carrier moves cargo either by road or rail to nearest sea port and ship via sea to final destination.

Here the carrier moves cargo by using two or more modes of transport between the port of receipt of goods and final destination. So, if a carrier uses two or more modes of transport, the shipper obtains a Combined Bill of Lading. In a combined bill of lading, carrier uses more than one mode of transport to reach the goods to final destination.

Are combined bill of lading and multi mode bill of lading same? 

Yes, multi mode bill of lading and combined bill of lading are same.

Difference between Clean On Board Bill of Lading and Shipped On Board Bill of Lading.

One of the readers of this web blog requested recently to explain the term Clean On Board Bill of Lading and Shipped on board Bill of Lading.

This is one of the common doubts among the traders to differentiate Shipped on Board Bill of Lading and Clean On Board Bill of Lading.  Are shipped on board bill of lading and clean on board bill of Lading same? If different, what are the difference between Clean On Board Bill of Lading and Shipped On Board Bill of Lading?

• What is Shipped On board Bill of Lading? 
• How does Shipped On board Bill of Lading work?

I have discussed about the step by step movement of goods from seller’s premise to buyer’s premise in detail in a couple of articles in same website.  In an export trade, once after completion of necessary customs export formalities at exporter’s country, the goods are handed over to Carrier for transportation to buyer’s destination.  If cargo is moved by sea, the carrier issues a receipt of goods to the shipper which is called Bill of Lading.  If said goods have not been gone on board the vessel, the bill of lading shows ‘Received for shipment’, without mentioning ‘Shipped On Board’.   If the shipper needs to mention ‘Shipped On Board’ on Bill of Lading, such bill of lading is issued once after the shipment gone ‘On Board’ the vessel.    Shipped On Board bill of lading may be demanded by buyer as per mutually agreed contract of sale or it may be required for the exporter to claim different export benefits from various government agencies.

• What is Clean On board Bill of Lading?   
• How does  Clean On board Bill of Lading work?

Clean On Board Bill of Lading is commonly mentioned under a contract of Letter of Credit between buyer and seller in terms of Transport Document under shipment of sale carries.

I have discussed about Clean Bill of Lading under my article on ‘different types of bill of lading’ in this web blog.

Let us discuss about Clean Bill of Lading and then Clean On board Bill of Lading.  A clean bill of Lading means, the carrier of goods receives cargo with good condition with proper packaging.    In other words, the cargo received under a clean bill of lading has no clause, notation or remarks on the quantity or quality of goods as well as packing.  Once after issuing a clean bill of lading by carrier, the responsibility on poor packing, damage of goods and other handling defective falls on carrier.  

Once the goods received with good conditions with proper packing gone on board the vessel, the carrier issues Clean On board Bill of Lading.  Clean On board Bill of Lading certifies that the cargo on board has no negative clause, notation or remarks on the quantity, quality or packaging of goods.   In other words, when issuing a clean on board bill of lading, the carrier certifies that the goods gone on board the vessel are in good conditions with proper packing.

What is the difference between re-exports and re-imports ?

The term re import and re export are used in international trade commonly. Let us distinction between re exports and re imports with simple example below. 

In simple terms, let me describe about re exports. If you categories exports as foreign goods and domestic goods, the export of foreign goods is called re-exports. This is the simplest method of understanding about re-exports. If any goods imported from another country (it becomes foreign goods) and thereafter exporting back, such goods are fell under re exports. For example, a machinery has been imported in to a country for testing purpose and after necessary testing, the said machinery is sent back. Here, the process of sending back such machinery is called re-exports. 

If you categories imports as foreign goods and domestic goods, the import of domestic goods is called re-import. This is the simplest method of understanding about re-import. If any goods of a country is exported to another country and thereafter importing back the same goods, such goods are fell under re imports. For example, a machinery has been exported to a country for testing purpose and after necessary testing, the said machinery is returning back to the country. Here, the process of returning back such machinery is called re-imports. 

