EXPORT FINANCING

Financial assistance is extended by the banks to the exporters at pre-shipment and post-shipment stages. Financial assistance extended to the exporter prior to shipment of goods from India falls within the scope of pre-shipment finance while that extended after shipment of the goods falls under post-shipment finance. While the pre-shipment finance is provided for working capital for the purchase of raw material, processing, packaging, transportation, warehousing etc. of the goods meant for export, post-shipment finance is generally provided in order to bridge the gap between shipment of goods and the realization of proceeds.

EXIM bank offers a lot of financial plans.. The Bank finances exports of Indian machinery, manufactured goods, and consultancy and technology services on deferred payment terms. EXIM INDIA also seeks to co finance projects with global and regional development agencies to assist Indian exporters in their efforts to participate in such overseas projects. The Export- Import Bank of India (Exim Bank) provides financial assistance to promote Indian exports through direct financial assistance, overseas investment finance, term finance for export production and export development, preshipping credit, buyers credit, lines of credit, relending facility, export bills rediscounting, refinance to commercial banks.

Deferred payment exports: Term finance is provided to Indian exporters of eligible goods and services, which enables them to offer deferred credit to overseas buyers.

Deferred credit can also cover Indian consultancy, technology and other services. Commercial banks participate in this program directly or under risk syndication arrangements.

Term loans for export production: Exim Bank provides term loans/deferred payment guarantees to 100% export-oriented units, units in free trade zones and computer software exporters.

In collaboration with International Finance Corporation., Washington, Exim Bank provides loans to enable small and medium enterprises to upgrade export production capability.

Finance for export marketing: This program, which is a component of a World Bank loan, helps exporters implement their export market development plans.

MODES OF PAYMENT IN INTERNATIONAL

TRADE Firm has to decide the terms of payment while executing an export order. Mode of payment differs on nature of market competition, type of products, credit worthiness of buyersetc Modes :

advance payments Documentary credit with letter of credit(L/C) Consignment sales Open account

1.advance payments:

Payment remitted by buyer in advance, either by draft mail or telegraphic transfer Simplest & less risky from exporters point of view There is no interest to pay
Exporter is dealing with an overseas buyer.. An assurance is required for both parties Bank plays a role as mediator, provides assurance to both parties Bank exporters agent Documents Bill of Lading & Bill of exchange

2. documentary credit

DOCUMENTARY CREDIT WITH LETTER OF CREDIT(L/C)

a documentary credit represents a commitment of a bank to pay the seller of goods or services a certain amount , provided, he presents stipulated documents evidencing the shipment of goods Importer applies to the issuing bank of exporter , located in his country, to open a L/C. Exporter reviews the terms & conditions, agrees, then ships the products After delivering the goods, B/L obtained, serves as a receipt of cargo shipped Along with all other documents, exporter submits this to the bank, releases the payment

CONSIGNMENT SALES
Under this, the shipment of the goods is made to the overseas consignee and the title of goods is retained with the exporter until it is finally sold This involves certain charges warehousing charges, insurance, interest, commission of the agents etc.. Risk for exporter wait till the goods sold Should trust the counterpart Exporter are required to declare the expected value of consignment on the guaranteed remittance form(GR).

Eg..

Export of precious stones, cut flowers etc

OPEN ACCOUNT
Exporter & importer agree the sales terms without documents calling for payments Invoice prepared by exporter, importer can take delivery without payments Subsequently importer settle down payments through periodic remittances Eventually importer will be able to finance Highly risky

IMPORT SUBSTITUTION

Definition: Government strategy that emphasizes replacement of some agricultural or industrial imports to encourage local production for local consumption, rather than producing for export markets. Import substitutes are meant to generate employment, reduce foreign exchange demand stimulate innovation, and make the country selfreliant in critical areas such as food, defense, and advanced technology.

IMPORT All imports now fall into one of the following four categories: 1.freely importable items Most capital goods fall into this category. Items in this category do not require import licenses and may be freely imported by any individual or entity.

2.licensed imports Certain items can be imported only with licenses and only by actual users. The current "negative list" of items in this category includes several broad product groups that are classified as consumer goods; precious and semi-precious stones; products related to safety and security; seeds, plants and animals; some insecticides, pharmaceuticals and chemicals; some electronical items; several items reserved for production by the small-scale sector; and 17 miscellaneous or special-category items. In April 1993 the government ended licensing requirements for several agricultural items, including prawns, shrimp and poultry feed.

3.canalised items Items under this category can be imported only by specified public-sector agencies. These include petroleum products (to be imported only by the Indian Oil Corporation); nitrogenous phosphatic, potassic and complex chemical fertilizers (by the Minerals and Metals Trading Corporation) vitamin- A drugs (by the State Trading Corporation); oils and seeds (by the State Trading Corporation and Hindustan Vegetable Oils); and cereals (by the Food Corporation of India).

4.prohibited items Only three itemstallow fat, animal rennet and unprocessed ivory-are completely banned from importation. Rennet is an extract from the stomach of certain animals, used in cheese making