9 min readConcept sheetMCQ · document identification and Incoterm match

Export-import procedures, documents and India's Foreign Trade Policy

Exporting runs from IEC registration to realising payment, backed by documents such as the bill of lading and letter of credit. Incoterms decide who bears cost and risk.

IECImporter-Exporter Code issued by DGFT; PAN-based; needed to export or import

IncotermsPublished by the International Chamber of Commerce; current version Incoterms 2020 with 11 terms

Letters of creditGoverned by the ICC's UCP 600 (in force 2007)

Policy lawForeign Trade (Development and Regulation) Act 1992; DGFT under the Ministry of Commerce and Industry

Export procedure in India

1
Get the IEC from DGFT and register with an Export Promotion Council (RCMC)
Basic eligibility to trade
2
Receive the enquiry, send a proforma invoice and confirm the order
Price and terms agreed
3
Secure payment terms, such as a letter of credit
Reduces risk of non-payment
4
Produce or buy the goods; arrange packing credit, inspection and packing
Pre-shipment stage
5
Book shipping space and arrange marine insurance
Insurance depends on the Incoterm
6★
File the shipping bill; customs examine the goods and issue the 'Let Export Order'
Customs clearance
7
Goods are loaded; the mate's receipt is exchanged for the bill of lading
Proof of shipment
8
Present documents to the bank for negotiation, realise payment and claim export benefits
Post-shipment stage

★ one-way, controls the pace

Key documents

Document	Issued by	Purpose
Commercial invoice	Exporter	Bill for the goods; basis for customs value
Packing list	Exporter	Contents of each package
Shipping bill	Exporter or customs broker, to customs	Main customs document for export clearance
Bill of entry	Importer, to customs	Main customs document for import clearance
Mate's receipt	Ship's officer	Receipt that goods are on board; exchanged for the bill of lading
Bill of lading	Shipping company	Receipt of goods, evidence of the contract of carriage and a document of title
Airway bill	Airline	Receipt and contract for air cargo; not a document of title
Certificate of origin	Chamber of commerce or authorised agency	Proves where goods were made; needed for preferential duty under trade agreements
Inspection certificate	Inspection agency	Confirms quality before shipment
Insurance policy or certificate	Insurer	Covers marine risk; required under CIF and CIP

Types of letter of credit

Type	Feature
Irrevocable	Cannot be changed or cancelled without all parties' consent; UCP 600 treats every credit as irrevocable
Confirmed	A second bank, usually in the exporter's country, adds its own guarantee
Revolving	Renews automatically for repeated shipments
Transferable	The first beneficiary can transfer it to a second, such as a supplier
Back-to-back	A second credit opened on the strength of the first
Red clause	Allows an advance to the exporter before shipment
Standby	Works like a guarantee; paid only if the buyer defaults

Incoterms 2020 (ICC)

Group	Terms	Key point
Any mode of transport	EXW, FCA, CPT, CIP, DAP, DPU, DDP	EXW is the minimum and DDP the maximum seller obligation
Sea and inland waterway only	FAS, FOB, CFR, CIF	Risk passes alongside the ship (FAS) or on board (FOB, CFR, CIF)
Seller buys insurance	CIF and CIP	CIP needs wider cover in the 2020 rules; CIF keeps minimum cover
New in 2020	DPU	Delivered at Place Unloaded replaced DAT

D/P vs D/A

Documents against payment (D/P)Sight draft. The buyer's bank releases the documents only when the buyer pays. Safer for the exporter.

Documents against acceptance (D/A)Usance (time) draft. Documents are released when the buyer accepts the bill and promises to pay later. Riskier.

India's Foreign Trade Policy (in words)

'EXIM policy' is the older name; since 2004 it has been called the Foreign Trade Policy (FTP).
It is framed under the FT(D&R) Act 1992 and administered by the DGFT.
FTP 2023 took effect on 1 April 2023 and, unlike earlier five-year policies, has no fixed end date.
It moves from incentives to remission of duties and taxes (such as RoDTEP), and promotes districts as export hubs, e-commerce exports and trade settled in rupees.
Duty-free input schemes: Advance Authorisation (inputs for exports) and EPCG (capital goods against an export obligation).
Support bodies: Export Promotion Councils, EXIM Bank (1982), ECGC (export credit insurance), SEZs under the SEZ Act 2005, and EOUs.

How NET asks this

NET asks you to identify a document from its function (document of title, customs clearance, proof of origin), to match Incoterms with seller obligations, and to recall who issues the IEC.

Exam angle

Typical MCQ: “Which transport document is also a document of title?” The ocean bill of lading. Trap: an airway bill is not a document of title.

Typical MCQ: “Under which Incoterm does the seller bear the maximum obligation?” DDP (Delivered Duty Paid). EXW (Ex Works) is the minimum.

Remember it

Incoterms ladder: EXW → F terms (FCA, FAS, FOB) → C terms (CFR, CIF, CPT, CIP) → D terms (DAP, DPU, DDP). The seller's burden rises E-F-C-D.