Import Export Policy 2002-2007


Import Export Policy of India,

 IMPORT EXPORT POLICY 2002-2007,trade policy governs exports from and imports into a country. IMPORT EXPORT POLICY 2002-2007 is one of the various policy instruments used by a country to attain her goals of economic development.  This policy is thus, formulated keeping in view, the national priorities for economic development and the international l commitments made by the country. IMPORT EXPORT POLICY 2002-2007 is essential that the entrepreneurs and the export managers understand the trade policy as it provides the vital inputs for the formulation of their business growth strategies. In India, the trade policy le., Import Export Policy is formulated by the Ministry of  commerce, Government of India in terms of section 5 of the Foreign Trade  (Development and Regulation ) Act, 1992 Besides, the Government of India also announced on January 30 , 2002 a Medium Term Export strategy, to guide the formulation the IMPORT EXPORT POLICY 2002-2007 with the, objective of achieving a share of 1 % in world trade by the end of 2006-07 from the present I share of 0.6%  (23000-01).  The text of this strategy is given as Appendix VII at the end of the book.  The present Export –Import Policy was announced on 31.3.2002 for a period of 5 years with effect from 1.4.2002 to 31.3.2007 co-terminus with Tenth Five Year Plan. It covers both the trade in merchandise and services. The present chapter explains legal framework affecting foreign trade of India particularly with reference to Import Export Policy; 2002-2007.  It also discusses the preferential trading arrangements affecting exports and imports of India.


 The foreign trade of India is guided by the Export-Import (EXIM) Policy of the Government of India arid is regulated by the Foreign Trade (Development and Regulation ) Act, 1992

 EXIM Policy contains various policy decisions taken by the government in the sphere of foreign trade, i.e., with respect to imports and exports from the country and more especially export promotion measures, policies and procedures related thereto. It is prepared and announced by the Central Government (Ministry of Commerce). India’s EXIM policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favourable balance of payments position.


In India, the legal framework for the regulation of foreign trade is mainly provided by the Foreign Trade ( Development and Regulation ) Act, 1992 , Garments Export  Entitlement Policy: 2000-2004, Export (Quality Control and Inspection ) Act, 1963, Customs and Central Excise Duties Drawback Rules, 1995 , Foreign Exchange Management Act, 1999-and the customs and Central Excise Regulations.  The main objective of the Foreign Trade (Development and Regulation) Act is to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India.  This Ac t has replaced the earlier law namely, the imports and Ex (Control) Act 1947. A comparison of the nomenclature of the two Acts makes it very dear that there is a shift in the focus of the law from control to development of foreign trade. This shift in the focus is the outcome of the emphasis on liberalisation and globalisation as a part of the process of economic reforms initiated in India since June 1991. The application of provisions of the Foreign Trade (Development & Regulation) Act 1992 has been exempted for certain trade transactions vide Foreign Trade (Exemption from application of Rules in certain case) Order 1993.


 Government control import of non-essential items through an import policy.  At the same time, all-out efforts are made to promote exports.  Thus, there are two aspects of trade policy; the import policy which is concerned with exports not only promotion but also regulation. The main objective of the Government policy is to promote exports to the maximum extent.  Exports should be promoted in such a manner that the economy of the country is snot affected by unregulated exports of items specially needed within the country.  Export control is, therefore, exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country.  In other words, the policy Aims at (i) Promoting exports and augmenting foreign exchange earnings; and (ii) Regulating exports wherever it is necessary for the purposes of either avoiding competition among the Indian exporters or ensuring domestic availability of essential items of mass consumption at reasonable prices. The government of India announced sweeping changes in the trade policy during the year 1991. As a result, the new Import Export Policy came into force from April 1, 1992. This was an important step towards the economic reforms of India. In order to bring stability and continuity, the policy was made for the duration of 5 years.  In this policy import was liberalised and export promotion measures were strengthened. The steps were also taken to boost the domestic industrial production. The more aspects of the Import Export Policy (1992-97) include: introduction of the duty-free Export Promotion Capital Goods (EPCG) scheme, strengthening of the Advance Licensing System, waiving of the condition on export proceeds realisation, rationalisation of schemes related to Export Oriented Units and units in the Export Processing Zones. The thrust area of this policy was to liberalise imports and boost exports.  The need for further liberalisation of imports and promotion of exports was felt and the Government of India announced the new Import Export Policy (1997, 2002). This policy has further simplified the procedures and reduced the interface between exporters and the.

Director General of foreign Trade (DGFT) by reducing the number of documents required for export by half. Import has been further liberalised and efforts have been made to promote exports. The new EXIM Policy 1997-2002 aims at consolidating the gains made so far, restructuring the schemes to achieve further liberalisation and increased transparency in the changed trading environment. It focuses on the strengthening the domestic industrial growth and exports and enabling higher level of employment with due recognition of the key role played by the SSI sector.  It recognises the fact that there is no substitute for growth, which creates jobs and generates income.  Such trade activities also help in stimulating expansion and Diversification of production in the country.  The policy has focussed on the need to let exporters concentrate on the manufacturing and marketing of their products globally and operate in a hassle free environment. The effort has been made to simplify and streamline the procedure. The objectives will be achieved through the coordinated efforts of all the departments of the Government in general and the Ministry of Commerce and the Directorate General of Foreign Trade and its network of Regional Offices in particular.  Further it will be achieved with a shared vision and commitment and in the, best spirit of facilitation in the interest of export.


 The principal objectives of the EXIM Policy 1997-2002 are as under:

  1. To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum, benefits from expanding global market opportunities.
  2. To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, ‘consumables and capital goods require for augmenting producing.
  3. To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby, improving their competitiveness.
  4. To generate new employment.  Opportunities and encourage the attainment of internationally accepted standards of quality.  To provide quality consumer products at reasonable prices.


 Period of the Policy

This policy is valid for five year instead of t): 1 years as in the case of earlier policies.  It is effective from 1st April 1997 to 31 March 2002.

  1. Liberalisation

A very important feature of the policy is liberalisation. It has substantially eliminated licensing, quantitative restrictions and other regulatory and discretionary controls. All good, except those coming under negative list, may be freely imported or exported.

  1. Imports Liberalisation of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have  been transferred to Open General Licence (OGL) List.
  2. Export Promotion Capital Goods (EPCG) Scheme.

The duty on imported capital goods under EPCG scheme has been reduced from 15 % to 10 % under the zero duty EPCG Scheme, the threshold limit has been reduced from Rs. 20 crore to Rs.5 crore for agricultural and allied!  Sectors.

  1. Advance Licence Scheme under Advance License Scheme, the period for export obligation has been extended from 12 months to 18 months.