In many cases re-imports and re-exports happen as the exported goods are not satisfied with quality measures, goods exported not matching with the buyer’s requirements, goods exported for specific purpose like project, exhibition etc.

Difference between Port of Discharge and Place of Delivery.

These terms are generally mentioned in sale contract of exporter and importer, shipping company who carries goods, and other related to shipping and freight forwarding. Let us learn these terms with simple example. Your overseas buyer situates far from discharge port. In every country, there are Cargo freight stations supervised and controlled by customs department of respective country. Once after arriving cargo at discharge port, you can arrange the carrier to move the cargo to your nearest freight station. You can complete the necessary import customs formalities at the said place. While contracting with the supplier, you need to specify the place of delivery. So, the carrier collects freight amount up to place of delivery and de-stuff cargo, where customs department functions. This arrangements are normally made by rail movement or road movement.

So ‘port of discharge’ means the discharging port of main carrier of goods. It can be by a vessel or flight. Once after unloading the cargo at port of discharge the importer can complete customs procedures at port of discharge or he can arrange to move the cargo to nearest freight station of his choice where customs department functions. Your carrier may arrange to move the cargo accordingly to the said place by road or rail. 

Legalization of export documents from Embassy

• Why required the Embassy legalization of export documents?
• What is legalization of documents by embassy? 
• Who does certify export documents legally?

If you are an exporter, you would have experienced about legalization of export documents, as one of the terms mentioned in Purchase Order or Letter of Credit. What does this legalization of export documents mean? Where to apply for such legalization of documents under export? Why does importing country insists for legalization of export documents?

Some of the countries are very particular about the goods importing to their country, due to political or other government policies, especially importing of food products. So the said governments insist importers to produce legalized documents while customs clearance of the said country. As you know, embassy of each foreign country is situated in a country to support the people of each country and resolves any socio economic or political problems of each country to have a good relationship each other.

If an importing country insists to have legalized shipping documents like invoice, packing list, certificate of origin etc. You (exporter) need to file the required documents with the embassy of buyer’s country and get attested by them. These documents have to be sent to your buyer through your bank. Importer can customs clear the goods only if he files these documents along with other required documents.

Rummaging in Imports

• What is Rummaging? 
• How does Rummaging work? 
• Is Rummaging done in all vessels arrival? 
• Who is the authority for Rummaging?.

Once after arrival of cargo at a customs location, the necessary details of arrival of goods have to be filed with customs station which is known as Import General Manifest. IGM is filed in a specified format legally to be followed by respective customs department. IGM can be amended later with necessary formalities and procedures. However, the omission of deletion in filing IGM willfully comes under ‘smuggling’ activities and thereby the customs preventive officials may take necessary steps to cross check whether all goods arrived at said customs location have been declared in IGM. Such customs officers are authorized to board the vessel or aircraft to take necessary suitable declaration, crew property list etc to confirm no items have been left out to declare in IGM. This thorough checking by customs preventive officials in a vessel or aircraft is called Rummaging. Rummaging is carried out only when the authorities required to be examined and not for all shipments arrive.

Importance of Fumigation in International trade.

• What is Fumigation in Export and Import ?
• What is fumigation in Exports and Imports? 
• Why does fumigation require? 
• What would be the reasons behind insisting of Fumigation certificate by overseas buyers?

Let us discuss the importance of Fumigation in international trade.

In most of the cases where in wood materials are used for packing of export goods, the buyer insists supplier to fumigate cargo and asked to produce fumigation certificate along with other export documents. Fumigation is a legal requirement by the buyer in most of the countries. So fumigation certificate is issued by the fumigator by obtaining approval for fumigation from the licensing authority. Most of the countries will not allow to import goods without fumigation certificate, wherever applicable on such goods.