A further extension for six months can be given on payment of 1 % of the value of unfulfilled exports

a.)Duty Entitlement Pass Book (DEPB) Scheme.

Under the DEPB, an exporter may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency.  Such credit can be can be utilized for import of raw materials, intermediates, components, parts, packaging materials, etc. for export purpose.

b.)Special Import Licence (SIL)

150 items from the restricted list have been transferred to SIL. SIL on exports from SSIs has been increased from 1 % to 2 %. Export houses and all forms of trading houses are eligible for additional SIL of 1 % on exports of products from SSIs from North Eastern States.  Additional SIL has been declared for exploration of new markets and for export of our products. The SIL entitlement of exporters holding ISO 9000 certification has been? From 2 % to 5 % of the FOB value exports.

Export Houses and Trading House: – The criteria for recognition of export houses and all forms of trading houses has been modified.


The major implications of the EXIM Policy 1997-2002 are:

  • Globalisation of Indian Economy: The EXIM policy 1997-02 proposed to prepare a framework for globalisation of Indian economy. Economy from low level of economic activities to – high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market   “The Indian economy has been exposed to more foreign competition. The regime of high protection is gradually‘vanishing.  It means, in order to survive, Indian companies will have to pay due attention to cost reduction, improvement in quality, delivery schedules and after sales service.  At the same time,; Indian industries  have also been given an opportunity to globalise their business by allowing them to import machineries and raw materials from abroad on liberal terms.
  • Impact on the Indian Industry: In the EXIM policy 1997-02, a series of reform measures have been introduced in order to give boost to India’s industrial growth and generate employment opportunities in non-agricultural sector.

The reduction of duty from 15 % to 10 % under SEPCG scheme will enable Indian firms to import capital goods.  This will improve the quality and productivity of the Indian industry.  However, liberalisation of imports by transferring 542’ items from restricted list to OGL and SIL list would adversely affect the growth of, consumer goods industry in India, as most of these items are consumer goods items.

  1. a) Impact on Agriculture: – many encouraging steps have been taken in order to given a boost to Indian agricultural sector. Double weight age for agro exports while calculating the eligibility for export houses and all forms of trading houses. Additional SIL of 1 % for export of agro products.  EOUs’ and units in EPZs in agriculture and allied sectors can sell 50 % of their output in the domestic tariff are (DTA) on payment of duty.  Under the zero duty EPCG scheme, the threshold level has been reduced from Rs. 20 crore to Rs. 5 crore for agriculture and allied sectors.
  2. b) Impact on Foreign Investment ….

In order to encourage foreign investment in India, the SEXIM policy 1997-02 has permitted 100 % foreign equity participation in the case of 100 % EOUs, and units set up in EPZs. Due to liberalisation of procedural formalities, foreign companies may be attracted to set up manufacturing units in India. Full Convertibility of Indian Rupee on revenue account would also give a fillip to foreign investment in India.

Impact on Quality Up gradation:

The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2 % to 5 % of the FOB value of exports.  This would encourage Indian industries to undertake research and development programmers and upgrade the quality of their product.  Liberalisation of EPCG scheme would encourage Indian industries to import capital goods and improve quality and increase productivity of goods.

Impact on Self-reliance : –

One of the long-term objective of the Indian planning is to become self-reliant. This objective is well reflected in the EXIM Policy 1997-02.  The policy aims at encouraging domestic sourcing of raw materials, so as to building up strong domestic production base.  In order to achieve this the policy has also extended the benefits given to exporters to deemed exporters.  This would lead to import substitution. Oil, Power and natural gas sectors have also been brought under the purview of deemed Exports. However, the globalisation policy of the government may harm the interests of SSIs and cottage industries, as they may not be able to compete with MNCs.


The export- Import Policy: 2002-2007 deals with both the export and import of merchandise and services.  It is worth mentioning here that the Import Export Policy:  1997-2002 had accorded a status of exporter to the business firm exporting services with effect from 1.4.1999. Such business firms are known as Services Providers.

The Import Export Policy has been described in the following documents:

Import Export Policy: 2002-2007

Handbook of Procedures Volume I

Handbook of Procedures Volume II

ITC (HS) Classification of Export-Import Items.

The main policy provisions are given in the policy document entitled “Import Export Policy 2002-2007”. An exporter will l have to refer to the Handbook of Procedures Volume-I to know the procedure3s. The agencies and the documentation required to take advantage of a certain provision of the policy.

There is a para-by-para correspondence between the Policy and the Handbook of Procedures Volume-I. Thus, if an exporter finds that para 6.2 of the policy is relevant  for his business enterprise then he should also refer to the corresponding para of the  Handbook of Procedures Volume-I to know precisely what is to be done to 1ake advantage of the policy provision. The Handbook of Procedure Volume-II provides a very vital information as regards the standard input-output norms in regard to items of export from India.  Based on these norms exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Scheme /Scheme/Duty Remission Scheme.  The policy regarding import or export of a specific tem is given in the document entitled “ITC (HS) Classifications of Export-Import Items“. In addition to these policy documents, an export enterprise regulatory authorities dealing with different aspects of foreign trade. One can refer to these notice either by visiting the relevant web site of the authority concerned or buy referring to carious trade magazines which circulate them.

Import Export Procedure

Import Export Procedure

Import Export Procedure

Import And Export Procedure, Financing, and Primary Consideration Of international shipping documents..

Import Export Procedure Introducing: Firms engaged in international trade face a problem – they have to trust someone who may be very difficult to track down if they default on an obligation.  Due to the lack of trust, each party to an international transaction has a different set of preferences regarding the configuration of the transaction. Firms can solve the problems arising from a lack of trust between exporters and importers by using a third party who is trusted by both–normally a reputable bank.  A bank issues a letter of credit, abbreviated as L/C at the request of an importer.  It states that the bank promises to pay a beneficiary, normally the exporter, upon presentation of documents specified in the letter of credit.  A draft (bill of exchange) is the instrument normally used in international commerce to effect payment.  It is an order written by an exporter instructing an importer, or an importer’s agent, to pay a specified amount of money at a specified time.

14 Steps for conducting export transaction

The entire 14-step process for conducting an export transaction is summarized.  Take for example an Indian importer and US exporter.

Step 1: The Indian importer place an order with the US exporter and asks the American if he would be willing to ship under a letter of credit.


Step 2:  The US exporter agrees to ship under a letter of credit and specifies relevant information such as price and delivery terms.

Step 3:  The Indian importer applies to (e.g.) State bank of India for a letter of credit to be issued in favour of the US exporter from the merchandise the importer wishes to buy.

Step 4: The state bank of India issues a letter of credit in the Indian importer’s favour and sends it to the US exporter’s bank, the bank of New York.

Step 5:  The bank of New York advices the US exporter of the opening of a letter of credit in his favour.

Step 6: The US exporter ships the goods to the Indian importer on a common carrier. An official of the carrier gives the exporter a bill of lading.

Step 7:  The US exporter presents a 90 day-time draft (bill of exchange) drawn on the State Bank of India, in accordance with its letter of credit and the bill of lading to the bank of New York. The US exporter endorses the bill of lading so title of goods is transferred to the Bank of New York.

Step 8: The bank of New York sends the draft and the bill of lading to the State Bank of India.  The State Bank of India accepts the draft, taking possession of the documents and promising to pay the now accepted draft in 90 days.

Step 9:  State Bank of India returns the accepted draft to the bank of New York.

Step 10:  The bank of New York tells the US exporter that it has received the accepted bank draft, which is payable in 90 days.

Step 11:  The exporter sells the draft to the bank of New York at a discount from its face value and receives the discounted cash value of the daft in return.

Step 12:  State Bank of India notifies the Indian importer of the arrival of the documents.  He agrees to pay the State Bank of India in 90 days.  State Bank of India releases the documents so the importer can take possessions of the shipment.

Step 13:  in 90 days, the State Bank of India receives the importer’s payment, so it has funds to pay the maturing draft.

Step 14:  In 90 days the holder of the matured acceptance i.e. bank of New York presents it to the State Bank of India for payment. The State Bank of India pays.

Export Assistance

Exporters in the Indian can draw upon two types of government-backed assistance to help finance their exports; the Export-Import bank and Export Credit Guarantee Corporation (ECGC) The Export-Import Bank (EXIM BANK ) is a public sector financial institution established in January 1 ,  1982 . It was established by an act of parliament for the purpose of financing, facilitating, and promoting foreign trade in India. Export Credit Guarantee Corporation (ECGC): this institution covers the exporter against various risks. It also provides guarantees to the financing banks to enable them to provide Adequate finances to exporters.

Export Import Primary Consideration

It will discuss the preliminary considerations that anyone intending to export should consider. Before beginning to export and on each export sale thereafter, a number of considerations should be addressed to avoid costly mistakes and difficulties. Those companies that begin exporting or continue to export without having addressed the following issues will run into problems sooner or later Products initially, the exporter should think about certain considerations relating to the Product it intends to export.  For example, is the product normally utilized as a component Ina customer’s manufacturing process? Is it sold separately as a spare part? Is the product a raw material, commodity, or finished product? Is it sold singly or as part of a set or system? Does the product need to be modified– such as the size, weight, weight, or colour-to be saleable in the foreign market? Is the product new or used?  (If the product is used, some countries prohibit importation or require independent appraisals of Value, which can delay the sale.) Often the appropriate   methods of manufacturing, marketing, the appropriate documentation, the appropriate procedures for exportation, and the treatment under foreign law, including foreign customs laws, will depend upon these considerations.


 What is the expected volume of export of the product? Will this be an isolated? Sale of a small quantity or an ongoing series of transactions amounting to substantial Quantities? Small quantities may be exported under purchase orders and purchase Order acceptances. Large quantities may require more formal international sales agreements: more secure methods of payment: special shipping, packing, and handling procedures: the appointment of sales agents and /or distributors in the foreign country: or After-sales service.

Country Market and Product Competitiveness  Research On many occasions, a company’s  sole export sales business consists of responding to orders from customers located in foreign countries without any active sales efforts by the company. However, as matter of successful exporting, it is imperative that the company adequately e valuate the various world markets where its product is likely to be marketable.  This will include review of  macro-economic factors such as the size of the population and the economic development level and buying power of the country, and the economic development level and buying power of the country, and specific factors, such as the existence of competitive products in that country.

 Identification of Customers:  End user, Distributors, and sales Agents Once the countries with the best market potential and the international competitiveness of your company’s products have been evaluated, the specific purchasers, Such as end users of the products, sales agents who can solicit sales in that country for the products, or distributors who are willing to buy and resell the products in that country, must be identified.

Compliance with Foreign Law

 Prior to exporting to a foreign country or e3ven agreeing to sell to a customer in a foreign country, U.S. company should be aware of any foreign laws which might affect the sale. Some specific examples are as follows:

Industry Standards

Foreign Customs Laws

Government Contracting

Buy American Equivalent Laws

Exchange Controls and Import Licenses

Value-Added Taxed

Specialized Laws


 Introduction:  Although the sales agreement is by far the most important single document in an export sales transaction, they are numerous other documents with which the exporter must be familiar. In some cases, the exporter may not actually prepare such documents, especially if the exporter utilizes the services of a freight forwarder. The exporter is responsible for the content of the documents prepared and filed by its agent, the freight forwarder.  Since the4 exporter has legal responsibility for any mistakes of the freight forwarder, it is very important for the exporter to understand what documents the freight forwarder is preparing and for the exporter to review and be totally comfortable with the contents of such documents. Furthermore, the documents prepared by the freight forwarder are usually prepared based on information supplied by the exporter.  If the exporter does not understand the documents or the information that is being requested and a mistake occurs, the freight forwards will claim that the mistake was due to improper information provided by the exporter.

Freight Forwarder’s Powers of Attorney:

 A freight forwarder will ordinarily provide a form contract that specifies the services it will perform and the terms and conditions of the relationship.  Among other things, the contract will contain a provision appointing the freight forwarder as an agent to prepare documentation and granting a power of attorney for that purpose. Under new regulations, if the freight forwarder will have the authority to prepare shipper’s Export Declarations that must be expressly stated in the power of attorney.) Usually, however, the freight forwarder will have a more elaborate contract which includes other specific terms of or provisions relating to, the Services which it will provide.

Shipper’s Letters of Instructions

 On each individual export transaction, the freight forwarder will want to receive instructions from the exporter on how the export is to be processed. The terms or Conditions of sale agreed between the seller and the buyer may vary from sale to sale. Consequently, in order for the freight forwarder to process the physical export of the goods and prepare the proper documentation, it is necessary for the exporter to advise the freight forwarder as to the specific agreement between the seller and buyer for that sale.  Freight forwarders offer provide standard forms containing spaces to be filled in by the exporter for the information that it needs.

Commercial Invoices

 When the exports is shipped, the exporter must prepare a commercial invoice, which is a statement to the buyer for payment. Usually English is sufficient but some countries require the seller’s invoice to be in their language.  Multiple copies are usually required, some of which are sent with the bill of lading and other transportation documents. The original is forwarded through banking channels for payment (except on open account sales, where it is sent directly to the buyer).  On letter of credit transactions, the invoice must be issued by the beneficiary of the letter of credit and addressed to the applicant for the letter of credit.  Putting the commercial invoice number on the other shipping documents helps to tie the documents together.