Fumigation is a method of killing pests, termites or any other harmful living organisms to prevent transfer of exotic organisms. Fumigation is executed, by suffocating or poisoning pest, within an area of specified space by using fumigants. Normally, fumigation is done for wood material used for packing of goods to be exported. In some cases, empty container before stuffing of cargo is fumigated. Most of the cases, fumigation is done after completion of stuffing of cargo and closing the door of container. The result of such fumigation is more effective, as the gases used for fumigation circulates all spaces in the container without spreading gas outside, as the container is closed. However, this method of fumigation is not allowed for the cargo for certain food products for direct consumption and other specified goods.

Methyl Bromide is commonly and widely used as fumigants for fumigation all over world. Other widely used fumigants are Chloropicrin, Phosphate, Dichloropropene, Methyl isocynate, hydrogen cyanide, sulfuryl fluoride, formaldehyde etc.

Export customs clearance procedures and formalities in India

Export customs clearance formalities are so simplified now days. 

Export clearance procedures are as simple as local sales procedures. After the member of GATT – General Agreement on Tariff and Trade, India has liberalized its import and export procedures and formalities very much. Before globalization till 1992, all procedures and formalities on export and import procedures are too complicated. Introduction of software system to file documents electronically made simple to handle export and import procedures for both government and traders in export import. The fast grown electronic and telecommunication industry worldwide contributed in large way in all sectors to boost simplification of procedures and formalities in export import trade also.

Here, let us discuss present export customs clearance procedures and formalities in India. Shipping bill is the legal document to be filed mandatory for moving goods outside India by an exporter.

How to apply Shipping bill electronically?

Once after preparing invoice and packing list, based on purchase order or Letter of credit, you need to arrange export customs clearance procedures, well in advance of time of shipment mentioned in export order. You can appoint a Customs broker or you your self can complete export customs clearance formalities. Normally, a customs house agent is appointed for smooth and fast clearance procedures under export. Invoice, Packing list, SDF declaration and other specific required documents are sent to customs house agents for completion of necessary export customs formalities.

After receiving documents from exporter, Customs broker files shipping bill through customs online software system electronically. This can be done at home, office or private EDI (electronic data information) centers appointed by government, as the filing software can be downloaded from ICEGATE electronically. The generation of shipping bill number is as per serial order all over the country, as the said software is a centralized one. ICE GATE is the software service provider for Customs department of Government of India for import and export customs clearance procedures and formalities. ICE GATE opens their software system 24 hours a day to support export import trade for smooth clearance procedures in India. So the shipping bill number – the serial number of export shipping bill - generated by software is obtained by customs broker or exporter who files online on a queue basis.

The goods read for export is moved to airport, sea port or container freight station and unloads in to the respective yard of shipping carrier. The location yard is decided by carrier who places the vessel/aircraft at the allocated place where in loading of goods makes easier. Export customs procedures and formalities for inspection of goods are completed with customs officials and enter the details of examination of goods in to software system online for the approval of higher officials of customs. The assessment of value of goods and other information are verified by the customs officials with necessary documentary supports if required. Customs department is also alert on the export benefits schemes filed by you (exporter) for claim by verifying with necessary supporting documents if required.

Let Export Order under export customs clearance procedures

After verifying all required information, customs authorize the assessment and inspection procedures and issue ‘Let Export Order’ as a proof of completion of export customs procedures and formalities. Then, the prints of shipping bill are generated. There are three type copies of shipping bills release this time, one for exporter’s copy, second one exchange control copy which has to be submitted with Reserve Bank of India through exporter’s bank, and third one for shipping carriers to move the cargo to port of final destination.

Export General Manifest – EGM

After obtaining the prints – hard copy - of said original shipping bills, the respective customs officials involved in the said process signs on the shipping bills and return to the exporter or their appointed Customs House Agent. Once after movement of goods from exporting country, the shipping carrier files necessary export general manifest (EGM) with customs and based on the same, customs department issue proof of export – Export promotion copy of shipping bill.

Why EP copy and EC copy under export Customs clearance formalities?

EP copy of shipping bill is taken as ‘proof of export’ by all government authorities for claiming any financial assistance from various government agencies. EP copy of shipping bill is taken as a proof of export of goods to fulfill export obligation against the benefits already obtained before exports. Another major document taken as proof of export is ‘On board Bill of Lading’ issued by carrier of goods.

Once after releasing shipping bills duly signed by customs authorities, customs house agents delivers the respective shipping bill to carrier to move the cargo to destination. Exchange control copy of shipping bill is submitted with bank along with other shipping documents. The authorized dealer of exporter sends the said exchange control copy of shipping bill to Reserve Bank of India. RBI requires exchange control copy for regulating inward and outward remittance of foreign exchange. Exporter’s copy of shipping bill is retained by exporter for their future reference.

Manual shipping bills are filed at a customs location where in no facility to file electronically to complete necessary export customs clearance procedures and formalities. Such shipping bills are filed in 6 copies. Original and duplicate for customs, Triplicate and EP copy for Exporter and next two copies for carrier to load goods at port of loading.

Surrender of Bill of Lading Some facts

• How to surrender Original Bill of Lading?
• What does the term ‘surrender of Bill of lading’ mean? 
• How to surrender original BL? 
• Why is there no original bill of lading along with import shipping documents? 
• What is the advantage of surrendering original bill of lading?

Procedures to surrender Bill of Lading

If a shipment is not under the terms ‘Documents against Payments’ or under Letter of credit,  most of shippers do not send original bill of lading to buyer but surrender original bill of lading after releasing with carrier. Surrendering procedures of bill of lading simplifies the mechanism of transportation procedures.

Once after completion of export customs formalities, the shipper hands over cargo to carrier to move final destination.  After receiving cargo by carrier, bill of lading is released after collecting necessary charges if any from shipper.

If the shipper wants to surrender original bill of lading, he can submit all originals with a request letter   to the carrier of goods with necessary  OBL surrender charges if any. Once after receiving original Bills of lading which carries normally three originals but in some cases five, the carrier arranges to send a message to his counter part at destination port stating that OBL surrendered at origin port and the consignee may not be insisted to produce original bill of lading at the time of delivery of cargo.  So the carrier at load port advises his office at destination port to release goods to consignee without original bill of lading.   A copy of such message is sent to the shipper also as a proof of surrendering OBL.

Shipper in turn, sends across the said release message copy to his buyer for smooth delivery of goods without insisting for Original Bill of Lading.   

The consignee at destination port takes delivery of goods by obtaining delivery order from carrier after verifying the identity of consignee.

What is a Dry port? CFS in export import trade?

As we know, sea port is situated near sea. If the importer or exporter is far away from sea port, it will be an inconvenience to co-ordinate and handle the goods properly. So government has allowed CFS (container freight station) to handle export and import formalities under customs supervision. The cargo will be moved by rail or road from the sea port to CFS.

The exporter can complete customs formalities in CFS and ship the goods without moving cargo to sea port. Likewise, importer can take delivery of cargo near his place after completing procedures at dry port. If the buyer insist for ‘on board bill of lading’, as a proof of export, the buyer waits to get the shipment reached at sea port and once cargo loaded in to vessel, the on board bill of lading is obtained from shipping line. If the buyer needs only a proof of shipment, the exporter can obtain ‘Received for shipment Bill of Lading’ from the carrier who is a multi model transporter. A multi model transporter is a carrier who carries goods in two or more modes of transport like road, rail, air, or sea.  

In short, Container Freight Station situated away from sea port where customs supervision is available is called Dry port.

Difference between Swift and wire transfer?

This is a common question among traders about swift and wire transfer. 

• What is the meaning of wire transfer, How does swift work? 
• Whether swift and wire transfer are same?

Before differentiating Swift and wire transfer let us find out 

• What is swift and what is wire transfer? 
• What is Swift ? How SWIFT works?