Bills of Lading

 Bills of lading are best understood if considered as bills of loading.  These documents are issued by transportation carriers as evidence that they have received the shipment and have agreed to transport it to the destination in accordance with their usual tariffs s (rate schedule). Separate bills of lading may be issued for the inland or domestic portion of the transportation and the ocean marine) or air transportation, or a through bill of lading covering all transportation to the destination may be issued.

The domestic portion of the route will usually be handled by the trucking company or railroad transporting the product to the port of export.  Such  transportation companies have the own forms of bills of lading and, again, commercial stationers make available forms that can be utilized by exporters, which generally say that the exporter agrees to all of the specific terms or conditions of transport normally  contained in the carrier’s usual bill of lading and tariff. The inland bill of lading should be prepared in accordance with the freight forwarders or transportation carrier’s instructions.

The ocean transportation will be covered by a marine bill of lading prepared by the exporter or freight forwarder and issued by the steamship company. Information in bills of lading (except apparent condition at the time of loading) such as marks, numbers, quantity, weight, and hazardous nature is based on information provided to the carrier by the shipper, and the shipper warrants its accuracy.  Making, altering, negotiating, or transferring a bill of lading with intent to defraud is a criminal offense.  If the transportation is by air, the airline carrier will prepare and issue an air waybill. A freight consolidator will issue house air waybills which are not binding on the carrier buy are given to each shipper to evidence inclusion of its shipment as part of the consolidated shipment. In such cases the freight consolidator becomes the “shipper” on the master bill of lading.

Dock and Warehouse Receipts

 Upon completion of the inland transportation to the port of export, the inland carrier may deliver the goods to a warehouse company or to a warehouse operated by the steamship company as arranged by the freight forwarder.  A dock receipt is often prepared by the freight forwarder on the steamship company’s form and is signed by the warehouseman or agent of the steamship company upon receipt of the goods as evidence of the receipt.  The inland carrier then provides a signed copy of the dock receipt to the freight forwarder as evidence that it has completed the delivery.

Consular Invoices

 In addition to a commercial invoice, some countries, including Panama, Bolivia, Haiti, the Dominican Republic, and Honduras, also require that a consular invoice be prepared.  A consular invoice is usually prepared from the information in the commercial invoice, but it must be signed by a representative of the country of destination stationed at that country’s embassy or consulate located in the United States nearest the exporter. One reasons for requiring such invoices is that the country of destination may deduct certain charges from the price of the goods in order to determine the value for customs duties. If the commercial invoice does not contain all of the information necessary, the foreign customs service would be unable to complete the duty assessment. The consular invoice list the specific items about which that country requires information. The consular charges a fee for this service.

Certificates of Origin

Some countries require that goods shipped to the country be accompanied by a certificate of    origin designating the place of manufacture or production of the goods.  This is signed by the exporter, and usually, a local chamber of commerce that is used to performing this service (again, for a feed) certifies to the best of its knowledge that the products are products of the country specified the exporter. The exporter may exports to or imports from Canada or Mexico. In general, in order to be eligible for the duty-free or reduced duty rates under NAFTA, all items imported from outside of North America must have undergone the “tariff shift”   specified in Annex 401 during the manufacturing process for that product.

Certificates of Free Sale

 Sometimes an importer will request that an exporter provide a certificate of free Sale.  Loosely speaking, this a certification that a product being purchased by the  importer complies with any U.S. government regulations for marketing the product  And may be freely sold within the United States. Sometimes, depending upon the Type of product involved, the importer will be able to accept a self-certification by the Exporter.  Frequently, however, the importer seeks the certificate of free sale because the importer’s own government requires it.

For example, these request are common With regard to food, beverages, pharmaceuticals, and medical devices.  The foreign Government may or may not require the importer to conduct its own testing of the Products for safety but May, either as a primary source or as backup for its own testing, seek confirmation that the products are in compliance with the U.S. Food, Drug and Cosmetics Act. Delivery Instructions and Delivery Orders The Delivery Instructions form is usually issued by the freight forwarding company to the inland transportation carrier (the trucking or rail company), indicating to the inland carrier which pier or steamship company has been selected for the ocean transportation and giving specific instructions to the inland carrier as to where to deliver the goods at the port of export.

This must be distinguished from the Delivery Order, which is a document used to instruct the customs broker at the foreign port of destination what to do with the  goods , in particular, the method of foreign inland transportation to the  buyer’s place of business.

Shipper’s Declarations for Dangerous Goods

 Under the U.S. Hazardous Materials Transportation Act, the international Air Transport Association Dangerous Goods Regulations, and the International Maritime Dangerous Goods Code, exporters are required to provide special declarations or notice to the inland and ocean transportation companies when the goods are hazardous. This includes explosives, radioactive materials, etiological agents, flammable liquids or solids, combustible liquids or solids, poisons, oxidizing or corrosive materials, and compressed gases. These include aerosols, dry ice, batteries, cotton, anti-freeze, cigarette lighters, motor vehicles, diesel fuel, disinfectants, cleaning liquids, fire extinguishers, Pesticides, animal or vegetable fabrics or fibres, matches, paints, and may other products.  The shipper must certify on the invoice that the goods are properly Classed, described, packaged, marked and labelled, and are in proper condition for Transportation in accordance with the regulations of the Department of Transportation Precursor and Essential Chemical Exports Those who export (or import) “precursor” chemicals and “essential “chemicals that can be used to manufacture illegal drugs are required to file Drug Enforcement Administration (DEA) Form 486 In some case,. This form must be filed fifteen days in advance of exportation (or importation).

Animal, Plant, and Food Export Certificates

  The U.S. Department of Agriculture is supportive of companies that want to export Livestock, animal product s, and plants and plant products. Often, the destination Country will have specific requirements in order to permit import to that country, but sometimes the foreign country will accept or require inspections performed and Certificates issued in the United States. In general, the U.S. Department of Agriculture Offers inspection services and a variety of certificates to enable exporters to satisfy Foreign Government requirements.