Society for Worldwide Interbank Financial Telecommunication is abbreviated as SWIFT. 

SWIFT extends service of network which enables banks and other financial organizations all over world to send and receive financial transaction information in a standardized, secured and reliable environment. SWIFT does not facilitate funds transfer; but SWIFT sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. SWIFT CODES means bank identification codes allotted to each bank all over world. SWIFT has been introduced after popular TELEX system service which had been used before 1990s.

The service of Telex is too slow and had no standardized format for the data it transfers, added up to an inefficient system apart from its insecurity. In order to solve the demerits of Telex services seven major international banks gathered together to discuss a suitable replacement of telex in the year 1974. After three years, in 1977, a society was formed and 230 member banks from 5 countries started operation of SWIFT. 

SWIFT has now more than 10000 members worldwide (more than 200 countries) handles more than 15 million messages daily. Any financial institution who holds a banking license can become a member of SWIFT by paying a joining fee and service charge for each message sent.

• What is wire transfer? 
• How wire transfer works?

Wire transfer is method of fund transfer by means of electronic from one individual or organization to another, either from one bank account to another or transfer of cash at a cash office. ‘ Western union money transfer’ is a good example for transfer of cash electronically who operates worldwide. In US, Fedwire system is more likely to be RTGS (Real Time Gross Settlement). 

Wire transfer services are in different categories like retail money transfer, International money transfer, international debit card etc.

In a retail money transfer (for example: western union), an individual or firm can transfer or receive money without having account with them.

International money transfers are effected with the help of SWIFT (Society for Worldwide Interbank Financial Telecommunication) messages. A six digit Bank Identification Code (BIC) is assigned to each bank and transfer of fund is effected with the help of SWIFT messages.

Can an importer take delivery of goods without original bill of lading?

Import Delivery without original bill of Lading.

This is one of the common doubts among exporters and importers – 

• Can an importer take delivery of goods without producing original bill of lading with carrier? 
• We have learned in other articles in same website that Bill of Lading is a document of title and transferable. 
• Without Bill of Lading, can carrier release goods to consignee at destination port?

Now let us discuss some different levels in export import trade where in Bill of Lading does function.

There are mainly four types of handling of Bill of Lading, normally by carriers in export import trade. Let us discuss below different levels of handling bill of lading by a shipping carrier of goods.

Delivery of Imported goods against Bill of Lading
Original bill of lading is issued by carrier of goods once he receives the cargo after completion of customs clearance procedures. The carrier can be a shipping line, freight forwarder, or a Multi model transport operator, or both. The exporter, once after obtaining original Bill of Lading, he submits the same along with other required documents with his bank to send to overseas buyer through buyer’s bank. The exporter’s bank sends the said documents to buyer’s bank after necessary formalities. The buyer’s bank delivers documents to the buyer. The buyer submits the said original bill of lading with the carrier of goods after completing customs procedures of importing country. The carrier receives the said Bill of Lading and arranges to deliver cargo to the consignee, after checking the authenticity of consignee if required.

Delivery of imported goods against OBL surrender message.
You (exporter) release Bill of Lading from carrier, and surrenders the same to the carrier. The carrier sends a message to his counter part at destination port about the surrender of Bill of lading at load port. He advises his office at destination to delivery the cargo to consignee without ‘insisting for original bill of lading’.
There could be many reasons to surrender OBL at load port. OBL could not have released in time, vessel would have reached at destination port before release of OBL, Buyer’s instruction to avoid loss in transit etc.etc.

Delivery of import goods against Express Release Bill of Lading:
You instruct carrier to release ‘Express Bill of Lading’. Here, the carrier issues a copy of express BL to exporter. A soft copy of the same BL is sent by carrier to his counterpart at destination. You (exporter) also send a soft copy to your overseas buyer. Your buyer can take delivery of goods by just submitting the said copy with the carrier at final destination of goods.