Drafts for Payment

 If payment for the sale is going to be made under a letter of credit or by documentary  Collection, such as documents against payment ( “DP” or sight draft ) or documents against acceptance (“DA or time draft ), the exporter will draw a draft on the buyer’s  bank in a little  of credit transaction or the l buyer in a documentary collection  transaction payable to itself ( sometimes it will be payable to the seller’s bank on a  confirmed letter or credit ) in the amount of the sale. This draft will be sent to the seller’s bank along with the instructions for collection, or sometimes the seller will sent it directly to the buyer’s bank. If the payment agreement between the seller and buyer is at sight, the buyer will pay the draft when it is received, or if issued under a letter of credit, the buyer’s bank will pay the draft when it is received.  If the agreement between the seller and the buyer is that the buyer will have some grace period before making payment, the amount of the delay, called the usance, will be written on the draft (time draft), and the buyer will usually be responsible for  payment of interest to the seller during the usance period unless the parties agree otherwise. The time period may also be specified as some period after a fixed date, such as ninety days after the bill of lading or commercial invoice date, or payment simply may be due on a fixed date.

Freight Forwarder’s Invoices

The freight forwarder will issue a bill to the exporter for its services. Sometimes. The forwarder will include certain services in its standard quotation while other services. Will be add-ons. It is important to make clear at the outset of the transaction which services will be performed by the exporter, the freight forwarder, and other, Such as the bank.

Shipper’s Export Declarations

The Shipper’s Export Declaration (SED) is important because it is the one by one of all of the export documents that is filled with and U.S. Governmental agency. The SED is given to the exporting steamship carrier or air carrier and is filed by them with the U.S. Customs Service prior to clearing the port. This document may be prepared by the exporter, or it may be prepared by the exporter’s agent, the freight forwarder, and the exporter may not see it.  Nevertheless, the SED form specifically states that any false statements in the form (which is interpreted to include accidentally false statements as well as intentionally false statements) will subject the exporter to various civil and criminal penalties, including a $ 10,000 fine and up to five year’s imprisonment.

Letters of credit

 When the buyer has agreed to provide a letter or credit as part of the payment terms, the buyer will apply to its local bank in its home country and a letter of credit will be issued. The seller should send instructions to the buyer before the letter of credit is opened, advising the seller as to the terms and conditions it desires.  The seller should always specify that the letter of credit must be irrevocable.  The bank in the buyer’s country is called the issuing bank. The buyer’s bank will contact a correspondent bank near the seller in the United States, and the U.S. bank will send a notice or advice to the exporter that the letter of credit has been opened.  If the letter of credit is a confirmed letter of credit, the U.S bank is called the confirming bank; otherwise, it is called the advising bank. The advice will specify the exact documents that the exporter must provide to the bank in order to receive payment.  Since the foreign and U.S. banks are acting as agent and subagent, respectively, for the buyer, the U.S. bank will refuse to pay unless the exact documents specified in the letter of credit are provided. The banks never see the actual shipment or inspect the goods; therefore, they are extremely meticulous about not releasing payment unless the documents required have been provided. The issuing bank and advising bank each have up to seven banking days to review the documents presented before making payment when the exporter receives the advice of the opening of a letter of credit, the exporter should review in detail the exact documents required in order to be paid under the letter of credit.

Introduction to Letters of Credit

Letters of credit are a payment mechanism, particularly used in international trade.  The Seller gets paid, not after the Buyer has inspected the goods and approved them,  but when the Seller present certain document ( typically a bill of lading evidencing  shipment of the goods, an insurance policy for the goods, commercial invoice, etc.) to  his bank. The bank does not verify that the documents presented are true, but only whether they “on their face” appear to be consistent with each other and comply with the terms of the credit. After examination the bank will pay the Seller (or in LC terms the beneficiary of the letter of credit).


  • Buyer and Seller sign a purchase contract that stipulates payment by letter of credit. It is good practice to agree already in the purchase contract which documents the Seller / Beneficiary has to present.
  • The Buyer goes to his bank (so called issuing bank ) opening the credit to the benefit of the Seller, in particular the Buyer tells his bank which documents the  Beneficiary has to present, where and how, and the amount of the credit and details of payment ( by sight, deferred sight payment, against acceptance or negotiation of drafts).
  • The issuing Bank, which is normally located in a foreign country, advises the Beneficiary through a correspondence bank located in the country of the Beneficiary of the credit.
  • The Buyer ships the goods and presents the necessary documents to his local bank which pays him after examining them.  The obligation of the bank is independent of the rights of the parties under the purchase/service contract.  This means that absent fraud, the bank has to pay when conforming documents are presented, even though the goods are not of the contractually agreed quality or quantity.

The Seller can strengthen his position by requesting a “confirmed“letter of credit.  The confirmation of a bank in the Seller’s country means that the payment obligation of the confirming bank is independent of the issuing bank. If the issuing bank cannot wire funds outside the country due to governmental restrictions, the confirming bank still has to pay, even though it will not be reimbursed by the issuing bank.

The Seller thus can avoid currency transfer restrictions which are sometimes found in   developing countries. A standby letter of credit is basically a bank guarantee. Previously US banks were not allowed to issue guarantees and circumvented this limitation by issuing standby letters of credit where the beneficiary basically has to present his face to get paid.  Most letters of credit, particularly in international transactions, are subject to the Uniform Customs and Practices (UCP) issued and published by the International Chamber of Commerce (ICC).

The current revision UCP 600 is publication No. 600 of the ICC and takes effect as of July 1 ,2007  Since the ICC lacks legislative authority, meaning it is not the arm of or authorized by any government but rather a trade association, the  UCP are no laws and have to be explicitly incorporated into individual transaction.  Some countries and states have enacted statutes regarding letters of credit (see e.g. Article 5 US Uniform Commercial Code). In international trade however, most parties choose to use the UCP.

The Letter of Credit

  A letter of credit is a document typically issued by a bank or financial institution ,  which authorizes the recipient of the letter ( the “customer “ of the bank ) to draw  amounts of money up to a specified total, consistent with any terms and conditions set forth in the letter.  This usually occurs where the bank’s customer seeks to assure a seller (the “beneficiary “ ) that it will receive payment for any goods it sells to the customer.

For example, the bank might extend the letter of credit conditioned upon the beneficiary’s providing documentation that the goods purchase with the line of credit have been shipped to the customer. The customer may use the letter of credit to assure the beneficiary that, if it satisfies the conditions set forth in the letter, it will be paid for any goods it sells and ships to the customer.

In simple terms, a letter of credit could be said to document a bank customer’s line of credit, and any terms associated with its use of that line of credit.  Letters of credit are most commonly used in association with long-distance and international commercial transactions.

Confirmed Letter of Credit.

A letter of credit, issued by a foreign bank, which has been verified and guaranteed by  a domestic bank in the event of default by the foreign bank or buyer.  Typically, this form of letter of credit will be sought when a domestic exporter seeks assurance of payment from a foreign importer.

Commercial Letter of Credit.

 A commercial letter of credit assures the seller that the bank will provide payment for any goods or merchandise shipped to the bank’s customer, assuming the seller provides any required documentation of the transaction and its shipment of the purchased goods.