Release of Import goods against endorsed BL / transferred BL
The consignee column of BL mentions “To Order” and the address other than your buyer. Normally this address will by your bank address, as your sale contract may be under Letter of Credit. Here, the carrier can deliver cargo to your buyer, only after the written permission from the address mentioned in the ‘consignee column’ of Bill of lading. The said permission should be in the form of ‘Deliver order’. Normally bank delivers such ‘order’ to deliver the cargo, only after receiving the payment of goods from the buyer.

Can Original Bill of lading be surrendered under LC at sight ?

• How does original Bill of Lading work in Sight LC?
• Can Original Bill of lading be surrendered under LC at sight?

This is one of the common questions among traders – 

1. Can Original Bill of Lading be surrendered under sight LC? Can an exporter release Sea way bill under LC at sight? 
2. Is Original Bill of Lading must to be enclosed along with other shipping documents under Letter of Credit at Sight?

Before finding answer on whether OBL can be surrendered at load port under LC at sight terms, let us find how LC at sight works.

• What is Sight LC and how does it work?

Under sight LC, the payment of export proceeds sent to seller’s bank by buyer’s bank immediately up on receipt of original shipping documents as per the terms and conditions mentioned on LC, on acceptance of documents by buyer. Here, the buyer accepts original documents from his bank for clearance of goods under import.

If the buyer and seller agrees to surrender bill of lading at port of loading and such clause has been added in the terms and conditions of letter of credit, seller can surrender original bill of lading at load port and arrange to send release message to buyer to take delivery of goods. However, in a payment term LC at sight, LC opening bank also does not prefer to surrender OBL at load port, as buyer can take delivery of goods, as carrier does not insist for original bill of lading. The opening bank remits amount of sale of goods mentioned in commercial invoice to the seller’s bank immediately up on receipt of shipping documents which satisfy with all terms and conditions of Letter of Credit at Sight.

So under most of the terms under Letter of credit at sight requires Original Bill of Lading as one of the shipping documents to be enclosed by exporter after export of goods at load port. Hence, surrender of OBL at load port under LC at sight is not permitted, unless otherwise agreed between buyer and seller. The release of Sea way bill also not permitted under Letter of Credit at Sight, unless otherwise buyer and seller mutually agreed.

Difference between DDP and DDU terms of delivery

What is DDU and how does DDP work in terms of delivelry under international business?  

Let us discuss DDP Vs DDU in this artilce. 

The difference between DDU and DDP terms of delivery can be explained as below: 

• DDU means Delivered Duty  Unpaid.  
• DDP means Delivered Duty Paid.

In a DDU shipment, except duty or taxes of importing country, all other charges has to be paid by the seller of goods. In other words, the selling cost of goods included all charges to deliver goods up to the door of consignee except duty or tax of importing country. In a DDU shipment, the seller takes care all necessary transportation, customs clearance charges, and shipping charges etc. at load port and destination port inclusive of handling charges at port of loading and port of discharge.

In the case of DDP – Delivered Duty Paid (Door delivered duty Paid), the seller of goods meets complete expenses including duty or tax under goods to deliver at the premises of buyer. In other words, the selling cost of goods includes all expenses inclusive of taxes to reach the goods at the door step of buyer’s premises. In a DDP shipments, exporter bears all expenses of transportation, customs clearance, handling expenses and all other charges at load port and destination port to reach the goods at importer’s premises.

Can a Bill of Lading be amended in description of goods column?

• Who does amend Bill of Lading in description of goods column of Bill of Lading? 
• Can description of goods be amended in Bill of Lading after submitting to bank? 
• How to amend Bill of Lading after dispatch to overseas buyer?

Bill of lading is issued by carrier of goods or his agent on receipt of cargo from shipper after completion of necessary export customs formalities. Once after issuing Bill of Lading, the said document is sent to overseas buyer through the shipper’s bank. Normally, after releasing Bill of lading, the exporter sends a copy to consignee electronically, either by mail or fax.

The seller may come to know the discrepancy of description of goods in bill of lading once after releasing BL by the carrier. If the discrepancy of description of goods in Bill of lading is found before submitting documents with exporter’s bank, the amendment can be effected by submitting all originals with the freight forwarder at load port who issued BL. The freight forwarder who carries goods can amend description of goods in bill of lading, only on the basis of export shipping documents authorized by customs authorities. So, any details of addition, deletion, or correction are subjected to the declaration by exporter mentioned in shipping documents. In such cases, exporter or his customs broker need to amend description of goods in the said shipping documents with customs firstly and after completion of such amendment of description of goods in shipping bill, he can approach shipping liner(carrier) to amend of description of goods in Bill of Lading accordingly.

If an amendment of description of goods is required once after submitting original bill of lading with shipper’s bank, the overseas buyer can amend description of goods in the said original bill of lading once after receiving BL from his bank through shipper’s bank. At this time, the consignee needs to approach the shipping liner’s counter part office at consignee’s location. The carrier (shipping company) at consignee’s location needs a ‘No Objection’ letter or message to amend description of goods in bill of lading from his counter part at load port who issued Bill of Lading. In turn, the shipping company at load port confirms the details to his counterpart at destination regarding amendment of description of goods in BL. The freight forwarder at load port provides ‘no objection’ up to the extent of information available in export shipping bill submitted by exporter. If consignee needs to amend description of goods other than declared in export shipping bill, the exporter (shipper) can amend shipping bill at load port with customs and submit such amended shipping bill with shipping company , so as to enable him to send a ‘no objection’ to amend description of goods to include in bill of lading.

Can Bill of Lading be surrendered on LC terms?

In a letter of credit, whether an exporter can surrender bill of lading and arrange to send OBL surrender message to release container without insisting for Original bill of lading.

  

Normally under LC terms, original bill of lading with other documents are submitted with negotiating bank by the beneficiary of letter of credit. The beneficiary bank arrange to send such documents to LC opening bank in term, LC opening bank delivers documents to buyer once after acceptance of documents from bank.

Here the question is, whether original bill of lading is required to be submitted in a letter of credit transactions. Let us discuss, how letter of credit works in an export import trade.

Letter of credit is an assurance given by the buyer’s bank to remit the amount to the seller through seller’s bank on maturity, as per the terms and conditions of document based on the contractual agreement between buyer and seller. Now in simple words, if LC opened on your name, you will receive amount through the buyer’s bank on the agreed time. All Letter of Credits for export import trade is handled under the guidelines of Uniform Customs and Pracice of Documentary Credit of International Chamber of Commerce (UCP 600). As per the agreed terms between buyer and seller, the period of credit is decided. Based on the same, the time to effect payment by opening bank (buyer’s bank) is determined. Different tenure periods of LC given below.

Once the shipment effected , the exporter prepares all required documents as per the terms and conditions of letter of credit. These documents will be submitted with exporter’s bank, along with the original LC. Bank verifies all documents and make sure, the documentation is in order as per LC conditions. The said documents will be sent to buyer’s bank and in turn to the buyer after necessary approval in documentation by seller’s bank. Once the buyer’s bank receives the documents, the export sales amount as per the said documents will be sent to exporter’s bank. This is the procedures under letter of credit at sight.

Some time, the foreign buyer may demand credit period to pay the amount of sales. Say for 30 days, 60 days, 90 days, 120 days etc. However as per government regulation, the total period of credit should not exceed more than 180 days.Normally the credit period is calculated from the date of shipment – the date of bill of lading or airway bill. 

Now, let us come back to the question, ‘can original bill of lading be surrendered at port of loading’ under letter of credit terms.