Irrevocable Letter of Credit

  An irrevocable letter of credit includes a guarantee by the issuing bank that if all of the terms and conditions set forth in the letter are satisfied by the beneficiary, the letter of credit will be honoured.

Standby Letter of Credit.

 In the event that the bank’s customer defaults on a payment to the beneficiary, and the beneficiary documents proof of its loss consistent with any terms set forth in the letter, a standby letter of credit may be used by the beneficiary to secure payment from the issuing bank.

Import And Export Procedure To start Export Business Along With Import Export Course Of international shipping documents.

Procuring, Materials Management

Procuring, Materials Management

Procuring and Supply Chain Management.

Procuring,Supply Chain Management is a total concept involving and organizational structure unifying into a single responsibility the systematic flow and control of material and identification of the need through customer delivery.

The Supply Chain management contributes to increased profitability by coordinated achievement of at least materials cost. This is achieved by optimizing capital investment, capacity of personal, consistent with the appropriate customer service level.

Supply Chain Management is an organizational concept in which a single manager has authority and responsibility for all activity for all activities, principally concern with the flow of material into organization. i.e. purchasing production planning and scheduling incoming traffic inventory control receiving and store normally are included

Supply Chain Management – Scope

The scope of materials management is very vast however, we can broadly identify the following functions of material management

1.Inventory Control

This function covers aspects like setting inventory levels, ABC analysis, fixing economical ordering quantities, verifying safety stock levels, lead time even analysis and reporting.

Some other functions of Supply Chain managements are below

  • -Receiving and inspection of incoming materials.
  • -Inward and outward transportation to various departments.
  • -Materials handling.
  • -Disposal of scrap, obsolete material, old equipment and machinery, surplus material.
  • -Value analysis.

2.Planning and Programming of SCM

This is accomplished with the help of sales forecast and production plans. Supply chain planning and programming involves identifying the individual requirements of parts, preparing materials budget, forecasting the level of inventories, scheduling the order and monitoring the performance in relation to production and sales.

3.Stores | Warehousing

Warehouse is responsible for physical control of materials, preserving materials, minimization of defects and damages through timely disposal and efficient handling. Stores also maintain proper record of materials, ensures proper location and stacking of materials. The physical verification of stocks and the reconciling them with book figures is also responsibility of stores.


These consists of selection of source of supply, deciding terms of purchase, placement of purchase orders, follow up and maintaining good relationship with supplies, approval of payments to supplier besides evaluating and rating suppliers.

Objectives of Supply Chain Management

Prominent objective of Supply Chain management is as under,

  1. To ensure continuous and uninterrupted production or services operations by maintaining steady flow of SCM.
  2. To reduce the cost of material by purchasing various material of right quality and right quantity from source at right price at appropriate time.
  3. To achieve economies in the cost incurred on material, after their purchase through storage, processing and warehousing till the finished goods ultimately reach customers.
  4. To minimize working capital requirements through proper and scientific inventory control.
  5. To keep watch on new products available in the market.
  6. To increase competitiveness of manufactured goods by reducing their price through cost reduction and value analysis.
  7. To identify import substitute product to reduce overall requirement of foreign exchange and dependence on foreign suppliers.
  8. To ensure co-operation and co-ordination among all departments within the company to meet material management objective and corporate and functional levels.
  9. To supply better quality raw materials or components with ultimate aim to improve quality of end products.
  10. To conserve materials resources within an organization with a view to conserve natural resources.

Procurement, Structure Of Supply Chain Department.

Procurement, Structure Of Supply Chain Department

We are going to discussed Procurement and  how supply chain department has to have close interaction with other departments in company for achieving desire goals of company and cannot afford to work in isolation.

 Procurement, Structure Of Supply Chain Department

Supply chain management being a critical function has to be handled by a competent person who should be part of the top management team. In view of this importance, the head of the material management function generally directly reports to the managing director like other departmental heads, viz, marketing, production, finance, personal, etc.

However, there can be little variations in organization plan depending upon the view and nature of operations of the organization.

The internal structure of the supply chain management department can be,

1.Structure based on commodities.
2. Structure based on location.
3. Structure based on functions.

Detail of each is,

Structure based on commodities.

Various items required by the organization are classified into different groups such as raw materials, spares, components, finished goods, important items, etc. The responsibility of age group is given to different individual.For example, carbide tools manufacturing company may have commodity groups for steel, carbide inserts, imported items and brought out components like shims, screws, levers, etc.

This structure avoids duplication of efforts as each commodity purchase is handled by a separate individual. Besides, the individuals are in charge of group can develop good rapport with the commodity market handled by him.

Secondly, this structure enables standardization and bulk buying in each group.

Structure based on location.

This structure is preferred when organisation has several plants spread across different location in the country.The decentralized supply chain management setup has separate materials manager at each location. This enables reduction in cost and time of procurement besides faster coordination with other departments like production, marketing etc.

An organization can also have an option of centralized supply chain management department instead of decentralized set up at each location. The advantage of this is the reduction in cost due to centralize bulk buying for requirements of all plants at different locations. Secondly it is possible to transfer material from one place to another in case of emergency or excess supplies.

Some organizations may develop system combining the advantages of centralization and decentralization. In this system, central supply chain management staff located at headquarters exercises control at policy level in terms of overall guidelines, procedures and system to be followed by decentralized departments at different plant locations.

The departments and plant are expected to report periodically to the centralised materials department and headquarters. The departments at plant level are given financial limits for the purchases by them, beyond which permission from headquarters is necessary. The items common to all plants is purchased by headquarters, which enables substantial saving due to bulk buying’s.

Structure based on the function.

In this structure the groups are formed on the basis of different functions like purchase, transport, receiving, stores, etc.

Each function is headed by a separate individual who reports directly to materials manager, example purchase activities for different plants will be looked after by one individual.

Similarly transport requirement for all plants will be looked after by another individual.

Composition of purchase department.

The composition of purchase department will depend upon requirements and the kind of activities involved in the organization. Purchase department also need support services like typing, clerical, statistical information, etc.

In large companies purchase department is supported by cost analysts, economists and legal advisers.


Relationships with other departments.

Purchase department should have continuing relations with only not only other departments in organization but also with its suppliers.

Procurement and engineering

Engineering department is responsible for preparing the technical specifications for company’s products and the materials required to produce product these products for maximizing profits.

The material specified by the engineering department must be both economical to procure and economical to fabricate and similarly these should be available from more than one supplier/ producer.

Generally, there has to be greater understanding between these two departments on their concepts of materials problems. Engineers may look for more safety, quality and performance, while purchaser may look for cost and timing and stick to closer performance requirements than higher safety.

Hence, dilemma of cost vs safety may crop up. In such circumstances, mutual understanding and willingness to give and take is necessary between purchase and engineering department to arrive at mutually satisfactory solution.

 Procurement and operations/ production.

The purchase department procures the goods and materials needed for production, after receiving material requisition from them.

If production department finalizes its production schedule last minute and does not allow purchase department sufficient time then such purchases may be very costly and increase final cost of company’s products.

Such situation leaves inadequate time for selection of good supplier and negotiate, the price. As against this, sometimes production department summit production schedule/ requisition to purchase department and purchase department fails to procure the necessary goods and materials.

This may result in starvation of raw materials required for production department and production of goods, which are not in demand.

Material shortages in process industries are very serious which may result in the complete production stoppage.

A good coordination between production and purchase department may lead to selection of proper materials and reduction in final cost of production.

Purchase department should also ensure timely supply of maintenance spares and materials to maintenance department, which is responsible for ensuring uninterrupted production.

Procurement and marketing .

Marketing department relies on the efficiency of purchase and production department when it commits delivery dates and quality standards to the customer the cost of finished products also depends upon the costs going for purchase of raw materials.

Similarly purchasing production sales cycle depends upon sales forecast given by marketing department.

This forecast decides the production schedule, which is the basis for purchase schedule. Hence it is necessary that marketing department summit accurate forecast.

Any changes in sales forecast should be immediately intimate to production as well as purchase department. Similarly purchase department should immediately inform marketing department about any increases in raw material prices, which can be used by marketing department for seeking price increase from its customer.

Purchase department can also access to its sales department by serving as a practical sales laboratory.

Many manufacturers and suppliers approach purchase department for selling their goods and services.

Therefore, officers in the purchase department can act as source of information to marketing staff to develop and refined their company’s sales policies and procedures.

Procurement and finance

Success of the business depend upon goods good financial planning. Accurate sales forecast and purchasing schedule unable to plan working capital needs and the cash required at given moment. Finance department is responsible for making prompt payment to the suppliers, which creates healthy relationship between purchaser and supplier. However, to affect this purchase department must give sufficient advance notice to finance department to organize the requirement of fund. Finance department also keeps watch on purchase transaction viz.

It sees that company’s policies, rules and regulations are adhered to when purchase transaction take place. Sometimes to take advantage of low prices of materials available in market, the purchase department me make large purchases, however, before this it should consult finance department about availability of finances and excess load on these treasuries.As against this, if finance department does not make available funds for such low-price purchase opportunity, the company may have to pay higher price for same materials at a later date.

Hence, close cooperation between purchase and finance department is necessary to manage working capital and to take benefit at right buying opportunities.

Procurement and planning

Purchase department can assist planning department to draw a realistic short term and long-term plans for the company based on their knowledge of the market.Purchase department can feed planning department accurate forecast about the position of materials supplies, market and new products introduced into the market.

As against this planning department should take purchase department in full confidence about plans chalked out by company.

Procurement and legal 

Purchase department being responsible for materials purchases, enters into a legal contract between them and suppliers, through purchase order.It is necessary that purchase department should understand legal implications of various clauses in purchase order.

Here, legal department can readily assist purchase department to draft and interpret correct clauses in purchase order or contract so as to protect interest of the company as well as purchase department.

Procurement and personnel department 

For efficient functioning purchase department should be equipped with the right kind of staff in terms of their knowledge and skills.Personnel department can correctly assess their needs, recruit and train search stuff for purchase department.


Logistics , Supply Chain Management

Logistics , Supply Chain Management

Logistics and Supply Chain Management.

Historic Development.

Logistics and Supply Chain Management has been discussed in trade books and textbooks since the past two centuries. The concept of evolution of logistics and supply chain management is of recent origin and has roots in USA.

The first college textbook on purchasing was authored by prof. Howard t. Lewis of Harvard business school in 1933. Prof. Howard t. Lewis also envisaged in large companies need for creation of separate senior level post for control of materials function covering areas like purchasing, inventory control, receiving, inspection, warehousing, etc.

The importance of materials management, improved means of transportation and communication and technological changes in industries brought in the concept of ‘scientific management’ in USA.

Statistical quality control that is SQC found increasing use as the industries started mass production. SQC was adopted by industries in Britain in 1930’s while japan started to use the same after few years.

However, it was observed that senior management of the company is concentrated on other department like marketing, finance, R&D etc. Rather than purchasing, similarly skill staff was also not made available even though purchasing was responsible for chunk of the cost of the goods sold.

The quality of finished product was dependent upon the purchased materials, which in turn also have an impact in the profit of the company.

Between 1960’s and 1970’s is inventory was managed by using “Kardex” system. During this period buyer was mainly focus on “purchase price” and was concerned for continuous production rather than management of inventory.

In the beginning of 1980’s the company started marketing and procuring on international scale. The use of computers was started for the management of inventory. Management started understanding importance of controlling the cost of materials and reducing the overall cost of the product through automation of production process.

Due to this transitions role of purchasing and evolution of logistics and supply chain management function increased in organization. Inventory control leads to increase in profits of many companies. The inventory was control by using technique like just in time (JIT) and computerized materials requirement planning (MRP).

Skilled staff was now being assigned to materials function. MRP action reports replaced Kardex cards. In nutshell, the importance of materials management function was duly understood for the functional success of the organization.

Purchase management started increasing use of electronic purchasing system and Japanese system like kaizen, Kanban, quality circle, etc. Along with this, materials department started having first group of people.

who were mainly responsible for operational part of purchasing and another group of people who were responsible for department of supply function. these second group viz.,

supply managers started taking care of new product development, selecting sources, managing costs and developing strategic alliance with suppliers.

Sometimes, supply managers also participate in strategic planning of an organization. Supply strategy is one of the important strategy for formulating business plan of an organization along with other three strategies viz. Production, marketing and finance.

Objectives of logistics and supply chain management.

In earlier days performance of purchase department was measured on the basis of the change in the purchase price of materials, success in continuously feeding materials to production department and cost of running own department. However nowadays purchase and supply function is also expected to take care of such as,


Procuring defect free materials.


Reducing overall costs of acquiring, moving, holding, and converting purchased products and services.


Reducing the time required to bring new product to the market.


Providing appropriate technology on time and controlling the technology when dealing with outside suppliers.

Continuity of Supply.

Maintaining study materials to avoid in an uninterrupted supply

To sum of materials management is also related to other field of business activities and the other departments in the company.

Hence, materials management staff requires combination of technical expertise, and leadership communication and team skills, which help to achieve common goals set by organization.