The terms and conditions on letter of credit is decided mutually by buyer and seller. As explained above, if seller agrees credit period under letter of credit, normally the buyer remits amount of goods to seller only after taking delivery of goods at destination port. In such cases seller may agree to surrender bill of lading in certain circumstances mutually agreed between buyer and seller. If buyer and seller in a contract of sale agrees to surrender bill of lading at load port, the said clause is added in the term and conditions of letter of credit. If such condition on surrender of bill of lading mentioned in a letter of credit, surrender of bill lading can be done at load port.

How is Bill of Lading issued under a triangular shipment? Switch B/L or Third Country Shipment?

Suppose you are supplier of goods in India, you obtains export order from ABC China and  ABC gets purchase order from USA.

Once after completing necessary customs clearance procedures at load port, carrier issues Bill of Lading to you. The shipper under this bill of lading is you in India and consignee is your buyer ABC in China. The port of loading will be ‘your loading port’ and port of discharge and place of delivery are in USA as final port of discharge and final place of delivery. Once after discounting / negotiating your export bills, you send the said Bill of Lading to your buyer ABC in China along with other required documents as usual through your bank.

SWITCH BILL OF LADING

Once after receiving original bills of lading from you, ABC in China surrenders the said original Bills of Lading with the carrier and make arrangements to issue another Bill of Lading to him, by mentioning shipper as ABC,CHINA and consignee as ZYZ, USA. This bill of lading is called ‘switch bill of lading’. So ABC in China sends the said bill of Lading to his buyer XYZ, USA. The said switch Bill of lading is used by ABC for discounting or negotiating his export bills with Bank. 

How does Bill of Lading work in DP (DAP) payment terms of exports and imports?

I have discussed in detail about the terms of payment in another article in same website. You may go through the same to have a clear idea about DP term of payment.

Here, let us discuss the role of Bill of Lading under DP terms of payment in a sea shipment of export and import. 
How does a Bill of Lading work in a payment term Documents against Payments – DP?

Bill of Lading plays a vital role in ‘Documents against Payments’ DAP – DP - terms of payment, compared to other terms of payment other than Letter of Credit.  
As you know, without presentation of original bill of lading with carrier of goods at port of destination the goods can not be released, unless otherwise Original bill of lading surrendered at load port or Seaway bill is issued in lieu of original bill of lading?

Can Bill of lading be surrendered under DP payment terms in Exports and Imports?

Under Documents against Payment term of payment, Original bill of lading can not be surrendered. Because, the payment against sale of goods are paid on the basis of acceptance of original bill of lading with other shipping documents required to take delivery of goods. So under a DP terms of payment in international trade, surrender of original bill lading should not be affected by seller – exporter – of goods, as original bill of lading is a hold with exporter to get his sale amount.

Normally once after releasing Bill of Lading at port of loading by carrier of goods, the exporter submits original bill of lading with other required shipping documents with his bank to deliver to his overseas buyer for import customs clearance and other reference.  Once after receiving the necessary documents from the exporter, his dealer bank sends the said documents to overseas buyer’s bank after necessary noting and endorsement.  Overseas buyer’s bank receives documents and notifies buyer to accept goods as per the terms and conditions of payment agreed with supplier each other.    The overseas buyer accepts documents, by paying export proceeds as per  purchase order  against  pertaining shipment and collect original bill of lading and other required shipping documents for import to take delivery of goods.

Here the point is, the buyer can take delivery of goods only by submitting original bill of lading to the carrier of goods, issued by carrier’s counter part at load port. If the terms of payment is ‘Documents against Payment (DAP or DP), the buyer’s bank can deliver original bill of lading with other documents  to buyer  only after  receiving  the amount of sale of goods pertaining to said shipment.  Without original bill of lading, buyer can not take delivery of goods.  In other words, under the term Documents against Payment, buyer can not take delivery of goods unless he remits invoice value of goods to his bank. In turn, after collecting the amount of sales under said consignment, buyer’s bank remits the said amount to seller through seller’s bank.