DGS&D- Public e-procurement

DGS&D- Public e-procurement

DGS&D- Public e-procurement

The DGS&D,

the Director General of supplies and disposals is the central agency (DGS&D- Public e-procurement), which buys material on behalf of Government of India.

It services various government departments like Ministries, public sector undertakings, Railways, state governments, local public bodies and Quasi public bodies like municipalities, district boards, etc. being a central purchase organization.

It has brought in substantial standardization of the procedure for tendering and contracting. DGS&D is accountable to Parliament for its actions.

Organization structure of DGS&D

It is headed by director general, who is supported by one additional director general and five Deputy Director Generals. Its headquarter is at Delhi and regional offices are at Kolkata, Mumbai, Chennai and Kanpur.

Besides, for Overseas purchases it has offices in London and Washington. It has four wings viz. supplies, inspection, progress and disposals. How you were supplies wings is main stay of the organization.

This thing has 11 directorates under it, dealing in different types of goods. In order to deal with homogeneous groups of item at one place, grouping at the purchase directorate has been made.

The Planning and development division rationalizes specifications and draw comprehensive program for receipt and booking of indent of common user item.

The O and M branch devises procedure, systems and effective control necessary to improve efficiency. The statistical branch maintains the up to date statistics of the requirements and publishes the annual report and directory of government purchases.

The inspection wing checks specifications of the supplies made by the suppliers and monitors the quality during the manufacturing process. It also gives technical advice to the various user departments.

The progress being keeps track of the supply position after contract is placed and makes efforts to expedite the supply.

Three branches of these Wings our defense, Railways and general. This week has number of field offices spread all over the country.

The disposal wing Shoulders as the responsibility of disposal of surplus materials. A limit of rupees 10000/-  has been set for disposal of Stores buy indenting department themselves. The annual value of disposal by this wing is estimated to be rupees 50 cores.

Public Relations directorate handles complaints from suppliers and also gives solutions to solve their problems. It also gives advice on procedural matters and disseminate information about working of DGS&D. besides, DGS&D also has a contract officer, legal adviser and liaison with Railways and defense.

The organization also has cost accounts branch, Deputy Secretary for internal and Finance matters and a purchase advisory Council under the chairmanship of minister of supply.

Representatives of trade, industry Indenters are member of this Council. This Council work as a catalyst to increase efficiency of organization and help to change the organization in tune with the social economic environment in country by advising on procurement policy and procedures.

Purchasing procedure

DGS&D give the top preferences to the raw materials and items manufacturers in India, followed by items fully or partly manufactured in India using imported materials then for items manufactured abroad but stocked in India and lastly for imported items manufactured overseas.

The payments are made in Rupees and deliveries are taken in India except in exceptional cases. DGS&D also encourages purchases from small scale units by giving them price preference of 15% Vis a Vis offers from units in organized sector.

Once the indent is registered in the central indent section after checking, it is sent to the tender enquiry section of the concerned purchase directorate. Then depending upon the value, nature and delivery period for the goods to be purchased the quote for the tenders are invited.

The tenders may be advertised tenders, Limited tender on single tender for proprietary article, once the contract is placed after evolution of tender, the supplier calls inspectors for the inspection. The inspected stores are then dispatched to the consignee by the supplier.

The supplier takes 4 to 6 weeks to commence supplies. Sometimes, if necessary, DGS&D assist supplier to get critical raw materials required to produce the item to be purchased. Generally DGS&D takes about 10 to 12 week to places contract after receipt of indent.

Registration of suppliers

DGS&D maintain a list of registered suppliers. Manufacturers, stockiest of indigenous and imported materials, sole selling agents of Indian manufacturers and Agents of overseas manufacturers can registered with DGS&D. both Indian and foreign firms can register with their names as per the prescribed form of DGS&D.

The applications are scrutinized and evaluation of suppliers in terms of plant machinery available, technological strengths, funds position and the standing in the market is undertaken.

The quality of the product is also inspected by personal visit to the factory. After approval, the firm is included in the list of registered suppliers. Incidences of adhoc purchases from the registered suppliers on a limited tender basis is also observed many times.

Advantages of registration are as follows.

  1. The first preference is given to the registered firms.
  2. Demands, which are not advertised are fulfilled by registered firms.
  3. For advertised demands, copies of the notice are sent to the registered supplier.
  4. Rate contract and running contract items are generally reserved for registered suppliers.
  5. Demands for supplies, which have operational priority are reserved for procurement from Register firms.
  6. Generally all routine demands are fulfilled through registered suppliers. Similarly about 70 to 80% of the urgent demands are reserved for supply from registered suppliers.
  7. No security deposit is required to be made by the registered suppliers.
  8. Registered firms with DGS&D may be exempted from payment of security deposit even by public sector undertakings and state government departments.
  9. Registration with DGS&D enhances overall image of the supplier Organization in the market.

Types of contracts

Rate Contract (R.C.)

This is a contract for supply of goods of specified rate during the period covered by the contract, generally one year. RC is generally made with only those suppliers whose capacity to deliver the goods as per demand of indenters has been verified.

The main advantage to the intent is that he can procure goods as and when wanted without doing elaborate paperwork and without losing time.

The supplier is assured of substantial demand during the period and can enjoy benefit of economies of large scale production. Generally, order or RC are placed for minimum total value, which is specified in the tender enquiry for RC and also in the rate contract.

Running contract (RG/C)

This type of contract is for the supply of an approximate quantity of stores at specified price during period covered by contract, generally one year.

DGS&D combines approximate requirements of number of indenters for certain period and any of these indenters can demand his requirements at any time or specified period, from the supplier directly or through intent on DGS&D.

Ihe purchaser has the right to take a certain quantity (generally 25%) more or less than the approximate quantity mentioned in the contract. generally about 75% of the contractual quantities are taken before the expiry of the contract.

Payment procedure

The payments are decentralized and can be obtained from regional offices also. Generally, the terms of contract are as follows.

  1. 95% on proof of inspection or dispatch or a provisional certificate from the consignee in case of local deliveries.
  2. 5% after receipt of stores in good condition by the consignee.

Pay and Accounts Officer arranges is the payment of supplier’s bill within 2 to 3 weeks of their presenting, if they are in order.

For C.I.F. contracts, 95% of the price will be paid in India on presentation of shipping documents along with the inspection certificate.

Balance 5% will be paid on receipt of the stores in accordance with the terms of the contract in good condition by the consignee and introducing the certificate of such a seat endorsed on one copy of the inspection note.

Ministries and government departments on their own also make purchases of high values, other than DGS&D purchases, mainly for projects. Government and public sector undertaking purchases being be bureaucratic and time consuming, there is lot of scope for improvement and bringing professional approach. This can be achieved through professional training and adapting to the modern method and technologies.